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CGS CIMB |
UOB KAYHIAN |
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Singapore Strategy
■ We highlight Singapore companies with exposure to China that could be beneficiaries of a strengthening in economic activity in China.
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REITs – Singapore US Office REITs: The End Is Near For Working From Home
Long-suffering US office REITs are finally seeing the light at the end of the tunnel. Leasing volume has picked up and tenants are more willing to commit to long-term leases. New construction has petered out and occupancy could recover to prepandemic levels by 2027. Upcoming rate cuts would support a continuation of the recovery. BUY KORE (Target: US$0.35) and PRIME (Target: US$0.32), which provide 2026 distribution yields of 19.2% and 27.6% respectively.
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UOB KAYHIAN |
MAYBANK KIM ENG |
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Hong Kong Exchanges and Clearing (388 HK) Further Valuation Re-rating Requires More Sustainable ADT Uptick Cycle
The increased turnover resulting from policy easing in China and the US rate cuts will improve HKEX's earnings. However, we remain cautious on the extremely high turnovers and the rich valuation (+1.2SD) might have priced in the sharp increase in ADT. We estimate that a 10% ADT increase could lead to a 4.8% EPS growth, but the NII decline will exert downward pressure on earnings. Thus, we see limited room for further valuation re-rating and downgrade HKEX to HOLD. Target price: HK$355.00.
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Sea Ltd (SE US) New monetisation avenues to achieve margin targets sooner
Lift TP to USD110; Raise earnings est. by 2-9% E-commerce competition remains benign, leading to monetisation initiatives such as seller take-rate increases (1-3%) and advertising growth, which in turn fast forwards margin improvement. We raise our 2030 e-commerce Adj. EBITDA to GMV margins to 2.7% by 2030 (from 1.9% previously). We think Shopee is comfortably positioned to exceed its long-term e-commerce Adj. EBITDA to GMV margins target of 2-3%. However, we think the company is likely to cap ecommerce margins to keep the space competitive to maintain its dominance and/or counter entry of aggressive new entrants. Absolute EBITDA though can expand, helped by elevated GMV growth momentum besides lifting growth of DFS business, which is highly tied to e-commerce, in our view. Raise TP to USD110 and reiterate BUY. MIBG Adj. EBITDA estimates are 10-14% above the Street.
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| LIM & TAN | LIM & TAN |
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Digital Core REIT / DCRU (US$0.58, down 0.015), a leading pureplay data centre REIT listed in Singapore and sponsored by Digital Realty (NYSE: DLR), announced that it has recast US$716 million of loan facilities (the “Facilities”), comprising a US$363 million senior unsecured multicurrency term loan facility maturing in 2030, a €70 million (or approximately US$78 million) senior unsecured term loan facility maturing in 2029 and a US$275 million senior unsecured revolving multicurrency loan facility maturing in 2029 (with two sixmonth extension options). At US$0.58, DCRU is capitalized at US$754mln and trades at 6% yield, 0.8x book and based on Bloomberg consensus target price of US$0.76, upside potential is 31%. Undemanding valuations coupled with consistent share buy backs justifies an “Accumulate” rating on DCRU.
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CapitaLand Ascott Trust / CLAS ($0.955, down 0.01) has divested Citadines Karasuma-Gojo Kyoto in Japan to an unrelated third party for about JPY6.18 billion (S$53.1 million). The 124-unit property was divested at 40.1% above book value at an exit EBITDA yield of about 0.3%. Net proceeds of the divestment are JPY4.4 billion (S$37.8 million) and CLAS has recognised a net gain of JPY0.9 billion (S$8.0 million). At 95.5 cents, CLAS is capitalized at $3.6bln and trades at forward div yield of 6.3% (6 cents annualized payout) and 0.8x price to book. Based on Bloomberg consensus 1 year target price of $1.46, upside potential is 47%. We continue to like the recycling initiatives from lower yielding matured assets to faster growing growth-oriented assets. Despite the recent rise, we would use short term pull-backs to “Accumulate” CLAS given its still undemanding valuations and ability to benefit from re-surgence of global tourism and also lower interest rates ahead. |
