DBS Equity Research: Wired Daily 9 Oct 2014

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Publish date: Thu, 09 Oct 2014, 10:37 AM

Asia BIG DATA - Mapletree Industrial Trust, Ascendas REIT, Declout, 21ViaNet and SUNevision are key companies riding on the trend

Mapletree Logistics Trust - Growing presence in China, BUY maintained, TP revised marginally to S$1.25

Social networking, e-commerce and big data are driving double digit growth in data centre (DC) and cloud services. The growth potential in data centre (DC) and cloud business is a silver lining for Telcos. To take advantage, Telcos need to offer (i) carrierneutral DCs to defend their market and (ii) private cloud services by acquiring or liaising with cloud providers. Cloud is a high volume-low margin business. Cloud providers are bypassing branded IT players like HP and Dell to source directly from original design manufacturers in bulk. Declout (fair value S$0.35) in Singapore is positioned to benefit from this trend as it provides low cost IT equipment to cloud providers for disaster recovery and less mission critical applications. We prefer DC players which have scale. 21Vianet (VNET US) and SUNevision(8008 HK) - market leaders in carrier-neutral DC space in China and Hong Kong respectively, are key beneficiaries.

Industrial REITS with tenants in this space, are also key beneficiaries. Many DC and cloud players prefer to lease the property for 20-30 years. Their intent is to avoid real estate capex so that they have enough capital to convert the property into DC. Mapletree Industrial Trust (BUY, TP: S$1.53) and Ascendas REIT (BUY, TP: S$2.51) are likely to see their earnings benefit from DC demand in Singapore.

Mapletree Logistics Trust had entered into sale and purchase agreements with its sponsor to purchase two properties: (1) Mapletree Yangshan Bonded Logistics Park (MYBLP) in Shanghai, China for RMB197.2m (c.$41.1m) at an initial NPI yield of 7.5% and (2) Mapletree Zhengzhou Logistics Park (MZLP) in Zhengzhou, China for RMB205.6m (c.S$42.8m) at an initial NPI yield of 8%. The initial yields are higher than the current portfolio yield of c. 6.75% for its properties in China. The strategic location of the two properties provides exposure to rapidly growing Chinese trade volumes. Contributions from these properties will result in a 0.2%/1.3% uplift to our FY15/16F DPUs. BUY maintained, target price revised marginally to S$1.25 (Prev S$ 1.24).

Global Logistic Properties has signed a strategic partnership agreement with China Development Bank Capital. GLP will become CDB Capital's major partner for logistics infrastructure development, enhancing GLP's access to land and financing resources. The partnership is expected to drive value creation as GLP accelerates its development pace.

Mermaid Maritime has increased its shareholding interest in Subtech Saudi Arabia from 70% to 95%. The move comes as Saudi Aramco unveils plans to increase investments over the next 10 years to keep oil production steady and double gas production. This planned increase in investment is likely to see greater spending within Saudi Arabian offshore facilities and associated projects where Mermaid has a presence.

Raffles Education intends to spin-off its wholly-owned subsidiary, Oriental University City Holdings (H.K.) , a company incorporated in Hong Kong, on the Growth Enterprise Market (GEM) of The Stock Exchange of Hong Kong (the SEHK).

Ryobi Kiso Holdings has secured additional new contracts worth S$130.4m, bringing the total new contracts secured since 1 January 2014 to S$179.2m. The above new contracts are expected to be delivered by the Group during the financial years ending 30 June 2015 and 30 June 2016 respectively.

Dow surged 275 points - its best performance for the whole year, on the back of a dovish report from Fed. Minutes from the Fed's mid-September meeting showed that some officials are worried about slowing global growth, especially in China and the euro zone. Central bankers are also concerned the rapidly-rising U.S. dollar could hurt U.S. exports. Policy makers renewed their pledge to keep interest rates near zero for a "considerable time" after ending bond purchases this month.

Source: DBS

Mapletree Ind Tr (ME8U)CapLand Ascendas REIT (A17U)Mapletree Log Tr (M44U)Mermaid Maritime (DU4)Raffles Edu (NR7)

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