UOBKayhian on 30 Jan 2015
FY14F PE (x): 14.3
FY15F PE (x): 11.9
Wilmar will announce its 4Q14 results on 12 Feb 15 after the market close. Wilmar’s
2014 earnings are expected to be in line with our and market expectation of
US$1,050m- 1,150m with 4Q14 net profit expected to come in around US$300m-350m
(vs 4Q13: US$369.1m, 3Q14: US$422.4m). Any surprise in earnings is likely to come in
the form of a positive surprise from oilseed & grains and sugar processing &
merchandising divisions largely on the back of its improved PBT margins.
2015 outlook. The palm-related business will continue to be under pressure from huge
soybean supply and low refining margins due to overcapacity. Soybean crushing in
China should see stability due to less market disruption from traders after: a) banks
tightened the financing for traders, and also b) declining prices deterred them from
market. The sugar division is an increasingly important earnings contributor and should
see continued growth in sales volume in Processing & Merchandising division.
Contribution from the sugar division is expected to hit 11% of total PBT in 2014F vs
only 6% two years ago.
Maintain HOLD and target price of S$3.55. This translates into a blended 2015F PE of
13.7x. Entry price is S$3.05.
Friday, 30 January 2015
Venture Corporation
UOBKayhian on 30 Jan 2015
FY14F PE (x): 16.3
FY15F PE (x): 13.9
Growing and differentiating. Venture targets to achieve mid- to high-single-digit growth in top-line and bottom line for 2015. The operating environment for Venture remains tough with corporations continuing staying lean on capital and IT expenditure. However, Venture is able to cope with the adversity by differentiating itself through a highly diversified product portfolio and customer base while expanding its engineering and R&D capabilities. Growing and differentiating. Venture is aiming for mid- to high-single-digit growth in topline and bottom line for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and Singapore dollar will help Venture maintain net margin within the targeted 6-8%. Over the longer term, Venture can count on the Life Science segment for growth. Maintain BUY. Rolling forward valuation to 2015, our target price is S$8.75, based on 15x 2015F PE (Benchmark Electronics: 14.7x, Plexus Corporation: 12.8x), justified by its average forward PE of 16.4x over the past 10 years.
FY14F PE (x): 16.3
FY15F PE (x): 13.9
Growing and differentiating. Venture targets to achieve mid- to high-single-digit growth in top-line and bottom line for 2015. The operating environment for Venture remains tough with corporations continuing staying lean on capital and IT expenditure. However, Venture is able to cope with the adversity by differentiating itself through a highly diversified product portfolio and customer base while expanding its engineering and R&D capabilities. Growing and differentiating. Venture is aiming for mid- to high-single-digit growth in topline and bottom line for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and Singapore dollar will help Venture maintain net margin within the targeted 6-8%. Over the longer term, Venture can count on the Life Science segment for growth. Maintain BUY. Rolling forward valuation to 2015, our target price is S$8.75, based on 15x 2015F PE (Benchmark Electronics: 14.7x, Plexus Corporation: 12.8x), justified by its average forward PE of 16.4x over the past 10 years.
SMRT Corporation
UOBKayhian on 30 Jan 2015
FY15F PE (x): 27.1
FY16F PE (x): 20.9
Good progress made in 3QFY15. SMRT’s 9M15 net profit of S$70.2m (+56% yoy) was in line with our estimates, representing 75% of full-year earnings forecast. The improvement was on the back of an increase in operating margin to 10.1% (9MFY14: 7.1%). The fare segment (bus and rail) registered a 4% yoy rise in revenue, boosted by higher ridership (2.5% yoy for trains and 4.4% yoy for bus) and higher fares. No interim dividend was declared. Maintain HOLD with a DCF-based target price of $1.73 (WACC: 7.9%, terminal growth: 3.0%). SMRT looks like it is fairly valued after rising 15% the past three months. A possible entry level would be S$1.56. We note that SMRT’s FY15 dividend yield of 2.0% and PE of 27.0x is not far off ComfortDegro’s FY14 dividend yield of 2.4% and PE of 22.0x. We expect SMRT to re-rate, should there be any further details offering clarity on the railway restructuring. However, we continue to favour ComfortDelGro for its overseas growth potential, diversification and cheaper valuations.
FY15F PE (x): 27.1
FY16F PE (x): 20.9
Good progress made in 3QFY15. SMRT’s 9M15 net profit of S$70.2m (+56% yoy) was in line with our estimates, representing 75% of full-year earnings forecast. The improvement was on the back of an increase in operating margin to 10.1% (9MFY14: 7.1%). The fare segment (bus and rail) registered a 4% yoy rise in revenue, boosted by higher ridership (2.5% yoy for trains and 4.4% yoy for bus) and higher fares. No interim dividend was declared. Maintain HOLD with a DCF-based target price of $1.73 (WACC: 7.9%, terminal growth: 3.0%). SMRT looks like it is fairly valued after rising 15% the past three months. A possible entry level would be S$1.56. We note that SMRT’s FY15 dividend yield of 2.0% and PE of 27.0x is not far off ComfortDegro’s FY14 dividend yield of 2.4% and PE of 22.0x. We expect SMRT to re-rate, should there be any further details offering clarity on the railway restructuring. However, we continue to favour ComfortDelGro for its overseas growth potential, diversification and cheaper valuations.
CDL Hospitality Trusts
OCBC on 29 Jan 2015
CDL Hospitality Trusts (CDLHT) reported its 4Q14 results which were in-line with the street’s expectations. Gross revenue and DPU rose 14.4% and 7.2% YoY to S$45.1m and 3.13 S cents, respectively, underpinned by the recognition of a full quarter's hotel revenue from Jumeirah Dhevanafushi. We expect market conditions to remain challenging in the near future, given the uncertain macroeconomic landscape. We believe the situation is further exacerbated by the weak Euro and Japanese Yen, which have drawn tourist arrivals to those areas. Looking ahead, CDLHT will continue to focus on finding suitable acquisition opportunities in the sector. It has sufficient debt headroom of S$339m to finance prospective acquisitions before reaching the 40% gearing level. Following a change in analyst coverage, we fine-tune our assumptions and derive a new fair value estimate of S$1.76 (previously S$1.80), based on our dividend discount model (discount rate: 8.4%, terminal growth rate: 2%). Maintain HOLD.
4Q14 results met the street’s expectations
CDL Hospitality Trusts (CDLHT) reported its 4Q14 results which were in-line with the street’s expectations. Gross revenue and DPU rose 14.4% and 7.2% YoY to S$45.1m and 3.13 S cents, respectively, underpinned by the recognition of a full quarter's hotel revenue from Jumeirah Dhevanafushi amounting to S$5.4m. FY14 gross revenue came in at S$166.8m (+12.1%), while DPU was flat at 10.98 S cents (+0.1%). This formed 103.1% and 99.8% of Bloomberg consensus’ projections, respectively.
Market conditions still challenging
Although CDLHT managed to record a 3 ppt growth in its Singapore hotels’ occupancy to 90% in 4Q14, competitive pressures from higher supply of hotel rooms and a cautious corporate spending environment resulted in a 4.7% decline in its average room rate to S$205. Hence RevPAR was down 1.1% to S$185. For FY14, CDLHT’s Singapore hotels saw a 1.6% dip in RevPAR to S$188. We expect market conditions to remain challenging in the near future, given the uncertain macroeconomic landscape. We believe the situation is further exacerbated by the weak Euro and Japanese Yen, which have drawn tourist arrivals to those areas. There is also an expected addition of 3,258 hotel rooms (+5.7%) to the Singapore market in 2015, and this would exert more pressure on room rates.
Maintain HOLD
Looking ahead, CDLHT will continue to focus on finding suitable acquisition opportunities in the hospitality sector, with Japan and Singapore being the key areas of interest. Its healthy gearing ratio of 31.7% (as at 31 Dec 2014) implies that it has sufficient debt headroom of S$339m to finance prospective acquisitions before reaching the 40% gearing level. Following a change in analyst coverage, we fine-tune our assumptions and derive a new fair value estimate of S$1.76 (previously S$1.80), based on our dividend discount model (discount rate: 8.4%, terminal growth rate: 2%). Maintain HOLD.
CDL Hospitality Trusts (CDLHT) reported its 4Q14 results which were in-line with the street’s expectations. Gross revenue and DPU rose 14.4% and 7.2% YoY to S$45.1m and 3.13 S cents, respectively, underpinned by the recognition of a full quarter's hotel revenue from Jumeirah Dhevanafushi amounting to S$5.4m. FY14 gross revenue came in at S$166.8m (+12.1%), while DPU was flat at 10.98 S cents (+0.1%). This formed 103.1% and 99.8% of Bloomberg consensus’ projections, respectively.
Market conditions still challenging
Although CDLHT managed to record a 3 ppt growth in its Singapore hotels’ occupancy to 90% in 4Q14, competitive pressures from higher supply of hotel rooms and a cautious corporate spending environment resulted in a 4.7% decline in its average room rate to S$205. Hence RevPAR was down 1.1% to S$185. For FY14, CDLHT’s Singapore hotels saw a 1.6% dip in RevPAR to S$188. We expect market conditions to remain challenging in the near future, given the uncertain macroeconomic landscape. We believe the situation is further exacerbated by the weak Euro and Japanese Yen, which have drawn tourist arrivals to those areas. There is also an expected addition of 3,258 hotel rooms (+5.7%) to the Singapore market in 2015, and this would exert more pressure on room rates.
Maintain HOLD
Looking ahead, CDLHT will continue to focus on finding suitable acquisition opportunities in the hospitality sector, with Japan and Singapore being the key areas of interest. Its healthy gearing ratio of 31.7% (as at 31 Dec 2014) implies that it has sufficient debt headroom of S$339m to finance prospective acquisitions before reaching the 40% gearing level. Following a change in analyst coverage, we fine-tune our assumptions and derive a new fair value estimate of S$1.76 (previously S$1.80), based on our dividend discount model (discount rate: 8.4%, terminal growth rate: 2%). Maintain HOLD.
Wednesday, 28 January 2015
OUE Commercial REIT
OCBC on 27 Jan 2015
OUE Commercial REIT’s 4Q14 distributable income and DPU came in at S$12.6m and 1.44 S-cents, respectively, which is 5.5% and 5.1% higher than forecasted in its IPO Prospectus. We judge these results to be within our expectations as FY14 (27 Jan 2014 to 31 Dec 2014) NPI of S$53.8m and distribution income of S$45.9m constitute 100.6% and 97.7% of our forecasts, respectively. The trust pays its distributions on a semi-annual basis, and the book closure for its 2H14 distribution of 2.84 S-cents per unit will be on 3 Feb 2015. Overall portfolio occupancy was firm at 98.0% as at end Dec-14, up QoQ versus 97.2% as at end Sep-14. OUE Bayfront remained 100% occupied as at end 4Q14, with positive rental reversions of 14.9% for leases signed in FY14, and average passing rents increased from S$10.40 psf at IPO to S$10.58 psf. Lippo Plaza’s occupancy rate increased QoQ to 96.0% as at end Dec-14 from 94.4% as at end Sep-14, and renewal rents in FY14 also showed a respectable 6.0% increase versus preceding rents. Maintain BUY with an unchanged fair value estimate of S$0.88.
4Q14 results within expectations
OUE Commercial REIT’s 4Q14 distributable income and DPU came in at S$12.6m and 1.44 S-cent, respectively, which is 5.5% and 5.1% higher than forecasted in its IPO Prospectus. We judge these results to be within our expectations as FY14 (27 Jan 2014 to 31 Dec 2014) NPI of S$53.8m and distribution income of S$45.9m constitute 100.6% and 97.7% of our forecasts, respectively. In terms of the topline, FY14 gross revenue of S$71.5m was 3.6% ahead of the IPO forecast but was marginally below our expectations (only 96.7% of our forecast) due to a weaker than anticipated contribution from Lippo Plaza. This was negated through effective cost controls by the REIT manager which brought the NPI line back within expectations. The trust pays its distributions on a semi-annual basis, and the book closure for its 2H14 distribution of 2.84 S-cents per unit will be on 3 Feb 2015.
Manager expects positive rental reversion to continue
Overall portfolio occupancy was firm at 98.0% as at end Dec-14, up QoQ versus 97.2% as at end Sep-14. 19.8% of the portfolio, by gross rental income, is up for renewal in 2015 and management expects overall occupancy rates to stay in the healthy mid-90% range over the year ahead. OUE Bayfront remained 100% occupied as at end 4Q14, with average passing rents increasing from S$10.40 psf at IPO to S$10.58 psf. Newly committed rents over FY14 for OUE Bayfront ranged from S$11.22 to S$15.50 psf which is, on average, 14.9% higher than preceding rentals. Lippo Plaza’s occupancy rate increased QoQ to 96.0% as at end Dec-14 from 94.4% as at end Sep-14, and renewal rents in FY14 also showed a respectable 6.0% increase versus preceding rents. Looking ahead, management expects positive rental reversion at Lippo Plaza to continue at a 3.0%-5.0% rate. Maintain BUY with an unchanged fair value estimate of S$0.88.
OUE Commercial REIT’s 4Q14 distributable income and DPU came in at S$12.6m and 1.44 S-cent, respectively, which is 5.5% and 5.1% higher than forecasted in its IPO Prospectus. We judge these results to be within our expectations as FY14 (27 Jan 2014 to 31 Dec 2014) NPI of S$53.8m and distribution income of S$45.9m constitute 100.6% and 97.7% of our forecasts, respectively. In terms of the topline, FY14 gross revenue of S$71.5m was 3.6% ahead of the IPO forecast but was marginally below our expectations (only 96.7% of our forecast) due to a weaker than anticipated contribution from Lippo Plaza. This was negated through effective cost controls by the REIT manager which brought the NPI line back within expectations. The trust pays its distributions on a semi-annual basis, and the book closure for its 2H14 distribution of 2.84 S-cents per unit will be on 3 Feb 2015.
Manager expects positive rental reversion to continue
Overall portfolio occupancy was firm at 98.0% as at end Dec-14, up QoQ versus 97.2% as at end Sep-14. 19.8% of the portfolio, by gross rental income, is up for renewal in 2015 and management expects overall occupancy rates to stay in the healthy mid-90% range over the year ahead. OUE Bayfront remained 100% occupied as at end 4Q14, with average passing rents increasing from S$10.40 psf at IPO to S$10.58 psf. Newly committed rents over FY14 for OUE Bayfront ranged from S$11.22 to S$15.50 psf which is, on average, 14.9% higher than preceding rentals. Lippo Plaza’s occupancy rate increased QoQ to 96.0% as at end Dec-14 from 94.4% as at end Sep-14, and renewal rents in FY14 also showed a respectable 6.0% increase versus preceding rents. Looking ahead, management expects positive rental reversion at Lippo Plaza to continue at a 3.0%-5.0% rate. Maintain BUY with an unchanged fair value estimate of S$0.88.
Tiger Airways
OCBC on 27 Jan 2015
Tiger Airways (Tigerair) finally turned profitable after several consecutive quarters of losses. Its 3QFY15 revenue increased 5.9% YoY to S$182.3m while expenses saw 1.5% decline to S$178.2m, largely due to improvement in yield, capacity rationalization as well as lower fuel and staff costs. This led to a positive PATMI of S$2.2m for 3QFY15 compared to net loss of S$118.5m in 3QFY14. We believe the longer-term success of Tigerair hinges on driving growth and managing costs through the alliance with Scoot as well as Singapore Airlines (SIA). However, we remain cautious on the outlook of Tigerair as one profitable quarter does not guarantee the success of its turnaround strategy. We prefer to wait and see if these improvements can be sustained. Factoring in the results and updated outlook, our FY15F/16F net losses narrow from S$255.3m/S$1.4m to S$246.6m/S$0.7m. Our fair value consequently increases from S$0.18 to S$0.23. We think the 23% share price spike yesterday was overdone, maintain SELL.
