Thursday, October 19, 2017

SG Market (19 Oct 17)

- The market is likely to trade in range, as investors await 3Q earnings releases from Keppel Corp tonight, as well as CapitaLand Commercial Trust and Frasers Commercial Trust tomorrow.
- Technically, the STI sees the next upside resistance at 3,355, with support at 3,280.

*Keppel REIT
- Weak 3Q17 as DPU slumped 12.5% to 1.4¢, taking 9M17 DPU of 4.27¢ (-12.7%) below street FY17 estimate.
- Distributable income fell 10.4% to $47m on reduced rental support (-22.4%), lower interest income (-2.6%), higher borrowing cost (+6%) and a drop in associate income (-17.1%).
- Gross income inched 2.3% higher to $40.4m from increased takings at 8 Exhibition Street (+20.4%), but was pared by a 0.7% slip in income from Ocean Financial Centre.
- However, NPI was flat at $31.7m (+0.3%) as property expenses jumped 10.3% from a 28% spike in property tax.
- Portfolio occupancy slipped 0.2ppt q/q to 99.6%, while aggregate leverage ticked higher to 38.8% (+0.3ppt q/q).
- Trades at 3Q17 annualised yield of 4.7% and 0.84x P/B.

*Keppel T&T
- 3Q17 net profit crashed 81.7% to $12.8m, mainly dragged by the absence of divestment gains (3Q16: $55.8m).
- Otherwise, core 3Q17 net profit slumped 27%, as revenue slipped 3% to $45m due to weak warehousing turnover in the logistics division and zero contribution from Keppel DC Singapore 3 and Keppel DC Reit Management following the sale.
- Bottom line was also impacted by higher operating expenses (+7.8%) from increased transportation costs, contract labour and subcontract costs in the logistics division.
- Net gearing reduced 8ppt to 38%.
- NAV/share at $1.45.

*ESR-REIT (former Cambridge REIT)
- 3Q17 DPU dipped 2.3% to 0.964¢, taking 9M17 DPU of 2.924¢ (-8.0%) to 73% of FY17 estimate.
- For the quarter, gross revenue slipped 1.9% to $27.1m amid income loss during the transition of properties from single-tenanted to multi-tenanted.
- NPI of $19.6m (-1.6%) also fell on higher expenses and increased maintenance cost.
- Portfolio occupancy narrowed 4.3ppt q/q to 91.1%, while aggregate leverage contracted 1.2ppt q/q to 36.7%.
- Separately, the REIT proposed to acquire an industrial property at 8 Tuas South Lane for $95m, 17% below market valuation.
- Pro forma FY16 DPU post-deal is expected to jump 8.5% to 4.527¢.
- NAV/unit at $0.633.

- Launched SGX America in Chicago to better serve the growing demand for North American investors who are looking East for growth opportunities across asset classes.
- Separately, SGX established a collaborative listing agreement with Nasdaq to tap corporate demand for a concurrent or sequential listing on both exchanges.
- Trades at 21.9x forward P/E.

- Entered agreement with Turkish Airlines (THY) to provide in-flight catering services to THY and other airlines at Istanbul New Airport.
- As a gauge, THY has a fleet of 329 (passenger and cargo) aircraft.

- Served an originating summons taken by Ravi Murarka, one of the noteholders for its $120m 3.65% notes due in 2020.
- The noteholder is requesting the group to redeem his notes on the basis that shares have ceased trading and could be in violation of the terms of the notes.
- Ezion believes otherwise, citing that its shares are merely suspended on its own request, and is currently seeking legal advice on the summons.

*Lippo Malls Indonesia Retail Trust
- Leasing 67,261 sqm of retail space to a party related to its sponsor for three years upon the expiry of existing leases on 18 Nov '17.
- Aggregate rental of $21.4m is in line with market rates, but will result in a 4.5% drop in 1H17 pro forma DPU to 1.71¢.
- Based on last close, this reduces 1H17 annualised yield from 8.2% to 7.9%.

- Guided for 3Q17 loss due to continued poor performance within the precast & PBU division.
- This was compounded by losses suffered by waste management services following a fire incident in Mar '17.
- Trades at 0.9x P/B.

- Investing $81.5m to acquire and refurbish a freehold hotel in Silicon Valley.
- The 136-unit hotel, The Domain Hotel, will be rebranded to Citadines Cupertino Sunnyvale in 4Q18.
- This will be Ascott's second Citadines-branded property in the US following the acquisition of Hotel Central Fifth Avenue New York in May '17.
- Trades at 17.9x forward P/E.

- Book will close on 26 Oct for its 1-for-4 bonus share issue.

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