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Sembcorp Industries Stronger winds in India ■ SCI is adding about 250MW of wind power in India, bringing total wind capacity to c.1,220MW (including those under development). ■ At a lower tariff of 3.46 Rs/unit, we estimate the current project to bring in S$3m-4m of profit from FY19, adding 23% to its current profitable wind business, SGI. ■ Maintain Hold and target price, still based on SOP. Re-rating catalysts include
1) a long-term PPA for SGPL, and b) spillover from SMM’s orders.
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SPH REIT: Positives from leasing front SPH REIT reported an in-line set of 2QFY17 results. Gross revenue and NPI grew 1.7% and 5.2% YoY to S$54.0m and S$42.7m, respectively. However, DPU was flat at 1.40 S cents, as S$1.6m of taxable income available for distribution was retained during the quarter (2QFY16: S$0.9m). Both Paragon and TCM achieved 100% committed occupancy, while strong rental reversions of 4.3% and 8.3% were secured for leases expiring in 1HFY17, respectively. Management has successfully renewed TCM’s leases which were due to expire in FY17. In terms of financial position, SPH REIT’s gearing remained stable and healthy at 25.7%, as at 28 Feb 2017, with 85.9% of its debt on a fixed rate basis. We reiterate BUY on SPH REIT, but with a higher fair value estimate of S$1.08 (previously S$1.04) as we incorporate a lower discount rate of 6.7% (previously 6.9%) in our dividend discount model given SPH REIT’s resilient portfolio, robust operational metrics and solid leasing management capabilities. |
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Food Empire Holdings Rise Of The Empire Food Empire is a dominant instant coffee mix player in the CIS countries. With 45% of its revenue generated in Russia, we think this is a good investment proxy to leverage on the strengthening RUB. Moving forward, the group is looking to deepen its penetration into the emerging markets in Asia. It is also expecting a turnaround of its associate – Caffé Bene – this year. As we believe its results have bottomed out, we reinitiate coverage with a BUY recommendation and SGD0.76 TP (31% upside).
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