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Ascendas REIT (BUY; Target Price; S$2.22)

Ascendas REIT’s (A-REIT) unit price performance has clearly attested to its resilience, gaining 10.4 per cent YTD as opposed to a 4.3 per cent increase in the broader market. The strength, in our opinion, is mainly attributable to its diversified portfolio of 102 properties, healthy lease profile, strong sponsor and quality management. Outlook is also expected to remain sanguine, with recent acquisitions and developments likely to contribute positively to its performance. Despite market concerns that the industrial rents may ease slightly in 2012, we still see potential for A-REIT to register positive rental reversions, as the passing rents for the area due for renewal are currently 16-32 per cent below the spot market rates. This should provide support to our FY13F DPU yield of 6.9 per cent, which is attractive in our view. A-REIT has also been very proactive in its capital management. Riding on its sturdy share price performance, the REIT strategically issued out 150 million new units at S$1.99 apiece (6.0 per cent premium to NAV) via a private placement in May. All the net proceeds, amounting to S$296.9 million, had since been used to repay its outstanding borrowings, which effectively pared down its aggregate leverage from 36.6 per cent as at March 31 to 32.1 per cent. In addition, we also note that A-REIT has announced the divestment of Goldin Logistics Hub at 6 Pioneer Walk for S$32.1 million, representing a respectable 36.2 per cent premium over its latest disclosed valuation of S$23.5 million in March 2011. As a result, A-REIT’s fortified financial position will likely provide it with greater financial ability to capitalise on growth opportunities, as well as secure borrowings at potentially more competitive terms to fund its committed investments. We now factor in an enlarged unit base following the placement and an expected loss in income from the divestment, partially balanced out by lower interest expenses from lower borrowings. – OCBC Investment Research

 

CDL Hospitality Trusts (BUY; Target Price: S$2.04)

On a worldwide basis, Singapore commands fairly high hotel room rates. To study the relative affordability of Singapore hotels we have examined the average hotel room rates paid by travellers from different places of origin to destinations worldwide. Travellers from China, India, Australia, HK and the UK, which form half of the top ten places of origin for travellers to Singapore in 2011, are willing to pay 24-61 per cent more for a hotel room in the most expensive destinations versus Singapore. For example, travellers from China paid an average of 40% more for a hotel room in London in 2011 versus one in Singapore. As Singapore continues to become a more attractive travel destination, especially for its trio of MICE, gaming and medical tourism, the premium that the most expensive hotel destinations command over it could shrink substantially with time. Additionally, the nine out of 10 top places of origin for visitors to Singapore are located in Asia-Pacific. With the continued rise of low-cost carriers (LCCs) in this region, intra-Asia travel will increase and people can afford to spend more on hotel rooms. For many, travelling to Singapore is already a lot cheaper than travelling to New York or Venice. Singapore’s first long-haul LCC, Scoot, will be making daily flights to Tokyo and Taipei from 3Q12. Scoot just completed its maiden flight to Australia and will begin flights to Gold Coast next week. The supply-demand dynamics for Singapore hotels remains positive. We project that hotel room supply will increase by 3.7 per cent p.a. for 2012-2015 while hotel room demand will grow faster at 6.4 per cent p.a. CDLHT is one of the few highly liquid, close-to-pure-plays for the Singapore hotel sector. We maintain our BUY rating on CDLHT and our RNAV-derived fair value estimate of S$2.04. – OCBC Investment Research

 

Global Palm Resources (HOLD; Target Price: S$0.19)

We have recently spoken with management of Global Palm Resources (GPR) to get an update after releasing its 1Q12 results which were mostly in line with our expectations. As a recap, revenue grew 12.0 per cent YoY to IDR98.918 billion, meeting 27.3 per cent of our full-year forecast. Net profit though fell 13.1 per cent YoY to IDR12.9 billion, or around 23.4 per cent of our FY12 forecast. However, we note that gross margin eased from 30.5 per cent in 1Q11 and 31.3 per cent in 4Q11 to 25.7 per cent; this probably due to lower ASPs. In addition, cash cost has also risen in 1Q12 to IDR3277/kg, up from the average of IDR2489/kg in FY11; this mainly due to higher indirect material used (fertilizers), higher cost of upkeep and harvesting and increased cost of fuel. We note that it was also higher than management’s earlier forecast of IDR3087/kg for FY12. As such, we will continue to monitor the situation and make any adjustments in our margin assumptions later. The group has kept its new planting target for 2012 at 1,000 ha; and it has planted some 166 ha in 1Q12. Currently, GPR’s plantation size is around 10,500 ha, with 58.6 per cent at the peak production stage (7-18 years). According to management, it still has around 2,700 ha available for future cultivation. It intends to spend IDR15.6 billion on plantation expenditure this year and another IDR35.9 billion on other capex – unchanged from its earlier guidance made after its 4Q11 results. Meanwhile, GPR is sitting on a net cash hoard of IDR225 billion (as of March 31), which is intends to use for M&As. – OCBC Investment Research

