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UOB KAYHIAN |
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Keppel Pacific Oak US REIT (KORE SP)
A Good Complementary Acquisition Maintain BUY and unchanged USD0.88 TP, 17% upside plus c.8% yield. The acquisition of One Twenty Five (OTF) by Keppel Pacific Oak US REIT (KORE) is a good complementary fit to its portfolio in our view as a long WALE and quality tenant base offer longer-term stability. Overall, besides an organic growth via rent escalations, we also see room for a healthy rent growth from its under-rented assets. Valuations are undemanding at 0.9x P/BV, and a c.8% yield with a healthy >300bps spread, when compared to multiples of Singapore Office REITs.
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Alpha Picks: Outperforms In A Challenging Month Our portfolio outperformed the FSSTI amid a challenging August, declining 4.2% mom vs the FSSTI’s -5.9% mom. For September, we change our SELL call for Venture to a BUY and remove BRC Asia.
WHAT’S NEW • A challenging August. The FSSTI retraced 5.9% mom in August, dragged by concerns over the US-China trade tensions, Singapore government’s downward revision of GDP growth to 0-1% for 2019, as well as the unrest in Hong Kong which hit counters with operations in Hong Kong. While our picks suffered declines of 2.2-8.8% mom, our portfolio’s simple average return of -4.2% mom (ex-dividend adjusted: -3.2% mom) outperformed the steeper decline in the FSSTI. Our best performer was our SELL call on Venture, which declined 2.3% mom. Among the worst hit were Keppel Corp (-8.8% mom), DBS (-7.1% mom) and ST Engineering (-7.1% mom).
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MAYBANK KIM ENG |
DBS VICKERS |
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Venture (VMS SP) Past, present, future
Long-term drivers intact; maintain BUY We remain constructive on VMS’ long-term prospects despite the current challenging operating environment, as i) customers historically show – and continue to demonstrate - revenue resilience; ii) end-markets appear broadly stable; and iii) potential from growth markets, new products and higher allocations by customers as a result of the US-China trade war is intact. We see room for DPS surprises, supported by strong FCF. Maintain BUY with ROE-g/COE-g TP of SGD18.88 (2.2x FY19E P/BV). Risks to our view include broad customer weakness due to a US/ global recession.
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Singapore Property Land prices moderated in latest GLS
• Lacklustre demand seen in two out of a batch of three GLS land tenders • Guocoland /Hong Leong Group bagged two out of the three sites; Hao Yuan won the remaining site • Land prices moderated with decent buffers • Next land tenders to close in January 2020
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Check out our compilation of Target Prices