Vibrant Group’s New S$110 Million Acquisition: Is That a Smart Move?


Vibrant Group (SGX: F01), previously known as Freight Links Express Holdings, has been transforming itself from a logistics outfit into a conglomerate by adding financial services and property businesses into its core business activities.

Incidentally, Vibrant Group is the sponsor and manager of Sabana REIT (SGX: M1GU), a real estate investment trust with a focus on industrial properties in Singapore. It is also the largest Shari’ah (Islamic finance) compliant REIT globally.

An expansion of Vibrant Group’s real estate business

As a way to expand its property business, Vibrant Group had just announced a few days back that it will be acquiring Cecil House, a commercial property located in the heart of Singapore’s Central Business District, for S$110 million.

The property will be acquired through Vibrant Group’s 51%-owned subsidiary, Shentoncil Pte. Ltd. Previously, Vibrant Group’s focus had been on industrial properties through its logistics and REIT businesses. This new investment is a good way for the company to diversify its property-mix

Vibrant Group is planning to upgrade the property to maximise its rental yield when the transaction is completed.

Cash outflow

From Vibrant Group’s latest quarterly report, it only has about S$53.7 million worth of cash and cash equivalents while having S$267 million in total borrowings.

Shentoncil is offering up to S$110 million to buy Cecil House. The property currently has outstanding liabilities of S$67.8 million, which would be factored into the eventual cash outlay that Shentoncil would fork out based on the offered price of S$110 million.

If Shentoncil is taking over all those liabilities, the cash outlay for it would only work out to around S$42.2 million (S$110 million minus S$67.8 million). Given Vibrant Group’s 51% stake in Shentoncil, it would mean a cash outlay for the former of only around S$21 million (51% of S$42.2 million). That’s an amount which Vibrant Group might still be able to absorb.

Foolish Summary

Vibrant Group is currently trading at a price/earnings ratio of 6.3 times while carrying a dividend yield of 4.8%. The company has stated in its latest earnings report that it will be seeking more opportunities in China in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.