| MAYBANK KIM ENG |
UOB KAYHIAN |
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Singapore REITs Patience Rewarded
Rates stay lower for longer S-REITs are up 11% YTD against the market’s 7%, and we see further outperformance as the Fed stays patient on its current rate hike cycle. We revisit our assumptions on lower interest rates, adjusting FY19-21 DPUs by between -2% and +4% and raising TPs by 2-9%. While investors could eye near-term profit-taking, fundamentals remain sound. 2019 DPU recovery will be demand-led, especially for hospitality. Capital recycling is gaining traction, with acquisition momentum favouring REITs with higher debt headroom. Our top picks remain AREIT, CDLHT and FCT – all BUYs. They trade at 5.7-6.0% FY19E div yield versus the sector’s 4.6%, and are set to deliver 4.2-7.0% DPU CAGR, against the sector’s 2.7-5.2%.
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Genting Singapore (GENS SP) World-class Commitment
The Singapore government’s just-announced measures for the gaming sector are slightly negative for the near term but positive for the long term. Measures include a 50% increase in gaming entry levy (minor negative impact on GENS), and a two-tier gaming tax system for both the VIP and mass segments from 2022. In return, exclusive rights are extended until end-30 with expanded gaming capacity. Maintain BUY on expected slight weakness but we trim target price to S$1.29 from S$1.32.
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| CGS CIMB | OCBC |
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Grand Venture Technology Ltd A play on growth
■ Grand Venture Technology Ltd (GVT) is an established manufacturing solutions provider that was listed on 23 Jan 2019 at an IPO price of S$0.275. ■ The purpose of the listing is to facilitate the company’s growth. Only new shares were offered in its IPO exercise. ■ We initiate coverage on GVT with an Add call and target price of S$0.34.
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Singapore Post: Looking for buyers for Jagged Peak and TradeGlobal Singapore Post (SingPost) announced yesterday that following a strategic review of its U.S. eCommerce businesses, it will commence a sale process of Jagged Peak and TradeGlobal. The group believes its strengths and strategic competitive advantages are in Southeast Asia and Asia Pacific, which provides attractive growth opportunities. As mentioned in our earlier report, “Expect impairments for US segment” on 1 Feb 2019, the US businesses are underperforming, should remain loss-making in the current financial year, and there is the risk of impairments. We estimate that the carrying value of the US businesses to be around S$90-100m; recall that SingPost saw ~S$185m related impairments in FY17. Maintain HOLD with S$1.00 fair value estimate on the stock. |
Check out our compilation of Target Prices
