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Suntec REIT Performance

  • 3Q17 DPU -2.1% YoY
  • Subdued office signing rents
  • Footfall and tenants’ sales still firm

3Q17 Results Within Our Expectations

Suntec REIT reported an in-line set of 3Q17 results. Gross revenue and NPI jumped 10.6% and 11.6% YoY to S$91.1m and S$63.9m, respectively. This was driven by higher revenue from Suntec Singapore and the office portfolio due largely to contribution from 177 Pacific Highway in Australia, but partially offset by softer retail revenue from Suntec City mall.

DPU fell 2.1% YoY to 2.48 S cents despite a higher capital distribution of S$8m (0.302 S cents per unit). Excluding this, DPU from operations declined 8.2% YoY to 2.181 S cents.

For 9M17, Suntec REIT’s gross revenue rose 11.4% to S$266.9m; NPI similarly jumped 13.0% to S$185.1m and formed 75.0% of our FY17 forecast. DPU of 7.401 S cents was flat (-0.1%), and constituted 74.1% of our full-year projection.

Office Signing Rents Softened Partly Due to Larger Spaces Renewed

Operationally, Suntec REIT’s portfolio occupancy came in at 98.6% for its office segment and 98.8% for retail. This was relatively stable as compared to the previous quarter. Average rents of S$8.61 psf/month and S$8.35 psf/month were secured for its Singapore office portfolio and Suntec City office, which were lower by 3.1% and 5.0% QoQ, respectively. We understand that this was partly attributed to renewals for larger spaces, which typically command lower rentals on a psf basis.

Although market office rents appear to have bottomed out, we remain cautious on Suntec REIT’s rental outlook in the near-term as existing vacancies in the market and secondary spaces still need to be backfilled.

For its retail performance, Suntec City Mall recorded a dip in revenue by 2.0% YoY, which we believe was largely due to lower passing rents. However, encouraging signs can be seen from the mall’s healthy growth in footfall (+12.2%) and tenants sales psf (+4.9%) for 9M17, albeit partly due to a low base effect, in our view.

Maintain HOLD

Given this in-line set of results, we retain our forecasts, HOLD rating and S$1.80 fair value estimate on Suntec REIT. Based on our projections, FY17F and FY18F distribution yields are both 5.2%.

Read More- Singapore Stocks Market Growth outlook of Suntec REIT

Singapore Stocks To Watch

  • UMS
  • HI-P
  • AEM

So Earn more With our Stock Recommendations

Recent Stock Recommendations

SGX:Buy UMS  ||  || Level 1.00 || Cut Profit @ 1.06 || Return 6%

KLSE:Buy KRONO || Level 1.10 || Cut Profit @ 1.17 || Return 6.36%

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Posted by on October 30, 2017 in Stocks


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Stats about Singapore Exchange (SGX)

  • Revenue improvement
  • Working on collaborations
  • Still a HOLD

Broad-based 1QFY18 Improvement

Singapore Exchange (SGX) posted 1QFY18 net earnings of S$90.7m, up 9.2% YoY and +6.4% QoQ. On a YoY basis, there was improvement in revenue from Equities and Fixed Income (+2% YoY and accounted for 49% of total revenue) and Derivatives (+14% YoY and 39% of revenue). Market Data and Connectivity was the stable segment, showing both YoY and QoQ improvement with revenue of S$24.2m, but this constituted only about 12% of revenue.

There was clear improvement in operating margin which rose from 47.8% last quarter to 51.8% this quarter. Staff cost rose at a smaller YoY percentage than the increase in revenue. Both Issuer Services Revenue and Securities Trading and Clearing Revenue rose YoY, and the former benefited from a 6% increase in listing revenue.


With the 18% increase in Securities Daily Average Traded Value (SDAV) for the quarter, this helped to lift revenue for securities trading and clearing. Management has declared a 5 cents dividend for this quarter. Book close is on 2 Nov and payable date is on 9 Nov 2017.

No Change in Guidance

Management is guiding for FY18 operating expenses of S$425m to S$435m (actual FY17 expenses of S$399m) and technology-related capital expenditure of between S$60m-S$65m. Management is fairly positive about its strategy and outlook, and has also guided for more IPO listings in the next 2-3 months and is also lining up to launch more new products. The recent Daily Leverage Certificate is also cited as one of the new products which have seen good trading activity. The exchange is also seeking to grow its collaboration with other exchanges and has recently set up office in Chicago.

Marginal Increase in FV From S$7.83 to S$7.87

While most leading indices are up for the year, we expect higher valuations to rein in some of the buying interest especially as we head towards the lull months in late November to December. We are keeping our forecast largely intact for FY18 and making some upwards revision to FY19. On that basis, our fair value estimate rises marginally from S$7.83 to S$7.87. Retain HOLD.

