Sinamars Land Limited - Phillip Securities 2016-06-27: Minimal impact from BREXIT

Sinamars Land Limited - Phillip Securities 2016-06-27: Minimal impact from BREXIT  SINARMAS LAND LIMITED A26.SI 

Sinarmas Land Limited - Minimal impact from BREXIT

What’s the news?

  • A referendum took place in the UK on 23 June 2016, where British citizens voted on whether the UK should leave or remain in the European Union. 52% of voters voted to leave while the rest voted to remain. 
  • Following referendum results, the GBP/SGD currency pair fell sharply to a low of 1.83 from 2.00, before finding support at 1.85.

How do we view this?

Weaker GBP translation caused by BREXIT has minimal impact on group’s overall performance. 

  • Rental revenue from SML’s two UK investment properties (Alphabeta Building and Warwick House) contributed less than 2% to Group’s total revenue in FY15. The 8% depreciation in GBP/SGD (2.00 to 1.85) translates to a revenue decline of 0.2% in our revenue forecast which will have minimal impact on the group’s overall performance.

Weaker GBP translation led to lower asset values of two UK properties and a reduction in projected RNAV. 

  • Factoring in a weaker GBP translation in our FY16E RNAV projections and keeping the rest of our assumptions intact led to a downward adjustment of S$0.02 to asset values of the two UK properties, representing a 1.2% reduction in total RNAV. These two properties made up 18% of the group’s total RNAV before the adjustments were made and 17% after adjustments.

Investment Actions

  • We maintain our BUY rating with a $0.02 reduction in TP to $0.72 (S$0.74 previously) based on our SOTP RNAV estimates, to take in account of a weaker contribution of rental income from the group’s two UK properties which has led to lower asset values in our projections. 
  • In the grand scheme of things, the impact is minimal to the group’s total revenue and prime offices in London will continue to benefit from the positive demand and supply dynamics in the near term (mentioned in a previous report published on 25-Apr-16).

Peter Ng Phillip Securities | 2016-06-27
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.72 Down 0.74