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Mapletree Industrial Trust (BUY; Target Price: S$1.26)

Mapletree Industrial Trust (MINT) reported 1Q DPU of 2.26 cents (+14 per cent YoY, +1.8 per cent QoQ), above our estimate of 2.14cts on lower than expected operating costs. MINT’s revenue and NPI rose 21 per cent YoY and 26 per cent YoY respectively, supported by stable occupancy, positive rental revisions, and the contribution from Tranche 2 of JTC’s portfolio, while DPU’s grew 14 per cent post equity raising. Rent revisions continue to be strong, rising 9.3 per cent to 31.7 per cent for business park space, flatted factories, warehouses, and stack-up/ramp-up buildings. Overall, average portfolio passing rents rose marginally to S$1.56psf (S$1.55psf in 4Q). MINT’s occupancy rate remained unchanged from the previous quarter at 94.9 per cent. Meanwhile, MINT’s retention rate dipped from 76.1 per cent to 71.1 per cent, primarily due to the warehouse segment which fell to 18 per cent in 1Q. However, this was offset by the signing of new tenants. Overall for FY13, c.13 per cent of its portfolio leases by revenue are due for renewal, which should underpin earnings visibility. AEI’s remain on track with 50 per cent of the new space at Woodlands Central Cluster pre-committed, and completion slated for 2Q13. Meanwhile, its Toa Payoh North 1 Cluster is slated for completion in 4Q13, and its first BTS project for Kulicke & Soffa is scheduled to complete in 2H13. MINT’s valuations look attractive with FY13E yields of 6.9 per cent implying a generous 557bps spread over the 10-year bond. Risks: sharper-than expected GDP and manufacturing slowdown affecting leasing demand, higher risk from SME tenants and capital raising, interest rate and refinancing risk. – Deutsche Bank

 

Raffles Medical Group (NEUTRAL; Target Price: S$2.870)

Valuations look fair at current levels. The stock trades close to peers’ average P/E. Investor demand for healthcare stocks remains strong but on the basis of fundamentals, we struggle to justify further significant multiples expansion that would warrant a Buy rating. With potential upside of only 11.2 per cent to our new target price, we turn Neutral on the stock. We adjust our forecasts downwards on the back of rising wage costs resulting from wage hikes to match revised public sector pay scales. Nonetheless, we remain positive on RFMD as we see it as a defensive company riding on strong structural healthcare demand due to an aging population locally, coupled with company-driven expansion plans. Sentiment seems to have overtaken fundamentals as the key stock price driver for RFMD, which has re-rated by 17 per cent since the announced listing of IHH. With the IHH IPO 30x over-subscribed, demand for healthcare stocks is strong. The price performance of IHH, upon listing, will arguably impact the stock price for RFMD. We change our valuation methodology from a takeout basis to a P/E basis anchored on average P/E valuations of peers, while rolling our earnings to a FY13F basis. The result is a slightly higher TP of SGD2.87 and a downgrade to Neutral. Key risks: a decline in medical tourists; an inability to attract and retain medical staff; an inability to control staff costs and unfavourable regulatory developments. – Nomura Equity Research

 

Genting Singapore PLC (HOLD; Target Price: S$1.36)

Given the weak regional macro trend and recent downgrade in Singapore GDP, we expect Genting Singapore’s 2012 VIP revenue growth to be negative (high hold effect) while operating costs stay high on a higher VIP commission rate, promotional/rebates and bad debt provisions. We cut Genting Singapore’s FY12-14E net profit by 14.2 per cent, 16.7 per cent and 15.4 per cent. Assuming normal VIP hold of 3 per cent, we forecast 2Q EBITDA of S$354m (+3.9 per cent yoy or -4.0 per cent qoq) against an easier comp of 2.66 per cent VIP hold a year ago. 2Q results are due on 10 August. We reduce Singapore gaming revenue growth to 5 per cent in 2012E and 7 per cent in 2013E, from 8 per cent and 12 per cent previously. The downgrade reflects our expectations of slower VIP market growth, which is highly dependent on VIP players from China/Hong Kong (more than 50 per cent of VIP rolling) and controlled domestic market growth due to an increasingly stringent regulatory environment. We cut our target price to S$1.36/share, reflecting our earnings estimate downgrades and a lower EV/EBITDA multiple of 11x (from 12x). This puts our target multiple in line with Macau peers (9-13x) and better reflects Genting Singapore’s historical multiple and growth profile. Slower growth, higher earnings volatility and uncertainty over the Echo investment should warrant a lower multiple. Downside risks include: regulatory tightening, overpaying for M&A. Upside risks include: more junket approvals, new gaming ventures. – Deutsche Bank

