By ARTHUR SIM

 

ASCOTT Group's Masters Golf & Country Club has been compulsorily acquired by the Guangzhou Municipal People's Government for $198.7 million.

 

In a statement released on Sunday, Ascott, which is part of CapitaLand, said the compulsory acquisition arose as a result of the planned construction of the Guangzhou Wuhan public railway lines over part of the 934,498 square metres of land occupied by the country club.

The acquisition includes a 6,000-sq-m club house, and an 18-hole golf course with a 64-bay public driving range.

Ascott said the compensation amount was based on the valuation carried out by independent valuers appointed by the Guangzhou Land Office, and will be paid out in stages with the entire sum expected to be received by June 30.

The club was developed in the mid-1990s by one of the merger entities before the formation of The Ascott Group and was financed mainly by shareholders' loans. Ascott said that as provisions were made in the past to write down the shareholders' loans, the transaction will result in an estimated write-back of $91 million.

The write-back is expected to be booked in the Ascott Group's accounts for the financial year ending Dec 31, 2007. As at March 31, the net asset value of the country club was $29.1 million - constituting 2.7 per cent of the net asset value of the Ascott Group of $1.07 billion.

For the three months ended March 31, the net profit attributed to the country club was $600,000, or about 5.7 per cent of the net profit of the Ascott Group of $10.4 million.

On the back of Ascott's Q1 performance and the announcement of the Ascott Residence (China) Incubator Fund, Macquarie Research rated the stock 'outperform' in a note released last week.

Macquarie Research adjusted FY2007 earnings by 30 per cent to account for portfolio gain from the sale of Hotel Asia. Macquarie Research's 12-month price target for the stock was $2.25 per share.

UBS Investment Research rated Ascott Group stock 'Buy 1'.

It said that Q1 2007 revenue was 3 per cent above its forecast but Ebitda margin fell from 26 per cent in Q1 2006 to 20 per cent in Q1 2007. As a result, EPS was around 34 per cent below its forecast.

'We expect margins in Asia to stay at 20-25 per cent given that mature assets would be divested to Ascott Residence Trust (ART),' UBS said.