DBS Equity Research: Wired Daily 2 Dec 2014

kiasutrader

Publish date: Tue, 02 Dec 2014, 10:51 AM

CDL HT's entry into Japan hospitality market positive - TP raised to $1.86

China related ETFs - Our HK market strategist sees more upside potential for A-shares

The benchmark STI fell 45pts yesterday to 3305 as it reacted to news of a soft Chinese November PMI figure and disappointing US Black Friday sales. Still, the decline is not unexpected. We expected further near-term decline to be halted around 3290 with immediate resistance at 3330. We keep the year-end objective of 3400.

Meanwhile, our HK market strategist sees more upside potential for A-shares. Despite the already strong YTD performance, the CSI-300 is still only trading at around 9.5x forward PE, or 1S.D. below 5 year mean of 12.5x. He expects H-shares to outperform the HSI in Dec 2014 and 2015 and Ashares to outperform both. He sees the current strength continuing for some time.

The positive outlook for A-shares is in line with our technical view for the SSEC to head for 2927 over the mid-term with near-term pullback support seen at 2650. Investors who are qualified to trade in Specified Investment Products (SIPs) can look at the following ETFs should the SSEC pullback towards technical support - 1) ISHARES FTSE A50 CHINA INDEX or 2823 HK 2) CSOP FTSE China A50 ETF or 82822 HK 3) CHINAAMC

CSI 300 IDX ETF or 83188 HK 4) DB X-TRACKERS FTSE CHINA 50 5) UNITED SSE 50 CHINA ETF 6) DBX CSI 300.

CDL Hospitality Trustsannounced the acquisition of two business hotels in Tokyo, Japan - the 138-room MyStays Asakusabashi and 116-room MyStays Kamata for a combined JPY5.8b (S$63.8m). This maiden acquisition in Japan marks its entry into the established and fast growing hospitality market. On the back of the robust outlook, CDREIT guided that ADR should increase by at least 5% p.a. over the next couple of years. With the acquisition 100% debt funded with JPY borrowings (interest rate of c.1.5%), we project 2% uplift to our FY15-16F DPU and raise our DDM-based TP to S$1.86. Maintain Buy.

Huationg Global, a Singapore-based integrated civil engineering provider, has launched an IPO for a Catalist listing on the SGX. The IPO offers a total of 27.5mil placement shares at 20cts each that represents approximately 18.2% of its post-placement share capital of 151.4 million shares. The IPO is expected to raise approximately S$5.5mil in gross proceeds, including net proceeds of about S$4.1mil. Some S$1.5mil will be used to explore mergers and acquisitions, joint ventures and strategic alliances.

China's official November PMI came in at 50.3, lower than the 50.8 recorded in October and the weakest since March, signalling further downward pressure on the Chinese economy. The PMI is considered a key indicator of the health of China's economy. Meanwhile, the HSBC Markit PMI for Indonesia fell to 48.0 in November, while is the lowest reading since the survey began in April 2011. The figure was down from 49.2 in October. A reading below 50.0 signals a contraction in activity. The dismal reading is due to sharply weaker output and new orders.

U.S. stocks fell after holiday spending slowed and the latest PMIs for China and Germany dropped. Technology and retailers led the decline. A report from the National Retail Federation showed US consumers spent an estimated 11% less than last year over the 4 days through November 30. Oil rebounded from its lowest level in 5 years with Brent crude for January delivery rising 3.4% to USD72.54pbl. Yields on 10-year Treasuries rose 7bps to 2.23%.

Source: DBS

CDL HTrust (J85)

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