Compiled by Lynette Khoo
GUOCOLAND LIMITED | BUY
SEPT 29 CLOSE: $2.27
TARGET PRICE: $2.80
UOB KayHian, Sept 29
The leasehold mixed-use site in Beach Road received a whopping $1.62 billion, or $1,706 per square foot per plot ratio (psf ppr), top bid from a 70-30 joint venture between GuocoLand and its Hong Kong-listed parent Guoco Group.
We estimate commercial breakeven at about $2,900-3,000 psf and residential breakeven at around $2,300 psf.
This would result in a blended average breakeven of around $2,750-2,800 psf based on our assumed 70-30 split for the commercial and residential components respectively.
The bid is pricing in a 20-30 per cent price increase for the office component and a 5-10 per cent price increase for the residential component when compared to office property values of $2,200-2,600 psf in the vicinity.
While the 5-10 per cent price increase potentially built in for the residential component is in line with our expectations, the 20-30 per cent price increase potentially built in for the office component seems aggressive.
As such, we expect the accretion from the residential component to be offset by dilution from the office component, minimally impacting the revalued net asset value (RNAV).
However, the development will strengthen GuocoLand's recurring earnings base and set the stage for asset monetisation possibly into a Reit platform.
We maintain BUY with an unchanged target price of $2.80, pegged at a 23.5 per cent discount to our RNAV of $3.63 per share.
ASCOTT RESIDENCE TRUST | HOLD
SEPT 29 CLOSE: $1.175
TARGET PRICE: $1.10
OCBC Investment Research, Sept 29
The Reit's sponsor Ascott Limited, a wholly owned business unit of CapitaLand, has been actively growing its serviced residence portfolio globally and securing its market leadership in various geographies. Earlier this month, The Ascott announced the acquisition of a prime serviced residence in Jakarta.
We continue to be positive on the geographical diversification of the portfolio and the support of a strong sponsor, but believe the Reit could trade at a more attractive yield.
We maintain HOLD with a fair value of $1.10.
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