DBS Equity Research: Wired Daily 12 May 2015

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Publish date: Tue, 12 May 2015, 03:28 PM

Singapore Property - EC sales slide on eroding price advantage

Frasers Hospitality Trust - Acquires Sofitel Sydney Wentworth for A$224m. Maintain BUY, TP raised to S$0.96

The recent five EC launches over Dec'14-Jan'15 are seeing mixed results. With the exception of Lake Life (located at Jurong West) which is substantially sold, the remaining projects - The Terrace (546 units) in Punggol, Bellewaters (651 units) in Sengkang, Bellewoods (561 units) in Woodlands, The Amore (378 units) in Punggo have only managed a 26% sell through rate, as of April'15. Competition to heat up as nine projects with 4,900 units is expected to enter the market by end of 2015. However, any policy tweak in the EC space could revive demand. As the government "mulls over" changes in the monthly household income ceiling for HDBs and ECs, we believe that any policy changes could widen the addressable market and lift transaction volumes in the space.

Frasers Hospitality Trust(FHT) announced its maiden acquisition with the purchase of 436-room Sofitel Sydney Wentworth for A$224m (c.S$236m). We are positive on the acquisition, given the increased exposure to the expanding Sydney market which is a beneficiary of growing tourist arrivals, new infrastructure projects as well as a benign supply outlook. We estimate 2% upside to our FY16F DPU forecasts. Maintain BUY, TP raised to S$0.96 (Prev S$ 0.95).

Centurion Corporation's1Q15 net profit makes up 24% of full-year estimates. Singapore posts a resilient set of results. Contribution from student dorms is expected to drive earnings. Although Centurion entered the student accommodation business only in 2014, we expect this business segment (which comprises the UK portfolio and 456-bed RMIT Village in Melbourne) to contribute c.20% of Centurion's net profit in FY15. Maintain BUY, TP S$0.85.

1Q15 earnings of US$27.7m for First Resources (FR) were below our/consensus expectations. The weaker earnings are a reflection of lower CPO ASP and zero export tax regime. FR is a beneficiary of Indonesia's B15 export levies, but implementation remains key. We are leaving our earnings, TP and HOLD for now; pending publication of export levy regulations.

The Land Transport Authority (LTA) announced that the first bus package (Bulim Bus Package) has been awarded to Tower Transit. Tower Transit is a bus operator from the UK. Under this contract, Tower Transit will operate 26 bus services progressively from 2H2016. The buses will be based at the Bulim Bus Depot and will operate from Jurong East, Bukit Batok and Clementi Bus Interchanges. The estimated value for the 5-year contract is S$556m. We currently retain our earnings forecasts for both ComfortDelGroand SMRT as we have already assumed that both incumbents do not win any of the three bus packages that will be up for competitive tender. In the near term, it should allay the market's earlier fears that SMRT's lowest price submitted will result in losses.

Tigerair Operating Statistics April 2015. For the month of April 2015, the airline operations in Singapore recorded a 6.4% (y-o-y) decline in traffic to 777 million revenue passenger-kilometres (RPK), while capacity decreased by 6.0% to 942 million available seat-kilometres (ASK). Consequently, y-o-y passenger load factor decreased by 0.3 percentage point to 82.5%. The number of passengers carried fell by 8.6% y-o-y to about 413,000. For the 12 months to April 2015, traffic increased by 2.1% y-o-y to 9.6 billion RPK, while capacity decreased by 2.6% to 11.8 billion ASK. Consequently, passenger load factor was 3.9 percentage points higher at 82.1%. The number of passengers carried declined by 0.8% to 5.1 million.

Manufacturing Integration Technology has signed two new solar contracts worth a total of RMB97m (S$21m) to design and supply 2 lines of equipment for making building integrated photovoltaics (BIPV) to a customer in China. Delivery for these 2 new contracts is scheduled to be completed by the end of 2015.

Quote from Bloomberg, MAS board member Lawrence Wong commented in Parliament yesterday that there are reports of aggressive land-banking by developers in Iskandar and Johor. There are more than 335,838 new private homes in the pipeline in Johor, according to data from Malaysia's National Property Information Centre. This is more than total number of private homes in Singapore. Fortunately, financial institutions in Singapore don't have large exposure to loans for purchase of overseas properties. Such loans make up only 2% of home loan portfolio of key mortgage lenders.

The government could potentially issue between S$2 bn and S$4 bn of the new Singapore Savings Bonds (SSB) in 2015 alone, depending on demand. When the first tranche of these non-tradable government bonds is launched in the second half of this year, investors can apply for up to S$50,000 for each issue, and be allowed to hold up to S$100,000 of the bonds at any one time. The minimum amount to apply for is S$500. The SSBs are a new type of Singapore Government Securities (SGS) designed to offer a long-term, flexible savings option with safe returns; both the principal and interest payments are guaranteed by the government.

US stocks fell, led by energy stocks as oil price fell. US and European bond yields rose as uncertainties lingered on whether Greece can resolve its debt problems. Greece needs to pay about €750mil to the IMF by today. Oil price fell on concerns that a global supply glut will continue.

Source: DBS

Frasers HTrust (ACV)Centurion (OU8)ComfortDelGro (C52)

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