DBS Equity Research: Wired Daily 26 Jun 2015

kiasutrader

Publish date: Fri, 26 Jun 2015, 04:52 PM

Vard Holdings (Fully Valued) - Limited catalysts, weak YTD order wins and poor visibility on margin recovery

Though the share price for Vard Holdings has corrected sharply over the last 12 months, we believe sentiment may continue to be affected by further losses in the Brazilian yards, as well as lack of order wins. Management has previously indicated that fierce competition for a limited number of specialized vessels has resulted in a very challenging environment, and Vard could well end up falling short of our NOK5bn new order win assumption for FY15. We maintain our FULLY VALUED recommendation with a target price of S$0.49, still pegged to 0.8x FY15 P/BV.

CapitaLand Limitedis selling their stake in DBS China Square Limited to DBS Group Holdings for a cash consideration of S$150m. The actual transacted price (after accounting for underlying debt) is closer to S$1,892 psf, which is in-line with valuation. Assuming a rental rate of S$9psf, this implies a yield of close to 4%, which is in line with office market valuations and transactions. The strategy is in line with CapitaLand's ongoing revaluation to recycle capital and deploy into higher yielding assets. Maintain BUY, TP S$4.11

Ascott Residence Trust(ART) has acquired three serviced residences and four rental housing properties in Australia and Japan for S$298m (inclusive of associated property debt), implying FY15 EBITDA yield of c.5.5%. The acquisition will be funded by (1) c.S$150m from the S$250m perpetual securities (4.68% yield) issued recently, and (2) JPY debt at c.1.5% interest rate. The transaction will expand ART's exposure to the growing Melbourne hospitality market, where RevPAR is projected to increase by 7.3% in 2015, according to Cushman & Wakefield.

Frasers Hospitality Trustintends to raise up to S$123mil by placing out 150mil new stapled securities at $0.81-0.82 apiece to fund its acquisition of Sofitel Sydney Wentworth. The offer size is about 12.5% of the existing units for the Trust. The indicative offer prices are at a 4.2-5.4% discount to Thursday's volume-weighted average price of $0.8558. US stocks fell after Thursday's negotiation between Greece & its creditors failed to reach an agreement, dragging discussions into the weekend before the deadline for debt repayment next Tuesday. Euro-area finance ministers reconvene Saturday. Energy stocks led losses as concern over a ramp up in oil output sent oil prices lower.

Also, US data shows inflation continues to drift lower. The core PCE deflator - the Fed's favoured inflation gauge - rose by a single tick in May, taking on-year inflation in the series to 1.2% from 1.3% in April. Our economist believes that the Fed has to be watching this. For the past three years, core PCE inflation has been drifting away from the Fed's 2% target rather than towards it. Officials may be confident, as we are, that inflation will move back towards 2% over time. But it would be another thing entirely to pull the trigger on rate rises while the target was slipping further from view. So long as core PCE inflation continues to drift lower, the Fed will be obliged to remain on hold.

Source: DBS

Frasers HTrust (ACV)

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