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Have been going JP the past few Saturdays. The human traffic is always amazing. Possibly the best of the suburban malls and better than most Orchard Road malls. Guthrie should be doing well, have been acquiring land and property of late. The numbers look good- low PE, good div yield, increasing NAV, rising profits.
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09-07-2011, 10:12 PM
(This post was last modified: 09-07-2011, 10:16 PM by greengiraffe.)
This note is first posted on 16 Jun 11
Noted that I do have interests in Guthrie shares for my coffin money.
Revalued Book Value (RBV) on Guthrie as of 31 Dec 10 - $0.708
Discount to RBV: 36.4%
Historical Div: 1.25 cents + 1.25 cents special
Historical Div Yield: 5.55%
It has been 4 years since the current Indonesian shareholders concluded a takeover of Guthrie at 43.5 cents. The Indonesian owners backed by Salim and long time owner Putra Masagong controlled 68.8% of Guthrie.
Back in Mar 07, the successful takeover price of 43.5% represented a small discount to the then appraised book value of 50 cents a share. Since then, book value at Guthrie has steadily risen to 70.8 cents due to asset inflation of its 50% stake in Jurong Point 1, Kovan Heartland Mall and a 25% interests in Jurong Point extension.
Based on the latest successful bid by Capitaland Gp on a landsale in Jurong East, there are more upside in the valuation of the established Jurong Point Mall. A quick indication point to a potential book value of 86 cents just on Jurong Point alone.
Guthrie is a silent operator unlike Capitaland Group. However, as pointed out by Kim Eng, it has adopted a very manageable yet scattered strategies on its management and ownership of shopping mall assets in Singapore. While analysts may be inclined to think that value may be unlocked at Guthrie via conventional REIT path, I view the chances as highly unlikely in the view of the financial strengths of its controlling holders and its strategic partners in most of the asset ownership ventures.
Given the wave of privatisation that is ongoing on SGX, one should not rule out the possibilities of Guthrie joining the long lists of candidates. As Guthrie is already firmly in the hands of Indonesian owners, such a possibility will pave way for a cleaner restructuring that will unlock value to its controlling owners. However, getting a fair value at a suitable timing is the biggest question. With a steady development model and recurrent rental income, stable dividend stream can be expected to reward shareholders for the patience.
Guthrie - LKT Purchase of Remaining 50% in JP2 - Further Analysis
I have attempted to find out more with regards to the rationale behind the recent purchase of 50% stake in Jurong Point 2 by the 2 companies.
From various published sources, I have gathered the following facts:
Estimated valuations of Jurong Point (100%): $700m
Original cost of Jurong Point (100% as per Guthrie 2007 Takeover Documents): $486m
Estimated Debt (100% as per page 69/70 of LKT Annual Report 2010): S$242.5m at annual interest rate of 3.4%pa
Current Acquisition Cost of 50% of Jurong Point Holding Co: $228.9m
Debt Funding of Current Acquisition: $223.0m
Equity Contributions By Guthrie-LKT: $5.9m
Net Profit resulting from acquisition based on 2010 net profit (Based on 25% stake) - $7.5m, ie total after tax profit from Jurong Point 2 - $30.0m
Monthly Rental For Jan - May 11 (excluding % rental) - $3.7m, ie S$44.4m pa
From the above facts, we can derive at the following:
Average Cost of Jurong Point 2 to Guthrie-LKT - $593m or $1942psf
Estimated total debt at Jurong Point 2 & Guthrie-LKT - $465.5m, 66.5% gearing on S$700 purchase price
Estimated Equity: $158.4m (based on 2m ord shares and 150.5m preference shares and latest equity contributions)
Estimated ROE: 18.9%
Given that Capland group has already set a record breakeven level for a yet to be built project in congested Jurong East @2400psf, with the above statistics, it is not difficult to see the rationale behind Guthrie-LKT's latest acquisitions. In addition, with a prime established retail asset, the options of unlocking value are aplenty for Guthrie-LKT. After a long absence, controlling shareholders of LKT are back accumulating LKT shares, further tighening their grip on an already illiquid share.
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Putra Masagung has been buying up its shares, probably accounting for this counter's resilience in this choppy markets. As alluded to previously, he may attempt make another offer as the price declines further.
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I quite like the move. They encash some of their assets, have a small share in the property fund that bought over from them and still get to run the malls involved in this transaction. So they become more asset light and focus on redeploying the funds elsehwere. Notice that they still keep their jewel in the crown, ie JP 1 & 2.
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Guthrie's not as close as LKT in terms of delisting, hope I got that right? Anyone who has a rough idea of how much control the boss PM and his allies have over Guthrie now?
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