Welcome to the latest edition of top stock market highlights.
Global growth outlook
There’s cause for worry when it comes to the global economic outlook.
The International Monetary Fund (IMF) has cautioned that global economic growth over the next five years is at its weakest in more than 30 years.
Higher interest rates are a root cause of this and the lender thinks that the world economy will only grow around 3% from now till 2027.
By comparison, the five-year average growth rate has come in at around 3.8% for the last two decades.
For starters, 2023’s global gross domestic product will probably expand by less than 3%, in line with the IMF’s forecast just three months ago.
Russia’s invasion of Ukraine has resulted in more tense relations between the US and China.
Surging inflation around the world is also causing pain in many economies.
Let’s not forget that a banking crisis erupted just weeks ago when Silicon Valley Bank and Signature Bank in the US went bust.
Central banks need to balance between containing the fallout and hiking interest rates to slow inflationary pressures.
The IMF has urged countries to strengthen their supply chains while it will, on its part, provide more debt relief to distressed nations to help see them through these difficult times.
Manulife US REIT (SGX: BTOU)
Manulife US REIT, or MUST, has provided an update on its strategic review.
The manager of the US office REIT has agreed to sell Tanasbourne, a property located in Hillsboro, Oregon.
The property is an office campus with three flex-office buildings and is fully occupied as of 31 December 2022.
The sale consideration amounted to US$33.5 million and was in line with the valuation done by JLL Valuation & Advisory Services as of the end of last year.
The rationale for the divestment is to provide the REIT with immediate liquidity that it can use as working capital or to pay down debt as its aggregate leverage stood at 48.8% at the end of last year.
Manulife US REIT will recognise a small US$0.4 million loss from this transaction.
If the proceeds were used to repay debt, 2022’s distribution per unit (DPU) will fall by 1.5% from US$0.0497 to US$0.049.
MUST’s gearing will, in turn, dip from 48.8% to 48%, which is still perilously close to the maximum threshold of 50%.
The strategic review also considered other alternatives such as further asset disposals and equity fundraising but noted that the former option was tough due to the prevailing negative sentiment surrounding the US office sector.
As for fundraising, MUST’s units have fallen by close to 32% year to date to US$0.184, making equity raising a tough affair.
A transaction with Mirae Asset Management is still on the cards and the manager believes that it can value-add to the REIT.
Should Mirae subscribe to new units of MUST, it can help to recapitalise the REIT while the reputation of Mirae Asset Financial Group should also give the office REIT a confidence boost.
Lian Beng Group Ltd (SGX: L03)
Lian Beng is a construction group that provides a one-stop shop with services such as integrated civil engineering, production of ready-mix concrete, and asphalt premix.
The Ong Family, which collectively owns a 69.56% stake in the group, has made a cash offer of S$0.62 per share to take the construction company private.
The offer represents a 15.7% premium over the volume-weighted average price of the group’s shares in the past month.
However, it was way below Lian Beng’s book value of S$1.5383 as of 30 November 2022.
The rationale for the offer is to allow shareholders to have a “clean cash exit opportunity” as the trading liquidity for the shares has been very low, averaging just around 162,000 per day over the last month.
If successful, the offeror intends to take the group private.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
