MCS Steel Non-Voting DR MSTUF

M.C.S. Steel Public Company Limited is a Thailand-based steel fabricating company. The principal activities of the Company and its subsidiaries are production and distribution of structural steel products for building construction, and residential development projects for sale. It is a large steel structure manufacturer, especially steel beams and columns for the construction of large high-rise buildings such as office buildings, hotels, shopping malls, and others. There are two types of steel structures produced by the Company: the steel structure used as a column-box and the steel structure used as beams, which are important components of the building. Its subsidiaries include Tanaka Welding Center Co., Ltd., which is focused on welder training and real estate; M.C.S.-Japan Co., Ltd., which is engaged in the design and production of structural steel products; and M.C.S. Steel-Xiamen Co., Ltd., which is engaged in the production and distribution of structural steel products.

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MCS Steel Non-Voting DR

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Post by retiredcfon Aug 15, 2016 9:23am

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Post# 25141575

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Milestone Apartments REIT

Bringing It All In House

What's Changed

Milestone's reported FFO of $21.3 mln. ($0.28/unit) compared to $17.3 mln. ($0.27/unit) in Q2/15 and slightly below our $22.8 mln. ($0.29/unit) estimate due to higher-than-expected non-cash compensation. Results were driven by +11.1% SP-NOI growth, boosted by +6.0% SP-revenue growth and higher total NOI margins of 57.5%, up 240 bps from Q2/15. Average Q2/16 occupancy was 95.2%, flat Y/Y.

Average occupied monthly rent/suite increased to $933 in Q2/16, up from $917 in Q1/16 and $837 at Q2/15. SP-rents increased from an average of $845 in Q2/15 to $900 in Q2/16.

Subsequent to the quarter, Milestone entered an agreement internalize its asset management function for $106.5 mln., through the issuance of 5.3 mln. Class B units and $25.0 mln. in cash. Subject to unitholder approval, the internalization is expected to close on September 30, 2016.

D/GBV assets was 48.9% at Q2/16, up from 47.8% in Q2/15 and below the REIT's limit of 60.0%. MST's cash balance was $10.6 mln.

Implications

Our 2016E FFO and AFFO estimates remain unchanged at $1.15/unit and 1.04/unit, respectively. To reflect the internalization of the asset management function, our 2017E FFO and AFFO estimates increase to $1.29/unit and $1.17/unit, respectively, from $1.25/unit and $1.12/unit. Our NAV estimate increases to $16.50/unit (from $15.00/unit) at a 6.25% cap rate.

Valuation

At C$21.20, Milestone trades at ~14.2x our 2016E FFO (F/X adjusted), a 1% discount to our $16.50/unit NAV estimate (from $15.00), and yields 3.4%. Our 12- to 18-month price target is C$22.50 (from C$20.00) or ~15.0x-15.5x 2016E FFO (F/X adjusted). We rate Milestone Sector Outperformer