DBS Equity Research: Wired Daily 1 Dec 2014

kiasutrader

Publish date: Mon, 01 Dec 2014, 02:42 PM

Parkway Life REIT acquires private nursing home in Japan - TP raised to $2.66 (prev. $2.62)

China exposure ETFs - SSEC mid-term technical objective raised to 2927 from 2655, pullback support above 2500

The Singapore equity market enters its traditional year-end holiday lull period. There is a tendency for market activity to taper down steadily till mid December before picking up again just before Christmas. Still, with the earnings revision trend stabilising in the just concluded 3Q14 results season, STI should head for 3400 by year-end based on 13.76x (average) FY15 PE and beyond that next year. Technical support in the event of a short-term pullback is slightly below 3300, which coincides with the 65-day EMA.

The Chinese equity market has been boosted by a combination of 3 factors in recent months: 1) Being the largest net importer of petroleum, China is a major beneficiary of the current drop in oil price 2) The surprise PBOC rate cut ignites a positive catalyst 3) Shanghai-HK stock-connect opens up a path for foreigners to buy into Chinese stocks. It's no wonder why the bulls there are on a war path.

We lift our mid-term objective for the SSEC to 2927 (from 2655) based on Fibonacci projection even as a near-term pullback cannot be ruled out, which should be halted above the 2500 support. Investors who are qualified to trade in Specified Investment Products (SIPs) can look selective China related ETFs should the SSEC pullback towards technical support. Refer to our report Regional Markets Focus (ETF Strategy - Global Markets Highlights for the Month) dated 18 November for more information and our ratings of these ETFs.

OUE Hospitality Trust(OUEHT) announced that it has entered into conditional agreements to acquire the 320-room Crowne Plaza Changi Airport (CPCA) for S$290m and the 243-room Crowne Plaza Changi Airport Extension (CPEX) for S$205m from sponsor OUE Limited. Depending on the financing structure - 100% debt or 75/25% debt/equity ratio - we estimate 0-7% upside to FY15-16F DPU and S$0.02-0.10 uplift to our TP. Gearing will likewise rise to 41-46% post the proposed acquisitions. The stock offers an attractive yield of 7.5%-8.1%. Maintain Buy (TP: $0.95).

Parkway Life REIT (P-Life REIT) proposes to acquire Habitation Jyosui, a private nursing home in Fukuoka. The acquisition price of JPY 3.5bn (S$39.3m) implies an initial yield of 5.8%. Gearing should remain conservative at c. 35% (vs 34% currently), well within the manager's long term optimal range of c. 40%. Given low interest rates in Japan and relatively high yield spreads achieved from this acquisition, we estimate DPU to increase by c. 1% post acquisition (expected in 1Q15). Our TP is likewise increased to S$2.66 (from S$2.62).

US futures are currently trading lower on news the holiday shopping season got off to a slow start over the weekend, with consumers cutting spending by an estimated 11% and far fewer bargain hunters hitting stores than predicted. Consumer spending fell to US$50.9bil in the past 4 days, down from $57.4bil in 2013, this according to the National Retail Federation. It was the second year in a row that sales declined during the post-Thanksgiving Black Friday weekend. Focus now shifts to Cyber Monday, when ecommerce sites release another wave of discounts.

Source: DBS

ParkwayLife Reit (C2PU)

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