DBS Equity Research: Daily Wired 26 Jan 2016

kiasutrader

Publish date: Tue, 26 Jan 2016, 02:07 PM

SMRT - Benefiting from government grants and lower energy costs, Upgrade to HOLD

US stocks fell, led by the energy sector as oil price pulled back from their recent rebound. The Dow declined 208pts, retracing c.38.2% of the gains in the past 2 days. Focus continues to be on the mid week FOMC meeting. Ahead of this, we see just moderate downside for the Dow with immediate support at 15790 that is about 100pts lower. To the upside, we note Dow's resistance at 16500.

OUE Hospitality Trust 4Q15 DPU came in at 1.7 Scts (-4.5% y-o-y), taking FY15 DPU to 6.55 Scts (-2.8% y-o-y) which was in line with our 6.52 Scts estimate. The weaker 4Q15 DPU was largely on the back of 3.7% decline in RevPAR at Mandarin Orchard Singapore (MOS) due to the heightened competition in the Singapore hospitality market, dip in committed occupancy at Mandarin Gallery to 94% from 98% in 3Q15 and increase in borrowing costs (+78% y-o-y) and number of shares on issue following the acquisition of Crown Plaza Changi Airport in early 2015. Gearing was stable at 42% with the average costs of debt inching up to 2.7% from 2.5% at end Sep15. The majority of OUEHT's debt (83%) also remains on fixed rates. While OUEHT is expected to face a challenging year ahead due to increased hotel room supply in Singapore, we believe this has largely been priced in with the stock trading at 17% discount to NAV per share of S$0.90. Thus, we maintain our BUY call and TP of S$0.91. At current levels OUEHT offers an attractive FY16F yield of 8.5%.

4Q15 gross revenue for Cache Logisticsrose to S$24.0m (+16.6% y-o-y) while net property income (NPI) declined by 1.0% to S$19.2m. While the quarter benefitted from the incremental contribution from acquisitions of 6 properties in Australia, its Singapore operations remained weak with an increase in vacancy rates, coupled with higher land rent, property tax and operational expenses, which had offset the increase in rental income from Australia. In view of the weakening operational outlook coupled with potential downside risks in the event that its master leases are not renewed, we have further moderated our rental reversions (from 1% to -2%). Our revised FY16F and FY17F DPU are 8.4 Scts and 8.5 Scts respectively, a reduction of 2-3%.

Our revised FY16F and FY17F DPU are 8.4 Scts and 8.5 Scts respectively, a reduction of 2-3%. Our TP is adjusted to S$0.96 (vs S$1.03 previously). Cache continues to offer attractive FY16F yield of close to 9.6%, and most of the negatives have been priced in. Maintain BUY, TP: $0.96.

IHH Healthcare Berhad (IHH) announced that it has broken ground for a US$70m, 250-bed hospital in Yangon, Myanmar. This will be the group's first foray into Myanmar. The hospital project is under development and will be operated by a joint venture consortium (Andaman Alliance Healthcare Limited) in which IHH's wholly-owned subsidiary, Parkway Healthcare Indo-China Pte Ltd, holds 52% stake. This investment will add another new market to its portfolio when completed but we do not envisage significant impact in the near term. We maintain our HOLD recommendation and TP of RM6.19 / S$2.04.

We upgrade SMRT to HOLD from FULLY VALUED, with a revised TP of S$1.50. 3Q16 net profit surged by 63.5% y-o-y to S$36.9m, which beat our expectations. Revenue grew 4.6% y-o-y to S$327.6m while total operating expenses grew by 2%. The strong performance arose largely from higher other operating income (due to government grants), lower electricity and diesel costs (-8.8%) and lower 'other operating expenses' (-5.5%). We raised our FY16F/ 17F forecasts by 23%/ 15%, taking into account the higher grants recognised in FY16, coupled with lower energy costs assumptions and interest expenses. While we acknowledge the strong 3Q performance, we believe 4Q16 performance could be more subdued taking into account the recent fare cuts (of 1.9% effective from 27 Dec 2015), coupled with higher repair and maintenance costs typically associated in the last quarter of the financial year. Upgrade to HOLD (TP: $1.50, prev. $1.24).

Source: DSB

ARA LOGOS Log Tr (K2LU)IHH (Q0F)

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