UOBKayhian on 27 Oct 2014
FY15F PE (x): 17.6
FY16F PE (x): 17.6
Hitting new highs. Frasers Centrepoint Trust’s (FCT) 4QFY14 DPU is 2.785 S cents, (-
6.5% yoy, -7.8% qoq) due to the release of retained cash in 3QFY14 and 4QFY13.
Tenant sales up 0.6% yoy while shoppper traffic was down 2% qoq and 3% yoy. FCT
realised 6.5% positive rental reversions for leases signed in the year, resulting in a
small uptick in occupancy costs to 16.4% (from 16%). Management shared that while
segments such as fashion continued to be impacted by online competition and as
Singaporeans travelled abroad to shop, other segments such as F&B remained resilient
and that there is still potential to expand the percentage of F&B in the older malls (eg
Northpoint) from a high single-digit/ low double-digit levels to 20-30% of the mall area.
Maintain BUY with a higher target price of S$2.23 (from S$2.21), based on DDM
(required rate of return: 6.8%, terminal growth: 1.8%).
Monday, 27 October 2014
Ezra Holdings
UOBKayhian on 27 Oct 2014
FY14F PE (x): 14.7
FY15F PE (x): 9.5
Revenue increased by 18% yoy to S$1.5b in FY14 due to higher revenue posted by the
subsea segment. Subsea revenue increased to US$1,040b in FY14 from US$797m in
FY13. This offset the lower revenues from the offshore support services (OSS) and
marine segments. Revenue from OSS declined from US$285m to US$260m while
marine revenue fell marginally from US$189m to US$188m. Maintain HOLD with a
lowered target price of S$0.94 which is pegged at 0.7x 2015F P/B vs. 1.0x previously.
Our recommended entry price is S$0.80. Ezra is deep in value, but an earnest
turnaround in share price can only come about when Emas AMC and EOL deliver
strong earnings improvement.
FY14F PE (x): 14.7
FY15F PE (x): 9.5
Revenue increased by 18% yoy to S$1.5b in FY14 due to higher revenue posted by the
subsea segment. Subsea revenue increased to US$1,040b in FY14 from US$797m in
FY13. This offset the lower revenues from the offshore support services (OSS) and
marine segments. Revenue from OSS declined from US$285m to US$260m while
marine revenue fell marginally from US$189m to US$188m. Maintain HOLD with a
lowered target price of S$0.94 which is pegged at 0.7x 2015F P/B vs. 1.0x previously.
Our recommended entry price is S$0.80. Ezra is deep in value, but an earnest
turnaround in share price can only come about when Emas AMC and EOL deliver
strong earnings improvement.
CapitaCommercial Trust
UOBKayhian on 27 Oct 2014
FY14F PE (x): 21.2
FY15F PE (x): 20.2
Results in line with expectations. CapitaCommercial Trust (CCT) reported a 3Q14
distributable income of S$61.6m (+4.8% yoy, -3.9% qoq) and a DPU of 2.18 cents
(+5.3% yoy, -3.7% qoq).
Securing 40% pre-commitments for CapitaGreen (2Q14: 23%) with pre-commitments in
3Q14 from A.M. Best Asia-Pacific (Singapore) Pte Ltd, BCD Travel Asia Pacific Pte Ltd,
Freight Investor Services Pte. Ltd., Total Gas & Power Asia Private Limited., and
Watson, Farley & Williams Asia Practice LLP. Management mentioned that they are in
advanced stages of negotiation for another 75,000sf of space, positioning them well to
achieve 50% target leasing commitments by end-14. We expect CCT to achieve rents
of over S$11psfpm for the entire building. Maintain BUY with an unchanged target of
S$1.88, based on DDM (required rate of return: 7.2%, terminal growth: 2.2%).
FY14F PE (x): 21.2
FY15F PE (x): 20.2
Results in line with expectations. CapitaCommercial Trust (CCT) reported a 3Q14
distributable income of S$61.6m (+4.8% yoy, -3.9% qoq) and a DPU of 2.18 cents
(+5.3% yoy, -3.7% qoq).
Securing 40% pre-commitments for CapitaGreen (2Q14: 23%) with pre-commitments in
3Q14 from A.M. Best Asia-Pacific (Singapore) Pte Ltd, BCD Travel Asia Pacific Pte Ltd,
Freight Investor Services Pte. Ltd., Total Gas & Power Asia Private Limited., and
Watson, Farley & Williams Asia Practice LLP. Management mentioned that they are in
advanced stages of negotiation for another 75,000sf of space, positioning them well to
achieve 50% target leasing commitments by end-14. We expect CCT to achieve rents
of over S$11psfpm for the entire building. Maintain BUY with an unchanged target of
S$1.88, based on DDM (required rate of return: 7.2%, terminal growth: 2.2%).
CapitaCommercial Trust
OCBC on 24 Oct 2014
3Q14 distributable income increased 4.8% YoY to S$61.6m. This cumulates to an YTD distributable income of S$185.6m, which we deem to be in line with expectations and comprises 76.4% of our FY14 forecast. 3Q13 DPU is 2.1 S-cents – this is 2.9% or 0.06 S-cents higher than the 2.04 S-cents paid out in 3Q13 and translates to a distribution yield of 5.2% based on CCT’s last closing price. The growth in distributable income in 3Q14 was mainly due to higher contributions from portfolio assets, except for Wilkie Edge, and stronger NPI and distributable income from RCS Trust as well. Management reports that CapitaGreen remains on track to be completed by the end of FY14. The trust has secured aggregate lease commitments for 40% (279.5k sq ft) of total NLA. We continue to expect contributions from CapitaGreen to MSO Trust from 2H15 onwards, and to CCT’s distributable income from FY16. Maintain HOLD with an unchanged fair value estimate of S$1.67.
3Q14 figures line with expectations
3Q14 distributable income increased 4.8% YoY to S$61.6m. This cumulates to a YTD distributable income of S$185.6m, which we deem to be in line with expectations and comprises 76.4% of our FY14 forecast. 3Q13 DPU is 2.1 S-cents – this is 2.9% or 0.06 S-cents higher than the 2.04 S-cents paid out in 3Q13 and translates to a distribution yield of 5.2% based on CCT’s last closing price. The growth in distributable income in 3Q14 was mainly due to higher contributions from portfolio assets, except for Wilkie Edge, and stronger NPI and distributable income from RCS Trust as well. In terms of the topline, gross revenues over the quarter also grew 8.4% YoY to S$66.4m due to overall positive rental reversions across CCT’s asset portfolio.
Positive rental reversion for leases committed
Portfolio occupancy remained stable at 99.4% as of end 3Q14 versus the previous quarter. As a result of strong office rentals and positive rental reversions for leases committed, we saw a significant QoQ increase in CCT’s average committed office portfolio rentals from S$8.23 to S$8.42/sq ft. Over the quarter, the trust also signed leases for 131k sq ft of space, of which 17% are new leases, and the portfolio WALE (weighted average lease term to expiry) as at end Sep-14 stands at 7.7 years. CCT continues to enjoy a healthy balance sheet, with gearing at 30.2% as at end 3Q14 and an average cost of debt of 2.3%.
CapitaGreen now 40% pre-committed
Management reports that CapitaGreen remains on track to be completed by the end of FY14. The trust has secured aggregate lease commitments for 40% (279.5k sq ft) of total NLA and is in advanced stages of negotiation for another 75k of NLA, which will bring commitments to 50% by end FY14. We continue to expect contributions from CapitaGreen to MSO Trust from 2H15 onwards and to CCT’s distributable income from FY16. Maintain HOLD with an unchanged fair value estimate of S$1.67.
3Q14 distributable income increased 4.8% YoY to S$61.6m. This cumulates to a YTD distributable income of S$185.6m, which we deem to be in line with expectations and comprises 76.4% of our FY14 forecast. 3Q13 DPU is 2.1 S-cents – this is 2.9% or 0.06 S-cents higher than the 2.04 S-cents paid out in 3Q13 and translates to a distribution yield of 5.2% based on CCT’s last closing price. The growth in distributable income in 3Q14 was mainly due to higher contributions from portfolio assets, except for Wilkie Edge, and stronger NPI and distributable income from RCS Trust as well. In terms of the topline, gross revenues over the quarter also grew 8.4% YoY to S$66.4m due to overall positive rental reversions across CCT’s asset portfolio.
Positive rental reversion for leases committed
Portfolio occupancy remained stable at 99.4% as of end 3Q14 versus the previous quarter. As a result of strong office rentals and positive rental reversions for leases committed, we saw a significant QoQ increase in CCT’s average committed office portfolio rentals from S$8.23 to S$8.42/sq ft. Over the quarter, the trust also signed leases for 131k sq ft of space, of which 17% are new leases, and the portfolio WALE (weighted average lease term to expiry) as at end Sep-14 stands at 7.7 years. CCT continues to enjoy a healthy balance sheet, with gearing at 30.2% as at end 3Q14 and an average cost of debt of 2.3%.
CapitaGreen now 40% pre-committed
Management reports that CapitaGreen remains on track to be completed by the end of FY14. The trust has secured aggregate lease commitments for 40% (279.5k sq ft) of total NLA and is in advanced stages of negotiation for another 75k of NLA, which will bring commitments to 50% by end FY14. We continue to expect contributions from CapitaGreen to MSO Trust from 2H15 onwards and to CCT’s distributable income from FY16. Maintain HOLD with an unchanged fair value estimate of S$1.67.
Singapore Banks
Kim Eng on 27 Oct 2014
As a follow-up to our note on 15 Sep, we delve deeper into Singapore’s property market to answer clients’ questions on broad property trends. First, vacancy rates for non-landed private homes, excluding ECs, have risen to 8.3%, their highest in eight years. Second, current seemingly-high rental yield spreads could reverse when interest rates start to rise in 2015. A massive supply of new homes — 63,000, of which 6,038 unsold — could tip the balance in 2015 as household formation tapers off. To absorb the supply, property prices and rentals will have to weaken, a consensus view. Our house forecasts up to a 15% decline in home prices from mid-2014 to end-2015.
But higher foreign purchases not a risk
Foreign investors have been snapping up Singapore homes, accounting for 13.8% of all purchases in 1Q05-4Q11. PRC Chinese and Malaysian buyers are the two largest groups, behind 28% and 26% of 2013’s purchases. High foreign purchases may seem a risk but we believe some protection is offered by lower LTV ratios for these buyers. Singapore’s improved position as one of the international wealth-management centres may also suggest some of these are long-term investments. Default cases at luxury projects are not reflective of the broader market, in our view. Banks tell us they are not concerned and expect a minimal earnings impact.
Neutral unchanged, DBS still our top pick
We still expect the banking sector to escape largely unscathed. That said, sector remains a Neutral, for lack of catalysts. DBS remains our top pick, as it should be best positioned to benefit from rising rates. We stay cautious on OCBC.
- Property market could get worse. Net supply to inundate market as population growth slows & interest rates rise.
- But banks are unfazed; see no threat of 20% price falls next year.
- Banks also have some protection. Neutral on sector. DBS our top pick.
As a follow-up to our note on 15 Sep, we delve deeper into Singapore’s property market to answer clients’ questions on broad property trends. First, vacancy rates for non-landed private homes, excluding ECs, have risen to 8.3%, their highest in eight years. Second, current seemingly-high rental yield spreads could reverse when interest rates start to rise in 2015. A massive supply of new homes — 63,000, of which 6,038 unsold — could tip the balance in 2015 as household formation tapers off. To absorb the supply, property prices and rentals will have to weaken, a consensus view. Our house forecasts up to a 15% decline in home prices from mid-2014 to end-2015.
But higher foreign purchases not a risk
Foreign investors have been snapping up Singapore homes, accounting for 13.8% of all purchases in 1Q05-4Q11. PRC Chinese and Malaysian buyers are the two largest groups, behind 28% and 26% of 2013’s purchases. High foreign purchases may seem a risk but we believe some protection is offered by lower LTV ratios for these buyers. Singapore’s improved position as one of the international wealth-management centres may also suggest some of these are long-term investments. Default cases at luxury projects are not reflective of the broader market, in our view. Banks tell us they are not concerned and expect a minimal earnings impact.
Neutral unchanged, DBS still our top pick
We still expect the banking sector to escape largely unscathed. That said, sector remains a Neutral, for lack of catalysts. DBS remains our top pick, as it should be best positioned to benefit from rising rates. We stay cautious on OCBC.
Friday, 24 October 2014
Ascendas REIT
UOBKayhian on 24 Oct 2014
FY14F PE (x): 16.1
FY15F PE (x): 15.2
Results in line with expectations. Ascendas REIT (A-REIT) reported 2QFY15 DPU of
3.66 cents (+1.7% yoy, +0.3% qoq). The results are in line with our expectations, where
1HFY15 DPU represents 49.3% of our full-year forecast.
Pace of MTB conversions to slow down, with only 11.1% of SUA NLA due to expire over
the next 3.5 years. This contrasts with the higher 16.6% SUA expiry point which
occurred during the same period last year. Management attributed the occupancy
weakness mainly to the downtime associated with the conversion of SUA assets into
MTB assets. However, with the proportion of SUA leases due for expiry diminishing,
occupancy pressures will likely ease.
Maintain BUY with an unchanged target price of S$2.73, based on DDM (required rate
of return: 6.9%, terminal growth: 1.8%).
FY14F PE (x): 16.1
FY15F PE (x): 15.2
Results in line with expectations. Ascendas REIT (A-REIT) reported 2QFY15 DPU of
3.66 cents (+1.7% yoy, +0.3% qoq). The results are in line with our expectations, where
1HFY15 DPU represents 49.3% of our full-year forecast.
Pace of MTB conversions to slow down, with only 11.1% of SUA NLA due to expire over
the next 3.5 years. This contrasts with the higher 16.6% SUA expiry point which
occurred during the same period last year. Management attributed the occupancy
weakness mainly to the downtime associated with the conversion of SUA assets into
MTB assets. However, with the proportion of SUA leases due for expiry diminishing,
occupancy pressures will likely ease.
Maintain BUY with an unchanged target price of S$2.73, based on DDM (required rate
of return: 6.9%, terminal growth: 1.8%).
Sino Grandness
Kim Eng on 24 Oct 2014
Sino Grandness’s share price retreated 12.5% in three trading days under attack from a short seller who questioned its financial creditability. With the short seller recommending a short and giving zero value to the stock, investors’ confidence was rocked.
Management hosted an investors’ meeting yesterday to refute claims in the report. It attributed the differences in its profit margins and other operating metrics to business-model variances in the industry. It also blamed the discrepancies in survey results on the different methodologies employed by the research firms. It provided independent research from Frost & Sullivan to show Garden Fresh’s loquat juice’s market position. Management would consider buying back shares if its share price stays weak.
Much stronger proof needed
While the allegations are poorly argued, confidence has been dented and solid evidence such as government documentation from the company is critical, in our view. Without this, we expect the overhang to linger. In view of this and Garden Fresh’s still-uncertain listing status, we keep our HOLD. Our TP is under review. We could turn more positive on the company on any powerful defence evidence.
