CGS CIMB | CGS CIMB |
Far East Hospitality Trust A redevelopment of Central Square?
■ Central Square could be redeveloped. Assuming FEHT divests Central Square by end-2021, its gearing level could fall to a very healthy 34%. ■ We expect FEHT to deliver stable DPU in FY21-22F and its DPU recovery to accelerate in FY23F given the positive Covid-19 vaccine developments. ■ Reiterate Add with a higher DDM-based TP of S$0.74, implying 0.95x P/BV
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ST Engineering Bold expansion
■ We are positive on STE’s potential acquisition of Cubic Transportation Systems, which we estimate at US$1.7bn-2.2bn (based on 2-2.5x P/sales). ■ If successful, the deal (funded via debt) may add US$75m of EBIT or 16% of STE EBIT, in our estimate. ■ The current bidder, Veritas/Evergreen has five days to counter the higher takeout offer. We believe that the deal could be finalised in two weeks’ time
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UOB KAYHIAN |
UOB KAYHIAN |
CapitaLand Integrated Commercial Trust (CICT SP) Pure Play On Recovery In The Domestic Economy
CICT provides diversified exposure to the retail and office sectors, which make it an ideal pure play on recovery in the domestic economy. In particular, we are optimistic that the recovery in retail spending will extend from suburban malls to downtown malls. We expect CICT to focus on enhancements for retail malls, such as Plaza Singapura, RCS, IMM and CQ. CICT provides 2022 distribution yield of 5.5%, which is attractive given its scale and diversification. Upgrade to BUY. Target price: S$2.42.
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ST Engineering (STE SP) Potentially The Largest M&A In STE’s History
STE’s bid for Cubic Corporation’s transportation system payments business would provide synergy to its existing capabilities and enhance its reach. However, STE has not disclosed whether it will be taking on US$0.85b in debt and the eventual divestment price of the defence business to Blackstone. For now, we estimate that STE could take up at least US$2b in debt to fund the acquisition, which is likely to stretch its balance sheet. Maintain HOLD with a target price of S$4.00.
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