DBS Equity Research: Wired Daily, 28 Aug 2014

kiasutrader

Publish date: Thu, 28 Aug 2014, 12:41 PM

Singapore REITs - Looking fairly valued; growth and asset quality are key to sustainable returns. Picks: FCT, MCT, FCOT, Cache, Magic

Singapore REITs continue to perform strongly as expected, returning +8% YTD, and bringing down FY14-15F sector yields to 6.0-6.2%. We believe this is due to attractive yield spreads of c.4.0% compared to benchmark 10-year government bond yields which are at YTD lows (USTs/10Y SG Bond at c2.4%/2.3%). While ongoing uncertainties due to geopolitical tensions in the Ukraine/Russian and quantitative easing (QE) programs by Europe and Japan have kept a lid on expectations of 10-year UST yields rising in the immediate term, investors should remain nimble as we believe the market will quickly reprice itself once there are hints of rate hikes on the horizon.

Looking ahead, with more moderate growth rate of c. 3.0% over FY14-15F, we believe that S-REITs are fairly valued at current prices, and outperformance would come from S-REITs with brighter prospects and/or quality assets. We focus on SREITs that offer growth, asset quality and attractive valuations to deliver sustained returns. Our picks are Mapletree Commercial Trust, Frasers Centrepoint Trust, Mapletree Greater China Commercial Trust, Frasers Commercial Trust and Cache Logistics Trust.

STATS ChipPACconfirmed that it has been approached by two Chinese semiconductor-testing companies interested in buying the company. Jiangsu Changjiang Electronics Technology Co and Tianshui Huatian Technology Co were first reported by Bloomberg to be considering bids for STATS ChipPAC. However, "there is no assurance that any of these approaches will result in any definitive agreement or transaction", STATS ChipPAC said in a statement. STATS ChipPAC had already announced as early as May that it had been approached by parties interested in buying the company.

The Singapore Flyer might have found a new owner, a year after financial troubles forced the iconic attraction to be put up for sale. Mainboard-listed tourism operator Straco Corporation could sign a deal to buy the Ferris wheel, The Business Times understands.Straco, listed on the Singapore Exchange since 2004, now runs two aquariums and a mountain cable car service in China.

Soilbuild Business Space REIT is proposing to acquire a property located at 20 Kian Teck Lane, Singapore, for

S$22.4m. The Property is a part 3 / part 6-storey light industrial building located along Kian Teck Lane, which is off Kian Teck Way. The Property is situated on a land area of 3,992.70 square metres and is held under a lease issued by JTC Corporation for a term of 30 years commencing from 1st May 2000 with a covenant by JTC to grant a further term of 20 years subject to the terms and conditions.

PT Trikomsel Oke Tbk. (Trikomsel) as one of the leading distributors and retailers of smart mobile devices in Indonesia announced that it has signed a partnership agreement with Xiaomi, in which Trikomsel is an authorised distributor for marketing products, such as Xiaomi mobile phones as well as its accessories in Indonesia. Polaris, a distributor and retailer of smart mobile devices as well as lifestyle electronics in Asia, owns 31.38% of Trikomsel's shares.

Keong Hong Holdings has been awarded the building works amounting to S$118m at Edgedale Plains / Punggol Central. The Project is to construct 6 Blocks of 17-Storey executive condominium with basement (total 378 units) and communal facilities. The construction of the Project is expected to be completed by 1 November 2016.

Takings in the business services sector in the second quarter continued to grow slower year on year, and flat against the first quarter, according to the latest Business Receipts Index for Services Industries. In the second quarter, the index shows services industries like financial & insurance, real estate, rental & leasing, education and health & social services raked in 2.8% more sales than they did in the same quarter last year. But this was slower than the 4.9% and 7.1% growth posted respectively, in the previous two quarters. Quarter on quarter, the second-quarter business receipts in the services sector stayed roughly the same level as in the past two quarters. Sales inched up a measly 0.2% in the quarter, with real estate, rental & leasing services posting the biggest jump of 5.8%.

The roughly 300 investment funds approved by the Central Provident Fund (CPF) continued to do well this year amid liquidity from central banks and low volatility. The average fund under the CPF Investment Scheme (CPFIS) posted a 3.73% return in the three-month period ended June 2014. They gained 11.82% for the 12-month period to June, and 16.68% for the 36-month period to June. Generally, equity, bond and mixed asset funds continue to perform, with equities generating the highest returns. However, funds worldwide saw net outflows this year, signalling investor caution.

Source: DBS

Mapletree PanAsia Com Tr (N2IU)Frasers Cpt Tr (J69U)Mapletree NAC Tr (RW0U)ARA LOGOS Log Tr (K2LU)Straco (S85)Keong Hong (5TT)

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