Finally profitable after consecutive quarters of losses
Tiger Airways (Tigerair) finally turned profitable after several consecutive quarters of losses. Its 3QFY15 revenue increased 5.9% YoY to S$182.3m while expenses saw 1.5% decline to S$178.2m, largely due to improvement in yield, capacity rationalization as well as lower fuel and staff costs. This led to a positive PATMI of S$2.2m for 3QFY15 compared to net loss of S$118.5m in 3QFY14. For 9MFY15 results, its revenue dropped 13.0% to S$498.0m while expenses declined 10.7% to S$535.6m mainly due to exclusion of Tigerair Australia as a subsidiary since 2QFY14. Excluding one-off items, its 9MFY15 recorded S$71.1m loss, which is a 27.9% improvement from S$98.6m core net loss in 9MFY14.
Alliance with Scoot and SIA key for turnaround success
The restructuring efforts by Tigerair’s management seem to be taking off as consolidation of its business to focus on Singapore operations saw its 3QFY15 passenger yield improved 4.9% YoY while load factor recorded 6.2ppt growth. Management stated they will focus on capacity rationalization to sustain the YoY improvements in yields but cautioned against uncertainties in the macro environment where competition in the region remains intense. We believe the longer-term success of Tigerair hinges on driving growth and managing costs through the alliance with Scoot as well as with its parent, Singapore Airlines Limited (SIA). While the key idea to capture interlining passenger traffic between Tigerair and Scoot through coordination of connecting flights, slot timings at Changi Airport are generally granted semi-annually for each route. As such, we expect impact on passenger traffic growth to materialize gradually only from 2HFY16 onwards.
Remain cautious; maintain SELL
We remain cautious on the outlook of Tigerair as one profitable quarter does not guarantee the success of its turnaround strategy. We prefer to wait and see if these improvements can be sustained. Factoring in the results and updated outlook, our FY15F/16F net losses narrow from S$255.3m/S$1.4m to S$246.6m/S$0.7m. Our FV consequently increases from S$0.18 to S$0.23. We think the 23% share price spike yesterday was overdone, maintain SELL.
Tiger Airways (Tigerair) finally turned profitable after several consecutive quarters of losses. Its 3QFY15 revenue increased 5.9% YoY to S$182.3m while expenses saw 1.5% decline to S$178.2m, largely due to improvement in yield, capacity rationalization as well as lower fuel and staff costs. This led to a positive PATMI of S$2.2m for 3QFY15 compared to net loss of S$118.5m in 3QFY14. For 9MFY15 results, its revenue dropped 13.0% to S$498.0m while expenses declined 10.7% to S$535.6m mainly due to exclusion of Tigerair Australia as a subsidiary since 2QFY14. Excluding one-off items, its 9MFY15 recorded S$71.1m loss, which is a 27.9% improvement from S$98.6m core net loss in 9MFY14.
Alliance with Scoot and SIA key for turnaround success
The restructuring efforts by Tigerair’s management seem to be taking off as consolidation of its business to focus on Singapore operations saw its 3QFY15 passenger yield improved 4.9% YoY while load factor recorded 6.2ppt growth. Management stated they will focus on capacity rationalization to sustain the YoY improvements in yields but cautioned against uncertainties in the macro environment where competition in the region remains intense. We believe the longer-term success of Tigerair hinges on driving growth and managing costs through the alliance with Scoot as well as with its parent, Singapore Airlines Limited (SIA). While the key idea to capture interlining passenger traffic between Tigerair and Scoot through coordination of connecting flights, slot timings at Changi Airport are generally granted semi-annually for each route. As such, we expect impact on passenger traffic growth to materialize gradually only from 2HFY16 onwards.
Remain cautious; maintain SELL
We remain cautious on the outlook of Tigerair as one profitable quarter does not guarantee the success of its turnaround strategy. We prefer to wait and see if these improvements can be sustained. Factoring in the results and updated outlook, our FY15F/16F net losses narrow from S$255.3m/S$1.4m to S$246.6m/S$0.7m. Our FV consequently increases from S$0.18 to S$0.23. We think the 23% share price spike yesterday was overdone, maintain SELL.
Frasers Commercial Trust
OCBC on 26 Jan 2015
Frasers Commercial Trust (FCOT) made a positive start to FY15, with 1QFY15 revenue and DPU increasing by 23.3% and 20.0% YoY to S$35.5m and 2.46 S cents, respectively. This was within our expectations. We expect FCOT’s robust rental reversions trend to continue in FY15, as its portfolio passing rents are still below current spot rents. We believe FCOT has managed its FX and interest rate risks well, having hedged 100% of its net AUD exposure and 73% of its total borrowings. It has no refinancing needs until FY17 (S$180m) and gearing ratio of 37.2% remains manageable, in our view. Given FCOT’s resilient performance and well-hedged strategies put in place, we lower our discount rate assumption from 8.5% to 7.9%. Consequently, our fair value estimate increases from S$1.50 to S$1.65. Maintain BUY.
1QFY15 results met our expectations
Frasers Commercial Trust (FCOT) made a positive start to FY15, with 1QFY15 revenue and DPU increasing by 23.3% and 20.0% YoY to S$35.5m and 2.46 S cents, respectively. This was within our expectations, as the former and latter formed 25.6% and 26.0% of our full-year forecasts, respectively. The strong set of results was driven by higher income contribution from the underlying leases of Alexandra Technopark (ATP), with NPI surging 66.2% YoY to S$8.9m, following the expiry of the master lease in Aug 2014 and higher occupancy and rental rates at China Square Central (CSC) and 55 Market Street (55 MS). This was partially offset by softness in its Australian properties. Portfolio occupancy stood at 96.6% (Singapore: 97.5%; Australia: 94.9%), relatively stable from the 96.5% achieved in 4QFY14.
Expect rental reversions trend to remain robust
FCOT attained positive weighted average rental reversions of 1.2% for CSC, 16.9% for ATP and 7.1% for 55 MS in 1QFY15. CSC’s rental reversion would have been closer to 10% if not for one lease which was renewed at a lower rate. The passing rents for leases expiring in FY15 for CSC, 55 MS and ATP are approximately 22%-27%, 15%-20%, and 20% below current spot rents, respectively, based on our estimates. Hence, we expect FCOT’s robust rental reversions trend to continue in FY15. Although the situation in Australia remains challenging, we note that current passing rent of AUD610 psm per annum at its Central Park asset is still below the Perth premium Grade office average net face rents of AUD715-AUD810 psm per annum. In addition, only 0.7% of Central Park’s NLA is up for renewal for the remainder of FY15.
Maintain BUY
We believe FCOT has managed its FX and interest rate risks well, having hedged 100% of its net AUD exposure and 73% of its total borrowings. It has no refinancing needs until FY17 (S$180m) and gearing ratio of 37.2% remains manageable, in our view. Given FCOT’s resilient performance and well-hedged strategies put in place, we lower our discount rate assumption from 8.5% to 7.9%. Consequently, our fair value estimate increases from S$1.50 to S$1.65. Maintain BUY.
Frasers Commercial Trust (FCOT) made a positive start to FY15, with 1QFY15 revenue and DPU increasing by 23.3% and 20.0% YoY to S$35.5m and 2.46 S cents, respectively. This was within our expectations, as the former and latter formed 25.6% and 26.0% of our full-year forecasts, respectively. The strong set of results was driven by higher income contribution from the underlying leases of Alexandra Technopark (ATP), with NPI surging 66.2% YoY to S$8.9m, following the expiry of the master lease in Aug 2014 and higher occupancy and rental rates at China Square Central (CSC) and 55 Market Street (55 MS). This was partially offset by softness in its Australian properties. Portfolio occupancy stood at 96.6% (Singapore: 97.5%; Australia: 94.9%), relatively stable from the 96.5% achieved in 4QFY14.
Expect rental reversions trend to remain robust
FCOT attained positive weighted average rental reversions of 1.2% for CSC, 16.9% for ATP and 7.1% for 55 MS in 1QFY15. CSC’s rental reversion would have been closer to 10% if not for one lease which was renewed at a lower rate. The passing rents for leases expiring in FY15 for CSC, 55 MS and ATP are approximately 22%-27%, 15%-20%, and 20% below current spot rents, respectively, based on our estimates. Hence, we expect FCOT’s robust rental reversions trend to continue in FY15. Although the situation in Australia remains challenging, we note that current passing rent of AUD610 psm per annum at its Central Park asset is still below the Perth premium Grade office average net face rents of AUD715-AUD810 psm per annum. In addition, only 0.7% of Central Park’s NLA is up for renewal for the remainder of FY15.
Maintain BUY
We believe FCOT has managed its FX and interest rate risks well, having hedged 100% of its net AUD exposure and 73% of its total borrowings. It has no refinancing needs until FY17 (S$180m) and gearing ratio of 37.2% remains manageable, in our view. Given FCOT’s resilient performance and well-hedged strategies put in place, we lower our discount rate assumption from 8.5% to 7.9%. Consequently, our fair value estimate increases from S$1.50 to S$1.65. Maintain BUY.
Frasers Centrepoint Trust
OCBC on26 Jan 2015
Frasers Centrepoint Trust (FCT) started FY15 on a bright note, recording an in-line 10.0% YoY growth in its 1QFY15 DPU to 2.75 S cents on the back of a 18.3% increase in growth revenue to S$47.2m. Management recorded robust rental reversions of 7.7% for its entire portfolio, although remaining leases expiring in FY15 at Changi City Point may be renewed at softer rates given market conditions. FCT’s gearing ratio was unchanged at a healthy 29.3%, with 87% of its debt hedged or on a fixed rate basis (end FY14: 75%). We keep our forecasts intact given this set of in-line results. However, we are raising our fair value on FCT from S$2.08 to S$2.27 as we lower our cost of equity assumptions from 7.5% to 7.0%. This is to take into account FCT’s continued resilient and defensive portfolio performance, and strong financial position. Maintain BUY.
1QFY15 results in-line with expectations
Frasers Centrepoint Trust (FCT) started FY15 on a bright note, recording a 10.0% YoY growth in its 1QFY15 DPU to 2.75 S cents on the back of a 18.3% increase in growth revenue to S$47.2m. This constituted 23.3% and 24.1% of our full-year forecasts, respectively. If we include S$1.4m (0.15 S cents per unit) of income retained, which we expect FCT to distribute in 2HFY15, adjusted DPU would have formed 24.6% of our FY15 projection, in-line with our expectations. Growth was driven largely by contribution from Changi City Point (CCP) which was acquired in Jun 2014, as well as organic growth from its other assets, with the exception of Bedok Point (BP). Although revenue and NPI for BP declined 12.5% and 24.2% YoY, respectively, this property contributed only 4.2% of FCT’s 1QFY15 NPI.
Operational metrics highlight resiliency
Management recorded robust rental reversions of 7.7% for its entire portfolio, with growth underpinned by CCP (+10.7%), Causeway Point (+9.1%) and YewTee Point (+8.8%), with a slight drag coming from BP (-1.3%). Management sounded a word of caution, highlighting that lease negotiations at CCP had started several months back and market conditions has since become more challenging. Hence the 10.7% reversion figure should not be used as a benchmark for the remaining leases to be renewed. Nevertheless, only 9.5% of CCP’s NLA is expiring for the remainder of FY15. Portfolio occupancy fell slightly from 98.9% to 96.4%, but this was partly due to transitional vacancies (i.e. space that has already been committed but tenants carrying out fit out works). We thus expect occupancy to improve in the coming quarter. FCT’s gearing ratio was unchanged at a healthy 29.3%, with 87% of its debt hedged or on a fixed rate basis (end FY14: 75%).
Reiterate BUY
We keep our forecasts intact given this set of in-line results. However, we are raising our fair value on FCT from S$2.08 to S$2.27 as we lower our cost of equity assumptions from 7.5% to 7.0%. This is to take into account FCT’s continued resilient and defensive portfolio performance, and strong financial position. Maintain BUY.
Frasers Centrepoint Trust (FCT) started FY15 on a bright note, recording a 10.0% YoY growth in its 1QFY15 DPU to 2.75 S cents on the back of a 18.3% increase in growth revenue to S$47.2m. This constituted 23.3% and 24.1% of our full-year forecasts, respectively. If we include S$1.4m (0.15 S cents per unit) of income retained, which we expect FCT to distribute in 2HFY15, adjusted DPU would have formed 24.6% of our FY15 projection, in-line with our expectations. Growth was driven largely by contribution from Changi City Point (CCP) which was acquired in Jun 2014, as well as organic growth from its other assets, with the exception of Bedok Point (BP). Although revenue and NPI for BP declined 12.5% and 24.2% YoY, respectively, this property contributed only 4.2% of FCT’s 1QFY15 NPI.
Operational metrics highlight resiliency
Management recorded robust rental reversions of 7.7% for its entire portfolio, with growth underpinned by CCP (+10.7%), Causeway Point (+9.1%) and YewTee Point (+8.8%), with a slight drag coming from BP (-1.3%). Management sounded a word of caution, highlighting that lease negotiations at CCP had started several months back and market conditions has since become more challenging. Hence the 10.7% reversion figure should not be used as a benchmark for the remaining leases to be renewed. Nevertheless, only 9.5% of CCP’s NLA is expiring for the remainder of FY15. Portfolio occupancy fell slightly from 98.9% to 96.4%, but this was partly due to transitional vacancies (i.e. space that has already been committed but tenants carrying out fit out works). We thus expect occupancy to improve in the coming quarter. FCT’s gearing ratio was unchanged at a healthy 29.3%, with 87% of its debt hedged or on a fixed rate basis (end FY14: 75%).
Reiterate BUY
We keep our forecasts intact given this set of in-line results. However, we are raising our fair value on FCT from S$2.08 to S$2.27 as we lower our cost of equity assumptions from 7.5% to 7.0%. This is to take into account FCT’s continued resilient and defensive portfolio performance, and strong financial position. Maintain BUY.
CapitaMall Trust
OCBC on 26 Jan 2015
CapitaMall Trust (CMT) reported its 4Q14 results which came in within our expectations. Gross revenue increased 2.2% YoY to S$165.2m, while DPU grew at a stronger pace of 5.1% to 2.86 S cents. Encouragingly, CMT saw an improvement to both its shopper traffic and tenants’ sales in 4Q14 despite ongoing industry headwinds. Positive rental reversions of 6.1% were achieved in FY14. We switch our valuation methodology from a RNAV model to a dividend discount model (cost of equity assumption: 7.4%; terminal growth rate: 2%), which is the more commonly used valuation metric within our S-REITs coverage. Our fair value is revised marginally from S$2.20 to S$2.21. CMT’s share price has performed well since we highlighted it as one of our top picks. With the stock trading at FY15F distribution yield of 4.9%, we believe valuations are no longer compelling. Downgrade CMT to HOLD.
