| RHB |
CGS CIMB |
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GSS Energy (GSSE SP) Overselling Presents Buying Opportunity
Maintain BUY with SGD0.19 TP, 86% upside. We remain optimistic of GSS Energy’s prospects, and expect both twin drivers to contribute positively to the business in FY19F. We believe the group is close to securing an off-taker for its gas, and the tech correction in 4Q18 across the board, especially on small-mid cap manufacturers like GSS, represents a good opportunity to accumulate at these levels. The depreciating IDR is also positive for it as the main factory is located in Batam, Indonesia, while revenue is largely USDdenominated.
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Building up the hi-tech portfolio
■ The DPU-accretive S$268m acquisition of 18 Tai Seng boosts FY3/20 DPU by 3.5% and increases exposure to the hi-tech segment (43% of portfolio). ■ The Equinix collaboration at 7 Tai Seng Dr deepens MINT’s participation in the data centre sub-segment and provides visible and stable rental income. ■ Maintain Add with a higher DDM-based TP of S$2.10.
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| MAYBANK KIM ENG | OCBC |
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Singapore REITs Yielding Growth
Defensive DPUs: prefer hospitality and industrials for growth & yield catalysts We stay positive on S-REITs on the back of three potential valuation drivers in 2019. These are: 1) a potential DPU recovery supported by easing supply; 2) momentum in overseas expansion, which should be further biased towards developed markets; and 3) still-benign interest rates. We continue to believe that hospitality and industrial REITs are best placed for growth and yields (6.1-7.8%). We see scope for further DPU yield compression with their underlying recovery off a multi-year low base. Our top picks remain AREIT (AREIT SP, SGD2.74, BUY, TP SGD2.95), CDLHT (CDREIT SP, SGD1.56, BUY, TP SGD1.75) and FCT (FCT SP, SGD2.27, BUY, TP SGD2.55). Risks are slower-than-expected recovery in demand fundamentals and faster-than-expected rise in interest rates.
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First REIT: Uncertainty still unsettling
First REIT’s (FREIT) 4Q18 results were in-line with our expectations. Gross revenue grew 2.7% YoY to S$29.3m, supported by contributions from Siloam Hospitals Buton & Lippo Plaza Buton, Siloam Hospitals Yogyakarta and existing properties. Receivables have increased 24.7% YoY to S$32.4m, but have (encouragingly) dropped 34.3% QoQ as Lippo Karawaci (LK), one of FREIT’s two sponsors, has caught up on their payments. 4Q18 DPU came in flat YoY at 2.15 S-cents, bringing FY18 DPU to 8.60 S-cents, which comprises 98.9% of our full-year forecast. We believe that the concerns outlined in our Dec’18 report remain valid. These include LK’s likely divestment of its remaining stake, uncertainty over the expiry of upcoming master leases, as well as potential equity fund raising in the near future. As we roll forward our valuations, we reduce our assumption for Singapore’s 2018 CPI, and increase our market risk premium assumption. Thus, our fair value drops from S$1.05 to S$0.97. Maintain HOLD. |
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