Today's Focus

Saizen REIT - A niche player in Japan residential real estate; fair value S$0.21

Resilience's the word. Powered by recovery optimism and liquidity flows from bonds into equities, STI reversed the negative reaction of the Singapore government's anti-property measures in just a little more than a week.

STI's immediate support is at the 15-day EMA, currently at 3220. We see the STI treading higher to re-test the November 2010 post-GFC high at 3313.

DBSV Research issues an Equity Explorer report on Saizen REIT, a niche player in Japan residential real estate, with a fair value of S$0.21. Saizen REIT strives to create value by investing in smaller-size properties that deliver stable income but are too small for consideration for the larger players. Saizen REIT will also kickstart its acquisition program in 2013. At current price, Saizen REIT's prospective FY13F yield of 6.0% appears fair relative to peers (smaller cap REITs and overseas exposure).

4Q DPU of 2.69 Scts for Parkway Life REIT in line, capping FY12 DPU at 10.3 Scts. Gearing remains healthy. We expect PREIT's hospital assets to continue to benefit from a higher inflation rate in Singapore. In line with DBS economists' latest forecast, we have raised our CPI assumption for 2013 to 4%, from 3.1% previously. As a result, our DPU is raised marginally to 10.7Scts (4.7% yield) and 11.1Scts for FY13F and FY14F respectively. Maintain HOLD, TP raised marginally to S$2.19 (Prev S$ 2.08).

Singpost's 3Q13 underlying profit of S$39.8 (+2% y-o-y, 22% q-o-q) and interim DPS of 1.25 Scts were in line. The group has acquired two more companies for S$97m, taking total amount spent on acquisitions to S$179m over the last two years. The stock is not cheap at 17x PER. Maintain HOLD with revised TP of S$1.14 (Prev S$1.04).

IndoAgri announced a proposed acquisition of 50% economic interest in Companhia Mineira de Açúcar e Álcool Participações (CMAA) in Brazil. This acquisition will enable IndoAgri to expand its geographical presence into the sugar and ethanol industry in Brazil, as well as strengthen its diversified plantation business model.


RH Energy plans to undertake a reverse takeover that will transform the loss-making oil and gas equipment company into a Chinese property developer. Under the proposed deal, RH Energy intends to effect a 3-into-1 share consolidation and a 3-into-1 warrant consolidation with a corresponding exercise price adjustment. RH Energy will then buy all of ChiwayLand Group, a property developer with residential and
commercial properties in the Yangtze River Delta region in China and a pipeline of 1.7 million square metres of projects. ChiwayLand will be bought for up to $396m through the issuance of up to 549.3m new consolidated shares at 69 cents per consolidated share.

Yamada Green Resources is expected to report significantly lower profit for 2Q13, i.e the period from 1 October 2012 to 31 December 2012, as compared to 2Q12. Lower profit was mainly attributable to lower yield and lower than expected prices of fresh shiitake mushroom coupled with the increase in raw materials cost of synthetic logs.

Industrial production slipped 0.6% y-o-y in December, a much smaller decline than the 4.8% drop the market had been expecting. The electronics cluster led manufacturing's decline with a 21st consecutive month of y-o-y contraction. Excluding the 19.5% jump in biomedical output, driven by strong growth in pharmaceuticals and medical technology production, overall industrial production for December would
have fallen 5.2% y-o-y. The 16.9% y-o-y decline in electronics output was steeper than November's 3.6% drop.

The Urban Redevelopment Authority's (URA) fourth-quarter real estate statistics show evidence of the investment and speculative activity that drove various segments of the Singapore property market last year and led to the latest cooling measures. Home buyers in the private housing market, for instance, picked up far more homes from developers last year (22,197 units) than in the previous year (15,904 units). However, fewer homes changed hands in the resale market, which covers secondary market deals involving completed properties, last year (12,811 units) than in 2011 (14,046 units). Prices of offices and shops increased in 2012, albeit by a smaller magnitude than in 2011, despite falls in rents. The URA's All Industrial price index shot up by 25.8% last year, outstripping a 10.1% increase in rentals.

The Housing & Development Board's (HDB) Resale Price Index rose 2.5% q-o-q to breach the 200-point price-index mark to hit 202.9 in the fourth quarter, resulting in a 6.6% increase in resale flat prices for the whole of 2012. Despite the rise, consultants say that prices should remain stable in the coming year, following the seventh round of cooling measures.

A freehold commercial property at the corner of Changi Road and Lorong 105 Changi has been put up for sale by tender. No. 160 Changi is offered for sale on a vacant possession basis, said its marketing agent Savills. This came after its owner, AIA Singapore, shifted operations that used to be housed there up until late last year to its other properties in Singapore. The site area is about 18,000 sq ft, about 300 metres away from Eunos MRT station and has a permissible gross plot ratio of 3.0.


Source: DBSV