Quill’s new acquisitions to enhance diversification
Posted on | August 8, 2007
By THE EDGE QUILL Capita Trust’s (Quill) proposed acquisitions of Wisma Technip and Plaza Mont’ Kiara will enhance its geographical and tenant diversification, said Aseambankers Research. The acquisition of the properties would make it live up to its billing as a frontrunner among Malaysian real estate investment trusts (REITs), at least in terms of asset growth, it added. Quill’s current property portfolio comprises office buildings in Cyberjaya, with HSBC Bank and DHL Express being the largest tenants with 56% of the net lettable area. “The acquisitions of the two properties would provide geographical and tenant diversification which in turn will reduce dependence on HSBC and DHL. “The inclusion of Technip Geoproduction (M) Sdn Bhd and Sunrise Bhd into Quill’s tenant base would also add more depth and diversification to its tenant exposure, which currently comprises multi-national corporations operating from Cyberjaya,” said the research house. It said oil and gas related player Technip and high-end property developer Sunrise that comes with a strong balance sheet would also provide the comfort of low default risk. Upon completion of the new acquisitions, Technip will become the largest tenant with 28.6% of the enlarged net lettable area of Quill’s property. Aseambankers Research maintained its “buy” recommendation on Quill with a target price of RM2, adding that Quill deserved a premium valuation to reflect its strong growth potential for its asset size to reach RM1 billion and RM2 billion by end-2008 and 2009 respectively. “Our sensitivity analysis shows that should Quill acquire another RM500 million in new properties by mid-2008 with an average net yield of 6%, and funded by new equity issuances at RM2 per unit, Quill’s value could re-rate further to RM2.30. “Should the potential RM500 million potential properties fail to materialise by 2008, our base case valuation for Quill is the recently revised RNAV of RM1.67,” it said. 
The two properties, to be acquired for RM215 million, would add to Quill’s existing four assets and brings its total investment property value to RM493 million from RM276 million.
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