Mapletree Greater China Commercial Trust
More challenges ahead
■ MAGIC’s 2Q/1HFY18 DPU of 1.868 Scts/3.714 Scts was in line with our expectations and consensus.
■ The results were underpinned by robust performance at FW.
■ We expect a more challenging operating environment at GW while SP is upbeat.
■ We find MAGIC’s balance sheet healthy with gearing of 38.5% at end-2QFY3/18.
■ We downgrade MAGIC from Add to Hold as its near-term performance could be limited. Our TP edges up to S$1.20 on stronger HK retail prospects in the longer term
We visited BAL’s estates and mill in Palangka Raya, Kalimantan, Indonesia. We were impressed by the clean and well-maintained mill. We noted many fresh fruit bunches ready for harvesting in 4Q17. Thus, BAL is likely to register another record quarter in 4Q17. Moreover, the female flower ratio has improved, indicating good production in 2018. We expect FFB production to grow 18% and 17% in 2017-18 respectively. Maintain BUY. Target price: S$1.03.
First REIT: Relative value emerges
First REIT’s (FREIT) 3Q17 results were in-line with our expectations. Gross revenue and NPI grew 3.3% YoY and 3.2% YoY to S$27.8m and S$27.5m, respectively. DPU rose 0.9% YoY to 2.14 S-cents, forming 25.2% of our full-year projection. FREIT has since completed the acquisition of Siloam Hospitals Buton and Lippo Plaza Buton, which should be DPU-accretive from 4Q17 onwards, while also looking to conduct a joint acquisition of an integrated development in Yogyakarta. Positive base rental revisions should also be achievable, with the latest reported inflation for Jan-Sep 2017 coming in at a 0.6% YoY increase. Over a 5-year period, PLREIT typically trades at a P/B premium of 14.6% over FREIT, and this has now grown to 19.8%. We believe FREIT is comparatively undervalued and increase our fair value from S$1.38 to S$1.44. Upgrade to BUY.
CapitaLand Mall Trust
No Bright Spots Here Yet
CMT’s 3Q results were in line. The retail market continues to remain soft, with rent reversions for 3Q accelerating to -2.1% (2Q17: -0.3%). Shopper traffic and tenant sales at its malls stood flat YoY despite the retail sales index showing some pick-up in recent months. On the positive front, management has been active in rejuvenating CMT’s assets and repositioning its malls to combat e-commerce threats. Looking ahead, we expect rent growth to be flat to slightly negative, as retail supply remains high amid changing consumer demand. Thus, its current FY18F valuation of 1.1x P/BV and yield of 5.5% is fair, in our view. Maintain NEUTRAL and SGD2.08 TP (2% upside)
Check out our compilation of Target Prices