METRO recently announced the completion of the sale of its 50 per cent stake in Metro City Beijing, a suburban retail mall in Chaoyang district, Beijing. With the sale, the group will realise a pretax gain of S$87.4 million, with a boost of 9 cents per share to its NAV. The sale proceeds of 688.5 million yuan (S$132 million) will add to its already formidable cash pile, with net cash expected to increase from 36 cents per share to 51 cents per share. We continue to like the stock as a proxy for consumption growth in China, helmed by an experienced management team and anchored by a sound balance sheet.
Management continues to look for opportunities to invest in China's real estate market but is cognisant that the competitive landscape is fraught with risk and keen competition. The group manages its risks by structuring deals to mitigate its downside exposure and tying up with reputable developers to co-invest and develop projects. Future projects could involve green/brown field projects with lower entry costs.
We raise our RNAV by 4 cents, from S$1.23 to S$1.27. The stock is trading at a 42 per cent discount to its RNAV and is backed by 51 cents per share in cash. Our TP of S$0.89 is based on 30 per cent discount to its RNAV. Going by past records, the company is likely to dish out special dividends along with its full-year results in May. Maintain 'buy'.
BUY
BUY
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