DBS Equity Research: Wired Daily 26 Jan 2015

kiasutrader

Publish date: Mon, 26 Jan 2015, 04:59 PM

Singapore Property Sector - Sentiment towards developers remain positive: stock picks are CAPL and UOL, Wing Tai. More volatility ahead for REITs.

Ezra - Outlook not exciting, maintain HOLD with lower TP of S$0.59

Capitamall Trust - Downgrade to HOLD on valuations

Sentiment towards property developers remain positive. Although the latest 4Q14 real estate data suggests a further 1.1% decline in the private property index, the negatives have been priced in. Valuation for the property sector remains attractive despite the recent rerating.It is also trading at below historical mean of 0.9x P/Bk NAV. For developers, we still like CapitaLandfor its multi growth levers. Also, its asset re-cycling strategy could bear fruit in 2015 as its listed REITs, CMT/CCTand CRCT are trading at levels at which acquisitions would be earnings accretive. UOL and mid-cap developer Wing Tai seems attractively valued. For REITS, we expect more volatility ahead as yield spreads are now tighter than historical average. Our picks are Ascendas-REIT, Mapletree Greater China Commercial, CDL Hospitality Trust and Frasers Commercial Trust.

Ezrahas been unable to stage a convincing turnaround in operating profitability over the past few quarters, with losses from the subsea division dragging down Group earnings. The offshore support vessel segment also failed to show signs of any strong margin rebound as the shallow water market remained especially competitive in the midst of oil price decline. Outlook is not exciting. New order intake is likely to be lower than FY14 while margins are also unlikely to rebound sharply back to normal in 2Q-FY15, as it is a seasonally weak quarter. We are cutting our FY15/16 core net profit forecasts for Ezra by about 60% to US$29m and US$42m respectively. Maintain HOLD with lower TP of S$0.59 (Prev S$ 1.17).

4Q14 results for Capitamall Trust in line. Short-term weakness anticipated as the Trust positions itself for long-term sustainability. Rental reversions are expected to moderate further. Downgrade to HOLD on valuations, TP S$2.19 (Prev S$ 2.12). At its current price, CMT offers a dividend yield of 5.1% for FY15F.

WE Holdings is proposing a renounceable non-underwritten rights issue of up to 4,206.03m warrants at an issue price of S$0.001 for each Warrant, on the basis of nine (9) warrants for every ten (10) existing share held. Each Warrant will carry the right to subscribe for one new share at an exercise price of S$0.003 for each New Share. The proposed issue is to raise additional funding to strengthen the financial position of the Group by enlarging working capital and capital base and enhance financial flexibility to capitalise on potential growth and acquisition opportunities. The company sets sights in mineral rich Philippines and targets the growing Philippines Commodity market.

DeClout has acquired about 520,000 new shares of its subsidiary Corous360 for S$7.36m, shoring its interest in the subsidiary back up to a 100%. DeClout has been in expansion mode in recent years in a bid to create vertical domain clouds in Asia, starting with the gaming domain.

Prices of private homes down 4% in 2014. The drag on the overall private residential price index came from both landed and non-landed (private condos) categories. Prices of landed homes fell 5.3% over the course of last year as these properties become even less affordable given the lending curbs while prices of non-landed private homes slipped 3.5%. At the same time, sales of private condos dived 44% from 2013's level to 12,723, of which 2,635 were sold in the last quarter. On a quarter-on-quarter basis, prices of landed homes declined 1.3% in Q4 while nonlanded private homes fell 1%. City-fringe private condos in the Rest of Central Region (RCR) suffered bigger price declines than those in the Core Central Region (CCR). RCR prices fell 1.4% in Q4, followed by CCR, down 0.9%; and Outside Central Region (OCR), down 0.8%.

Source: DBS

Ezra (5DN)CapLand IntCom T (C38U)

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