4Q14 results within our expectations
CapitaMall Trust (CMT) reported its 4Q14 results which came in within our expectations. Gross revenue increased 2.2% YoY to S$165.2m, while DPU grew at a stronger pace of 5.1% to 2.86 S cents. This was driven by contribution from the completed phase 2 AEI at Bugis Junction, distribution of taxable income retained in 1H14 (S$11.2m) and one-off other gain distribution amounting to S$4.5m. For FY14, gross revenue came in at S$658.9m (+3.3%) and matched our forecast. With the exception of JCube, all of CMT’s assets recorded positive revenue growth in FY14. DPU grew 5.6% to 10.84 S cents and formed 98.6% of our estimate.
Improvement in shopper traffic and tenants’ sales in 4Q14
Although shopper traffic dipped 0.9% and tenants’ sales psf pm fell 1.9% in FY14, we note that this was an improvement from the 1.5% and 3.0% decline recorded in 9M14, respectively. We estimate that this translated into positive growth of 0.9% and 1.4% in footfall and tenants’ sales psf pm in 4Q14, respectively, an encouraging sign amid ongoing industry headwinds. CMT also managed to record rental reversions of 6.1% for its portfolio in FY14. This was the fifth consecutive year in which CMT delivered positive rental uplifts of at least 6%. While management acknowledged that this figure is under pressure this year, as was the case in FY14, it will continue to enhance the positioning of its malls and make them relevant to shoppers.
Downgrade to HOLD
We switch our valuation methodology from a RNAV model to a dividend discount model (cost of equity assumption: 7.4%; terminal growth rate: 2%), which is the more commonly used valuation metric within our S-REITs coverage. Our fair value is revised marginally from S$2.20 to S$2.21. CMT was highlighted as one of OIR’s top picks in our Singapore Strategy report dated 2 Dec 2014. Since then, its share price has appreciated 13.6%. FY15F distribution yield has now been compressed to 4.9%, which is below its 10-year average 12-month forward distribution yield of 5.3%. We believe valuations are no longer compelling, and thus downgrade CMT to HOLD.
CapitaMall Trust (CMT) reported its 4Q14 results which came in within our expectations. Gross revenue increased 2.2% YoY to S$165.2m, while DPU grew at a stronger pace of 5.1% to 2.86 S cents. This was driven by contribution from the completed phase 2 AEI at Bugis Junction, distribution of taxable income retained in 1H14 (S$11.2m) and one-off other gain distribution amounting to S$4.5m. For FY14, gross revenue came in at S$658.9m (+3.3%) and matched our forecast. With the exception of JCube, all of CMT’s assets recorded positive revenue growth in FY14. DPU grew 5.6% to 10.84 S cents and formed 98.6% of our estimate.
Improvement in shopper traffic and tenants’ sales in 4Q14
Although shopper traffic dipped 0.9% and tenants’ sales psf pm fell 1.9% in FY14, we note that this was an improvement from the 1.5% and 3.0% decline recorded in 9M14, respectively. We estimate that this translated into positive growth of 0.9% and 1.4% in footfall and tenants’ sales psf pm in 4Q14, respectively, an encouraging sign amid ongoing industry headwinds. CMT also managed to record rental reversions of 6.1% for its portfolio in FY14. This was the fifth consecutive year in which CMT delivered positive rental uplifts of at least 6%. While management acknowledged that this figure is under pressure this year, as was the case in FY14, it will continue to enhance the positioning of its malls and make them relevant to shoppers.
Downgrade to HOLD
We switch our valuation methodology from a RNAV model to a dividend discount model (cost of equity assumption: 7.4%; terminal growth rate: 2%), which is the more commonly used valuation metric within our S-REITs coverage. Our fair value is revised marginally from S$2.20 to S$2.21. CMT was highlighted as one of OIR’s top picks in our Singapore Strategy report dated 2 Dec 2014. Since then, its share price has appreciated 13.6%. FY15F distribution yield has now been compressed to 4.9%, which is below its 10-year average 12-month forward distribution yield of 5.3%. We believe valuations are no longer compelling, and thus downgrade CMT to HOLD.
Tuesday, 27 January 2015
Keppel Land
OCBC on 26 Jan 2015
Last Friday, Keppel Corp (KepCorp) announced a voluntary unconditional cash offer for its real estate unit, Keppel Land (KPLD), our top pick in the real estate sector. KepCorp will offer S$4.38 in cash for each share of KPLD that it does not already own or control. In the event that the level of acceptances brings the Offerer over the compulsory acquisition threshold of 90%, the offer price will be adjusted to S$4.60 per share in cash. Note that both offer prices include KPLD’s proposed final FY14 dividend of S$0.14 per share. Also, both offer prices from KepCorp are final. Given uncertain outlooks for KPLD’s core development businesses in Singapore and China, we believe this is a fair enough offer and allows minority shareholders to exit at a share price above the last 36-month high. Our recommendation is to ACCEPT THE OFFER. We advise a switch to CapitaLand [BUY; FV: S$3.79] which is now our preferred pick in the sector.
Voluntary unconditional cash offer for KPLD
Last Friday, Keppel Corp (KepCorp) announced a voluntary unconditional cash offer for its real estate unit, Keppel Land (KPLD), our top pick in the real estate sector. KepCorp will offer S$4.38 in cash for each share of KPLD that it does not already own or control. In the event that the level of acceptances brings the Offerer over the compulsory acquisition threshold of 90%, the offer price will be adjusted to S$4.60 per share in cash. Note that both offer prices include KPLD’s proposed final FY14 dividend of S$0.14 per share. Also, KepCorp has indicated that both offer prices are final.
FY14 earnings within expectations
KPLD also reported its full year earnings and FY14 PATMI came in at S$752.5m, down 15.1%, mostly due to a dip in contributions from the property trading segment and partially offset by divestment gains from the its interests in MBFC T3 and Equity Plaza and other overseas assets. Adjusting for fair-value gains, we estimate core PATMI at S$508.8m and judge this to be in line with our expectations, constituting 104.6% of our full year estimates. In terms of the topline, FY14 revenue came in at S$1497.2m, which was fairly stable YoY and inched up 2.5% mainly due to marginally higher sales from the property trading segment in 2014.
Our recommendation: ACCEPT THE OFFER
The Base Offer Price and Higher Offer Price implies a Price/NAV ratio of 0.88x and 0.93x, respectively and, by our estimates, a Price/RNAV ratio of 0.73x and 0.76x, respectively. Given uncertain outlooks for KPLD’s core development businesses in Singapore and China, we believe this is a fair enough offer and allows minority shareholders to exit at a share price above the last 36-month high. Our recommendation is to ACCEPT THE OFFER. We advise a switch to CapitaLand [BUY; FV: S$3.79] which is our new preferred pick in the sector. In the mid-cap space, we also like Wheelock Properties (S) Ltd [BUY; FV: S$2.38].
Last Friday, Keppel Corp (KepCorp) announced a voluntary unconditional cash offer for its real estate unit, Keppel Land (KPLD), our top pick in the real estate sector. KepCorp will offer S$4.38 in cash for each share of KPLD that it does not already own or control. In the event that the level of acceptances brings the Offerer over the compulsory acquisition threshold of 90%, the offer price will be adjusted to S$4.60 per share in cash. Note that both offer prices include KPLD’s proposed final FY14 dividend of S$0.14 per share. Also, KepCorp has indicated that both offer prices are final.
FY14 earnings within expectations
KPLD also reported its full year earnings and FY14 PATMI came in at S$752.5m, down 15.1%, mostly due to a dip in contributions from the property trading segment and partially offset by divestment gains from the its interests in MBFC T3 and Equity Plaza and other overseas assets. Adjusting for fair-value gains, we estimate core PATMI at S$508.8m and judge this to be in line with our expectations, constituting 104.6% of our full year estimates. In terms of the topline, FY14 revenue came in at S$1497.2m, which was fairly stable YoY and inched up 2.5% mainly due to marginally higher sales from the property trading segment in 2014.
Our recommendation: ACCEPT THE OFFER
The Base Offer Price and Higher Offer Price implies a Price/NAV ratio of 0.88x and 0.93x, respectively and, by our estimates, a Price/RNAV ratio of 0.73x and 0.76x, respectively. Given uncertain outlooks for KPLD’s core development businesses in Singapore and China, we believe this is a fair enough offer and allows minority shareholders to exit at a share price above the last 36-month high. Our recommendation is to ACCEPT THE OFFER. We advise a switch to CapitaLand [BUY; FV: S$3.79] which is our new preferred pick in the sector. In the mid-cap space, we also like Wheelock Properties (S) Ltd [BUY; FV: S$2.38].
Keppel Corp
OCBC on 26 Jan 2015
Keppel Corp (KEP) reported a set of in-line results last week. The net order book for the O&M division stood at S$12.5b at the end of 2014, which will keep Keppel’s yards busy this year and next. What the market will focus on, however, is KEP’s offer to privatise KepLand, which we believe has taken many by surprise. Given 1) the rich price offered for KepLand and 2) synergies for the combination may not be immediately apparent, there may be some near-term weakness in KEP’s share price. We incorporate a higher conglomerate discount of 10% (5% prev.) for the privatization of KepLand, and after updating the market values of KEP’s listed entities, our fair value estimate drops from S$9.89 to S$9.14. However, given the upside potential of 19% (includes 5.8% dividend yield), we maintain our BUY rating on the stock; longer-term investors may wish to accumulate on dips.
Results in line; S$0.36/share final dividend
Keppel Corp (KEP) reported a 9.1% YoY rise in revenue to S$3.9b and a 6.1% increase in net profit to S$725.9m in 4Q14, bringing full year net profit to S$1.88b vs S$1.85b in FY13. Adjusting for one-off items, we estimate recurring net income to be about S$1.44b, close to our full year estimate of S$1.49b. A final dividend of S$0.36/share has been declared, compared to S$0.30/share last year (and also beats our expectations of S$0.35/share). This brings total dividends for FY14 to S$0.48/share.
Yards remain busy with order book execution
Despite the fall in oil prices, KEP is in a comfortable position with its S$12.5b net order book. The group will be delivering 15 rigs this year, and management said that its yards will be fully utilized this year, 80% in FY16 and 60% in FY17, based on the current order book. KEP has also seen no cancellations on its rig contracts and there has not been any renegotiation of payments so far. However, there have been a few requests from customers to delay delivery of orders.
Seeking to privatise Keppel Land
Ending the suspense of the trading halt, the group announced that it has launched a voluntary unconditional cash offer for all the remaining shares of its 54.6%-owned subsidiary, Keppel Land. A base offer price of S$4.38 is offered for each KepLand share, which is at a 25% premium to the one-month VWAP of KepLand shares preceding the offer. A higher offer price of S$4.60 (31% premium) will be paid when KEP acquires more than 90% of KepLand’s shares.
Share price may see near-term weakness
We believe that this privatisation attempt has taken the market by surprise. Given 1) the rich price offered for KepLand and 2) synergies for the combination may not be immediately apparent, there may be some near-term weakness in KEP’s share price. We incorporate a higher conglomerate discount of 10% (5% prev.) for the privatization of KepLand, and after updating the market values of KEP’s listed entities, our fair value estimate drops from S$9.89 to S$9.14. However, given the upside potential of 19% (includes 5.8% dividend yield), we maintain our BUY rating on the stock; longer-term investors may wish to accumulate on dips.
Keppel Corp (KEP) reported a 9.1% YoY rise in revenue to S$3.9b and a 6.1% increase in net profit to S$725.9m in 4Q14, bringing full year net profit to S$1.88b vs S$1.85b in FY13. Adjusting for one-off items, we estimate recurring net income to be about S$1.44b, close to our full year estimate of S$1.49b. A final dividend of S$0.36/share has been declared, compared to S$0.30/share last year (and also beats our expectations of S$0.35/share). This brings total dividends for FY14 to S$0.48/share.
Yards remain busy with order book execution
Despite the fall in oil prices, KEP is in a comfortable position with its S$12.5b net order book. The group will be delivering 15 rigs this year, and management said that its yards will be fully utilized this year, 80% in FY16 and 60% in FY17, based on the current order book. KEP has also seen no cancellations on its rig contracts and there has not been any renegotiation of payments so far. However, there have been a few requests from customers to delay delivery of orders.
Seeking to privatise Keppel Land
Ending the suspense of the trading halt, the group announced that it has launched a voluntary unconditional cash offer for all the remaining shares of its 54.6%-owned subsidiary, Keppel Land. A base offer price of S$4.38 is offered for each KepLand share, which is at a 25% premium to the one-month VWAP of KepLand shares preceding the offer. A higher offer price of S$4.60 (31% premium) will be paid when KEP acquires more than 90% of KepLand’s shares.
Share price may see near-term weakness
We believe that this privatisation attempt has taken the market by surprise. Given 1) the rich price offered for KepLand and 2) synergies for the combination may not be immediately apparent, there may be some near-term weakness in KEP’s share price. We incorporate a higher conglomerate discount of 10% (5% prev.) for the privatization of KepLand, and after updating the market values of KEP’s listed entities, our fair value estimate drops from S$9.89 to S$9.14. However, given the upside potential of 19% (includes 5.8% dividend yield), we maintain our BUY rating on the stock; longer-term investors may wish to accumulate on dips.
Suntec REIT
OCBC on 23 Jan 2015
Suntec REIT reported 4Q14 revenue of S$76.8m, an increase of 7.3% YoY. DPU was up marginally by 0.6% to 2.577 S cents and was in-line with our expectations. Management updated us that the committed occupancy for Phase 3 of Suntec City mall’s AEI came in slightly above 70% as at end FY14, as compared to 60% in 3Q14. This is a concern to us as TOP is expected to happen soon. We believe progress has been hampered by the tough leasing environment due to retail sector headwinds. On the other hand, Suntec REIT’s office segment continued to drive its growth, with a committed occupancy rate of 100% and positive rental reversions. Outlook for its office segment remains robust in 2015. However, we maintain our HOLD rating on the stock, with a lower fair value estimate of S$1.86 (previously S$1.90), as we believe valuations do not excite. Our forecasted FY15F distribution yield of 5.1% comes in close to 1.5 standard deviations below Suntec REIT’s 5-year average forward yield of 6.2%.
4Q14 results within expectations
Suntec REIT reported 4Q14 revenue of S$76.8m, an increase of 7.3% YoY. This was largely due to the opening of Suntec Singapore, completion of Phase 2 of the AEI at Suntec City mall and stronger contribution from its office segment. DPU was up marginally by 0.6% to 2.577 S cents and was in-line with our expectations. For FY14, revenue rose 20.6% to S$282.4m, or 2.4% above our forecast. DPU of 9.4 S cents translated into a growth of 0.8% and formed 100.9% of our FY14 projection.
Leasing progress for Phase 3 of Suntec City mall still muted
Management updated us that the committed occupancy for Phase 3 of Suntec City mall’s AEI came in slightly above 70% as at end FY14, as compared to 60% in 3Q14. This is a concern to us as TOP is expected to happen soon. We believe progress has been hampered by the tough leasing environment due to retail sector headwinds. Overall committed occupancy for all phases of the Suntec City AEI was 91.3%, with a committed passing rent of S$12.27 psf pm. On the other hand, Suntec REIT’s office segment continued to drive its growth, clocking in a committed occupancy rate of 100%. Average rental rates of S$8.92 psf pm were secured for leases signed in 4Q14, a healthy level, in our view, as Suntec REIT is still delivering positive rental reversions for its new office leases. Outlook for its office segment remains robust in 2015.
Maintain HOLD
We lower our FY15 DPU forecast by 5.9% and introduce our FY16 estimates. As we roll forward our valuations, our fair value estimate is lowered from S$1.90 to S$1.86. With a forecasted FY15F distribution yield of 5.1%, we believe valuations do not excite, as this is close to 1.5 standard deviations below Suntec REIT’s 5-year average forward yield of 6.2%. We thus maintain our HOLD rating on the stock.
