Accordia Golf Trust - Weather-related disruptions hit 2Q FY16 results

Declares 1H FY16 DPU of SGD0.0232; 2Q DPU below forecast

■ Cutting our DPU forecasts by 5-7%, lowering TP to SGD0.88

■ Weather-related volatility aside; reiterate Buy (1) rating

What's new:
AGT announced its 2Q FY16 results on 12 November, after market hours. AGT reported a 1H FY16 DPU of JPY2.02 and unitholders will receive the semi-annual distribution of SGD0.0232 on 15 December 2015 (the payment date). The ex-date for the DPU is 27 November 2015. Investors should also note that AGT’s distribution is normally higher in the second half of its financial year due to seasonal factors.

What's the impact:
The 2Q FY16 DPU of JPY0.58 was 57% lower than our forecast (based on our pro-rated FY16 DPU forecast excluding acquisitions). The major source of the negative variance came from lowerthan-expected revenue (8% below our forecast and 6% below management’s forecast) due to unfavourable weather conditions in the quarter (especially in September), with typhoons causing unprecedented heavy rains in some areas, according to management. The DPU was also after a 10% distribution retention ‘for unitholders’ benefit’, vs. our forecast of only a 5% retention.

Post the results announcement, we revise down our FY16-18 DPU forecasts by 10-12% in JPY terms and 5-7% in SGD terms.

The downgrade comes from a combination of:
1) lowering our revenue assumptions (due to the negative weather-related impact on 2Q FY16 operating performance),

2) reducing our payout assumption to 90% from 95%, and

3) scaling back our acquisition assumptions from JPY15.9bn to JPY7.9bn for FY16 and from JPY26.9bn to JPY 23.8bn for FY17 (with the financial year winding down, AGT has not announced any acquisitions).

In view of the recent strength of the JPY against the SGD, we also revise our JPY:SGD exchange rate assumption for all future periods to 88 (obtained from the current SGD/USD spot rate and the Daiwa JPY/USD forecast [in the 30 October 2015 issue of Yen 4Sight] of 125 for end-June 2016) from 93 previously. We estimate that the stronger JPY assumption alone would contribute a 6% increase to the DPU forecast in SGD terms.

In line with our DPU-forecast changes, we lower our DDM-derived 12- month target price to SGD0.88 from SGD0.93. AGT’s loan-to-value ratio remained low, at 28.8% as at 30 September 2015, and remains well placed for DPU-accretive acquisitions, in our opinion.

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What we recommend:
We reaffirm our Buy (1) rating because we still see deep value in the stock. A negative risk would be further weather-related disappointments in its operating results in the coming quarters.

How we differ:
We are the only research house covering AGT. (Read Report)

Source : Daiwa Capital Markets

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