CGS-CIMB Research analyst Ong Khang Chuen is sanguine on Boustead Projects’ impending acquisition of a 49% stake in a Vietnam industrial real estate fund that is being jointly set up with Khai Toan Joint Stock Company (KTG).
See: Boustead Projects signs option to purchase 49% stake in Vietnam real estate fund co-sponsored by KTG for $17 mil
Boustead Projects inked an option agreement to acquire the stake from KTG, a leading conglomerate in electrical appliances, building materials and industrial real estate in Vietnam.
Under the option agreement, Boustead Projects will pay a fully refundable option deposit of US$12.5 million ($16.5 million) to KTG, with KTG giving Boustead Projects a call option for the purchase of the 49% stake, while Boustead Project grants KTG a corresponding put option. The option has a validity period of 18 months.
Ong notes that the fund will be seeded with US$141 million worth of assets, comprising 10 assets to be injected by KTG, and three by Boustead Projects.
The assets are located in mature industrial zones in Greater Hanoi and Greater Ho Chi Minh regions, with average occupancy above 95%. The assets cover about 840,000 sq m of land area and about 550,000 sq m of gross leasable area.
Following its establishment, the fund intends to acquire other potential industrial real estate assets under an identified pipeline of targets, which would have the potential to double the land area and gross leasable area in the portfolio. “We believe the fund will also work on greenfield development to further expand assets under management,” adds Ong.
Ong believes the transaction signifies “a major step” towards Boustead Projects’ next leg of growth post its capital recycling exercise earlier this year.
“We view this announcement positively, as it provides more clarity on how Boustead Projects plans to utilise its significant cash holdings,” he explains. He also views the partnership between Boustead Projects and KTG to be synergistic, with KTF offering development capabilities and local contacts, while Boustead Projects brings expertise in design-and-build, asset management and contacts to the table.
“The real estate fund can also generate good recurring income for the firm,” he adds.
Ong has left his earnings estimates unchanged, pending further details on the partnership. To that end, his ‘add’ rating and ex-dividend target price of $1.40 remain unchanged.
He believes Boustead Projects is attractively valued, with its net cash making up around 80% of market capitalisation. In addition, he is positive on Boustead Projects’ ownership of industrial properties worth around $700 million that can be potentially injected into Boustead Industrial Fund to further unlock value.
As at 3.45pm, shares in Boustead Projects are up 1 cent or 0.84% higher at $1.20.
