Towards Financial Freedom
DBS Equity Research - Wired Daily 8 Jan 2016
Singapore Property & REITs - Developer top picks: CAPL, CDL and FCL as valuations are too cheap to ignore. S-REIT top picks: A-REIT, FCT, MAGIC and CRCT for stable growth amidst attractive yields
We expect lower prices and rentals across most major real estate subsectors on the back of a more modest economic outlook for Singapore. Cyclical sectors especially office and hotel sectors, will feel the brunt of the economic slowdown on top of downward pressure from heightened supply completions over 2016-2017. We believe retail sector to remain resilient with preference for malls with sizable scale in the suburban space.
We believe that it is time to re-look at property developers, now trading at an attractive 0.7x P/Bk which is close to cyclical troughs (vs normalized 0.9x P/bk). Our top developer pick is CapitaLand, City Dev and Frasers Centrepoint Ltd for their improving ROEs, diversified earnings base respectively and conservative balance sheets. SREITs currently offer forward yield spreads of 4.0%. Our preference is to position in resilient sectors and selected offshore-focused S-REITs with continued ability to deliver consistent growth. We like Ascendas REIT, Frasers Centrepoint Trust, Mapletree Greater China Trustand CapitaLand Retail China Trust.
Koh Brothers Group(KBG) and its SGX Catalist-listed subsidiary, Koh Brothers Eco Engineering (KB Eco), announced their proposal for KB Eco to acquire a KBG subsidiary involved in building and civil engineering construction for S$19m. The restructuring exercise is to streamline Koh Brothers Group's businesses and reap synergies with subsidiary company Koh Brothers Eco Engineering to tap opportunities in the water and wastewater treatment and hydro-engineering sectors. Koh Brothers Group will focus on property development, building materials as well as leisure and hospitality businesses with a view to expand regionally. Koh Brothers Eco Engineering, with broadened capabilities, is well positioned to tender for projects in the hydro-engineering and construction sectors.
Standard & Poor's cut its investment credit rating on Noble Group to junk, lowering its long-term corporate credit rating on the Hong Kong-based company to "BB+" from "BBB-". A week ago, Moody's Investors Service cut Noble's rating to junk status. Credit rater Fitch Ratings, however, said that the increased collateral requirements for Noble (BBB-/Stable) following a series of credit events in 2015 is manageable, given its improved liquidity following asset sales.
CapitaLand's wholly owned serviced residence business unit, The Ascott Limited (Ascott), will make available its global network of serviced residences on Alitrip, an online travel service platform under Chinese e-commerce giant the Alibaba Group, a first for any serviced residence company. The partnership will allow Ascott to deepen access to over 100 million Chinese travellers currently served by Alitrip.
Private equity investors Blackstone Group LP and Gaw Capital Partners are weighing separate bids for Singapore's Ascendas Hospitality Trust, according to sources, eyeing a target with a market value of US$600m.
US S&P 500 index sank 2.4%, on the back of the collapse in China's stock market. Another cut in the value of the Chinese yuan triggered a plunge in shares on Chinese exchanges, leading to the second suspension of trading on the Shanghai exchange this week. Dow shed 2.3% while Nasdaq suffered the deepest losses, down 3%. The sell-off was widespread, even hitting tech giants Apple and Amazon, which were down 4% and 3.7% respectively.
Source: DBS
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