Read More – Good time to BUY Singapore Stocks

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Posted by on October 26, 2017 in Stocks


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Know these things about Ascott Residence Trust

  • DPU fell 28% YoY
  • Look forward to AOS
  • Maintain HOLD

3Q17 Results Within Expectations

Ascott Residence Trust’s (ART) 3Q17 results were within expectations. Revenue rose 2.4% to S$126.9m or 25% of our full-year forecast, mainly due to the additional revenue of S$4.9m from the acquisitions of DoubleTree by Hilton Hotel New York and two services residences in Germany, which was partially offset by the decrease in revenue of S$1.9m from the divestments in Japan.

On a same-store basis, revenue remained flat YoY. DPU fell 28% YoY to 1.69 Scents, mainly due to the enlarged unit base after the rights issue launched back in Mar.

Portfolio RevPAU for Mgt Contracts Down Only 1% YoY

Markets such as Singapore, Japan, and US continue to face headwinds such as an oversupply of accommodation and weaker corporate demand. Singapore RevPAU fell 10% YoY in 3Q17 while Japan RevPAU clocked a 13% decline. Despite these challenges, due to the substantial diversification of the portfolio, the decrease in 3Q17 RevPAU on a portfolio basis for assets on management contracts was limited at 1%.

In terms of the best-performing markets, Belgium, Spain, and the United Kingdom have clocked +43%, +8%, and +5% YoY increases in RevPAU respectively during the quarter. 3Q17 RevPAU growth for the Philippines and Vietnam was also positive, boosted by the recent apartment refurbishments.

Read More – Investment Alert: MAS won’t control cryptographic forms of money

Trading at 6.0% FY18F Yield

ART’s gearing decreased from 32.4% as at 30 Jun 2017 to 31.9% as at 30 Sept 2017. While we expect finance costs to increase next quarter given the completion of Ascott Orchard Singapore (AOS) on 10 Oct, we adjust our fullyear finance costs downwards to account for the refinancing of bank loans at lower interest rates and repayment of bank loans with the rights issue and divestment proceeds.

Do note that our FY17F DPU forecast figure excludes the realized exchange gain of S$11.9m. If we include those one-offs, our FY17F DPU would increase from 6.3 Scents to 6.8 Scents.

We look forward to the contributions from AOS, though we do not find current unit prices compelling. Against yesterday’s closing price, ART is trading at 5.2% FY17F yield and 6.0% FY18F yield. As we roll our estimates forward, our fair value estimate increases from S$1.10 to S$1.11. Maintain HOLD.

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Posted by on October 25, 2017 in Stocks


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Mark Value of Mapletree Greater China Commercial Trust

2QFY18 DPU +5.8% YoY
Portfolio occupancy at 98.2%
Positive rental reversions of 10%-14%

2QFY18 Results Met Our Expectations

Mapletree Greater China Commercial Trust (MGCCT) reported its 2QFY18 results which came in within our expectations. Gross revenue and NPI grew 6.1% and 5.4% YoY to S$88.1m and S$70.9m, respectively. This was largely driven by a stronger HKD and RMB against the SGD and higher average rental rates at Festival Walk (FW) and Gateway Plaza (GP). The latter also saw lower accrued revenue in 2QFY17 due to the uncertainty in the applicable VAT rate prior to clarification received from the authorities in Mar this year.

DPU rose 5.8% YoY to 1.868 S cents. For MGCCT’s 1HFY18 performance, gross revenue increased 5.4% to S$177.0m and constituted 49.2% of our FY18 forecast. DPU of 3.714 S cents represented growth of 2.9% and formed 50.4% of our full-year forecast.

Tenants’ Sales Momentum Gathered Pace

Operationally, MGCCT’s properties continued to showcase resilience. Positive rental reversions were achieved across all three assets, coming in at 11% for FW (retail component), 10% for GP and 14% for Sandhill Plaza (SP). Although FW’s footfall was flat YoY (-0.2%) in 2QFY18 (1HFY18: +2.0% to 19.4m), tenants’ sales grew at a stronger momentum of 2.9% YoY (1QFY18: +2.1%; 1HFY18: +2.5% to HK$2.38b).

This was also reflected in overall Hong Kong retail sales, which grew 4.0% and 2.7% YoY in Jul and Aug, respectively (8M17: +0.3%). MGCCT’s overall portfolio occupancy dipped slightly by 0.6 ppt QoQ to 98.2%, as the increase at SP (+2.5 ppt QoQ) was offset by the decline at GP (-3.0 ppt QoQ). FW remained fully occupied.

Maintain BUY
For our valuations, we are lowering our cost of equity assumption from 8.1% to 7.8%. We believe this is justifiable given

the continued re-rating momentum in the S-REITs sector,
MGCCT’s healthier balance sheet (gearing ratio of 38.5%, its lowest since 4QFY15 and recent successful refinancing at better margins) and
improved consumer sentiment.
Consequently, our fair value estimate is raised from S$1.22 to S$1.28. Maintain BUY.

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Venture Corp Share Investment Singapore

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Posted by on October 24, 2017 in Stocks


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Market Research of Keppel DC REIT

Image result for Keppel DC REIT

Keppel DC REIT (KDCREIT) reported its 3Q17 results which met our expectations. Gross revenue and NPI jumped 56.6% and 42.1% YoY to S$35.5m and S$32.3m, respectively.

