Manulife US REIT (MUST SP)
Building a Robust Diversified Portfolio
BUY, new TP of SGD1.12 from SGD1.10, 8% upside with c.6% FY20F yield. 4QFY19 numbers are in line with our (24%) and Street estimates. Its good-quality diversified US office portfolio still benefits from favourable market dynamics, remaining relatively immune to the coronavirus threat, with largely domestic-centric tenants. It has outperformed peers since its recent index inclusion (Dec 2019), and should sustain this near-term momentum on a possible capital rotation into US office REITs, which are less impacted by the recent virus outbreak.
First Resources (FR SP)
4Q19 Results Preview: Time To Accumulate
FR’s 4Q19 earnings are estimated at US$32m-35m, supported by higher sales volume and better selling prices. We expect higher sales volume on the back of higher inventory drawdown before the exports levy came into effect on 1 Jan 20. Downstream operations are expected to have remained stable. FR’s share price has dropped by 10% from the recent high and we reckon that it is the right time to accumulate before earnings start to reflect the high CPO prices. Maintain BUY. Target price: S$2.10.
Riding against the bug; contrarian or foolhardy?
Riding against the bug; accumulation opportunity.
We upgrade our recommendation to BUY, with TP at S$2.45. While we acknowledge impact to CD’s China operations from the outbreak of the novel coronavirus (2019-nCoV), we believe this to be temporary and manageable. Firstly, we estimate that China accounts for only c.4%/9% of the Group’s revenue and operating profits while the 10% decline YTD (vs STI’s -1%) imply that most of these negatives are priced in. Moreover, with the 2003 SARS experience, we see the company better prepared this time round, and the impact is likely to be only temporary, in our view. As such, trading at 15.8x/1.7x at -1SD of its 5-year historical PE and PB band, we see this as an attractive accumulation point.
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