Accordia Golf Trust - CIMB Securities 2016-07-12: Tailwind from stronger yen

ACCORDIA GOLF TRUST ADQU.SI

Accordia Golf Trust - Tailwind from stronger yen

Accordia Golf Trust AGT’s sponsor is the top golf course operator in Japan and has injected 89 golf courses into AGT.
Bloomberg consensus puts forward dividend yield at 11.6% and forward P/BV at 0.64x.
Loan-to-valuation ratio of 28.8%. Management targeting accretive acquisitions from sponsor.
Targeting ¥50bn worth of acquisitions by end-Mar 17.

Dividends are derived in yen and paid in S$. Company does not hedge exchange rate.

We visited AGT recently for an update post its first full-year results (IPO was in July 2014). AGT’s full year DPU was 6.63 Scts.
A warmer winter and favourable weather conditions offset the lower visitorship to its golf courses in 2Q due to the longer rainy season.
Demand from its senior customer base was steady. Utilisation rate for its golf courses was around 78% in FY3/16. Visitorship at 5.81m was also the highest in 6 years.

Based on Bloomberg consensus expectations, AGT trades at a forward dividend yield of 11.6% and a forward P/BV of 0.64x.
Dividend payouts are in yen and are converted into S$ at the exchange rate on the payment date.
After due consideration, AGT opines that it is better not to hedge the exchange rate exposure at this point in time. Naturally, the strengthening Yen provides some translation upside.

AGT’s sponsor is the number one golf operator in Japan and has a stabilised portfolio of some 26 golf courses available for acquisition. AGT’s target is to acquire 50bn yen worth of golf courses by end-Mar 17.
Its loan-to-valuation (LTV) ratio currently stands at 28.8%. The maximum LTV ratio that AGT can leverage up to is 60.0%. AGT has been in ongoing negotiations with its sponsor and the company believes that its ability to conclude some accretive acquisitions could re-rate its share price.

AGT derives all its revenue and expenses in Japan in JPY. Its debts are also entirely denominated in yen. About 77% of its debts have been swapped into fixed rates.
AGT’s weighted average interest rate is 1.94% per annum. There are three term loans maturing in Aug 17, Aug 18 and Aug 19, respectively.

Other than the exchange rate translation risk from yen into S$ for the dividend distributions, other key risks highlighted by AGT include
1. poor weather which affects revenue,
2. ownership, registration and land-related issues, and
3. lack of organic growth opportunities.
We note that there has been some progress on risk number 2.
Not Rated.

William TNG CFA CIMB Securities | http://research.itradecimb.com/ 2016-07-13

CIMB Securities SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998