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WHA Corporation

Sale of assets to funds, building purchase okayed BUY

WHA Corporation Plc (WHA)

News: WHA's board of directors has approved three plans:

1. To buy Equinox Office Tower from MJD for Bt2.05bn.

2. To sell three assets to WHA Premium Growth Freehold and Leasehold REIT for

Bt4.5bn and then take Bt511mn stake in the REIT

3. To sell the improvement of DSG in Hemaraj Saraburi Industrial Estate to

WHAPF for Bt17.5mn

Comments:

Office acquisition is an opportunity. According to the company this acquisition is

an opportunity. Our calculations indicate a contribution to net profit of less than

Bt100mn in the first three years or less than 4-5% of our current forecasts, with

incremental valuation of less than 5% assuming 8% yield and rent increase of 3% p.a.

Nearby office buildings are full and this will help secure clients in the energy and

telecommunications sectors. It expects 50% occupancy in the first year, rising to 70% in

the second year and reaching 85-90% in the third year.

Equinox Office Tower is an office building, grade B non-CBD, off Vibhawadee-Rangsit

Road, near the Energy Complex, scheduled for completion by year-end. It has 21K sqm

net leasable area: 19K sqm of office space and 2K sqm of retail space.

Positive office industry outlook. The Thai office market is improving, with vacancies

coming down and rents rising. According to CBRE, occupancy of non-CBD grade B office

has increased to 90.6% in 1Q14 from 82.9% in 2009, with a rent increase of 4.3% p.a.

during 2009-1Q14, above the inflation rate.

Bt4.5bn in asset sales to REIT. This is in line with the company's earlier guidance and

already in our forecast. The transaction is expected in 4Q14. Profit from the sale of the

improvement of DSG to WHAPF is insignificant at less than Bt1mn.

Maintain BUY. We see WHA as a sound investment in the current situation as it relies

least on FDI and BoI tax privileges. Its outlook is more closely linked to the current

uptrend in the capex cycle for retailers and modern trade players. We value WHA at

Bt40/share base on SOTP (Bt38/share for logistic business and Bt2/share for WHAPF).


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