Compiled by Andrea Soh
COMFORTDELGRO | HOLD
DEC 11 CLOSE: $2.03
TARGET PRICE: $2.18
DBS Group Research, Dec 11
ComfortDelGro (CDG) is forming a joint venture with Uber Technologies Inc through the acquisition of a 51 per cent stake in Lion City Holdings Pte Ltd (LCH).
LCH, in turn, operates Lion City Rentals (LCR) which has a fleet of about 14,000 vehicles.
The aggregate cash consideration for the acquisition is estimated at $295 million, which is based on the net asset value of about $642 million (based on 51 per cent share). This, in turn, is based on the value of about 12,450 vehicles, and implies a value of about $101,000 per vehicle.
We are neutral on the transaction with the positive and uncertain weighing relatively equally. On the positive side, we believe the tie-up and collaboration outweigh the competition, coupled with our view that the price seems fair - at net asset value. In addition, there could be potential synergies from a larger fleet and for taxis to leverage on the Uber app.
However, competition still exists from Grab which we believe would still be aggressive in its bid to gain market share. On the operational side, the collaboration between CDG and LCR/ Uber could require some lead time post regulatory approval, in our view.
CITY DEVELOPMENTS LIMITED | BUY
DEC 11 CLOSE: $12.57
TARGET PRICE: $14.03
UOBKayHian Research, Dec 11
The 12 per cent raise in CDL's privatisation offer for M&C remains value-accretive (3.3 per cent accretion to RNAV).
It implies a 0.76 times P/B, suggesting potential acquisition of M&C's hotel assets at over 25 per cent discount to prevailing market value, providing good potential to unlock value.
Although CDL has explicitly stated its intention to not sell, or repurpose any of the M&C hotels in London or New York for at least three years, its hotel assets in other geographies make up a hefty 56 per cent of its total hotel operating assets (or £1.499 billion, $2.7 billion).
One of the means to unlock the remaining 56 per cent of M&C hotel operating assets is in changing the ownership structure, such as parking them into a Reit (and owning them via share ownership into the Reit).
Also, streamlining of operations and bringing synergies in will help to narrow the valuation discount that investors typically apply for asset-heavy hotel operators, due to their high capex requirements and difficulties scaling up.
CDL will fund the transaction through internal cash resources and bank borrowings. Maintain "buy" with an unchanged target price of $14.03, pegged at parity to RNAV, pending M&C's minority shareholders' approval of the offer.
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