SGX Stocks and Warrants

Author: kimeng   |   Latest post: Wed, 17 Jul 2019, 12:06 PM


CapitaLand Commercial Trust: 2Q19 Results In-line; Secures Lease for 21 Collyer Quay

Author: kimeng   |  Publish date: Wed, 17 Jul 2019, 12:06 PM

CapitaLand Commercial Trust (CCT) announced its 2Q19 results this morning which met our expectations. Gross revenue and NPI grew 3.0% and 0.8% YoY to S$101.0m and S$78.4m, respectively. DPU rose 1.9% to 2.20 S cents.

For 1H19, CCT’s NPI increased by 2.1% to S$158.2m, while DPU was up 2.8% to 4.40 S cents and this formed 48.2% of our full-year forecast. Rental reversions came in strong in 2Q19. Committed rents (psf/month basis) at Asia Square Tower 2, Six Battery Road, One George Street and CapitaGreen were S$11.87-S$13.50, S$12.90- S$13.20, S$9.50-S$10.80 and S$12.00-S$13.30, versus average expired rents of S$10.58, S$11.70, S$9.10 and S$11.62, respectively.

Separately, CCT also announced that it has secured Wework Singapore Pte Ltd as a new tenant for its 21 Collyer Quay property. The lease will commence from early 2Q21 for a tenure of seven years. This lifts the overhang on the property as the HSBC lease will be expiring in Apr 2020.

There will be some downtime as CCT will close the entire building for upgrading works from 2Q20 to 4Q20 at an estimated cost of S$45m and targeted ~9% return on investment.

CCT also proposed to acquire an effective 94.9% interest in Main Airport Center (MAC), a freehold office property in Frankfurt, from its sponsor CapitaLand. The proposed transaction is based on an agreed property value of EUR265.0m (~S$407.8m) and an estimated initial NPI yield of 4.0%. CCT intends to make this acquisition DPU accretive.

Pending an analyst briefing, we currently have a SELL rating and S$1.88 fair value on CCT.

Source: OCBC Research - 17 Jul 2019

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Wilmar: Proposed IPO of Yihai Kerry Arawana Holdings

Author: kimeng   |  Publish date: Wed, 17 Jul 2019, 12:05 PM

  • Listing is pending for CSRC’s approval
  • Wilmar will retain majority control
  • Expansion in China’s operations

YKA to be Listed on Shenzhen Stock Exchange

Wilmar announced that Yihai Kerry Arawana Holdings Co., Ltd (YKA), a 99.99% owned subsidiary, submitted its IPO application to the China Securities Regulatory Commission (CSRC) for its proposed listing on the Shenzhen Stock Exchange last Friday. YKA is one of the largest agribusiness and food processing companies in China, mainly engaged in the production, sales and R&D of kitchen food, feed ingredients and oleochemicals in China.

The listing, if approved by the CSRC, will see YKA issuing up to 54.2m shares, or about 10% of the total pro-forma share capital of YKA after the proposed IPO. There will not be any secondary offering.

Funding for Capital Expenditure

Wilmar will retain the majority control in YKA post listing and for the foreseeable future. Wilmar is anticipated to hold 89.99% of YKA via its wholly owned subsidiary, Bathos Company Limited, immediately post the proposed IPO. The estimated net IPO proceeds of CNY 13.9b is intended to fund YKA’s capital expenditure requirements, focusing on fixed assets investment projects in the kitchen food industry which is the also core business of YKA, representing ~60% of YKA’s revenue in FY18.

Fair Value Increased to S$4.26

According to the prospectus, YKA’s reported 4% YoY growth in net profit to CNY 5.5b (~US$0.8b) in FY18, contributing ~63% of Wilmar’s net profit of US$1.3b in FY18. The proposed IPO is aimed to expand and grow Wilmar’s operations in China by promoting the brand’s visibility and awareness among existing and potential customer and investors.

In view of YKA’s IPO, we attach a higher valuation to Wilmar’s oilseeds & grains segment (PER of 19X). Based on the SOTP valuation methodology, our fair value estimate consequently increases from S$3.66 to S$4.26. Upgrade from Hold to BUY.

