| MAYBANK KIM ENG | OCBC |
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Singapore REITs Industrials Bottoming Out
Positive sector fundamentals; AREIT best proxy We remain constructive on industrial REITs, despite the recent pull-back in share prices against a rising interest rate regime. We see positive earnings momentum led by the large cap names from improving supply and demand, with near-term catalysts rising occupancies and stable/positive rental reversions. We see limited risks from higher interest rates given the sector’s well-cushioned balance sheets, with potential acquisition growth upside not priced in. Valuations remain compelling, especially for AREIT and MINT, given their headroom for accretive deals.
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Hutchison Port Holdings Trust: Trade spat affects <2% of throughput
Goods targeted in the proposed tariffs make up around 2% of Hutchison Port Holding Trust’s (HPHT) YICT throughput and 1% of its Kwai Tsing’s throughput, based on analysis done by HPHT’s management of the product types they handle. Even if all of the throughput related to these goods were to cease completely as a result of the tariffs (which may or may not be implemented), a scenario which we consider unlikely in itself, we estimate that the impact on HPHT will be less than 2%. Furthermore, we believe yesterday’s 1Q18 results indicate that the fears surrounding NDRC 30% tariff cut have been overblown – revenue/TEU for YICT fell only 1% YoY in 1Q18, which in turn was mainly a result of continued impact from shipping line M&A and a change in throughput mix, countered by RMB strength. After adjustments, our fair value remains at US$0.43, which represents an upside of 30.3% against 13 Apr’s close of US$0.33. HPHT is trading at a 8.1% FY18F yield as of 13 Apr’s close. Re-iterate BUY.
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| RHB | PHILLIP |
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Kimly Ltd Defensive Staple On Verge Of Inorganic Expansion
Kimly operates and manages coffee shops and food courts locally, which have a defensive nature accompanied by rich cash flows. Going forward, we expect Kimly to add up to 1-2 coffee shops a year, as well as ramp up on operating third party brands, which could contribute 5-8% growth pa during FY19F-20F. In addition, with M&As in the pipeline, we believe that growth would be exciting in the coming years. As a result, we initiate coverage with a BUY with DCF-derived TP of SGD0.43 (30% upside), implying FY18F P/E of 22.8x.
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Offshore & Marine Monthly Extended soft conditions SINGAPORE | OIL AND GAS | UPDATE
Banks as de facto owners of vessels prolonging the supply imbalance Upstream production activities recover modestly but still depressed Offshore support vessels market is still in a predicament The rally of oil price will speed down as glut is coming back
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