DBS Equity Research: Wired Daily 18 Apr 2016

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Publish date: Wed, 20 Apr 2016, 02:00 PM

STI - Near-term upside capped, pullback support 2867 and 2837

Brent crude lower after Doha meeting ended with no agreement, technical support USD36-38pbl

The STI tested and went slightly beyond the upper limit of our started range at 2920. But with the 1Q results season started and corporate earnings still on a downward revision path, we keep our stance and sees limited near-term upside ahead. The 2965 level coincides with 12.09x (-1SD) blended FY16/17 PE that should put a cap on the benchmark index for now. Pullback support is lifted higher at 2867 and 2837. The stock market's undertone remains firm and situational interest in SMC stocks can continue.

Talks over the weekend in Doha among the oil producers have ended without any agreement on limiting supplies. As a result, oil price on concerns about another rout in prices. Discussions stumbled after Saudi Arabia and other Gulf nations wouldn't agree to any deal unless all OPEC members joined including Iran, which wasn't present at the meeting. Brent for June settlement fell as much as $3 to $40.10pbl.

1Q16 DPU of 1.68 Scts for Keppel REIT in line. We believe the impact on DPU from the potential loss of key tenants or negative rental reversions in 2016 has reduced considerably. Post renewals in 1Q16, only 3% of leases have yet to be renewed for the remainder of 2016. In addition, risk of negative rental reversions is low in the near term, given expiring rents (between S$8.50 to low S$9's) remain below recent signing rents of S$10.30 and core CBD Grade A rents of S$9.90. Maintain BUY call with a higher TP of S$1.11 (Prev S$1.12). Keppel REIT remains attractive despite its recent rally.

CapitaLand Commercial Trustreported 1Q16 DPU of 2.19 Scts (+3% y-o-y), in line. With CCT's gearing at only c.30.1%, implying debt headroom of over S$1bn assuming gearing of 40%, CCT is in a strong position to acquire the remaining 60% stake of CapitaGreen it does not own. We expect CCT to deliver positive rental reversions in 2016. Maintain BUY, TP revised to S$1.53 (Prev S$1.45).

Soilbuild Business Space Reit reported 1Q16 DPU dipped 4.7% y-o-y; in line with expectations. With yield of c.8.4%, one of the highest in the S-REIT universe, we believe that negatives are priced in and SBREIT remains an attractive laggard play among peers. Maintain BUY, TP S$0.84.

1Q16 DPU of 1.75 Scts (-1% y-o-y) for Ascott Residence Trust were below expectations. We expect sequential uplift and boost from recent New York acquisition ahead. Trim FY16-17F DPU by 3% each to account for impact from recent terrorist attacks in Belgium, Brexit referendum and weaker British Pound. We maintain our BUY recommendation on ART with revised TP of S$1.28 (Prev S$1.33).

Shareholders of OSIM International who sold their shares on April 5 below S$1.39 each will receive an additional payment from the group on a goodwill basis. The additional payment will be made to all affected shareholders, regardless of whether they sold their shares to the offeror or to third parties. Each affected shareholder will receive the difference between the transacted sale price for each share and the final ex-dividend offer price.

Keppel T&T is expanding its data centre footprint to Hong Kong with a long-term collaboration agreement with PCCW Global, the international operating division of HKT, Hong Kong's premier telecommunications service provider. Under the agreement, Keppel Data Centres Holding and PCCW Global will co-develop and market an international carrier exchange in Hong Kong, which offers connectivity-related managed services to facilitate interconnects.

The Trendlines Group has signed a definitive agreement with Bayer AG to set up a limited partnership in Israel, in which Bayer will invest US$10m. The fund, known as Bayer Trendlines Agtech Innovation Fund, will be managed by Trendlines and will focus on investments in early-stage agritech companies of the group.

China Environment expects to report a loss in 1Q2016. The loss in 1Q16 was mainly due to nil revenue in 1Q16. Currently the Group is formulating new strategy and the main focus is on cash collection for existing trade receivables and securing projects from customers with good payment terms.

Singapore's non-oil domestic exports (NODX) plunged 15.6% y-o-y in March, reversing from the 2.0% rise in February. Month on month, the NODX dipped a seasonally adjusted 0.2%, easing from the 4.2% drop in the previous month. Except for Japan and Hong Kong, shipments to Singapore's all 10 major markets fell. The European Union, China and Indonesia were the biggest contributors to March's NODX contraction. The electronic NODX tumbled 9.1% y-o-y, after a 0.7% increase in February. Non-electronic NODX also reversed the previous month's 2.6% rise to fall 18.0% in March. Non oil re-exports slipped 2.4% in March, compared to 1.8% increase in February.

After an uninspiring year in 2015, Singapore's tourism industry started 2016 on a better note as arrivals rose some 12% in the first two months of the year, fuelled by doubledigit increases in key source markets such as China and Indonesia. According to preliminary estimates by the Singapore Tourism Board (STB), Singapore received a total of 2.74 million visitors in January and February, up 12.3% y-o-y. Most notably, China rebounded with a near 34% surge in visitors to around 505,760 travellers, surpassing the 465,530 arrivals from Indonesia. Arrivals from Indonesia (historically Singapore's biggest source of tourists) were up almost 11%.

Source: DBS

Keppel Reit (K71U)Trendlines (42T)China Env (5OU)

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