Tuesday, July 9, 2013

Cambridge Industrial Trust : Lam Soon finally sold (CIMB)

Cambridge Industrial Trust
Current S$0.73
Target S$0.80
Lam Soon finally sold

 While the divestment price of Lam Soon may marginally disappoint investors looking forward to its sale as a residential site, the sale should still be a positive given the greater certainty of value-unlocking in its entirety and accretion from the use of divestment proceeds.

We raise DPUs, assuming that the proceeds will be used for debt repayment and the unwinding of previously-assumed equity fund raisings. Our DDM-based target price (discount rate: 8.3%) rises accordingly. Maintain Outperform on catalysts from accretive acquisitions and developments.

What Happened
CIT has announced the divestment of its entire 69.4% strata stake in Lam Soon Industrial Building for S$140.8m to entities related to Enviro-Hub Holdings and BS Capital. The sale price represents a premium of about S$30.8m or 28% above the book value of S$110m. CIT intends to employ the proceeds towards debt repayment, acquisitions and/or developments. Subject to the fulfilment of conditions, completion should take place within12 weeks from the date of exercise of the purchase option.

What We Think
The asset’s NPI yield on book value is about 2.9%, implying a 2.3% yield on the divestment price. The use of proceeds for debt repayment or investments could thus result in accretion of 2-16%,depending on whether proceeds are used to fully repay loans or for acquisitions/developments.

Accretion from the use of divestment proceeds is a positive although investors who had been looking forward to the sale as a residential site are likely to be disappointed. The selling price of S$475psf appears to be at the lower end of the S$431-638psf fetched by strata transactions at Hillview Avenue over the past two years, although we highlight the piece-meal nature of these vs. CIT’s sale of its entire stake. While there appears to be room for an even better selling price, greater certainty of value-unlocking from the asset in its entirety and accretion from the use of divestment proceeds should nonetheless be a positive.

What You Should Do
Maintain Outperform. We raise DPUs, factoring in full-debt repayment, which wil lower asset leverage to about 27%from 35% as at 1Q13. We also unwind previously assumed equity fund-raisings.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 08/07/13

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