Source: OCBC Research - 17 Jul 2019

Labels: Wilmar Intl
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Keppel DC REIT: Demand Still Buoyant; Awaiting Acquisitions

Author: kimeng   |  Publish date: Wed, 17 Jul 2019, 12:03 PM

  • 2Q19 DPU +6.0% YoY
  • Positive rental reversions
  • Bump up FV to S$1.93

2Q19 Results Within Our Expectations

Keppel DC REIT (KDCREIT) reported its 2Q19 results which met our expectations. Gross revenue and NPI jumped 13.2% and 13.6% YoY to S$47.5m and S$43.3m, respectively. This was driven by the acquisition of Keppel DC Singapore 5 in Jun 2018 (including rental top up). DPU grew 6.0% YoY to 1.93 S cents. For 1H19, KDCREIT’s gross revenue increased 19.5% YoY to S$95.5m, while NPI accelerated 19.9% YoY to S$86.5m. DPU of 3.85 S cents represented growth of 6.4% YoY and this formed 49.0% of our full-year forecast.

Positive Rental Reversions, Albeit for Smaller Clients

Management shared that it completed five lease renewals during 2Q19, resulting in positive rental reversions, although the magnitude was not disclosed. The impact was also not significant given that these were smaller clients, but we believe this is a reflection of robust demand in the market. This is especially true for Singapore, with positive demand and supply dynamics. Globally, the colocation market is expected to grow by 16%-18% this year, versus an earlier forecast of 15%-17%, according to BroadGroup.

Looking ahead, KDCREIT remains focused on hunting for acquisitions, although there were some deals which were delayed or taken off the market. Given the increased competition for data centre assets and compression in cap rates, management highlighted that it would be more difficult to acquire at above the 7% cap rate level which it had traditionally been able to do in the past.

Raising Our FV on Lower Discount Rate Assumptions

We lower our risk-free rate assumption from 2.3% to 2.0% as we expect the interest rate environment to remain conducive over the foreseeable future. We also pare our overall cost of equity assumption from 7.4% to 6.7%.

We believe this is justifiable given the following reasons:

i) While KDCREIT does not have a long listing history (IPO in Dec 2014), we believe it has increasingly been establishing a good track record in DPU growth and acquisitions,

ii) prudent capital management with a healthy aggregate leverage of 31.9% and consistent risk management strategy in place for its forex and debt hedges,

iii) defensive and unique asset class with ‘sticky’ client relationships and long portfolio WALE of 7.8 years, which is one of the longest in the S-REITs sector.

Factoring these in, our fair value estimate is bumped up from S$1.64 to S$1.93.

Source: OCBC Research - 17 Jul 2019

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Singapore Press Holdings: Below Expectations

Author: kimeng   |  Publish date: Mon, 15 Jul 2019, 11:24 AM

SPH’s 3QFY19 results came in below our expectations. Operating revenue fell 1.6% YoY to S$246.1m on the back of lower print advertisement and circulation revenue, as well as the absence of contribution from Shareinvestor.com holdings following its divestment in Nov18. However, the decline was partially offset by rental revenue from the group’s Purpose-Built Student Accommodation Portfolio, as well as SPH REIT’s Figtree Grove Shopping Centre in Australia.

The group recorded impairment charges on goodwill and intangibles relating primarily to the Aged Care business, owing to the recent increase in buildown-lease nursing home bed capacity coming on stream. The group’s share of results of associates and JVs increased from S$0.3m in 3QFY18 to S$10.8m in 3QFY19 due to the divestment gain recognized from the sale of Chinatown Point.

After accounting for one-offs, core PATMI came in at S$39.4m (-32.0% YoY), constituting 18% of our full-year forecast. We maintain our HOLD rating but place our FV estimate of S$2.55 under review.

Source: OCBC Research - 15 Jul 2019

Labels: SPH
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SPH REIT: Healthy Rental Reversions

Author: kimeng   |  Publish date: Mon, 15 Jul 2019, 11:16 AM

  • 3QFY19 results in-line
  • DPU was 1.39 S cents
  • FV estimate of S$1.05

Growth driven by The Rail Mall and Figtree Grove Shopping Centre

SPH REIT’s 3QFY19 gross revenue grew by S$6.6m or 12.7% YoY to S$58.3m and net property income (NPI) increased by S$5.8m or 14.2% YoY to S$46.3m, bringing 9MFY19 to 75% of our full-year estimates, which we consider to be in-line with our expectations. Growth was largely contributed by the acquisitions of The Rail Mall in Singapore and Figtree Grove Shopping Centre in New South Wales, Australia, which were acquired in 2018.

