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Ascendas REIT (BUY; Target Price: S$2.31)

Following the announcement on February 6 to acquire three properties at Science Park Drive from sponsor Ascendas Land, Ascendas REIT (A-REIT) reported that the transaction was completed on March 29 at a total consideration cost of S$185.5 million. No consideration units were issued as Ascendas Land had indicated that it did not wish to receive any equity consideration. This is contrary to A-REIT’s initial intention to fulfil the acquisition by making partial payment via unit issuance amounting to not more than 50 per cent of the purchase price. As a result, the purchase consideration was fully paid in cash by way of internal resources and drawdown of debt. This should raise A-REIT’s aggregate leverage from 34.3 per cent as at 31 December 2011 to 38 per cent, according to management. However, following the recent revaluation gains of S$260.5 million (+4.5 per cent) over the prior valuation for its portfolio properties, we estimate that its leverage may be lowered closer to 36 per cent. In the same announcement, A-REIT updated that its Singapore properties continued to achieve positive rental reversions of 2.6-12.5 per cent YTD upon renewal of its existing leases. Moreover, the passing rents for all the leases in its multi-tenanted buildings, with expiry dates over multiple years, are still some 13-28 per cent below the prevailing market spot rental rates. This is in line with our view that A-REIT’s operating performance is likely to stay resilient in the coming quarters. As a note, property consultant DTZ Research is expecting industrial rents to fall by 5-10 per cent in 2012. This is still higher than A-REIT’s passing rents, even if industrial rents correct to the higher end of the estimates. – OCBC Investment Research


CDL Hospitality Trusts (BUY; Target Price: S$2.00)

Visitor arrivals for January-February totalled 2.3 million, up 13.9 per cent YoY and higher than the upper limit of the 2.5-10.1 per cent growth implied by the STB’s 2012 target of 13.5-14.5 million visitor arrivals for Singapore. To recap, the STB also set a target for S$23-24 billion in tourism receipts this year, implying a 3.6-8.1 per cent YoY increase. The mid-points of the target growth rates are 5.9 per cent and 6.3 per cent respectively. STB chief Aw Kah Peng has indicated that if the outlook improves in the second half, the performance might be even better than these projections. We believe that our RevPAR growth rate assumption of 5.5 per cent for CDLHT’s Singapore hotels in 2012 is conservative. Hotels across all tiers saw significant growth in Revenue per Available Room (RevPAR) for February with increases of 19.2-26.4 per cent YoY on the back of increased occupancy and increased average room rates. As with January, high-end hotels outperformed budget hotels, with RevPAR increasing more for Luxury and Upscale hotels as opposed to Mid-tier and Economy hotels. As a testament to their pricing power, high-end hotels also registered greater increases in their average room rates. Exciting developments continue in the tourism sector. The International Cruise Terminal is scheduled to open this quarter and the River Safari will open next quarter. Last month marked the first time junket promoters were granted licenses by the Casino Regulatory Authority. With the hotels at integrated resorts running at near full capacity, the big spenders that are brought here by junket operations should gradually have a positive spill-over effect on high-end hotels. – OCBC Investment Research


Cordlife Group (Not Rated)

The stock closed at 37 per cent above its IPO price of S$0.495 on the first day of trading on 29 March 2012 and is now 48 per cent above its IPO price. Of the net proceeds of S$26.3 million raised, Cordlife plans to use S$16.6 million to develop and expand its business operations in Singapore and overseas, S$3.0 million to renovate its new headquarters in Yishun, S$2.0 million for IT infrastructure investments, and the remaining for working capital purposes. Cordlife was carved out from Australia-listed Cordlife Limited (CBB) and came with the Singapore and Hong Kong businesses which are already in the developed stage. It also owns a 10 per cent indirect stake in the sole cord blood banking operator in China’s Guangdong province. This is a protected industry in China and Cordlife is the only foreign entity to have an interest in a China cord blood company. Cordlife also has the right of first refusal to acquire CBB’s cord blood banking businesses in Indonesia, the Philippines and India, which are currently in the developing stages. The India market may take up to five years to develop while Indonesia and the Philippines could take about three years. The cord blood business is essentially stable and recurring in nature. Cordlife’s 20,000-strong customer base currently generates a stable annual cash flow of about S$5 million. According to a market report by Deloitte & Touche Financial Advisory Services, the cord blood storage market is expected to grow at 9-10 per cent CAGR for Singapore and Hong Kong and 22 per cent pa for China over 2010-15. While this is a good business with high entry barriers, valuation is hard to determine as most comparable companies are illiquid. China Cord Blood and Cryosite, are trading at about 10-11x PER (price earnings ratio). Cordlife currently trades at 20x FY11 PER following the surge in its share price. We believe that share price may start to retreat after the initial euphoria. – Maybank Kim Eng Research


