DBS Equity Research: Wired Daily 13 Apr 2016

kiasutrader

Publish date: Wed, 13 Apr 2016, 01:26 PM

Singapore Hospitality - Positive start but outlook unclear due to looming supply. Top pick CDL Hospitality Trust

Yangzijiang - Awarded US$510m contract

The Singapore hospitality market had a stronger than expected start to 2016 with total tourist arrivals for 2M16 jumping 12% y-o-y or 10% y-o-y versus our 3% growth projection for 2016. This was driven by 11% and 34% higher Indonesian and Chinese arrivals respectively. Meanwhile, industry wide RevPAR rose 1.9% to S$210 underpinned by occupancy increasing 130bps to 84.8% and ADR (average daily room rate) ticking up 0.3% to S$248. This bodes well for the upcoming 1Q16 results season. Despite our cautious stance on overall industry RevPAR this year and the sector's depressed valuations (up to 30% discount to book), we believe sentiment for the hospitality sector will progressively improve as we approach 2017 which is projected to have more balanced demand and supply situation. Our top sector pick remains CDL Hospitality Trust (BUY, TP S$1.54).

Yangzijiang Shipbuildinghas been awarded shipbuilding orders for six 400,000 DWT Very Large Ore Carrier (VLOC) in April 2016, with a total contract value of US$510m. The VLOCs are scheduled for deliveries from 2018 to 2019. The orders were placed by ICBC Leasing, one of the largest ship owner in China and is a wholly-owned subsidiary of ICBC, China's largest state-owned commercial bank.

2Q16 results for SPH in line. Operating profit of S$76.4m (-2% y-o-y) was within expectations. The revenue decline of 4% y-o-y (S$260m) was mitigated by lower operating costs (-5%) as a result of lower staff costs, material and consumables, and other operating expenses. Interim DPS of 7 Scts was declared, within expectations. The soft economy points to lower ad revenue outlook. We currently have a HOLD recommendation and TP of S$3.51. We now place our recommendation and TP under review as we reassess our key assumptions and DPS outlook for the stock.

Changjiang Fertilizer is looking to acquire WBH Investments and Cowealth Investments while disposing of its assets in China to transform itself into a real estate developer and investor. For the WBH acquisition, the aggregate consideration is S$13.8m, of which S$4.8m will be satisfied through the allotment and issue of 969.1m new shares of Changjiang Fertilizer at an issue price of S$0.005 per share. The remaining S$9m will be paid in cash. Meanwhile, the aggregate consideration for the purchase of the Cowealth is S$13.8m. Of this, S$4.2m will be satisfied through the allotment and issue of 830.7m new shares and a cash consideration of S$9.7m.

Resale prices of non-landed private homes inched up 0.3% last month, compared with February, SRX Property estimates. This was buoyed by the uptick of 0.1% and 1.3% in the Rest of Central Region (RCR) and Outside Central Region (OCR) respectively. Resale prices in the Core Central Region (CCR) however slipped 1.7% last month. Resale volume of non landed private residential transactions jumped 47.6% from a month ago to 577 units in March.

Source: DBS

YZJ Shipbldg SGD (BS6)SPH (T39)CDL HTrust (J85)

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