PCRT

PCRT: Exercised its option to increase stake in Chengdu Longemont Shopping Mall Dev (CLSM) from 50% to 80% for Rmb2.24b, lower than Rmb2.28b which was earlier touted. It has also entered into an earn-out deed with Shanghai Summit to provide PCRT with additional earn-out amount of Rmb342.0m. GFA of CLSM is expected to be reduced from 455.3k sqm to approx 280k sqm and number of lvls will be reduced from 8 to 5.C o has view that the rental performance and mkt value per sqm of GFA of a mall typically increases as its height and number of lvls decrease, the value of the mall is likely to improve as a result. The consideration paid remains at Rmb10k per sqm. The previous proposed acquisition on 4 Nov 2011 was for 50% of 455.3k sqm at Rmb10k per sqm which was approx Rmb2.28b. The earn-out prev was Rmb226.5m. Shanghai Summit will retain the remaining 20% stake. Overall news might be neutral to slightly positive given the reduced price and increased control which might make it easier for PCRT to eventually take over the entire stake. Known substantial investors in PCRT include Wilmar’s COO Martua Sitorus with a 5.7% stake and CEO Kuok Khoon Hong with a 16.9% stake. CIMB is positive (maintain Outperform TP$0.60 up from TP$0.59) on the exercise of option and notes that valuations are undemanding while yields remain supported at 8-9% on back of earn-out structures. House is of view that the increase in stake also raises transparency in financials and topline growth as Chengdu’s revenues and assets will now be consolidated. Reduction in lvls was due to height restrictions on request by the local governor in Chengdu.