Towards Financial Freedom
DBS Equity Research: Wired Daily 14 Apr 2016
STI - Yesterday's rise lifts near-term support to 2867, watch resistance around 2965
MAS eases monetary policy, flattens S$ policy band
SPH - Advertising revenue continues to fall; downgrade to FULLY VALUED
The benchmark STI added more than 2% yesterday, riding on gains from the large cap rig builders and bank stocks as oil price gained further grow following an agreement between Saudi Arabia and Russia to freeze production. Brent reached our near-term resistance at USD45pbl. In the near-term, further upside for the STI should be capped around 2965 with pullback support at 2867.
MAS eases monetary policy, moving to a neutral policy stance of zero per cent appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) band. The width of the policy band and the level at which it is centred will be unchanged. MAS had adopted a "modest and gradual" appreciation path for the S$NEER policy band since April 2010.
The Singapore economy beat estimates to grow by 1.8% yo-y in 1Q16, unchanged from the previous quarter. Consensus expects a 1.6% gain. Growth was flat on a quarter-on-quarter seasonally-adjusted annualised (qoq saar) basis, a contrast to the 6.2% expansion in the preceding quarter. The services sector posted its weakest performance in over a year, while expansion in the construction sector quickened pace. The manufacturing sector seemed to be slowing its pace of contraction. It shrank by 2% from a year ago, the smallest decrease in over a year. It was weighed down by a decline in the output of the transport engineering, precision engineering and electronics clusters. The sector had declined by 6.7% in Q4 2015.
We downgrade SPH from HOLD to FULLY VALUED as we believe current share price valuation at 24x PE and 4.8% yield looks excessive premised on our view that its core print ad revenue will continue to deteriorate. Core media business continues to be dragged by declining advertising expenditure which we believe will lead to weaker adspend, poorer earnings outlook and reduction in DPS payout ultimately. Our TP of S$3.50 is based on sum-of-parts valuation.
1Q16 DPU of 2.71 Scts (+2.7% y-o-y) for CapitaLand Retail China Trust in line with expectations. NPI for core multitenanted malls up 3.7% with reduced loses at Minzhongleyuan and Wuhu. Uptick in rental reversions from 5.9% in 4Q15 to 8.1% in 1Q16. Maintain BUY, TP S$1.69.
Keppel Infrastructure Trust's DPU of 0.93 Scts for 1QFY16 was in line with estimates. Data centre asset completed, will contribute to cash flows from 2Q16. Basslink repair costs were covered by insurance, thus should not have any effect on distribution income. DPU outlook remains steady; current yield of 7.4% attractive, in our view. Maintain BUY, TP: S$0.56.
1Q16 results for Keppel DC REIT in line. DPU of 1.67 Scts is 1.2% above IPO forecasts, driven mainly from acquisitions. Top line and net property income are 2.8% and 2.1% respectively on lower power-related revenues for cost recovery and ad hoc charges. We have moved our acquisition assumptions from beginning of 2016 to 3Q16, and now assume S$200m in our estimates (vs S$250m previously). Given the smaller acquisition quantum and longer-thanexpected acquisition timeframe, resulting in a 19% drop in DPU estimates for FY16F and a 8% drop in FY17F DPU to 6.7 Scts and 7.4 Scts respectively. Maintain BUY, TP: S$1.14.
AIMS AMP Capital Industrial REIT announced plans to redevelop 8 & 10 Tuas Avenue 20 under its ongoing asset enhancement strategy. The redevelopment will transform two adjoining two-storey detached industrial spaces into a versatile industrial facility with ramp and cargo lift access, making it suitable for production and warehouse usage. Due for completion in 2H of 2017, the property's value upon completion is estimated at S$32m. Gross floor area will increase by around 41,614 square feet or 35%, improving the plot ratio from 1.03 to the maximum of 1.4. This redevelopment project is awarded to Boustead Projects, raising its order book backlog to S$258m (as at end of December 2015 plus new orders since).
SIIC Environment has entered into a concession agreement for a concessionary period of 25 years with Suizhou City Housing and Urban Development Committee for the Suizhou City Cheng Nan Wastewater Treatment PPP Project. The total design capital of Suizhou Project is 50,000 tons/day. The total investment cost for this project is estimated at approximately RMB99m.
CITIC Envirotech has recently secured its first BOT Sludge Treatment Project in Weifang City, Shandong Province, China with total investment of RMB 220m. The project involves the design, construction and operation of a 700 tons/day sludge treatment plant to treat sludge generated from 6 municipal wastewater treatment plants in Weifang City.
Source: DBS
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