BT: Asia Food & Property: an emerging regional property powerhouse
Business Times - 05 Jul 2010
Hock Lock Siew
Asia Food & Property: an emerging regional property powerhouse
By VEN SREENIVASAN
IN AN imperfect market, some companies attract scant market attention even when they are in the right business and doing the right things.
Somehow, Widjaja-controlled Asia Food & Property (AFP) has found itself on the short end of the proverbial stick. This is despite boasting a portfolio of property spread across several countries in the Asia-Pacific which provides steady earnings growth.
But this could change soon following the recent restructuring which has boosted AFP shareholders' value, strengthened its books and reshaped the company as a regional property play.
The company's decision to hive off and do an in-specie distribution of its Shanghai-based Bund Center Investment (BCI group), coupled with the sale of its China-based food business, leaves it as a pure regional property play with assets spread across Indonesia, Malaysia and Singapore.
The assets being bundled and distributed to shareholders comprise The Bund Centre in Shanghai, which houses the five star 570-room Westin Hotel and the adjacent 40 storey Bund centre office tower. Also included is a six-storey retail complex in Ningbo with 131,000 sq ft of lettable space. These properties earned some $32 million last year, or a third of AFP's income.
AFP said the demerger of the BCI group was being done so that the assets could 'be analysed and valued on its own merit, risks and strategies'.
Its shareholders - who got one BCI share for every two AFP shares held - won't argue with this.
While these China assets - built in 2002 - are carried at $410 million or some 27 cents per share, an independent valuation done late last year places the value of BCI assets at almost $1.5 billion (net of debt), translating into an RNAV of 72 cents per share.
On paper, the Bund Centre also looks like a potential candidate for a REIT, something which would not have escaped the notice of the Widjaja family, who still control two thirds of BCI.
Meanwhile, AFP itself emerges an unpolished diamond.
The mainboard-listed company is selling its China-based food firm, Florentian International, to its sister company Golden Agri Resources, for 976 million yuan (S$200 million). This leaves it in a net cash position and an array of valuable regional property holdings.
In Singapore this includes 90,000 sq ft or 21 per cent of the strata area for Orchard Towers, carried in its books at just $66 million, or $733 psf.
Given that Tanglin Shopping Centre's owners are said to be asking some $4,000 psf for an enbloc sale, AFP's valuation appears overly conservative. Even if one were to take a $2,000 psf valuation, its Orchard Towers property would be worth some $180 million.
In Malaysia, AFP owns 9.5 million sq ft of resort land and a 330 room five-star hotel at Palm Resort, near the Iskandar new special development zone in Johor. Conservative estimates value this property at $100 million.
But Indonesia - which has been showing remarkable economic buoyancy - is where AFP has its crown jewels.
This includes some 1.252 million sq ft of office space spreading from central Jakarta to North Sumatra, which is conservatively valued by the market at some $250 million. Its 977-room Grand Hyatt Plaza and adjoining properties in Jakarta alone are valued at some $78 million.
But the bulk of AFP's Indonesian property consists of some 85 million sq m or 917 million sq ft of valuable township, residential and resort land stretching from greater Jakarta to Bali. While there are no consistent valuations available on these, a Cushman & Wakefield report cited value of industrial land in greater Jakarta at between US$5.10 psf and US$13.80 psf during the January quarter. Assuming a conservative estimate of S$5 psf for AFP's holdings, these assets could be worth some S$4.6 billion.
<b>Taken together, AFP appears to be sitting on well over $5 billion or $1.62 per share worth of regional property assets, or triple its current market cap of some $1.5 billion.</b>
So while the market has been chasing sexy penny stocks and China plays, AFP has been sitting pretty, but unnoticed, on a goldmine of regional property assets. In recent months, it has shown a newfound willingness to unlock value and reward loyal shareholders who have stuck with it. This is the right way to go if it wants to be noticed and taken seriously.
If AFP - and BCI - execute their strategies correctly, they could emerge as pan-Asian property plays rivalling the incumbents who currently rule the roost.
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