• We forecast DPU of JPY1.40
• No major surprises expected
• Reaffirm Buy (1), SGD0.96 TP
■ What’s new
AGT is scheduled to announce its 1Q FY16 results on 14 August, before market hours.
■ What’s the impact
We forecast an overall distribution of JPY1.54bn, or a distribution-perunit (DPU) of JPY1.40. AGT has a semi-annual distribution policy, so the 1H FY16 distribution (for the period 1 April to 30 September) will only be distributed in late-2015.
The financial results of AGT’s sponsor, Accordia Golf (2131 JP, JPY1,307, Outperform ), announced on 10 August, provide some assurance, in our opinion, that AGT is unlikely to report any negative surprises. Although the sponsor’s financial results were distorted by the YoY operating comparisons after the spinoff of its 89 golf courses to AGT, the company acknowledged that both operating revenue and operating profit were “trending ahead of the company’s (internal) targets”. Moreover, the average revenue per visitor was trending flat (YoY). Please refer to our 10 August note, Golf course acquisitions and sales yet to ramp up. We believe this is an encouraging sign since AGT’s 2H FY15 performance was adversely affected by a slight decline in revenue per visitor (vs. the prospectus forecast).
One uncertainty for FY16 is the payout ratio. AGT’s stated policy is 100% (of distributable income) for FY15 and at least 90% from FY16. We have assumed 100% for FY16 and FY17 as the distributable income already takes into account budgeted capital expenditures.
Another uncertainty is the possibility that AGT could enter into a foreign exchange hedge for the 1Q distribution. We have assumed a JPY/SGD rate of 93 in our forecasts for FY16-18E, vs. the current spot exchange rate of 89. AGT might also announce a change in its foreign exchange hedging policy (the current policy is not to hedge any distribution).
Our 1Q FY16 DPU forecast represents an annualised, recurrent DPU of JPY5.6, which is slightly ahead of AGT’s normalised DPU of JPY5.5 (according to its most recent results presentation). Our FY16 forecast is higher than the annualised figure because we also assume some contributions from golf-course acquisitions (of JPY15.9bn). AGT has not announced any acquisitions to date.
■ What we recommend
We maintain our Buy (1) rating and DDM-derived 12-month target price of SGD0.96. We believe AGT represents deep value, with a recurrent DPU yield in excess of 9% pa even if it does not make any acquisitions. The main risk to our call: an inability to make any acquisitions in FY16.
■ How we differ
We are the only research house covering AGT. (Read Report)
Source : Daiwa Capital Markets
Labels: Accordia Golf Trust, S-REITs