Suntec REIT reported 4Q14 revenue of S$76.8m, an increase of 7.3% YoY. This was largely due to the opening of Suntec Singapore, completion of Phase 2 of the AEI at Suntec City mall and stronger contribution from its office segment. DPU was up marginally by 0.6% to 2.577 S cents and was in-line with our expectations. For FY14, revenue rose 20.6% to S$282.4m, or 2.4% above our forecast. DPU of 9.4 S cents translated into a growth of 0.8% and formed 100.9% of our FY14 projection.
Leasing progress for Phase 3 of Suntec City mall still muted
Management updated us that the committed occupancy for Phase 3 of Suntec City mall’s AEI came in slightly above 70% as at end FY14, as compared to 60% in 3Q14. This is a concern to us as TOP is expected to happen soon. We believe progress has been hampered by the tough leasing environment due to retail sector headwinds. Overall committed occupancy for all phases of the Suntec City AEI was 91.3%, with a committed passing rent of S$12.27 psf pm. On the other hand, Suntec REIT’s office segment continued to drive its growth, clocking in a committed occupancy rate of 100%. Average rental rates of S$8.92 psf pm were secured for leases signed in 4Q14, a healthy level, in our view, as Suntec REIT is still delivering positive rental reversions for its new office leases. Outlook for its office segment remains robust in 2015.
Maintain HOLD
We lower our FY15 DPU forecast by 5.9% and introduce our FY16 estimates. As we roll forward our valuations, our fair value estimate is lowered from S$1.90 to S$1.86. With a forecasted FY15F distribution yield of 5.1%, we believe valuations do not excite, as this is close to 1.5 standard deviations below Suntec REIT’s 5-year average forward yield of 6.2%. We thus maintain our HOLD rating on the stock.
Ascott Residence Trust
OCBC on 23 Jan 2015
Ascott Residence Trust (ART) announced its 4Q14 results which came in within our expectations. Revenue increased 13.2% YoY to S$95.0m, while DPU jumped 62.4% to 2.16 S cents. Adjusting for one-off items and a rights issue exercise carried out in Dec 2013, ART’s normalised DPU would have increased 12.8% YoY to 1.76 S cents. Management is keeping a close watch on its FX risks and has put in place hedging strategies. Looking ahead, although the global macroeconomic environment remains challenging, ART expects its operational performance to remain healthy given its resilient extended-stay business model and geographical diversification. We fine-tune our assumptions and roll forward our valuations, thus deriving a higher fair value estimate of S$1.49 (previously S$1.37). Maintain BUY on ART, with the stock trading at FY15F P/B ratio of 0.9x and a distribution yield of 6.6%.
4Q14 results in-line with our expectations
Ascott Residence Trust (ART) announced its 4Q14 results which came in within our expectations. Revenue increased 13.2% YoY to S$95.0m, while DPU jumped 62.4% to 2.16 S cents. Adjusting for one-off items and a rights issue exercise carried out in Dec 2013, ART’s normalised DPU would have increased 12.8% YoY to 1.76 S cents. For FY14, revenue climbed 12.8% to S$357.2m and formed 100.3% of our estimate. DPU of 8.2 S cents represented a slight decline of 2.4% (normalised DPU +5.8% to 7.61 S cents) but was 0.6% above our forecast.
Watching FX risks closely
As 89.9% of ART’s revenue is derived outside of Singapore, management keeps a close watch on its FX risks, especially in key markets such as Europe, UK and Japan. It has already hedged 70% of its estimated income denominated in Euros in 2015 (at a rate of EUR1 to S$1.63). For its Yen exposure, ART has hedged 20% of its estimated income and has the intention to increase this hedge to ~70%. In terms of capital management, 80% of ART’s total debt is on a fixed rate basis.
Maintain BUY
Looking ahead, although the global macroeconomic environment remains challenging, ART expects its operational performance to remain healthy given its resilient extended-stay business model and geographical diversification. It remains positive on its prospects in Japan given robust occupancy rates and ADR growth in excess of 10% in 2014. ART would be keen to acquire more assets in Japan. China, on the other hand, would be slightly challenging in FY15, but we believe this would be mitigated by contribution from new acquisitions made in FY14. As at 31 Dec 2014, ART’s portfolio comprises 90 properties with 10,502 apartment units spread across 37 cities in 13 countries in Asia Pacific and Europe. We fine-tune our assumptions and roll forward our valuations, thus deriving a higher fair value estimate of S$1.49 (previously S$1.37). Maintain BUY on ART, with the stock trading at FY15F P/B ratio of 0.9x and a distribution yield of 6.6%.
Ascott Residence Trust (ART) announced its 4Q14 results which came in within our expectations. Revenue increased 13.2% YoY to S$95.0m, while DPU jumped 62.4% to 2.16 S cents. Adjusting for one-off items and a rights issue exercise carried out in Dec 2013, ART’s normalised DPU would have increased 12.8% YoY to 1.76 S cents. For FY14, revenue climbed 12.8% to S$357.2m and formed 100.3% of our estimate. DPU of 8.2 S cents represented a slight decline of 2.4% (normalised DPU +5.8% to 7.61 S cents) but was 0.6% above our forecast.
Watching FX risks closely
As 89.9% of ART’s revenue is derived outside of Singapore, management keeps a close watch on its FX risks, especially in key markets such as Europe, UK and Japan. It has already hedged 70% of its estimated income denominated in Euros in 2015 (at a rate of EUR1 to S$1.63). For its Yen exposure, ART has hedged 20% of its estimated income and has the intention to increase this hedge to ~70%. In terms of capital management, 80% of ART’s total debt is on a fixed rate basis.
Maintain BUY
Looking ahead, although the global macroeconomic environment remains challenging, ART expects its operational performance to remain healthy given its resilient extended-stay business model and geographical diversification. It remains positive on its prospects in Japan given robust occupancy rates and ADR growth in excess of 10% in 2014. ART would be keen to acquire more assets in Japan. China, on the other hand, would be slightly challenging in FY15, but we believe this would be mitigated by contribution from new acquisitions made in FY14. As at 31 Dec 2014, ART’s portfolio comprises 90 properties with 10,502 apartment units spread across 37 cities in 13 countries in Asia Pacific and Europe. We fine-tune our assumptions and roll forward our valuations, thus deriving a higher fair value estimate of S$1.49 (previously S$1.37). Maintain BUY on ART, with the stock trading at FY15F P/B ratio of 0.9x and a distribution yield of 6.6%.
Ascendas REIT
OCBC on 23 Jan 2015
Ascendas REIT (A-REIT) reported its 3QFY15 results with topline meeting our expectations but DPU (+1.4% YoY to 3.59 S cents) fell slightly short due to higher-than-expected property operating expenses. During 3QFY15, A-REIT managed to achieve positive rental reversions of 7.7% for leases which were renewed. We expect this trend to continue going forward, as the weighted average passing rent for most of A-REIT’s multi-tenanted space which are due for renewal in FY15 and FY16 are still below current spot rents. But we trim our FY15 and FY16 DPU forecasts by 1.8% and 2.1%, respectively, as we input lower NPI margin assumptions in our model. This causes our fair value estimate to decline slightly from S$2.45 to S$2.42. Coupled with A- REIT’s 5.9% YTD share price appreciation, we believe valuations are now fair, with the stock trading at 1.24x FY15F P/B ratio. Hence, we downgrade A-REIT to HOLD.
3QFY15 DPU slightly below expectations
Ascendas REIT (A-REIT) reported its 3QFY15 results with topline meeting our expectations but DPU fell slightly short due to higher-than-expected property operating expenses. Gross revenue rose 11.2% YoY to S$171.7m, underpinned by contribution from new acquisitions (Aperia and Hyflux Innovation Centre) and higher occupancy at Nexus@one-north and A-REIT City@Jinqiao. However, property operating expenses spiked up by 24.6% to S$57.1m due to higher property tax and other property expenses incurred following the conversion of certain properties from single-tenanted to multi-tenanted lease structures. As a result, DPU grew by a mild 1.4% YoY to 3.59 S cents. For 9MFY15, revenue increased 9.3% to S$499.7m and formed 75.3% of our FY15 forecast. DPU of 10.89 S cents translated into a growth of 1.9% and constituted 73.6% of our full-year projection.
Rental reversion trend remains positive
During 3QFY15, A-REIT managed to achieve positive rental reversions of 7.7% for leases which were renewed. This was driven largely by its Light Industrial (+13.0%) and Hi-Specs Industrial (+11.1%) segments. We believe this trend would likely continue going forward, as the weighted average passing rent for most of A-REIT’s multi-tenanted space which are due for renewal in FY15 and FY16 are still below current spot rents. A-REIT’s overall portfolio occupancy rebounded on a QoQ basis from 85.6% to 86.8%, meeting our expectations as we had highlighted in our 2QFY15 results note that its occupancy may trough soon.
Downgrade to HOLD
We trim our FY15 and FY16 DPU forecasts by 1.8% and 2.1%, respectively, as we input lower NPI margin assumptions in our model. This causes our DDM-derived fair value estimate to decline slightly from S$2.45 to S$2.42. A-REIT’s share price has performed well YTD, appreciating 5.9%. We believe valuations are now fair, with the stock trading at 1.24x FY15F P/B ratio. This is approximately half a standard deviation above its 5-year average forward P/B ratio of 1.20x. Hence, we downgrade A-REIT to HOLD.
Ascendas REIT (A-REIT) reported its 3QFY15 results with topline meeting our expectations but DPU fell slightly short due to higher-than-expected property operating expenses. Gross revenue rose 11.2% YoY to S$171.7m, underpinned by contribution from new acquisitions (Aperia and Hyflux Innovation Centre) and higher occupancy at Nexus@one-north and A-REIT City@Jinqiao. However, property operating expenses spiked up by 24.6% to S$57.1m due to higher property tax and other property expenses incurred following the conversion of certain properties from single-tenanted to multi-tenanted lease structures. As a result, DPU grew by a mild 1.4% YoY to 3.59 S cents. For 9MFY15, revenue increased 9.3% to S$499.7m and formed 75.3% of our FY15 forecast. DPU of 10.89 S cents translated into a growth of 1.9% and constituted 73.6% of our full-year projection.
Rental reversion trend remains positive
During 3QFY15, A-REIT managed to achieve positive rental reversions of 7.7% for leases which were renewed. This was driven largely by its Light Industrial (+13.0%) and Hi-Specs Industrial (+11.1%) segments. We believe this trend would likely continue going forward, as the weighted average passing rent for most of A-REIT’s multi-tenanted space which are due for renewal in FY15 and FY16 are still below current spot rents. A-REIT’s overall portfolio occupancy rebounded on a QoQ basis from 85.6% to 86.8%, meeting our expectations as we had highlighted in our 2QFY15 results note that its occupancy may trough soon.
Downgrade to HOLD
We trim our FY15 and FY16 DPU forecasts by 1.8% and 2.1%, respectively, as we input lower NPI margin assumptions in our model. This causes our DDM-derived fair value estimate to decline slightly from S$2.45 to S$2.42. A-REIT’s share price has performed well YTD, appreciating 5.9%. We believe valuations are now fair, with the stock trading at 1.24x FY15F P/B ratio. This is approximately half a standard deviation above its 5-year average forward P/B ratio of 1.20x. Hence, we downgrade A-REIT to HOLD.
Singapore Exchange
OCBC on 22 Jan 2015
Singapore Exchange (SGX) posted a strong 15.5% YoY rise in 2Q net earnings to S$86.6m, largely boosted by a strong 46% jump in Derivatives Revenue to S$76.4m. Securities Revenue fell 1.1% YoY to S$51.7m. Management indicated that there will be continuous efforts to grow its Derivatives and Fixed Income businesses. As such, technology-related expenditures are projected to increase from the previous guidance of S$50-55m to S$70-75m. Taking into account the better Derivatives contribution, we have adjusted our FY15 net earnings from S$313m to S$336m. We are maintaining our HOLD rating but raising our fair value estimate marginally from S$7.26 to S$7.52.
16% jump in 2Q earnings
Buoyed by strong contribution from its Derivatives business, Singapore Exchange (SGX) posted a strong 15.5% YoY rise in 2Q net earnings to S$86.6m, resulting in 1H earnings of S$164.2m (down 1.8%). This was largely boosted by a strong 46% jump in 2Q Derivatives Revenue to S$76.4m, which lifted total group revenue to S$195.1m, up 18.6% YoY. However, Securities Revenue remained flat at about S$51.7m, down 1.1% YoY. This accounted for 26% of total revenue versus 39% for Derivatives. Although Securities daily average traded value (SDAV) rose marginally by 4% to S$1.04b, the drag came from lower average clearing fee, which fell from 3.1bps to 3.0 bps. Under Derivatives, several futures contracts saw meaningful double-digit growth including the FTSE China Index Futures which saw an almost tripling to 17.45m contracts.
Building up Derivatives and Fixed Income businesses
Management indicated that there will be continuous efforts to grow its Derivatives and Fixed Income businesses. This will require more investment into technology and capital expenditures are projected to increase from the previous guidance of S$50-55m to S$70-75m for this year. For its operating expenses, management is expecting this to go up from S$330-340m to S$360-370m.
Challenges and opportunities
This quarter got off to a rocky start with the surprise SNB action, the Kaisa Group loan default, low oil prices, etc. This marks a period of uncertainty ahead. Volume on the local bourse has also come off slightly from an average of 2.02b in 2014 to about 1.56b for the first few weeks of Jan 2015. While volatility is likely to persist in the first half of 2015, stability in the local bourse could also present opportunities for investors looking for stable core holdings. On the derivatives side, strong momentum is likely to remain in view of the volatility. We have revised slightly our FY15 numbers, bringing net earnings from S$313m to S$336m. However, SGX’s share price has recovered well from the lows in mid-Oct 2014, and at current price, we are maintaining our HOLD rating and raising our fair value estimate marginally from S$7.26 to S$7.52 at 24x FY15 earnings.
Buoyed by strong contribution from its Derivatives business, Singapore Exchange (SGX) posted a strong 15.5% YoY rise in 2Q net earnings to S$86.6m, resulting in 1H earnings of S$164.2m (down 1.8%). This was largely boosted by a strong 46% jump in 2Q Derivatives Revenue to S$76.4m, which lifted total group revenue to S$195.1m, up 18.6% YoY. However, Securities Revenue remained flat at about S$51.7m, down 1.1% YoY. This accounted for 26% of total revenue versus 39% for Derivatives. Although Securities daily average traded value (SDAV) rose marginally by 4% to S$1.04b, the drag came from lower average clearing fee, which fell from 3.1bps to 3.0 bps. Under Derivatives, several futures contracts saw meaningful double-digit growth including the FTSE China Index Futures which saw an almost tripling to 17.45m contracts.
Building up Derivatives and Fixed Income businesses
Management indicated that there will be continuous efforts to grow its Derivatives and Fixed Income businesses. This will require more investment into technology and capital expenditures are projected to increase from the previous guidance of S$50-55m to S$70-75m for this year. For its operating expenses, management is expecting this to go up from S$330-340m to S$360-370m.
