DBS Equity Research: Wired Daily 11 May 201

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Publish date: Mon, 11 May 2015, 11:33 AM

STI - Correction likely ended at 3425 last week, expect initial rise towards 3500

Ascendas Hospitality Trust - Upgrade to Buy TP $0.73

Stocks should start the week on a positive note on the back of Friday's rally on Wall Street and after China loosened monetary policy further over the weekend. In US, concerns about a June rate hike faded. The PBOC will reduce the oneyear lending rate 0.25% to 5.1% and cut the one-year deposit rate by the same amount to 2.25%, effective Monday. The deposit-rate ceiling will be expanded to 150% of the benchmark from 130%. Expect interest among selective S-chips and property names with China exposure.

We believe that STI's pullback from 3550 has ended at 3425 last week, this on the presumption that Greece's €750mil loan repayment to the IMF tomorrow will proceed smoothly. Doing so should see a further rise in the STI to 3500. However, if that doesn't go well and global markets react negatively, a further dip towards 3370 (200-day EMA, closer to 13x or -0.5SD fwd PE) is possible before the correction ends.

4Q DPS for Ascendas Hospitality Trust rose 3% y-o-y to 1.25cts, in line with expectations. Going forward, we expect the growing number of international visitors to continue to boost ASCHT's properties in Australia and Japan. Combined with lower than expected overheads, we raise our FY16-17F DPU by 1% each and lift our DCF-based TP to S$0.73 from S$0.68. With ASCHT trading below its NAV per share of S$0.74 and offering one year total returns of 12% (4% upside to our revised TP of S$0.73 and attractive 8.3% yield), we upgrade our recommendation to BUY.

Perennial Real Estatereported 3Q15 revenue of S$27.1m and EBIT of S$15m while operating PATMI came in at S$3.4m, in line with expectations. Looking ahead, we expect earnings to ramp up progressively as AXA Tower begins to contribute from this quarter onwards; we also anticipate recognition of a one-off acquisition fee of c.S$12m in respect of this asset. With things progressing on track, we maintain our BUY call, with TP of S$1.30 representing a 40% discount to our RNAV of S$2.16 (adjusted from S$2.14 as we factor in a smaller-than assumed share base).

Core net profit for F&N was S$25.7m, down marginally by 1.5% y-o-y while topline increased by 3.2% y-o-y to S$608.3m. The marginally below expectations results were dragged by weaker soft drinks and printing and publishing performances. DPS of 2 Scts declared. We expect growth to be subdued going forward, given the muted consumer sentiment, particularly in Malaysia post-GST implementation in April. We maintain our HOLD recommendation with a TP of S$2.80. The stock is currently trading at 28x/24.5x FY15F/16F PE which we believe is fair. Upside or downside catalysts could arise from an unexpected valuation outcome of its 55% stake in MBL.

Core 1Q15 earnings of US$263m for Wilmar International were above our forecast but slightly below consensus on annualised basis. The earnings jump was due to 11-fold increase in Oilseeds & Grains pretax, drop in FX losses, higher Associates' contribution and offset by drop in Tropical Oils pretax. Going forward, soybean crush margins should remain strong in 1H15 while Tropical Oils contribution may recover in 2H15. We are maintaining our earnings forecasts for now, pending issuance of CPO export levies in Indonesia. TP maintained at US$3.50. Maintain HOLD.

2Q15 results for Frasers Centrepoint Ltdwas in line with expectations. A 2.4 scts interim dividend was declared. FCL has existing capital recycling platforms in its listed REITs that are trading well and can potentially acquire stabilized assets from FCL, freeing up capital to invest in other higher ROE development projects. We recommend BUY on FCL, with a target price of S$2.36 based on a 30% discount to RNAV. We think that FCL is attractive at 0.7x P/Bk NAV and believe that the stock is trading at this level largely due to its tight liquidity constraints.

Source: DBS

F & N (F99)Wilmar Intl (F34)Frasers Property (TQ5)

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