Bund Center - RHB Invest 2016-05-19: An Overlooked Gem

BUND CENTER INVESTMENT LTD BTE.SI

Bund Center was spun off from AFP Land (which has since been re-named Sinarmas Land) and listed on the Singapore Exchange in 2010.
The company owns prime commercial assets in Ningbo and Shanghai.
Bund’s crown jewel is its namesake mixed development in Shanghai, comprising a 43-storey office tower with 1,414,600 sf of gross floor area and a 570-room five-star hotel managed by Starwood under the Westin brand. Due to its superb location, both the hotel and office have consistently achieved high occupancies and rates.

Bund boosts a strong balance sheet with a net cash position of S$65m and generates a recurring rental stream of S$50-60m.
And while dividends have been lumpy, the company has been generous in rewarding investors, dishing out S$130m in dividends over the last 2 years.
We expect the group’s hotel operations to receive a further boost to its earnings with the opening of Disneyland Shanghai, which is expected to attract an annual 10 million visitorship to the park based on initial estimates.

Perhaps most glaring is the sharp valuation discount of the stock relative to its net asset value.
Bund adopts a conservative accounting policy of valuing its properties at cost less accumulated depreciation.
Based on its latest accounts, its Shanghai and Ningbo properties are carried at a total book cost of S$448m. This compares to independent market appraisal of S$2.1bn, giving rise to a whopping S$1.65bn surplus.
Imputing this valuation surplus and following a recent 4- into-1 share consolidation, Bund’s RNAV/share stands at $2.78.
At current price of S$0.70-0.80, the stock is trading a massive 70-75% discount to its RNAV.
We think the stock is massively undervalued and could trade up to $1.11 based on a 60% discount to its RNAV.

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-19

RHB Invest SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 1.11 Same 1.11

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