Attachment 1 - Accordia Golf Trust

COMPANY UPDATE
Accordia Golf Trust
Singapore
Monday, 24 October 2011
( AGT SP; ACCO.SI )
Not rated
Price as of 10 Apr 2015
0.770
12M target price (S$)
-
Previous target price (S$)
-
Upside, incl div (%)
-
Trading data
Market Cap (S$m)
846.3
Issued Shares (m)
Ave Daily Traded
(3-Month) Vol / Val
52 week lo / hi
Free Float
1,099.1
1.7m / $1.3m
$0.73 / $0.93
71.1%
Major Shareholders
Accordia Golf Co Ltd
28.9%
Goldman Sachs Group Inc
11.1%
Morgan Stanley
Daiwa Securities Group Inc
8.0%
7.2%
Poised for a bounce back
Recently listed on 1 Aug 2014, Accordia Golf Trust (AGT) has retreated 21%
from its IPO price, which outweighed the 7.4% depreciation of the JPY
against the SGD. Due to the large correction, we think that AGT is currently
trading
at
an
attractive
yield
of
8.7%
ex-distribution.
*We use an exchange rate of 88.4 SGDJPY for our calculations
Attractive 8.7% recurring yield ex-distribution. Including one-off items, we
look forward to the forecasted distribution accrued for the period Aug-14 to
Mar-15, amounting to JPY5.49b (~5.65 S cents) that will be paid by June.
Without the one-off items, AGT estimates a recurring distributable income
of JPY6.06b (6.23 S cents) in FY15, or 8.7% yield ex-distribution. AGT had
slightly weaker results in Aug-Dec 2014 due to the unusual bad weather.
Moving forward, results may improve as utilization rates have been steadily
improving. AGT encourages the growing senior population to play on
weekdays (utilization on weekends may be full depending on the season).
Also, AGT has been attracting female golfers to the male-dominated sport,
and may roll out promotions to the younger crowd during summer when
utilization is lower.
12-Mth AGT SP (Blue) vs. FSSTI
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
Mar-15
Jan-15
Feb-15
Dec-14
Oct-14
Nov-14
Sep-14
Jul-14
Aug-14
3,700
3,500
3,300
3,100
2,900
2,700
2,500
Source: Bloomberg
Financials & Key Operating Statistics
YE Mar (JPY bil)
2011 2012 2013
Revenue
Operating Profit
Total profit
EBITDA
Borrowings
Total Assets
BVPS (Scts)
Gearing (%)
Price / Book (x)
56.4 54.3 54.2
8.5
9.1
9.4
5.3
5.8
6.0
12.1 12.5 12.7
43.1 43.1 43.1
177.6 177.1 179.5
84.9 84.9 84.8
24.3 24.3 24.0
0.9
0.9
0.9
Source: Company Data, KGI Fraser
Hong Wei WONG
wonghongwei@amfraser.com.sg
+65 6236 2850
Aug-Dec
CY2014
23.6
5.2
3.6
6.8
43.2
183.1
86.7
23.6
0.9
Upside catalysts with huge acquisition pipeline and Olympics. AGT targets
to acquire JPY50b of assets by Mar-2017, adding on to the existing portfolio
of JPY160b. We believe that such acquisitions will be highly accretive at 5%
net yield (pre-tax) as AGT is looking to acquire at 8.3% net operating income
yield (in-line with its current portfolio) while management intends to fund
acquisitions by taking debt, which we think may cost 3%-3.3%. Other upside
catalysts include the addition of golf into the Olympic Games 2016 and the
Olympics Games 2020 that will be held in Tokyo.
Sheltered from several macro risks. ~77% of debt are hedged till at least
2017, and we believe borrowing costs may remain low in Japan for a long
time given the ultra loose monetary policy. Consumption tax hike has not
impacted sales, and AGT could fully pass through the tax to customers.
Priced at attractive 8.7% yield ex-distribution compared to REITs. Due to a
lack of listed golf comparables, we examine the differences with SREITs.
