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UOB KAYHIAN |
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Singapore REITs Raising Limits, Adding Growth
Acquisition growth levers arising We see potential DPU growth levers arising in the coming quarters as MAS seeks feedback on its proposal to increase the leverage limits for S-REITs, which should help support valuations. S-REITs have acquired overseas for diversification and growth; yet maintain strong balance sheets. An increase in leverage from 45% to 50% raises debt headroom by 10-14% for AUMs and opportunities for DPU-accretive deals. We see industrial SREITs as likely beneficiaries, especially as they push further into Europe and the US. AREIT, MINT, FCT, CDLHT and FEHT remain our top picks due to DPU recovery, yields and acquisition-growth upside.
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Singapore Airlines (SIA SP) Double-digit Decline In Cargo Traffic Is A Key Negative, Even As Pax Traffic Remains Robust For Now
In August, cargo traffic declined by 10.2% yoy, registering its steepest decline since Mar 19. Despite August’s strong pax traffic growth and load factors, we remain neutral on SIA as yields could weaken if the economic environment deteriorates further. Maintain HOLD. Target price: S$9.50. Suggested entry price: S$8.70-8.80.
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RHB |
CGS CIMB |
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ComfortDelGro (CD SP) Near-Term Headwinds Persist Reiterate NEUTRAL and SGD2.55 TP, 4% upside. While contribution from acquisitions and organic growth in ComfortDelGro’s public transport business should drive earnings, we remain cautious in the near term amidst weakening metrics for its taxi business, and the expected increase in operating costs for the rail business. A sustainable c.4% dividend yield should provide support to share price. Trading at 17.1x 2020F P/E (5-year average: 15x), the stock looks fairly priced.
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REIT Hospitality: 3Q should be a good quarter
■ Jul arrivals rose 4% yoy, the fastest pace since Nov 2018, while RevPAR delivered positive growth. ■ We expect a good 3Q19F, driven by stronger arrivals and positive spillover effect from HK unrest. Haze should not deter travelling at this stage. ■ We are sector Overweight with hospitality as our second preferred subsector. Upside/downside risks include stronger/weaker-than-expected tourist arrivals.
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Check out our compilation of Target Prices
