SINGAPORE (Nov 3): DBS says Chip Eng Seng’s termination of sale contracts for its Tower Melbourne project entered into by its wholly-owned subsidiary in Australia, CESQ, could be a blessing in disguise.
DBS says the termination has been widely anticipated given that construction has been delayed by ongoing legal proceedings since 2013.
Given the indefinite delay of the project timeline and with the sunset date for underlying sales contracts set to kick in from 2018 onwards, Chip Eng Seng has decided to proceed with the termination of existing contracts.
The termination process for the 556 outstanding contracts would entail the return of the initial deposit of 10% of purchase price together with the interest accrued on the deposit.
The necessary funds have already been set aside under trust, and will not impact on-balance-sheet cash. Concurrently, CES will also be exploring other viable exit options with regard to the property, including offering the property for sale.
“The fate of underlying property still remains unclear at this point, but we see upside potential if and when ongoing legal proceedings are resolved given the prime location and that median prices for Melbourne CBD units have risen by nearly 50% since Dec 2012. These could potentially be unlocked through the sale of the property, or if CES chooses to subsequently relaunch the site at a later date,” says DBS.
At the moment, the research house will leave Chip Eng Seng’s RNAV of $1.88 and target price of $1.18 intact.
Shares in Chip Eng Seng are down 2.5 cents to 94.5 cents.
