DBS Equity Research: Wired Daily 17 Oct 2014

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Publish date: Fri, 17 Oct 2014, 12:20 PM

Ascott Residence Trust - Stronger presence in Tokyo; maintain BUY, TP revised up to S$1.39

China Merchants Hldgs (Pacific) - Jiurui E'way acquisition provides immediate boost; maintain BUY with higher TP of S$1.42

Ascott Residence Trust (ART) announced the acquisition of Best Western Shinjuku Astina Hotel Tokyo, a 206-room hotel with 3 retail units, for JPY8bn (S$95.2m), which represents a c.5% discount to independent valuation of S$100m. The property's proforma FY13 EBITDA yield stood at 4.3%. Located in the prime area of Shinjuku-ku Tokyo, the hotel is a 7 minute walk to Shinjuku Station, a major transportation hub in Japan and is adjacent to many restaurants, entertainment outlets and department stores. The hotel strengthens ART's presence in a recovering hospitality market, backed by rising tourist arrivals ahead of the 2020 Tokyo Olympic Games. NPI yield is expected to rise to 5-5.2% post Citadines rebranding. FY14-16F DPU lifted by 1-3%; maintain BUY, target price revised to S$1.39 (Prev S$ 1.36). We continue to like ART for its decent growth prospects and attractive yield of 6.9-7.4%.

The acquisition of Jiurui Expressway provides immediate boost to China Merchants Hldgs (Pacific) (CMHP). Our analyst expects Jiurui Expressway to begin making a small but positive contribution of c. HK$20m to the CMHP's bottom line in 2015, while providing firm long term earnings growth prospects for the Group. Factoring in Jiurui E'way acquisition, we lift FY15F net profit by 4% and introduce FY16F. This acquisition will contribute to net profit immediately upon debt restructuring, while lengthening remaining toll concessions to 15 years for the Group. Post Convertible Bond conversion, there is room for further debt-financed acquisition(s) to drive expansion. Maintain BUY with a raised target price of S$1.42 (Prev S$ 1.32).

M1's 3Q14 net profit of S$44.5m (+13% y-o-y, +1% q-o-q) was 5% ahead of our estimates. Tiered data plan adoption and fibre customer base continue to trend up. Weaker international call service (IDD) revenue was offset by higher handset sales. Maintain BUY with unchanged target price of S$3.85. The stock offers a dividend yield of 4.8% for this year.

Cosco Corp announced this morning that it has agreed to defer delivery date of its 4th cylindrical ultra deepwater semi-submersible rig, Sevan Developer, to Sevan Drilling for 12 months with options exercisable at 6-month intervals, to extend the delivery date up to a total of 36 months from 15 Oct 2014. The contract will terminate at the end of each deferred period, unless extended by mutual agreement between the Shipowner and COSCO Qidong. Oslo-listed Sevan, has considered cancelling the contract after failing to secure work for the rig in a lacklustre drilling market. Order for the rig was placed in May 2011 at contract price of US$525m. According to Upstream, Sevan has paid 20% of contract value. The extension buys them time to continue looking for charter contract. In view of the deferment and the uncertainty as to whether the options will be exercised, it is not possible to ascertain the financial impact at this point in time.

OUE Hospitality Trust (OUEHT) announced that they have been assigned a credit rating of Ba1 (outlook stable) corporate family rating by Moody's Investor Service. This allows the REIT to gear up from its current c. 33%. Management has previously iterated that they are comfortable with a gearing ratio of c.40%. Based on current balance sheet metrics, assuming a gearing of 40%/45%, OUE HT can debt fund up to S$250m/S$400m worth of acquisitions. We believe that the additional flexibility will allow the REIT to embark on growth plans previously alluded to by management.

Sino Grandness Food Industry Group's own-branded, "Garden Fresh" fruit juices are now available in wellcome, one of the largest supermarket chains in Hong Kong with more than 200 retail points through the engagement of a new distributor. Its presence in Hong Kong market is expected to improve brand awareness and brand equity.

ST Engineering announced that its electronics arm, ST Electronics has secured about $513m worth of contracts in the third quarter of 2014 for rail electronics and intelligent transportation, satellite and broadband communications, as well as advanced electronics and Information Communications Technologies (ICT) solutions.

Global Logistic Properties has leased 13,000 sqm (140,000 sq ft) to PepsiCo in São Paulo, Brazil. The customer, one of the world's largest food and beverage companies, is expanding their logistics network amid growing domestic demand for its products. This leasing agreement marks the first collaboration of PepsiCo and GLP in Brazil. The stabilized logistics portfolio lease ratio in Brazil stands at 98%.

US markets reversed early session losses with the Dow recovering from a decline below 16,000 for a second straight session as investors reacted to comments from the St. Louis Federal Reserve Bank President James Bullard that policy makers should consider delaying the end of bond purchases to halt the decline in inflation expectations. Chesapeake Energy Corp shares surged, leading a rally in energy producers on plans to sell natural gas and oil shale fields for USD5.4bil. Netflix Inc. plunged after saying a price increase had slowed subscriber growth. EBay Inc. shares fell after its sales forecast missed estimates. U.S. 10-year Treasury yields were up 1.4 basis points to 2.15% after falling below 2% for the first time since June 2013.

Source: DBS

COSCO SHP SG (F83)Sino Grandness (T4B)ST Engineering (S63)

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