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LIM & TAN |
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Elite Commercial REIT (ELITE SP) Postcard from UK
A visit to REIT’s UK office assets We recently visited 18 Elite Commercial assets (valued at GBP148.6m, 32% of AUM) in London, North West England and Scotland. Anchored by 155 office assets across the UK, ELITE offers exposure to mostly freehold, triple-net-leased, and government-occupied assets with a WALE of 4.5 years. The major tenant, DWP, occupies 146 buildings, including its public serving Jobcentre Plus and back offices. Based on FactSet consensus data, ELITE is trading at 0.48x FY23E P/BV (see pg.2).
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The Edge Singapore reported that Singapore Technologies Engineering / ST Engineering ($3.79, down $0.09) has been awarded the contract to design, build and maintain Abu Dhabi’s first multimodal Intelligent Transportation Central Platform (ITCP) over three and a half years till 2027. The contract was awarded to ST Engineering’s urban solutions subsidiary as part of a consortium. ST Engineering’s share price has fallen a sharp 6% in the past 5 days, along with the sharp correction in global markets, and with the latest new contract win would provide another good opportunity for investors to “Accumulate” the stock. While its valuations of 20x PE, 4.8x price to book and 4.2% dividend yield looks rather fair, we note that in times of uncertainties and heightened geo-political tensions, we see investors looking to seek shelter in solid & reliable blue chip companies such as ST Engineering given their diversified business exposures and also providing scarce exposure to the “defence sector”. That likely explains why consensus remains bullish on ST Engineering despite its high valuations with average 1 year consensus target price at around $4.30. We are a tad more bullish with our own target price standing at $4.43.
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LIM & TAN |
CGS-CIMB |
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Keppel Corp ($6.25, down 0.07) has released its voluntary business update for 3Q & 9M 2023. In 9M 2023, net profit from continuing operations grew year-on-year (yoy) bolstered by stronger performance from the Infrastructure and Connectivity segments. Net profit for 3Q 2023 was also stronger yoy, with all three horizontal segments — Infrastructure, Real Estate and Connectivity — registering improvements.
We continue to favor Keppel Corp’s pivot towards green and sustainable solutions which aligns their business direction with global government’s efforts to scale up their ESG initiatives in the years ahead. We also like that Keppel Corp is taking a leaf and following in the successful footsteps of Sembcorp Industries to move away from dirty energy into clean and renewable energy space and at the same time build up their recurring income streams, similar to what Capitaland Investment Ltd has successfully executed. As Keppel’s ESG/renewables/building of recurring income stream inititives gain traction, we see them repeating the success of Sembcorp Industries & Capitaland Investment Ltd which has re-rated significantly since their pivot towards that direction. For example, SCI is currently trading at a significant 80% premium to its NAV or 1.8x price to book against Keppel Corp’s 1x price to book or parity to its NAV. At $6.26, Keppel Corp is trading at undemanding valuations of 1 x book, 10x PE, 5.3% dividend yield. Kep Corp’s shareholders will also be entitled to receive 1 for 5 Keppel REIT’s shares (goes ex entitlement on 25 Oct’23). We maintain an “Accumulate” rating on Keppel Corp.
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FRENCKEN GROUP FY24-25F outlook likely to improve ■ We expect Frencken to issue its 3Q23 business update by after the market close on 27 Nov 2023. ■ We estimate Frencken posting a S$176.8m revenue (-9.5% yoy, -1.0% qoq) and S$6.0m net profit (-45.1% yoy, -12.5% qoq) for 3Q23F. ■ Our FY23-25F forecasts and P/E multiples are unchanged, but our TP is increased to S$1.37 on rollover to FY25F. Read more.. |
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