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PHILLIP SECURITIES |
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Silverlake Axis Ltd Take a breather
■ 4Q19 NP was in line with our expectations, but below Bloomberg consensus. ■ Although SILV’s orderbook backlog of c.RM260m remains healthy, the absence of large-sized project wins could pressure margins in FY20F. ■ We also lower our dividend payout expectations as SILV is reserving cash for further M&As. Resume coverage with a Hold rating and TP of S$0.53.
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Singapore REITs Monthly Monthly Tracker: August 2019 SINGAPORE | REAL ESTATE (REIT) | UPDATE
FTSE S-REIT Index gained +0.4% MTD and +21.7% YTD. Strongest gains were from the healthcare sub-sector (+3.9%) and weakest showing at the hospitality sub-sector (-2.3%). Performance in August: Best performer – Keppel-KBS US REIT (+5.7%), Worst performer – Eagle Hospitality Trust (-10.3%). Sector yield spread of 288bps over the benchmark 10-year SGS (10YSGS) yield was at the -1.3 standard deviation (SD) level. 3m SOR was flat at 1.75% at 16 August 2019 versus 1.76% at end-July. Remain NEUTRAL on S-REITs sector. Sub-sector preferences: Office and Hospitality.
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UOB KAYHIAN |
MAYBANK KIM ENG |
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Keppel Corporation (KEP SP) Kris Energy: A Larger-than-expected Millstone
Kris Energy (KRIS SP, Not Rated) filed for bankruptcy protection post its recent 1H19 results. KEP has a 40% stake in the company and has invested nearly S$400m in Kris since its IPO in Jul 13. Kris has not been profitable since its IPO and instead has been a larger-than-expected millstone for KEP within its investments segment. We have assessed the impact on KEP in a worst-case scenario and believe that it will be minimal. Maintain BUY on KEP with a target price of S$7.61.
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Singapore market monitor Deconstructing the June 2019 quarter
Mixed messages Q/e June 2019 saw a 2.4% YoY cumulative core PATMI decline (vs. +6.3% in q/e Mar 2019) for our coverage. Yet, in our view, the quarter was not as bad as headline numbers suggest with around two-thirds and half of the stocks delivering revenue growth and core PATMI growth. Specifically, four stocks saw profit declines much worse than expected, excluding which, core PATMI would have grown 5.1% instead. But macro, earnings risks remain, dictating our unchanged defensive view in top stock picks.
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Check out our compilation of Target Prices
