buysellhold july.23



Frasers Centrepoint Trust (FCT SP)

Pivoting Towards Dominant Suburban Malls


The acquisition of an additional 24.5% stake in Nex is accretive to pro forma 2023 DPU by 0.4%. We expect the acquisition to be completed in end-2QFY24 and contributions to kick in starting 3QFY24. NEX could be enhanced by: a) decanting existing carpark space for conversion into 60,000sf of commercial space, and b) rightsizing its tenant mix to reduce the reliance on anchor tenants. FCT provides defensive FY25 distribution yield of 5.3%. Maintain BUY. Target price: S$2.73.



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Renewable Energy – China

Solar: Combined Power Capacities Of Solar And Wind To Surpass Coal in 2024; EU Mulls Protective Measures For Solar Manufacturers


China’s solar annual installation hit a new high in 2023 at 216.88GW, equivalent to the total for the past four years. CEC expects solar and wind power generating capacity to reach 780GW and 530GW respectively in 2023, with a combined capacity of 1,300GW by end-24 and surpassing thermal power plants’ capacities for the first time. European module manufacturers are facing an existential threat and on the brink of bankruptcy, and are petitioning for government aid and more aggressive protective measures. Maintain MARKET WEIGHT. 



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Paragon REIT ($0.84, down 3 cents) announced its financial results for the full year ended 31 December 2023 (“FY2023”) and reported that gross revenue increased 1.8% year-on-year to S$288.9 million for FY2023, and Net Property Income (“NPI”) increased 1.7% year-on-year to S$215.1 million for the same period. Distribution per unit (“DPU”) for FY2023 was 5.02 cents, a decrease of 9% year-on-year mainly due to rising interest cost. 2H FY2023 distribution of 2.60 cents is expected be paid on 22 March 2024. PARAGON REIT’s assets continue to benefit from resilient retail spending, maintaining a portfolio occupancy rate of 98.1% as at 31 December 2023. PARAGON REIT achieved a positive rental reversion rate of 6.3% in FY2023, reflecting retailers’ positive leasing sentiments post pandemic to position for progressive growth in international demand. The portfolio weighted average lease expiry stood at 5.1 years by net lettable area and 3.0 years by gross rental income, translating to a distributed lease expiry profile with low concentration risk.

Paragon REIT’s market cap stands at S$2.4bln and currently trades at 0.83x PB, with a dividend yield of 6.0%. Consensus target price stands at S$1.05, representing 25.0% upside from current share price. We like Paragon REIT’s heartland malls in Singapore and super regional mall in South Australia, which is typically more resilient and defensive should a downturn come. Additionally, the expected lower interest rate environment should help to reduce interest expense and lift overall DPU in FY24. We thus have an “Accumulate” rating on Paragon REIT (previously known as SPH REIT).


CapitaLand Integrated Commercial Trust / CICT ($1.96, down 0.05), today reported a distributable income of S$362.5 million for the six months ended 31 December 2023 (2H 2023). This marks a 2.1% year-on-year (y-o-y) increase compared to the S$355.1 million for 2H 2022. The higher distributable income was underpinned by sound operational performance driven by proactive portfolio management and prudent cost management. CICT’s 2H 2023 distribution per unit (DPU) was 5.45 cents, up 1.7% y-o-y. This brings the total DPU for FY 2023 to 10.75 cents, up 1.6% y-o-y, translating to a total return of 6.3%. Based on the closing price of S$1.96 per unit, CICT’s distribution yield for FY 2023 was 5.5%. With the record date on Thursday, 15 February 2024, CICT unitholders (Unitholders) can expect to receive their 2H 2023 DPU on Thursday, 28 March 2024. CICT is also pleased to announce a Distribution Reinvestment Plan (DRP) applicable to its 2H 2023 distribution. The DRP provides Unitholders with the option to receive their 2H 2023 distribution in units, or a combination of both units and cash in lieu of the cash amount of distribution. Payment Date dated 6 February 2024. 

At $1.96, CICT is capitalized at $13.05 billion and trades at 5.5%- 5.6% forward dividend yields and 0.95x price to book. Based on Bloomberg 1 year consensus target price of $2.15, upside potential is about 10%. While we like the resilient and defensive portfolios and assets of CICT, we note that valuations currently looks fair and upside potential coupled with dividend returns are modest, hence we maintain a HOLD recommendation on CICT.


Keppel Infrastructure Trust

All aboard the Melbourne express


• Proposed acquisition of largest bus service business in Melbourne, Australia

• Potential equity fund raising exercise on the horizon to fund transaction; acquisition is still expected to be accretive despite impact of dilution

• Maintain fair value estimate of SGD0.595

Investment thesis

Keppel Infrastructure Trust (KIT) is a flagship investment vehicle for investors seeking exposure to infrastructure businesses and assets, alongside themes such as sustainability, energy transition, and a circular economy. KIT has a diversified portfolio of assets spanning energy transition, environmental services, and distribution and storage, which are located in jurisdictions with well-developed legal frameworks. Many of its assets are backed by long-term concession agreements, with more than 90% of its portfolio insulated against inflation via cost pass-through mechanisms or strong price-setting capabilities. This translates to stable, recurring cash flows that are relatively unaffected by the ebbs and flows of the business cycle. Acquisitions remain a key growth driver, and KIT is well supported in this regard by an experienced management team and the ability to tap on the Keppel ecosystem. As such, we favour KIT as a defensive play in the face of heightened market volatility and a potential economic downturn, with the secular tailwind of rising infrastructure spending providing further support.



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