OSEA currently trades on a PER of 4.7x and a P/BV of 0.7x based on 2015E earnings.
Acquisition of two floors at the WTC strengthens rentals (+3% YoY). OSEA announced a rights issue (1 for 19) to raise c.LKR 977mn in order to buy-back two floors at its WTC towers. The acquisition cost of the two floors is c.LKR 762mn, which is at a c.10% premium to WTC’s 2015E NAV of LKR 22.2bn. The remaining funds are earmarked to be used for OSEA’s ongoing investment needs. Due to a lack of A-grade commercial space, CAL assumes a 6% Cagr in rental revisions through 2018E.
CAL’s 2015E EPS LKR 4.9 (+41% YoY). We expect c.3 months of additional rentals from the expected acquisition of two floors. As a result, CAL has revised 2015E rental revenues to LKR 5bn (vs. previous LKR 2.1bn). CAL expects c.140 apartments to be sold by end-2015 and a further 65 in 2016E. 2015E GP margins are expected to improve to 45% (vs. 2014 c.40%).