Challenges and opportunities
This quarter got off to a rocky start with the surprise SNB action, the Kaisa Group loan default, low oil prices, etc. This marks a period of uncertainty ahead. Volume on the local bourse has also come off slightly from an average of 2.02b in 2014 to about 1.56b for the first few weeks of Jan 2015. While volatility is likely to persist in the first half of 2015, stability in the local bourse could also present opportunities for investors looking for stable core holdings. On the derivatives side, strong momentum is likely to remain in view of the volatility. We have revised slightly our FY15 numbers, bringing net earnings from S$313m to S$336m. However, SGX’s share price has recovered well from the lows in mid-Oct 2014, and at current price, we are maintaining our HOLD rating and raising our fair value estimate marginally from S$7.26 to S$7.52 at 24x FY15 earnings.
Tigerair
UOBKayhian on 27 Jan 2015
FY15F PE (x): n.m.
FY16F PE (x): 11.9
Higher fares and a cut in capacity lead to recovery. Improvement in earnings came from pricing power as Tigerair cut capacity by 5.7% yoy in 3QFY15. Opex only declined by 1.5% due to fuel hedging losses, exchange losses, higher lease costs and maintenance costs. Future capacity growth would be dependant on the ability to grow traffic rather than manage capacity. Good pricing power but “not out of the woods”. The improvement in average fares was a major surprise in 3Q14. However, it is too early to assume a return to pricing power. Arch rival, Airasia has raised the ante by removing surcharges, which could somewhat curtain Tigerair’s pricing power. Still, the recent airline disasters could have Tigerair benefitting at the expense of rivals. Upgrade to HOLD. Tigerair now operates a cleaner balance sheet and has demonstrated pricing power, but we are unsure to what extent that it can be maintained. It is also worth bearing in mind that improved earnings came amid declining pax traffic. We had previously valued Tigerair at 1x P/B. We now value Tigerair on a PE basis and accord the airline a 12x PE multiple, a 20% premium to Airasia’s valuation. Our target price is raised by 30% to $S0.34. Recommended entry price $S0.29.
FY15F PE (x): n.m.
FY16F PE (x): 11.9
Higher fares and a cut in capacity lead to recovery. Improvement in earnings came from pricing power as Tigerair cut capacity by 5.7% yoy in 3QFY15. Opex only declined by 1.5% due to fuel hedging losses, exchange losses, higher lease costs and maintenance costs. Future capacity growth would be dependant on the ability to grow traffic rather than manage capacity. Good pricing power but “not out of the woods”. The improvement in average fares was a major surprise in 3Q14. However, it is too early to assume a return to pricing power. Arch rival, Airasia has raised the ante by removing surcharges, which could somewhat curtain Tigerair’s pricing power. Still, the recent airline disasters could have Tigerair benefitting at the expense of rivals. Upgrade to HOLD. Tigerair now operates a cleaner balance sheet and has demonstrated pricing power, but we are unsure to what extent that it can be maintained. It is also worth bearing in mind that improved earnings came amid declining pax traffic. We had previously valued Tigerair at 1x P/B. We now value Tigerair on a PE basis and accord the airline a 12x PE multiple, a 20% premium to Airasia’s valuation. Our target price is raised by 30% to $S0.34. Recommended entry price $S0.29.
Monday, 26 January 2015
Keppel Land
UOBKayhian on 26 Jan 2015
FY15F PE (x): 12.3
FY16F PE (x): 11.0
Keppel Land privatisation offer. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) in a 2-tier approach: a) Base offer price of S$4.38/share (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. b) Higher offer price of S$4.60/share, to be paid of Keppel is entitled to exercise its rights of compulsory acquisition (with 90% shares held by the offeror. The higher offer price (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. We recommend taking up the offer since even the base offer price (S$4.38/share) is above our target of S$4.30/share. However, long-term investors are likely to hold out for a higher offer price as the offer is at a 7-12% discount to the book value. The offer is inclusive of the 14 S cents per share dividend declared in the 4Q14 results. The final tender date has yet to be decided. Maintain BUY and target price of S$4.30, pegged at 20% discount to our RNAV of S$5.37/share. Key catalysts include acquisitions, divestment of its office assets and sustained recovery in China sales.
FY15F PE (x): 12.3
FY16F PE (x): 11.0
Keppel Land privatisation offer. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) in a 2-tier approach: a) Base offer price of S$4.38/share (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. b) Higher offer price of S$4.60/share, to be paid of Keppel is entitled to exercise its rights of compulsory acquisition (with 90% shares held by the offeror. The higher offer price (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. We recommend taking up the offer since even the base offer price (S$4.38/share) is above our target of S$4.30/share. However, long-term investors are likely to hold out for a higher offer price as the offer is at a 7-12% discount to the book value. The offer is inclusive of the 14 S cents per share dividend declared in the 4Q14 results. The final tender date has yet to be decided. Maintain BUY and target price of S$4.30, pegged at 20% discount to our RNAV of S$5.37/share. Key catalysts include acquisitions, divestment of its office assets and sustained recovery in China sales.
Keppel Corp
UOBKayhian on 26 Jan 2015
FY15F PE (x): 9.7
FY16F PE (x): 10.2
Keppel Land privatisation. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) with a 2-tier approach: a) Base offer price of S$4.38/share b) Higher offer price of S$4.60/share, to be paid if Keppel is entitled to exercise its rights of the compulsory acquisition (with 90% shares held by the offeror). Our take on the deal. The offer prices are fair and relatively in line with our target price of S$4.30 (pegged at 20% discount to our RNAV of S$5.37) for KepLand. The base offer price of S$4.38 (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. The higher offer price of S$4.60 (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. The offer prices are relatively in line with the target price of S$4.30 that we have ascribed to KepLand in our SOTP valuation for Keppel. Maintain HOLD and our target price of S$8.80, which values KepLand at S$4.30 and Keppel’s O&M business at a 2016F PE of 9.5x. Amid the low oil prices, Sembcorp Industries (BUY/target: S$5.20) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.
FY15F PE (x): 9.7
FY16F PE (x): 10.2
Keppel Land privatisation. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) with a 2-tier approach: a) Base offer price of S$4.38/share b) Higher offer price of S$4.60/share, to be paid if Keppel is entitled to exercise its rights of the compulsory acquisition (with 90% shares held by the offeror). Our take on the deal. The offer prices are fair and relatively in line with our target price of S$4.30 (pegged at 20% discount to our RNAV of S$5.37) for KepLand. The base offer price of S$4.38 (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. The higher offer price of S$4.60 (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. The offer prices are relatively in line with the target price of S$4.30 that we have ascribed to KepLand in our SOTP valuation for Keppel. Maintain HOLD and our target price of S$8.80, which values KepLand at S$4.30 and Keppel’s O&M business at a 2016F PE of 9.5x. Amid the low oil prices, Sembcorp Industries (BUY/target: S$5.20) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.
Frasers Centrepoint Trust
UOBKayhian on 26 Jan 2015
FY15F PE (x): 18.3
FY16F PE (x): 18.3
Frasers Centrepoint Trust (FCT) reported 1QFY15 DPU of 2.75 S cents, (+10.0% yoy, - 1.3% qoq) its strongest first-quarter showing yet. The results are in line with our expectations with 1QFY15 DPU accounting for 23.9% of our full-year forecast. FCT’s latest operating asset, Changi City Point, registered the highest reversion rate within the portfolio, at 10.7% in 1QFY15. Over 50% of leases expiring in FY15 at Causeway Point and Northpoint were renewed in 1QFY15 at healthy reversion rates of 9.1% and 6.1% respectively. Downgrade to HOLD post the strong 13% yoy increase in the share price. Our target price of S$2.23 is based on DDM (required rate of return: 6.8%, terminal growth: 1.8%). Entry price is S$1.90.
FY15F PE (x): 18.3
FY16F PE (x): 18.3
Frasers Centrepoint Trust (FCT) reported 1QFY15 DPU of 2.75 S cents, (+10.0% yoy, - 1.3% qoq) its strongest first-quarter showing yet. The results are in line with our expectations with 1QFY15 DPU accounting for 23.9% of our full-year forecast. FCT’s latest operating asset, Changi City Point, registered the highest reversion rate within the portfolio, at 10.7% in 1QFY15. Over 50% of leases expiring in FY15 at Causeway Point and Northpoint were renewed in 1QFY15 at healthy reversion rates of 9.1% and 6.1% respectively. Downgrade to HOLD post the strong 13% yoy increase in the share price. Our target price of S$2.23 is based on DDM (required rate of return: 6.8%, terminal growth: 1.8%). Entry price is S$1.90.
CapitaMall Trust
UOBKayhian on26 Jan 2015
FY15F PE (x): 20.8
FY16F PE (x): 20.5
CapitaMall Trust (CMT) reported a 4Q14 DPU of 2.86 S cents (+5.6% yoy, +5.1% qoq). Full-year 2014 DPU of 10.84 S cents is in line with our expectations, accounting for 100.4% of our full-year estimate of 10.1 S cents. Footfall fell 0.9% yoy and tenant sales dropped 1.9% yoy psfpm. Lukewarm consumer demand was likely exacerbated by increased competition from new malls (Suntec’s Phase 3 AEI is slated to attain TOP soon) and the rise of e-commerce platforms. Tenant sales in segments such as toys and hobbies, telecommunications and Information Technology have been hit hardest, registering 10-15% drop in sales. Downgrade to SELL with an unchanged target of S$2.14, based on DDM (required rate of return: 6.8%, terminal growth: 1.8%). The retail environment is expected to remain challenging from the increased supply, rising costs and threat from alternative retail channels.
FY15F PE (x): 20.8
FY16F PE (x): 20.5
CapitaMall Trust (CMT) reported a 4Q14 DPU of 2.86 S cents (+5.6% yoy, +5.1% qoq). Full-year 2014 DPU of 10.84 S cents is in line with our expectations, accounting for 100.4% of our full-year estimate of 10.1 S cents. Footfall fell 0.9% yoy and tenant sales dropped 1.9% yoy psfpm. Lukewarm consumer demand was likely exacerbated by increased competition from new malls (Suntec’s Phase 3 AEI is slated to attain TOP soon) and the rise of e-commerce platforms. Tenant sales in segments such as toys and hobbies, telecommunications and Information Technology have been hit hardest, registering 10-15% drop in sales. Downgrade to SELL with an unchanged target of S$2.14, based on DDM (required rate of return: 6.8%, terminal growth: 1.8%). The retail environment is expected to remain challenging from the increased supply, rising costs and threat from alternative retail channels.
Friday, 23 January 2015
LIAN BENG
UOBKayhian on 23 Jan 2015
VALUATION
VALUATION
- Lian Beng is trading at 3.7x FY14 PE, offering a FY14 dividend yield of 3.7%.
- Lian Beng’s 1HFY15 net profit doubled to S$35.5m on the back of increased contributions from associates and JVs. Share of results of associates and JVs surged to S$21.4m (1HFY14: loss of S$0.9m) due to the disposal of a 19% stake in a proposed hotel development at 122 Middle Road, and the recognition of developer profits from projects such as Newest, KAP Residences and The Midtown.
- Its construction orderbook remains strong at S$821m as at 30 Nov 14, and shows good earnings visibility until FY17.
- As a BCA A1-graded contractor with a 40-year operational track record, Lian Beng prevails as an established local contractor, having served a wide range of clients, including the HDB, Ministry of Defence and Marina Bay Sands.
- Savvy business management. As competition intensified in the local construction scene, Lian Beng was quick to react as it diversified into complementary businesses such as the supply of ready mixed concrete (RMC) and its most recent venture into asphalt premix (used for roads) to control costs.
- Diversified business units...Lian Beng currently has four main business segments:a) construction, b) property development, c) construction-related businesses (engineering and leasing of construction machinery, supply of RMC and asphalt) and d) the leasing of a workers’ dormitory. Excluding FV gains and profits from property developments, we estimate profit from construction and related businesses as well as rental income from its workers’ dormitory should account for about 71%, 22% and 7% of FY14’s profit respectively.
- … with value waiting to be unlocked. For FY14, profit from construction-related business contributed to S$9.2m of Lian Beng’s FY14 pre-tax profit. This number is expected to grow as the new asphalt plant, in which Lian Beng holds a 40% stake, is set to come on stream by early-15 and start contributing to net profit in FY16. As highlighted in our previous report, we do not dismiss the prospect of a possible spinoff of this segment in the future as the profit grows. To recall, in 2011, Lian Beng had proposed to spin-off and list its construction-related businesses on the Taiwan Stock Exchange. The plan was abandoned in 2012 due to unfavourable market conditions and new policies imposed by the relevant authorities in Taiwan.
- Our view. Lian Beng’s share price has seen a correction of about 20% from its 52- week high. From Oct 14-Dec 14, Lian Beng repurchased 19.6m shares (about 3.7% of total outstanding shares) through their share buyback programme with prices ranging from S$0.60-0.68/share. With a diversified earnings base, dividend yield of 3% and price support coming from its daily share buybacks, we think Lian Beng is worth a look at current levels.
Suntec REIT
UOBKayhian on 23 Jan 2015
FY15F DPU (cent): 10.4
FY16F DPU (cent): 10.8
Downgrade to HOLD as we see limited upside post the 26% yoy surge in share price. Management remains confident on the office portfolio’s healthy performance with Suntec office occupancies unaffected by the completion of the South Beach project. However, management noted the challenging operating environment for the retail segment that resulted in a drop in Suntec Mall’s overall committed rents compared with the previous quarter. Downgrade to HOLD with a raised target price of S$2.08 (from S$2.05). Entry price is S$1.75.
Downgrade to HOLD post the strong 26% yoy increase in the share price. While we increase target price to S$2.08 (from 2.05) as we roll forward our earnings estimates, we see limited upside from current share price levels. Our valuation is based on DDM (required rate of return: 7.1%, terminal growth: 2.2%). Entry price is S$1.75.
FY15F DPU (cent): 10.4
FY16F DPU (cent): 10.8
Downgrade to HOLD as we see limited upside post the 26% yoy surge in share price. Management remains confident on the office portfolio’s healthy performance with Suntec office occupancies unaffected by the completion of the South Beach project. However, management noted the challenging operating environment for the retail segment that resulted in a drop in Suntec Mall’s overall committed rents compared with the previous quarter. Downgrade to HOLD with a raised target price of S$2.08 (from S$2.05). Entry price is S$1.75.
Downgrade to HOLD post the strong 26% yoy increase in the share price. While we increase target price to S$2.08 (from 2.05) as we roll forward our earnings estimates, we see limited upside from current share price levels. Our valuation is based on DDM (required rate of return: 7.1%, terminal growth: 2.2%). Entry price is S$1.75.
Keppel Corp
UOBKayhian on 23 Jan 2015
FY15F PE (x): 9.7
FY16F PE (x): 10.2
Excluding exceptional gains, results were within our expectation. 4Q14’s O&M operating margin of 13.2% was lower than 3Q14’s 14.9% (4Q13: 14.6%). Contract wins of S$5.5b in 2014 were marginally ahead of our forecast of S$5b. However, we lower our net profit forecasts for 2015-16 by 5-10% on lower contract win assumptions. Maintain HOLD but we cut target price from S$9.50 to S$8.80, pegged at 9.5x 2016F PE.
Maintain HOLD, but cutting our target price from S$9.50 to S$8.80, based on the sum of-the-parts valuation which values Keppel’s O&M business at a 2016F PE of 9.5x. Amid low oil prices, Sembcorp Industries (BUY/target: S$5.95) – with half of its earnings from its relatively defensive utilities business - is the most defensive largecap stock in the Singapore offshore & marine space.
