UOBKayhian on 3 Feb 2014
FY14F PE (x): 14.4
FY15F PE (x): 13.5
Positive rental reversions to drive organic growth. Positive reversions are likely for the master-leases coming due in 2015 (34% of portfolio), based on current market rents.
Management was more optimistic on the prospects for higher reversions for properties in the Eastern region of Singapore, where slower growth in new supply will ensure that occupancies will remain high. We estimate that the IPO portfolio could see double-digit rental reversions of 10-12% in 2015, providing an organic growth catalyst, while annual rents under the master-leases have been growing at 1.5-2.0% p.a. over the four years from listing, with market rents for logistic facilities having risen 22% since 2Q10. Maintain BUY with target price of S$1.31, based on DDM (required rate of return: 6.9%, terminal growth: 1.5%).
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