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19-11-2013, 02:09 PM (This post was last modified: 19-11-2013, 02:10 PM by yanziyang.)
From CIMB
We turned positive because of: 1) the built-in step-up rental lease agreement, 2) the progressive payments that could prevent net gearing from rising above 40%, and 3) the full hedging of income streams against currency fluctuations. We raise our DDM-based target price (discount rate 7.9%) to S$1.96, based on our new DPU growth estimates (including the acquisition) of 0.9% in
FY15, 3.5% in FY16 and 4.6% in FY17.
What Happened
During the briefing, management highlighted several key points on the deal, including: 1) the 3.5% yearly step-up in rental rates that has been built into Leighton’s lease (WALE of 10 years for 76% of the building’s total NLA),
2) Leighton’s intention to sub-let the remaining 24% NLA, with SUN collecting the market rent attained, or pay a guaranteed NPI of c.A$724/sq m/year with 3.5% annual escalation in rental rate (whichever is higher) for four years after completion,
3) payment for the construction of the property will be progressive over a 2-year period,
4) the below 3% all-in interest rate for the S$500m loan,
5) both the purchase price (during the construction phase) and the recurring rental income (upon
completion) will be fully hedged against currency fluctuations.
What We Think
The attractive yield, financing package and management direction indicates that management has thoroughly considered the acquisition’s risks and rewards. Furthermore, we believe that the progressive payment for the acquisition will keep SUN’s gearing at a comfortable level of below 40%. The divestment of Park Mall, if the right offer comes along, is an option for SUN to lower gearing. Although, the high average translated NPI of A$724/sq m/year (vs. downtown Sydney’s c.A$520/sq m/year) remains a concern, our calculations revealed that even if the rental rate drops to the current market rate after the first four years, the building’s yield remains at an attractive level of 6.4% (from the initial yield of 6.9%).
PANG Ti Wee
T (65) 6210 8609
E tiwee.pang@cimb.com
Donald CHUA
T (65) 6210 8606
E donald.chua@cimb.com
Just thought of sharing a recent article about Leighton, the graft and the cost overruns were things of the past... but being awarded contracts by the stingiest (cheaper better faster) government isn't always a good thing (e.g Alphine Bau -> http://tunneltalk.com/Company-News-27Jun...nkrupt.php)
Three legs good?
An ailing Spanish firm finds solace in Australia
Oct 12th 2013 |From the print edition
FLORENTINO PÉREZ, chairman of Real Madrid, seems relaxed about the high levels of debt at his football club. But in a current spat with fans they disagree about exactly how much it owes for buying expensive players such as Gareth Bale: he says the club owes €90m ($122m), they say it is a whopping €541m.
Three years ago, ACS, a big Spanish construction group of which Mr Pérez is also chairman, put a strain on its balance-sheet to buy Hochtief, a bigger German rival. For a building firm, the collapse of property prices meant almost anywhere looked better than Spain. Taking over Hochtief was cheap—a bid for the whole company was not required because of a quirk in German securities law—and a stake in Leighton, an Australian construction firm, came as part of the package. Leighton resented this raid by a cash-strapped Spanish firm. But the three companies were lumbered with each other.
Things have not gone entirely to plan for ACS. Leighton, with operations across Asia and the Middle East, was supposed to offset the European recession that thumped ACS and Hochtief. But the company has issued a series of profit warnings as a result of cost overruns on projects in Australia, because of bad weather and poor risk management, and cashflow problems with a joint-venture partner in the Middle East.
ACS reported a €2.5 billion pre-tax loss in 2012, but not just because of Leighton. ACS had bought into a couple of Spanish utilities that also suffered from the effects of Spain’s economic crash and complying with costly government regulations. It sold one, but was still extricating itself from Iberdrola, a power firm, at a steep loss.
Now the outlook is slightly better, apart from press reports of a bribery probe, which had been initiated by Leighton in 2011. The firm is co-operating with an investigation. Leighton’s costs are being better managed, although the construction industry is going through a tough time in the developed world, and is slowing even in Asia. The stake in Iberdrola has been whittled down to 6%. Leighton made a pre-tax profit of A$554m ($560m) in the first half of the year, having sorted out its cost overruns, and contributed most of the profits for the entire group. Hochtief was just in the black, while ACS’s other companies made a net loss of €95m.
The group’s debt was cut from €9 billion to €5 billion during 2012. Hochtief has shed its divisions which operate airports and other facilities, for about €1.3 billion, and has settled a potentially damaging spat at home about the cost of a concert hall it is building for the city of Hamburg.
Both Hochtief and Leighton are on their third chief executive since the takeover. But Marcelino Fernández Verdes, a former ACS man who is now Hochtief’s boss and sits on Leighton’s board, seems to have won the respect of the Germans and Australians with his firm action on divestments and cost-cutting. It is a tricky balancing-act: although Hochtief and Leighton are consolidated on ACS’s balance-sheet they are separately listed and supposedly independent companies.
Mr Verdes is meant to represent all shareholders, not just ACS. But this may not continue to be the case. Hochtief has been buying back some of its own shares and also some of Leighton’s. Both these moves strengthen the voting power of ACS. It is still a long way from the 75% stake which would give it full control of Hochtief. It has always denied that this is its plan, protesting that construction firms need a local identity. But “never say never,” confides an ACS source.