FY15F PE (x): 9.7
FY16F PE (x): 10.2
Excluding exceptional gains, results were within our expectation. 4Q14’s O&M operating margin of 13.2% was lower than 3Q14’s 14.9% (4Q13: 14.6%). Contract wins of S$5.5b in 2014 were marginally ahead of our forecast of S$5b. However, we lower our net profit forecasts for 2015-16 by 5-10% on lower contract win assumptions. Maintain HOLD but we cut target price from S$9.50 to S$8.80, pegged at 9.5x 2016F PE.
Maintain HOLD, but cutting our target price from S$9.50 to S$8.80, based on the sum of-the-parts valuation which values Keppel’s O&M business at a 2016F PE of 9.5x. Amid low oil prices, Sembcorp Industries (BUY/target: S$5.95) – with half of its earnings from its relatively defensive utilities business - is the most defensive largecap stock in the Singapore offshore & marine space.
Ascott Residence Trust
UOBKayhian on 23 Jan 2015
FY15F DPU (cent): 9.0
FY16F DPU (cent): 9.4
4Q14 results were in line with expectations. 2015 looks promising for ART with full contributions from its recent string of acquisitions and stable RevPAU growth from existing properties. Concern over forex losses and a weaker euro zone are mitigated by its active hedging policy and long master leases. The stock offers an attractive 2015 yield of 7%. Maintain BUY. Target price: S$1.42.
Maintain BUY with a slightly higher target price S$1.42. Our valuation is based on a two stage DDM model (required rate of return: 8.1%; terminal growth rate: 2.0%). We expect a strong 2015 on the back of contributions from newly-acquired assets and stable RevPAU growth from its properties. The stock offers an attractive 2015F yield of 7%.
FY15F DPU (cent): 9.0
FY16F DPU (cent): 9.4
4Q14 results were in line with expectations. 2015 looks promising for ART with full contributions from its recent string of acquisitions and stable RevPAU growth from existing properties. Concern over forex losses and a weaker euro zone are mitigated by its active hedging policy and long master leases. The stock offers an attractive 2015 yield of 7%. Maintain BUY. Target price: S$1.42.
Maintain BUY with a slightly higher target price S$1.42. Our valuation is based on a two stage DDM model (required rate of return: 8.1%; terminal growth rate: 2.0%). We expect a strong 2015 on the back of contributions from newly-acquired assets and stable RevPAU growth from its properties. The stock offers an attractive 2015F yield of 7%.
Keppel Corp
Kim Eng on 23 Jan 2015
Adjusting for SGD436m in one-off gains, FY14 PATMI of SGD1,449m (+2.6% YoY) missed expectations, at 94%/95% of our/consensus forecasts. Unexpectedly, 4Q14 O&M margins dipped 1.8ppts to 13.2% (3Q14: 15.0%, 4Q13: 14.2%), suggesting weaker execution.
Property was weighed down by soft Singapore sales although sales in China were modestly higher in 4Q. If not for the one-offs, overall performance would have been uninspiring.
Challenging times; watch for corporate actions
O&M secured in-line orders of SGD5.5b in FY14, bringing its net order book to SGD12.5b, down from record of SGD14.2b in FY13. We further lower our win assumptions for FY15E/16E to SGD4.2b/3.8b, from SGD4.4b/4.2b. This is to reflect a further deterioration in the offshore rig market. Property markets remain insipid while infrastructure faces electricity-market competition. Keppel’s diversification should help it tide over the challenging times.
Maintain HOLD with yield support. Our SOTP-based TP drops to SGD8.60 from SGD9.00 mainly on marginally lower O&M valuation following our cuts in order win assumptions. FY16E EPS is cut by 3% and we also introduce FY17E forecasts. Things which could change our mind are: 1) positive corporate developments; 2) improved drilling dynamics triggering a new rig-ordering cycle; 3) higher
O&M margins; and 4) a property-sector revival.
- Excluding one-offs, FY14 results missed. 4Q14 O&M operating margins down 1.8ppts QoQ to 13.2%. Trim FY16E EPS by 3%.
- Stock on trading halt, watch for corporate actions.
- Maintain HOLD. Lower SOTP-based TP to SGD8.60 from SGD9.00. Support from final DPS of 36 cts for a full-year 48 cts or 5.9% yields.
Adjusting for SGD436m in one-off gains, FY14 PATMI of SGD1,449m (+2.6% YoY) missed expectations, at 94%/95% of our/consensus forecasts. Unexpectedly, 4Q14 O&M margins dipped 1.8ppts to 13.2% (3Q14: 15.0%, 4Q13: 14.2%), suggesting weaker execution.
Property was weighed down by soft Singapore sales although sales in China were modestly higher in 4Q. If not for the one-offs, overall performance would have been uninspiring.
Challenging times; watch for corporate actions
O&M secured in-line orders of SGD5.5b in FY14, bringing its net order book to SGD12.5b, down from record of SGD14.2b in FY13. We further lower our win assumptions for FY15E/16E to SGD4.2b/3.8b, from SGD4.4b/4.2b. This is to reflect a further deterioration in the offshore rig market. Property markets remain insipid while infrastructure faces electricity-market competition. Keppel’s diversification should help it tide over the challenging times.
Maintain HOLD with yield support. Our SOTP-based TP drops to SGD8.60 from SGD9.00 mainly on marginally lower O&M valuation following our cuts in order win assumptions. FY16E EPS is cut by 3% and we also introduce FY17E forecasts. Things which could change our mind are: 1) positive corporate developments; 2) improved drilling dynamics triggering a new rig-ordering cycle; 3) higher
O&M margins; and 4) a property-sector revival.
Thursday, 22 January 2015
Singapore Land Transport
Kim Eng on 22 Jan 2015
The Public Transport Council has announced a fare hike of 2.8% for bus and MRT rides from 5 Apr 2015. It arrived at this based on a 0.6% contraction in the sector’s fare-formula output plus a positive 3.4% carried over from its previous year’s exercise. Singapore’s two public-transport operators are also required to contribute a combined SGD13.5m to the Public Transport Fund: SGD5.5m from SBST (Not Rated) and SGD8.0m from SMRT. The money will be used for the needy. With a fare revenue pool of SGD1.7b pa, this fare hike will translate into higher gross revenue of SGD48.5m for the sector. It implies net benefits of SGD35m, SGD16.4m accruing to SBST and SGD18.6m to SMRT.
No surprise, limited reprieve
The quantum of the hike was expected, having been flagged by Transport Minister, Lui Tuck Yew, during a recent parliamentary reply. Allied with lower oil prices, this hike should provide some near-term margin relief for operators. However, we do not think Land Transport is a good proxy for oilprice movements in the medium term. This is because the sector’s fare-adjustment formula^ already takes into account changes in energy prices. In fact, in the same parliamentary reply, Minister Lui signalled that fares could be reduced by 1% in the next review.
This could mute benefits for the operators.
Remain Neutral on the sector.
^Fare adj. formula = 0.4*cCPI + 0.4*WI + 0.2*EI – 0.5%.
cCPI= Core Consumer Price Index, WI= Wage Index, EI= Energy
Index.
- Fare hike of 2.8% for rail & bus rides largely within expectations. Together with cheaper oil, could provide some relief to operators’ bottom lines.
- Land Transport not good mid-term proxy for oil-price movements because of fare-adjustment formula. Fares could be lowered by 1% next year.
- Remain Neutral on sector.
The Public Transport Council has announced a fare hike of 2.8% for bus and MRT rides from 5 Apr 2015. It arrived at this based on a 0.6% contraction in the sector’s fare-formula output plus a positive 3.4% carried over from its previous year’s exercise. Singapore’s two public-transport operators are also required to contribute a combined SGD13.5m to the Public Transport Fund: SGD5.5m from SBST (Not Rated) and SGD8.0m from SMRT. The money will be used for the needy. With a fare revenue pool of SGD1.7b pa, this fare hike will translate into higher gross revenue of SGD48.5m for the sector. It implies net benefits of SGD35m, SGD16.4m accruing to SBST and SGD18.6m to SMRT.
No surprise, limited reprieve
The quantum of the hike was expected, having been flagged by Transport Minister, Lui Tuck Yew, during a recent parliamentary reply. Allied with lower oil prices, this hike should provide some near-term margin relief for operators. However, we do not think Land Transport is a good proxy for oilprice movements in the medium term. This is because the sector’s fare-adjustment formula^ already takes into account changes in energy prices. In fact, in the same parliamentary reply, Minister Lui signalled that fares could be reduced by 1% in the next review.
This could mute benefits for the operators.
Remain Neutral on the sector.
^Fare adj. formula = 0.4*cCPI + 0.4*WI + 0.2*EI – 0.5%.
cCPI= Core Consumer Price Index, WI= Wage Index, EI= Energy
Index.
Fortune REIT
OCBC on 22 Jan 2015
Fortune REIT reported another good set of results, with 4Q14 revenue and DPU increasing by 8.4% and 8.0% YoY to HK$425.7m and 10.5 HK cents, respectively. This was within our expectations. Looking ahead, we expect contribution from its recently acquired Laguna Plaza to further boost its growth. We raise our FY15 DPU forecast by 5.4% and also roll forward our valuations. This results in our fair value estimate increasing from HK$7.29 to HK$8.05. While we like Fortune REIT for its resilient portfolio as 57% of its gross rental income is derived from the non-discretionary retail sector, we believe the stock appears fairly priced, having appreciated 7.4% YTD. Our forecasted FY15F distribution yield of 5.4% is more than one standard deviation below its 5-year average forward yield of 6.4%. Maintain HOLD.
4Q14 results met our expectations
Fortune REIT reported another good set of results, with 4Q14 revenue and DPU increasing by 8.4% and 8.0% YoY to HK$425.7m and 10.5 HK cents, respectively. For FY14, revenue jumped 25.7% to HK$1,655.8m, due to robust rental reversion of 23.8% and a full year of contribution from Fortune Kingswood (rental reversion in excess of 30%). Its portfolio passing rent increased by 8.7% to HK$36.4 psf pm. FY14 DPU of 41.68 HK cents translated into a growth of 15.8%, and formed 99.8% of our full year forecast. Results were within our expectations. All of Fortune REIT’s assets recorded an increase in their valuations ranging from 2.7% (Rhine Avenue) to 13.9% (Fortune City One).
Contribution from Laguna Plaza to further boost growth
Fortune REIT recently completed the acquisition of Laguna Plaza on 9 Jan 2015 for HK$1,918.5m (4.7% passing initial yield). This was fully funded by debt and the asset is expected to form synergies with Fortune REIT’s Centre de Laguna which is located at close proximity. We expect Fortune REIT’s gearing ratio to reach 33% at end FY15, versus 29.4% as at 31 Dec 2014. This is still a healthy level, in our view. Following this acquisition, Fortune REIT’s total debt hedged will ease from 55% to 46%.
Maintain HOLD
We raise our FY15 DPU forecast by 5.4% to take into account the acquisition of Laguna Plaza and also introduce our FY16 projections. Rolling forward our valuations, we bump up our fair value estimate from HK$7.29 to HK$8.05. While we like Fortune REIT for its resilient portfolio as 57% of its gross rental income is derived from the non-discretionary retail sector, we believe the stock appears fairly priced, having appreciated 7.4% YTD. Our forecasted FY15F distribution yield of 5.4% is more than one standard deviation below its 5-year average forward yield of 6.4%. Maintain HOLD.
Fortune REIT reported another good set of results, with 4Q14 revenue and DPU increasing by 8.4% and 8.0% YoY to HK$425.7m and 10.5 HK cents, respectively. For FY14, revenue jumped 25.7% to HK$1,655.8m, due to robust rental reversion of 23.8% and a full year of contribution from Fortune Kingswood (rental reversion in excess of 30%). Its portfolio passing rent increased by 8.7% to HK$36.4 psf pm. FY14 DPU of 41.68 HK cents translated into a growth of 15.8%, and formed 99.8% of our full year forecast. Results were within our expectations. All of Fortune REIT’s assets recorded an increase in their valuations ranging from 2.7% (Rhine Avenue) to 13.9% (Fortune City One).
Contribution from Laguna Plaza to further boost growth
Fortune REIT recently completed the acquisition of Laguna Plaza on 9 Jan 2015 for HK$1,918.5m (4.7% passing initial yield). This was fully funded by debt and the asset is expected to form synergies with Fortune REIT’s Centre de Laguna which is located at close proximity. We expect Fortune REIT’s gearing ratio to reach 33% at end FY15, versus 29.4% as at 31 Dec 2014. This is still a healthy level, in our view. Following this acquisition, Fortune REIT’s total debt hedged will ease from 55% to 46%.
Maintain HOLD
We raise our FY15 DPU forecast by 5.4% to take into account the acquisition of Laguna Plaza and also introduce our FY16 projections. Rolling forward our valuations, we bump up our fair value estimate from HK$7.29 to HK$8.05. While we like Fortune REIT for its resilient portfolio as 57% of its gross rental income is derived from the non-discretionary retail sector, we believe the stock appears fairly priced, having appreciated 7.4% YTD. Our forecasted FY15F distribution yield of 5.4% is more than one standard deviation below its 5-year average forward yield of 6.4%. Maintain HOLD.
Soilbuild Business Space REIT
OCBC on 22 Jan 2015
Soilbuild Business Space REIT (Soilbuild REIT) reported its 4Q14 which met our expectations. Revenue rose 8.3% YoY to S$17.7m, while DPU grew 5.0% to 1.585 S cents. Portfolio occupancy stood at 100%, as at 31 Dec 2014. Soilbuild REIT managed to achieve an average rental reversion of 9.8% in FY14. Management will increase its focus on securing renewals on leases expiring in FY15 (~18.2% of rental income). While there is an impending court case regarding a dispute over the amount of land rent payable to JTC Corporation for its Solaris property, Soilbuild REIT believes it has a strong case based on the advice of its legal counsels. We raise our FY15 and FY16 DPU forecasts by 3.6% and 3.9%, respectively, to take into account recent acquisitions. Rolling forward our valuations, we derive a higher fair value estimate of S$0.93 (previously S$0.88). Coupled with an attractive FY15F distribution yield of 8.2%, we maintain BUY on Soilbuild REIT.
4Q14 results within our expectations
Soilbuild Business Space REIT (Soilbuild REIT) reported its 4Q14 which met our expectations. Revenue rose 8.3% YoY to S$17.7m, underpinned by contribution from new acquisitions and higher rental revenue from Solaris, West Park BizCentral and Tuas Connection. DPU grew 5.0% to 1.585 S cents (ex-dividend on 27 Jan). For FY14, Soilbuild REIT’s revenue came in at S$68.1m, forming 100.6% of our estimate but was 2.8% higher than its projection stated in its IPO Prospectus. DPU of 6.193 S cents translated into a distribution yield of 7.8%, and was 0.7% and 3.8% higher than ours and the REIT Manager’s forecasts, respectively.
Healthy operational statistics
Soilbuild REIT’s portfolio occupancy stood at 100%, as at 31 Dec 2014. It achieved an average rental reversion of 9.8% in FY14. 18.2% of Soilbuild REIT’s leases (by rental income) are expiring in FY15, and management will increase its focus on securing renewals on these leases. Negotiations for renewals of over 20% of FY15 expiries (~200,000 sq ft) have already been completed. Approximately 81.9% of Soilbuild REIT’s total debt has been hedged with interest rate swaps.