- Share price shed 12.5% in three days under siege from short seller.
- Do not share the same view but think solid evidence from management critical.
- Maintain HOLD. TP under review.
Sino Grandness’s share price retreated 12.5% in three trading days under attack from a short seller who questioned its financial creditability. With the short seller recommending a short and giving zero value to the stock, investors’ confidence was rocked.
Management hosted an investors’ meeting yesterday to refute claims in the report. It attributed the differences in its profit margins and other operating metrics to business-model variances in the industry. It also blamed the discrepancies in survey results on the different methodologies employed by the research firms. It provided independent research from Frost & Sullivan to show Garden Fresh’s loquat juice’s market position. Management would consider buying back shares if its share price stays weak.
Much stronger proof needed
While the allegations are poorly argued, confidence has been dented and solid evidence such as government documentation from the company is critical, in our view. Without this, we expect the overhang to linger. In view of this and Garden Fresh’s still-uncertain listing status, we keep our HOLD. Our TP is under review. We could turn more positive on the company on any powerful defence evidence.
Singapore Exchange
OCBC on 23 Oct 2014
Singapore Exchange (SGX) posted 1QFY15 net earnings of S$77.6m, in line with consensus estimate of S$78.6m. Securities market continued to experience low trading activities. Securities daily average traded value (SDAV) fell 27% YoY to S$1.0b. Fortunately, SGX’s overall performance was fortunately mitigated by other businesses and Derivatives revenue now accounted for about 32% of total revenue. Recent efforts by the SGX to increase the profile of listed companies, attract more institutional interest and to explore more collaboration could over time bring in more activities onto the local bourse. As 1Q came in largely in line with expectations and coupled with an expected quiet 2Q, we see no drivers to raise our FY15 projections. We are maintaining our fair value estimate of $7.26 and our HOLD rating on SGX.
1QFY15 came in within expectations
Singapore Exchange (SGX) posted 1QFY15 net earnings of S$77.6m, in line with consensus estimate of S$78.6m. This is down 16% YoY. Revenue fell 8% YoY to S$168.9m. Management has declared an unchanged dividend of 4 cents payable on 6 Nov 2014. The drag came from the Securities market, which continued to experience low trading activities. Securities daily average traded value (SDAV) fell 27% YoY to S$1.0b. For stocks priced below 20 cents, this plunged 66% to S$0.1b. SGX’s overall performance was fortunately mitigated by other businesses and Derivatives revenue now accounted for about 32% of total revenue. Total volumes of derivatives contracts rose 9% to 28.8m in 1Q. The China index futures, the FTSE A50, accounted for 10.8m contracts during the same period.
SDAV - trailing down, 4QCY2014 is yet another quiet quarter
Based on current market conditions and the lack of key Singapore market specific news, it was not surprising that the SDAV on the local bourse has been falling in the last four quarters. Since 1Q CY2013, quarterly SDAV has been on a general downtrend, moving down from S$1.7b to S$1.0b by the latest quarter. This lacklustre trend is unlikely to get any reprieve in 4QCY2014 based on early Oct numbers.
Intensifying its efforts
Recent efforts by the SGX to increase the profile of listed companies, attract more institutional interest and to explore more collaboration could over time bring in more activities onto the local bourse. SGX has also introduced market makers and liquidity providers in Jun 2014 in an effort to increase liquidity and depth to the market. Next year, the standard board-lot size will be reduced from 1000 shares to 100 shares. On the operating side, management is expecting tech-related capital expenditure of between S$50-55m and guiding for operating expenses of S$330-340m for FY15.
Maintain HOLD
As 1Q came in largely in line with expectations and coupled with an expected quiet 2Q, we see no drivers to raise our FY15 projections. We are maintaining our fair value estimate of $7.26 and our HOLDrating on SGX.
Singapore Exchange (SGX) posted 1QFY15 net earnings of S$77.6m, in line with consensus estimate of S$78.6m. This is down 16% YoY. Revenue fell 8% YoY to S$168.9m. Management has declared an unchanged dividend of 4 cents payable on 6 Nov 2014. The drag came from the Securities market, which continued to experience low trading activities. Securities daily average traded value (SDAV) fell 27% YoY to S$1.0b. For stocks priced below 20 cents, this plunged 66% to S$0.1b. SGX’s overall performance was fortunately mitigated by other businesses and Derivatives revenue now accounted for about 32% of total revenue. Total volumes of derivatives contracts rose 9% to 28.8m in 1Q. The China index futures, the FTSE A50, accounted for 10.8m contracts during the same period.
SDAV - trailing down, 4QCY2014 is yet another quiet quarter
Based on current market conditions and the lack of key Singapore market specific news, it was not surprising that the SDAV on the local bourse has been falling in the last four quarters. Since 1Q CY2013, quarterly SDAV has been on a general downtrend, moving down from S$1.7b to S$1.0b by the latest quarter. This lacklustre trend is unlikely to get any reprieve in 4QCY2014 based on early Oct numbers.
Intensifying its efforts
Recent efforts by the SGX to increase the profile of listed companies, attract more institutional interest and to explore more collaboration could over time bring in more activities onto the local bourse. SGX has also introduced market makers and liquidity providers in Jun 2014 in an effort to increase liquidity and depth to the market. Next year, the standard board-lot size will be reduced from 1000 shares to 100 shares. On the operating side, management is expecting tech-related capital expenditure of between S$50-55m and guiding for operating expenses of S$330-340m for FY15.
Maintain HOLD
As 1Q came in largely in line with expectations and coupled with an expected quiet 2Q, we see no drivers to raise our FY15 projections. We are maintaining our fair value estimate of $7.26 and our HOLDrating on SGX.
Keppel Land
OCBC on 23 Oct 2014
3Q14 PATMI decreased 10.6% YoY to S$113.0m, mostly due to lower profits from the property development segment, but partially offset by divestment gains from Equity Plaza and a share of Keppel REIT’s gain from its sale of Prudential Tower. In terms of the the topline, 3Q14 revenue dipped 59.6% YoY to S$168.7m as contributions from the property development segment fell with The Lakefront Residences attaining TOP in May 2014 and lower numbers from Park Avenue and the Springdale from Shanghai as well. 9M14 PATMI now cumulates to S$308.1m, forming 65% of our FY14 forecast, which we judge to be broadly in line with our expectations, given anticipated divestment gains from MBFC T3 ahead. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).
Weaker contributions from property development
3Q14 PATMI decreased 10.6% YoY to S$113.0m, mostly due to lower profits from the property development segment, but partially offset by divestment gains from Equity Plaza and a share of Keppel REIT’s gain from its sale of Prudential Tower. In terms of the the topline, 3Q14 revenue dipped 59.6% YoY to S$168.7m as contributions from the property development segment fell with The Lakefront Residences attaining TOP in May 2014 and lower numbers from Park Avenue and the Springdale from Shanghai as well. 9M14 PATMI now cumulates to S$308.1m, forming 65% of our FY14 forecast, which we judge to be broadly in line with our expectations, given anticipated divestment gains from MBFC T3 ahead. In Singapore, KPLD sold about 280 residential units over 9M14 (versus 310 units in 9M13) and its newest launch, Highline Residences in Tiong Bahru, sold 28% of its 500 total units at an average price of S$1,900 psf. In China, the group sold 1,420 units in 9M14, down versus the 3,100 units in 9M13, as The Botanica in Chengdu is now almost fully-sold.
Actively recycling capital into regional office and retail assets
Over the year to date, the group has announced sales of Equity Plaza, MBFC T3, and its stakes in a retail mall (BG Junction) in Surabaya, Indonesia and a condominium development (Al Mada Towers) in Jeddah, Saudi Arabia. We estimate that the group would gather, from these four projects, total net proceeds and net divestment gains of S$954m and S$168m, respectively. Looking ahead, KPLD would expand its presence in overseas office and retail assets, particularly in China, Indonesia and Vietnam; we have seen management announce over the last three months the development of Saigon Centre Phase Two offices in Vietnam, the development of an office tower and expansion of retail space in a mixed-use development in Manila, and the redevelopment of International Financial Centre Jakarta Tower 1 in Indonesia. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).
3Q14 PATMI decreased 10.6% YoY to S$113.0m, mostly due to lower profits from the property development segment, but partially offset by divestment gains from Equity Plaza and a share of Keppel REIT’s gain from its sale of Prudential Tower. In terms of the the topline, 3Q14 revenue dipped 59.6% YoY to S$168.7m as contributions from the property development segment fell with The Lakefront Residences attaining TOP in May 2014 and lower numbers from Park Avenue and the Springdale from Shanghai as well. 9M14 PATMI now cumulates to S$308.1m, forming 65% of our FY14 forecast, which we judge to be broadly in line with our expectations, given anticipated divestment gains from MBFC T3 ahead. In Singapore, KPLD sold about 280 residential units over 9M14 (versus 310 units in 9M13) and its newest launch, Highline Residences in Tiong Bahru, sold 28% of its 500 total units at an average price of S$1,900 psf. In China, the group sold 1,420 units in 9M14, down versus the 3,100 units in 9M13, as The Botanica in Chengdu is now almost fully-sold.
Actively recycling capital into regional office and retail assets
Over the year to date, the group has announced sales of Equity Plaza, MBFC T3, and its stakes in a retail mall (BG Junction) in Surabaya, Indonesia and a condominium development (Al Mada Towers) in Jeddah, Saudi Arabia. We estimate that the group would gather, from these four projects, total net proceeds and net divestment gains of S$954m and S$168m, respectively. Looking ahead, KPLD would expand its presence in overseas office and retail assets, particularly in China, Indonesia and Vietnam; we have seen management announce over the last three months the development of Saigon Centre Phase Two offices in Vietnam, the development of an office tower and expansion of retail space in a mixed-use development in Manila, and the redevelopment of International Financial Centre Jakarta Tower 1 in Indonesia. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).
Keppel Corp
OCBC on 23 Oct 2014
Keppel Corp (KEP) reported an 8.1% YoY rise in revenue to S$3.18b but saw a 9.5% decrease in net profit to S$414.2m in 3Q14, such that 9M14 net profit met 76% of our full year estimates, in line with expectations. Operating margin in the O&M division remained healthy in the quarter, at 14.9% in 3Q14 vs. 14.7% in 2Q14. The semi-submersibles for Sete Brasil are also on track. Though there have been jitters in the oil market recently, management believes that this has not altered the sound fundamentals of the industry. Still, KEP’s order flow YTD has been relatively slow, and we have lowered our new order win estimates to S$5.7b for FY14 and S$6b for FY15, compared to S$6.7b and S$6.5b earlier. Our fair value estimate correspondingly drops to S$11.75 (prev. S$12.31), but given the potential upside and forecasted dividend yield of ~4.8% on the stock, we maintain our BUY rating on KEP.
3Q14 results in line
Keppel Corp (KEP) reported an 8.1% YoY rise in revenue to S$3.18b but saw a 9.5% decrease in net profit to S$414.2m in 3Q14, such that 9M14 net profit met 76% of our full year estimates, in line with expectations. The offshore & marine division remained the largest contributor to group net profit at 65% in 9M14, followed by property at 19%, infrastructure at 9% and investments at 7%.
Smooth execution in O&M
Operating margin in the O&M division remained healthy in the quarter, at 14.9% in 3Q14 vs. 14.7% in 2Q14. The semi-submersibles for Sete Brasil are also on track, with the first unit over 75% completed, the second over 40% completed, and the third unit almost 20% completed. With regards to the second Golar FLNG unit, KEP hopes to convert the LOI into a firm contract by the end of this year. Meanwhile, net order book for the O&M division stood at S$12.7b as at end 3Q14.
Unfazed by oil market jitters
Though there have been jitters in the oil market recently, management believes that this has not altered the sound fundamentals of the industry. With regards to capex cuts by international oil companies, KEP believes that they are just “kicking the can down the road” and will at some point need to spend to replenish reserves, while drilling contractors have to replace their fleet with new, safer and technologically superior rigs. In the mean time, national oil companies are expected to continue to raise their capex, such as PEMEX which plans to boost its annual E&P investment from US$19b in 2011 to US$30b in 2016.
4.8% dividend yield on a quality stock
KEP has secured orders of about S$3.7b YTD, and order flow has been slower than ours and the street’s expectations. As such, we lower our new order win estimates to S$5.7b for FY14 and S$6b for FY15, compared to S$6.7b and S$6.5b earlier. Our fair value estimate correspondingly drops to S$11.75 (prev. S$12.31), but given the potential upside and forecasted dividend yield of ~4.8% on the stock, we maintain our BUY rating on KEP.
Keppel Corp (KEP) reported an 8.1% YoY rise in revenue to S$3.18b but saw a 9.5% decrease in net profit to S$414.2m in 3Q14, such that 9M14 net profit met 76% of our full year estimates, in line with expectations. The offshore & marine division remained the largest contributor to group net profit at 65% in 9M14, followed by property at 19%, infrastructure at 9% and investments at 7%.
Smooth execution in O&M
Operating margin in the O&M division remained healthy in the quarter, at 14.9% in 3Q14 vs. 14.7% in 2Q14. The semi-submersibles for Sete Brasil are also on track, with the first unit over 75% completed, the second over 40% completed, and the third unit almost 20% completed. With regards to the second Golar FLNG unit, KEP hopes to convert the LOI into a firm contract by the end of this year. Meanwhile, net order book for the O&M division stood at S$12.7b as at end 3Q14.
Unfazed by oil market jitters
Though there have been jitters in the oil market recently, management believes that this has not altered the sound fundamentals of the industry. With regards to capex cuts by international oil companies, KEP believes that they are just “kicking the can down the road” and will at some point need to spend to replenish reserves, while drilling contractors have to replace their fleet with new, safer and technologically superior rigs. In the mean time, national oil companies are expected to continue to raise their capex, such as PEMEX which plans to boost its annual E&P investment from US$19b in 2011 to US$30b in 2016.
4.8% dividend yield on a quality stock
KEP has secured orders of about S$3.7b YTD, and order flow has been slower than ours and the street’s expectations. As such, we lower our new order win estimates to S$5.7b for FY14 and S$6b for FY15, compared to S$6.7b and S$6.5b earlier. Our fair value estimate correspondingly drops to S$11.75 (prev. S$12.31), but given the potential upside and forecasted dividend yield of ~4.8% on the stock, we maintain our BUY rating on KEP.
Singtel
OCBC on 23 Oct 2014
SingTel’s share price has fallen some 7% to hit a recent S$3.64 low since we downgraded our call to Hold on 14 Aug. While part of the fall could be due to the overall weaker market, with SingTel being the largest market cap stock listed here, the continued slide in the AUD against the SGD could have also played a part; this as Optus accounts for some 50% of the group’s revenue, and about 30% of the NPAT, based on our estimates.
