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Ezra Holdings (HOLD; Target Price: S$1.28)

Following its trading halt on Friday, Ezra Holdings announced that it has entered into a placement agreement with Credit Suisse and DBS Bank in order to raise capital. 110 million shares (12.7 per cent of existing share capital) will be placed to institutional and other investors, as well as existing members of the company at an issue price of S$1.10. After deducting associated costs and expenses, the placement is expected to raise about S$118.8 million for Ezra. The group intends to use the funds for general working capital and corporate purposes and/or business opportunities, strategic investments, JVs and/or the paying down of existing debt, capital expenditure or vessel acquisitions. As mentioned in our 16 January 2012 report, out of Ezra’s US$357.5 million short-term debt, we estimate that about US$140 million of this comprises mainly vessel loans (secured debt) that may be rolled over to a longer term. However, embedded within its US$647.3m of long-term debt is a 4 per cent convertible bond issue (US$100m) which bondholders are likely to redeem. Along with capex of about US$150-175 million this year, we estimate the group would need to prepare at least US$460 million for these purposes. After taking into account Ezra’s cash level of US$116 million, this placement, and its recent divestment of Ezion shares, the group may still need at least US$207 million more funds by the end of this year. This could be supported by divestment of non-core assets, as well as the debt markets. – OCBC Investment Research


Global Logistic Properties (Not Rated)

Media reports have suggested that GLP is looking to list some of its Japanese assets in Tokyo as a REIT in an IPO that could raise US$1 billion. Management clarified that while it is studying various options, no decision has been made. GLP joined hands with China Investment Corporation (CIC) last December to acquire a portfolio of 15 logistics assets from Lasalle Investment Management in a US$1.6 billion deal. These properties, however, are not expected to be the seed assets for the potential IPO. In our view, an IPO would free up capital to be redeployed into China, which should see stronger growth. It will also allow GLP to build up its fund management expertise. Despite Beijing recently lowering its 2012 GDP growth forecast to 7.5 per cent, we believe that the economic restructuring will spur domestic consumption, and hence lead to continued strong demand for GLP’s warehousing space. Currently, e-commerce operators Amazon and Vancl are among its top three tenants in China. Bain & Company estimates that online shopping in China will grow at 48 per cent per annum from 2010 to RMB1.5 trillion next year, potentially overtaking the US as the world’s largest e-commerce market. This should fuel demand for modern logistics facilities. As at last December, GLP has a cash position of US$1.8 billion with net gearing of 0.33x. Proceeds from the potential IPO could further fund the capex needed to grow in China. In addition, GLP is one of the first Singapore-listed companies to tap on the demand for perpetual securities, raising S$750 million from the issue of 5.5 per cent perpetuals last December and this January. As its properties are long-term assets, this should provide for better asset-liability management. – Maybank Kim Eng Research


Goodpack Limited (BUY; Target Price: S$2.65)

Goodpack’s recent pact with General Motors South Africa may spark the implementation of its IBC (international bulk container) solution within the GM Group and the auto industry. We are the first in the market to try to quantify the size of this potential market and what it means for Goodpack. Assuming a trajectory similar to its synthetic rubber market, Goodpack will be a US$1.8 billion market cap company within 3 years, implying share price of S$4.00. Management may have to consider spinning off its IBC fleet into a business trust to fund aggressive fleet expansion. This is a positive development as it would provide a long-term capital recycling engine to power its growth. At current price, investors are paying only for conservative cash flow over five years, which provides a fantastic entry price to ride Goodpack’s next phase of growth. We expect the stock to re-rate above its mean PER (price earnings ratio) of 17x over the next 12 months. – Maybank Kim Eng Research


Orchard Parade Holdings (Not Rated)

