SARINE TECHNOLOGIES LTD U77.SI Sarine Technologies (SARINE SP) - Diamond in the rough
Guided for 2Q16 revenue to exceed USD20m…
- Sarine guided that 2Q16 revenue could exceed USD20m due to positive midstream profitability that continued to drive manufacturing activities.
- The company delivered a record of 20 Galaxy-related machines in 2Q16 (1Q16: 18, 2Q15: 6), of which 10 were for the new Meteor, eight Solaris and two Galaxy Ultra. This development supports our views expressed on 25 May 2016, The Path to Normalcy, where we highlighted industry data points that suggest recovery remains on track.
Singapore Strategy Unmasking Asia Thematic Research Series - The Singapore Fix
- With sub-2% GDP growth expectations and EPS contractions for equities, Singapore is struggling.
- Some of the attributes that have been responsible for its success so far are, ironically, stifling its further growth. These include appreciating property prices, high wage growth, high savings rates and lower returns from overseas investments.
- While the government has been evolving steps to address these, we think that radical changes are called for – if not already afoot - to guard against a precipitous loss of Singapore’s relevance to global markets.
MAPLETREE COMMERCIAL TRUST N2UY.SI Mapletree Commercial Trust (MCT SP) - Transformative Acquisition
Positive on major acquisition; U/G to HOLD
- MCT’s proposed SGD1.86b acquisition of Mapletree Business City Phase 1 (MBC1) will transform it to having 24% exposure to business parks — the real estate sub-sector with the best supply/demand outlook.
- Acquisition is at market price and estimated to be funded 53:47 equity/debt.
- DPU accretion raises FY3/17-19 estimates by 3.2-5.5%. U/G to HOLD with TP revised to SGD1.56 from SGD1.35.
Singapore PropertyWING TAI HLDGS LTDW05.SI CITY DEVELOPMENTS LIMITEDC09.SI Singapore Property - CityDev acquires Wing Tai’s 50% stake in Nouvel 18
CityDev assumes full ownership of Nouvel 18
- CityDev acquired Wing Tai’s 50% stake in Nouvel 18, a 156-unit high-end project in the prestigious Ardmore locale, for SGD411m.
- By acquiring its joint venture partner’s stake, CityDev has assumed full ownership of this project.
- With the streamlining of its shareholding structure, we expect CityDev to aggressively market this project as a bulk sale or build a structured product with it to avoid incurring significant Qualifying Certificate (QC) charges.
SARINE TECHNOLOGIES LTD U77.SI Sarine Technologies (SARINE SP) - Another Step Forward
Missed but recovery growth intact. Maintain BUY
- Sarine continued to recover as 1Q16 net profit surged 240% YoY and 101% QoQ to USD3m, but was below our USD4-5m expectation.
- Nevertheless, Sarine could have met our estimate with just an incremental USD1.5- 2.0m in revenue due to operating leverage.
WING TAI HLDGS LTD W05.SI Wing Tai (WINGT SP) - Overhang from Looming Deadlines
Maintain HOLD, TP SGD1.93
- 3Q16 below expectations on weaker profit margins.
- Home sales at mid to high-end projects still slow and will face critical sales deadlines soon. Without better visibility, this remains a stock overhang.
- Maintain HOLD and SGD1.93 TP, 16% below RNAV of SGD2.29.
Ascendas REIT ASCENDAS REAL ESTATE INV TRUST A17U.SI Ascendas REIT (AREIT SP) - It’ll be tough before it gets better
Full-year results. Accumulate on weakness.
- Full-year results were expectedly strong from occupancy growth and acquisitions.
- The year ahead will be about maintaining occupancy in the face of a weak economy. Investors should accumulate AREIT on market weakness as from 2017 onwards supply will start to tighten, and there could be distribution per unit growth from spare capacity.
RIVERSTONE HOLDINGS LIMITED AP4.SI Riverstone Holdings (RSTON SP) - Weaker cleanroom segment, expansion on track
Results in line, key cleanroom segment deteriorated
- 1Q16 results were in line with expectations; core earnings after FX adjustments rose 20% YoY and met 21% of our FY16E.
- Gross margin fell by 2.5/2.2 ppt YoY/QoQ, due to 30% volume decline of the higher ASP and margin cleanroom glove and ASP decline of 3-5% for healthcare gloves.
- Cleanroom glove demand is expected to remain subdued in 2Q16, due to reduced demand from HDD and flat panel display customers.
STARHUB LTD CC3.SI StarHub (STH SP) - Awaiting clarity on potential new entrant
Within expectations
- 1Q16 within expectations.
- Decent quarter, boosted by excellent opex management, although service revenue was weak.
- Growth in broadband and enterprise (25% of total revenue) was offset by weakness in mobile and pay TV (66% of total revenue).
SEMBCORP INDUSTRIES LTD U96.SI Sembcorp Industries (SCI SP) - Take Profit
Results missed; D/G to SELL
- 1Q16 PATMI of SGD107m (+76% YoY, -25% QoQ) missed, forming 21%/19% of our/consensus’ FY16E.
- Utilities segment continued to be dragged by weak Singapore power operations from spark spread compression while India’s TPCIL disappointed.
- We think that SCI’s surge from the Jan 2016 low of SGD2.19 was on views that it is unlikely to raise its stake in SMM.
