GUTHRIE GTS and Lee Kim Tah Holdings are two retail mall plays which are trading below their net asset values. At 50 cents, Guthrie is trading below its NAV of 66 cents, at a price-to-book ratio of 0.75 times. Lee Kim Tah’s book value is 62.7 cents, and it is trading at a price-to-book of 0.9 times. The two companies own a 50% stake each in Jurong Point I, and a 25% stake each in Jurong Point II.

In a research note on Jan 7, Kim Eng Research raises the possibility of Guthrie GTS unlocking value of Jurong Point via a REIT. Following the completion of Jurong Point II, Jurong Point I and II together is Singapore’s largest suburban mall with a nett lettable space of about 750,000 sq ft, housing 450 shop units and adjacent to Boon Lay MRT station and a bus interchange.

According to Lee Kim Tah’s latest annual report, with the opening of the new bus interchange, Jurong Point’s shoppers’ traffic is now averaging 3.6 million per month. Lee Kim Tah says URA’s plans to remake the region into “Jurong Lake District” comprising Jurong Gateway and Lakeside in the next 10 to 15 years should also benefit Jurong Point. Jurong Gateway will have new offices, hotels, retail and entertainment centres and more homes and Lakeside will be the focal point for young families with a variety of tourist attractions and water-related sports. In June last year, Lend Lease paid $749 million for a 19,124.5 sq m (205,856 sq ft) white site at Jurong Gateway Road.

Kim Eng estimates that Jurong Point I and II together are worth around $1 billion, based on the average market price of suburban retail malls. “One way to unlock the value of Jurong Point I&II is via a spin‐off into a REIT,” the report says. Apart from a lift via capital recycling, Kim Eng makes the case for recurring income through its property fund management.

In addition to the stake in Jurong Point, Guthrie owns 50% of Heartland Mall and 20% of Tampines 1. It too manages Singapore’s newest mall nex, and through minority stakes in two funds Asia Retail Mall Fund and Asia Retail Mall II Fund, has shares in White Sands, Hougang Mall, Century Square, Liang Court, Tiong Bahru Plaza and Central Plaza.

Most property funds have a finite lifespan and Kim Eng believes that the Asia Retail Mall Funds may be looking for an exit strategy for its investors. “The retail malls here are currently enjoying strong occupancy rates and shopper traffic, and the time seems ripe to unlock value for investors through a securitisation,” Kim Eng says.

Other retail mall plays trading below NAVs are Suntec REIT trading at a price-to-book of 0.78 times and Starhill Global REIT trading at a price-to-book of just 0.68 times, the cheapest retail mall play.

WATCH THOSE CHIPS
Genting Singapore has just been downgraded to a sell by UOB KayHian. Apart from being the most expensive casino stock in Asia -- the stock trades at EV/EBITDA of 17.5 times, and PER of 30 times -- UOB KayHian reckons that junkets are not likely to be legalised any time soon. Also, its 3Q10 results were below the consensus gaming EBITDA forecasts of $320 million to $330 million for that quarter. “Marina Bay Sands could be gaining market share to eventually take pole position (MBS’s market share was 33% in 2Q10 and 47% in 3Q10),” UOB KayHian states, adding that “EBITDA margins could fall significantly, reflecting intensifying overseas marketing efforts and greater dependency in the lower (junket-like) margin high roller segment.”
However non-gaming revenue could improve. Universal Studios Singapore has been drawing in the crowds, and better hotel revenues are likely as more hotels open this year and RevPAR rises. UOB KayHian has a target of $1.85 for Genting Singapore, and the stock last traded at $2.22.

CHART VIEW
The STI (3,261) is approaching a resistance area at 3,300-3,320. With short-term stochastics and other indicators at the top end of their range, the index may need a respite from its recent climb. Support is initially at 3,200. The focus could once again be rotational, with situational stocks attracting interest as blue chips consolidate. There is some attention on stocks trading below their NAVs. Bonvests Holdings (which owns Liat Towers and The Sheraton Towers Singapore) last traded at $1.13, below its book NAV of $1.65.