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MAYBANK KIM ENG |
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IREIT Global (IREIT SP) Stable High Yielding German Office Play; BUY
Initiating coverage with BUY and SGD 0.92 TP, 17% upside with a dividend yield of c.7%. We like IREIT Global – whose office portfolio comprises nine office assets valued at EUR630m – for its exposure to the resilient German economy and good quality stable tenant profile. It is also led by a capable sponsor and strategic investor. IREIT’s yield is an attractive c.100bps, 200bps, and 800bps higher than its peers, the SREIT average, and 10-year German bonds, which we believe is due to a lack of analyst coverage and unfamiliarity over its assets
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Singapore REITs Growth Matters
Macros conducive, prefer industrial REITs, U/G CMT S-REITs have pulled back with the market and now trade at 4.5% FY20E div yield and 1.04x P/BV. We expect valuations to stay elevated against the negative macro undercurrents and a lower interest rate regime. DPUs for S-REITs are well-backed by their cashflows, especially for our preferred industrial and US office sector REIT names. We believe the acquisition theme will continue to take centre stage against slower DPU recovery, while scale aspirations and index inclusion could spur further consolidation among the smaller names. Balance sheets are strong, with debt headroom set to rise on possible higher leverage limits. We maintain our sector bias towards industrial REITs, and lowered earnings for hospitality given low DPU visibility and downside risk. US office SREITs fundamentals are favourable and stay within our preferred picks into 2020.
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| CGS CIMB | ISDN |
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Centurion Corporation Ltd 4Q19 results beat; structural growth intact
■ FY19 core net profit of S$38m was a beat, rising 11.6% yoy on the back of higher revenue of S$133m and overprovision for taxes in prior years. ■ Industry dynamics still favour CENT’s PBSA and PBWA assets, and growth plans, albeit with some near-term revenue headwinds from Covid-19. ■ Reiterate Add with a lower TP of S$0.58 and c.5% dividend yield. Current valuations at 8.7x FY21F P/E and 0.6x FY20F P/BV are not demanding.
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ISDN Holdings Ltd 4Q19 loss leads to underperformance
■ ISDN Holdings recorded a net loss of S$0.3m in 4Q19, leading to a FY19 net profit of S$7.0m, which was 25% below our expectations. ■ Core business gross profit margin was 26.8%. FY19 revenue decline was due to trade tensions, as well as non-renewal of certain accounts. ■ Our TP decreased to S$0.23 on our lowered earnings forecasts. Reiterate Add.
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