- In our view, this is mostly priced in and risk is now negatively skewed.
JUMBO GROUP LIMITED 42R.SI Jumbo Group Ltd (JUMBO SP) - Checking in on China crabs
BUY maintained post-IFC outlet visit
- We visited Jumbo’s newest restaurant at the IFC Mall in Shanghai last week and came away encouraged by what we observed.
- We hold on to our optimism that the IFC outlet could help China operations to turn around to profitability soon, perhaps as soon as 2Q FY9/16 which will be reported next week.
- We expect a strong 15-16% growth in the top and bottomline to SGD38m and SGD5.5m respectively.
AIMS AMP CAP INDUSTRIAL REIT O5RU.SI AIMS AMP (AAREIT SP) - Aiming for better days
Weak Leasing. Maintain HOLD. Latent potential.
- 3Q3/16 results confirm a weak leasing environment.
- We temper our occupancy expectations by c.1ppt, which docks DPU expectations by 1.1- 1.7%.
- TP lowered accordingly to SGD1.45 from SGD1.47 on a 7.75% target yield. Maintain HOLD.
SEMBCORP MARINE LTD S51.SI Sembcorp Marine (SMM SP) - Expect losses in 4Q15
Warns of net loss in 4Q15
- SMM warned that it will have a net loss in 4Q15 and FY15 net profit will be significantly lower YoY when it reports on 15 Feb 2016. It attributes the expected 4Q loss to a challenging operating environment and customers deferring or seeking to defer their rig orders.
- We cut FY15E/16E EPS by 33%/6% as we factor in more deferrals and importantly, an assumed provision of SGD70m in 4Q15.
- Reiterate SELL and TP of SGD1.75 as we continue to expect weak order wins, cancellation risks and unresolved payment issues from Sete Brasil to weigh on the stock.
AREIT ASCENDAS REAL ESTATE INV TRUST A17U.SI MAPLETREE INDUSTRIAL TRUST ME8U.SI Industrials: Cleanest Dirty Shirt
- SREITs have declined 16% off their Apr15 peaks and are 11% down YTD. Over the same periods, the STI is down 19% and 15%. We maintain that SREITs are in a de-rating phase, more sensitive to growth risks than interest rates.
- Compounding weak demand, 2016-18 supply is front loaded but averaging 2.0x historical demand for retail, 1.4x for office and 1.2x for industrial.
- Industrial REIT valuations seem to have priced in the negatives. Not so for retail. For office, to a certain extent. Areit & MINT are our recommended picks. Top SELLs: FCT, MCT, CT.
AIMS AMP CAP INDUSTRIAL REIT O5RU.SI AIMS AMP (AAREIT) - Floor Area to Unearth
- Fourth-largest industrial SREIT with 60% rental exposure to warehouses, 20% to factories & 20% to business parks.
- Forecast FY3/16-18 DPU growth of 1.4%/1.4%/5% on rent escalations & redevelopment project. Potential to increase NLA by 11% from unlocked plot ratios.
- Initiate with HOLD, as no immediate catalysts. TP of SGD1.47 based on 7.75% yield target applied to FY3/17 DPU. Risks include 22% exposure to single tenant, CWT.
Ascendas REIT ASCENDAS REAL ESTATE INV TRUST A17U.SI Ascendas REIT - Beat Expectations
- 2Q results beat expectations on the back of stronger than expected rent reversions from business parks.
- FY16-18 DPU forecasts raised by 4-6%. Growth will largely be due to new Australian logistics assets.
- Yield target tightened by 25bp to 7%, TP raised 9.6% to SGD2.28. Maintain HOLD.
SUNTEC REIT SUNTEC REAL ESTATE INV TRUST T82U.SI Suntec REIT - Softer operating performance
- 3Q15 DPU of 2.522 SGD cts in line. Capital distribution lends strength to operations. 9M15 at 77.4% of full-year estimates.
- Guided down on passing rents at Suntec retail. Occupancy at MBFC offices weakened. However, debt metrics remained healthy.
- Maintain SELL and SGD1.33 TP (FY16E target yield of 7.25%). Less attractive yields than office peers.
SHENG SIONG GROUP LTD OV8.SI Sheng Siong Group - Another One on the List
- 3Q15 results in line. Sales driven by five new stores added in Dec 2014 and 2015.
- New store in Queenstown to be opened in Nov 2015.
- Defensive business, highest margins among peers. Reiterate BUY with TP of SGD1.07, at 26x FY16E P/E. Expect catalysts from store openings.
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KEPPEL CORPORATION LIMITED BN4.SI Keppel Corp - Support from 6% yield
- 3Q15 met expectations. Weaker O&M performance offset by stronger property contribution. We marginally cut EPS 1-2%.
- Infrastructure unlikely to be burdened by any more losses as EPC projects are complete.
- Maintain HOLD, but slightly trim SOTP TP to SGD7.70 from SGD7.80. Stock price is supported by 6% dividend yield.
SEMBCORP MARINE LTD S51.SI Unabated pressure; maintain SELL
- 3Q15 missed on weak rigbuilding, associate losses and impairment. Cut FY15-17E EPS by 12-26%.
- EBIT margin was only 6.6% due to suspension of recognition for rigs in which delivery dates were deferred.
- Maintain SELL and cut TP from SGD2.00 to SGD1.75, still based on 0.55x EV/Backlog.
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