After Nan Fung bought 26% stake in Forterra Trust,
Forterra Trust's board has identify the quality and strength of the Nan Fung organization. Nan Fung provides significant advantages to be enjoyed by Forterra Trust and its Unitholders. The Board intends to review thoroughly
the following areas, inter alia, in which ongoing value can be delivered as part of the
2014 business planning process:
1)Forterra to leverage Nan Fung’s branding, network, relationships and development expertise in
Greater China where possible to advance Forterra’s business
2) Explore co investment opportunities between Nan Fung and Forterra
3) Access to Nan Fung’s quality commercial assets and projects in PRC, which could be considered for
injection into Forterra on an arm length basis, subject to:
(i)Acquisitions delivering accretive and net asset value growth to Forterra’s unitholders
(ii)Approval by Forterra’s independent directors and unitholders' approval (where required) and
other relevant regulatory requirements
There is a Restatement of 2013 Medium Term Objectives of Forterra Trust’s Vision
1) Provide consistent recurrent income from lease rental revenue to underwrite stable unitholder
distributions no later than 2015
2) Significantly reduce the “development asset discount” inherent in Forterra’s
unit price; and
3) Provide certainty in regard to the ongoing cashflow & liquidity of the Trust
From the following announcements since Nan Fung become the largest shareholder, it has indeed provide some comfort to the unitholders. The rise from $1.6 to $2.38 on 22nd July 2013 is enough to justify that.
My view:
1) since then, the price is showing signs of weakness till $1.695 on 17th May 2014. Long term shareholder seeking income via dividend, have exited as board mentioned that all resources is channeled to the construction and development of The Plaza. Shareholder seeking capital growth will put on hold as ppl are exiting Forterra for the moment, until 2015, when the dividend resume.
2) It is trading at a steep discount 61%, using NTA of $4.4 and share price of $1.695. Trading at 0.39x book value. It is really trading at a steep discount, with the quality project and landbanks it is holding, i think Forterra deserved a higher valuation.
3) Bond Holders have not exercised their options to convert to share at $2.10, which sets the price as a immediate target. Very likely, Forterra will redeemed the bonds upon expiry on sep 2014.
4) Board is committed to the trust objective of 50% of income as dividend, and achieving capital growth for unit holders.
I am of the view that Forterra is a buy at $1.695, with my target of 0.6x book value of $2.64.
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