Tuesday, February 12, 2008
If you'd refered to my previous posting on Singtel, http://bear-analysis.blogspot.com/2008/02/singtel-very-interesting.html, I'd once again point out the stubborness of this counter.
Once again, it tested it's 200MA on the 06/02/2008 and it bounced back.
Did anyone got onto the boat that turned back? =)
Resistance would be around 3.96 and $4. Not much of a difference though, just another resistance technically in another counter.
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4 February 2008
Broker's Call
Allco Commercial REIT (Feb 4: 75.5 cents)
Maintain BUY.
Allco Commercial REIT (Allco)reported FY07 results. Allco reported gross revenue of S$75.2 million (+116% YoY) and net property income of S$61.4 million (+114% YoY). Full year distributable income amounts $47.5 million, translating to a DPU of 6.73 cents.
Acquisitions adding to top-line growth. FY07 result is better than the manager’s own forecast. Out-performance can be attributed to the better than expected contributions from 55 Market Street, Central Park, the capital distribution from AWPF as well as contributions from the Japan properties and Keypoint.
Better than our estimates. We were pleasantly surprised that Allco achieved much better results than our estimates (gross revenue +11%, NPI +5%, DPU +24%). The disparity is because we have incorporated much more conservative assumptions in our projections.
Asset growth. Allco grew its initial portfolio of 2 properties to 9 currently, with presence in Singapore, Australia and Japan. Revaluation gains of S$302.8 million boosted asset value from S$880 million to S$1.95 billion. NAV grew from $1.17 to $1.49 (+27% YoY).
Funding concern. As the acquisitions have been funded with debt, gearing is now 43.6%, well within the 60% regulatory limit. Allco has almost S$620 million of debt maturing this year and we note that Moody has recently downgraded Allco credit rating 1 level from Baa2 to Ba1 on refinancing concern as well as a weakened credit profile. In response, Management has mentioned they are on course to obtaining refinancing before the debt maturity date and Allco is well within the covenants set out in the regulatory guidelines.
Management plans. Management has indicated the key focus for 2008 will be on consolidating the property portfolio. Attention will be on driving organic growth and redeploying capital to higher growth assets. We believe that would mean more attention on managing the properties and slowing the pace of acquisition, which we feel is a timely move given the current market condition where acquisitions may be tight.
Valuation and recommendations. Refinancing risk is our top concern amid the volatile credit market. However, we remain very much positive on the outlook of Allco. Asset value more than doubled in the past year driven by acquisitions and revaluation gains in the strong property market. We believe management effort on active portfolio management comes well suited after a trail of acquisitions. In view of the volatile market conditions, we raised our assumptions for beta and risk premium in our DCF model. Fair value is lowered from $1.60 to $1.21. Fundamentally, we see no reason for the falling share price and recognise great value at the current price which is at a 50% discount to NAV and offers an attractive yield of 12%.
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11 February 2008
Insider Moves
Capital Group trims stake in Allco Commercial REIT
By Nova Theresianto
The steep fall in Allco Commercial REIT’s share price over the last few months isn’t stopping the Capital Group of Companies Inc from trimming its holdings.
According to filings with the Singapore Exchange, the US-based fund management giant sold 8.3 million units in the beleaguered real estate investment trust (REIT) on Jan 30 and Feb 1. Following the sale, The Capital Group holds 69.7 million units, or 9.9%, of Allco Commercial, according to the filings. Its last purchase of units in the REIT was on Jan 18, when it bought 1.8 million units.
Amid the turmoil in financial markets over the last few months, many REITs have had difficulty raising money to expand their investment portfolios and distributions per unit (DPUs). In November, Allco Commercial called off a rights issue. The month before, it had acquired KeyPoint, an office building on Beach Road, for $370 million. The acquisition had pushed its gearing up to 46%. According to analyst reports, the REIT has borrowings of $882.2 million, of which $615.9 million has to be repaid within a year.
To make matters worse, Allco Commercial’s parent in Australia, Allco Finance Group, which holds a 15.8% stake in the REIT, is also heavily leveraged and has been facing trouble getting refinancing. Shares in Australia-listed Allco Finance have fallen dramatically in recent weeks, triggering margin calls that have forced the sales of shares in Allco Finance owned by a key shareholder Allco Principals Investments. In the past 12 months, shares in Allco Finance are down nearly 80% to A$2.96 ($3.80) last week.
