02-09-2013, 06:52 PM
Forterra Trust is a research client of Edison Investment Research Limited-
**The HQ, so attention should now turn to construction and pre-leasing progress ahead of its launch in early-2014. The shares remain 50% below FY12 NAV/share. That gap should close as The HQ approaches completion, with more visibility on revenues and timing of resumed dividends.**
**The shares are currently 50% below S$4.44 end-FY12 NAV/share. The investment case pivots on
successful completion of The HQ, by far the most significant component (58%) of the portfolio by
value (see Exhibit 2) and the source of a potentially material increase in group rental income from
FY14 onwards. The latter should stabilise group finances, reduce portfolio development weighting
(to 6%) and underpin commitment to resume dividend payments from FY15 at the latest. Basic
NAV/unit was S$4.44 (FY11: S$4.62), net of S$1.74/unit of deferred tax as at the end of FY12. The
fall relates mainly to foreign exchange: 6.2% S$/US$ and 5.1% S$/RMB appreciation.**
**Financials: Outlook stabilised by sales and The HQ launch
We set out in this note how we expect Forterra to cover The HQ development and meet its working
capital commitments, together with our assumptions. We expect the proceed from the Central Plaza
sale to effectively bridge the period until initial rental revenues flow from the retail element of The
HQ in early-FY14, with the first full-year contribution from the scheme as a whole in FY15. We have
not incorporated any proceeds from the sale of the Beijing Logistics Park in our forecasts, although
discussions with management suggest this is proceeding as planned.**
**The HQ, so attention should now turn to construction and pre-leasing progress ahead of its launch in early-2014. The shares remain 50% below FY12 NAV/share. That gap should close as The HQ approaches completion, with more visibility on revenues and timing of resumed dividends.**
**The shares are currently 50% below S$4.44 end-FY12 NAV/share. The investment case pivots on
successful completion of The HQ, by far the most significant component (58%) of the portfolio by
value (see Exhibit 2) and the source of a potentially material increase in group rental income from
FY14 onwards. The latter should stabilise group finances, reduce portfolio development weighting
(to 6%) and underpin commitment to resume dividend payments from FY15 at the latest. Basic
NAV/unit was S$4.44 (FY11: S$4.62), net of S$1.74/unit of deferred tax as at the end of FY12. The
fall relates mainly to foreign exchange: 6.2% S$/US$ and 5.1% S$/RMB appreciation.**
**Financials: Outlook stabilised by sales and The HQ launch
We set out in this note how we expect Forterra to cover The HQ development and meet its working
capital commitments, together with our assumptions. We expect the proceed from the Central Plaza
sale to effectively bridge the period until initial rental revenues flow from the retail element of The
HQ in early-FY14, with the first full-year contribution from the scheme as a whole in FY15. We have
not incorporated any proceeds from the sale of the Beijing Logistics Park in our forecasts, although
discussions with management suggest this is proceeding as planned.**