SINGAPORE (Apr 20): The manager of Accordia Golf Trust shouldn't have much problem maintaining or raising prices of its golf courses in Nagoya, says CIMB in a Thursday non-rated report.
This was due to their proximity to the expressways and their less challenging design, which favours casual players.
And while pricing is mainly subjected to competitive forces, management says the situation has been helped by the closure of some golf courses nearby, AGT's management tells analyst William Tng following a visit to the city's four trust’s golf courses, three of which are in the Greater Nagoya region while one is located at the Greater Osaka region.
AGT hosted two analysts and three investors over Apr 16-17, for a tour of four of its golf courses in the city. Key concerns raised included valuation of the golf courses; pricing trends; player visitorship numbers; potential steps that can be taken to raise revenue; acquisition pipeline; competition and ability to benefit from the improving Japanese economy.
Presently, AGT management's current priority is to refinance its existing two term loans of JPY 15 billion ($183.0 million) each that will mature in August. The management is confident that the loans will be renewed by then.
Once the loans have been refinanced, Tng says management expects to be able to explore acquisitions.
In March last year, Accordia Golf Co, the sponsor of AGT, became a wholly owned subsidiary of KK MBKP Resort that is owned by private equity firm, MBK Partners which management said is more willing to approve spending to enhance golf course values.
MBKP Resort assumes all assets, liabilities, rights and obligations of Accordia Golf Co. The relationship between AGT and its sponsor remains unchanged and no material adverse changes to the business and operations of AGT are expected.
The management reckons that MBK is more open to asset enhancement initiatives.
Among the four golf courses that Tng visited, the Yokkaichinosato Golf Club had the highest utilisation rate of 84.1% in FY17 and the highest appraisal value of JPY2.5 billion in the Greater Nagoya portfolio. This golf course was acquired in 2009 and saw 59,472 visitors in FY17.
As AGT's dividends are derived in JPY and paid in SGD, the manager engages in short-term hedging on the distribution amount to minimise foreign exchange risk to unitholders.
According to Bloomberg estimates, AGT is currently covered by two brokers with a consensus average target price of 76 cents or 0.7 times FY18 book with a dividend yield of 7.8%.
As at 11.25am, units in AGT are trading at 64 cents.
