ANALYSTS SAY: Buy, Sell, Hold (28 Oct)

UOB KAYHIAN

Suntec REIT (SUN SP)
3Q22: Held Back By Higher Interest Rates And Weaker GBP

SUN achieved stronger operational performance in occupancies and rents across its office and retail portfolios. DPU from operations declined 15.6% yoy due to higher interest rates, weakness of the GBP and a higher proportion of asset management fees paid in cash. Management intends to maintain capital distribution at S$23m for two years. 2023F distribution yield is fair at 5.5%, although P/NAV of 0.66x is attractive. Maintain HOLD. Target price: S$1.39.

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Offshore & Marine – Singapore
KOM And SMM Merger: A Simpler Transaction

KEP and SMM announced the variance of their merger terms, thus making it simpler and faster to complete. Our view remains that the combination of KEP’s offshore marine segment and SMM benefits both in the short and long term. For KEP, the divestment of KOM will allow it to focus more on asset-light and/or recurring-fee businesses while SMM will become a larger and arguably more competitive entity with a strong renewables focus. Maintain BUY ratings on both KEP and SMM.

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UOB KAYHIAN

Mapletree Industrial Trust (MINT SP)
2QFY23: Weathering Headwinds From Higher Inflation And Interest Rates

Gross rental rate for MINT’s Singapore portfolio edged higher by 0.9% qoq to S$2.13psf/month in 2QFY23 despite uncertainties in the macro environment. Occupancy for the Singapore portfolio improved 0.8ppt qoq to 96.8%. Our existing DPU forecast is unchanged as we have already factored in the higher cost of debt and electricity tariff. MINT provides FY23 distribution yield of 6.0%, which is in line with peers’ (DCREIT: 6.8% and KDCREIT: 6.5%). Maintain BUY. Target price: S$3.12.

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First Resources (FR SP)
3Q22 Preview: Buoyed By Strong Sales Volume And Stable Downstream Margin

We expect 3Q22 earnings to be slightly higher qoq and yoy on the back of strong sales volume growth and steady refining margin. Having said that, this is partially offset by lower operating margin, due to lower CPO ASP and higher cost of production. Upgrade to BUY with the same target price of S$1.70 as we see stable downstream performance to mitigate CPO downtrend and good dividend yield of 6-7% for 2022-24.

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Sembcorp Marine
Closer to becoming the largest regional yard

■ We upgrade SMM from Hold to Add with a revised TP of S$0.19, based on 1.6x P/BV or average trading band from 2016-present.
■ Our upgrade is premised upon 1) deal certainty to acquire KOM and 2) stronger order book of S$18bn for the enlarged entity.
■ Key catalysts: stronger order momentum and consistent earnings improvement. Key risk: severe cost overrun derailing profitability. 

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Keppel DC REIT
Portfolio reconstitution paying off

■ 3Q/9M22 DPU of 2.585/7.634 Scts (+5.0%/+3.4% yoy) was in line at 25.5%/75.2% of our FY22F, lifted by acquisitions and reversions/escalations.
■ Earnings protected by FX hedge and ability to pass through higher utilities.
■ ReiterateAdd; valuations attractive at 5.8% FY22F DPU yield, 1.3x P/NAV. 

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