Near our comfort level
But we note that the share price has fallen close to our comfort level of S$3.60, which in our view, should have captured most of the negativity surrounding the AUD’s slide. In any case, some market watchers expect the AUD to consolidate around current levels and possibly edge up slightly against the SGD towards the year end before easing slightly towards end 2015. And with SingTel expected to pay around 60-75% of its underlying net profit as dividend, we believe that the forecast yield of 4.6% for FY15 is starting to look quite respectable.
Moving beyond a pure telco play
We note that SingTel is making progress in moving beyond just a pure telco play; this following its move to acquire Adconion and Kontera for a total of US$359m in Jun this year – a move to further its Digital Life strategy of turning amobee into the global leader in mobile-led digital advertising space. However, we note that this is still very much work in progress – SingTel has also alluded that it may take 3-5 years for amobee to break even and become profitable. Nevertheless, we recognize that this is an important step as the traditional telco space which is increasingly being commoditized.
Upgrade to BUY with S$4.08 fair value
While we are paring down our AUD/SGD assumption slightly, which reduces our FY15 estimates for topline by 2.2% and bottomline by 0.5%, our SOTP-based fair value remains unchanged at S$4.08 due to the higher market value of its listed associates. Upgrade to BUY.
SingTel’s share price has fallen some 7% to hit a recent S$3.64 low since we downgraded our call to Hold on 14 Aug; this in line with the lower overall market as well as the persistent slide in the AUD against the SGD (50% of its revenue is from Optus). But we note that the share price has fallen close to our comfort level of S$3.60, which in our view, should have captured most of the negativity surrounding the AUD’s slide. While we are paring down our AUD/SGD assumption slightly, which reduces our FY15 estimates for topline by 2.2% and bottomline by 0.5%, our SOTP-based fair value remains unchanged at S$4.08 due to the higher market value of its listed associates. Upgrade to BUY.
Shares down 7% since mid-Aug
SingTel’s share price has fallen some 7% to hit a recent S$3.64 low since we downgraded our call to Hold on 14 Aug. While part of the fall could be due to the overall weaker market, with SingTel being the largest market cap stock listed here, the continued slide in the AUD against the SGD could have also played a part; this as Optus accounts for some 50% of the group’s revenue, and about 30% of the NPAT, based on our estimates.
Near our comfort level
But we note that the share price has fallen close to our comfort level of S$3.60, which in our view, should have captured most of the negativity surrounding the AUD’s slide. In any case, some market watchers expect the AUD to consolidate around current levels and possibly edge up slightly against the SGD towards the year end before easing slightly towards end 2015. And with SingTel expected to pay around 60-75% of its underlying net profit as dividend, we believe that the forecast yield of 4.6% for FY15 is starting to look quite respectable.
Moving beyond a pure telco play
We note that SingTel is making progress in moving beyond just a pure telco play; this following its move to acquire Adconion and Kontera for a total of US$359m in Jun this year – a move to further its Digital Life strategy of turning amobee into the global leader in mobile-led digital advertising space. However, we note that this is still very much work in progress – SingTel has also alluded that it may take 3-5 years for amobee to break even and become profitable. Nevertheless, we recognize that this is an important step as the traditional telco space which is increasingly being commoditized.
Upgrade to BUY with S$4.08 fair value
While we are paring down our AUD/SGD assumption slightly, which reduces our FY15 estimates for topline by 2.2% and bottomline by 0.5%, our SOTP-based fair value remains unchanged at S$4.08 due to the higher market value of its listed associates. Upgrade to BUY.
Suntec REIT
OCBC on 23 Oct 2014
Suntec REIT’s 3Q14 revenue grew 8.5% YoY to S$71.5m, underpinned largely by the completion of Phase 2 (opened in Jun 2014) of the asset enhancement works in Suntec City mall. DPU inched up 1.7% YoY to 2.328 S cents. This fell short of our expectations but was in-line with Bloomberg consensus. Although momentum for its Office segment remained healthy, we believe the 60% commitment for its Suntec City retail mall Phase 3 has progressed slower-than-expected, given that completion is expected by end-2014. We pare our FY14 and FY15 DPU forecasts by 4.1% and 3.1%, respectively. Our DDM-derived fair value estimate correspondingly falls from S$1.96 to S$1.90. However, we maintain BUY on Suntec REIT, as we believe valuations remain undemanding, with the stock trading at 0.85x FY14F P/B.
3Q14 results missed our expectations
Suntec REIT’s 3Q14 revenue grew 8.5% YoY to S$71.5m, underpinned largely by the completion of Phase 2 (opened in Jun 2014) of the asset enhancement works in Suntec City mall. DPU inched up 1.7% YoY to 2.328 S cents. This fell short of our expectations but was in-line with Bloomberg consensus. For 9M14, gross revenue jumped 26.5% to S$205.6m, while DPU was up slightly by 0.8% to 6.823 S cents. This constituted 67.8% and 70.2% of our FY14 projections, respectively. Portfolio occupancy remained healthy, coming in at 100% for Office and 98.4% for Retail. Suntec City mall has attained an overall committed occupancy of 86% YTD (Phase 1: 100%; Phase 2: 99.4%; Phase 3: 60%). We believe commitment for Phase 3 has progressed slower-than-expected, given that completion is expected by end-2014. Management is cognisant of the headwinds facing the retail sector in Singapore, but retained its ROI projection of 10.1%. Passing rents for Phase 1 and Phase 2 were stable at S$12.59 psf pm compared to 2Q14 (S$12.57 psf pm).
Office momentum still healthy
Suntec REIT achieved an average rent of S$8.24 psf pm for office leases secured in 3Q14. This was lower than the S$8.98 psf pm rate in 2Q14. Management explained that out of the 280,000 sqft of space replaced, 150,000 sqft was renewed by an anchor tenant at a discount to the market rate (new lease to commence in FY15). Nevertheless, the new rental rate for this tenant still represents a healthy double-digit increase from its previous lease. If we exclude the impact of this renewal, Suntec REIT’s average rent secured in 3Q14 would have been in excess of S$9 psf pm. Management guided that it is confident its office portfolio performance in FY14 would be better than FY13.
Lower forecast, but maintain BUY
We pare our FY14 and FY15 DPU forecasts by 4.1% and 3.1%, respectively. Our DDM-derived fair value estimate correspondingly falls from S$1.96 to S$1.90. However, we maintain BUY on Suntec REIT, as we believe valuations remain undemanding, with the stock trading at 0.85x FY14F P/B.
Suntec REIT’s 3Q14 revenue grew 8.5% YoY to S$71.5m, underpinned largely by the completion of Phase 2 (opened in Jun 2014) of the asset enhancement works in Suntec City mall. DPU inched up 1.7% YoY to 2.328 S cents. This fell short of our expectations but was in-line with Bloomberg consensus. For 9M14, gross revenue jumped 26.5% to S$205.6m, while DPU was up slightly by 0.8% to 6.823 S cents. This constituted 67.8% and 70.2% of our FY14 projections, respectively. Portfolio occupancy remained healthy, coming in at 100% for Office and 98.4% for Retail. Suntec City mall has attained an overall committed occupancy of 86% YTD (Phase 1: 100%; Phase 2: 99.4%; Phase 3: 60%). We believe commitment for Phase 3 has progressed slower-than-expected, given that completion is expected by end-2014. Management is cognisant of the headwinds facing the retail sector in Singapore, but retained its ROI projection of 10.1%. Passing rents for Phase 1 and Phase 2 were stable at S$12.59 psf pm compared to 2Q14 (S$12.57 psf pm).
Office momentum still healthy
Suntec REIT achieved an average rent of S$8.24 psf pm for office leases secured in 3Q14. This was lower than the S$8.98 psf pm rate in 2Q14. Management explained that out of the 280,000 sqft of space replaced, 150,000 sqft was renewed by an anchor tenant at a discount to the market rate (new lease to commence in FY15). Nevertheless, the new rental rate for this tenant still represents a healthy double-digit increase from its previous lease. If we exclude the impact of this renewal, Suntec REIT’s average rent secured in 3Q14 would have been in excess of S$9 psf pm. Management guided that it is confident its office portfolio performance in FY14 would be better than FY13.
Lower forecast, but maintain BUY
We pare our FY14 and FY15 DPU forecasts by 4.1% and 3.1%, respectively. Our DDM-derived fair value estimate correspondingly falls from S$1.96 to S$1.90. However, we maintain BUY on Suntec REIT, as we believe valuations remain undemanding, with the stock trading at 0.85x FY14F P/B.
Mapletree Logistics Trust
OCBC on 23 Oct 2014
Mapletree Logistics Trust (MLT) reported a 3.3% YoY increase in its 2QFY15 DPU to 1.88 S cents on the back of a 5.8% growth in its gross revenue to S$81.5m. Results were in-line with expectations. MLT has concluded four accretive acquisitions in Malaysia, South Korea and China worth ~S$149m YTD, with NPI yields ranging from 7.5%-8.4%. Although MLT managed to achieve positive average rental reversions of 9% for leases renewed in 2QFY15, the outlook remains muted. While we still expect rental reversions to remain positive, the pace of growth would likely moderate. After updating our valuation model for our latest assumptions, our DDM-derived fair value remains unchanged at S$1.12 and we maintain our HOLD rating.
2QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a 3.3% YoY increase in its 2QFY15 DPU to 1.88 S cents on the back of a 5.8% growth in its gross revenue to S$81.5m. This was driven by contributions from its redevelopment project Mapletree Benoi Logistics Hub, higher revenue from existing assets in Singapore and Hong Kong, but partially offset by lower occupancy at several of its newly converted multi-tenanted buildings in Singapore. Overall portfolio occupancy rates slipped 0.4 ppt to 97.2%, its fourth consecutive quarter of QoQ decline. For 1HFY15, revenue and DPU grew 6.6% and 4.4% to S$162.5m and 3.78 S cents, respectively, both of which formed 49.4% of our FY15 forecasts. We view this set of results as in-line with our expectations.
Four accretive acquisitions concluded YTD
MLT has concluded four accretive acquisitions in Malaysia, South Korea and China worth ~S$149m YTD (two were completed post 2QFY15 in China on 8 Oct), with NPI yields ranging from 7.5%-8.4%. This is attractive compared to its FY14 portfolio NPI yield of 6.3%, in our view. The four assets are funded wholly by debt, which will cause its aggregate leverage ratio to increase to 34.6%.
Maintain HOLD on muted outlook
Although MLT managed to achieve positive average rental reversions of 9% for leases renewed in 2QFY15, the outlook remains muted. This is attributed to the sluggish macroeconomic environment, tighter regulatory landscape and higher expenses from the continued conversion of its single-tenanted assets to multi-tenanted buildings in Singapore. Nevertheless, we still expect rental reversions to remain positive, although the pace of growth would likely moderate. After updating our valuation model for our latest assumptions, our DDM-derived fair value remains unchanged at S$1.12. Maintain HOLD. In our view, valuations appear rich, with the stock trading at 1.23x FY15F P/B, which is approximately 0.5 standard deviation above its 10-year average forward P/B ratio of 1.07x.
Mapletree Logistics Trust (MLT) reported a 3.3% YoY increase in its 2QFY15 DPU to 1.88 S cents on the back of a 5.8% growth in its gross revenue to S$81.5m. This was driven by contributions from its redevelopment project Mapletree Benoi Logistics Hub, higher revenue from existing assets in Singapore and Hong Kong, but partially offset by lower occupancy at several of its newly converted multi-tenanted buildings in Singapore. Overall portfolio occupancy rates slipped 0.4 ppt to 97.2%, its fourth consecutive quarter of QoQ decline. For 1HFY15, revenue and DPU grew 6.6% and 4.4% to S$162.5m and 3.78 S cents, respectively, both of which formed 49.4% of our FY15 forecasts. We view this set of results as in-line with our expectations.
Four accretive acquisitions concluded YTD
MLT has concluded four accretive acquisitions in Malaysia, South Korea and China worth ~S$149m YTD (two were completed post 2QFY15 in China on 8 Oct), with NPI yields ranging from 7.5%-8.4%. This is attractive compared to its FY14 portfolio NPI yield of 6.3%, in our view. The four assets are funded wholly by debt, which will cause its aggregate leverage ratio to increase to 34.6%.
Maintain HOLD on muted outlook
Although MLT managed to achieve positive average rental reversions of 9% for leases renewed in 2QFY15, the outlook remains muted. This is attributed to the sluggish macroeconomic environment, tighter regulatory landscape and higher expenses from the continued conversion of its single-tenanted assets to multi-tenanted buildings in Singapore. Nevertheless, we still expect rental reversions to remain positive, although the pace of growth would likely moderate. After updating our valuation model for our latest assumptions, our DDM-derived fair value remains unchanged at S$1.12. Maintain HOLD. In our view, valuations appear rich, with the stock trading at 1.23x FY15F P/B, which is approximately 0.5 standard deviation above its 10-year average forward P/B ratio of 1.07x.
Frasers Commercial Trust
OCBC on 23 Oct 2014
Frasers Commercial Trust (FCOT)’s 4QFY14 results came in within our expectations, with DPU increasing 6.2% YoY to 2.21 S cents. Its FY14 DPU of 8.51 S cents (+8.7%) was a record high and also spot on with our estimate. FCOT managed to achieve positive weighted average rental reversions of 6.0%-18.4% and 13.7%-21.4% for 4QFY14 and FY14, respectively. We expect this robust momentum to continue, as passing rents for leases expiring in FY15 are largely below the market rate. We fine-tune our assumptions following a change in analyst coverage. Our fair value estimate increases from S$1.48 to S$1.50 as we roll forward our valuations. Coupled with a decent distribution yield of 6.8% and 7.2% for FY15F and FY16F, respectively, we reiterate BUY on FCOT.
4QFY14 results met our expectations
Frasers Commercial Trust (FCOT) 4QFY14 results came in within our expectations. Gross revenue grew 10.5% YoY to S$31.8m, while DPU of 2.21 S cents represented an increase of 6.2%. This was driven by higher rental contribution from the underlying leases following the expiry of the master lease at Alexandra Technopark (ATP), coupled with improved occupancy and rental rates at China Square Central. For FY14, revenue inched up 0.5% to S$118.8m, forming 96.8% of our full-year forecast. DPU grew 8.7% to 8.51 S cents and was spot on with our estimate of 8.5 S cents, due largely to lower-than-expected finance costs. This DPU was a record high for FCOT.
Healthy rental reversions; more to come
FCOT managed to achieve positive weighted average rental reversions of 6.0%-18.4% and 13.7%-21.4% for 4QFY14 and FY14, respectively. We expect this robust momentum to continue, as passing rents for leases expiring in FY15 for China Square Central, 55 Market Street, ATP and Central Park are approximately 23%-27%, 7%-13%, 20% and 25% below the market rate, respectively, based on our estimates. In terms of portfolio valuation, there was a slight increase of 0.7% from S$1,811.4m (as at 30 Sep 2013) to S$1,824.9m (as at 30 Sep 2014). The gain in valuation of its Singapore properties was partially offset by the decline in valuation of its Australia assets (partly due to weaker AUD). Although there is some softness in the Perth office market, the silver lining comes from the fact that there are minimal leases expiring at Central Park in FY15 (0.7% of its portfolio gross rental income).
