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Background: Orchard Parade Holdings (OPH) is engaged in the hospitality business, property investment and property development. It is more than 50% owned by private developer Far East Organization (FEO), arguably Singapore’s largest real estate player. OPH’s key assets include Orchard Parade Hotel, Albert Court Village Hotel and Central Square. OPH also owns nearly 50% of Yeo Hiap Seng Limited (YHS), a leading F&B brand in the region.
Recent development: FEO is planning to raise at least $500m through the listing of its hotel and serviced residence assets in a REIT as early as next year. One of the assets that may be spun off into the REIT has been identified as OPH’s Orchard Parade Hotel. In an announcement, OPH has confirmed it is in preliminary discussion with FEO over the injection of assets.
Our view:
OPH sells assets to new FEO REIT. OPH could sell its hospitality assets, collectively worth $691m ($1.96 per share) based on the last reported book value, to the new REIT. OPH will end up in a net cash position of $335m. The cash proceeds would enable OPH to land bank and focus on property development.
FEO takes OPH private. We think this is a likelier scenario. The book value of the hospitality assets is 1.2x OPH’s current market cap. In addition to the hospitality assets, OPH owns nearly 50% of Yeo Hiap Seng, valued at $415m based on last traded price of $1.46. OPH also has around $140m in development profits yet to be recognised from residential projects Floridian, redevelopment of Pastoral View, EuHabitat, and Jardin. In short, if we assume FEO makes an offer at $2.24 (20% discount to book), FEO pays $790m for a company we value at $1,208m, and gets back $691m upon injection of OPH’s hospitality assets into the new REIT.
Key ratios…
Price-to-earnings: 6.9
Price-to-NTA: 0.5779
Dividend per share / yield: 6 cts / 3.7%
Net debt per share: $1.01
Net debt as % of market cap: 62.5%
Share price (S$) 1.62
No of shares (m) 353.0
Market cap (S$m) 571.9
Free float (%) 35.73%
Recent fundraising None
Financial YE 31 December
Major shareholders Far East Organisation – 58.9%, Estate of Khoo Teck Phuat - 5.8%
YTD change +0.8%
52-wk price range S$0.9935 - S$1.7045
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