Excerpts from analysts' report

RHB Research analysts: Edison Chen & Goh Han Peng

In our latest feature story, we profile GL Limited. GL is the listed hospitality arm of Quek Leng Chan’s Guoco Group and has one of the largest concentrations of prime hotels in London. An asset rejuvenation/capital recycling story and cheap valuation makes the stock a compelling pick. 


Model Portfolio
♦ Since the inception of our model portfolio back in September 2015, it has registered a 7.4% return, outperforming the STI index (+3.2%). The best performing stocks within our portfolio is Yoma (+32.9%), followed by China Aviation Oil (+13.6%).

♦ In portfolio news, Yoma Strategic is poised to book a large gain from its revised agreement with Axiata on its telecoms tower JV, while Yanlord Group reported another strong month of sales in November that bolstered its 2015 contract sales to a record RMB30bn. Our portfolio also received its maiden dividends from k1 Venture (SGD7,500) which dished out 1.5cts/share prior to a 5-into-1 share consolidation.

♦ We are adding 100,000 shares of GL Limited at SGD0.875 apiece. GL is an undervalued play on the London hospitality market with a portfolio of 15 prime hotels in downtown London. On-going asset rejuvenation and operational improvements are driving an earnings upcycle for its core hotel business, while impending non-core assets sale will improve its balance sheet further, with scope for special dividends.

♦ We also add 13,000 shares of City Developments at SGD7.65 apiece. CDL is one of the worst performers among the STI component stocks in 2015, but attractive valuations and potential for asset recycling, alongside a growing overseas portfolio, should drive a re-rating of its shares in 2016. To fund our purchases, we are divesting Global Invacom with a small gain (+3.5%).

♦ Our portfolio outperformed the market with a decline of 0.4% MoM against a 1.2% drop in the STI and 1.6% slide in FSTS during the last month of the year. Since the inception of our model portfolio in September 2015, it has returned 7.4%, outperforming the STI index (+3.2%). The best performing stocks within our portfolio is Yoma (+32.9%), followed by China Aviation Oil (+13.6%).

Yoma Strategic was the top contributor with a 32.9% gain. The stock rose on the back of a successfully-held general election in Myanmar on the 8th November, in which the NLD party won a landslide victory and gained control of parliament. Yoma offers a pure play on Myanmar and is building up its core businesses in automotive distribution and consumer services to balance its hitherto propertyheavy business. We believe its prospects are positive with a strong management team in place and its first mover advantage to build leading businesses in its chosen fields.

♦ The latest partnership agreement with Axiata on its telecoms tower JV will garner a US$19.5m gain for the group, representing a 100% gain on an investment made some 18 months ago. Yoma will remain Axiata’s partner in the telecoms tower JV and retain further upside should the business continue to do well.

♦ In other portfolio news, Yanlord Group reported another strong month of sales in November, with contracted sales rising 45.7% yoy to RMB3.8bn. Year-to-date, the group has chalked up contracted sales of RMB26bn (+152%), with an additional RMB6.2bn in subscription sales pending conversion at end 2015. The solid pre-sales achieved to date is way ahead of the earlier RMB18bn sales target that the group had set for 2015. We continue to hold on to k1 Ventures as we expect the company to pay out proceeds received from the divestment of KUE’s educational interests.

♦ We are divesting our stake in Global Invacom with a small gain, to fund our latest additions to the portfolio. We are buying 100,000 shares of GL Limited (GL) at SGD0.875 apiece. GL is an undervalued play on the London hospitality market with a portfolio of 15 prime hotels in downtown London. On-going asset rejuvenation and operational improvements are driving an earnings uplift in its core hotel business, while impending non-core assets sale will improve capital allocation and provide scope for special dividends.

♦ We are also adding 13,000 shares of City Developments at SGD7.65 apiece. The stock has been one of the worst performers among the STI component stocks, with a YTD decline of some 25% largely on account of its exposure to slowing Singapore residential market. CDL has a diverse portfolio, with a solid stream of recurring earnings stemming from its commercial properties and global chain of hotels under the Millennium and Copthorne Group.

Recent efforts to recycle capital via securitization deals such as the Profit Participating Securities for the Quayside Collection (S$1.5bn deal value) and its commercial properties (Manulife Centre, 7&9 Tampines Grande and Central Mall) have unlocked substantial capital for the group to re-deploy to grow its global hotel footprints. We think the stock is oversold with multiple catalysts in sight to trigger a re-rating in 2016.



Full report here.

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