Maintain BUY
We fine-tune our assumptions following a change in analyst coverage. Our fair value estimate increases from S$1.48 to S$1.50 as we roll forward our valuations. Coupled with a decent distribution yield of 6.8% and 7.2% for FY15F and FY16F, respectively, we reiterate BUY on FCOT.
Frasers Commercial Trust (FCOT) 4QFY14 results came in within our expectations. Gross revenue grew 10.5% YoY to S$31.8m, while DPU of 2.21 S cents represented an increase of 6.2%. This was driven by higher rental contribution from the underlying leases following the expiry of the master lease at Alexandra Technopark (ATP), coupled with improved occupancy and rental rates at China Square Central. For FY14, revenue inched up 0.5% to S$118.8m, forming 96.8% of our full-year forecast. DPU grew 8.7% to 8.51 S cents and was spot on with our estimate of 8.5 S cents, due largely to lower-than-expected finance costs. This DPU was a record high for FCOT.
Healthy rental reversions; more to come
FCOT managed to achieve positive weighted average rental reversions of 6.0%-18.4% and 13.7%-21.4% for 4QFY14 and FY14, respectively. We expect this robust momentum to continue, as passing rents for leases expiring in FY15 for China Square Central, 55 Market Street, ATP and Central Park are approximately 23%-27%, 7%-13%, 20% and 25% below the market rate, respectively, based on our estimates. In terms of portfolio valuation, there was a slight increase of 0.7% from S$1,811.4m (as at 30 Sep 2013) to S$1,824.9m (as at 30 Sep 2014). The gain in valuation of its Singapore properties was partially offset by the decline in valuation of its Australia assets (partly due to weaker AUD). Although there is some softness in the Perth office market, the silver lining comes from the fact that there are minimal leases expiring at Central Park in FY15 (0.7% of its portfolio gross rental income).
Maintain BUY
We fine-tune our assumptions following a change in analyst coverage. Our fair value estimate increases from S$1.48 to S$1.50 as we roll forward our valuations. Coupled with a decent distribution yield of 6.8% and 7.2% for FY15F and FY16F, respectively, we reiterate BUY on FCOT.
Thursday, 23 October 2014
Triyards Holdings
UOBKayhian on 23 Oct 2014
FY14 PE (x): 5.7
FY15F PE (x): 4.7
Triyards’ FY14 results were in line with expectations. The recent earnings-accretive
acquisition of Strategic Marine’s yards will boost its yard capacity and expand its
product segment and client base. Demand for liftboats has picked up with Triyards in
negotiations for 10-12 liftboat contracts worth US$500m-600m. The stock is trading at a
relatively cheap 4.7x 2015F PE. Our small-cap top pick with a target price of S$1.13.
Our preferred OSV small-cap pick with a target price of S$1.13, based on 8x FY15F
PE, or a 15% premium to peers’ long-term mean of 7x, as we see strong earnings
growth potential from growing liftboat demand. The premium is justified, considering
Triyards being one of the very few Asian yards with an excellent track record of building
and delivering liftboats. The stock is currently trading at a cheap 4.7x FY15F PE,
providing huge upside potential.
FY14 PE (x): 5.7
FY15F PE (x): 4.7
Triyards’ FY14 results were in line with expectations. The recent earnings-accretive
acquisition of Strategic Marine’s yards will boost its yard capacity and expand its
product segment and client base. Demand for liftboats has picked up with Triyards in
negotiations for 10-12 liftboat contracts worth US$500m-600m. The stock is trading at a
relatively cheap 4.7x 2015F PE. Our small-cap top pick with a target price of S$1.13.
Our preferred OSV small-cap pick with a target price of S$1.13, based on 8x FY15F
PE, or a 15% premium to peers’ long-term mean of 7x, as we see strong earnings
growth potential from growing liftboat demand. The premium is justified, considering
Triyards being one of the very few Asian yards with an excellent track record of building
and delivering liftboats. The stock is currently trading at a cheap 4.7x FY15F PE,
providing huge upside potential.
Suntec REIT
UOBKayhian on 23 Oct 2014
FY14F DPU (S$ cent): 9.4
FY15F DPU (S$ cent): 10.4
Results are in line with the opening of phase 2 of Suntec City mall boosting sales.
Management remains confident on the office portfolio’s outperformance. While our site
visits suggest foot traffic is still recovering, the full impact of AEI works is expected only
when the entire mall opens. Management is targeting to secure accessible luxury
brands in phase 3, while phase 1 continues to focus on highstreet brands and phase 2
on family, entertainment and kids.
Maintain BUY and target price of S$2.05. Anticipate further acquisitions with improved
financing flexibility as gearing remained low at 34.4% (1Q14: 34.1%). This could include
further acquisitions of Grade-A assets in Australia’s gateway cities including Sydney
and Melbourne. In Singapore, Suntec REIT could further raise its stake in Suntec
Convention Centre from its current 61%. The additional funds could also be used to
finance a potential AEI at Park Mall.
FY14F DPU (S$ cent): 9.4
FY15F DPU (S$ cent): 10.4
Results are in line with the opening of phase 2 of Suntec City mall boosting sales.
Management remains confident on the office portfolio’s outperformance. While our site
visits suggest foot traffic is still recovering, the full impact of AEI works is expected only
when the entire mall opens. Management is targeting to secure accessible luxury
brands in phase 3, while phase 1 continues to focus on highstreet brands and phase 2
on family, entertainment and kids.
Maintain BUY and target price of S$2.05. Anticipate further acquisitions with improved
financing flexibility as gearing remained low at 34.4% (1Q14: 34.1%). This could include
further acquisitions of Grade-A assets in Australia’s gateway cities including Sydney
and Melbourne. In Singapore, Suntec REIT could further raise its stake in Suntec
Convention Centre from its current 61%. The additional funds could also be used to
finance a potential AEI at Park Mall.
Mapletree Industrial Trust
UOBKyahian on 23 Oct 2014
FY14 DPU (S$ cent): 9.9
FY15F DPU (S$ cent): 10.1
Organic growth drivers are intact as the impact of Toa Payoh AEI and rental reversions
in flatted factories continued to drive top-line growth despite weakness in business park
space. Expect further upside with the completion of the equinix development by 1Q15.
Maintain BUY and DDM-based target price of S$1.66.
Sponsor Mapletree Investment’s plan to build a S$250m industrial facility in Tai Seng,
linked to the Tai Seng MRT station, on a S$120m GLS white site will form a ROFR
pipeline asset for MIT when completed in 1H16.
FY14 DPU (S$ cent): 9.9
FY15F DPU (S$ cent): 10.1
Organic growth drivers are intact as the impact of Toa Payoh AEI and rental reversions
in flatted factories continued to drive top-line growth despite weakness in business park
space. Expect further upside with the completion of the equinix development by 1Q15.
Maintain BUY and DDM-based target price of S$1.66.
Sponsor Mapletree Investment’s plan to build a S$250m industrial facility in Tai Seng,
linked to the Tai Seng MRT station, on a S$120m GLS white site will form a ROFR
pipeline asset for MIT when completed in 1H16.
Keppel Corp
UOBKayhian on 23 Oct 2014
FY14F PE (x): 10.8
FY15F PE (x): 10.9
Results were within our expectation. 3Q14’s O&M operating margin of 14.9% was stable compared with 1Q14’s 14.6% and 2Q14’s 14.7%. Semi-submersible rigs for Sete Brasil are on track. However, ytd total contract wins are lagging behind our S$7b projection. We cut our contract win projections from S$7b p.a. to S$5b p.a. for 2014 and 2015, and S$6b for 2016. We lower our target price to S$12.60 but maintain our BUY call.
Maintain BUY, but cutting our target price from S$13.50 to S$12.60, based on the sumof-the-parts valuation which values Keppel’s O&M business at 15x 2015F PE. Amid lower oil price fears, Sembcorp Industries (BUY/target: S$5.95) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.
FY14F PE (x): 10.8
FY15F PE (x): 10.9
Results were within our expectation. 3Q14’s O&M operating margin of 14.9% was stable compared with 1Q14’s 14.6% and 2Q14’s 14.7%. Semi-submersible rigs for Sete Brasil are on track. However, ytd total contract wins are lagging behind our S$7b projection. We cut our contract win projections from S$7b p.a. to S$5b p.a. for 2014 and 2015, and S$6b for 2016. We lower our target price to S$12.60 but maintain our BUY call.
Maintain BUY, but cutting our target price from S$13.50 to S$12.60, based on the sumof-the-parts valuation which values Keppel’s O&M business at 15x 2015F PE. Amid lower oil price fears, Sembcorp Industries (BUY/target: S$5.95) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.
Sino Grandness Food
UOBKayhian on 23 Oct 2014
FY14F PE (x): 3.4
FY15F PE (x): 2.8
An anonymous author newman9 from Value Investor Club (VIC) had issued a sell
report on Sino Grandness (SGF) with a price target of S$0. SGF found the allegations
baseless and is working with lawyers and auditors to issue an official press release in
due time. We will continue to monitor the situation closely for further development. Riskaverse
investors should only accumulate the shares after Garden Fresh’s listing
becomes more apparent. Maintain BUY. Target price: S$0.95.
Maintain BUY and target price of S$0.95 as we continue to monitor the situation closely
for further development. Our target price assumes GF’s listing will go through at 16x
PE, a 20% holding company discount on its eventual stake of GF and a 5.0x 2015F PE
valuation on its remaining business. We will review our recommendation and target
price again after the release of its 3Q14 results in mid-November. Intrinsic value of
S$0.75 if the listing exercise fails. We would value SGF at S$0.75, pegging its 2015F
PE to Singapore-listed peers’ average of 4.55x. This valuation would also have taken
account the potential equity and debt raising in 2015 to redeem fully the two convertible
bonds
FY14F PE (x): 3.4
FY15F PE (x): 2.8
An anonymous author newman9 from Value Investor Club (VIC) had issued a sell
report on Sino Grandness (SGF) with a price target of S$0. SGF found the allegations
baseless and is working with lawyers and auditors to issue an official press release in
due time. We will continue to monitor the situation closely for further development. Riskaverse
investors should only accumulate the shares after Garden Fresh’s listing
becomes more apparent. Maintain BUY. Target price: S$0.95.
Maintain BUY and target price of S$0.95 as we continue to monitor the situation closely
for further development. Our target price assumes GF’s listing will go through at 16x
PE, a 20% holding company discount on its eventual stake of GF and a 5.0x 2015F PE
valuation on its remaining business. We will review our recommendation and target
price again after the release of its 3Q14 results in mid-November. Intrinsic value of
S$0.75 if the listing exercise fails. We would value SGF at S$0.75, pegging its 2015F
PE to Singapore-listed peers’ average of 4.55x. This valuation would also have taken
account the potential equity and debt raising in 2015 to redeem fully the two convertible
bonds
Keppel Corp
Kim Eng on 23 Oct 2014
3Q14 PATMI of SGD414.2m (-9.5% YoY, +2.0% QoQ) broadly met consensus and our expectations. 9M14 PATMI (-0.2% YoY) formed 74% and 72% of the respective FY14E forecasts. O&M operating margins inched up 0.3ppt QoQ to 15.0% (2Q14: 14.7%, 3Q13: 16.5%), on track for our 14.9% full-year forecast. Property PATMI receded 52% YoY on weaker Singapore and China sales.
Risks to order intake
Keppel has secured SGD3.7b of O&M orders YTD, lifting its backlog to SGD12.7b. It sees no material decline in order enquiries and expects a balanced mix of rig and non-rig orders. Still-healthy enquiries, plus seven outstanding options worth c.USD2.6b, should help it meet our below-consensus SGD5.5b order-win target for FY14E. That said, we see increasing risks as Ensco did not exercise its option for a jackup rig recently. We expect drillers to defer their rig orders in a deteriorating drilling market. Softening residential markets in Singapore and China are added concerns.
Still, Keppel’s strong execution and order backlog should help it ride out the volatility, with attractive yields of 4.5%. Maintain HOLD. Our SOTP-based TP dips to SGD10.74 from SGD10.95 with less than 1% changes to our FY14E-16E EPS.
To turn positive again, we need to see: 1) improving drilling-market dynamics; 2) higher O&M margins; and 3) an improved property outlook.
- Maintain HOLD with lower SOTP-based TP of SGD10.74 (from SGD10.95), with 4.5% yields.
- 3Q14 met expectations. Property the only weak spot. Fine-tuned FY14E-16E EPS.
- Deteriorating sector sentiment a risk to O&M orders.
3Q14 PATMI of SGD414.2m (-9.5% YoY, +2.0% QoQ) broadly met consensus and our expectations. 9M14 PATMI (-0.2% YoY) formed 74% and 72% of the respective FY14E forecasts. O&M operating margins inched up 0.3ppt QoQ to 15.0% (2Q14: 14.7%, 3Q13: 16.5%), on track for our 14.9% full-year forecast. Property PATMI receded 52% YoY on weaker Singapore and China sales.
Risks to order intake
Keppel has secured SGD3.7b of O&M orders YTD, lifting its backlog to SGD12.7b. It sees no material decline in order enquiries and expects a balanced mix of rig and non-rig orders. Still-healthy enquiries, plus seven outstanding options worth c.USD2.6b, should help it meet our below-consensus SGD5.5b order-win target for FY14E. That said, we see increasing risks as Ensco did not exercise its option for a jackup rig recently. We expect drillers to defer their rig orders in a deteriorating drilling market. Softening residential markets in Singapore and China are added concerns.
Still, Keppel’s strong execution and order backlog should help it ride out the volatility, with attractive yields of 4.5%. Maintain HOLD. Our SOTP-based TP dips to SGD10.74 from SGD10.95 with less than 1% changes to our FY14E-16E EPS.
To turn positive again, we need to see: 1) improving drilling-market dynamics; 2) higher O&M margins; and 3) an improved property outlook.
Silverlake Axis
Kim Eng on 23 Oct 2014
A recent survey published by Temenos, a Switzerland-based banking-software vendor, augurs well for the industry. Participating banks are more bullish than ever on their IT spending in the coming year. Asian banks are the most optimistic, with 76% expecting bigger IT budgets. Core banking was highlighted as a top priority of all the categories of spending. This should benefit SAL.
Earnings resilience invaluable amid market turmoil
With a growing base of installed products across the region, we expect SAL’s recurring cash flow to rise 5ppts to 49% of its FY6/17E total. This should enhance the quality and resilience of its earnings and prove invaluable amid the market turmoil.
