Business

Brokers' take

Compiled by Andrea Soh

THAI BEVERAGE | HOLD (DOWNGRADE)

DEC 20 CLOSE: $0.94

TARGET PRICE: $1

CIMB Research, Dec 19

Vietnam Beverage wins bid for 53.6 per cent of Vietnam's largest brewer Saigon Beer Alcohol Beverage Corp (Sabeco); ThaiBev now has a 26.3 per cent effective stake in Sabeco.

The aggregate acquisition price for the 53.6 per cent stake is 109.7 trillion Vietnamese dong (S$6.5 billion), based on 320,000 Vietnamese dong/share.

Illustrative FY9/17 net debt of 1.3 times (versus existing 0.2 times) implies that ThaiBev foots majority of the consideration and that the deal may be pricey at about 78.7 times forward valuations.

We tweak our forecasts and downgrade our sum of the parts-based TP to $1.00.

ThaiBev may embark on prospective M&As to re-optimise its balance sheet, but near-term uncertainties may cap interest in the stock.

CAPITALAND | BUYDEC 20 CLOSE: $3.53

TARGET PRICE: $4.35

DBS Group Research, Dec 20

CapitaLand Ltd (CAPL) announced that the group has entered into an agreement with an unrelated third party to acquire a commercial land plot in Wujiaochang decentralised business district (DBD), Shanghai for 838 million yuan (S$171 million).

This signals the group's deepening presence in Wujiaochang district, which is one of Shanghai's most vibrant DBDs.

We are positive on this investment as the group's deepening exposure in Wujiaochang brings about a myriad operational benefits.

Located next to Innov Centre, the development, when completed in 2020, will increase CAPL's operational footprint in the submarket close to 118,466 sqm.

This empowers CAPL with the increased ability to tap a wider tenant base, potentially larger tenants who require bigger spaces.

The high rents in the central business district (CBD) have pushed tenants to look at decentralised options and we believe that CAPL will capture this trend, especially when the properties are located in a submarket with excellent connectivity to public transport - including the operational metro line 10 and the upcoming line 18.

The group is expected to utilise onshore funds, which will improve the group's capital productivity.

Assuming a market rent of six yuan/day at full occupancy implies an entry yield of close to 4.3 per cent for the new acquisition, but with potential to hit closer to the 5.0 per cent level in the medium term once demand picks up for the properties in the submarket when a critical mass of tenants and properties are built up over time.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.