DBS Equtiy Research: Wired Daily 10 April 2015

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Publish date: Fri, 10 Apr 2015, 11:17 AM

Keppel DC REIT - Strong maiden results; maintain BUY, TP raised to S$1.10

Keppel DC REIT has reported a strong set of maiden results. DPU of 1.94 scts was in line. The REIT has managed to lock in better than expected interest rates of 2.5% (vs forecast of 3.2%) and has hedged 100% of its debt over the next 4-5 years. Going forward, acquisitions will be a key growth driver. We have assumed c. S$50m worth of acquisitions @8% yield (nil previously) to contribute by 3Q15. Maintain BUY, TP raised to S$1.10 (Prev S$ 1.05).

United Envirotechannounced that it has entered into an agreement for the acquisition of an industrial waste water treatment plant (with total capacity of 200,000 m3 per day) and a recycling plant (with a capacity of 20,000 m3 per day) in Gaoyang, Hebei. Both plants are operating in full capacity. Consideration amounts to Rmb500m. In addition, United Envirotech has the right to further expand the waste water treatment plant into Phase III with a capacity of 60,000 m3 per day, bringing the total capacity of waste water treatment to 260,000 m3 per day. The capacity of the recycling plant will also be expanded to 40,000 m3 per day. Coupled with a new recycling plant (another 40,000 m3 per day), total recycling capacity will be 80,000 m3 per day. Total investment cost of the expansion is estimated to be Rmb300m. United Envirotech targets to become a top three player in the water sector. Our HOLD rating and TP are under review.

Sound Globalannounced that the asset injection plan from Sound Environment is terminated. One of the conditions for the transaction is that trading of Sound Global's shares cannot be suspended for more than 15 consecutive trading days. As the shares have been suspended since 16 Mar and will continue to be suspended until the announcement of 2014 results, the above condition cannot be fulfilled. As a result, the asset injection plan will be terminated.

SMRTsubsidiary Singapore Rail Engineering (SRE) and Faiveley Transport, a global manufacturer and supplier of railway equipment, have entered into a joint venture agreement to market and supply maintenance, repair and overhaul (MRO) services for rolling stock components in South-east Asia. The scope of the agreement covers the region except for Thailand, Taiwan and Hong Kong. The joint venture company will market and supply MRO services for brakes, access doors, platform screen doors, heating ventilation and air-conditioning systems, and automatic power supply systems.

Viva Industrial Trust (VIT) has secured its first retail anchor tenant, global sporting goods retailer Decathlon, for its asset enhancement initiative (AEI) at Technopark@Chai Chee.

With manufacturing's poorer than expected showing so far this year, Singapore's economic growth in the first quarter is expected to have slowed from that of the previous three months. In quarter-on-quarter annualised terms, gross domestic product (GDP) is forecast to have expanded a mere 0.1% after seasonal adjustments, after Q4 2014's 4.9% sequential growth. And according to consensus forecast, year-on-year growth remained flat at 2.1% in Q1, unchanged from Q4 2014's pace. These market forecasts put Q1's growth at the low end of the official 2015 forecast of 2-4% growth. The advance Q1 growth estimates will be released on April 14. The central bank is due to release its monetary policy statement then too.

In US, Dow closed higher, with gains in the energy and healthcare sectors partly offset by falling utilities shares. Energy shares rebounded as crude prices bounced back from a trouncing in the previous session. The dollar added to recent gains, on a continued reaction to more hawkish comments from Federal Reserve officials suggesting that a June interest-rate increase could still be a possibility. US bond yields were also higher, after a weak sale of 30-year Treasury bonds.

Source: DBS

Keppel DC Reit (AJBU)

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