By Carey Wong
Tue, 1 Jun 2010, 09:02:02 SGT

Wilmar, CCT and MLT (01 Jun 2010)

FOCUS

Wilmar: Expands operations in Africa

Summary: More signs that it is business as usual for Wilmar International Limited (WIL): the world’s largest crude palm oil (CPO) trader has just announced that it intends to make an offer to acquire at least 58.45% of the entire issued ordinary share capital of Benso Oil Palm Plantation Ltd (BOPP) from Unilever Ghana Limited. Meanwhile, WIL has also entered into an agreement with Unilever Ghana to acquire the “Frytol” cooking oil brand and its oil processing activities in Ghana. The proposed acquisition of BOPP and Unilever Ghana’s “Frytol” cooking brand and its oil processing activities are consistent with WIL’s plans to develop a fully integrated oil palm business, from plantation development to the distribution of high quality refined edible oils in Ghana and the African sub-region. Once again, we note that it is worth re-iterating that WIL’s core business is still expanding and investors should not get overly concerned by the recent allegations of questionable tax refunds in Indonesia (repeatedly refuted by WIL). Maintain BUY with S$7.15 fair value. (Carey Wong)

CapitaCommercial Trust: Asset enhancement at 6 Battery Road

Summary: Last week, CapitaCommercial Trust (CCT) unveiled its asset enhancement initiative (AEI) at 6 Battery Road (6BR). The AEI will commence in Oct 2010 and carried out in phases until 2013 in order to minimize the inconvenience to its tenants. Estimated capex for the AEI is ~S$92m and the cost is equivalent to 8% of the building’s valuation at the end of Dec 2009. We view this AEI positively. We believe that the completion of the upgrading works will place 6BR in a better position to compete with the newer office buildings and thus leading to higher rental rates. However, we think that it is too early to make any adjustments to our rental assumptions from 2013 onwards as there is still a lack of clarity on the recovery in office rents. As such, we leave our estimates unchanged. Our fair value also remains at S$1.26. With a total return of 16.4%, we reiterate our BUY rating on CCT. (Foo Sze Ming)

Mapletree Logistics Trust: Acquiring three properties for S$83.5m

Summary: Mapletree Logistics Trust (MLT) announced that it intends to acquire three properties in Vietnam, Japan and Singapore for a total consideration of S$83.5m. This is the trust’s first foray into Vietnam. The two warehouses in Vietnam (Mapletree Logistics Centre) and Japan (Sendai Centre) are being acquired by way of a conditional sale and purchase agreement with MLT’s sponsor Mapletree Investments Pte Ltd. Natural Cool Lifestyle Hub, the distribution centre in Singapore, is being acquired by way of a put and call option agreement with a wholly-owned subsidiary of SGX-listed Natural Cool Holdings Ltd [NOT RATED]. The acquisitions are expected to be completed by Sep. The three properties are being acquired at net property income yields of 6.8% (Japan), 8.05% (Singapore), and 10.3% (Vietnam) or a weighted NPI yield of 7.9% (versus existing portfolio: 6.2%). The manager intends to finance all three acquisitions fully by debt in the interim, which would bring the REIT’s leverage up to 40.2% debt-to-assets compared to 38.6% as of 31 Mar; this is within MLT’s target of 45%. MLT estimates that, on a pro forma annualized basis, the purchases add 0.157 S cent to DPU (2.62%). The accretion drops to 0.039 S cent or (0.64%) by the manager’s estimate if the assets were 40% debt funded instead. The acquisitions – especially from the sponsor – were as per prior guidance and are likely, in our view, to be the first of several transactions in the next two years. We maintain our BUY rating but place our S$0.93 fair value under review as we re-look our earnings estimates. (Meenal Kumar)


For more information on the above, visit www.ocbcresearch.com for the detailed report.

NEWS HEADLINES

- Shares in Parkway Holdings closed 69 cents, or 23%, higher in trading yesterday in the wake of last Thursday announcement that Khazanah has made a S$1.18b partial offer.

- Overseas Union Enterprise (OUE) is planning to issue up to S$200m in convertible notes due 2015. Lippo Group is also selling an undisclosed number of its shares in OUE.

- Hwa Hong Corporation will use approximately S$33m of the net proceeds from the sale of its stake in Tenet Insurance Company for the payment of a special dividend.

- Datapulse Technology posted a 57% YoY decrease in net profit for 3Q ended 30 Apr to S$1.4m.

- United Engineers and Lee Metal Group have won a joint bid for the land parcel at Sengkang East Avenue/Buangkok Drive.

- Sun East Group reported a smaller net of HK$4.3m for its financial quarter ended 31 Dec 2009.

- Guangzhao Industrial Forest Biotechnology Group will resume trading at 9am today.

- Meghmani Organics reported a 39.2% YoY increase in its net profit to Rs. 516.8m for its financial year ended 31 Mar 2010

- Pan Hong Property Group said it has terminated the cooperation agreement signed with Little Golden Star Education Group.