In the latest management reshuffle, Orchard Parade Holdings (OPH) announced that Lucas Chow, an executive director at Far East Organization, has been appointed chief executive officer and managing director of the group while Vincent Yik will be taking over as chief financial officer. Danny Peh will relinquish his post of group financial controller within OPH and take on new and expanded responsibilities within parent Far East Organization. With the latest change, we believe Orchard Parade will play a more active role in its property development and hospitality businesses, as previously the group did not have such a CEO position. On the property development front, OPH has tied up with its parent on several joint venture projects in recent years, including a 30 per cent stake in 7 and 11 Bassein Road, a 20 per cent stake in EuHabitat and a 20 per cent stake in the land parcel at Robinson/Cecil Street. The Floridian, a 60:40 JV project with Wing Tai is nearing completion and will provide good cashflows for the group to further grow its property development business. On the hospitality front, OPH is exploring a potential injection of its hotel assets into a hospitality REIT that FEO is mulling. OPH is also considering restructuring its business and business strategy should the REIT go ahead. Such a spinoff will help to unlock value and allow OPH to monetise its assets at a good price and recycle capital to further grow its property development business and F&B arm under Yeo Hiap Seng. Stock is currently trading at a 42 per cent discount to our RNAV of S$2.99. – DMG Research


Wheelock Properties (BUY; Target Price: S$1.87)

Wheelock Properties (Singapore)’s CEO, the late David Lawrence, passed away on 4 March 2012, at age 65. In a filing to the SGX, the company placed on record the outstanding and significant contributions made by its late CEO. When Lawrence first took over as MD in 1996, Wheelock (then known as Marco Polo Developments) was a smallish developer with a hotel (Marco Polo Hotel) and a commercial property (Lane Crawford Place). Over the years, under his charge, shareholders’ funds grew from S$500 million to S$2.9 billion over a 15-year period, representing a compounded growth of 12 per cent in NAV per annum, handily beating its peers in the sector. David Lawrence’s keen sense of the property cycle and ability to time the market well was instrumental to this track record. At the same time, he successfully established Wheelock as a developer with a strong brand for prime quality projects, with the ability to command a pricing premium for its projects. Using the billion-dollar profits from its Ardmore Park project, Wheelock went on to acquire a string of residential sites on the eve of a property upturn in 2003-2006. These were subsequently launched as the Grange Residences, The Seaview, Cosmopolitan, Ardmore II, Orchard View and Scotts Square. On our estimates, Scotts Square alone contributed close to a billion dollars of pretax profits, if one were to include the revaluation gains from its retail component. We looked at implications for the group with the CEO’s demise, from succession planning to future strategy and re-visit a possible privatisation scenario by the parent. On the immediate issue of succession, we believe any successor is likely to be sourced internally, either from within Wheelock Singapore or someone from its Hong Kong parent. Two senior executives within Wheelock, executive directors Ms Tan Bee Kim and Mr Tan Zing Yan are potential candidates for the CEO position. Both have worked in the company for over 15 years, overseeing key functions such as project marketing, asset management and investments and risk management. While replicating David Lawrence’s track record will be no easy feat, the potential successor will inherit a portfolio of quality assets with a strong balance sheet. – DMG Research


Wilmar International (HOLD; Target Price: S$5.15)

Wilmar International Limited (WIL) saw its share price tumble 17.1 per cent, after reporting a muted set of 4Q11 results on February 22, to hit a recent low of S$4.86. YTD, the stock is down 0.6 per cent compared to the STI’s 12.6 per cent rally. While we believe WIL’s operations should not worsen from here, it is notable that management continues to maintain a slightly cautious tone. WIL’s Oilseeds & Grains business is especially challenged because of the margin pressures it is facing in China, as a result of prevailing excess capacity. WIL recently announced that it has paid A$115 million to acquire a 10.1 per cent stake in Goodman Fielder, Australasia’s leading listed branded food company, to become its largest shareholder. WIL said it is currently assessing whether to increase its stake Goodman, which produces baked goods, dairy products, home ingredients and commercial food products. WIL added it will work with Goodman’s management to increase collaboration between the two groups over time. However, while there are potential synergies between the two groups, any potential collaboration would take time to crystallise and a further increase in stake in Goodman could possibly face scrutiny from the Australian authorities. Hence, we hold off adjusting our estimates since any synergistic boost to WIL’s earnings would not happen in the near term. – OCBC Investment Research