Towards Financial Freedom
DBS Equity Research: Wired Daily 19 Feb 2016
Singapore REITs - Rate hike fears subsiding, current yield spread of 4.8% attractive. Top picks: AREIT, MAGIC, MLT, FCT and CRCT
With rate hike fears subsiding, we see S-REITs' current yield spread of 4.8% as attractive as it is above the 10- and 5-year average of 3.8% and 4.1%. Thus, we still see upside to share prices in the immediate tem. Our preference is for SREITs with outsized yields and opportunities to surprise on the upside through acquisitions or with portfolios that continue to withstand operational uncertainties. Our top picks are Ascendas REIT, Mapletree Greater China Commercial Trust, Mapletree Logistics Trust, Frasers Centrepoint Trust and CapitaLand Retail China Trust.
Sembcorp Industries'4Q15 was affected by losses from Marine and slower ramp up of Indian power plant (TPCIL). TPCIL will contribute positively from 1Q16, with >80% utilisation since end Dec-15 A final DPS of 6 Scts was declared; FY15 DPS at 11 Scts, on similar 36% payout ratio. In response to the privatization rumour of SembCorp Marine, management stressed that any asset acquisitions should be accretive and enhance returns to SCI shareholders. Moreover, there are more appealing opportunities in the utilities space in view of the lacklustre marine prospects. In our view, the more likely scenario of a restructuring of rigbuilders would be the merger of Keppel O&M and SMM. As such, the elimination of fear of privatisation could give an uplift to SCI's stock prices in the near term. Reiterate BUY, TP adjusted to S$3.30 (Prev S$3.50).
4Q15 core earnings for Wilmar were ahead of expectations. Tropical oils pretax was softer than expected. We expect stronger Tropical Oils contribution in 1Q16. Balance sheet revealed significant drop in debts. Maintain BUY call and TP of S$3.70.
FY15 results for iFAST in line; FY15 net profit rose 15.1% yo-y to S$12.1m, but declined 1.2% y-o-y in 4Q15 to S$2.9m (excl. IPO expenses). Assets Under Administration (AUA) rose 5.2% y-o-y to S$5.6bn as at Dec 15, with Singapore contributing 72%. We cut AUA growth to 5% p.a. for FY16F and a higher 10% for FY17F, from 15% and 20% respectively, as we are now more cautious given the recent sharp drop in global equity markets. We now expect FY15-FY17F earnings CAGR of 16%, down from 23%, on the back of enhanced business operations and new opportunities iFAST is expected to garner. iFAST's key performance driver lies in the growth of AUA, which generates recurring revenues. We believe iFAST offers investors a unique investment proposition as a direct proxy to the wealth management industry as well as an angle into digital finance. Maintain BUY, TP reduced to S$1.45 (Prev S$1.61).
SIA Engineering announced the renewal of its Fleet Management Programme (FMP) Agreement with Tigerair Taiwan. The new agreement has a term of 5 years and covers a broad spectrum of inventory and technical management services for Tigerair Taiwan's fleet of A320 aircraft.
Sunpower Group has entered into a concession agreement with the Management Committee of the Anhui Quanjiao Economic Development Zone to build a centralised steam Build-Operate-Transfer (BOT) project in the Anhui Quanjiao Economic Development Zone. This project will contribute to the Group's recurring income for a concessionary period of 30 years.
Rotary Engineering has secured contracts worth approximately S$65m for the period November 2015 to early February 2016. The diverse nature of the new contracts secured demonstrates Rotary's capability to execute projects requiring multi-disciplinary engineering skills beyond tank storage construction and reinforces its resilience to the oil and gas slump.
The Infocomm Development Authority of Singapore (IDA) unveiled a spectrum allocation framework that would facilitate the entry of a new mobile network operator (MNO). IDA will make available 60 MHz of spectrum from the 900 MHz and 2.3 GHz bands for the New Entrant Spectrum Auction, at a starting bid price of S$35m, down from the initially proposed S$40m, to factor changes to the composition of the spectrum. The New Entrant Spectrum Auction will take place in Q3 2016; spectrum rights for the new entrant will commence in April 2017. We prefer M1 to StarHub as negatives are priced in.
According to estimates by Real Estate Developers' Association of Singapore (Redas), there are some 700 unsold units across 13 developments that are affected by the qualifying certificate (QC) rules this year, with the estimated extension charges on them approaching S$100m. The QC rules require most developers here to pay extension fees for condo units which are not sold within two years of the completion of the project; the fees are pro-rated according to the proportion of units unsold.
Source: DBS
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