Furthermore, OCBC’s recently-completed acquisition of Wing Hang Bank should increase SAL’s workload in the coming quarters. We also believe the impending CIMB-RHB-MBSB merger in Malaysia will be positive for SAL. With CIMB and MBSB already customers, their merger should effectively bring RHB onto SAL’s platform. Together with the delivery of a MYR280m backlog, this should underpin a three-year 14% EBITDA CAGR to FY6/17E.
We see re-rating from solid multi-year earnings deliveries. Maintain BUY and DCF-based TP of SGD1.40 (WACC 9.3%, TG 3%).
- Reiterate BUY & DCF-based SGD1.40 TP.
- Temenos survey flags most bullish IT spending in recent years. Asian banks most optimistic. Core banking upgrades a top priority.
- Catalysts from further customer traction and earnings deliveries amid market turmoil.
A recent survey published by Temenos, a Switzerland-based banking-software vendor, augurs well for the industry. Participating banks are more bullish than ever on their IT spending in the coming year. Asian banks are the most optimistic, with 76% expecting bigger IT budgets. Core banking was highlighted as a top priority of all the categories of spending. This should benefit SAL.
Earnings resilience invaluable amid market turmoil
With a growing base of installed products across the region, we expect SAL’s recurring cash flow to rise 5ppts to 49% of its FY6/17E total. This should enhance the quality and resilience of its earnings and prove invaluable amid the market turmoil.
Furthermore, OCBC’s recently-completed acquisition of Wing Hang Bank should increase SAL’s workload in the coming quarters. We also believe the impending CIMB-RHB-MBSB merger in Malaysia will be positive for SAL. With CIMB and MBSB already customers, their merger should effectively bring RHB onto SAL’s platform. Together with the delivery of a MYR280m backlog, this should underpin a three-year 14% EBITDA CAGR to FY6/17E.
We see re-rating from solid multi-year earnings deliveries. Maintain BUY and DCF-based TP of SGD1.40 (WACC 9.3%, TG 3%).
Nam Cheong Ltd
Kim Eng on 17 Oct 2014
Nam Cheong has launched its first proprietary-designed vessel, an 80T BP diesel electric AHTS dubbed NCA80E. This is a 64.8m fuel-efficient and environmentally-friendly vessel with fuel savings of up to 20%. The greater positive is, it has signed LOIs worth USD186m for the sale and charter of 12 such vessels with five customers. There are options for eight more. The LOIs are expected to be converted into firm contracts within 90-120 days. The vessels will be delivered from 2016, from its Miri yard in Malaysia and third-party Chinese yards.
What’s Our View
We could not dissect the headline value, comprising vessel sales and charter rates, for the price of each vessel but estimate each at about USD15m. This would be slightly above the price of a 6,000 BHP AHTS. The vessels are technically under a build-to-stock (BTS) programme. But as customers confirm their orders early, margins would be lower than the 15-20% for BTS contracts. Still, these orders are a strong positive for the stock, especially in the wake of volatile oil prices. Nam Cheong has covered a large part its 2016 production output with the 20 vessels. Its subcontracting model allows it to scale up quickly and it has plenty of time to take its 2016 output to a higher level. Strong take-up by a reputable list of customers is an endorsement of its design.
The vessels would have positive impact on FY14E-16E earnings when the LOIs are executed, which are not yet in our current forecast. Maintain BUY and TP of SGD0.55, pegged to 2.2x FY15E P/BV, GGM-based.
- Maintain BUY & SGD0.55 TP (2.2x FY15E P/BV).
- Launched propriety-designed AHTS. Signed LOIs worth USD186m for 12 vessels with options for eight more, all to be delivered from 2016, providing revenue visibility.
- Expect catalysts from further contract wins.
Nam Cheong has launched its first proprietary-designed vessel, an 80T BP diesel electric AHTS dubbed NCA80E. This is a 64.8m fuel-efficient and environmentally-friendly vessel with fuel savings of up to 20%. The greater positive is, it has signed LOIs worth USD186m for the sale and charter of 12 such vessels with five customers. There are options for eight more. The LOIs are expected to be converted into firm contracts within 90-120 days. The vessels will be delivered from 2016, from its Miri yard in Malaysia and third-party Chinese yards.
What’s Our View
We could not dissect the headline value, comprising vessel sales and charter rates, for the price of each vessel but estimate each at about USD15m. This would be slightly above the price of a 6,000 BHP AHTS. The vessels are technically under a build-to-stock (BTS) programme. But as customers confirm their orders early, margins would be lower than the 15-20% for BTS contracts. Still, these orders are a strong positive for the stock, especially in the wake of volatile oil prices. Nam Cheong has covered a large part its 2016 production output with the 20 vessels. Its subcontracting model allows it to scale up quickly and it has plenty of time to take its 2016 output to a higher level. Strong take-up by a reputable list of customers is an endorsement of its design.
The vessels would have positive impact on FY14E-16E earnings when the LOIs are executed, which are not yet in our current forecast. Maintain BUY and TP of SGD0.55, pegged to 2.2x FY15E P/BV, GGM-based.
Genting Singapore
OCBC on 21 Oct 2014
Genting Singapore (GS) has seen its share price taking quite a tumble, falling 29.4% YTD and down 18.0% alone after reporting a large S$81.6m impairment on its trade receivables at its 2Q14 results announcement on 14 Aug. But in view of the near-term negatives, especially lingering concerns over its accounts receivables and the decline in China high rollers, the fall in share price may be partially substantiated. Nevertheless, we opt to keep our FY14 estimates unchanged for now as we have already priced in a 30% YoY fall in core earnings for 3Q14. Still, we lower our DCF-based fair value from S$1.33 to S$1.03, mostly to reflect lower growth assumptions in wake of the likely slower economy in China for the next few years. But we note that value is starting to emerge around current levels, making GS a decent bet for a potential Japan IR win. Maintain HOLD.
Share price has taken a tumble
Genting Singapore (GS) has seen its share price taking quite a tumble after reporting a large S$81.6m impairment on its trade receivables in its 2Q14 results; this despite management saying that the charge is likely to “one-off” and it was just being prudent. To date, GS’ share price is down 29.4%, with the bulk of the fall (18.0%) coming after its 2Q14 results announcement on 14 Aug; but the rout in the global stock markets (STI is up just 0.7% YTD) has also not helped its cause.
Still faces near-term negatives
In view of the near-term negatives, the fall in share price may be partially substantiated. As seen in rival MBS’ 3Q14 results just out, gaming volume has fallen quite drastically, especially for the VIP segment (down 34% YoY to US$9.1b), following the drop in Chinese tourist visitation. As GS commands a larger share of the VIP market here, it would thus feel a bit more of the impact. Following the previous quarter’s large provision, investors are likely to keep a close watch over GS’ accounts receivables, which stood at S$1.19b as of end Jun 2014.
Keeping FY14 estimates for now
In any case, we would have a better idea of how much has the drop in Chinese tourists affected its business when it next reports its 3Q14 results in mid-Nov. As our forecast already provides for a 30% decline in core earnings for the third quarter, we opt to keep our FY14 estimates for now.
But lowering fair value to S$1.03
Nevertheless, we tweak our DCF model to assume a lower free cash flow growth rate, which lowers our fair value to S$1.03; this to account for a slower China economic growth outlook over the next few years. But we note that value is starting to emerge around current levels, making GS a decent bet for a potential Japan IR win. Maintain HOLD.
Genting Singapore (GS) has seen its share price taking quite a tumble after reporting a large S$81.6m impairment on its trade receivables in its 2Q14 results; this despite management saying that the charge is likely to “one-off” and it was just being prudent. To date, GS’ share price is down 29.4%, with the bulk of the fall (18.0%) coming after its 2Q14 results announcement on 14 Aug; but the rout in the global stock markets (STI is up just 0.7% YTD) has also not helped its cause.
Still faces near-term negatives
In view of the near-term negatives, the fall in share price may be partially substantiated. As seen in rival MBS’ 3Q14 results just out, gaming volume has fallen quite drastically, especially for the VIP segment (down 34% YoY to US$9.1b), following the drop in Chinese tourist visitation. As GS commands a larger share of the VIP market here, it would thus feel a bit more of the impact. Following the previous quarter’s large provision, investors are likely to keep a close watch over GS’ accounts receivables, which stood at S$1.19b as of end Jun 2014.
Keeping FY14 estimates for now
In any case, we would have a better idea of how much has the drop in Chinese tourists affected its business when it next reports its 3Q14 results in mid-Nov. As our forecast already provides for a 30% decline in core earnings for the third quarter, we opt to keep our FY14 estimates for now.
But lowering fair value to S$1.03
Nevertheless, we tweak our DCF model to assume a lower free cash flow growth rate, which lowers our fair value to S$1.03; this to account for a slower China economic growth outlook over the next few years. But we note that value is starting to emerge around current levels, making GS a decent bet for a potential Japan IR win. Maintain HOLD.
CapitaMall Trust
OCBC on 20 Oct 2014
CapitaMall Trust (CMT) reported its 3Q14 results which were in-line with ours and the street’s expectations. Gross revenue increased 2.9% YoY to S$164.6m, while DPU grew at a stronger 6.2% to 2.72 S cents. We expect S$11.2m, or 0.32 S cents/unit of taxable income retained in 1H14 to be distributed in 4Q14. Despite softness in its shopper traffic and tenants’ sales psf, we note that the magnitude of decline has moderated, while portfolio occupancy rate was stable at 98.5%. Positive rental reversions of 6.3% were also achieved for 9M14. We retain our forecasts given this in-line set of results. CMT is trading at 5.7% FY14F and 6.0% FY15F distribution yield, above its 10-year average blended 12-month forward distribution yield of 5.3%. Maintain BUY, with an unchanged fair value estimate of S$2.20. This implies total potential returns of 21%.
3Q14 results within expectations
CapitaMall Trust (CMT) reported its 3Q14 results which were in-line with ours and the street’s expectations. Gross revenue increased 2.9% YoY to S$164.6m, underpinned largely by the completion of the AEIs at Bugis Junction in Oct 2013 and Sep 2014, coupled with higher rentals on new and renewed leases. DPU grew at a stronger 6.2% YoY to 2.72 S cents (ex-dividend on 24 Oct), partly due to a +0.3 ppt increase in its NPI margin to 69.3%. For 9M14, revenue rose 3.7% to S$493.6m, while DPU climbed 5.7% to 7.98 S cents. This constituted 74.9% and 72.6% of our FY14 forecasts, respectively. The latter is within expectations as S$11.2m, or 0.32 S cents/unit of taxable income retained in 1H14 is expected to be distributed in 4Q14.
Softness in retail scene; but portfolio still resilient
CMT recorded a 1.5% and 3.0% YoY decline in its shopper traffic and tenants’ sales psf in 9M14, respectively, in-line with the softness in Singapore’s retail sales. Nevertheless, we note that the magnitude of decline has moderated (shopper traffic and tenants’ sales psf were down 2.0% and 3.7% in 1H14, respectively). Its portfolio occupancy rate was also stable at 98.5% as at end Sep 2014, versus 98.6% as at end 1H14 and 98.5% as at end Dec 2013. CMT managed to achieve positive rental reversions of 6.3% for 9M14, despite a slight drag coming from IMM (-2.8%). We expect the situation to improve at IMM, as management plans to carry out Phase 2 of AEIs to incorporate more outlet stores. Three other malls are also undergoing AEIs at the moment.
Maintain BUY
In terms of financial position, CMT has maintained a comfortable gearing ratio of 34.1%, with an average cost of debt of 3.6%. We retain our forecasts given this in-line set of results. CMT is trading at 5.7% FY14F and 6.0% FY15F distribution yield, above its 10-year average blended 12-month forward distribution yield of 5.3%. Maintain BUY, with an unchanged fair value estimate of S$2.20. This implies total potential returns of 21%.
CapitaMall Trust (CMT) reported its 3Q14 results which were in-line with ours and the street’s expectations. Gross revenue increased 2.9% YoY to S$164.6m, underpinned largely by the completion of the AEIs at Bugis Junction in Oct 2013 and Sep 2014, coupled with higher rentals on new and renewed leases. DPU grew at a stronger 6.2% YoY to 2.72 S cents (ex-dividend on 24 Oct), partly due to a +0.3 ppt increase in its NPI margin to 69.3%. For 9M14, revenue rose 3.7% to S$493.6m, while DPU climbed 5.7% to 7.98 S cents. This constituted 74.9% and 72.6% of our FY14 forecasts, respectively. The latter is within expectations as S$11.2m, or 0.32 S cents/unit of taxable income retained in 1H14 is expected to be distributed in 4Q14.
Softness in retail scene; but portfolio still resilient
CMT recorded a 1.5% and 3.0% YoY decline in its shopper traffic and tenants’ sales psf in 9M14, respectively, in-line with the softness in Singapore’s retail sales. Nevertheless, we note that the magnitude of decline has moderated (shopper traffic and tenants’ sales psf were down 2.0% and 3.7% in 1H14, respectively). Its portfolio occupancy rate was also stable at 98.5% as at end Sep 2014, versus 98.6% as at end 1H14 and 98.5% as at end Dec 2013. CMT managed to achieve positive rental reversions of 6.3% for 9M14, despite a slight drag coming from IMM (-2.8%). We expect the situation to improve at IMM, as management plans to carry out Phase 2 of AEIs to incorporate more outlet stores. Three other malls are also undergoing AEIs at the moment.
Maintain BUY
In terms of financial position, CMT has maintained a comfortable gearing ratio of 34.1%, with an average cost of debt of 3.6%. We retain our forecasts given this in-line set of results. CMT is trading at 5.7% FY14F and 6.0% FY15F distribution yield, above its 10-year average blended 12-month forward distribution yield of 5.3%. Maintain BUY, with an unchanged fair value estimate of S$2.20. This implies total potential returns of 21%.
First REIT
OCBC on 20 Oct 2014
First REIT’s (FREIT) 3Q14 results came in within our expectations. DPU of 2.02 S cents was another record high (+3.1% YoY; +1% QoQ), aided by organic growth and a full quarter of contribution from an acquisition made in May 2014. Looking ahead, management believes the victory by Joko Widodo at the recent Indonesian presidential elections augurs well for the economy and the healthcare sector, in particular. Hence, we expect FREIT to maintain its core focus on the Indonesian market for future acquisitions-fuelled growth. We believe it is currently in negotiations with Lippo Karawaci on possible acquisition targets, with 4Q14 a possible timeline for an agreement to be reached. We trim our FY14 and FY15 forecasts slightly by 2.8%, as we input higher tax expenses and a larger unit base in our model. Correspondingly, our DDM-derived fair value estimate declines from S$1.21 to S$1.18. Maintain HOLD.
3Q14 results in-line with our expectations
First REIT’s (FREIT) 3Q14 results came in within our expectations. Revenue, distributable income and DPU rose 4.6%, 6.1% and 3.1% YoY to S$23.8m, S$14.7m and 2.02 S cents (ex-dividend on 24 Oct), respectively. Notably, its DPU achieved another record high (+1% QoQ), aided by organic growth in its portfolio and a full quarter of contribution from Siloam Hospitals Purwakarta (SHPW), which was acquired in May this year. For 9M14, revenue, distributable income and DPU jumped 14.7%, 13.5% and 8.3% to S$69.4m, S$43.3m and 6.01 S cents; and this formed 74.4%, 72.0% and 72.4% of our FY14 projections, respectively.