Meanwhile, rating agency Moody’s downgraded Allco Commercial’s corporate family rating by one level last month, from Baa3 to Ba1, which is “junk” status. That leaves Allco Commercial facing the risk of having to refinance its debt on less favourable terms in the future, or raising fresh equity at the current depressed prices. It could also force it into selling its portfolio of nine office and retail properties in Singapore, Japan and Australia.
Units in Allco Commercial were down 32% over the past year. At current levels, they are trading at a distribution yield of over 12%, and a discount to net asset value of more than 50%, according to analysts’ reports.
Allco in talks on buyout
Scott Rochfort
February 12, 2008
Macquarie Group is in talks with Allco Finance to buy out the troubled billion dollar infrastructure and investment group whose shares have been battered by the fallout from its exposure to debt markets.
Allco, led by the chairman David Coe, put its shares in a trading halt as the market opened yesterday, sparking rumours over its future ahead of its results later this week. It emerged later in the day that Macquarie had approached Allco about a possible buyout in a move to take advantage of a 75 per cent slump in its shares over the last year.
Since its castratrophic fall last month to $1.70, the company has staged a minor recovery, closing at $3.05 last week.
Allco and Macquarie declined to comment on the rumours. "The company doesn't want to add anything to the announcement," said an Allco spokesman, Ian Brown.
Macquarie said it did not comment on market speculation.
Allco also put the hybrid securities (AHUGA) in a trading halt, fuelling speculation the pending announcement would relate to a David Coe- and Allco senior management-owned investment vehicle, Allco Principals Trust, which had its stake in Allco Finance and Allco HIT subjected to margin calls last month.
There was also speculation during the day of a management buyout, later discounted given the volatility in the company's share price, which has also affected the executive team's own shareholdings via margin calls on the value of their stakes.
It has been rumoured that Allco management is keen to ensure the company's share price does not fall further, after Allco Principals Trust won a reprieve from its two remaining margin lenders.
The speculation has been fuelled by the recent re-emergence of the Allco founder John Kinghorn, who raided the company's share register for a 6.8 per cent stake at a bargain price last month. A management buyout proposal, one observer said, could a help put a floor under Allco Finance's share price and keep the margin lenders at bay.
"They need some circuit-breaker to stop the stock from going into freefall," he said.
Mr Kinghorn left Allco a decade ago to build up his RAMS home loan business. Some market watchers believe the $650 million Mr Kinghorn earned from the float of RAMS last July could help fund the buyout of Allco. His remaining 20 per cent stake in RAMS has lost about 88 per cent of its value since the company's listing on the stock exchange.
Some market watchers were circumspect on the talk of a buyout. "Given the issues the company has got, if they can fund $1 billion to purchase the firm I'd be very surprised," one said.
There are fears a planned announcement by the firm when the trading halt is lifted could contain nasty surprises before its half-year results briefing on Friday.
These fears were reflected in the trading of other Allco-related stocks, such as Rubicon American Trust which slumped 8.5c to 27c, Rubicon European Trust, which fell 5c to 27.5c, and Allco HIT, which fell 1c to 56c.
Allco extends share trading halt
February 13, 2008 - 10:13AM
Allco Finance Group has extended the trading halt in its shares initially placed last Monday.
Allco has made the request for suspension because stock exchange policy does not allow an extension to the two-day limit applicable to trading halts.
Allco ordinary shares initially were placed in a trading halt from the commencement of trading on February 9.
Allco has asked that the suspension remain in place until it is in a position to make a further announcement to the market, the company said in its letter to the Australian Securities Exchange.
In recent weeks, Allco's stock price has been hammered by investors concerned about the level of debt used in its complex investment strategy.
The run on its shares was accelerated by margin calls.
Allco generates its earnings from aircraft and ship leasing businesses, along with funds management.
Its announcement of a trading halt two days ago sparked speculation the troubled finance firm might be preparing for a management buy-out or a merger.
Both Macquarie Group and Babcock & Brown have been reported as likely suitors.
Allco is due to report is half-year results on Friday.
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