Stocks In Focus SG (A-REIT, Jardine Strategic, OSIM Int’l) – 20/01/14

A-REIT’s 3Q14 Distribution To Unitholders Increased 4.9%

• For the quarter ended 31 December 2013, net property income of Ascendas Real Estate Investment Trust (A-REIT) grew 3.7 percent to $108.6 million from $104.7 million in 3Q13, attributed to a 6.4 percent increase in revenue contribution mainly from higher rental income from Nexus@one-north, A-REIT City@Jinqiao, The Galen and finance lease interest income received from a tenant.

• Property expenses for the quarter expanded 13.2 percent from $40.5 million to $45.9 million, largely as a result of additional expenses incurred in the aforementioned properties, changes in lease structure arising from conversion of properties, higher maintenance and conservancy costs at certain properties and property tax from upward revision in the annual valuation of a property.

• Subsequently, amount available for distribution to unitholders in 3Q14 increased 4.9 percent year-on-year to $85.1 million from $81.1 million.

Significance:Despite the better performance by A-REIT, distribution per unit fell 2.2 percent to $0.0354, due to the dilution of unitholders’ distribution from the three unit placements in March, April and December 2013.

Jardine Strategic To Acquire 20% Stake In Mainland China Motor Dealership Group

• Jardine Strategic Holdings agreed to acquire a 20 percent stake in Hong Kong-listed Zhongsheng Group Holdings, one of mainland China’s leading motor dealership groups.

• Zhongsheng operates over 170 outlets in over 60 cities across 15 provinces. The company carries over 15 major marques, including Mercedes-Benz, Audi and Lexus in the luxury segment and Toyota, Nissan and Volkswagen in the mid-to-high-end segment.

• The purchase consideration for the acquisition amounts to US$731 million, where the deal will be financed by cash. Under the agreement, Jardine Strategic is to purchase new shares in Zhongsheng representing 12.5 percent of existing share capital and subscribe for an equivalent of US$399 million of convertible bonds. At Jardine Strategic’s discretion, the bonds are exercisable within three years for a further 12.5% of the existing share capital of Zhongsheng.

Significance: The combination of Zhongsheng’s strong presence in the China motor dealership market, coupled with Jardines’ in-depth experience in the sector across Asia through its subsidiary, Jardine Cycle & Carriage, generates synergy which the two companies can tap on to create new opportunities.

OSIM Boosts Stake In TWG Tea To 70%

• OSIM International raises stakes in its subsidiary, TWG Tea, from 53.7 percent to 70 percent on 18 January 2014.

• The increase in shareholding was a result from a rights issue at TWG Tea where new TWG Tea shares were issued to raise $25 million.

• The proceeds generated through the rights issue will be utilised mainly for the company’s expansion plans in 2014, as well as to repay a bank loan and another loan from a shareholder. The increased stake in TWG Tea is expected to be earnings accretive for OSIM in FY14.

Significance: TWG Tea plans to expand rapidly this year across Asia and the Middle East by launching 20 tea boutiques and shops. The tea retailer has grown annual sales exponentially from $1 million to $55 million five years ago.

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