Metro (update)

Metro (update): FYMar12 net profit rose 12% to $91.9m, boosted by a disposal gain of $98.7m from the sale of its 50% stake in its Beijing retail mall, Metro City Beijing. DMG notes this transaction once again highlights Metro’s track record as a real estate investor in China, coming on the back of a string of earlier successful divestments including One Financial Street and Metropolis Tower in Beijing. The sale proceeds bolstered the group’s net cash to $429m ($0.52/sh), while NAV/sh rose from $1.30 to $1.35, translating to valuation of 0.6x P/B. To reward shareholders, the group is declaring a final dividend of 2cts/sh and a special dividend of 4cts/sh, amounting to a payout ratio of 54% and a yield of 7.7% based on the last closing price of $0.78. Following the sale of Metro City Beijing, Metro will continue to have a significant presence in China with an investment property portfolio worth o> $500m in Tier-1 cities. Operationally, its commercial properties in China continued to perform well with rental income growth driven by higher occupancies (95% vs 88% in prior year) and the completion of asset enhancement initiatives (AEI) at its flagship Metro City Shanghai. Meanwhile, its retail operations in Singapore were boosted by broad-base sales growth, in line with improved consumer sentiments and strong sales at its recently refurbished Metro Woodlands. DMG continues to like the stock for its undemanding valuations and management’s ability to drive accretive NAV growth. Maintains Buy with TP of $0.89.