OCBC Report 22 Nov 13

SPH REIT: Retail blue chip with just valuation Summary: SPH REIT is a Singapore-based REIT established principally to invest in a portfolio of income-producing real estate used primarily for retail purposes in Asia-Pacific. The initial portfolio comprises two commercial properties in Singapore, namely Paragon, upscale retail mall and medical suite/office property, and The Clementi Mall, a mid-market suburban mall. We like SPH REIT’s exposure to the local retail landscape as the outlook is expected to remain robust, bolstered by growing retail sales, rising visitor arrivals, an expanding population and comfortable supply of retail space. In addition, the underlying growth drivers for the regional healthcare scene are expected to remain strong. Since its listing, we note that SPH REIT has enjoyed a strong run-up in unit price of 8.9%, significantly outperforming the FTSE ST REIT Index over the same period. At current price, SPH REIT is trading at 1.10x P/B, slightly higher than the local retail subsector P/B of 1.05x. Our DDM-based fair value of S$0.99 implies a total expected return of 6.4%, including a FY14F DPU yield of 5.4%. As the counter appears to be fairly priced with no visible strong near-term price catalyst, we initiate coverage on SPH REIT with a HOLD rating. (Kevin Tan)

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NEWS HEADLINES - The Dow achieved its first-ever close above 16,000 on Thu as US stocks rallied, boosted by better-than-expected data on weekly jobless claims and less concerns on the Fed tapering talks. - The Singapore government raised its 2013 GDP growth forecast to 3.5%-4% from its earlier 2.5%-3.5% forecast range. - The S$126m buyout of OpenNet by SingTel-owned NetLink Trust has been given the nod by the Infocomm Development Authority. - LionGold Corp's partially owned Ghana gold mining unit, Owere Mines, has entered into an agreement with Australia's B&C Gold to purchase and process gold-bearing waste tailings. - CapitaLand raised A$426m (S$485m) by selling a third of its stake in Australian property developer Australand. - CosmoSteel Holdings reported a net profit of S$1.16m for 4QFY13, down 53.3% YoY. - KLW Holdings has secured three contracts worth a total of S$6.4m for residential project developments in Singapore.