| CIMB | OCBC |
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CapitaLand Ground checks in South China and Vietnam ■ Ground checks in China and Vietnam shows that property activities are still robust. ■ The company has strong locked-in China residential earnings, with longer-term returns boosted by alternative landbanking sources. ■ It is expanding residential activities in Vietnam and venturing into commercial properties with capital partners. ■ Higher recurrent income base from completion of eight malls in 2017, with positive knock-on effect on ROE when contributions stabilise. ■ Maintain Add with unchanged TP of S$4.17.
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Venture Corp: Beneficiary of USD strength 8 Nov 2016 was yet another day since Brexit that shocked the world as U.S. chose Trump to be their next president after Obama. While the market initially expected the greenback to weaken under Trump given his protectionist trade policy proposals, the opposite happened – the USD strengthened against its major peers, and since 8 Nov, appreciated ~3.4% against the SGD to 1.4335 on 30 Nov. According to forecasts by OCBC Treasury Research and Strategy (as at 31 Oct), the USD is also expected to slightly appreciate further against the SGD to hit 1.4367 by Sep 17. In our view, Venture Corporation Ltd (VMS) will be a beneficiary of such strength in USD against the SGD, with ~90% of its revenue denominated in USD. This could further boost its sales should USD strength sustain. On the costs side, with ~60% of its manufacturing operations done in Malaysia, VMS may potentially see some lift in earnings if the recent weakness of MYR against SGD persists ahead. On positive fundamental growth, solid balance sheet and attractive dividend yield, reiterate BUY on VMS with an unchanged FV of S$10.36. |
| UOB KAYHIAN | |
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LHN (LHN SP) Recent Acquisitions To Bear Fruit LHN will see strong contributions streaming in from its recent acquisitions, with the Ang Mo Kio property alone potentially generating steady state annual revenue of $6m. It is in a niche market of providing bite-sized spaces and is unaffected by tighter JTC subletting rules, unlike industrial REITs. Their margins are relatively defensive in the soft industrial market. Maintain BUY with a reduced target price of S$0.28 (from S$0.32).
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| DBS VICKERS | |
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CapitaLand Retail China Trust Down but not out Yields at +1 SD of mean; already pricing in a rise in 10-year bond yields rise to 3%. Following the recent share price correction, we upgrade our recommendation on CapitaLand Retail China Trust (CRCT) from HOLD to BUY with an unchanged TP of S$1.60. While CRCT will face headwinds in the form of a weaker average RMB exchange rate, impact from higher property taxes in Beijing and an increase in interest rates over the next few quarters, we believe these risks have largely been priced in. At current levels, CRCT trades on a yield of 7.5- 7.7%, which is +1 SD above its average yield of 7.4% and already accounts for the risk of the 10-year SGD bond yield rising to 3% (versus spot rate of 2.3%); CRCT is trading at a yield spread of 4.5-4.7% (assuming 10-year bond yield of 3%) compared to its average yield spread of 4.6% since 2010.
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