Towards Financial Freedom
DBS Equity Research: Wired Daily 27 April 2015
STI - Range within support at 3430-3550 near term
FCOT acquires Australian property from wholly owned FCL subsidiary for A$222.5mil
We maintain our view that in the near-term, STI should range within support at 3430-3450 that coincides with the 13.4x (-0.25SD) 12-mth forward PE and resistance at 3520-3550 that is around the 13.8x (ave) 12-mth forward PE. A pullback to 3430/50 is an opportunity as the underlying trend remains up and our current year-end target is 3620 based on a conservative 13.4x (-0.25SD) FY16F PE. If the current tendency for the Singapore market to head for its 13.8x (ave) 12-mth forward PE continues, there is even room for the STI to end at 3720 by year-end.
Meanwhile, the current fair valuation of the Singapore market, being a 'follower' status to HK/China equity markets, numerous blue chips going ex-dividend during this period and the unlikelihood that the current 1Q results season will see a meaningful upward earnings revision are reasons why we think the Singapore market has paused for a breather in the near-term.
The 1QCY15 results season is in progress. Key results this week include the three banks, HPH Trust, SembCorp Marineand hospitality stocks - CDL Hospitality Trust and Far East Hospitality Trust.
Mapletree Greater China Commercial Trust 4Q15 DPU of 1.742 Scts (+10% y-o-y) is in line with expectations. A 13% increase in valuation of its investment properties was attributed to higher rental income and a weaker SGD. This led to a corresponding rise in NAV per share to S$1.198 from S$1.058 at end-Mar14. The outlook is positive at Festival Walk despite fewer visitors from Hong Kong while tailwind should resume of the SGD continues to weaken. Maintain Buy, TP: $1.15.
Frasers Commercial Trust(FCOT) announced it has entered into a conditional agreement to facilitate Frasers Centerpoint Limited (FCL) in carrying out the development of a hotel at China Square Central. A long lease for the hotel will be granted to FCL for S$44.8m. FCOT also announced the acquisition of 357 Collins Street, Melbourne, Australia for A$222.5m (c.S$232.2m) from Australand, a wholly owned subsidiary of FCL.
Brazilian rig-owner Sete Brasil is in advanced talks with state-run banks Banco do Brasil and Caixa Economica Federal (CEF), seeking a US$3.7bn credit line, along with another US$1.7bn through an infrastructure fund linked to CEF. In addition, Sete Brasil's shareholders are poised to pump another US$1.3bn into the project.
The new financial arrangements are an attempt to circumnavigate the refusal by Brazil's national development bank (BNDES) to anchor a promised US$5bn loan after bribery allegations against the entity's former director. If finalized, this should eliminate a key overhang - Sete Brasil's default risks - for Singapore rigbuilders, which last received monthly payments from the Brazilian customer in Nov-2014.
Source: DBS
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