Money Talk: Ascott Reit, Tat Hong Holdings, Yongmao Holdings

Ascott Reit has signed conditional deals to acquire its first serviced residences in Kuala Lumpur and two sub-provincial Chinese cities, Wuhan and Xi’an, for $173.9 million combined. -- PHOTO: ASCOTT
Ascott Reit has signed conditional deals to acquire its first serviced residences in Kuala Lumpur and two sub-provincial Chinese cities, Wuhan and Xi’an, for $173.9 million combined. -- PHOTO: ASCOTT

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Ascott Residence Trust (Ascott Reit)

Broker: CIMB

Ascott Reit has entered into conditional agreements to acquire its first serviced residence in Kuala Lumpur, Malaysia as well as one property in Wuhan and another in Xi'an, China for a total consideration of $173.9 million.

On a blended basis, these acquisitions are expected to offer an EBITDA (earnings before interest, tax, depreciation and amortisation) yield of 5.1 per cent while FY2013 distribution per unit is estimated to rise by 1.2 per cent on a proforma basis. Occupancy of these properties is estimated at sub- to mid-80 per cent, with the majority of the customers underpinned by corporate travellers staying in these properties for an average 4-5 months.

With the acquisition of these properties, the capital raised from the rights issue in November 2013 has been fully deployed. Although management has previously highlighted that some of the properties acquired are for strategic purposes, while others may offer future growth potential, we believe unitholders' return is weaker now than before - at least until the full potential of these acquisitions previously highlighted are realised.

Maintain Hold with a slightly higher target price of $1.23 as we take into account the earnings from the latest acquisitions.

2. Tat Hong Holdings

Broker: OCBC

Tat Hong made two announcements regarding disposal of assets totalling about $55.7 million through its wholly-owned subsidiaries.

It said Tutt Bryant Group has entered into a conditional sale and leaseback agreement with TransLinQ Income in relation to five Australian properties for a total cash consideration of A$30.0 million ($35.1 million).

Tat Hong Heavyequipment has also entered into a conditional sale and purchase agreement to divest its entire 70 per cent interest in Hup Hin Transport Co to Hup Hin Capital for a total cash consideration of $20.6 million. We think these moves are part of Tat Hong's asset-light strategy and will allow the company to refocus in the face of a weaker Australian mining sector.

We maintain Hold with a $0.89 fair value estimate.

3. Yongmao Holdings

Broker: OSK-DMG

Listed back in 1999 on the Singapore Exchange mainboard, Yongmao Holdings is a China-based designer and manufacturer of tower cranes with a 22-year operating history. Tat Hong Holdings, a more well-known crane rental company of Singapore origins, owns 23.95 per cent of Yongmao, which they partner exclusively with for the requisition of cranes for rental in China.

We recently visited Yongmao's new crane manufacturing facilities in Fushun, Liaoning Province, China, which the group has invested 200 million yuan in. Spanning 240,000 sq m, the spacious new facilities have an annual production capacity of 400 tower cranes. The facilities have incorporated various elements of automation, such as robotic welding arms and a conveyor-based sandblasting and painting workflow.

Notably, Yongmao has also been nationally accredited as a top-grade tower crane manufacturer by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in China. Yongmao currently trades at 9.0 times FY2014 price-earnings.

The company's closest competitor, Zoomlion Heavy Industry Science and Technology, trades at 11.9 times FY2013 price-earnings. On the other hand, Tat Hong, involved in the more recurrent crane rental business, trades at 13.1 times FY2013 price-earnings.

Join ST's Telegram channel and get the latest breaking news delivered to you.