|MAYBANK KIM ENG
Covered Bonds: Diversify Source Of Funding
DBS priced issue of EUR750m covered bonds DBS announced it has successfully priced the issue of EUR750m in fixedrate covered bonds due 2024 under its USD10b Global Covered Bond Programme. These covered bonds will bear a fixed coupon of 0.375% per annum payable yearly in arrears. This is DBS’s third issuance of covered bonds, after its USD1b and AUD750m issuance in 2015 and 2016 respectively. DBS’s covered bonds issuance will diversify funding source and reduce cost of funding but we think it is unlikely to meaningfully boost the bank’s NIM.
Lifting exposure in Vietnam
■ Sells stake in The Nassim for S$411.6m, acquires commercial land in Vietnam.
■ The sale reflects a de-risking of its Singapore residential portfolio and potential freeing up of capital for redeployment into new investments.
■ Deepening exposure in Vietnam by reinvesting, into the office upcycle, potential ROE-boost in the medium term.
■ Maintain Add, with a revised target price of S$4.15.
Room for more deals
Positive despite share dilution. Despite the possible dilution from the share placement, we maintain our BUY rating on SIIC Environment (SIIC). The company is making good progress of gradually expanding its water treatment portfolio with good growth potential from upgrades and tariff hikes. It is also grabbing opportunities in the sludge treatment market. After the share placement, its financial position will be strengthened, allowing it to conclude more M&A transactions.
CapitaLand Commercial Trust: Boost from higher stake in CapitaGreen
CCT’s 4Q16 distributable income increased 10.1% YoY mainly due to increased contributions from the Trust’s higher stake in CapitaGreen. The trust reported an estimated DPU for the quarter of 2.39 S-cents which similarly grew 10.1% YoY and as a result, FY16 DPU now cumulates to 9.08 S-cents – up 5.3% YoY. Based on CCT’s last closing price of S$1.565, this translates to a distribution yield of 5.8%. In terms of the topline, 4Q16 gross revenues and net property income increased 32.7% and 35.4% to S$89.7m and S$70.8m, respectively, again primarily due to the Trust’s increased stake in CapitaGreen (now at 100% after the completion of the stake acquisition in Aug 2016). We deem these results to be mostly within expectations and note that 2H16 DPU (CCT pays its distributable income semi-annually) is expected to be paid on 27 Feb 2017. We update our valuation models for firmer rental assumptions over FY18-19 and potential accretions gains from the GSCP redevelopment and our fair value estimate increases to S$1.53 from S$1.39. Maintain HOLD.
Telecommunications – Singapore To Share Or Not To Share?
M1 and StarHub will be commencing studies on the sharing of network infrastructure, such as base stations and backhaul transmission. We believe the likelihood of the two companies collaborating is high, given that they share common equipment vendors, namely Huawei and Nokia. We have upgraded M1 (Target: S$2.50) and StarHub (Target: S$3.55) to BUYs, assuming network sharing reduces mobile-related capex and 5G-related opex by 25%. Upgrade to OVERWEIGHT.
• Agreed to talk. M1 and StarHub have signed a MOU to study mobile infrastructure sharing focused on radio access network and backhaul transmission. Both companies will benefit from the expanded coverage and capacity of the shared infrastructure. However, they will retain independent management of network traffic (runs their separate core networks and billing systems).
Check out our compilation of Target Prices