More acquisitions could come in 4Q14
Management believes the victory by Joko Widodo at the recent Indonesian presidential elections augurs well for the economy and the healthcare sector, in particular. Hence, we expect FREIT to maintain its core focus on the Indonesian market for future acquisitions-fuelled growth. Siloam International Hospitals, a subsidiary of FREIT’s sponsor Lippo Karawaci, recently won the Healthcare Services Provider of the Year title in the Frost & Sullivan Indonesia Excellence Awards 2014. Its Strategic Development Director, Dr. Anang Prayudi, highlighted plans to achieve growth of ~30-40% via greenfield projects and M&A activities. We expect FREIT to be a beneficiary of this trend, and believe it is currently in negotiations with Lippo Karawaci on possible acquisition targets, with 4Q14 a possible timeline for an agreement to be reached.
Pare estimates slightly; maintain HOLD
We trim our FY14 and FY15 forecasts slightly by 2.8%, as we input higher tax expenses and a larger unit base in our model to account for its distribution reinvestment plan. Correspondingly, our DDM-derived fair value estimate declines from S$1.21 to S$1.18. Despite our lowered DPU forecast, FREIT still offers a healthy FY14 and FY15 dividend yield of 6.8% and 7.0%, respectively. Nevertheless, we are maintaining our HOLD rating on the stock as valuations appear fair, in our opinion, with the stock trading at 1.3x FY14F and FY15F P/B.
First REIT’s (FREIT) 3Q14 results came in within our expectations. Revenue, distributable income and DPU rose 4.6%, 6.1% and 3.1% YoY to S$23.8m, S$14.7m and 2.02 S cents (ex-dividend on 24 Oct), respectively. Notably, its DPU achieved another record high (+1% QoQ), aided by organic growth in its portfolio and a full quarter of contribution from Siloam Hospitals Purwakarta (SHPW), which was acquired in May this year. For 9M14, revenue, distributable income and DPU jumped 14.7%, 13.5% and 8.3% to S$69.4m, S$43.3m and 6.01 S cents; and this formed 74.4%, 72.0% and 72.4% of our FY14 projections, respectively.
More acquisitions could come in 4Q14
Management believes the victory by Joko Widodo at the recent Indonesian presidential elections augurs well for the economy and the healthcare sector, in particular. Hence, we expect FREIT to maintain its core focus on the Indonesian market for future acquisitions-fuelled growth. Siloam International Hospitals, a subsidiary of FREIT’s sponsor Lippo Karawaci, recently won the Healthcare Services Provider of the Year title in the Frost & Sullivan Indonesia Excellence Awards 2014. Its Strategic Development Director, Dr. Anang Prayudi, highlighted plans to achieve growth of ~30-40% via greenfield projects and M&A activities. We expect FREIT to be a beneficiary of this trend, and believe it is currently in negotiations with Lippo Karawaci on possible acquisition targets, with 4Q14 a possible timeline for an agreement to be reached.
Pare estimates slightly; maintain HOLD
We trim our FY14 and FY15 forecasts slightly by 2.8%, as we input higher tax expenses and a larger unit base in our model to account for its distribution reinvestment plan. Correspondingly, our DDM-derived fair value estimate declines from S$1.21 to S$1.18. Despite our lowered DPU forecast, FREIT still offers a healthy FY14 and FY15 dividend yield of 6.8% and 7.0%, respectively. Nevertheless, we are maintaining our HOLD rating on the stock as valuations appear fair, in our opinion, with the stock trading at 1.3x FY14F and FY15F P/B.
Tiger Airways Holdings
OCBC on 20 Oct 2014
Tiger Airways Holdings (Tigerair) reported a disappointing 2QFY15 results yet again. It recorded a 107.7% YoY increase in 2QFY15 core loss to S$26.6m, mainly due to weaker yields albeit higher traffic volume, which led to a 126.0% increase in 1HFY15 core loss to S$44.3m. Tigerair’s 2QFY15 results were further worsened by large provisions amounting to S$159.1m, which led to net loss amounting to S$182.4m, against its 2QFY14 PATMI of S$23.8m. It also announced last week the proposal to undertake an 85-for-100 rights issue to raise gross proceeds of up to ~S$234m at S$0.20 per rights share. SIA has undertaken to subscribe for its pro rata entitlement as well as excess rights shares up to total of S$140m. We have not factored in the effects of the rights issue as it is only at the proposal stage and with the tremendous drop in book value, we change our valuation methodology to EV/EBITDA instead P/B. Hence, at 8x FY16F EV/EBITDA (regional LCCs average blended FY15F/16F EV/EBITDA: 8.2x), we lower our FV estimate to S$0.21 (prev: S$0.35) while maintaining a SELL rating.
Disappointing 2QFY15 results once again
Tiger Airways Holdings (Tigerair) reported a 10.5% YoY decline in its 2QFY15 revenue to S$146.7m while its 1HFY15 revenue declined 21.1% to S$315.7m due to exclusion of Tigerair Australia, meeting 96.2% of our forecasted 1HFY15 revenue. It also recorded a 107.7% YoY increase in 2QFY15 core loss to S$26.6m, mainly due to weaker yields albeit higher traffic volume, which led to a 126.0% increase in 1HFY15 core loss to S$44.3m. Tigerair’s 2QFY15 results were further worsened by large provisions amounting to S$159.1m. Out of the S$159.1m, S$99.3m was provided for onerous aircraft lease contracts while the remaining provision was for the loss expected from the planned divestment of Tigerair Australia. Taking into account these provisions, Tigerair’s 2QFY15 net loss amounted to S$182.4m, against its 2QFY14 PATMI of S$23.8m.
Proposed rights issue to strengthen balance sheet
The large provisions charged during the quarter weakened Tigerair’s balance sheet tremendously and reduced its book value by 91.9% from S$278.7m as at 31-Mar to S$22.6m as at 30-Sep. It announced last week the proposal to undertake an 85-for-100 rights issue to raise gross proceeds of up to ~S$234m at S$0.20 per rights share. SIA has undertaken to subscribe for its pro rata entitlement as well as excess rights shares up to total of S$140m. In addition, SIA announced that it will convert all of its perpetual convertible capital securities (PCCS) holdings into shares prior to the rights issue, raising its stake in Tigerair from 40% to ~55%. Simply put, if the rights issue is approved, the minimum gross proceeds that Tigerair should receive is at least S$140m.
Change in FV estimate; maintain SELL
With large provisions and a weak performance in 2QFY15, we increase our forecasted FY15F net loss by 145.3% to S$254.4m. But given the reduction in cash burden from the sublease of the 12 aircraft, we narrow our FY16F estimated net loss by 62.7% to S$6.0m. We also have not factored in the effects of the rights issue as it is only at the proposal stage. With tremendous drop in book value, we change our valuation methodology to EV/EBITDA instead P/B. We will review our estimate again when the rights issue is approved. Hence, at 8x FY16F EV/EBITDA (regional LCCs average blended FY15F/16F EV/EBITDA: 8.2x), we lower our FV estimate to S$0.21 (prev: S$0.35) while maintaining a SELL rating. We will review our estimate again when the rights issue is approved.
Tiger Airways Holdings (Tigerair) reported a 10.5% YoY decline in its 2QFY15 revenue to S$146.7m while its 1HFY15 revenue declined 21.1% to S$315.7m due to exclusion of Tigerair Australia, meeting 96.2% of our forecasted 1HFY15 revenue. It also recorded a 107.7% YoY increase in 2QFY15 core loss to S$26.6m, mainly due to weaker yields albeit higher traffic volume, which led to a 126.0% increase in 1HFY15 core loss to S$44.3m. Tigerair’s 2QFY15 results were further worsened by large provisions amounting to S$159.1m. Out of the S$159.1m, S$99.3m was provided for onerous aircraft lease contracts while the remaining provision was for the loss expected from the planned divestment of Tigerair Australia. Taking into account these provisions, Tigerair’s 2QFY15 net loss amounted to S$182.4m, against its 2QFY14 PATMI of S$23.8m.
Proposed rights issue to strengthen balance sheet
The large provisions charged during the quarter weakened Tigerair’s balance sheet tremendously and reduced its book value by 91.9% from S$278.7m as at 31-Mar to S$22.6m as at 30-Sep. It announced last week the proposal to undertake an 85-for-100 rights issue to raise gross proceeds of up to ~S$234m at S$0.20 per rights share. SIA has undertaken to subscribe for its pro rata entitlement as well as excess rights shares up to total of S$140m. In addition, SIA announced that it will convert all of its perpetual convertible capital securities (PCCS) holdings into shares prior to the rights issue, raising its stake in Tigerair from 40% to ~55%. Simply put, if the rights issue is approved, the minimum gross proceeds that Tigerair should receive is at least S$140m.
Change in FV estimate; maintain SELL
With large provisions and a weak performance in 2QFY15, we increase our forecasted FY15F net loss by 145.3% to S$254.4m. But given the reduction in cash burden from the sublease of the 12 aircraft, we narrow our FY16F estimated net loss by 62.7% to S$6.0m. We also have not factored in the effects of the rights issue as it is only at the proposal stage. With tremendous drop in book value, we change our valuation methodology to EV/EBITDA instead P/B. We will review our estimate again when the rights issue is approved. Hence, at 8x FY16F EV/EBITDA (regional LCCs average blended FY15F/16F EV/EBITDA: 8.2x), we lower our FV estimate to S$0.21 (prev: S$0.35) while maintaining a SELL rating. We will review our estimate again when the rights issue is approved.
M1
OCBC on 17 Oct 2014
M1 Ltd reported its 3Q14 results last evening, with revenue inching up 3.5% YoY (+4.4% QoQ) to S$250.2m, but net profit jumped 12.8% YoY (+1.4% QoQ ) to S$44.5m. As such, 9M14 revenue inched up 0.1% to S$ S$730.0m, meeting 71% of our full-year forecast, while net profit rose 9.7% to S$131.2m, or about 79% of our FY14 estimate, which we deem to be largely in line (this as expenses are likely to increase in 4Q14 due to year-end promotions; management has also guided for seasonally higher acquisition cost). M1 has kept its moderate earnings growth guidance for the year, with capex unchanged at S$130m as well. With 9M14 results coming within expectations, we opt to keep our estimates unchanged. Our DCF-based fair value also remains at S$3.37. Maintain HOLD on M1.
3Q14 results within forecast
M1 Ltd reported its 3Q14 results last evening, with revenue inching up 3.5% YoY (+4.4% QoQ) to S$250.2m, aided by higher handset sales (launch of the new Apple iPhone 6 and 6+ was on 19 Sep); this also led to acquisition cost jumping 38% QoQ to S$369/post-paid subscriber. Nevertheless, net profit still managed to climb a credible 12.8% YoY (+1.4% QoQ) to S$44.5m, as EBITDA grew 8.9% YoY (+1.4% QoQ) to S$84.4m. 9M14 revenue was almost flat (+0.1%) at S$730.0m, meeting 71% of our full-year forecast, while net profit rose 9.7% to S$131.2m, or about 79% of our FY14 estimate, which we deem to be largely in line (this as expenses are likely to increase in 4Q14 due to year-end promotions; management has also guided for seasonally higher acquisition cost).
Keeps moderate earnings growth outlook
Going forward, management says it can continue to achieve moderate earnings growth (within the single-digit range), driven by the stronger data usage. M1 revealed that it has introduced new 4G smartphone plans with larger data bundles to better meet customers’ data usage requirement, but we note that these plans generally come with a higher monthly subscription. Separately, we note that M1’s total subscriber base has fallen 5% QoQ to below the 2m mark – this due to the 11.6% QoQ fall in pre-paid customers. On the fixed services side, M1 will focus on delivering better user experience and value, though it notes that competition is likely to remain keen. The pace of fiber acquisition is flattening out at +4.3% QoQ (was +4.4% in 2Q14, +5.9% in 1Q14), although fiber ARPU has improved to S$45/month in 3Q14, versus S$41.9 in 2Q14. Lastly, it has maintained its S$130m capex guidance due to ongoing upgrades to its network to LTE-Advanced.
Maintain HOLD with S$3.37 fair value
With 9M14 results coming within expectations, we opt to keep our estimates unchanged. Our DCF-based fair value also remains at S$3.37. Maintain HOLD on M1.
M1 Ltd reported its 3Q14 results last evening, with revenue inching up 3.5% YoY (+4.4% QoQ) to S$250.2m, aided by higher handset sales (launch of the new Apple iPhone 6 and 6+ was on 19 Sep); this also led to acquisition cost jumping 38% QoQ to S$369/post-paid subscriber. Nevertheless, net profit still managed to climb a credible 12.8% YoY (+1.4% QoQ) to S$44.5m, as EBITDA grew 8.9% YoY (+1.4% QoQ) to S$84.4m. 9M14 revenue was almost flat (+0.1%) at S$730.0m, meeting 71% of our full-year forecast, while net profit rose 9.7% to S$131.2m, or about 79% of our FY14 estimate, which we deem to be largely in line (this as expenses are likely to increase in 4Q14 due to year-end promotions; management has also guided for seasonally higher acquisition cost).
Keeps moderate earnings growth outlook
Going forward, management says it can continue to achieve moderate earnings growth (within the single-digit range), driven by the stronger data usage. M1 revealed that it has introduced new 4G smartphone plans with larger data bundles to better meet customers’ data usage requirement, but we note that these plans generally come with a higher monthly subscription. Separately, we note that M1’s total subscriber base has fallen 5% QoQ to below the 2m mark – this due to the 11.6% QoQ fall in pre-paid customers. On the fixed services side, M1 will focus on delivering better user experience and value, though it notes that competition is likely to remain keen. The pace of fiber acquisition is flattening out at +4.3% QoQ (was +4.4% in 2Q14, +5.9% in 1Q14), although fiber ARPU has improved to S$45/month in 3Q14, versus S$41.9 in 2Q14. Lastly, it has maintained its S$130m capex guidance due to ongoing upgrades to its network to LTE-Advanced.
Maintain HOLD with S$3.37 fair value
With 9M14 results coming within expectations, we opt to keep our estimates unchanged. Our DCF-based fair value also remains at S$3.37. Maintain HOLD on M1.
Singapore Press Holdings
OCBC on 16 Oct 2014
SPH reported FY14 PATMI of S$404.3m, down 6.2%, mostly due to a decline in operating profit, a larger net loss from associates/JV, and a lower fair value gain from investment properties, partially offset by gains from the sale of 701Search and higher investment income. Overall, we judge FY14 results to be broadly within expectations. Conditions for the print ad segments remain difficult, with FY14 display and classified revenues falling 7.1% and 8.0%, respectively. We understand the group’s new Seletar Mall is on target to open by Nov-14, with occupancy rates around 90% and average rentals around S$11 psf pm. Management highlights that The Seletar Mall is located in a less established retail area, compared to The Clementi Mall, and stabilization of the new asset before it is ready for capital recycling could take between 4-6 years. SPH also declared a final dividend of 14 S-cents. Maintain HOLD on SPH with an unchanged fair value estimate of S$4.13.