(29-11-2013, 11:43 PM)tonyking Wrote: Suntec REIT's chart pattern seem reversing current bearish trend with bullish divergence. Any take? [vested] [Image: attachment.php?aid=616]
Comparing Suntec and Fraser Centrepoint Reits it does seem like both are clearly below their 50, 100 and 200 day moving averages. However at around the 3rd week of October Suntec was challenging its 200 day moving average while Fraser was also looking to go above its 100 day moving average. Suntec's effort succeeded from 21 October to 31 October while Fraser's just bounced off its 100 day moving average (i.e. was resisted), broke under its 50 day moving average and continued heading downwards. So it appears to me that while both have formidable times challenging all three moving averages going forward, it seems to me Suntec's performance could be more range-bound (more of a hunch) than Fraser's which because Suntec's 50 day moving average is still above its 100 day one while Fraser's pattern looks more classic and maybe looking to find some near or mid-term bottom (have to look at historical charts if one is really a charting person).
I tried to upload image files just using the SGX website but not successful.
30-11-2013, 10:13 AM (This post was last modified: 30-11-2013, 10:40 AM by cyclone.)
Dear tonyking and tikam tikam,
I'd like to remind you that if you want to discuss about technical analysis, you have come to the wrong place. We are a value investing forum. Any future technical analysis posts will be deleted, so please do not waste your time and energy again in posting about TA in the forum. Thanks.
frankly, I haven't heard of anyone who became immensely wealthy through tech analysis and I haven't heard of anyone who knows of anyone who became immensely wealthy through tech analysis.
short term gains at technical or forex tend to get boasted either at coffeeshop tables, company agms, own blogsites or online forums while losses will get hidden away.
once the sum gets larger or the number of "punt" gets larger, its harder to win always.
(30-11-2013, 10:50 AM)gautam Wrote: frankly, I haven't heard of anyone who became immensely wealthy through tech analysis and I haven't heard of anyone who knows of anyone who became immensely wealthy through tech analysis.
short term gains at technical or forex tend to get boasted either at coffeeshop tables, company agms, own blogsites or online forums while losses will get hidden away.
once the sum gets larger or the number of "punt" gets larger, its harder to win always.
13-12-2013, 12:32 PM (This post was last modified: 13-12-2013, 12:37 PM by yanziyang.)
Suntec REIT poised for multi-year growth. Overseas foray to boost earnings.
According to OCBC Investment Research, Suntec REIT has essentially locked in robust growth over the next few years with its strong asset management and execution.
Here's more:
First started its Phase 1 rejuvenation works at Suntec City in Jun 2012, Suntec REIT has recently reopened Suntec Singapore and the retail space in 2Q13 with a strong committed occupancy of 99.6%.
In addition, passing rent of S$13.09 for Phase 1 space was significantly above the rent of S$10.34 achieved at the rest of the mall, proving the success of the asset enhancement initiative (AEI).
We understand that Phase 2 AEI is on track for completion in 4Q13, and that leasing interest has been equally optimistic (pre-commitment of 83.7% in 3Q13). While we may potentially see some weakness as Suntec REIT prepares for Phase 3 AEI in the immediate term, we believe it has laid the foundation for sustainable growth in the years ahead.
Overseas foray likely to be earnings accretive
In mid-Nov, Suntec REIT also made its first overseas investment with the acquisition of 177-199 Pacific Highway, a Grade A freehold office tower under development in Australia.
We see several strong merits in the transaction. First, the deal is expected to be earnings-accretive, as Suntec REIT will receive coupon payments at a yield of 6.32% p.a. during the construction, and a NPI yield of 6.89% upon completion of the property.
Second, the property is 100% pre-committed, and Suntec REIT will enjoy an annual rental escalation of c. 3.5% for its head lease and rental guarantee for four years for any vacant space upon completion. Thirdly, all-in borrowing cost (including interest rate hedge) is expected to be below 3%, hence giving Suntec REIT a positive yield spread.
(13-12-2013, 12:32 PM)yanziyang Wrote: Suntec REIT poised for multi-year growth. Overseas foray to boost earnings.
According to OCBC Investment Research, Suntec REIT has essentially locked in robust growth over the next few years with its strong asset management and execution.
Here's more:
First started its Phase 1 rejuvenation works at Suntec City in Jun 2012, Suntec REIT has recently reopened Suntec Singapore and the retail space in 2Q13 with a strong committed occupancy of 99.6%.
In addition, passing rent of S$13.09 for Phase 1 space was significantly above the rent of S$10.34 achieved at the rest of the mall, proving the success of the asset enhancement initiative (AEI).
We understand that Phase 2 AEI is on track for completion in 4Q13, and that leasing interest has been equally optimistic (pre-commitment of 83.7% in 3Q13). While we may potentially see some weakness as Suntec REIT prepares for Phase 3 AEI in the immediate term, we believe it has laid the foundation for sustainable growth in the years ahead.
Overseas foray likely to be earnings accretive
In mid-Nov, Suntec REIT also made its first overseas investment with the acquisition of 177-199 Pacific Highway, a Grade A freehold office tower under development in Australia.
We see several strong merits in the transaction. First, the deal is expected to be earnings-accretive, as Suntec REIT will receive coupon payments at a yield of 6.32% p.a. during the construction, and a NPI yield of 6.89% upon completion of the property.
Second, the property is 100% pre-committed, and Suntec REIT will enjoy an annual rental escalation of c. 3.5% for its head lease and rental guarantee for four years for any vacant space upon completion. Thirdly, all-in borrowing cost (including interest rate hedge) is expected to be below 3%, hence giving Suntec REIT a positive yield spread.
(vested)
I also note that Q4 is significantly higher than other quarters in 2011 & 2012. Thus any share prices increase may come after Q4 announcements & dividend ex-date.
The current slack in REITs could be a good opportunity to load up on good quality REITS.
(vested)
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