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

Bund Center - RHB Invest 2016-05-19: An Overlooked Gem BUND CENTER INVESTMENT LTD BTE.SI 

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

An Overlooked Gem. 

  • 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’s other asset is a six-storey retail complex in Ningbo. 

Solid financials with a further boost from opening of Disneyland Shanghai. 

  • 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. 

70-75% discount to revalued NAV. 

  • 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