| CIMB | OCBC |
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Singapore Strategy Rocky is the new status quo ■ The path to a new status quo is likely to be a rocky one, given the expected Fed rate hike, Brexit, Trump presidency, multiple elections in Europe and OPEC. ■ However, as low oil prices and low interest rates are becoming a thing of the past. cyclicals could come into favour, if investors look past lacklustre earnings growth. ■ We are not all-out bullish on cyclicals, as the sectors still grapple with structural challenges, but we see opportunity to buy on dips. Is market ready to re-rate? As we enter a world of higher interest rates and oil prices, cyclicals could come back in favour. The latest run-up in the bank, and offshore & marine sectors suggest the market is pricing in an ‘all is well’ environment, ignoring near-term lacklustre fundamentals. At c.14x CY17 P/E, FSSTI is trading at historical mean against 2% EPS growth. We believe the market is impatiently looking past 2017, and re-rating ahead based on 2018 (EPS growth of 5%). A top-down index reading of 3,140 (7% upside) is plausible.
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CapitaLand Limited: Signs MOU for coworking partnership CapitaLand announced that it has signed an MOU with IE Singapore and Urwork, a leading Chinese co-working space operator, to form a partnership to help Singapore SMEs enter China. This partnership aims to provide a conducive working environment, leads and business advisory services, and smooth the market entry process into China for Singapore SMEs. IE Singapore will identify and link potential Singapore SMEs to these co-working spaces while CapitaLand will work together with UrWork to launch coworking spaces in its Chinese and Singapore malls. The partnership will look to jointly attract and groom companies with innovative concepts who can also work with C31 Ventures (CapitaLand’s venture capital arm) for financing. We see this as positive development for CAPL, together with the setting up of C31 Ventures earlier this year, as it actively future-proofs its businesses amidst sharing economy and technology trends. Maintain BUY with an unchanged fair value estimate of S$3.68. |
| DBS VICKERS | |
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Ascendas REIT Takes three at a go! Maintain BUY, TP maintained at S$2.65. Ascendas REIT (A-REIT) offers attractive yields of close to 6.6% to investors looking for steady returns in the current volatile market. A low leverage of 35% supports any potential M&A activities which the REIT has the ability and access to deliver on.
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| MAYBANK KIM ENG | RHB |
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Singapore Property Stability Trumps Growth in 2017 Prefer strong recurring income: CCT, KREIT, UOL With another challenging year ahead for the physical market, we struggle to turn more positive on property counters despite cheap valuations. In this risk-averse environment, we position defensively at the lower end of the risk spectrum and prefer exposure to stable platforms over trading portfolios. Hence, our preference for Office REITs over Developers. We like CCT and KREIT for their attractive valuations, strong WALE and low lease expiry in the near term. While we retain a cautious view on Developers, we see trading opportunities within the sector. Developers with a large base of recurring income and a less risky development profile could outperform. UOL is our top developer pick.
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Ascendas REIT(AREIT SP, BUY, TP: SGD2.63) Acquisition of Science Park buildings a positive move Ascendas REIT (AREIT) announced proposed acquisition of DSO National Laboratories buildings and DNV GL Technology Centre from sponsor Ascendas Land for a total purchase consideration of SGD 437.5m (incl. fees and transaction costs). The properties located along Science Park Drive are fully tenanted to DSO National Laboratories and DNV GL Technology Centre with a Weighted Average Lease Expiry (WALE) of 16.5 years. The properties are newly completed (weighted average age: 2.0 years) and has remaining land tenure of 64.7 years. The acquisition is subject to unitholders approval in extraordinary general meeting ("EGM") as the purchase consideration accounts for 7.3% of its existing net tangible assets (exceeding the threshold of 5.0% NTA).
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