DBS Equity Research: Wired Daily 1 Apr 2016

kiasutrader

Publish date: Mon, 04 Apr 2016, 10:13 AM

Ezra - Chiyoda JV finalized; near-term cash-flow overhangs now resolved.

Ezra announces the completion of EMAS AMC - Chiyoda Subsea Joint Venture. While no new information was disclosed on the terms, the purchase price for 50% of EMAS AMC - Ezra's subsea division - had been fixed at US$180m, of which US$150m would be paid to Ezra and US$30m injected directly into the new JV entity. The cash receipts by Ezra will be used to repay standby credit facilities and lead to lower gearing. TP adjusted up to S$0.11 (Prev S$0.08); maintain HOLD as the industry outlook remains lacklustre.

We believe that the upcoming rent review for Toshin lease at Ngee Ann City will have a significant impact on distributions for YTL Starhill Global REIT as Toshin accounts for c.19% of topline in FY16F. Toshin renewed the lease for a further 12 years starting Jun'13. The rent review mechanism only allows for upward adjustment in rents only, capped at 25%. This implies that the REIT's earnings growth profile is projected to growing at a steady 2-3% rate in the coming two years. In our estimates, we have assumed a 6% increase come Jun'16. This will bring estimated rents from S$15psf/mth to close to S$16psf/mth, which is in line with median rents for Orchard Road. We believe this is a conservative estimate. Maintain BUY, TP S$0.84, withm attractive 14% total returns (7% upside, 7% yield).

SATS has signed a joint venture agreement with Oman Air SAOC (Oman Air) for cargo handling at Muscat International Airport. The JV company, Oman SATS Cargo, is expected to commence operations during the second quarter of 2016. It will become the single source provider of cargo handling services first at the existing cargo facility and then at the new state-of-the-art cargo terminal in Muscat International Airport.

PACC Offshore Services Holdings (POSH) has secured a one year contract for its POSH Xanadu semisubmersible accommodation vessel (SSAV). Under the terms of the contract, POSH Xanadu will continue to support the client's oil and gas production activities in the Campos Basin.

Darco Water Technologies has signed a Memorandum of Understanding (MOU) with Aquaporin Asia for a forward Osmosis Project. The 3-year project is funded by a S$2.5m grant from the Singapore National Research Foundation. The project involves piloting and test-bedding of low energy Zero Liquid Discharge system for industrial wastewater treatment. With this, the Group will position itself as a first mover in the application of Forward Osmosis Technologies to lower operating costs within industrial wastewater treatment.

Moody's Investors Service downgrades its ratings outlook for the Singapore banks from "stable" to "negative". This was alongside fresh data from the month of February that showed bank lending had fallen for five straight months from a year ago - a malaise not seen since 1999. It expects challenging environment to pressure asset quality and profitability. Despite these headwinds, Moody's said Singapore banks maintain very strong buffers in terms of capital, loan-loss provisions and pre-provision income; funding and liquidity profiles are also robust.

Private residential property prices slipped 0.7% in the first quarter, from the fourth quarter of last year, flash estimates from the Urban Redevelopment Authority (URA) show. This followed a 0.5% decline in the fourth quarter of 2015. The drag in the first quarter came from suburban and city fringe areas, with the Outside Central Region registering a 0.9% price fall and the Rest of Central Region marking a 0.4% decline. Prices of non-landed private residential properties in the Core Central Region, however, rose 0.4%. Resale prices of public flats fell a marginal 0.1% in the first quarter of this year, over Q4 2015.

Source: DBS

Ezra (5DN)StarhillGbl Reit (P40U)SATS (S58)Darco Water Tech (BLR)

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