UOB KAYHIAN |
CGS-CIMB |
Banking – Singapore
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GKE Corp Ltd |
MAYBANK KIM ENG |
MAYBANK KIM ENG |
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. |
Thailand REITs
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DBS GROUP | LIM & TAN |
News Alert: Cash from CSE sale has now been fully reallocated
(+) 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:
(+) 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.
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We highlight the key extracts from Mapletree Industrial Trust’s / MIT ($2.65, up 0.02) latest annual report release:
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). |