Signing off on a muted year
SPH reported FY14 PATMI of S$404.3m, down 6.2%, mostly due to a 5.5% decline in operating profit to S$349.0m, a larger net loss from associates/JV, and a lower fair value gain from investment properties, partially offset by gains from the sale of 701Search and higher investment income. Overall, we judge FY14 results to be broadly within expectations. Management also declared a final dividend of 14 S-cents, comprising a normal dividend of 8 S-cents and a special dividend of 6 S-cents. FY14 dividends cumulates to 21 S-cents (payout ratio 107.8%), which is marginally lower than the 22 S-cents paid last year (excluding special dividend for SPH REIT).
Ad conditions remain difficult
FY14 revenues dipped 2.0% to S$1,215.2m as core newspaper and magazine revenues decreased 6.0% to S$931.7m. Conditions for the print ad segments remain difficult, with FY14 display and classified revenues falling 7.1% and 8.0%, respectively. Given persistent headwinds in the Singapore housing space and a continued structural shift in terms of readers moving onto new media channels, we expect ad topline pressure to continue into 1H15. In 4QFY14, newsprint prices inched down to S$598/mt versus S$607/mt in 3QFY14, while YTD staff costs increased 7.1% YoY to S$374.5m.
Seletar Mall on target for Nov 14 opening
We saw stable performance from the group’s property segment, with FY14 revenues inching up 3.5% to S$205.0m as higher rental income was derived from both retail malls. We understand the group’s new Seletar Mall is on target to open by Nov-14, with occupancy rates around 90% and rentals around S$11 psf pm (on an average basis including anchor tenants). Management highlights that The Seletar Mall is located in a less established retail area, compared to The Clementi Mall, and stabilization of the new asset before it is ready for capital recycling could take between 4-6 years. Maintain HOLD on SPH with an unchanged fair value estimate of S$4.13.
SPH reported FY14 PATMI of S$404.3m, down 6.2%, mostly due to a 5.5% decline in operating profit to S$349.0m, a larger net loss from associates/JV, and a lower fair value gain from investment properties, partially offset by gains from the sale of 701Search and higher investment income. Overall, we judge FY14 results to be broadly within expectations. Management also declared a final dividend of 14 S-cents, comprising a normal dividend of 8 S-cents and a special dividend of 6 S-cents. FY14 dividends cumulates to 21 S-cents (payout ratio 107.8%), which is marginally lower than the 22 S-cents paid last year (excluding special dividend for SPH REIT).
Ad conditions remain difficult
FY14 revenues dipped 2.0% to S$1,215.2m as core newspaper and magazine revenues decreased 6.0% to S$931.7m. Conditions for the print ad segments remain difficult, with FY14 display and classified revenues falling 7.1% and 8.0%, respectively. Given persistent headwinds in the Singapore housing space and a continued structural shift in terms of readers moving onto new media channels, we expect ad topline pressure to continue into 1H15. In 4QFY14, newsprint prices inched down to S$598/mt versus S$607/mt in 3QFY14, while YTD staff costs increased 7.1% YoY to S$374.5m.
Seletar Mall on target for Nov 14 opening
We saw stable performance from the group’s property segment, with FY14 revenues inching up 3.5% to S$205.0m as higher rental income was derived from both retail malls. We understand the group’s new Seletar Mall is on target to open by Nov-14, with occupancy rates around 90% and rentals around S$11 psf pm (on an average basis including anchor tenants). Management highlights that The Seletar Mall is located in a less established retail area, compared to The Clementi Mall, and stabilization of the new asset before it is ready for capital recycling could take between 4-6 years. Maintain HOLD on SPH with an unchanged fair value estimate of S$4.13.
Singapore Post
OCBC on 15 Oct 2014
Singapore Post (SingPost) announced last evening that it will be developing a fully integrated regional eCommerce logistics hub to cater to its expanding ecommerce logistics business and the fast-growing ecommerce market. Given the recent Alibaba placement and Singpost’s push to transform itself as a regional logistics and e-Commerce player, we think it is justifiable to impute higher growth assumptions in SingPost’s earnings ahead. In our 3-stage DCF model, we have increased our FCFE growth assumption for FY19-FY23 from 5% to 9%, which is justifiable given 1) the significant growth potential of e-Commerce sales in Singapore and the region, 2) the accompanying rise in logistics services that are required to support this growth, and 3) the likelihood of SingPost directing its huge cash pile to earnings-accretive investments in the next few years. With this, our fair value estimate rises from S$1.78 to S$2.09. Upgrade to BUY.
Developing a fully integrated eCommerce logistics hub in Singapore
Singapore Post (SingPost) announced last evening that it will be developing a fully integrated regional eCommerce logistics hub to cater to its expanding ecommerce logistics business and the fast-growing ecommerce market. The three storey hub in Tampines LogisPark will be the first of its kind in SE Asia, equipped with state-of-the-art technology. Scheduled to be fully operational in 2H16, the estimated development cost is S$182m, and includes lease of land, construction costs and equipment costs. This will be funded internally from cash.
Capitalising on online retail and logistics solutions
There is room for Singapore’s e-Commerce scene to grow, as the country’s e-commerce sale volume as compared to the total retail market size was remains relatively low. Singapore’s rising importance as a logistics hub is also highlighted by recent investments in warehouse and distribution facilities by DHL and Menlo Logistics. In addition, SingPost, being a postal operator, may be already sitting on a huge amount of data waiting to be monetized. The partnership between postal operators and e-retailers may thus extend beyond the posts’ role of enablers of e-Commerce to supporting the e-retailers to expand and grow by analyzing, translating and interpreting data.
Raising growth rate assumptions and fair value estimate
In our 3-stage DCF model, we have forecasted earnings growth of 7-9% for FY15-16, and 16-17% in FY17-18 as SingPost builds up its e-Commerce capabilities and reputation. However, we have also assumed higher working capital requirements and capital expenditure, resulting in a 5-7% growth in free cash flow to equity (FCFE). For FY19-FY23, we increase our FCFE growth rate assumption from 5% to 9%, which is justifiable given 1) the significant growth potential of e-Commerce sales in Singapore and the region, 2) the accompanying rise in logistics services that are required to support this growth 3) the likelihood of SingPost directing its huge cash pile to earnings-accretive investments in the next few years. With this, our fair value estimate rises from S$1.78 to S$2.09. Upgrade to BUY
.
Singapore Post (SingPost) announced last evening that it will be developing a fully integrated regional eCommerce logistics hub to cater to its expanding ecommerce logistics business and the fast-growing ecommerce market. The three storey hub in Tampines LogisPark will be the first of its kind in SE Asia, equipped with state-of-the-art technology. Scheduled to be fully operational in 2H16, the estimated development cost is S$182m, and includes lease of land, construction costs and equipment costs. This will be funded internally from cash.
Capitalising on online retail and logistics solutions
There is room for Singapore’s e-Commerce scene to grow, as the country’s e-commerce sale volume as compared to the total retail market size was remains relatively low. Singapore’s rising importance as a logistics hub is also highlighted by recent investments in warehouse and distribution facilities by DHL and Menlo Logistics. In addition, SingPost, being a postal operator, may be already sitting on a huge amount of data waiting to be monetized. The partnership between postal operators and e-retailers may thus extend beyond the posts’ role of enablers of e-Commerce to supporting the e-retailers to expand and grow by analyzing, translating and interpreting data.
Raising growth rate assumptions and fair value estimate
In our 3-stage DCF model, we have forecasted earnings growth of 7-9% for FY15-16, and 16-17% in FY17-18 as SingPost builds up its e-Commerce capabilities and reputation. However, we have also assumed higher working capital requirements and capital expenditure, resulting in a 5-7% growth in free cash flow to equity (FCFE). For FY19-FY23, we increase our FCFE growth rate assumption from 5% to 9%, which is justifiable given 1) the significant growth potential of e-Commerce sales in Singapore and the region, 2) the accompanying rise in logistics services that are required to support this growth 3) the likelihood of SingPost directing its huge cash pile to earnings-accretive investments in the next few years. With this, our fair value estimate rises from S$1.78 to S$2.09. Upgrade to BUY
.
United Envirotech Limited
OCBC on 15 Oct 2014
United Envirotech Limited (UEL) has formed a 49%/51%-JV with Chengdu Xingrong Investment Co (XRTZ) with a paid-up capital of RMB50m (S$10m) in Sichuan, China. XRTZ is a state-owned enterprise listed in the A-share of the Shenzhen Stock Exchange (RMB17.7b market cap); also owns around 5m m3/day of water treatment concessions. The new JV will provide EPC services using UEL’s membrane technologies and membrane products; will also undertake investments in water treatment projects in western China. The first block of projects the JV will undertake is the expansion and upgrading of wastewater treatment plants and recycling of treated wastewater with a combined capacity of 1m m3/day – this estimated to exceed RMB1.5b (S$300m). These projects will start immediately and be completed by end 2015; but UEL does not expect them to have any material impact on its NTA or EPS for FY15. We have adjusted our figures accordingly; but we are keeping our fair value at S$1.43, now based on 24x (versus 28x previously, in line with its peers) FY16F EPS, and believe a re-rating would come when we see more TOT investments, which should increase its recurring income stream. Maintain HOLD.
JV with Chengdu Xingrong
United Envirotech Limited (UEL) has formed a 49%/51%-JV with Chengdu Xingrong Investment Co (XRTZ) with a paid-up capital of RMB50m (S$10m) in Sichuan, China. XRTZ is a state-owned enterprise listed in the A-share of the Shenzhen Stock Exchange (RMB17.7b market cap); also owns around 5m m3/day of water treatment concessions. The new JV will provide EPC (engineering, procurement, construction) services using UEL’s membrane technologies and membrane products; will also undertake investments in water treatment projects in western China.
Kicking off first project immediately
According to UEL, the first block of projects the JV will undertake is the expansion and upgrading of wastewater treatment plants and recycling of treated wastewater with a combined capacity of 1m m3/day – this estimated to exceed RMB1.5b (S$300m). These projects will start immediately and be completed by end 2015. In fact, management reveals that the value of Memstar membrane products to be used in this first block of projects alone is estimated to be RMB300m (S$60m); this again highlighting the importance of UEL as a vertically integrated water treatment solutions provider.
Impact to be felt in FY16
Nevertheless, UEL notes that the first block of projects would not have any material impact on its FY15 (ending Mar 15) NTA and EPS; just share of JV profit in FY16 plus S$60m of membrane sales. But UEL’s share price did not react positively to the news. Instead, we suspect the market is more interested in knowing the progress of “a potential acquisition of shares in the company”, which we understand is unrelated to XRTZ.
Maintain HOLD with S$1.43 FV
In any case, we keep our fair value at S$1.43, now based on 24x (versus 28x previously, in line with its peers) FY16F EPS, and believe a re-rating would come when we see more TOT investments, which should increase its recurring income stream. Maintain HOLD.
United Envirotech Limited (UEL) has formed a 49%/51%-JV with Chengdu Xingrong Investment Co (XRTZ) with a paid-up capital of RMB50m (S$10m) in Sichuan, China. XRTZ is a state-owned enterprise listed in the A-share of the Shenzhen Stock Exchange (RMB17.7b market cap); also owns around 5m m3/day of water treatment concessions. The new JV will provide EPC (engineering, procurement, construction) services using UEL’s membrane technologies and membrane products; will also undertake investments in water treatment projects in western China.
Kicking off first project immediately
According to UEL, the first block of projects the JV will undertake is the expansion and upgrading of wastewater treatment plants and recycling of treated wastewater with a combined capacity of 1m m3/day – this estimated to exceed RMB1.5b (S$300m). These projects will start immediately and be completed by end 2015. In fact, management reveals that the value of Memstar membrane products to be used in this first block of projects alone is estimated to be RMB300m (S$60m); this again highlighting the importance of UEL as a vertically integrated water treatment solutions provider.
Impact to be felt in FY16
Nevertheless, UEL notes that the first block of projects would not have any material impact on its FY15 (ending Mar 15) NTA and EPS; just share of JV profit in FY16 plus S$60m of membrane sales. But UEL’s share price did not react positively to the news. Instead, we suspect the market is more interested in knowing the progress of “a potential acquisition of shares in the company”, which we understand is unrelated to XRTZ.
Maintain HOLD with S$1.43 FV
In any case, we keep our fair value at S$1.43, now based on 24x (versus 28x previously, in line with its peers) FY16F EPS, and believe a re-rating would come when we see more TOT investments, which should increase its recurring income stream. Maintain HOLD.
Friday, 17 October 2014
M1
UOBKayhian on 17 Oct 2014
FY14F PE (x): 18.8
FY15F PE (x): 17.9
M1 reported net profit of S$44.5m for 3Q14 (+12.7% yoy), which is in line with our
expectations. Slight easing of growth for post-paid. M1’s post-paid subscriber base
contracted slightly by 1,000 on a qoq basis. The pace of expansion has eased and
management intends to intensify promotions to regain lost ground. Post-paid ARPU
eased marginally by 0.8% qoq to S$61.80 due to dilution from SurfShare plans. Our
target price for M1 is S$4.00 based on DCF (required rate of return: 6.7%, terminal
growth: 1.0%).
FY14F PE (x): 18.8
FY15F PE (x): 17.9
M1 reported net profit of S$44.5m for 3Q14 (+12.7% yoy), which is in line with our
expectations. Slight easing of growth for post-paid. M1’s post-paid subscriber base
contracted slightly by 1,000 on a qoq basis. The pace of expansion has eased and
management intends to intensify promotions to regain lost ground. Post-paid ARPU
eased marginally by 0.8% qoq to S$61.80 due to dilution from SurfShare plans. Our
target price for M1 is S$4.00 based on DCF (required rate of return: 6.7%, terminal
growth: 1.0%).
Keppel REIT
UOBKayhian on 17 Oct 2014
FY14F PE (x): 23.3
FY15F PE (x): 23.0
Results in line with expectations. Keppel REIT (KREIT) reported a DPU of 1.85 S
cents/share (-6.1% yoy, -2.6% qoq) as higher property income was offset by lower
rental support, higher finance costs and management fees together with dilution from
the share placements. Results were in line with expectations, with 9M14 DPU
representing 73.3% of our forecast.
Maintain BUY with an unchanged target of S$1.42, based on DDM (required rate of
return: 7.1%, terminal growth: 2.2%).
FY14F PE (x): 23.3
FY15F PE (x): 23.0
Results in line with expectations. Keppel REIT (KREIT) reported a DPU of 1.85 S
cents/share (-6.1% yoy, -2.6% qoq) as higher property income was offset by lower
rental support, higher finance costs and management fees together with dilution from
the share placements. Results were in line with expectations, with 9M14 DPU
representing 73.3% of our forecast.
