DBS Equity Research: Wired Daily 27 Nov 2014

kiasutrader

Publish date: Thu, 27 Nov 2014, 12:33 PM

Ascendas Hospitality Trust - Exploring rebranding and AEI opportunities; maintain HOLD and TP of S$0.72b

We hosted Ascendas Hospitality Trust (ASCHT) for an investor luncheon recently. Management highlighted the upside potential in its portfolio: (a) exploring the possibility of rebranding its Osaka property once the master lease agreement expires at end of 2015 and besides a change in branding, ASCHT may also conduct refurbishment works; (b) studying AEI (Asset Enhancement Initiatives) opportunities in Australia. The drag from the unwinding of cross currency swap which caused 2Q15 DPU to drop 10% y-o-y should end from 4Q15 onwards. Approximately 48% of the group's portfolio by asset value is derived from Australia, down from 67% at its listing two years ago. To further diversify its portfolio, ASCHT is exploring opportunities to expand into China and Japan. With limited upside to our target price of S$0.72, we maintain our HOLD call. At current level, ASCHT offers yields of 8.0-9.0%.

Silverlake Axis has secured two new software upgrading contracts from existing customers totaling approximately RM40m. One of the contracts involves the core banking system upgrade for the Singapore operations of a leading ASEAN Bank. For the second contract, the Group will upgrade the Silverlake Integrated Provident Fund System (SIPFS) for Tabung Amanah Pekerja (TAP), a social security organisation and government agency in Brunei.

YuuZoo Corporation, the world's first third generation social ecommerce company has signed a ground-breaking deal with Etisalat, the fastest growing telecommunications network in Africa's most populous country, Nigeria. The partnership targets Etisalat's more than 20 million subscribers in Nigeria, including thousands of SME's. It brings YuuZoo's unique social e-commerce model to Nigeria, where current annual ecommerce revenue is over US$500m and has an annual potential of US$10 bn.

Advance SCT has entered into a MOU with Meike International Assets Management (Beijing) Co., Ltd. Both parties have expressed the intention to incorporate a joint venture holding company (JVC) that will acquire and operate wastewater treatment facilities in China. Four wastewater treatment plants in the provinces of Anhui, Jiangsu and Liaoning have been identified by both parties as potential assets for immediate injection into the JVC.

Singapore Medical Group has entered into a non-binding memorandum of understanding (MOU) with Leaders Cosmetics Division of Sansung Life & Science Co., Ltd (Leaders) in relation to a proposed joint venture. Leaders is a company incorporated in South Korea and is principally engaged in the aesthetic medicine and cosmeceutical products business primarily in South Korea. Pursuant to the MOU, the Company and Leaders have agreed to explore the formation of a 51:49 joint venture entity in Singapore which will engage in the aesthetics and dermatology businesses and distribution of dermatological and cosmeceutical products in the South-East Asia region.

Singapore Exchange (SGX) announced its intention to launch a bond trading platform by mid-2015. It will initially trade Asian corporate bonds in G3 currencies, with Asian local currencies to follow. To drive this initiative, the first of its kind focused on Asian bonds, SGX has formed a new subsidiary, SGX Bond Trading ( SGX BT ).

Singapore October factory output disappoints, up just 0.2% y-o-y. Overall, industrial production was pulled up by a double-digit increase in pharmaceuticals output, which offset contractions in the electronics and transport engineering clusters. Excluding biomedical output - which grew 22.5% in October - industrial production would have declined 4.3%. Apart from the biomedical, precision engineering, and chemicals clusters - which grew 22.5%, 1.3%, and 2.3% respectively - output of all other clusters fell. The electronics cluster disappointed with a deeper 6.1% contraction, compared to September's 2.3% decline. The semiconductors, computer peripherals, and data storage segments contracted 0.5%, 31.1%, and 18.5% respectively. The worst-performing cluster was transport engineering - its output declined 8.8% on lower contributions from rig building and ship conversion projects, and slow demand for aerospace engine repair jobs. The general manufacturing cluster contracted 3.3%. After adjusting for seasonal factors, industrial production grew 2.6% month-on-month in October. Excluding biomedical manufacturing, output would have fallen 3.4%.

The president of the Real Estate Developers' Association of Singapore (Redas) Chia Boon Kuah urged the government to "stand ready to take supportive measures to prevent a tipping point" if the property market turns volatile and worsens. He said developers were concerned about the slowdown that has gripped the residential market since the cooling measures and the total debt servicing ratio kicked in.

Global investor confidence fell in November, with the decline paced by North American and Asian investors. According to the State Street Investor Confidence Index, the global index fell to 114.0, down slightly by 1.8 points from October's revised reading of 115.8. The North American index fell 4.4 points to finish at 104.3, down from October's level of 108.7, while the Asian index fell 2.7 points to 96.9. European investors bucked the downward trend, however. The European index registered a large increase of 20.7 points to finish at a record high of 141.9.

US stocks rose, boosted by tech shares, with the S&P 500 and Dow closing at records, while the energy sector was once more the largest weight on the market as crude prices stay low. US consumer spending rose modestly in October and a measure of business spending plans fell for a second straight month, but consumer confidence was already near a 7-1/2-year high.

Source: DBS

YuuZoo Networks (AFC)Silverlake Axis (5CP)SingMedical (5OT)SGX (S68)

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