Towards Financial Freedom
DBS Equity Research: Wired Daily 26 Mar 2015
Singapore Hospitality - Prospects of rebound dimming. Downgrade CDREIT to HOLD; top pick ART
Indonesian tourists, Singapore's largest source market (c.20% share) fell 7% y-o-y in 2H14 and we expect further weakness in 1H15. We believe this will taper expected rebound in visitor arrivals to Singapore. In our view, a key reason for this weakness is the 25% y-o-y cut in 1H 15 seat capacities by LCCs flying from Indonesia to Singapore. We now expect a 2% y-o-y decline in Indonesian arrivals in 2015 versus 5% growth previously. This is partially offset by an expected recovery in Chinese visitors (+12.5%) which should translate to 3% growth in overall visitors to 15.5m, in line with the top end of the Singapore government's recent 15.1m-15.5m target.
Given lower projected arrivals, our earlier hope of recovery in the hospitality market is fading. With new hotel supply (+6% yo-y), our revised industry RevPAR is expected to fall 5% y-o-y to S$209, compared to our earlier projection of a 3% improvement. We have reduced our FY15-17F DPU estimates for the hospitality S-REITs under our coverage by 2-8%. Likewise, this has led us to trim respective TP's by 1-5% and downgrade our BUY recommendations for CDL Hospitality Trusts to HOLD. Given our cautious stance on the Singapore hospitality market, we advocate investors focus on geographical diversified REITs, with Ascott Residence Trust (BUY, TP S$1.34) as our top sector pick.
SIIC Environmenthas entered into a sale and purchase agreement to acquire 92.15% stake in a group of water treatment companies for Rmb1,068.8m. The target group has a planned water treatment capacity of >1m tons per day, lifting SIIC's total capacity to 5.8m tons per day. In addition, it will pay off an outstanding debt of Rmb479.2m, bringing the total consideration to Rmb1,548m. The consideration will be settled by cash of Rmb151.7m and issue of 1.56bn new shares at S$0.132 per share. Maintain BUY with TP adjusted to S$0.20 (Prev. S$0.23) to reflect issue of new shares.
Swiber Holdings, despite the downturn in the oil and gas industry, clinches a total of US$405.6m for a series of contracts, including its latest US$333m contract for Engineering, Procurement, Installation and Construction (EPIC) services in India. The awards boost the Group's order book to over US$1.8 bn to-date.
Hyfluxhas been formally awarded the Qurayyat Independent Water Project (Project) by Oman Power and Water Procurement Company SAOC (OPWP), following the signing of the water purchase agreement. Hyflux holds 85% of the shares of Qurayyat Desalination Company.
Dairy Farm had acquired the Macau-based supermarket operator, San Miu Supermarket Limited. San Miu operates 15 mass-market supermarkets with an average gross store size of approximately 9,500 sq. ft. The acquisition of San Miu reinforces Dairy Farm's retail presence in Macau, and complements its convenience store and health and beauty businesses in the territory.
Civmec, which has seen its share price plunge over the past couple of weeks, said that it is on the lookout for potential acquisitions to expand its business. It is still actively tendering for contracts in all of its business segments and may consider buying back its own shares to support the hammered stock.
Asia Fashion Holdings has entered into placement agreements for 58.8m new shares at a placement price of S$0.06 per share. The issue price represents a premium of approximately 9.09% to the last volume weighted average price. The estimated net proceeds of approximately S$3.2m will be used for investment and for working capital purposes.
Beng Kuang Marine has entered into agreements to issue up to S$5m in aggregate principal amount equity-linked redeemable convertible bonds, which will bear interest at eight per cent (8%) per annum. The Bonds will not be listed. The conversion price is S$0.21 per share.
US stocks fell, led by technology sector as the selloff in semiconductor stocks amid downgrades on suppliers to the PC business spread to the broader market. The Philadelphia Stock Exchange Semiconductor Index dropped 4.6%. Durable goods orders (actual -1.4%, consensus +0.2%, previous +2%) unexpectedly dropped in February, a sign the slowdown in global growth may be weighing on American manufacturers.
Source: DBS
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