| UOB KAYHIAN |
UOB KAYHIAN |
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REITs – Singapore S-REITs Monthly Update (Mar 24)
Interest rates in OECD countries have already peaked. Based on the latest summary of economic projections, FOMC participants expect three rate cuts of 25bp in 2024 and the Fed Funds Rate to ease to 4.5% by end-24. Maintain OVERWEIGHT. Our top picks are hospitality and retail plays, which benefit from continued recovery in visitor arrivals and resilient consumer spending.
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Keppel REIT (KREIT SP) Choice Pick From Down Under
The acquisition of 255 George Street is attractive due to: a) strategic location within Core Precinct of Sydney CBD and near major transportation nodes, b) recently refurbished in 2022, c) diversified tenant base anchored by Australian Tax Office and Bank of Queensland, and d) provides high yield of above 6.0%. KREIT’s valuation is attractive with 2025 distribution yield of 7.1% (CICT: 5.5% and Suntec: 6.3%) and P/NAV at 0.67x. Maintain BUY. Target price: of S$1.26.
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LIM & TAN SECURITIES |
LIM & TAN |
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We highlight the following key points from Haw Par Corp’s ($9.73, up 0.05) FY23 annual report: 2023 marked a year of recovery from the Covid-19 pandemic. With the improvement in our Healthcare and Leisure businesses and the increase in investment income from our strategic investments, the Group achieved record earnings of $216.6 million representing a 46% increase from 2022. Group revenue grew by 27% to $232.1 million as demand for Tiger Balm products in Asian markets rebounded due to improved consumer sentiment. At $9.73, Haw Par is capitalized at $2.15 billion and trades at 10x PE, 4.1% yield and 0.6x book. Valuations are undemanding, especially comparing its current market cap of $2.15 billion to its holdings of UOB, UOL & other long-term investments of $2.7 billion + cash plus debt securities worth $760 million.
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We highlight the key points from Capitaland Ascendas REIT’s / CLAR ($2.78, up 1 cent) FY23 annual report which was just released: CLAR continued to record a healthy operational and financial performance in FY2023. This was attributed to our well-balanced portfolio comprising assets in the business space, life sciences, logistics, industrial and data centre sectors across Singapore, Australia, the US and the UK/Europe, as well as our prudent capital management approach which provided liquidity for CLAR to execute its acquisition plans. CLAR’s market cap stands at S$12.2bln and currently trades at 19x forward PE and 1.2x PB, with a forward dividend yield of 5.8%. Consensus target price stands at S$3.13, representing 13% upside from current share price. We continue to like CLAR for its fundamentally strong and diversified portfolio that can benefit from it’s pivot towards data centres amidst a lower interest rate environment. With inflation peaking and downside risks for REITs minimised, we position CLAR as a liquid large-cap REIT that can benefit from the “soft landing” that the Fed envisions. As such, we maintain an ACCUMULATE rating on CLAR. CLAR anchors an investor’s portfolio while collecting a defensive and steady yield until valuations recover to a pre-COVID high of c.1.6x PB. |
| MAYBANK KIM ENG | MAYBANK KIM ENG |
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Keppel REIT (KREIT SP) Acquiring ‘down under’
Buying 50% of freehold Grade-A Sydney CBD office KREIT proposed acquisition of a 50% stake in 255 George Street for AUD363.8m from Mirvac Funds. The office building has 93% committed occupancy with an average lease to maturity of 6.8 years mostly tenanted to government agencies and a financial institution. The initial NPI yield exceeds 6%. Funded with a mix of AUD and SGD debt, pro-forma DPU accretion will be 1.4% with a higher gearing of 41%. Maintain BUY with unchanged estimates and DDM-based TP of SGD1.00 on an attractive 6.7% dividend yield and 40% discount to book.
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Malaysia Banking 5.8% loan growth in Feb 2024
POSITIVE on the sector Loan growth continues to be fairly robust, rising 5.8% YoY in Feb 2024, which is currently above our full-year projection of 5.1%. Positively, the momentum has been encouraging on both the household and business fronts. We remain Positive on the sector with BUYs on AMMB, CIMB, PBK, HLBK, ABMB and HLFG, in that order of preference.
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