Monday, June 18, 2018

SG Market (18 Jun 18)

MARKET OVERVIEW
- Brace for escalating trade war worries after President Trump approved 25% tariffs on USD50b of Chinese imports, sparking tit-for-tat retaliation from China.
- Oil-related counters could come under pressure ahead of this week's OPEC summit as Saudi Arabia and Russia may consider raising output by 1.5m bpd.
- Technically, the STI is approaching key support at 3,340 after sinking beneath the 200-dma at 3,430 last week.

POSITIVE NEWS
*Keppel Corp
- Divesting its 100% interest in Keppel Township Development (Shenyang) (KTDS) to Shenyang SUNAC Xinxing Enterprise for Rmb980m ($205m).
- KTDS owns and is currently developing a residential township project in Shenbei New District, Shenyang City, China.
- The divestment is expected to reap a disposal gain of $43m and raise its pro forma NAV/share by 3¢ to $6.34..
- It is also in line with Keppel Land's strategy to recycle assets to seek higher returns and re-balance its portfolio to focus on selected high-growth cities in China.
- Trades at 11.5x forward P/E

Ascendas Hospitality Trust
- Acquiring three Osaka hotels in Japan for ¥10.3b ($126.1m), or 2.9% discount to the latest valuation.
- The deal will be fully funded by debt and is expected to be DPS accretive. On a pro forma basis, FY3/18 DPS would have increased by 4.3% to 6.11¢.
- The acquisition of 168-room Hotel WBF Kitasemba West and 168-room Hotel WBF Kitasemba East are expected to be completed by Sep '18, while the acquisition of 182-room Hotel WBF Honmachi is expected to be completed by Jan '19.
- Trades at 8.1% yield and 0.84x P/B.

NEUTRAL NEWS
*SGX
- Granted a licence extension to continue the listing and trading of SGX Nifty contracts beyond Aug'18, as part of ongoing arbitration proceedings.
- The Nifty products will continue to list for at least two successive contract month maturation beyond the arbitration's completion date.
- But SGX is not allowed to launch or list any new India equity derivatives product until a final decision is made. The hearings on evidence are expected to commence in early 2019.
- Trades at 20.3x forward P/E.
- MKE has a Buy with TP of $8.79.

*Ho Bee Land
- Acquired Frasia Properties (FPS), which owns a freehold property known as Ropemaker Place in London for £650m ($1.16b).
- The 602,000 sf Grade A office tower is located near Liverpool Street Station and has a weighted average lease term of 10.5 years with annual rental income of £30.57m ($55m), translating to a net yield of 4.68%.
- This will provide the group with a steady and sustainable recurrent income stream, thus enabling it to weather the Brexit uncertainty over the next 2-3 years.
- The acquisition will increase its total investment in London to $2.4b, representing 41% of the group's investment portfolio.
- Trades at 0.52x P/B.
- MKE as a Buy with TP of $3.30.

*Noble Group
- Proposed sale of a Kamsarmax dry bulk carrier vessel to Aeolian Spirit Shipping for US$23.79m.
- The vessel currently operates as part of the group's freight business, which it has decided to monetise, subject to favourable market conditions.
- The vessel has been mortgaged to a financial institution and part of the proceeds will be used to pay down the amounts owed under the relevant facility.
- The one-off gain on the disposal would amount to US$0.03m based on the carrying value of the vessel as at Mar '18.

*Sembcorp Industries
- Completed the acquisition of a 40MW grid-tied solar power project, which is under construction in Singapore.
- Total investment including acquisition and future investment is estimated to be $55m.
- Trades at 14.8x forward P/E.

*Sunpower
- A 2x50MW coal-fired power plant in Indonesia designed by 80%-owned subsidiary Shandong Yangguang Engineering Design Institute has been successfully connected to the local grid.
- This marks the 35th power plant Yangguang has provided design services in Indonesia.
- Trades at 7.9x forward P/E.

*Mapletree Industrial Trust
- Exercised option to purchase 7 Tai Seng Drive for $68m.
- JTC Corp has granted its in-principle approval for the transaction subject to compliance with the stipulated conditions.
- The proposed acquisition is expected to be completed by Jun '18.
- Trades at 6.1% yield and 1.3x P/B.

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