Excerpts from analysts' reports
Voyage Research ups Roxy-Pacific's target price to 72 cents on Aussie acquisition
Analyst: Liu Jinshu (left)Roxy-Pacific Holdings Limited (Roxy) announced the acquisition of an A$90.2m 28-storey commercial building in the Sydney CBD precinct. The 89% occupied building will raise Roxy’s investment property revenue from S$1.6m in FY13 to an estimated S$4.6m in FY14; and S$11.9m in FY15 on full year contribution.
The project enhances Roxy’s return on its balance sheet, with scope for redevelopment upside at a later date. As such, we reduced our discount on RNAV from 20% to 18% (200bp), thus raising our valuation of the company to S$0.720.
The project enhances Roxy’s return on its balance sheet, with scope for redevelopment upside at a later date. As such, we reduced our discount on RNAV from 20% to 18% (200bp), thus raising our valuation of the company to S$0.720.
Additional Income Bumps Up Profitability: According to agents’ marketing materials, the building (59 Goulburn Street, Sydney, Australia) has total net lettable area of 19,552.7m2 and a weighted average lease expiry of 3.3 years. Based on the existing occupancy level, annual gross income is about A$8.9m or S$10.3m.
We estimate that the building can provide Roxy with an annual pre-tax yield of 7.3% and up to 8.8% on full occupancy. As a result, forecast FY15 net profit has been bumped up by S$7.3m, from S$98.0m to S$105.3m.
We estimate that the building can provide Roxy with an annual pre-tax yield of 7.3% and up to 8.8% on full occupancy. As a result, forecast FY15 net profit has been bumped up by S$7.3m, from S$98.0m to S$105.3m.
Real Kicker Stems from Upside Potential of Site: The property is about 500m away from the billion dollar Darling Harbour Live project, slated for opening in late 2016 as Sydney’s new convention, exhibition and entertainment hub.
At the same time, the property sits right next to the cross junction with George Street, where part of a major light rail, to be constructed over the next five to six years, will run parallel to it. Based on these developments, we opine that Roxy is likely to enjoy capital appreciation gains over a three to five-year horizon.
Source: Google Maps, Voyage Research
Source: Google Maps, Voyage ResearchRoxy may also redevelop the site or enhance the building to fully realize its value such as the case with its project in Hong Kong. The site is permitted for office, retail, entertainment, residential and/or hospitality uses and a higher plot ratio may be applied from the authorities if floor space is utilized for qualifying purposes such as residential or hotel accommodation. However, we understand that local authority approval may take two to three years to obtain.
As such, any redevelopment will only take place at the later part of Roxy’s current pipeline.
Recent story: @ ROXY-PACIFIC's AGM: Seeking opportunities post-property boom in S'pore
As such, any redevelopment will only take place at the later part of Roxy’s current pipeline.
Recent story: @ ROXY-PACIFIC's AGM: Seeking opportunities post-property boom in S'pore
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OSK-DMG maintains 'buy' call and 43-c target on King Wan Corp  Analyst: Lee Yue Jer (left)King Wan has received 116.32m KTIS shares worth SGD45.3m (which began trading on the Stock Exchange of Thailand yesterday). King Wan will recognise a SGD24m profit, and we continue to expect a 1-cent special dividend to be declared for FY14, increasing to 1.5 cents for FY15 and beyond.
Further, there may be long-term capital gain potential from the KTIS shares due to: i) rebounding sugar prices and ii) investment in two new biomass electricity plants with the IPO proceeds which is expected to drive earnings growth. We estimate King Wan’s SOP valuation to be SGD0.49 per share. Our SOP methodology is as follows: i) core mechanical & electrical and rentals businesses at 9x P/E; ii) book value for investments in property development and vessel-owning associates; iii) capital gains on vessel but conservatively zero gains on property developments; iv) KTIS shares at THB10 per share; v) less SGD1m of net debt. The SOP value for King Wan works out to be SGD0.49 per share. Interestingly, King Wan’s price of SGD0.335 (recently) implies a core P/E of 0.5x. Alternatively, the share price implies 7.75x core P/E and zero value for the entire KTIS stake. We maintain BUY with SGD0.43 TP based on a 7% required yield, though a lower required yield is arguable. |
