ANALYSTS SAY: Buy, Sell, Hold (18 Oct 2016)

CIMB

Keppel DC REIT Acquisition momentum to mask near-term supply bump

■ 9MFY16 DPU of 5.24Scts (+7.7% yoy) was within our and consensus expectations, at 75% of our full-year estimate. 3Q16 made up 27% of our FY16F.

■ KDCREIT renewed a major lease in SGP 1 for more than five years, but with an 8% negative rental reversion.

■ Acquisition of SGP 3 to be fully funded by preferential rights issue. We expect initial NPI yield to be 10.5% and acquisition to be DPU-accretive.

■ Adjust our FY16 DPU by -8.3% to factor in the rights issue. Lift our FY17-18F DPU by 4.8-5.5% as we factor in the SGP 3 and Cardiff acquisitions.

■ Retain Add with higher TP. Catalysts are acquisitions and potential revaluation gain.

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UOB KayHian

Singapore Airlines (SIA SP) Weak Performance By SIA And Scoot Likely To Affect 2QFY17 Earnings

SIA’s pax loads continued to fall for the fifth consecutive month in September on the back of declining traffic. Pax load factors also declined for both Scoot and SilkAir, with Scoot registering a sharp 4.9ppt drop. We reckon Scoot’s earnings will likely be lower qoq. Meanwhile, Cathay Pacific’s recent profit warning has negative implications for SIA and we believe SIA’s yields will likely remain weak in 2QFY17. We will provide an earnings preview shortly. Maintain HOLD. Target price: S$10.00.

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OCBC

Ezion Holdings: Monitoring PEMEX

With regards to the three drilling rigs under the Ezion-Swissco JV, Strategic Offshore, there have been concerns about the charterer’s ability (end client is PEMEX) to pay on time since the oil price plunge. Ezion had also previously highlighted that the group has been experiencing difficulties obtaining payments from clients, and it was also reported in the media that PEMEX has been dragging its feet on payments to contractors and suppliers. As a result, there is a risk that provisions on receivables and the JV (NAV: US$107.9m as at Dec ‘15) could be incurred in the coming quarters, but we also note that PEMEX earlier this month has successfully placed some US$3.95b in bonds to help address its financial needs for 2017; the offering was 2.2x oversubscribed. In Sep, PEMEX also completed a US$1.1b sale of its stake in a pipeline operator, following which we could see more asset sales. Maintain HOLD with S$0.35 fair value estimate on Ezion.

UOB KayHian

KEPPEL INFRASTRUCTURE TRUST (KIT SP) 3Q16: Yet Another Stable Quarter; Does 5% Effective Yield Interest You?

VALUATION

• Maintain HOLD with unchanged target price of S$0.55. Our target price is based on a DCF of KIT’s cashflows, arriving at S$0.55. Taking into account that the effective dividend is 2.73 S cents, KIT’s effective yield is 5.4%. Given the limited capital appreciation upside, house rules mandate a HOLD call. However, we recognize KIT’s stable yield and recommend strong accumulation at prices below S$0.495.

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Phillip Securities 

Keppel DC REIT Preferential Offering to fund acquisition of Keppel DC Singapore 3 SINGAPORE | REAL ESTATE (REIT) | RESULTS

 S$22.66mn Gross revenue missed our forecast of S$24.82mn by 8.7%

 1.90 cents DPU exceeded our forecast of 1.72 cents by 10.5%

 Adjusting for one-off refund, 1.67 cents DPU was in line with our forecast of 1.72 cents

 Acquisition of 90% interest in Keppel DC Singapore 3 for S$202.5mn announced

 274-for-1,000 Preferential Offering to raise c.$275.3mn

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