Aside from differences in the REIT and the business trust structure, AGT’s
golf assets may not be as easily transacted and liquid as properties that are
owned by REITs. However, 80% of AGT’s golf courses are on freehold land
instead of leasehold seen in most REITs. As opposed to REITs with rental
escalations clauses, we think that AGT could increase its revenue through
higher utilization and materializing the huge acquisition potential. If
investors could hedge the currency risk, AGT offers 290bp pickup compared
to the average SREIT which typically yield ~5.8%, which is extremely
attractive and more than compensates for the differences, in our view.
Please see important disclosures at the end of this publication
Singapore
Accordia Golf Trust
A few angles we pondered
Who has been selling down AGT? From the original 58.8% allocation at IPO,
Japan retail investors have been selling AGT shares and we estimate that this
group of investors currently still own 35% of the total shares. Other than
flipping allocated shares post-IPO, AGT management thinks that AGT shares
could have been sold in order to recognise losses to minimize tax liabilities, as
the Nikkei 225 has run up and Japanese investors are liable for capital gains
taxes. On the buying side, we note that recently Goldman Sachs has increased
its stake to more than 7% direct interest (with 11% indirect interest) while
Morgan Stanley also boosted its indirect stake to more than 8%.
Stabilising yen. Since the BoJ undertook a more accommodative monetary
stance in Oct 2014, JPY depreciated ~10% against the SGD but subsequently
stabilized to recover some grounds.
Figure 1: SGDJPY since IPO
94
92
90
88
86
84
82
80
78
76
1/8/2014
1/9/2014
1/10/2014
1/11/2014
1/12/2014
1/1/2015
1/2/2015
1/3/2015
1/4/2015
Source: Bloomberg
Captive audience to F&B. AGT offers F&B at its premises, which constitutes
23.6% of total revenue. During our site visit, we realized that golfers are largely
captives of Accordia’s restaurants due to a lack of nearby alternatives, and also
because of the hassle to travel far out and back to be in time for the next
game.
Possibility to attract foreign players. Currently, Accordia does not attract many
foreign golfers, and we note that non-Japanese languages (e.g. English,
Chinese) are infrequently used on signboards and maps. Japanese golfers may
frown on foreign golfers, as a site general manager shared an example of
Japanese golfers objecting to American golfers who spot tattoos.
Nevertheless, these issues could be resolved (in the example, the site general
manager requested the American golfer to wear full-body clothing to cover up
the tattoo). In the medium to long term, golf in Japan could boom with the
government targeting to attract 20m visitors in 2020.
Background on pipeline from sponsor. In the acquisition pipeline, the sponsor,
Accordia, has 26 golf courses under the Accordia brand and under the nonAccordia brand there are 17 golf courses and 22 driving ranges. Accordia is the
largest golf operator in Japan, and AGT is likely to benefit as the sponsor aims
to sell at least JPY40b in assets to stay asset-light.
April 13, 2015
2
$ 222
Singapore
Accordia Golf Trust
Figure 2: Location of AGT’s golf courses
Source: Company
Unbeatable yield compared to peers. AGT offers the highest yield amongst the
Japanese yield stocks listed on the SGX. In spite of a lower 10Y government
rate in Japan than Singapore, the SGX-listed Japanese yield stocks trade at far
higher yields than SREITs. We note that J-REITs listed in Japan trade at 3-4%
yield. As such, there may be significant upside potential if the market begins to
appreciate and rerate the SGX-listed Japanese yield stocks.
Figure 3: Yield-comparison
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Accordia Golf Trust Croesus Retail
Trust
Saizen REIT
SREITs
SG 10Y rate
Jap 10Y rate
Source: Bloomberg
April 13, 2015
3
$ 333
Accordia Golf Trust
KGI’s Ratings
Disclaimer
Singapore
Rating
Definition
KGI Fraser Research’s recommendations are based on a Absolute Return rating system.
BUY
>10% total return over the next 12 months
HOLD
-10% to +10% total return over the next 12 months
SELL
<-10% total return over the next 12 months
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April 13, 2015
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