KGI: Accordia Golf Trust set to benefit from market share gains, tourism boom

Novelty Japan pens at DaisoNovelty Japan pens at Daiso

Accordia Golf Trust is set to benefit from golf course closures and consolidation in Japan’s market, KGI said in a note on Tuesday.

That was after visiting four of the trust’s golf courses near the city of Nagoya last week, KGI said, noting that 12 of AGT’s 89 courses are located in the Greater Nagoya region, contributing 12 percent of 2017’s total net operating income of 11.9 billion yen. Greater Tokyo contributed 48 percent of the income and Greater Osaka was at 25 percent, the note said.

“We understand from our meetings with local management that smaller and independently-run golf courses are closing down. For example, nine golf courses closed down over the past five years around its Kasumi Golf Course, leaving only 12 golf courses remaining,” it said. “Given this prevailing trend, the largest golf operators such as Accordia may eventually increase market share given the benefits from their size, i.e. economies of scale.”

KGI also pointed to several trends that should benefit AGT, including continued economic growth in Japan and a tourism boom. Japan attracted a record 27.7 million visitors in 2017, up 19 percent on-year, it noted.

“Over the next three years, Japan’s tourism industry and economy may get an additional uplift from two of the three biggest sporting events in the world to be held in the country – the Rugby World Cup 2019 (the first time to be held in Asia) and the Tokyo 2020 Olympics,” KGI said. “We believe the inclusion of golf in the Olympics may attract younger players and benefit AGT.”

KGI kept a Buy call on AGT with a S$0.78 target price, saying its 8.0-9.0 dividend yield was attractive, offering a spread of 200-300 basis points over Singapore REITs and 400 basis points over Japan REITs.

The unit ended down 1.59 percent at S$0.62 on Wednesday.