SINGAPORE (June 13): Phillip Securities Research likes The Straits Trading Company (STC) which is shaping up to be a property powerhouse with a propitious tin-mining business.
STC started as a tin smelter back in 1887 but transformed into an active investor and developer of property when investment group Tecity in 2008 acquired a controlling stake in the company.
At present, STC has three core businesses consisting of Real estate, Hospitality and Resources.
Phillip says STC’s in-house property arm, Straits Trading Real Estate (SRE) has tripled its assets under management (AUM) in just four years.
“In 2017, SRE sold an Australian prime office building at an IRR of almost 25%. In 2018, it divested a Japan office fund after disposing seven office assets at an IRR of 19%,” says Phillip, “SRE’s target is to add $1 billion in AUM within the next four years.”
In addition, STC has several assets that could be unlocked, says Phillip. These include $316 million of non-core properties, including eight good-class bungalows and several townhouses in Singapore.
There is also its stake in ARA Asset Management now carried at $353 million on its books. “If ARA were to be re-listed on the SGX, STC’s 21% stake could be worth $673 million,” says Phillip, adding that ARA plans to grow gross assets by another $20 billion in the next three years.
Another is the redevelopment of a 40.1-acre mixed-development project in Penang with a GDV of RM3 billion ($1 billion).
As for its resources business, STC has a 54.8% stake of Bursa-listed Malaysia Smelting Corp (MSC), which has the third largest tin smelter in the world.
In a 2018 study by MIT, tin is expected to be the most sought-after metal by evolving technologies such as autonomous and electric vehicles, advanced robotics, renewable energy and advanced computing & IT.
“MSC is well placed to take advantage with their new plant in Klang that will raise output capacity by 50%,” says Phillip.
STC trades at a 50% discount to its RNAV of $4.40. Since 2008, it has tripled its dividends.
Current yield of 3% or $25 million is supported by recurring income of $25 million from rentals, dividends and associate income.
As at 12.01pm, shares in STC are up 1 cent at $2.20.