Koufu Group - UOB Kay Hian 2021-03-15: Disposal Of Central Kitchens Could Lead To A Special Dividend

KOUFU GROUP LIMITED (SGX:VL6) | SGinvestors.io KOUFU GROUP LIMITED (SGX:VL6)

Koufu Group - Disposal Of Central Kitchens Could Lead To A Special Dividend

  • Koufu announced that it has granted an independent third-party purchaser an option to buy its properties at Woodlands Terrace for a consideration of S$11.8m. The sale of the central kitchens are in the light of the upcoming commencement of operations of its integrated facility by 2Q21. The properties’ valuation is within expectations and we estimate this could unlock gains of S$9m, which could bump up dividend.
  • Maintain BUY on Koufu (SGX:VL6) with an unchanged target price of S$0.77.



Proposed disposal of two central kitchens.

  • On 11 Mar 21, Koufu announced that is has granted an independent third-party purchaser an option to purchase its properties located at 18 and 20 Woodlands Terrace for an aggregate consideration of S$11.8m, to be satisfied fully in cash. The properties are its existing central kitchens and corporate headquarters. The proposed disposal is in line with Koufu’s intentions (highlighted in its prospectus) to sell the properties within two years from obtaining the Temporary Occupation Permit (TOP) for the property located at Woodlands Avenue 12, on which its integrated facility is being constructed.
  • Koufu expects the TOP to be obtained in 1Q21 and to commence operations from the integrated facility by 2Q21.


STOCK IMPACT


Property valuation is within expectations.

  • As highlighted in our initiation report Koufu Group - UOB Kay Hian 2019-03-08: An Overlooked F&B Empire, we expected the properties to fetch a combined S$10m, based on the average market price in similar transactions.
  • Similarly, Koufu's management highlighted that the purchase consideration took into account the valuation of the properties of S$10.1m, based on the independent valuation report of PREMAS Valuers & Property Consultants dated 22 Feb 21, as commissioned by the company.

Disposal of central kitchens should unlock value and open doors for special dividend.

  • We estimate that the sale could generate gains of S$9m (60% of 2021F earnings), which could bump up Koufu's dividend by up to 1.8 cents per share, or a dividend yield of 2.7%. This had not been factored into our earnings forecasts as the proposed disposal is subject to and conditional upon the written in-principle approval from the Jurong Town Corporation.


EARNINGS REVISION/RISK

  • No changes.

VALUATION/RECOMMENDATION



SHARE PRICE CATALYST

  • Easing of travel restrictions in Singapore and Macau.





John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-03-15
SGX Stock Analyst Report BUY MAINTAIN BUY 0.770 SAME 0.770



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