Accordia Golf Trust (AGT SP) - UOB Kay Hian 2017-05-24: Watch MBK Take Its Swing

ACCORDIA GOLF TRUST ADQU.SI

Accordia Golf Trust (AGT SP) - Watch MBK Take Its Swing

Accordia Golf Trust (AGT) is the first business trust investing in Japan’s golf course assets that is listed on the SGX.
AGT’s sponsor, Accordia Golf (Accordia) is the largest player in Japan with an estimated 5.69% market share.
Owing to foreign exchange volatility and an absence of asset injection, share performance has been lacklustre. However, the recent privatisation of its sponsor, Accordia Golf, by MBK Partners has ignited interest surrounding potential asset injections or a privatisation attempt by MBK Partners.

Based on Bloomberg consensus, Accordia Golf Trust (AGT) is trading at 0.84x 2017F P/B with 7.7% dividend yield.

AGT’s sponsor, Accordia Golf (Accordia), is the largest golf course operator in Japan with 132 golf courses, 89 of which made up AGT’s initial portfolio. The appraisal value of AGT’s initial portfolio is about ¥151.0b with 86.0% of it situated in Japan’s three largest metropolitan areas.
Accordia’s strong branding and reasonable pricing have culminated in a high market penetration rate with 4.14m loyalty card holders as at 31 Mar 16 which represented about 57.5% of the total number of golfers in Japan.

3QFY17 utilisation rates averaged 79.6% (FY16: 77.9%) while the number of golf plays in Japan has remained stable over the last five years with an increasing proportion of seniors.
Golf’s return to the Olympics can have a positive impact on growing the game and generating greater youth participation as Japan prepares for the 2020 Summer Olympic Games (Tokyo 2020).
With the number of golf plays expected to remain steady in the medium term, AGT should see stable operating cash flows going forward.

With a ¥15b term loan maturing in Aug 17, management is already negotiating refinancing terms with its bankers. We expect the finalisation of favourable refinancing terms to lift investor concern with regard to DPU and set a precedent for other outstanding loans.
Management has guided that negotiations are on track and will be finalised a week before maturity date.

The recent privatisation of Accordia by MBK Partners (MBK) has reignited interest in AGT due to the possibility of new asset injections or a potential privatisation attempt by MBK.
We understand that the absence of new asset injections from its sponsor since its listing is largely due to AGT’s inability to secure financing at favourable rates.
We do not rule out the possibility of MBK securing new lines of credit for AGT or taking AGT private in an attempt to expand its golfing assets without the regulatory burdens that come with being affiliated with a listed entity.

Yeo Hai Wei UOB Kay Hian | Edison Chen UOB Kay Hian | http://research.uobkayhian.com/ 2017-05-24

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