DPU reported growth of 1.5% YoY to 1.39 S cents, which was in-line, at 75% of our full-year estimate. Gearing ratio remained healthy at 30.1% and average cost of debt was 2.89% as at 31 May 2019.

Positive Rental Reversions for the Portfolio

Overall committed occupancy remained strong at 99.0%. In 9MFY19, overall portfolio continued to register positive rental reversions of 8.4% on the back of rising overall tenant sales and higher visitor traffic (+4.4% YoY) for SPH REIT’s Singapore assets. For Paragon, its rental reversions were +8.6% in 9MFY19, on 21.4% of the property’s NLA.

The Clementi Mall and The Rail Mall also saw positive reversions of 5.8% and 9.1%, respectively, representing 10.1% and 21.2% of the property’s NLA. For 4QFY19, 22.0% of the leases at Figtree Grove Shopping Centre are due for renewal. There are limited leases expiries for Paragon (0.1%) and The Clementi Mall (1.0%) while The Rail Mall will see 41.2% of its leases expiring. However, the contribution of The Rail Mall to the overall portfolio is small, only contributing to 2.2% of the portfolio’s gross revenue and NPI in 9MFY19.

For The Clementi Mall, 70.0% of its leases will be expiring in FY20. The management has started engaging with the tenants and is positive about the retention rate given the past track record and continued rising tenant sales.

Limited Challenges From Jewel

The impact from the opening of Jewel on SPH REIT is likely to be limited, given the locations of the SPH REIT’s 3 malls (none is located in the East) and the different positioning. Jewel is mainly focused on F&B, Fashion and entertainment. We expect the impact which Jewel poses on Paragon to be limited, given Paragon’s positioning as a premier upscale retail mall housing luxury brands.

Maintain HOLD and our fair value estimate increases from S$1.00 to S$1.05.

Source: OCBC Research - 15 Jul 2019

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Frasers Logistics & Industrial Trust: Leveraging on Sponsor Pipeline

Author: kimeng   |  Publish date: Thu, 4 Jul 2019, 11:24 AM

  • Estimated initial NPI yield of 5.1%
  • Healthy portfolio specifications
  • Expected to be DPU accretive Proposed acquisition of 9 properties in

Germany and 3 in Australia

Frasers Logistics & Industrial Trust (FLT) announced that it has entered into various sale and purchase agreements with its sponsor Frasers Property Limited for the acquisition of nine logistics properties in Germany and three logistics properties in Australia.

The 12 properties are freehold, 100% occupied, have a young age of 3.7 years and long WALE of 8.6 years. The agreed property purchase price for this portfolio is ~A$644.7m (EUR320.3m or A$519.2m for the German properties and A$125.5m for the Australian properties).

We estimate the initial NPI yield for this acquisition to be ~5.1%. We are not surprised with this proposed acquisition, as we had recently highlighted our expectations that FLT would recycle its capital from recent divestment proceeds into new acquisitions in Australia and/or Europe.

Positive on This Transaction

We are positive on this transaction given the solid portfolio metrics and the strategic location within the major logistics hubs of Germany and Australia. It will deepen FLT’s presence in its core markets of Melbourne, Sydney and Brisbane in Australia and expand its geographical footprint in Germany by adding one asset each in Berlin and Frankfurt. Post-acquisition, FLT will have a strategic presence across all of the key logistics hubs in Germany.

Its proportion of freehold assets will increase from 77.6% to 81.7%, portfolio age will decline from 7.7 years to 7.0 years and WALE will be increased from 6.5 years to 6.7 years.

Expected to be DPU accretive

Furthermore, this transaction is also expected to be DPU accretive, although the final funding mix (mixture of debt and equity) will only be announced in due course.

Based on FLT’s pro forma 1HFY19 results, this acquisition, coupled with FLT’s recent divestments, is expected to boost its DPU by 1.4% in AUD terms, and 1.1% in SGD terms. This excludes the one-off estimated capital gains tax on the aforementioned divestments.

NAV per unit would have increased by 3.2% in AUD terms and 3.3% in SGD terms, while gearing ratio will increase marginally from 35.1% to 36.1% (assuming proceeds from divestments are used to repay its borrowings). Pending details of the final funding structure and EGM approval, we keep our forecasts for now. Our fair value remains at S$1.20.

Source: OCBC Research - 4 Jul 2019

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