DBS Equity Research: Wired Daily 2 Jan 2015

kiasutrader

Publish date: Mon, 05 Jan 2015, 10:09 AM

SIA - Lift from lower jet fuel price; upgrade to BUY with S$12.90 TP

Ascendas India Trust - Deploying capital to use; upgrade to BUY, TP raised to S$0.87

The year-end holiday lull period ends but we do not see bulls rushing in like the flick of a switch to greet the New Year. There is limited upside in the immediate term with the likelihood of a pullback to near-term support at 3330 or 3000. Support is firm at 3250 that is close to 13x (-0.5SD) 12-mth forward PE. It may be a slow start to the year but interest should pick up from February as investors once again position ahead of blue chips' FY ex-dividend period typically in the months of Apr-May.

SIA Group(including Tigerair), is projected to consume over 48m barrels of jet fuel per year, and with jet fuel currently at US$75 per barrel versus nearly US$120 per barrel just in August, benefits from lower fuel costs should be substantial. However, the upside will not be immediately apparent given that the US$ has strengthened by about 6% against the S$ since August and that SIA has hedged over 60% of its fuel requirements until March 2015 at c. US$116/bbl. We now assume jet fuel price to average US$95/bbl in FY16 vs US$125/bbl previously, but cost savings would be partially offset by stronger USD/SGD rate and lower yield assumptions. We lift FY16F earnings by 30% and introduce FY17 estimates; expecting SIA's ROE to rebound strongly to 7.3% in FY16 and 9% in FY17. Higher dividends for FY16 are likely given improved profit outlook and strong balance sheet. Upgrade to BUY with S$12.90 (Prev S$ 10.12) target price (1.1x FY16 P/BV).

Ascendas India Trust(a-iTrust) announced the acquisition of BlueRidge Phase II, a 1.5m sq ft IT property in Pune. a-iTrust will initially subscribe for INR2.6bn (S$54m) worth of Nonconvertible Debentures (NCDs) to help fund the construction of the property which is 80% completed and scheduled for completion by 2H15. On 31Dec 16, AIT will then acquire the property if the minimum leasing threshold of 65% is met, at no more than INR6.4bn (S$133m) or at an estimated 10-11% NPI yield. Downside protection comes from the right to call for the repayment of the NCDs, if the property fails to meet the minimum 65% leasing threshold then. The acquisition will be funded through existing cash and additional bank debt. There is a potential 1-9% upside to FY15-17F DPU. Upgrade to BUY, TP raised to S$0.87 (Prev S$ 0.81).

Centurion announced that its 51/49 JV with Lian Beng Constructionhas won a land tender by the Association of Process Industry (ASPRI) to develop a 7900-bed workers' dormitory and training centre for workers in the process industry, located at Jalan Papan, which is close to Jurong Island. According to the Group, total development cost, which includes land premium and acquisition cost, is estimated at S$200m, and will be funded by a combination of bank loans and internal resources. The dormitory is expected to be completed in 2017, and this will coincide with expiry of the 8,600-bed Tuas dormitory, thereby mitigating against the expected drop in earnings. We are positive on this deal, as it bolsters Centurion's core business segment in Singapore amid a highly competitive bidding landscape. Maintain BUY, target price adjusted to S$0.85 (Prev S$ 0.91) as we roll forward valuations.

Japfahas entered into a strategic five-year milk supply agreement with Inner Mongolia Yili Industrial Group (Yili), China's second-largest dairy producer by revenue. The agreement will see the Group supplying 500 tons of raw milk per day to Yili from 2015 to 2019. The latest off-take agreement with Yili follows another contract to supply

China Mengniu with 100 tons of raw milk per day in 2015.

Soilbuild Construction Group has been awarded a S$128m contract by the Housing & Development Board (HDB) for the building works at Sembawang Neighbourhood 3 Contract 8 and Park. The construction period is approximately 36 months.

The Singapore economy grew a weaker-than-expected 1.5% y-o-y in Q4 2014, slowing from Q3's 2.8% expansion as the manufacturing sector shrank in the final quarter. The market was expecting Q4 growth of 2.2%. In quarter-on-quarter terms, the market's median forecast of an annualised 3.1% growth rate turned out to be optimistic too. The government's advance estimates point to a quarter-on-quarter annualised growth rate of 1.6% in the quarter, after seasonal adjustments. This was also a slowdown from Q3's 3.1% quarter-on-quarter expansion. All the key sectors weakened in the final quarter of 2014. Growth of 1.6% in Q4 implies that the economy grew 2.8% over the whole of 2014. The government has said that it expects the economy to grow by 2-4% in 2015.

China's official Purchasing Managers' Index (PMI) slipped to 50.1 in December from November's 50.3, a government study showed. This is its lowest level of the year. An index for new orders - a proxy for foreign and domestic demand - retreated to 50.4 in December from November's 50.9. But new export orders shrank at a slower rate, climbing to 49.1 in December from 48.4 in November.

Source: DBS

SIA (C6L)CapLand India T (CY6U)Centurion (OU8)Japfa (UD2)Soilbuild Const (S7P)

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