 

Starhill Global REIT (OUTPERFORM; Target Price: S$0.750)

Starhill Global REIT (Starhill) announced its 2Q12 results on 24 July, after market hours. The DPU of 1.08¢ was 6.1 per cent higher than our forecast, helped by overall resilient revenue (3.2 per cent above forecast) and net-property income (NPI) (4.6 per cent above our forecast). By property, the outperformer was Wisma Atria (WA), which recorded higher NPI (QoQ) for both the retail (S$9.8m, 20 per cent above forecast) and office (S$1.8m, 11 per cent above forecast). The retail asset-enhancement initiative (AEI) at WA is nearly finished, with a committed occupancy of 99.5 per cent as at 30 June 2012. We maintain our Outperform rating. So far in 2012, Starhill’s Singapore properties have been as resilient as suburban malls, and with WA’s AEI execution risk receding rapidly, we expect a better performance over the next 12-months on a recovery of footfall and tenant sales at WA. Unlike its Singapore retail S-REIT peers, Starhill still trades at a considerable discount to its book value of S$0.86 (excluding the convertible preference shares). Its gearing was a comfortable 30.5 per cent as at 30 June 2012. We are revising up our 2012-14 DPU forecasts by 1.7-3.8 per cent, after raising our overall NPI forecasts for WA by 4-8 per cent.We raise our six-month target price, pegged to parity with our 10-year DDM, to S$0.75 (from S$0.72) – Daiwa Capital Markets

 

Ascendas India Trust (HOLD; Target Price: S$0.785)

Ascendas India Trust’s (a-itrust) underlying performance in INR remained robust with a 23 per cent and 22 per cent jump in revenues and net property income to INR 1,393 m and INR 772m respectively. The stronger performance was due to an enlarged portfolio, coming from the acquisition of aVance & new buildings (Zenith, Park Square ad Voyager). However, the 20 per cent strengthening of the SGD/INR exchange rate resulted in reported revenue and net property income coming in only a mere 2.6 per cent and 1.4 per cent higher at S$32m and S$17.8m respectively. Distributable income was 10.5 per cent lower y-o-y at S$10.3m due to higher dividend distribution tax (DDT) and higher finance costs. Post withholding 10 per cent of distributable income in 1Q13, distributable income was S$9.2m (1.2 Scts, -20 per cent y-o-y). a-itrust’s underlying operational metrics remained healthy with occupancy at 95 per cent (97 per cent committed occupancy) supported by strong tenant retention rates of c.62 per cent, while renewals were stable. The trust renewed close to 400k sqft in the quarter, of which 150k were forward leasing arrangements. In the coming three quarters, only 9 per cent of its total space is left to be renewed. The trust’s new development project in ITPB also saw strong precommitments with over 26 per cent of its space committed, implying strong demand for space within the IT SEZ in ITPB. While management continues to execute strongly, the strong S$, which strengthened by 20 per cent y-o-y, continues to undermine its ‘true operating performance’. Looking ahead, our DBS economist expects the INR to remain at the 42.5/43.5 level in the next 2 years. Hence, we adjust our currency forecasts, resulting in a c16.4 per cent cut in our distribution assumptions, and a lower TP of S$0.84 based on DDM. Given limited re-rating catalysts in the immediate term and limited upside to our revised TP of S$0.84, we downgrade our recommendation to HOLD. – DBS Group Research