ANALYSTS SAY: Buy, Sell, Hold (21 June 2017)

Ascendas REIT: Had a good run, time for a breather

Ascendas REIT’s (A-REIT) share price has strongly outperformed the STI and FTSE ST REIT Index YTD. We opine that valuations are no longer attractive at this juncture, with our forecasted FY18F distribution yield of 5.8% coming in at ~1.4 standard deviations below its 5-year average. Hence, we believe investors can lock in some gains; we downgrade A-REIT to HOLD on valuation grounds, with an unchanged fair value estimate of S$2.66. Our downgrade is also premised on our projections for relatively modest DPU growth of 0.9% in FY18, although we acknowledge that there is potential upside to our DPU forecasts should A-REIT make DPU accretive acquisitions given its ample debt headroom. Another bright spot could come from A-REIT’s strong presence in Sydney (50.9% of its Australian portfolio valuation), in our view. JLL has projected average prime rents in the Outer Central West and South Sydney precinct to grow at a CAGR of 2.5% and 3.5% from 2017 to 2021, respectively.

Singapore Airlines (SIA SP)

Operating Environment Unlikely To Improve Amid Excess Capacity And Terror Attacks

We believe that yields will remain challenged in FY18 as excess capacity and security concerns over terror attacks lead to capacity diversions and impact Asian network carriers. Airlines without a domestic hinterland will be most affected. This will negatively impact SIA. We also believe that a disposal of SIA Engineering is not in SIA’s shareholders’ interest, nor do we think it will be part of SIA’s transformational plan. Maintain HOLD. Target price: S$10.00. Entry price: S$9.00.

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 CIMB

Hatten Land Ltd

Building on Melaka’s transformation

■ Hatten Land is a developer of integrated developments, largely in Melaka.

■ It has a large pool of locked-in sales, which we believe underpin its medium-term earnings outlook.

■ Melaka property market is likely to benefit from the development of numerous mega projects.

■ Strong sponsor (Hatten Group) landbank pipeline to extend forward income visibility, in our view.

■ Initiate with Add rating and target price of S$0.38.

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SGX

Broad-Based Growth Expected In FY18

For 4QFY17, QTD SADV of SGD1.15bn was relatively unexciting, in our view. However, we believe the strengthening global growth would be positive for Singapore’s economic growth, and would drive FY18F SADV to SGD1.35bn. We also remain hopeful of a surge in trading volume for the China A50 Index Futures, driven by lag effect from the Dec 2016 implementation of the Shenzhen-Hong Kong Stock Connect. Our BUY recommendation is unchanged as we fine-tune our TP to SGD9.00 (from SDGD9.10, 23% upside). SGX provides a decent dividend yield of 4.1%.

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Sheng Siong Group

Margin expansion not over yet

Maintain BUY TP S$1.20, more positive on margins. We remain positive on Sheng Siong on the back of better visibility for higher margins. We believe expansion of its distribution centre will grow and sustain gross margins going forward. Margins remain on the uptrend supported by the increase in direct sourcing, bulk handling, and fresh mix, contributing to earnings growth. Stock is trading attractively at 20.4x FY18F PE compared to historical average of 23x since listing. Yield remains attractive at 4.4%.

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