ANALYSTS SAY: Buy, Sell, Hold (24 Jan '18)

Mapletree Logistics Trust

3QFY3/18: active portfolio rejuvenation; acquisition momentum to continue

■ 9MFY3/18 DPU of 5.681 Scts (+1.8%) was in line with consensus and our expectations, at 73% of our full-year estimate. 3QFY18 DPU of 1.907 was at 24%.

■ 3QFY18 was driven by stable organic performance and fresh contribution from Tsing Yi. Occupancy improved 40bp qoq to 96.2%; +2% rental reversion recorded.

■ The manager is actively repositioning its assets (i.e. Shatin No. 3). It targets a 5% yield on cost for the asset in the next 9-12 months, following AEI (cost of c.HK$30m).

■ Guided for active acquisition pipeline with sizeable M&As likely in next 3-6 months.

■ Looking past valuations, the bottom-up story for MLT is constructive. We see continued unit price performance and upgrade the stock from Hold to Add.

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Frasers Centrepoint Trust: Healthy start to FY18

Frasers Centrepoint Trust (FCT) reported a decent set of 1QFY18 results which met our expectations. DPU for the quarter came in at 3.00 S cents, representing YoY growth of 3.8% following the completion of Northpoint City North Wing’s (NPNW) major AEI. FCT’s portfolio occupancy stood at 92.6% (+0.6 ppt QoQ), again led by a rebound at NPNW. Overall portfolio rental reversion came in at 1.0% due to the drag from Bedok Point (BP), which registered negative rental reversions of 31.2%. Excluding BP, average rental reversion for the portfolio would have increased 3.3%. Looking ahead, we expect operational improvement at NPNW and Changi City Point as management ramps up the occupancy at these two malls. Coupled with a more positive consumer sentiment and further re-rating in the S-REITs sector, we deem it appropriate to lower our cost of equity assumption to 6.5% from 6.7%. Consequently, our fair value estimate increases from S$2.40 to S$2.49. Maintain BUY.

Keppel DC REIT

Lifted by acquisitions and more to come

SINGAPORE | REAL ESTATE (REIT) | FY17 RESULTS

 Gross revenue and DPU were within expectations

 3.49 cents DPU declared for 2H17 to be paid on Feb 28 (2H16: 2.80 cents)

 Maintain Neutral, higher target price of $1.47 (previously $1.36)

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Keppel REIT(KREIT SP)

Better Value in Developer Landlords

Maintain HOLD; Positives priced-in

FY17 DPU was slightly below ours and consensus estimates. While KREIT continues to report negative rental reversions, the magnitude of the contraction has lessened. Also, asset valuations were largely unchanged. While the narrow trading yield of KREIT is justified by a turn in the office cycle, we believe valuations are rich (4.3% yield, 0.94x P/BV) relative to historical values and could cap share price upside in the near-term. Maintain HOLD and TP of SGD1.19 based on a target yield of 5.25%. For exposure to Singapore’s recovering office market, we see better value in developer landlords with large prime office exposure (UOL and GUOL).

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 CLSA

Memtech International

Revamp and revive

Successful repositioning of product mix; initiate coverage with BUY
Once a top-five global keypad manufacturer, Memtech’s growth was affected when keypad phones became obsolete. However, the firm is now in a new phase of growth as it has diversified successfully into consumer electronics and automotives. Multiple engagements with new and existing customers suggest consensus could have overlooked its growth potential. Our 34% earnings Cagr over 2017-19 is 18-32% above Bloomberg consensus. Trading at about 9x 18CL PE, the firm appears undervalued compared to local peers, yet has a strong
balance sheet (23% net cash to equity) generating positive free cashflow. We initiate coverage with a BUY rating and a S$2.0 target, based on 0.45x PE/G.