Maintain BUY
While there is an impending court case regarding a dispute over the amount of land rent payable to JTC Corporation for its Solaris property, Soilbuild REIT believes it has a strong case based on the advice of its legal counsels. Moreover, the property is leased under a triple net lease. Hence all the land rent has to be borne by the lessee. This means that there would be no impact on the distributable income of Soilbuild REIT up to 15 Aug 2018 even if it loses the court case. Taking into account the recent completion of acquisitions made by Soilbuild REIT, we raise our FY15 and FY16 DPU forecasts by 3.6% and 3.9%, respectively. Rolling forward our valuations, we derive a higher fair value estimate of S$0.93 (previously S$0.88). Coupled with an attractive FY15F distribution yield of 8.2%, we maintain our BUY rating on Soilbuild REIT.
Soilbuild Business Space REIT (Soilbuild REIT) reported its 4Q14 which met our expectations. Revenue rose 8.3% YoY to S$17.7m, underpinned by contribution from new acquisitions and higher rental revenue from Solaris, West Park BizCentral and Tuas Connection. DPU grew 5.0% to 1.585 S cents (ex-dividend on 27 Jan). For FY14, Soilbuild REIT’s revenue came in at S$68.1m, forming 100.6% of our estimate but was 2.8% higher than its projection stated in its IPO Prospectus. DPU of 6.193 S cents translated into a distribution yield of 7.8%, and was 0.7% and 3.8% higher than ours and the REIT Manager’s forecasts, respectively.
Healthy operational statistics
Soilbuild REIT’s portfolio occupancy stood at 100%, as at 31 Dec 2014. It achieved an average rental reversion of 9.8% in FY14. 18.2% of Soilbuild REIT’s leases (by rental income) are expiring in FY15, and management will increase its focus on securing renewals on these leases. Negotiations for renewals of over 20% of FY15 expiries (~200,000 sq ft) have already been completed. Approximately 81.9% of Soilbuild REIT’s total debt has been hedged with interest rate swaps.
Maintain BUY
While there is an impending court case regarding a dispute over the amount of land rent payable to JTC Corporation for its Solaris property, Soilbuild REIT believes it has a strong case based on the advice of its legal counsels. Moreover, the property is leased under a triple net lease. Hence all the land rent has to be borne by the lessee. This means that there would be no impact on the distributable income of Soilbuild REIT up to 15 Aug 2018 even if it loses the court case. Taking into account the recent completion of acquisitions made by Soilbuild REIT, we raise our FY15 and FY16 DPU forecasts by 3.6% and 3.9%, respectively. Rolling forward our valuations, we derive a higher fair value estimate of S$0.93 (previously S$0.88). Coupled with an attractive FY15F distribution yield of 8.2%, we maintain our BUY rating on Soilbuild REIT.
CapitaCommercial Trust
OCBC on 22 Jan 2015
CCT reported 4Q14 distributable income and net property income of S$63.6m and S$50.6m which increased 5.7% and 3.0% YoY, respectively. DPU for the quarter is an estimated 2.15 S-cents, up 2.9% YoY versus 2.09 S-cents for 4Q13. We judge this set of results to be within expectations, as FY14 distributable income and net property income forms 102.7% and 100.4% of our full year forecast, respectively. Excluding the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 99.4% and positive rental reversions for its Grade A office leases committed over the quarter. The newly completed CapitaGreen is now 69.3% committed and we note that the trust, which holds a call option to buy the 60% remaining interest in CapitaGreen from 2015-17, has a debt headroom of S$1.3b assuming a 40% gearing. Our fair value estimate remains unchanged at S$1.67 but we downgrade our rating to SELL on valuation grounds.
4Q14 results within expectations
CapitaCommercial Trust (CCT) reported 4Q14 distributable income and net property income of S$63.6m and S$50.6m which increased 5.7% and 3.0% YoY, respectively. DPU for the quarter is an estimated 2.15 S-cents, up 2.9% YoY versus 2.09 S-cents for 4Q13. We judge this set of results to be within expectations, as FY14 distributable income and net property income forms 102.7% and 100.4% of our full year forecast, respectively. In terms of the topline, the trust’s 4Q14 revenue similarly increased 3.1% YoY to S$66.4m mostly due to higher rentals and occupancy rates across its office portfolio.
Average portfolio rents up 5.9% YoY to S$8.61 psf
Excluding the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 99.4% and positive rental reversions for its Grade A office leases committed over the quarter. Over the year, the trust signed leases for 900k sqft of NLA, of which 15% are new leases and management reports a tenant retention rate of 86% in 2014, significantly higher than 67% in 2013. Mainly due to positive rental reversions and the inclusion of CapitaGreen, CCT’s average portfolio rents continued its uptrend, rising 5.9% from S$8.13 psf as at Dec 13 to S$8.61 as at Dec 14. The group’s balance sheet remain healthy with gearing at 29.3% as at end 4Q14 and an average cost of debt of 2.3%.
CapitaGreen achieves 69% commitment
As at end 4Q14, CapitaGreen (which achieved TOP status on 18 Dec 2014) was valued at S$1,526m and CCT’s 40% interest held through MSO Trust is S$610.4m. The asset is now 69.3% committed, above the trust’s target occupancy of 50%. We note that the trust has a debt headroom of S$1.3b assuming a 40% gearing, and is holding a call option to buy the 60% remaining interest in CapitaGreen from 2015-17. Our fair value estimate remains unchanged at S$1.67 but we downgrade our rating to SELL on valuation grounds.
CapitaCommercial Trust (CCT) reported 4Q14 distributable income and net property income of S$63.6m and S$50.6m which increased 5.7% and 3.0% YoY, respectively. DPU for the quarter is an estimated 2.15 S-cents, up 2.9% YoY versus 2.09 S-cents for 4Q13. We judge this set of results to be within expectations, as FY14 distributable income and net property income forms 102.7% and 100.4% of our full year forecast, respectively. In terms of the topline, the trust’s 4Q14 revenue similarly increased 3.1% YoY to S$66.4m mostly due to higher rentals and occupancy rates across its office portfolio.
Average portfolio rents up 5.9% YoY to S$8.61 psf
Excluding the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 99.4% and positive rental reversions for its Grade A office leases committed over the quarter. Over the year, the trust signed leases for 900k sqft of NLA, of which 15% are new leases and management reports a tenant retention rate of 86% in 2014, significantly higher than 67% in 2013. Mainly due to positive rental reversions and the inclusion of CapitaGreen, CCT’s average portfolio rents continued its uptrend, rising 5.9% from S$8.13 psf as at Dec 13 to S$8.61 as at Dec 14. The group’s balance sheet remain healthy with gearing at 29.3% as at end 4Q14 and an average cost of debt of 2.3%.
CapitaGreen achieves 69% commitment
As at end 4Q14, CapitaGreen (which achieved TOP status on 18 Dec 2014) was valued at S$1,526m and CCT’s 40% interest held through MSO Trust is S$610.4m. The asset is now 69.3% committed, above the trust’s target occupancy of 50%. We note that the trust has a debt headroom of S$1.3b assuming a 40% gearing, and is holding a call option to buy the 60% remaining interest in CapitaGreen from 2015-17. Our fair value estimate remains unchanged at S$1.67 but we downgrade our rating to SELL on valuation grounds.
Wednesday, 21 January 2015
Mapletree Logistics Trust
UOBKayhian on 21 Jan 2015
FY15F PE (x): 16.6
FY16F PE (x): 17.0
Results in line with expectations. Mapletree Logistics Trust (MLT) reported 3QFY15
DPU of 1.87 S cents (+3.3% yoy, -1.1% qoq). 9MFY15 DPU is in line with our
expectations, accounting for 74.3% of our full-year DPU estimate of 7.60 S cents. Rent
reversions remained at a positive 9% in 3QFY15.
Rental uplift from MTBs set to remain muted in the near term. While management
expects increased rental uplift post conversion, low occupancy rates during transition
will impact earnings. Management has highlighted that occupancy during MTB
conversion hovers at around 50%.
Maintain HOLD with an unchanged target of S$1.32, based on DDM (required rate of
return: 6.9%, terminal growth: 1.5%). Entry price is at S$1.15.
FY15F PE (x): 16.6
FY16F PE (x): 17.0
Results in line with expectations. Mapletree Logistics Trust (MLT) reported 3QFY15
DPU of 1.87 S cents (+3.3% yoy, -1.1% qoq). 9MFY15 DPU is in line with our
expectations, accounting for 74.3% of our full-year DPU estimate of 7.60 S cents. Rent
reversions remained at a positive 9% in 3QFY15.
Rental uplift from MTBs set to remain muted in the near term. While management
expects increased rental uplift post conversion, low occupancy rates during transition
will impact earnings. Management has highlighted that occupancy during MTB
conversion hovers at around 50%.
Maintain HOLD with an unchanged target of S$1.32, based on DDM (required rate of
return: 6.9%, terminal growth: 1.5%). Entry price is at S$1.15.
China Everbright Water
Kim Eng on 21 Jan 2015
China Everbright Water (CEW) announced an issue of 120.7m new shares to IFC (49.7m) and RRJ (71m) at SGD0.94 apiece. This represents a 9% discount to its last closing price. The new shares are equivalent to 4.8% of its existing share base. This exercise will cause a small 5% EPS dilution.
Cash-rich, hungry for growth
We view this deal positively. Given its strong balance sheet and low gearing, CEW is not in dire need of capital. But this deal could give it two strategic investors. IFC and RRJ are not new to the company. IFC is an existing lender to CEW. RRJ is active in the water sector and is a minority shareholder of China Everbright International (257 HK) and SIIC. Although the placement price is at a big discount, we think CEW could benefit from potentially cheaper debt from IFC to fund its future growth. CEW remains our top sector pick. After a 12-month M&A lull, it is cash-rich and hungry for good assets. We expect acquisitions this year and have factored in an additional 1m tonnes/day of capacity for FY15E-16E each. Maintain BUY with capacity expansion as key catalysts. Pending
SGX and shareholders’ approval, we keep our EPS and TP.
- Placing 120.7m new shares to IFC and RRJ at SGD0.94 each, 9% discount to last closing price.
- Positive on the deal. CEW could receive cheaper debt from IFC to fund future growth.
- Still our sector top pick. Maintain BUY, EPS & SGD1.26 TP for now. Catalysts from capacity expansion.
China Everbright Water (CEW) announced an issue of 120.7m new shares to IFC (49.7m) and RRJ (71m) at SGD0.94 apiece. This represents a 9% discount to its last closing price. The new shares are equivalent to 4.8% of its existing share base. This exercise will cause a small 5% EPS dilution.
Cash-rich, hungry for growth
We view this deal positively. Given its strong balance sheet and low gearing, CEW is not in dire need of capital. But this deal could give it two strategic investors. IFC and RRJ are not new to the company. IFC is an existing lender to CEW. RRJ is active in the water sector and is a minority shareholder of China Everbright International (257 HK) and SIIC. Although the placement price is at a big discount, we think CEW could benefit from potentially cheaper debt from IFC to fund its future growth. CEW remains our top sector pick. After a 12-month M&A lull, it is cash-rich and hungry for good assets. We expect acquisitions this year and have factored in an additional 1m tonnes/day of capacity for FY15E-16E each. Maintain BUY with capacity expansion as key catalysts. Pending
SGX and shareholders’ approval, we keep our EPS and TP.
Sarine Technologies
Kim Eng on 21 Jan 2015
Sarine has announced the break-up of the shareholding structures of Sarin R&D (28.7% stake) and Interhightech (12.7%), as we anticipated in our 27 Mar 2014 report. Sarin R&D comprises seven manufacturing and trading holding companies and Interhightech, four personal-holding companies. Following their dissolution, their shares will be distributed down to the next holding levels.
What’s Our View
Following the above restructuring, only two founding entities, Hargem Ltd and Stark Hanoh Holdings, both originally under Sarin R&D, will appear as substantial shareholders, with about 7.0% and 7.3% stakes respectively. Executive Chairman, Mr Daniel Glinert, and CEO, Mr Uzi Levami, both originally under Interhightech, will hold about 3.5% each. The shareholders have agreed to a lock-up period till Aug 2015. Sarine will implement a mechanism to limit the sale of these shares after the lock-up.
While some investors may fret that the above move was made to facilitate the exit of its founding shareholders, we believe it had been well-flagged and will not affect Sarine’s share price. It should allow the founding shareholders to monetise their investments for retirement and wealth distribution. Many of them are getting on in years and are no longer involved in the business. The restructuring is also unlikely to have any adverse impact on the business. On a more positive note, it could improve the stock’s trading liquidity. Maintain BUY and DCF-based TP of SGD3.18 (WACC 9.6%, terminal
growth 2%).
- Breaking up two founding holding companies and distributing shares downwards.
- Voluntary lock-up till Aug 2015. Mechanism to limit subsequent sale of shares to preserve enterprise value.
- Maintain BUY & DCF TP of SGD3.18.
Sarine has announced the break-up of the shareholding structures of Sarin R&D (28.7% stake) and Interhightech (12.7%), as we anticipated in our 27 Mar 2014 report. Sarin R&D comprises seven manufacturing and trading holding companies and Interhightech, four personal-holding companies. Following their dissolution, their shares will be distributed down to the next holding levels.
What’s Our View
Following the above restructuring, only two founding entities, Hargem Ltd and Stark Hanoh Holdings, both originally under Sarin R&D, will appear as substantial shareholders, with about 7.0% and 7.3% stakes respectively. Executive Chairman, Mr Daniel Glinert, and CEO, Mr Uzi Levami, both originally under Interhightech, will hold about 3.5% each. The shareholders have agreed to a lock-up period till Aug 2015. Sarine will implement a mechanism to limit the sale of these shares after the lock-up.
While some investors may fret that the above move was made to facilitate the exit of its founding shareholders, we believe it had been well-flagged and will not affect Sarine’s share price. It should allow the founding shareholders to monetise their investments for retirement and wealth distribution. Many of them are getting on in years and are no longer involved in the business. The restructuring is also unlikely to have any adverse impact on the business. On a more positive note, it could improve the stock’s trading liquidity. Maintain BUY and DCF-based TP of SGD3.18 (WACC 9.6%, terminal
growth 2%).
Ezion Holdings
Kim Eng on 21 Jan 2015
We expect Ezion to secure at least two liftboat contracts in 1Q15, going by industry newsflow. Our confidence was lately reinforced by signs of positive regional demand for liftboats despite oil’s rout. Modern liftboats may start to contend for other offshore jobs, thanks to their improved capabilities, versatility and efficiency.
Strongest visibility & stability
Ezion is our top sector pick. We believe its 42% slide from its peak of SGD2.02 has priced in prior concerns of deployment delays. Among asset owners under coverage, it arguably offers the strongest FY15E-16E job visibility and earnings resilience on strong contract coverage and exposure to more-stable maintenance demand. We understand most of the five vessels that are due for renewal this year can be recontracted at similar or higher rates. We see upside from potential new contracts, as opposed to risks for the rest of our stocks. Such near-term catalysts do not hinge on an oil-price recovery.
High headline net gearing of 1.0x as at end-3Q14 should be addressed by improving cash flows from the deployment of nine additional units in FY15E. These could swing Ezion to positive FCF. For now, we trim FY14E-16E EPS by 1-4% for minor contract adjustments. This is mitigated by a higher SGD/USD exchange rate of 1.30 vs 1.25. All in all, our TP is unchanged at SGD1.93, still at 9x FY15E P/E, its 5-year mean. Reiterate BUY.
- Top conviction BUY in sector. Improving FCF & earnings stability in FY15 not contingent on oil prices.