 

Hutchison Port Holdings Trust (Not Rated)

HPHT’s share price has slid by 15 per cent since the beginning of this year from a high of US$0.80 (IPO at US$1.01), in tandem with the decline in regional indices, despite the relatively resilient nature of the container port business. Container throughput during the financial crisis years of 2008 and 2009 fell only marginally by 1 per cent and 4 per cent YoY, respectively, before posting a more than 10 per cent CAGR recovery in 2010 and 2011. Company-projected DPU payouts look enticing, notwithstanding current uncertain economic times. HPHT reported 1QFY12 NPATMI of HK$463 million, in line with management’s projections in the IPO prospectus. This came on the back of a 5 per cent YoY increase in throughput, which was underpinned by 9.4 per cent YoY growth in HIT following stronger-than-expected growth in transhipment cargo. HPHT maintained its FY12 DPU projection of 51.2 HK-cents, and said it will manage cash flow to maintain DPU levels, possibly deferring capex. HPHT is not fully insulated from the risk of possible global economic turmoil ahead. With a third of its projected throughput comprising transhipment volumes and the remaining being “local”, its fortunes are tied to both global and domestic demand trends. However, its throughput volumes do seem resilient from a historical perspective even in times of crises, and its company-projected DPU of HK$0.512 might prove too enticing to pass up for investors looking for a forward yield exceeding 9 per cent. – Maybank Kim Eng Research

 

Starhill Global REIT (BUY; Target Price: S$0.75)

Occupancies for Starhill Global REIT’s (SGReit) Singapore office portfolio are back to pre-crisis levels, while Chengdu property’s revenue should improve in 2H with the refreshed tenant mix. More importantly, we see visible growth catalysts coming from: Wisma Atria, as the AEI works complete in 3Q12. About 20 per cent of the mall’s NLA is expected to enjoy close to 50 per cent increase in rents post AEI works. Rental revenue to rise in 2H12 as all the stores that are part of the AEI works including Cortina, Coach and Tory Burch flagship stores have opened. Upward rental reversion of its Malaysia master lease which constitutes 17 per cent of its gross revenue and is due for a 7 per cent rental hike next year. Meanwhile, earnings upside could come from one-off accumulated arrears in rents from Toshin’s lease, if any, which we have yet to factor into our numbers. Longer term, the possible divestment of its Japanese properties could help to unlock values. Balance sheet remains strong with gearing at 30 per cent and no major refinancing due this year. In addition, we see limited downside risk from the convertible preferred units (CPU), with dilution estimated at 0.4 per cent to 1.2 per cent to FY13-14 DPU assuming full conversion. We see strong organic growth outlook for SGReit’s portfolio, backed by stable income derived from master tenants. SGReit stands out for its compelling valuation of 0.7x P/NAV and attractive FY12/13F yields of 6.7-7.2 per cent in the small mid cap REIT space. We have raised our target price by 5.6 per cent and FY12/13 DPU slightly to account for Wisma Atria’s stronger performance. Our revised target price offers investors a total return of 26 per cent. – DBS Vickers

 

Swiber Holdings (NEUTRAL; Target Price: S$0.66)

Swiber announced a series of new contracts valued at more than US$830 million and we estimate that the new orders lifted their backlog orderbook to more than US$2 billion, 2.6x FY12F revenue. The new orders secured include offshore construction projects in Asia Pacific and vessel chartering services in Asia Pacific and Middle East (through a JV). We have anticipated strong order win for Swiber given the robust tendering activities but remain lukewarm on margins. We think the market is looking beyond new order announcements as share price has declined 33 per cent from its recent peak (of S$0.77) despite continued order wins. Share price may get a short-term lift from the latest announcement but any sustained re-rating depends on delivery of better margins, in our view. Key upside risks are stronger-than-expected orders and higher margins. Stock is now trading at 8x FY12F P/E (price earnings). – OSK-DMG