Maintain BUY with an unchanged target of S$1.42, based on DDM (required rate of
return: 7.1%, terminal growth: 2.2%).
M1
Kim Eng on 17 Oct 2014
Net profit of SGD44.5m in 3Q14 (+13% YoY, +1.4% QoQ) took 9M14 profit to SGD131.2m. At 77% of our full-year forecast, this was in line. We expect a slightly weaker 4Q14 as subscriber acquisition costs could be higher following the launch of iPhone 6 on 19 Sep 2014 and Samsung Note 4 on 10 Oct 2014. No change to EPS or DCF-based TP of SGD4.24 (WACC 6.0%). Maintain BUY with catalysts from continued monetisation of data plans. M1 is still our top sector pick.
Data strength sustainable
Average data usage increased from 2.4GB a month in 3Q13 to 2.9GB in 3Q14. We believe this strength is sustainable, governed by: 1) higher smartphone penetration for both postpaid (86%) and prepaid (35%); 2) rising postpaid users on tiered plans, at 61% in 3Q14 from 32% a year ago; and 3) higher smartphone and data usage among prepaid users, at 35% from negligible a year ago.
Managing prepaid challenges well
Following 1 Apr’s ruling on 10-to-3 SIM card purchases, prepaid users should continue to fall. But in our view, M1’s strong focus on revenue growth will serve it well, with smartphone penetration and rising data usage compensating for subscriber attritions and declining IDD minutes. Already, M1’s postpaid revenue has beenrising despite net subscriber attritions, a trend which is inevitable in a highly-penetrated mobile market like Singapore’s.
- 3Q14 in line. Maintain BUY & SGD4.24 TP, DCF-based. Still our top telco pick.
- Very clear M1 is benefiting the most from data-plan monetisation.
- Rising smartphone data usage sustaining revenue growth in a highly-penetrated market.
Net profit of SGD44.5m in 3Q14 (+13% YoY, +1.4% QoQ) took 9M14 profit to SGD131.2m. At 77% of our full-year forecast, this was in line. We expect a slightly weaker 4Q14 as subscriber acquisition costs could be higher following the launch of iPhone 6 on 19 Sep 2014 and Samsung Note 4 on 10 Oct 2014. No change to EPS or DCF-based TP of SGD4.24 (WACC 6.0%). Maintain BUY with catalysts from continued monetisation of data plans. M1 is still our top sector pick.
Data strength sustainable
Average data usage increased from 2.4GB a month in 3Q13 to 2.9GB in 3Q14. We believe this strength is sustainable, governed by: 1) higher smartphone penetration for both postpaid (86%) and prepaid (35%); 2) rising postpaid users on tiered plans, at 61% in 3Q14 from 32% a year ago; and 3) higher smartphone and data usage among prepaid users, at 35% from negligible a year ago.
Managing prepaid challenges well
Following 1 Apr’s ruling on 10-to-3 SIM card purchases, prepaid users should continue to fall. But in our view, M1’s strong focus on revenue growth will serve it well, with smartphone penetration and rising data usage compensating for subscriber attritions and declining IDD minutes. Already, M1’s postpaid revenue has beenrising despite net subscriber attritions, a trend which is inevitable in a highly-penetrated mobile market like Singapore’s.
Thursday, 16 October 2014
Singapore Press Holdings Limited
UOBKayhian on 16 Oct 2014
FY14F PE (x): 22.5
FY15F PE (x): 21.7
Core earnings were within our expectation. Singapore Press Holdings (SPH) reported a
net profit of S$404m for FY14. Excluding an estimated investment property revaluation
gain of S$76m (net of MI) booked in 4QFY14, we estimate that FY14 net profit would
have been S$328m, in line with our forecast of S$335m. SPH has declared a final DPS
of 14 S cents.
Flat share price but dividend yield is decent. SPH’s print revenue is expected to perform
in tandem with Singapore’s muted GDP growth which is projected at 3.5% for 2014 and
3.8% for 2015. Traditionally, share price has had a good correlation with domestic
economic growth. Share price is expected to be flat, but annual dividend yields of 4.8%
for FY15-17 are decent amid a low interest-rate environment.
Maintain HOLD. We tweak our target price from S$4.20 to S$4.30 which is based on
sum-of-the-parts (SOTP) valuation. Our recommended entry price is S$4.00 and below.
FY14F PE (x): 22.5
FY15F PE (x): 21.7
Core earnings were within our expectation. Singapore Press Holdings (SPH) reported a
net profit of S$404m for FY14. Excluding an estimated investment property revaluation
gain of S$76m (net of MI) booked in 4QFY14, we estimate that FY14 net profit would
have been S$328m, in line with our forecast of S$335m. SPH has declared a final DPS
of 14 S cents.
Flat share price but dividend yield is decent. SPH’s print revenue is expected to perform
in tandem with Singapore’s muted GDP growth which is projected at 3.5% for 2014 and
3.8% for 2015. Traditionally, share price has had a good correlation with domestic
economic growth. Share price is expected to be flat, but annual dividend yields of 4.8%
for FY15-17 are decent amid a low interest-rate environment.
Maintain HOLD. We tweak our target price from S$4.20 to S$4.30 which is based on
sum-of-the-parts (SOTP) valuation. Our recommended entry price is S$4.00 and below.
Wheelock Properties
OCBC on 13 Oct 2014
Summary: Recent flash estimates of the URA private residential property price index showed a 0.6% decline in 3Q14 – a fourth consecutive quarter of price decrease cumulating in a 3.8% dip since its peak in 2Q13. We expect unabated headwinds in the weak domestic residential market going ahead, and prefer developers with sizeable diversified income from investment assets, a strong balance sheet and potential catalysts ahead. Wheelock is our top pick amongst the mid-sized developers, with a stable 3.3% yield underpinned by prime Orchard investment assets, a strong balance sheet (7.3% net gearing) that will likely buttress the group through the domestic residential downtrend, and potential upside from its 22.6% stake in Hotel Properties Limited. We advocate that investors buy on its recent price weakness, particularly as it finds technical support near S$1.76. Maintain BUY with an unchanged fair value estimate of S$2.38.
Stable dividend yield supported by prime Orchard assets
Recent flash estimates of the URA private residential property price index showed a 0.6% decline in 3Q14 – a fourth consecutive quarter of price decrease cumulating in a 3.8% dip since its peak in 2Q13. We expect unabated headwinds in the weak domestic residential market going ahead and prefer developers with sizeable income from investment assets, a strong balance sheet and potential upside catalysts. Wheelock Properties (S) Limited (“Wheelock”) provides a stable dividend yield of 3.3% underpinned by the group’s prime Orchard retail assets: Wheelock Place and Scotts Square Retail. As at end Jun 2014, Wheelock Place was 100% occupied with an overall monthly rental of above S$13 psf per month. Scotts Square Retail was 93% occupied, with an average rental of above S$22 psf per month, and management reports that they are actively looking at rejuvenating the mall with stronger international luxury labels and F&B concepts.
Strong balance sheet can buttress group through downturn
The group’s domestic residential projects, Scotts Square (338 total units), The Panorama (698 total units) and Ardmore Three (84 total units) are 79%, 38% and 4% sold, respectively. While SG residential sales are likely to remain uninspiring, Wheelock’s development asset exposure is contained at 30% of total assets as at end 2Q14, and we believe the group’s solid balance sheet, with a healthy cash balance of S$410.0m and low gearing of 7.3%, will likely buttress it through the residential down-cycle ahead.
BUY on current price weakness
Finally, we continue to view Wheelock's 22.6% stake in Hotel Properties Limited (HPL) shares as another potential catalyst, which could precipitate further upside should HPL decide to optimize and extract value from its multiple highly-prized but under-developed assets in the Orchard area ahead. Wheelock is our top pick amongst the mid-sized developers and we advocate that investors buy on its recent price weakness, particularly as it finds technical support near S$1.76. Maintain BUY with an unchanged fair value estimate of S$2.38.
Recent flash estimates of the URA private residential property price index showed a 0.6% decline in 3Q14 – a fourth consecutive quarter of price decrease cumulating in a 3.8% dip since its peak in 2Q13. We expect unabated headwinds in the weak domestic residential market going ahead and prefer developers with sizeable income from investment assets, a strong balance sheet and potential upside catalysts. Wheelock Properties (S) Limited (“Wheelock”) provides a stable dividend yield of 3.3% underpinned by the group’s prime Orchard retail assets: Wheelock Place and Scotts Square Retail. As at end Jun 2014, Wheelock Place was 100% occupied with an overall monthly rental of above S$13 psf per month. Scotts Square Retail was 93% occupied, with an average rental of above S$22 psf per month, and management reports that they are actively looking at rejuvenating the mall with stronger international luxury labels and F&B concepts.
Strong balance sheet can buttress group through downturn
The group’s domestic residential projects, Scotts Square (338 total units), The Panorama (698 total units) and Ardmore Three (84 total units) are 79%, 38% and 4% sold, respectively. While SG residential sales are likely to remain uninspiring, Wheelock’s development asset exposure is contained at 30% of total assets as at end 2Q14, and we believe the group’s solid balance sheet, with a healthy cash balance of S$410.0m and low gearing of 7.3%, will likely buttress it through the residential down-cycle ahead.
BUY on current price weakness
Finally, we continue to view Wheelock's 22.6% stake in Hotel Properties Limited (HPL) shares as another potential catalyst, which could precipitate further upside should HPL decide to optimize and extract value from its multiple highly-prized but under-developed assets in the Orchard area ahead. Wheelock is our top pick amongst the mid-sized developers and we advocate that investors buy on its recent price weakness, particularly as it finds technical support near S$1.76. Maintain BUY with an unchanged fair value estimate of S$2.38.
Neptune Orient Lines
OCBC on 10 Oct 2014
We recently met up with Neptune Orient Lines (NOL) and noted that operational efficiency continues to be the key focus going forward for its liner segment, mainly through its fleet renewal programme. Overall, we expect fleet capacity to shrink by ~5% after the planned retirement of 34 chartered vessels are completed by FY15. With a leaner and more efficient fleet, we believe cost savings are likely derived from: 1) lower bunker costs, 2) network reconfiguration, and 3) leveraging on its G6 alliance for top-line growth. We also believe supply growth will continue to exceed forecasted demand growth putting downward pressure on freight rates. However, we expect the effects of operational efficiency and capacity discipline to partly offset the effects of lower profitability from depressed freight rates in its liner segment. Hence, we reduce FY14F and FY15F losses by a slight 3.7% to US$268.7m and 2.4% to US$238.2m, respectively, and with the recent slide in its share price since our last update in Aug-14, we upgrade NOL to HOLD on valuation grounds with an unchanged fair value estimate of S$0.90 (still based on 0.97x FY14F P/B).
Cost savings arising from operational efficiency
We recently met up with Neptune Orient Lines (NOL) and noted that operational efficiency continues to be the key focus going forward for its liner segment, mainly through its fleet renewal programme. The 34 fuel-efficient new-build vessels acquired through the programme were all received by end 2QFY14. Overall, we expect fleet capacity to shrink by ~5% after the planned retirement of 34 chartered vessels are completed by FY15, with no plans to purchase any vessels within the next few years. With a leaner and more efficient fleet, we believe cost savings are likely derived from: 1) lower bunker costs which makes up ~20-25% of total costs to operate a vessel, 2) network reconfiguration (e.g. calling on more ports with the same larger vessel), and 3) leveraging on its G6 alliance for top-line growth (i.e. buying slots from its partners on routes its does not operate in) without increasing its fleet capacity. We expect to see similar level of cost savings for 2HFY14 as compared to 1HFY14 of US$195.0m.
Depressed freight rates likely to continue
IMF recently cut its global GDP growth forecast on 7-Oct to 3.3% for 2014 and 3.8% for 2015, against its Jul-14 forecasts of 3.4% for 2014 and 4.0% for 2015. The demand growth driver for the industry is dependent on the world GDP growth and we expect demand to soften on weaker outlook. Based on order book as at Sep-14, market watcher Alphaliner forecasted that the supply of cellular fleet will grow 5.8% in 2014 and 8.0% in 2015. Hence, with supply growth exceeding forecasted demand growth, we think downward pressure on freight rates is likely to sustain for at least until end-2015 as we expect overcapacity to continue to plague the industry.
Upgrade to HOLD on valuation grounds
We expect the effects of operational efficiency and capacity discipline to partly offset the effects of lower profitability from depressed freight rates in its liner segment. Hence, we reduce FY14F and FY15F losses by a slight 3.7% to US$268.7m and 2.4% to US$238.2m, respectively, and with the recent slide in its share price since our last update in Aug-14, we upgrade NOL to HOLD on valuation grounds with an unchanged fair value of S$0.90 (still based on 0.97x FY14F P/B).
We recently met up with Neptune Orient Lines (NOL) and noted that operational efficiency continues to be the key focus going forward for its liner segment, mainly through its fleet renewal programme. The 34 fuel-efficient new-build vessels acquired through the programme were all received by end 2QFY14. Overall, we expect fleet capacity to shrink by ~5% after the planned retirement of 34 chartered vessels are completed by FY15, with no plans to purchase any vessels within the next few years. With a leaner and more efficient fleet, we believe cost savings are likely derived from: 1) lower bunker costs which makes up ~20-25% of total costs to operate a vessel, 2) network reconfiguration (e.g. calling on more ports with the same larger vessel), and 3) leveraging on its G6 alliance for top-line growth (i.e. buying slots from its partners on routes its does not operate in) without increasing its fleet capacity. We expect to see similar level of cost savings for 2HFY14 as compared to 1HFY14 of US$195.0m.
Depressed freight rates likely to continue
IMF recently cut its global GDP growth forecast on 7-Oct to 3.3% for 2014 and 3.8% for 2015, against its Jul-14 forecasts of 3.4% for 2014 and 4.0% for 2015. The demand growth driver for the industry is dependent on the world GDP growth and we expect demand to soften on weaker outlook. Based on order book as at Sep-14, market watcher Alphaliner forecasted that the supply of cellular fleet will grow 5.8% in 2014 and 8.0% in 2015. Hence, with supply growth exceeding forecasted demand growth, we think downward pressure on freight rates is likely to sustain for at least until end-2015 as we expect overcapacity to continue to plague the industry.
Upgrade to HOLD on valuation grounds
We expect the effects of operational efficiency and capacity discipline to partly offset the effects of lower profitability from depressed freight rates in its liner segment. Hence, we reduce FY14F and FY15F losses by a slight 3.7% to US$268.7m and 2.4% to US$238.2m, respectively, and with the recent slide in its share price since our last update in Aug-14, we upgrade NOL to HOLD on valuation grounds with an unchanged fair value of S$0.90 (still based on 0.97x FY14F P/B).
Subscribe to:
Posts (Atom)