This was largely driven by the acquisitions of the 90% interest of KDC SGP 3, Milan DC, Cardiff DC and to a smaller extent B10 DC in Dublin (half a month of contribution), coupled with higher variable income from KDC SGP 1 due to an increase in recurring revenue.

DPU grew 16.8% YoY to 1.74 S cents. If we make adjustments to account for the impact of the preferential offering exercise and a one-off net property tax refund in 3Q16, KDCREIT’s adjusted DPU would have increased 4.2% YoY.

For 9M17, KDCREIT’s gross revenue spiked up 41.4% to S$102.2m and formed 76.8% of our FY17 forecast. DPU rose 11.2% to 5.37 S cents (adjusted DPU +4.2% to 5.22 S cents) and constituted 74.0% of our full-year projection.

Operationally, KDCREIT’s portfolio occupancy creeped up 0.3 ppt QoQ to 93.4% as there was slight improvement recorded at KDC SGP 1 and Keppel DC Dublin 1.

Pertaining to Singapore’s data centre industry, management highlighted that while there are still some vacancies in the market, it remains upbeat that this space will eventually be absorbed in the foreseeable future given limited upcoming supply and robust demand, especially from the cloud service providers.

Maintain BUY and S$1.39 fair value estimate on KDCREIT.

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Posted by on October 17, 2017 in Stocks


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Good Time to Sell or Buy SingPost

  • Boost from 701Search stake sale
  • Sound approach to rationalization
  • FV estimate updated to S$2.93

FY17 PATMI Boosted by One-time Divestment Gain

SPH reported that FY17 PATMI increased 32.0% YoY to S$350m mostly due to a gain of S$150m from a partial divestment of the group’s stake in the regional online classifieds business, and a fair value gain on investment properties of S$57m, which were partially offset by impairment charges of S$96m on the group’s magazine business and printing presses.

Excluding these one-time charges, however, FY17 recurring earnings declined 20% YoY and FY17 operating revenues also declined 8% lower as the core media business continued to suffer the disruption of digital media. The property segment, however, delivered steady results as revenues increased 1% YoY from higher rental income from the group’s retail assets.

We deem this set of results to be mostly within our expectations. A final dividend of 9 S-cents per share has been proposed, bringing total dividends in FY17 to 15 S-cents.

Catch more – Good Time to Buy Keppel Corp

Sound Approach to Rationalizing Media Business

While there is no denying the impact of digital disruption on the group’s core media earnings – which continue to decline over the latest quarter – our view is that the management team’s approach in rationalizing the business is mostly realistic and sound. The group will complete a 10% staff reduction by this calendar year, incurring retrenchment costs of S$13m, and will also invest for new growth in terms of digital, data analytics, radio broadcasts, video and content marketing capabilities. This will also help the group better meet the changing needs of their market.

Since we have upgraded the stock to a buy rating three weeks ago, we note that the price has rebounded but, as we update our valuation model for the latest results and assumptions, our fair value estimate declines to S$2.93 versus S$3.25 previously. We, therefore, downgrade our rating to HOLD on valuation grounds.

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Posted by on October 13, 2017 in Stocks


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Singapore Stock City Developments Limited Update

  • Possible offer for M&C
  • Cash offer of 552.5 pence per share
  • Likely accretive if successful

Possible Cash Offer of 552.5 Pence Per M&C Share

Singapore Stock City Developments Limited Update

CDL announced that they have reached an agreement with the independent directors of Millennium & Copthorne Hotels PLC (M&C) on the price at which these directors will recommend a possible cash offer by CDL for all the outstanding M&C ordinary shares that CDL does not already own. As at 9 Oct 2017, CDL indirectly owns 65.2% of the shares of M&C.

The proposed cash consideration comprises a cash amount of 545 pence per M&C share and a special dividend of 7.5 pence per share which will be payable upon the offer becoming unconditional. This represents a 22.0% premium to the VWAP of 452.7 pence per share over the period of one month before 6 Oct 2017, and also a 21.4% premium to the closing share price of 455.0 pence on 6 Oct 2017.

No Certainty That a Formal Offer Will be Made

We highlight that there is no certainty a formal offer will be made, and discussions on the other terms and conditions of the proposed offer are still ongoing. If successful, we see this as a positive development for CDL which will almost certainly be accretive. Given green shoots in the global economy, the outlook for hospitality assets is broadly turning positive.

In addition, CDL already indirectly owns a substantial stake in M&C, and intimately understands its expansive hotel portfolio and business model as an owner and operator. Against this backdrop, it makes sense for CDL to fully consolidate its hotel subsidiary – if the right price can be agreed upon.

In our view, while the potential cash offer price is fairly attractive for CDL, it also offers M&C shareholders a valuable opportunity for liquidity at a sizeable 21.4% premium to the last closing price on 6 Oct.

Pending a formal offer, our fair value estimate of S$12.90 for CDL remains unchanged. Maintain BUY.

Momentum Singapore Stocks To Watch

  • ASTI

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Posted by on October 11, 2017 in Stocks


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