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MAYBANK KIM ENG |
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Genting Singapore Playing a crucial hand
■ Its net cash position and track record give GENS a strong chance of winning urban/regional IR in Japan that may accrete 18-23/7 Scts to FY20F fair value. ■ On the home front, we estimate RWS 2.0 could spur GENS’s non-gaming revenue up to S$1.2bn in FY26F (vs. FY18: S$834m). ■ GENS is in crucial long-term transformation mode and we like its current compelling valuation of 6.5x FY20F EV/EBITDA. Maintain Add.
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Mapletree Commercial Trust (MCT SP) Prime Beneficiary Of Rejuvenation Of Sentosa And Pulau Brani
VivoCity is the gateway to Sentosa. It achieved positive rental reversion of 24.9% in FY12 after Resorts World Sentosa opened in Jan 11. It will similarly benefit from the government’s plan to develop new tourism attractions at Sentosa and Pulau Brani going forward. We estimate the acquisition of MBC 2 would raise pro forma 2020 DPU by 2.8% to 9.65 S cents. Initiate coverage on MCT with BUY and target price of S$2.22.
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OCBC |
RHB |
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CapitaLand Commercial Trust: Tailwinds from rates but price is not right
The share price of CapitaLand Commercial Trust (CCT) has ballooned 22.3% YTD (total returns: +25.2%), supported by a flight to defensive safe names and a dovish bias from the Fed. This has resulted in CCT’s FY19F distribution yield compressing to 4.3%, based on our forecast, or 4.2% according to Bloomberg blended forward 12-month consensus. The latter is not just at the lowest level over an 8-year period (-2.2 standard deviations from mean), but we would have to go all the way back to Nov 2007 when CCT last traded at such tight valuations in terms of absolute yield. Even if subsequent rate cuts do happen, it would likely be driven by a slowdown in macroeconomic conditions. While we acknowledge that CCT’s high quality portfolio will remain resilient (portfolio WALE of 5.7 years by NLA as at end-1Q19), it would not be immune to the vagaries of the macro environment.
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Singapore Equity Strategy Revisiting Our Top Picks
Stay defensive. After delivering 6.5% in returns this month, STI’s forward 12.7x P/E is now closer to its historical average of 13.3x. With elevated economic uncertainties, we believe there exists downside risks to STI’s earnings. Investors should stick with REITs, which should benefit from the likely decline in interest rate. Consumer is our preferred defensive sector. Cache Logistics Trust replaces Starhill Global REIT and Oxley replaces HRnetGroup in our Singapore Top Picks.
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Check out our compilation of Target Prices
