CapitaLand Commercial Trust
Brokers: DBS Group Research
Target Price: $1.69
CapitaLand Commercial Trust (CCT) announced that it has sold Wilkie Edge for $280 million or $1,812 per square foot (psf), which translates to a 12-month trailing net property income yield of 3.39 per cent.
The disposal price is 39.3 per cent above the property's valuation of $201 million ($1,301 psf) as at Dec 31 last year, and 53.3 per cent above the original purchase price of $182.7 million in 2008. The buyers of Wilkie Edge are Lian Beng Group, an SGX-listed construction and property group, and its joint venture partner, Apricot Capital.
CCT will recognise an estimated net gain of approximately $76 million. Net asset value (NAV) per unit after the sale of Wilkie Edge will rise to $1.76 and including the sale of One George Street, we estimate NAV per unit will increase to approximately $1.80, from $1.73 as at Dec 31 last year.
While CCT's share price may react positively, investors will ask "what's next" and whether CCT will use some of the proceeds to stabilise its distribution per unit, given its strong balance sheet.
Target Price: 17 cents
Jadason has firmly returned to the black since the third quarter of last year. Net losses bottomed at $1.2 million in the second quarter, followed by three consecutive quarters of positive net profit.
Key factors aiding the turnaround were a right-sizing of its workforce, an improvement in productivity, a higher use of automation and a large $12.9 million impairment on its production equipment in financial year 2015.
Jadason is believed to be headed for a strong earnings recovery over the forecasted period of financial year 2017-2018. This is likely to be driven by new orders from its customers, in particular, customer A (which cannot be named due to non-disclosure agreements) who has won large orders from a mobile device customer that is looking at a product launch, possible in the second half of this year.
Jadason will be the sole provider of the outsourced PCB drilling required by customer A. Short-term competition is non-existent as Jadason is not only the cheapest supplier, but also the only one that can satisfy customer A's large capacity requirements.
Potential short-term share price re-rating catalysts are: strong earnings performance in the second half of this year as business from customer A kicks off; exit from SGX watch list, which could widen the base of investors; and resumption of dividend payment on the back of strong profit recovery.