S$0.465-SGXL.SI
As Chairman Ow Chio Kiat (OCK) had earlier indicated, Stamford Land is enhancing shareholder value by entering a MOU to sell and lease back (S&L) 3 hotels in Australia.
The buyer, whose identity is “required to remain undisclosed” (we expect it to be a real estate investment trust), will pay A$316 mln / S$401.3 mln for Stamford Plaza Melbourne, Grand Adelaide and Plaza Sydney Airport Hotels.
The significance is that Stamford Land will realize a book profit of A$167.3 mln / S$212.5 mln, which works out to 24.6 Singapore cents a share, and which will theoretically raise book value by 42% to 83.6 cents a share.
For illustrative purpose, assuming the other 5 hotels are worth similar premium, Stamfored Land’s revalued asset value shoots up to >$1.20 a share.
Book value of Property Plant & Equipment at end Jun ’11 was S$488.77 mln, ie S$300 mln excluding the 3 hotels under the proposed Sale & Leaseback. A similar 1.2x premium translates to S$336 mln surplus or 39 cents a share.
(Note that Stamford Land had, in 2008, received an unsolicited A$850 mln bid for its hotel portfolio.)
We expect OCK to declare a special dividend if the S&L deal goes through. (Stock went ex-3 cents dividend in August.) He will also likely be even more “inspired” to proceed with the redevelopment of the North Ryde, Sydney property.
We maintain BUY.
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