ANALYSTS SAY: Buy, Sell, Hold (7 July 2017)

Singapore Property

Hong Kong marketing feedback

On the supply outlook and other policy measures We met with investors in HK following our recent property sector upgrade. Discussions centred on the (improving) supply outlook across the various subsectors in supporting prices and rents, and the broader demand drivers (affordability ratios, new economy industries). Despite the strong YTD share price rally, we believe investors were anticipating incremental policy measures to drive further sector re-rating. In general, investors appear to demonstrate a relative preference for developers, followed by commercial and lastly industrial REITs. Our large-cap BUYs are CDL, UOL, CCT, KREIT, AREIT and MINT.

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Keppel Corporation (KEP SP)

Gas Strategy Hints At Building A Recurrent Earnings Stream

Keppel’s underlying gas strategy entails more than just being a preferred vendor for LNG solutions; it hints towards building up a base of FLNG assets that generate recurring income. The compelling economics of FLNG units support this, with equity IRR as high as ~40%. Keppel could create a FLNG trust, in the footsteps of Golar LNG Partners. However, this will take years to unfold and near-term headwinds cap share price upside. Maintain HOLD with an unchanged target price of S$6.55. Entry price: S$5.90.

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Thai Beverage

Impending excise tax hike does not faze us

■ We retain our view that any near-term consumption weakness from the mourning period or impending tax hike (to be implemented in Sep 2017) is temporary.

■ Historical evidence shows no prolonged volume impact from excise tax hikes.

■ Instead, there could be margin upside potential if Thaibev raises ASPs beyond the excise tax hike.

■ We also met F&N recently and we like its regional expansion ambitions. This fits in perfectly with Thaibev’s planned transformation into a regional beverage player.

■ Reiterate Add with an unchanged TP of S$1.07.

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CapitaLand Limited: Further expansion of serviced residence portfolio

CapitaLand recently announced that its serviced residence segment, The Ascott Ltd, will acquire for A$180m (S$191m) an additional 60% stake in Quest Apartment Hotels (Quest). This will boost CapitaLand’s stake to 80% after which the group will become the largest serviced residence provider in Australiasia. We take a favorable view on the acquisition as Ascott continues to execute on its growth plan and expands its presence worldwide, and the group remains on track to exceed its target of having 80k units in its portfolio globally by 2020. We note CapitaLand will also be marking a milestone in its integrated development strategy this year with four integrated resorts openings in China. Management indicates that they currently have over 6.2m sqm of GFA in terms of integrated development exposure in China, of which more than half is under development. As the green-field component of the group’s portfolio gets developed and becomes operational, CapitaLand will be well positioned to expand its recurring income base and improve its ROE. Maintain BUY with an unchanged fair value estimate of S$4.07.