Keppel Corp (BUY; Target Price: S$13.40)

Keppel announced that its US wholly-owned unit, Keppel AmFELS, has secured a US$205 million contract from a repeat customer, Perforadora Central, to build a jackup rig valued at US$205 million. The rig will be based on the LeTourneau Super 116E design and will be delivered in 1Q2014. The earlier jackup rig for Perforadora Central (ordered in March 2011) was priced at US$195 million and will be delivered in 1Q2013. With the latest contract, new orders secured in 2012 increased to S$842 million vs. S$1.75 billion for SMM (which includes the S$1 billion drillship order). We estimate that Keppel has an outstanding backlog of S$10.2 billion. In our model, we assume Keppel O&M to win S$6 billion non-Petrobras orders in 2012 and an additional S$5 billion more from Sete Brasil. Maintain BUY on Keppel with a target price of S$13.40, implying 16x FY12F P/E (price-earnings). – OSK-DMG


Perennial China Retail Trust (Not Rated)

Listed in June last year, Perennial China Retail Trust (PCRT) is Singapore’s first pureplay China retail development business trust. This means that there is no restriction on the number of development assets PCRT can hold, unlike a REIT. Gearing also is not capped, although management has a self-imposed limit of 60 per cent. PCRT’s portfolio includes three properties in Shenyang and two suburban malls in Foshan and Chengdu that are still under construction. In addition, the business trust has the options and right of first refusal to prime commercial development sites directly connected to the high-speed rail (HSR) stations in Chengdu, Xi’an and Changsha. It recently obtained unitholders’ approval to acquire a 50 per cent stake in Chengdu Longemont Mall, which will have a GFA of 455,260 sq m, to be built beside Chengdu’s HSR station. PCRT’s initial portfolio comprises its 50 per cent stakes in Shenyang Red Star Macalline Furniture Mall, Shenyang Longemont Shopping Mall, Shenyang Longemont Offices, Foshan Yicui Shijia Shopping Mall and Chengdu Qingyang Guanghua Shopping Mall. Currently, only the first two properties are in operation, but PCRT expects all the properties to be completed and income-producing by 2Q14. Even Chengdu Longemont Mall is expected to be completed by 3Q14. PCRT’s sponsor is Perennial Real Estate Pte Ltd, helmed by Mr Pua Seck Guan. With over 20 years of real estate experience, Pua was instrumental in Singapore’s first REIT listing of CapitaMall Trust and was CEO of CapitaLand Retail Limited (which later became CapitaMalls Asia). During his time at CapitaLand, Pua was involved in the acquisition, development and management of 70 malls across China. PCRT unitholders can look forward to NAV (net asset value) growth as its properties get completed and stabilised, given the attractive acquisition costs which are on a completed basis. When China’s capital markets mature, there may be avenues to realise the enhanced value. In the meantime, unitholders are likely to be rewarded with a DPU of 3.86 S-cents for FY12F, translating to an attractive yield of 7.4 per cent. – Maybank Kim Eng Research


TEE International (Not Rated)

TEE International announced that Bertie Cheng Shao Shiong, the Independent and Non-Executive Chairman and Phua Chian Kin, the Group Chief Executive and Managing Director, are the subjects of the investigations by the Commercial Affairs Department (CAD) and that they are assisting with its investigations on possible contravention of market rigging provisions in the Securities and Futures Act (Chapter 289). Cheng and Phua have indicated that they will cooperate fully with CAD in its investigations and are providing CAD with access to the relevant records for the period from 1 July 2008 to 31 March 2009. Following the news release, we believe the share price will come under pressure. We do not have a rating on this stock and still remain positive on the sector on the back of strong construction demand with upcoming mega infrastructure projects such as the North-South Expressway. – OSK-DMG