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CIMB
Cache Logistics Trust: In an impasse
CACHE'S master lessee for its property at 51 Alps Ave, C&P Land, leased out the property to sub-tenant Schenker, a German logistics giant. When the lease expired on 31 Aug 2016, Schenker refused to move as it wants to exercise its option to renew its anchor lease for another five years, at the pre-agreed rate of S$0.77 psf pm.
Hence, it filed a summons against CACHE, seeking to bind the anchor lease agreement upon the trust. CACHE is not technically agreeable to the rent figure, but will accept it under the holding arrangement.
The worst outcome is a court ruling for CACHE to receive the pre-agreed rent for the next 5 years. This would cut our FY16 DPU by 1.6% and our FY17-18 DPU by 6%.
The best outcome is a court ruling for rental adjustment to rates in the proximity of Alps Avenue of c.S$1.50-1.60 psf pm. This would raise our FY17-18 DPU by 4%, and increase our target price to S$0.86.
We downgrade CACHE from Hold to Reduce, with a lower DDM-based target price of S$0.80.
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OCBC
SATS: Cautious on rich valuations
Singapore Changi Airport registered steady growth for the period Jan-Aug 2016. However, we think Aug 2016 statistics also showed indications that traffic growth at Changi Airport may be slowing down.
Aug 2016 passenger throughput declined 0.6% YoY (Jul 2016: +5.9% YoY), aircraft movements rose 2.2% (Jul 2016: +4.7%) and air freight movements rose 7.6% (Jul 2016: +9.4%). In our view, SATS’ on-going plans to diversify out of Singapore and away from reliance on the aviation industry will take time to bear fruit, and unlikely to see material results in the near-term.
Its focus to drive productivity improvement is already bearing fruit and we expect such improvement to continue, albeit at a slower pace. We think the near-term positives are priced-in with SATS trading at a rich valuation of 22x FY17F P/E.
Therefore, we maintain HOLD with an unchanged FV of S$4.70. However, we are still positive on SATS’ long-term growth and would look for buying opportunities below S$4.40.
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OCBC
SGX: Secured Baltic shareholders' approval
Singapore Exchange recently announced that the shareholders of The Baltic Exchange have approved all the resolutions required for the acquisition of The Baltic Exchange.
As part of the terms of the acquisition, SGX is committed to maintain The Baltic Exchange’s existing clearing house model and also strengthen product offerings and services. This acquisition is also conditional on securing the approval of the UK Financial Conduct Authority (FCA).
Once the acquisition is finalized, this is likely to widen SGX's offering, especially for index services and products.
At current price of S$7.47, we maintain our HOLD rating on SGX and our fair value estimate of S$7.36. Current dividend yield is at about 4%.
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