CACHE LOGISTICS TRUST | SELL
TARGET PRICE: $0.71
APRIL 11 CLOSE: $0.875
CIMB, APRIL 10
What are the possible implications with the impending takeover of CWT? Chinese conglomerate HNA Holding Group has offered to buy CWT for $1.4 billion or $2.33 a share, representing about 13 per cent premium over the stock's last trading price on April 5.
CWT prides itself as Singapore's largest home-grown logistics provider.
It is also the sponsor of Cache Logistics Trust. For Cache, CWT and ARA Asset Management own 40 per cent and 60 per cent of the Reit manager respectively; and 60 per cent and 40 per cent of the property manager respectively.
We expect it to be business as usual for Cache, unless there is a major restructuring at CWT level. HNA said that it intends to keep CWT's management team. In addition, the rights of first refusal pipeline remains intact.
Now that uncertainty over the future of CWT has lifted, we expect asset injections to accelerate. We believe HNA would undertake capital recycling. We also postulate that HNA could inject its assets into the Cache platform.
Pending release of Q1FY17 results on April 20, we maintain our recommendation, target price and forecasts.
Bottom up, nothing fundamentally has changed; topdown, we remain cautious on the logistics sector in the near-term due to strong completions in 2017.
AMARA HOLDINGS | BUY
TARGET PRICE: $0.88
APRIL 11 CLOSE: $0.54
RHB, APRIL 11
We initiate coverage on Amara. Its new 343-room hotel in Shanghai is expected to start operating in Q3 this year and we see it as a key catalyst for a potential share price re-rating.
The potential revenue enhancement could be in excess of S$20 million, which is more than 24 per cent of its FY16 revenue.
Amara trades at a P/RNAV of 0.38x, i.e. lower than its peers' P/BV average multiple of 0.8x.
In May or June, shareholders stand to receive final and special dividends totalling three Singapore cents, which implies a dividend yield of about 6 per cent.
There could be some initial losses from the hotel operations, but management expects the retail and office parts to be profitable from the start.
We expect significant contributions to Amara's earnings by FY18. The group's balance sheet reflects only the cost of the hotel.
There are several significant valuation upsides for Amara Singapore, Amara Sanctuary Resort Sentosa and Amara Signature Shanghai.
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