Global Premium Hotels: DMG expects the IPO to be well-subscribed given the sector's scarcity of liquid plays and resilience in past downturns; says investors will also want to ride on the coattails of Koh Wee Meng, founder of Fragrance Group, who grew the company from a market cap of $50 m at its listing in 2005 to a $1.5 b co today through a series of record-setting financial performances.
But DMG adds, GPH's valuation, with a $0.25-0.28 indicative range, is not cheap at 0.9X P/BV against the sector's 0.7X P/BV; adds, as part of the restructuring exercise under which Fragrance sold its hotels to GPH, high debt was introduced. The house estimates post-IPO asset gearing of 60%, above the REIT sector's average 30-40%, with the high debt burden set to impact financial performance through interest expense and affect the expansion rate. DMG recommends a quick flip on the IPO, with a $0.32 target based on 5% forward yield.
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