| CIMB | PHILLIP SECURITIES |
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REIT Tug and tussle between the doves and the hawks ■ A dovish Fed outlook and a potential sector re-rating ahead of a broader physical market recovery in 2018 lead us to rotate into this under-owned sector. ■ Yellen assured the markets that the Fed has not decided on a faster pace of tightening, and that the Fed can tolerate inflation temporarily overshooting 2%. ■ On the flip slide, a growth-led rate increase implies faster/sharper macro recovery. We believe REITs could re-rate on a broader physical market in 2018. ■ Our sub-sector preference is unchanged. The market has not priced in a recovery for hotels. Fortune favours the brave if our view of a 2018 argument pans out. ■ With S-REITs the best performing REIT market globally, our attention shifts to laggards, CDREIT and MAGIC.
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CapitaLand Limited Period of reckoning when efforts bear fruits Investment Merits Period of reckoning when efforts start to bear fruit In 2017, a record one million square metres of retail GFA is set to be opened, which will be CapitaLand (CAPL)’s largest ever retail GFA offering in a single year. Close to 90% of this record offering in 2017 will be in China. The new total retail GFA due to open in 2017 represents c.10% of CAPL’s total global retail exposure (including Integrated developments, IDs). In particular, the total new retail GFA in China represents a significant c.13% of the total retail GFA (including IDs) CAPL has built up in China over two decades since its entry in 1994.
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OCBC |
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Keppel DC REIT: Robust growth potential Keppel DC REIT (KDCREIT) is poised to benefit from the solid growth potential of the data centre industry, underpinned by expected increases in data creation and outsourcing trends. For the key cities which KDCREIT has exposure to, we note that new demand is projected by BroadGroup Consulting to grow at a CAGR of between 4.7% (Frankfurt) to 14.7% (Dublin) from 2016 to 2021. We are also positive on KDCREIT’s lease renewal for this year and with a portfolio WALE of 9.6 years, we believe KDCREIT is one of the most defensive REITs within the S-REITs space. Based on our forecasts, KDCREIT is offering distribution yields of 6.1% and 6.3% for FY17F and FY18F, which is attractive relative to its peers’ Bloomberg consensus average yield of 3.8% and 4.1%, respectively. Given healthy valuations, a robust industry outlook and strong DPU growth profile in FY17 (+19.2%), we maintain BUY and S$1.39 fair value estimate on KDCREIT. |
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| MAYBANK KIM ENG | RHB |
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Singapore Banks Loan improvement in Feb; key is sustainability in FI loans Some positive signs System loans grew 3.5% YoY in Feb (Jan +1%), partly due to: 1) low-base effect as 2016 saw contraction in credit growth; 2) recovery in the macroeconomic environment; and 3) remarkable growth in lending to financial institutions (FI). We estimate the multiplier between system loans growth and Singapore GDP growth is 2x, on average. Our loan growth assumption for Singapore banks is 2-4% YoY in FY17, on the basis that banks will make selective lending. We estimate every 1% increase in loan growth could potentially raise net interest income by c.1%, ceteris paribus. Maintain NEUTRAL.
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OUE Hospitality Trust A Terminal Boost We upgrade OUEHT to BUY (from Neutral) as we see sector headwinds receding in 2H17, and catalysts emerging. Key drivers ahead are: 1. Opening of new Changi Airport Terminal-4 in 2H17; 2. Hotel supply headwinds tapering off post 2018; 3. Valuations remain attractive with FY17F yield of 7.3% and P/BV of 0.9x. We expect a potential turnaround at the hotel segment in 2018, with supply pressures abating. Upgrade to BUY with higher TP of SGD0.76 (from SGD0.70, 10% upside).
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