ANALYSTS SAY: Buy, Sell, Hold (12 June 2017)

CapitaLand Mall Trust

Strong operator in a challenging environment

SINGAPORE | REAL ESTATE (REIT) | INITIATION

 Expect retail sales to bottom in 2H17 as the economy continues to recover. Sentiment could receive further boost with improving home prices.

 Largest mall owner in Singapore with a focus on suburban malls that are well integrated into major transport hubs and with near monopolistic locations.

 Structural challenges remain the e-commerce threat and slowing population growth.

 Initiate coverage with NEUTRAL rating and DDM-derived target price of $2.01.

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Lippo Malls Indo Retail Trust (LMIRT): Conditional Kendari acquisition

Lippo Malls Indonesia Retail Trust (LMIRT) recently entered into conditional share purchase agreements to acquire the entire issued share capital of PT MASB for ~S$33.2m which is to be financed from debt and/or perpetual securities. PT MASB in turn owns a Kendari shopping mall under a 30-year Build-Operate-Transfer (BOT) agreement with the Government of Southeast Sulawesi. Upon completion of the acquisition, LMIRT’s portfolio is estimated to increase by ~1.6%. While the acquisition is relatively small, we see the acquisition of an asset outside Jakarta as being in line with LMIRT’s strategy for tapping on Indonesia’s continued urbanization. Pending the fulfillment of the conditions precedent to the acquisition’s completion, we keep our forecasts for now. Re-iterate BUY on LMIRT with a fair value of S$0.435.

UOB KAYHIAN

SATS (SATS SP)

Unfolding The Pieces Of The China Puzzle

The restructuring of SATS’ China-based JV, Jilin JVCo, will see the entry of new partners – CP and Singbridge. While SATS’ effective stake will be diluted to 21% from 30%, we view the entry of CP positively as it has extensive upstream and downstream food processing capabilities. This will allow SATS to control the supply chain and manage its own supply to provide safe and high quality food in China via its JV with Wilmar. While still in the early stages, SATS’ strategic investments in China have the potential to grow and expand into other markets. Maintain HOLD with target price of S$5.05. Suggested entry price: S$4.75.

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Ascendas REIT (AREIT SP)

Future-Proof Industrialist

Best proxy for industrial-sector recovery We update our model post-4Q17 for higher margin assumptions, raising FY18-20E DPU by 0-2%. Our new DDM-based TP is SGD2.90 (from SGD2.85). AREIT remains our top industrial-sector pick with the best exposure to a sector recovery, in our view. An expected tapering off of new supply in 2017 is expected to benefit its well-entrenched business parks and hi-spec industrial properties. With debt headroom estimated at 14-27% of its market cap, we see DPU upside from potential acquisitions. Reiterate BUY

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Asia Equity Strategy

Calculating the risks

 Growth moderation in process but end of cycle not in sight

 Valuations should have some room to rise; investors should stay invested and rotate to potential growth pockets and bright spots

 Selective in ASEAN markets — Overweight Philippines, downgrade Singapore to Neutral and Thailand to Underweight

 Earnings recovery bodes well for Korea but it is in the price for Taiwan; raise Korea to Neutral

 More upside potential for China / Hong Kong stocks driven by the new millennials — reiterate Overweight

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