CWT Ltd - OCBC Investment 2017-04-05: Still waiting for clarity over strategic review

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CWT LIMITED C14.SI

CWT Ltd - Still waiting for clarity over strategic review

• On-going discussion with HNA group.
• Fairly valued based on fundamentals.
• Maintain HOLD.

Almost a year since CWT announced exclusive talks with HNA 

• It has been more than 1.5 years since CWT Limited (CWT) announced that the shareholders of C&P Holdings Pte Ltd (C&P) are considering a strategic review of business and assets. 
• C&P subsequently entered into exclusive negotiations with HNA Group on 16 May 2016, which may or may not lead to any transaction. 
• For now, this strategic review remains a key catalyst, although there are still no official details or further information. 
• Since 16 May 2016, CWT has been trading within the range of S$1.88-S$2.20.

HNA plans to take 35% stake in Singapore REIT 

• On 21 Mar this year, HNA Group announced that it is planning to buy at least a 35% stake in an Asia-focused REIT that will list in Singapore and will also take a 75% stake in the REIT’s management company formed with Singapore-based AEP Investment Management Pte Ltd (AEP). The latter owns commercial and industrial real estate properties. 
• Recall in Nov 2016, Bloomberg News reported that AEP was considering listing some of its assets through a Singapore IPO and may possibly include properties such as StarHub Green Business Park.
• If this new REIT has the mandate to acquire industrial properties, there is the possibility for HNA to unlock potential synergy between the REIT and CWT – HNA will be able to recycle capital by divesting CWT’s logistics properties into the REIT.

Unchanged FV of S$1.95 

• All said, without firm details, these transactions may or may not materialize. Based on current fundamentals, CWT is fairly valued at yesterday’s closing price. However, we believe it makes sense for existing shareholders to continue holding CWT shares for any potential upside from the strategic review. 
• The new mega logistics hub is still on track to complete in 1H17, but it will take time to ramp up occupancy, possibly pressuring margins in the near-term. 
• Maintain HOLD with an unchanged FV of S$1.95.

Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2017-04-05

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.950 Same 1.950