ANALYSTS SAY: Buy, Sell, Hold (25 Jan)

StarHub (STH SP)
On Stable Footing, Frontloading Capex To Drive Future Earnings

Starhub continues to experience improvement amid rational competition and increased 5G network rollout. The launch of HubBundle (mobile, home broadband, entertainment) has been encouraging and the company aims to drive stickiness via innovative products. As such, we expect Starhub to frontload capex to drive cost and product efficiency to achieve an additional cumulative S$220m in gross profit over 2022-26 (4% incremental profit annually). Maintain HOLD. Target price: S$1.30. 

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LIM & TAN

LIM & TAN

Parkway Life REIT ($4.94, down 2 cents) announced a DPU of 3.57 Singapore cents for the fourth quarter ended 31 December 2021 (“4Q 2021”), consistent year-on-year (“Y-O-Y”); and 14.08 Singapore cents for the full year ended 31 December 2021 (“FY 2021”), representing an increase of 2.1% Y-O-Y, coming in line with expectations.

Parkway Life REIT’s market cap stands at S$2.9bln and currently trades at 34x forward PE and 2.1 PB. Dividend yield stands at 2.9% and consensus target price stands at S$4.97, representing 1% upside from current share price. Despite lofty valuations, we continue to like that Parkway
can generate growth through its Japan’s nursing portfolio while being anchored by its Singapore hospitals as it continues to maintain high revenue visibility for the next 20 years. With a strong porƞ olio and hedging of interest rate to protect against current hawkish sentiments,
investors can be assured of sustainable dividends moving forward – We maintain a “HOLD” recommendation on Parkway Life REIT.

Keppel DC REIT ($2.25, down 0.01) is pleased to announce that it has achieved distributable income (DI) of $87.4 million for the second half of 2021 (2H 2021), bringing DI for FY 2021 to $171.6 million. The 9.4%
year-on-year (y-o-y) growth in DI was supported by contributions from new acquisitions including Kelsterbach Data Centre in Germany (May 2020), Amsterdam Data Centre (December 2020) and Eindhoven Campus (September 2021) in the Netherlands; the compleƟ on of Intellicentre 3 East Data Centre (IC3 East DC) development at Intellicentre Campus in Sydney, Australia in July 2021; as well as the completion of asset enhancement initiatives at data centres in Dublin and Singapore in 1Q 2021. 

At $2.25, Keppel DC REIT is capitalized at $3.86 billion and trades at 1.7x price to book ratio and 4.4% dividend yield. Based on consensus target price of $2.66, the 12 month potential upside is 18%. However, we note that the hawkish US Fed stance which has caused a sharp rise in bond yields would continue to put a cap on Keppel CD REIT’s near term upside potential. Maintain HOLD.