Thursday, January 23, 2014

OCBC Report 24 Jan 14

KEY IDEA

CapitaCommercial Trust: Poised to benefit from CBD office recovery

4Q13 distributable income increased 3.3% YoY to S$60.2m. This cumulates to a distributable income of S$234.2m for FY13, which is up 2.5% YoY mainly due to higher revenue contributions across portfolio properties and a full-year contribution from Twenty Anson. FY13 distributable income constitutes 102.1% of our annual forecast and we deem this this performance to be within expectations. The group reported 4Q13 DPU at 2.09 S-cents, adding up to a total FY13 DPU of 8.14 S-cents – a 5.6% distribution yield based on the traded price of S$1.45 per unit. We continue to like CCT for its exposure to the relatively attractive CBD sub-market. With its low gearing of 29.3%, there is significant dry powder for accretive acquisitions with a debt headroom of S$1.2b (40% gearing). Maintain BUY with an unchanged fair value estimate of S$1.61. (Eli Lee)


MORE REPORTS


Keppel Corporation: BUY with lower S$12.25 FV

Keppel Corporation (KEP) reported a set of disappointing FY13 results last night, with core earnings falling 26% to S$1.41b, or around 7% below ours and the street’s forecast; this mainly due to larger-than-expected provisions for its Infrastructure business. Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. We also believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units. (Low Pei Han, Carey Wong)

Suntec REIT: Starting to shine brightly

Suntec REIT’s 4Q13 results exceeded both market and our expectations. Going forward, we understand that management will continue to focus on forward renewal of its office leases. With only 12.5% of its office leases due to expire in 2014, we believe the office segment will remain robust. Suntec REIT also updated that Phase 2 AEI is on track for completion in 1Q14, and that pre-commitment for the retail space has reached 97.0%, up from 83.7% in 3Q. While bottomline may experience a dip in 1Q as Phase 3 tenants vacate for the last phase of AEI, we continue to be overall positive on its longer-term potential, arising from 1) strong rental uplift at Suntec City, 2) earnings accretion from 177-199 Pacific Highway acquisition and 3) potential interest savings post refinancing of its S$773.5m club loan due in 2014. We maintain BUY with unchanged fair value of S$1.90 on Suntec REIT. (Kevin Tan)

Tiger Airways: Time to disembark

Tiger Airways Holdings (TR) recorded a shocking S$118.5m net loss, including S$88.3m in exceptional charges, for 3QFY14; net profit a year ago was S$2.0m. The exceptional charges comprise a S$30.3m loss on the planned disposal of Tigerair Philippines (TRP) and an impairment of associates of S$58.0m (this latter number excludes TRP). TR also clocked S$23.1m as its share of losses of associates. While Tigerair Singapore (TRS) saw an increase in traffic volume of 9.2% YoY, its revenue fell by 2.9% to S$168.0m. Yield had contracted 11.3% and load factor declined by 9.8 ppt to 75.8%. Management states the TRS continues to face short-term pressure on yield and load factors in the current seasonally weaker quarter given the industry’s overcapacity situation. TR’s NAV fell from S$0.51 as of end-Sep to S$0.39 as of end-Dec. Adjusting our estimates, we cut our FV estimate from S$0.55 to S$0.42 (1.1x FY14F P/B) and downgrade TR from Hold to SELL. We expect strong pressure on the share price following these disappointing results. (Sarah Ong)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks closed sharply lower on Thu as weak economic data from China prompted investors to sell resource stocks and emerging-markets assets and seek safety in bonds, gold, and high-dividend paying sectors.

- A 60-40 consortium comprising Sun Ventures Homes and Low Keng Huat (Singapore) has exercised its options to buy Westgate Tower from CapitaLand for S$579.4m.

- Ascendas India Trust yesterday reported a 4% rise in its DPU, to 55 Indian paise, for the 3QFY14, compared to a year ago.

- SunVic Chemical Holdings is selling its plant in Taixing, China to French chemical producer Arkema for RMB3.9b (S$817m).

- GK Goh Holdings has launched a mandatory conditional takeover offer for Boardroom Ltd, a provider of corporate and advisory services, at 57.5 S cents a share in cash.

- Mapletree Greater China Commercial Trust announced a DPU of 1.518 S cents for 3QFY14, 16.6% more than the forecast DPU of 1.302 S cents.

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