Growth through rebalancing, stability through diversification
SINGAPORE | REAL ESTATE (REIT) | INITIATION
Established and well-diversified platform, with a track-record of growing DPU.
Singapore Industrial rents expected to bottom by 2018.
Initiate coverage with Accumulate rating and $2.86 target price. Initiating with Accumulate rating and DDM valuation of $2.86 We like Ascendas Real Estate Investment Trust (A-REIT) for its track record of growing YoY distributions to Unitholders, active capital recycling, repositioning of portfolio mix and stability through its well-diversified portfolio. Our dividend discount model (DDM) valuation represents an implied 1.35x multiple over FY18e net-asset-value.
Existing portfolio grinding along
■ 1H17 DPU of 1.96 Scts (-10.5% yoy) was below consensus and our expectations, at 45% of our FY17 forecast. 2Q17 DPU of 0.956 Scts (-11.3% yoy) was at 22%.
■ Portfolio WALE decreased to 3.4 years (1Q17: 3.7 years). Occupancy was flat qoq at 95.4%. Rental reversion for 1H17 was -18.3% (1Q17: -18.9%).
■ We cut our FY17F-18F DPU by 8.4-8.5% on 1H17 results and lower NPI margins. We also introduce our FY19F estimates.
■ There could be slight upside to our FY17 forecast should EREIT be reimbursed by insurance for the fire at 30 Toh Guan Road that occurred in 2Q17.
■ Maintain Hold. Upside risk could come from potential corporate actions.
Sheng Siong Group: Broader sector sees resilience
|MAYBANK KIM ENG||UOB KAYHIAN|
CapitaLand Commercial Trust (CCT SP)
Capturing Office Rebound
Maintain BUY & SGD1.81 TP Long-awaited details for Golden Shoe’s redevelopment have been announced. We are positive as the redeveloped property should position CCT for a rebound in Singapore’s office market, by 2021. Our preliminary estimates suggest a development surplus of 2.9cts for CCT’s 45% stake. With its conservative 35% pro-forma aggregate leverage, before divestment of Wilkie Edge, we believe CCT has sufficient capacity to acquire another property to fill its income void during redevelopment. Independent valuers also recently raised their valuation of CCT’s properties by cutting cap / discount rates by 15/25bps. This is in line with our view of narrowing cap rates. Reiterate BUY and SGD1.81 TP, based on a target yield of 5.0%.No change to our estimates pending a full model update. Catalysts are expected from a rebound in office rents, while risks include a protracted office-market downturn and cost overruns in redevelopment projects.
Oversea-Chinese Banking Corporation (OCBC SP)
2Q17 Results Preview:
Broad-based Growth With Resilient Asset Quality
We expect a slight uptick of 1bp qoq to 1.63% for NIM in 2Q17, driven by lower cost of deposits as OCBC collected more CASA from SMEs. High net worth clients remained on a risk-on mode, which contributed to higher loan growth from financing of leveraged investments and growth in wealth management fees. Asset quality has stabilised and provisions remained benign with no further damage from the oil & gas sector. Maintain BUY. Target price: S$13.00.
Check out our compilation of Target Prices