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DBS Equity Research: Wired Daily 21 Sep 2015

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Publish date: Mon, 21 Sep 2015, 01:07 PM
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OUE Commercial REIT - Initiate coverage with HOLD call, TP S$0.67

Ascendas REIT - Upgrade to BUY on valuations, TP raised to S$2.45

The 2750-3050 range for the STI continues. The FED has pushed back the initial rate hike and for the first time cited uncertainties in China and emerging markets as one of the reasons for the postponement. A December hike is still on the cards. The risk of a technical recession in Singapore is now higher with the weak August NODX. We are bias for a downward move towards 2750 before support emerges.

We initiate coverage on OUE Commercial REIT (OUECT) with HOLD call, TP S$0.67. OUECT's transformational exercise with the acquisition of One Raffles Place is expected to provide earnings upside while Sponsor's income support offers earnings stability through a potentially volatile 2016-2017. The stock currently offers investors a DPU yield of 7.5% for FY16 which is attractive but fair.

Ascendas REIT is proposing to acquire a portfolio of 26 logistics properties in Australia for A$1,013m from the real estate arm of GIC and Frasers Property Australia Pty Limited through their controlled subsidiaries/ affiliates. A-REIT intends to fund the acquisition through a mix of debt and new perpetual securities (60%:40% ratio); the latter is likely to be opportunistic, given the current appetite for yield in the capital markets. This acquisition is expected to provide 3.0%-3.5% uplift to DPU, with further earnings diversification. Upgrade to BUY on valuations, TP raised to S$2.45 (Prev S$2.30).

Sembcorp Industries has signed an agreement to divest its 40% stake in SembSita Pacific to 60% joint venture partner, Suez Environnement Asia, for a sale consideration of A$485m. SembSita is an investment holding entity for an integrated waste management business in Australia. This divestment will result in an expected net gain of approximately S$350m for the Group for the financial year ending December 31, 2015. The divestment is subject to Foreign Investment Board Review approval in Australia, and is expected to be completed by the fourth quarter of 2015.

Shenzhen-listed ZhongHong Holdings intends to make a cash bid for Asiatravel.com at 30 Singapore cents a share in a deal worth S$93m. ZhongHong is mainly involved in marketing, sales and development of commercial properties, mainly in the tourism space such as theme parks.

SHS Holdings, formerly known as See Hup Seng, is proposing to sell off its biggest business segment. It has inked a deal to sell its refined petroleum distribution arm for S$100.3m in cash to German chemicals distributor Brenntag. The disposal would unlock shareholder value and boost its financial flexibility. This will enable SHS to grow its other strategic business units.

Source: DBS
OUE Com Reit (TS0U)CapLand Ascendas REIT (A17U)Sembcorp Ind (U96)SHS (566)Asiatravel.com (5AM)
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