Brokers' take

This article is more than 12 months old

Compiled by Lynette Khoo, The Business Times



OCT 11 CLOSE: $0.94

RHB Research Institute

Viva Industrial Trust (VIT) announced that it has declined an offer from Ho Lee Group (HLG) for the acquisition of an industrial property in Ang Mo Kio at a purchase consideration of $300 million pursuant to the right of first refusal (ROFR) agreement.

HLG made the offer to Viva as it received an offer from an unrelated third party to acquire the property at the above mentioned price.

While the tenants are of good quality, VIT noted that the large equity fund raising required to acquire the asset would make it non-accretive to existing unit holders.

We view the move favourably, and it shows that the manager is careful in picking the assets to deliver growth.

Besides this property, VIT has a ROFR pipeline to three industrial properties in South Korea and one in Shanghai.

Its gearing remains relatively high at 39.1 per cent and future acquisitions are expected to be funded by a combination of equity and debt.

In Q1 2017, VIT submitted an application to the Inland Revenue Authority of Singapore regarding tax transparency treatment for rental support agreements, after an amendment to the Income Tax Act.

While the outcome is still pending, we believe there is a good chance for a favourable ruling.

This could potentially save some $2 million in tax income for FY2017-2018 and further boost our distribution per unit forecasts by some 3 per cent.

We expect a solid Q3 2017, and maintain BUY and target price of $0.97 (3 per cent upside).



OCT 11 CLOSE: $11.92

OCBC Investment Research, Oct 11

CDL announced that it has reached an agreement with the independent directors of Millennium & Copthorne Hotels (M&C) on the price at which these directors will recommend a possible cash offer by CDL for all the outstanding M&C ordinary shares that CDL does not already own.

As at Oct 9, CDL indirectly owns 65.2 per cent of the shares of M&C.

The proposed cash consideration comprises a cash amount of 545 pence per M&C share and a special dividend of 7.5 pence per share that will be payable upon the offer becoming unconditional.

If successful, we see this as a positive development for CDL, which will almost certainly be accretive.

In our view, while the potential cash offer price is fairly attractive for CDL, it also offers M&C shareholders a valuable opportunity for liquidity at a sizeable 21.4 per cent premium to the last closing price on Oct 6.

Pending a formal offer, our fair value estimate of $12.90 for CDL remains unchanged.

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