buy sell hold 2021




Banking – Singapore
Upside From Higher Interest Rates vs Perceived Threat From Looming Recession

The Fed accelerated the tempo of rate hikes to quell inflationary pressure. We expect another 75bp hike on 27 July but the intensity of hikes could ease after the FOMC meeting on 21 Sep 22. The resilient labour market and strong households’ and companies’ balance sheets in the US ensure that potential economic downturn, if it materialises, would be mild. BUY DBS (Target: S$38.78) and OCBC (Target: S$14.95) for their 2022 dividend yields of 4.8% and 4.9% respectively. Maintain OVERWEIGHT.


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GKE Corp Ltd
Slowdown in China to remain an overhang

■ We see slowdown in GKE’s RMC operations due to weak sentiment in
China’s property sector and tougher macroeconomic conditions.

■ Positively, warehouse utilisation and rates in Singapore should remain strong in 2HFY22F due to strong demand for storage spaces.

■ We project a weaker 2HFY22F net profit of S$3.0m (-22% hoh, -41% yoy).

Downgrade to Hold as slow China operations likely to remain an overhang.

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Sapura Energy (SAPE MK)
1QFY1/23 results – In the red

Maintain SELL and MYR0.03 TP
Excluding the one-offs in 1QFY1/23, SAPE remained in the red for the 5th consecutive quarter, weighed down by legacy issues (54% of its total contracts). SAPE remains vulnerable for its negative mix of stretched balance sheet, tight cash flows, legacy contracts, poor execution and cost overruns. While an operational and financial restructuring exercise is underway, turning around SAPE will be a massive challenge and will take time. We see better values elsewhere for now. Our TP is SOP-based.
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Thailand REITs
Fears of rising rates still loom in 2H22


The Thai property fund/REIT index has fallen by 10% YTD. Industrial REITs WHART and FTREIT have declined by 20% and 18% since early-22 due to rising inflation and interest rates. CPNREIT has outperformed the index, possibly on expectation of a sharp recovery in performance postpandemic. We adjust our TPs again to reflect rapid rises in interest rates/inflation. Among industrial REITs, we prefer WHART over FTREIT.
U/G WHART to BUY from HOLD with of new TP of THB11.40 from THB12.12.
Also, we D/G CPNREIT to HOLD and switch to CPN, Thailand’s largest retail mall operator who is one of the prime beneficiaries of full economic reopening. 


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News Alert: Cash from CSE sale has now been fully reallocated
  • Announced the forward funding acquisition of a logistics facility development in the UK
  • Total consideration of GBP101.0m (S$171.7m) will be funded partially by remaining cash and new debt
  • 15-year lease to a leading UK auto distributor, with built-in rental escalation mechanism
  • Remaining cash proceeds from CSE divestment will be utilised; still has ample debt headroom with gearing currently at only c.30%
  • Maintain BUY with a TP of S$1.75

(+) Delivering on another development project

FLCT delivered on a forward funding opportunity in Cheshire, North West England, UK. Some of the details on the deal:

  • Total consideration on a completed basis is GBP101.0m (S$171.7m)
  • Development expected to complete in 2H23
  • NLA of 667,185 sqft.
  • 15-year lease to Peugeot Motor Company Plc
  • Estimated NPI yield of c.3.7%: will receive coupon payments on amount paid down during the construction phase

(+) Rental escalations to commensurate with inflation

During the 15-year lease, rentals will be reviewed in year 5 and 10, based on the retail price index compounded for five years (guaranteed minimum of 2% per annum, compounded for five years). This ensures that rentals will increase by at least 10.4% at year 5 and year 10, mitigating inflation.

(+) Partially funded by cash and new borrowings

Based on our estimates, FLCT will fund this development with a mix of cash and new debt (50:50 mix), interest rates on new loans estimated to be in the low-3% range. Following the divestment of CSE, FLCT has been proactively utilising its cash balance to acquire a suburban commercial property and three logistics and industrial properties in Victoria, Australia. We understand that part of the cash proceeds have also used to fund its other ongoing development and AEI projects.

(+) Fully utilising cash from CSE sale

Since divesting CSE in late January 2022, FLCT has been very active in reallocating its capital. Half of the sale proceeds of S$810.8m was used to pay down debt, and the remaining to fund ongoing developments and these recent acquisitions.

Our thoughts

This acquisition of a state-of-the-art logistics facility in the UK will provide FLCT with a steady and growing income stream in the coming years. In addition to receiving coupon payments for the amounts paid during the construction phase, the property will have a 15-year lease to Peugeot Motor Company plc. The built-in rental escalation mechanism that is pegged to the retail price index also helps to mitigate any inflation throughout the course of the lease.

With an estimated NPI yield of c.3.7%, we believe that it is relatively attractive compared to other modern logistics facilities in the UK which are transacting at yields closer to 3%. Although borrowing costs in the UK has risen to slightly more than 3% currently, FLCT benefits from being able to fund approximately half of the entire amount through cash on its balance sheet, making it accretive.

Based on our estimates, the divestment of CSE left a c.S$20m void to its NPI on an annual basis. Through the recent acquisitions (1 suburban commercial property in Australia, 3 logistics and industrial properties in Australia, and this forward funded development in the UK), we estimate that they would generate a total NPI of more than S$11.2m when completed. Although these acquisitions do not fully offset the entire amount of NPI void from CSE, we remain positive on FLCT for its speed in reallocating its capital.

We will be maintaining our BUY recommendation with a TP of S$1.75.







We highlight the key extracts from Mapletree Industrial Trust’s / MIT ($2.65, up 0.02) latest annual report release:

MIT made significant strides in our strategy to reshape and build a portfolio of assets for higher value uses. The US$1.32 billion portfolio acquisition of 29 data centres in the United States enabled us to signifi cantly scale up our data centre presence and diversify our footprint across key markets
in the United States. The 29 data centres with a total net lettable area (“NLA”) of approximately 3.3 million square feet (“sq Ō ”), are strategically located across 18 states in the United States. 


In conclusion, we continue to like MIT’s exposures to fast growing industrial, data-centres and e-commerce business segments. MIT’s strong financial position and high proportion of debt on fixed-rate basis would help mitigate the impact from rising interest rates. Trading at close to 5% dividend yield (DPU growth of 3-5%) and providing a 1-year 12% upside potential to consensus target price of $3, we maintain an “Accumulate” rating on MIT. The strong ROFR pipeline provides growth opportunities in the years ahead. (Since our last “Accumulate” rating in Jan’22, MIT’ share price has outperformed the FSSTI index by 7% points).

Share Prices

Counter NameLastChange
AEM Holdings3.8700.030
Avi-Tech Electronics0.2800.005
Best World1.7900.030
Broadway Ind0.118-
China Sunsine0.405-
Food Empire0.635-0.015
Fortress Minerals0.330-
Geo Energy Res0.360-0.015
Golden Energy0.7850.005
GSS Energy0.0480.002
ISDN Holdings0.4150.010
IX Biopharma0.1270.001
Jiutian Chemical0.0820.004
KSH Holdings0.350-
Leader Env0.056-
Medtecs Intl0.139-0.001
Meta Health0.025-
Nordic Group0.475-0.005
Oxley Holdings0.1500.001
REX International0.2400.005
Sinostar PEC0.1850.015
Southern Alliance Mining0.380-
Straco Corp.0.400-0.005
Sunpower Group0.2850.025
The Trendlines0.0930.005
Totm Technologies0.103-0.002
UG Healthcare0.194-0.001
Uni-Asia Group0.8350.005
Wilmar Intl4.120-
Yangzijiang Shipbldg1.410-0.010

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