SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.
Broker: Maybank Kim Eng
CapitaLand (has made) a conditional offer of $2.22 per share to privatise 65.3 per cent-owned subsidiary CapitaMalls Asia (CMA). This exercise makes sense for CapitaLand for a number of reasons.
First, since its Nov 2009 IPO, CMA has been trading at deep discounts to its revalued net asset value (RNAV) despite its strong execution and steady earnings delivery. If the privatisation is successfully executed, it would be one of CapitaLand's most astute acquisitions, allowing it to leverage on CMA's retail expertise while keeping it as a key earnings driver.
Second, we believe the business streamlining will be positive for CapitaLand as it would be more synergistic to pursue integrated developments - similar to its suite of Raffles City - under one combined entity, rather than a consortium of related listed entities.
Third, this is a positive redeployment of the proceeds raised from the recent sale of Australand (about $1.5 billion). The only obstacle, in our view, is to achieve enough acceptances. Maintain Buy and target price of $3.85 for CapitaLand.
Since the start of the year, UOB has outperformed both its peers in the local banking sector. The stock has gained 3.7 per cent year-to-date versus -1.5 per cent for the industry average.
Earlier in the year, management guided for high single-digit loans growth and double-digit growth in fee income in financial year 2014. UOB will be releasing its Q1 results on April 30, and we are expecting net earnings of $724 million, down 6 per cent quarter-on-quarter and flat year-on-year.
Recently, the market seems to favor quality stocks, a reflection of the flight to quality, and we are increasing our peg back to our historical level of 1.4x now that the political tensions in Thailand and Indonesia have waned.
We are increasing our fair value estimate from $20.94 to $22.40. Maintain Hold.
3. Hotel Properties (HPL)
Wheelock Properties and Hotel Properties Limited co-founder Ong Beng Seng have formed a new joint venture company, 68 Holdings, which is making a general cash offer for HPL shares at $3.50 each.
This is a 11.8 per cent premium to HPL's last traded price and net asset value of $3.13. 68 Holdings has already secured a 41.91 per cent stake in HPL, largely from the above two shareholders.
We think this opportunistic bid is too low given that both HPL owns almost 3 hectares of prime land in Orchard Road.