FW: SG: Market Pulse (22 July 2016)

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Ye Tian (James)

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Jul 22, 2016, 12:29:54 AM7/22/16



Friday, 22 July 2016

KEY IDEA
Ascendas REIT: Decent start
Ascendas REIT (A-REIT) reported its 1QFY17 results which met our expectations. Gross revenue and DPU increased 15.0% and 4.0% YoY to S$207.6m and 3.996 S cents, respectively. Although the operating environment remains challenging, management still achieved positive rental reversions of 4.1% for its Singapore properties for leases renewed in 1QFY17, although this was a moderation from the previous quarter. Overall portfolio occupancy stood at 88.2% (+0.6 ppt QoQ), as at 30 Jun 2016, with improvements seen in Singapore and China. We ease our FY17 and FY18 DPU forecasts marginally by 0.4% and 0.3%, respectively, as we factor in A-REIT’s divestment of Jiashan Logistics Centre in our model. However, as we also lower our cost of equity assumption from 7.8% to 7.5%, our fair value estimate increases from S$2.56 to S$2.66.		Maintain BUY, with the fair value estimate increased from S$2.56 to S$2.66. (Wong Teck Ching Andy)


MORE REPORTS
Keppel Corporation: Lowers interim dividend
Keppel Corp (KEP) reported a 37% YoY drop in revenue to S$1.6b and a 48% fall in net profit to S$205.8m in 2Q16, while 1H16 net profit fell 45%, mainly due to weaker results from O&M, and also the absence of one-time gains from the Infrastructure division a year ago. The impact was cushioned by good performance from the Property segment, which is now the biggest contributor to bottom-line. Overall, results were lower than expected, as 1H16 net profit accounted for 40% and 36% of ours and the street’s full year estimates, respectively. The Chinese property market remains healthy in the key cities where KEP operates, while on the offshore side, the group has received additional deferment requests. An interim dividend of S$0.08/share for 1H16 has been declared, compared to S$0.12/share in 1H15. We incorporate the recently-formed Keppel Capital into our sum-of-parts valuation, and also update our valuations for the O&M and property segments, such that our fair value estimate rises slightly to S$5.68.		Maintain HOLD with S$5.68 fair value estimate; we would turn buyers around S$5.30. *(Low Pei Han)*


SATS Ltd: 1QFY17 slightly better than expected
SATS Limited (SATS) 1QFY17 results came in slightly better than our expectations as 1QFY17 revenue grew by 1.8% YoY to S$424.2m, mainly attributable to 4.7% growth from Gateway Services (GS), but partly offset by 0.5% decline from Food Solutions (FS) due to transfer of food distribution revenue to JV. Excluding the transfer of business to JV, 1QFY17 revenue would have increased 8.6% YoY while FS revenue would have grown 11.4%. 1QFY17 operating expenses fell by 0.9% YoY to S$369.7m mainly due to transfer of business to JV while 1QFY17 share of profits from associates/JVs declined 4.7% YoY to S$12.2m mainly due to dilution of stake in Beijing associate. Consequently, 1QFY17 core PATMI posted a solid 17.6% YoY growth to S$55.4m. Going forward, we expect SATS to continue growing steadily on: 1) higher airline loads despite weak yields, 2) productivity drive to improve profitability, especially in Japan, and 3) longer-term growth driven by non-aviation businesses.	As we still expect stable growth in dividends, our DDM-derived FV remains unchanged at S$4.20. Maintain HOLD. *(Eugene Chua)*


Suntec REIT: Take profit on rich valuations
Suntec REIT’s 2Q16 gross revenue declined 3.1% YoY to S$78.9m. DPU was flat at 2.501 S cents, and was boosted by a distribution from capital amounting to S$8m (0.316 S cents per unit). Results were in-line with our expectations. Suntec REIT proactively managed its lease expiry profile during the quarter, bringing down both its office and retail lease expiries for the remainder of the year. However, committed portfolio passing rents continued to soften. We raise our fair value estimate on Suntec REIT to S$1.54 (previously S$1.51), as we factor in a lower risk-free rate assumption of 2.4% (previously 3.0%) in our model. Nevertheless, we maintain our SELL rating as we believe valuations remain rich. Suntec REIT is trading at 5.6% FY16F distribution yield, which is more than half a standard deviation below its 5-year average forward yield of 6.1%.		We maintain our SELL rating with S$1.54 fair value estimate as we believe valuations remain rich. *(Wong Teck Ching Andy)*


CapitaLand Mall Trust: 2Q16 results in-line with our expectations
CapitaLand Mall Trust (CMT) reported a 7.1% YoY increase for its 2Q16 gross revenue to S$170.9m, driven by the acquisition of Bedok Mall on 1 Oct 2015 and higher rental achieved for properties which had recently completed their AEIs, but partially offset by lower contribution from Funan DigitaLife Mall. DPU inched up 1.1% to 2.74 S cents. Results were in-line with our expectations. For 1H16, CMT’s gross revenue rose 7.3% to S$350.7m and this formed 49.1% of our FY16 forecast. DPU of 5.47 S cents represented growth of 1.5% and accounted for 48.0% of our full-year projection. If we include the S$12.0m of taxable income available for distribution which was retained in 1H16 and expected to be paid out in 2H16, CMT’s adjusted DPU would have formed 51.0% of our FY16 forecast. CMT showcased its resilience by recording an increase of 3.6% YoY for its shopper traffic in 1H16, while its tenants’ sales psf per month grew 2.3%. Occupancy at its malls was also stable at 97.9%, as at 30 Jun 2016. However, CMT experienced a continued moderation in its rental reversion trend, as the increase in rental rates came in at 1.7% for 1H16 (FY15: 3.7%). We will provide more updates after the analyst briefing.	Maintain HOLD on CMT, but with our S$2.10 fair value estimate under review. *(Wong Teck Ching Andy)*


NEWS HEADLINES
- Ezra Holdings' 50:50 JV with Chiyoda Corporation has, in partnership with Larsen & Toubro Hydrocarbon Engineering, been awarded a US$1.6b contract by Saudi Aramco. - SMJ International expects to report a net loss for 1H16. - AsiaPhos has received approval for the Mine 2 Exploration Right Renewal Application from the Sichuan Land Authority. The right is for an exploration area of approximately 1.28 sq km and is valid from 16 June 2016 to 16 June 2018. - The Stratech Group's auditor has included an emphasis of matter in the Independent Auditor's Report for FY16.


For more information on the above, please refer to the detailed report attached.



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