- Liftboats may expand into other offshore jobs. Contract wins near-term catalysts.
- Higher SGD/USD mitigates our 1-4% cut to FY14E-16E EPS for contract timing adjustments. This results in an unchanged TP of SGD1.93, still at 9x FY15E P/E.
We expect Ezion to secure at least two liftboat contracts in 1Q15, going by industry newsflow. Our confidence was lately reinforced by signs of positive regional demand for liftboats despite oil’s rout. Modern liftboats may start to contend for other offshore jobs, thanks to their improved capabilities, versatility and efficiency.
Strongest visibility & stability
Ezion is our top sector pick. We believe its 42% slide from its peak of SGD2.02 has priced in prior concerns of deployment delays. Among asset owners under coverage, it arguably offers the strongest FY15E-16E job visibility and earnings resilience on strong contract coverage and exposure to more-stable maintenance demand. We understand most of the five vessels that are due for renewal this year can be recontracted at similar or higher rates. We see upside from potential new contracts, as opposed to risks for the rest of our stocks. Such near-term catalysts do not hinge on an oil-price recovery.
High headline net gearing of 1.0x as at end-3Q14 should be addressed by improving cash flows from the deployment of nine additional units in FY15E. These could swing Ezion to positive FCF. For now, we trim FY14E-16E EPS by 1-4% for minor contract adjustments. This is mitigated by a higher SGD/USD exchange rate of 1.30 vs 1.25. All in all, our TP is unchanged at SGD1.93, still at 9x FY15E P/E, its 5-year mean. Reiterate BUY.
Mapletree Industrial Trust
OCBC on 21 Jan 2015
Mapletree Industrial Trust (MIT) reported a decent set of 3QFY15 results which was in-line with our expectations. Revenue and DPU grew 3.3% and 6.4% YoY to S$78.1m and 2.67 S cents, respectively. MIT’s balance sheet remains healthy, with an aggregate leverage ratio of 32.8%, while its interest rate hedge ratio has been increased from 77% to 86% which allows it to mitigate interest rate risks. Looking ahead, we expect the leasing environment to remain challenging. Rental reversions are likely to continue to moderate as the gap between MIT’s passing rents and market rents are narrowing. Maintain HOLD on MIT with an unchanged fair value estimate of S$1.43. Valuations appear rich, in our view, with the stock trading at FY15F P/B ratio of 1.3x, which is approximately one standard deviation above its average forward P/B ratio since its IPO.
3QFY15 results within our expectations
Mapletree Industrial Trust (MIT) reported a decent set of 3QFY15 results which was in-line with our expectations. Revenue rose 3.3% YoY to S$78.1m, while DPU growth of 6.4% to 2.67 S cents was underpinned by lower borrowing costs and an improved NPI margin (+1.5 ppt to 74.2%) as a result of lower utilities expenses. For 9MFY15, revenue increased 4.6% to S$234.5m, or 75.3% of our FY15 projection. DPU grew 5.0% to 7.78 S cents and constituted 76.0% of our full-year estimate. Average portfolio occupancy dipped slightly from 91.5% in 2QFY15 to 90.8% in 3QFY15 due to the continued relocation of tenants from the Telok Blangah Cluster (11% occupancy rate). Positive rental reversions of 5.9%, 4.8%, 3.2% and 6.9% were achieved for renewal leases for MIT’s Flatted Factories, Hi-Tech Buildings, Business Park Buildings and Stack-Up/Ramp-Up Buildings, respectively.
Strong financial position
MIT’s balance sheet remains healthy, with an aggregate leverage ratio of 32.8%, as at 31 Dec 2014 (-0.3 ppt QoQ). Management also increased its interest rate hedge ratio from 77% to 86%, thus putting it in a strong position to weather any possible spikes in interest rates in the foreseeable future.
Maintain HOLD
We are keeping our forecasts intact given this set of in-line results. Looking ahead, we expect the leasing environment to remain challenging due to competitive pressures and the soft macroeconomic landscape. Rental reversions are likely to continue to moderate as the gap between MIT’s passing rents and market rents are narrowing. Maintain HOLD on MIT with an unchanged fair value estimate of S$1.43. MIT’s share price has already risen 6.4% YTD, and the stock is now trading at FY15F P/B ratio of 1.3x, which we deem as rich. This is approximately one standard deviation above its average forward P/B ratio since its IPO.
Mapletree Industrial Trust (MIT) reported a decent set of 3QFY15 results which was in-line with our expectations. Revenue rose 3.3% YoY to S$78.1m, while DPU growth of 6.4% to 2.67 S cents was underpinned by lower borrowing costs and an improved NPI margin (+1.5 ppt to 74.2%) as a result of lower utilities expenses. For 9MFY15, revenue increased 4.6% to S$234.5m, or 75.3% of our FY15 projection. DPU grew 5.0% to 7.78 S cents and constituted 76.0% of our full-year estimate. Average portfolio occupancy dipped slightly from 91.5% in 2QFY15 to 90.8% in 3QFY15 due to the continued relocation of tenants from the Telok Blangah Cluster (11% occupancy rate). Positive rental reversions of 5.9%, 4.8%, 3.2% and 6.9% were achieved for renewal leases for MIT’s Flatted Factories, Hi-Tech Buildings, Business Park Buildings and Stack-Up/Ramp-Up Buildings, respectively.
Strong financial position
MIT’s balance sheet remains healthy, with an aggregate leverage ratio of 32.8%, as at 31 Dec 2014 (-0.3 ppt QoQ). Management also increased its interest rate hedge ratio from 77% to 86%, thus putting it in a strong position to weather any possible spikes in interest rates in the foreseeable future.
Maintain HOLD
We are keeping our forecasts intact given this set of in-line results. Looking ahead, we expect the leasing environment to remain challenging due to competitive pressures and the soft macroeconomic landscape. Rental reversions are likely to continue to moderate as the gap between MIT’s passing rents and market rents are narrowing. Maintain HOLD on MIT with an unchanged fair value estimate of S$1.43. MIT’s share price has already risen 6.4% YTD, and the stock is now trading at FY15F P/B ratio of 1.3x, which we deem as rich. This is approximately one standard deviation above its average forward P/B ratio since its IPO.
Mapletree Logistics Trust
OCBC on 21 Jan 2015
Mapletree Logistics Trust (MLT) reported a mild 1.6% YoY growth in its 3QFY15 DPU to 1.87 S cents on the back of a 6.2% increase in its gross revenue to S$82.9m. Results were in-line with our expectations. Looking ahead, we believe the outlook remains challenging, especially in Singapore. This is underpinned by the continued conversion of its single-user assets to multi-tenanted buildings, which would result in downtime and pressure on margins and occupancy. Management is seeking to mitigate this by exploring acquisition and divestment opportunities, with net gains from divestments to be distributed back to unitholders. Maintain HOLD on MLT, with an unchanged fair value estimate of S$1.12. We believe valuations are rich, with the stock trading at FY15F P/B of 1.3x.
3QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a mild 1.6% YoY growth in its 3QFY15 DPU to 1.87 S cents on the back of a 6.2% increase in its gross revenue to S$82.9m. Topline growth was driven by contributions from six acquisitions in China, Singapore, Malaysia and Korea, the Mapletree Benoi Logistics Hub redevelopment project, and higher revenue from existing assets in Singapore, Malaysia and Hong Kong. These were partially offset by lower occupancy at several of its newly converted multi-tenanted buildings (MTBs) in Singapore. For 9MFY15, revenue grew 6.4% to S$245.4m and DPU rose 3.5% to 5.65 S cents. The former and latter constituted 74.6% and 74.1% of our FY15 forecasts, respectively. This was within our expectations.
Some pressure on occupancy rates
MLT’s portfolio occupancy eased 0.3 ppt QoQ to 96.9% (as at end 3QFY15), its fifth consecutive quarter of sequential decline. The drag came largely from its Singapore assets, which experienced downtime due to the conversion of single-user assets (SUAs) to MTBs. Management would focus on tenant retention during this challenging period. As at 31 Dec 2014, MLT’s leverage ratio stood at 34.7%, while ~76% of its total debt have been hedged or are on a fixed rate basis.
Headwinds to persist in the near-term
MLT managed to achieve positive average rental reversions of 9% for leases renewed in 3QFY15, but we believe the outlook remains challenging, especially in Singapore. We see headwinds ahead as 16 of its SUAs have leases which are expiring in FY16 (9.5% of NLA and 9%-10% of gross revenue). Approximately half of these leases are expected to be converted into MTBs, which would result in further downtime and pressure on margins and occupancy rates. Management is seeking to mitigate this by exploring acquisition and divestment opportunities, with net gains from divestments to be distributed back to unitholders. Maintain HOLD on MLT, with an unchanged fair value estimate of S$1.12. We believe valuations are rich, with the stock trading at FY15F P/B of 1.3x, following a 4.2% appreciation in its share price YTD.
Mapletree Logistics Trust (MLT) reported a mild 1.6% YoY growth in its 3QFY15 DPU to 1.87 S cents on the back of a 6.2% increase in its gross revenue to S$82.9m. Topline growth was driven by contributions from six acquisitions in China, Singapore, Malaysia and Korea, the Mapletree Benoi Logistics Hub redevelopment project, and higher revenue from existing assets in Singapore, Malaysia and Hong Kong. These were partially offset by lower occupancy at several of its newly converted multi-tenanted buildings (MTBs) in Singapore. For 9MFY15, revenue grew 6.4% to S$245.4m and DPU rose 3.5% to 5.65 S cents. The former and latter constituted 74.6% and 74.1% of our FY15 forecasts, respectively. This was within our expectations.
Some pressure on occupancy rates
MLT’s portfolio occupancy eased 0.3 ppt QoQ to 96.9% (as at end 3QFY15), its fifth consecutive quarter of sequential decline. The drag came largely from its Singapore assets, which experienced downtime due to the conversion of single-user assets (SUAs) to MTBs. Management would focus on tenant retention during this challenging period. As at 31 Dec 2014, MLT’s leverage ratio stood at 34.7%, while ~76% of its total debt have been hedged or are on a fixed rate basis.
Headwinds to persist in the near-term
MLT managed to achieve positive average rental reversions of 9% for leases renewed in 3QFY15, but we believe the outlook remains challenging, especially in Singapore. We see headwinds ahead as 16 of its SUAs have leases which are expiring in FY16 (9.5% of NLA and 9%-10% of gross revenue). Approximately half of these leases are expected to be converted into MTBs, which would result in further downtime and pressure on margins and occupancy rates. Management is seeking to mitigate this by exploring acquisition and divestment opportunities, with net gains from divestments to be distributed back to unitholders. Maintain HOLD on MLT, with an unchanged fair value estimate of S$1.12. We believe valuations are rich, with the stock trading at FY15F P/B of 1.3x, following a 4.2% appreciation in its share price YTD.
M1
OCBC on 20 Jan 2015
M1 Ltd reported its 4Q14 results last evening, where revenue jumped 24.3% YoY (also +38.4% QoQ) to S$346.4m, net profit rose 9.8% YoY (down 0.1% QoQ) to S$44.5m. The better-than-expected set of results saw its FY14 revenue of S$1076.3m (+6.8%) exceed our estimate by 4.9% and net profit of S$175.8m (+9.7%) outpace our forecast by 6.2%. M1 declared a final dividend of S$0.119/share, bringing its total payout this year to S$0.189/share, versus S$0.21 last year. For FY15, management continues to believe that it can achieve moderate earnings growth (within the single-digit range); it also reduces expected capex spending to S$120m from S$139.6m in 2014. In line with the latest guidance, we revise our FY15 estimates up by 2-7%; our DCF-based fair value also improves from S$3.37 to S$3.66, mainly due to the drop in 10-year bond yields. Maintain HOLD.
Better-than-expected 4Q14 showing
M1 Ltd reported its 4Q14 results last evening, where revenue jumped 24.3% YoY (also +38.4% QoQ) to S$346.4m, driven largely by the strong handset sales, as demand for the new Apple iPhone 6 and 6+ remained robust. However, net profit grew by a slower 9.8% YoY (down 0.1% QoQ) to S$44.5m, mainly due to higher operating expenses (acquisition cost rose 10.6% YoY, +18.7% QoQ) and higher taxes. Nevertheless, the better-than-expected set of results saw its FY14 revenue of S$1076.3m (+6.8%) exceed our estimate by 4.9% and net profit of S$175.8m (+9.7%) outpace our forecast by 6.2%. M1 declared a final dividend of S$0.119/share, bringing its total payout this year to S$0.189/share, versus S$0.21 last year.
Keeps moderate earnings growth outlook
For FY15, management continues to believe that it can achieve moderate earnings growth (within the single-digit range), driven by the stronger data usage. M1 notes that smartphone users contributed 65% of total data traffic in 2014, up from 55% in 2013. The group also revealed that 66% of post-paid customers are on tiered data plans, where 22% exceeded their data bundles. M1 is also upbeat about its fixed services segment, where the take-up of higher speed fibre plans will be ARPU accretive in the residential segment; it believes it is also well-placed to capture growth in the corporate segment with its product and service differentiation. And with its LTE-network upgrade almost done, M1 expects to spend around S$120m as capex, down from the S$139.6m spent in 2014.
Improving FV to S$3.66
Besides the better-than-expected 4Q14 numbers, we are also heartened by the recovery in the residential fibre ARPUs, suggesting that the extreme price competition is starting to become more rational; although the continued drop in pre-paid subscribers is an area to watch. In line with the latest guidance, we revise our FY15 estimates up by 2-7%; our DCF-based fair value also improves from S$3.37 to S$3.66, mainly due to the drop in 10-year bond yields. Maintain HOLD.
M1 Ltd reported its 4Q14 results last evening, where revenue jumped 24.3% YoY (also +38.4% QoQ) to S$346.4m, driven largely by the strong handset sales, as demand for the new Apple iPhone 6 and 6+ remained robust. However, net profit grew by a slower 9.8% YoY (down 0.1% QoQ) to S$44.5m, mainly due to higher operating expenses (acquisition cost rose 10.6% YoY, +18.7% QoQ) and higher taxes. Nevertheless, the better-than-expected set of results saw its FY14 revenue of S$1076.3m (+6.8%) exceed our estimate by 4.9% and net profit of S$175.8m (+9.7%) outpace our forecast by 6.2%. M1 declared a final dividend of S$0.119/share, bringing its total payout this year to S$0.189/share, versus S$0.21 last year.
Keeps moderate earnings growth outlook
For FY15, management continues to believe that it can achieve moderate earnings growth (within the single-digit range), driven by the stronger data usage. M1 notes that smartphone users contributed 65% of total data traffic in 2014, up from 55% in 2013. The group also revealed that 66% of post-paid customers are on tiered data plans, where 22% exceeded their data bundles. M1 is also upbeat about its fixed services segment, where the take-up of higher speed fibre plans will be ARPU accretive in the residential segment; it believes it is also well-placed to capture growth in the corporate segment with its product and service differentiation. And with its LTE-network upgrade almost done, M1 expects to spend around S$120m as capex, down from the S$139.6m spent in 2014.
Improving FV to S$3.66
Besides the better-than-expected 4Q14 numbers, we are also heartened by the recovery in the residential fibre ARPUs, suggesting that the extreme price competition is starting to become more rational; although the continued drop in pre-paid subscribers is an area to watch. In line with the latest guidance, we revise our FY15 estimates up by 2-7%; our DCF-based fair value also improves from S$3.37 to S$3.66, mainly due to the drop in 10-year bond yields. Maintain HOLD.
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