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PHILLIP SECURITIES |
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Keppel Corporation Toning down expectations
■ 3Q19 net profit of S$159m was below consensus, with 9M19 net profit of S$516m forming 54% of our FY19F. Expectations were high on property. ■ The lack of bulky divestment gains resulted in -52% yoy and -40% qoq profits in property. O&M continued to deliver profits and improvement in margins. ■ The stock is trading at an undemanding 0.9x FY19 P/BV or -1 s.d. of its 10- year mean. Maintain Add with a lower TP of S$8.36, based on SOP.
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Singapore REITs Monthly Monthly Tracker: October 2019 SINGAPORE | REAL ESTATE (REIT) | UPDATE
FTSE S-REIT index return gained 1.3% MTD and 25.1% YTD. Strongest gains were from the Industrial sector (+3.7% MTD) and weakest showing at the Healthcare (-0.9% MTD). Performance in September: Best – Keppel DC REIT (+13.5%), Worst – MapleTree North Asia Trust (-7.5%) Sector yield spread compressed MoM to 245bps, -1.5 standard deviation (s.d.) over the benchmark 10-year SGS (10YSGS) yield. 3-month SOR fell 40bps to 1.57% at 16 October 2019 versus 1.75% last month. Elevated P/NAVs expected to persist in the lower interest rate environment. Remain NEUTRAL on S-REITs sector. Sub-sector preferences: Office and Hospitality.
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MAYBANK KIM ENG |
DBS VICKERS |
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Singapore Telcos Latest 5G iteration: more cooks?
Looking tougher… The Communications Minister has unveiled the latest on 5G licensing, with two more localised-area 5G licenses to be issued on top of two nationwide licenses. Higher competition risks could dampen the business case scenarios being run by interested parties. It could also potentially raise investors’ risk perception on upcoming and undisclosed 5G capex by Singtel and StarHub etc. Remain NEUTRAL as we await whether a 4- player 5G match-up would materialise in 2020. Netlink and StarHub remain our key BUYs.
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Soilbuild Business Space Reit Confronting hurdles progressively Maintain HOLD and TP of S$0.55.
While business park assets continue to see positive rental reversions that will span well into next year, we continue to see headwinds within its industrial segment. We expect income weakness for its master-leases to NK Ingredients and Beng Kuang Marine to remain an overhang. Our DCF-based TP has been lowered to S$0.55 to account for the drag on earnings caused by the enlarged shareholder base, and our revised earnings estimates. Maintain HOLD.
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