Tuesday, September 17, 2013

Sabana Shari’ah Compliant REIT : S$40m Private Placement To Fund AMD Acquisition (UOBKH)

Sabana Shari’ah Compliant REIT
Share Price S$1.08
Target Price S$1.26
S$40m Private Placement To Fund AMD Acquisition

Sabana has completed a private placement of 40m new units (6.2% of outstanding units) at S$1.00 per unit, to raise S$40m to partially fund the proposed acquisition of AMD’s factory building for S$68m. Although the placement reduces the near-term risk of additional equity fund-raising, we remain cautious due to the expiry of the master-leases. Maintain HOLD with a lower target price of S$1.26 (from S$1.29). Entry price is S$1.05.

What’s New
• Private placement of 40m units. Sabana REIT (Sabana) has completed a private placement of 40m new units at an issue price of S$1.00 per unit to raise gross proceeds of S$40.0m. The placement price was at the low end of the initial indicative range of S$1.00 to S$1.02 per unit. Net proceeds are about S$39.2m after fees. The 40m new units represent a 6.2% increase from the 649.7m units in issue as at 30 Jun 13. The underwriters are HSBC and Morgan Stanley.

• Placement price at 9.6% discount to VWAP. The placement price of S$1.00 per unit represents a 9.6% discount to the adjusted Volume Weighted Average Price (VWAP) of S$1.1066 per unit for trades done on 12 September (less the proposed advanced distribution) and at a 11.1% discount to the last traded price of S$1.125 per unit. The issue price also represents an 8.3% discount to the adjusted NAV per unit of S$1.09 as at 30 Jun 13.

• Proposed advanced distribution of 2.2 S cents. Sabana has also announced an estimated advanced distribution of 2.2 S cents for the period 1 July to the date prior to which the new units are issued (estimated 24 Sep 13). Details will be announced at a later date when management accounts for the period has been finalised.

Stock Impact
• Proceeds used to partially fund acquisition of AMD factory. The net proceeds of S$39.2m will be used to fund 58% of the S$67.2m acquisition of the Advanced Micro Devices’ (AMD) light industrial building at 508 Chai Chee Lane, which was announced on 22 August.

• Aggregate leverage remains at 37.2%, following the acquisition and the private placement, relatively unchanged from the 37.1% as at 30 Jun 13. We had earlier estimated that if the acquisition had been fully-funded by debt, gearing would have reached 40.5%.

• Potential near-term dilution. We see a potential near-term 1-3% dilution of DPU as the acquisition is currently 50% occupied, and would need some time to be fully leased out. However, this will be supported by AMD’s commitments to leaseback 50% of the property for a period of 10 years, with options to renew for a further 11 years. We estimate that the rentals that AMD will be signing are between S$2.50-3.00 psf pm.

Earnings Revision/Risk
• We lower our 2013-15 DPU estimates by 1-3% to factor in the dilution from the private placement. Key near-term risks remain the expiry of the master-leases in Nov 13.

• We maintain HOLD with a lower target price of S$1.26 (from S$1.29), based on DDM (required rate of return: 8.1%, terminal growth: 1.8%). Entry price is S$1.05.

Share Price Catalyst
• Positive newsflow on industrial rentals and underlying lease renewals.
• Yield-accretive acquisitions

Source/Extract/Excerpts/来源/转贴/摘录: UOBKH-Research,
Publish date: 16/09/13

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