Stamford Land Corp

Phillip Securities Research on 12 Sept 2012

THE Australian hotel and property economics have continued to be favourable, with H1 2012 almost matching H1 2011, in terms of Colliers' "combination of portfolio sales, direct property transactions & take-private of Reits". Jones Lang Lasalle, in a global report, recorded a 44 per cent y-o-y drop from H1 2011 of hotel transaction volumes in Asia-Pacific, but stated that Australia dominated with 65 per cent of the US$1.4 billion market in H1 2012.

We update with transactions in Starhill's purchase of the three Marriott hotels, Shangri-La Asia's purchase of the Shangri-La Sydney, and Ascendas Hospitality Trust's valuation of Courtyard by Marriott North Ryde.

We revise our valuation for the North Ryde property as our valuation is too far away from reality. We have not revised our valuation of Sir Stamford@Circular Quay as our valuation is based on yield. But we do note that the market is at least 2.25 cents (share price terms) better.

Our target price of S$0.76 (41 per cent upside) is mainly based on market prices of properties that are near the company's, and had been recently transacted or exchange-listed.

In summary, our valuation is very conservative on Sir Stamford@Circular Quay, as compared to Shangri-La Sydney. We also factored in a 6.5 per cent "cost" on the carrying cost of its unsold Auckland apartments. Its Southpoint property in Singapore is also about 50 per cent below asking-market. We have also subtracted, from the reported Q1 2013 balance sheet, the cash paid out as dividends.

We wait for a buyer of hotels to make a bid for Stamford Land's hotel portfolio. While waiting, we should continue to receive a pretty dividend. At half of its last dividend it is still a respectable 3.6 per cent yield.

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