Guocoland - CIMB Research 2016-10-28: Expanding geographic footprint

Guocoland - CIMB Research 2016-10-28: Expanding geographic footprint GUOCOLAND LIMITED F17.SI

Guocoland - Expanding geographic footprint

  • GUOL has announced a potential participation in 27% of the enlarged Eco World International Bhd (EWI).
  • This will expand GUOL’s geographic exposure to the UK and Australia.
  • Maintain Add with an unchanged RNAV-based TP of S$2.59.

Potential participation in EWI.

  • GUOL has announced that it has entered into a conditional Shareholders’ Agreement with Eco World Development Group and Tan Sri Liew Kee Sin in relation to a potential participation in the planned IPO of Eco World International Bhd (EWI) on the Main Market of Bursa Securities. 
  • Under this agreement, GUOL will be a strategic investor in EWI with a 27% stake of the enlarged capital of EWI.

EWI has projects in UK and Australia

  • EWI owns 75% stakes in three ongoing property development, largely residential, projects in London and a 100% stake in one ongoing project in West Sydney, Australia. These projects have a combined gross development value is £2.4bn (S$4.1bn). 
  • As at Oct 16, EWI’s cumulative sales (including reserved units) from the four projects are approximately £1bn (S$1.7bn).

Diversifying geographic footprint through a scalable platform

  • We think this strategic investment will not only broaden GUOL’s current footprint in Asia (Singapore, China, Malaysia and Vietnam) to new and deep markets, such as the UK and Australia, but the diversification will help provide GUOL with scale and immediate exposure to ongoing developments, as 41% of the development value of the four projects already locked in through pre-sales.

GUOL’s balance sheet is strong with gross cash hoard of S$1.1bn

  • The total amount of GUOL’s potential participation in the EWI IPO shall be determined after the latter’s price has been fixed. GUOL intends to fund its stake with internal resources. 
  • The group’s gearing stood at 0.9x as at end-1QFY17, with a gross cash hoard of S$1.1bn.

Maintain Add

  • We leave our FY17-19F earnings estimates and RNAV unchanged, pending more details and completion of the transaction. 
  • We maintain our Add call with an unchanged RNAV-based target price of S$2.59.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2016-10-28
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 2.590 Same 2.590