Penguin International Ltd
Cash to ride this cycle
Penguin provided some business updates in their recent AGM. The outlook is challenging due to Covid-19 and collapse in oil prices. Charter rate for crew boats will be under pressure, demand for new vessels is down and ferry customers will suffer from the pandemic.
We downgrade to ACCUMULATE from BUY. Our FY20e earnings is cut by 52%. The target price is dropped to S$0.55 (prev. S$0.88). We change our methodology from 5x PE (excluding cash) to a P/BV of 0.7x FY20e (historical 10-year average). The net cash of S$60mn (end-Dec19) will allow the company to ride through this turbulence. Net cash is now 52% of market capitalisation.
Starhill Global REIT (SGREIT SP)
Attractive Valuation; U/G To BUY
Upgrade to BUY from Neutral with new TP of SGD0.63 from SGD0.76, 17% upside and 7% yield. While outlook for the retail sector remains grim Starhill Global REIT’s master/anchor leases, which account for nearly half of its rents, provide some stability. Its balance sheet remains relatively healthy (gearing: 36.7%) with no near-term debt refinancing concerns. With the stock trading near -2SD (0.6x P/BV) and being a laggard among retail REIT peers in terms of valuation, we see room for rebound.
APAC Realty Ltd
Slower sales environment
■ Primary private home sales of 322 units for the first 3 weeks in May, YTD new home sales -22% yoy.
■ Lower FY20-22F EPS for APAC on moderated market transaction volumes.
■ Maintain Add rating with a lower TP of S$0.538.
Singapore Retail REITs
Retail Sector – Poised for recovery
• Listed landlords outperformed retail sector in overall operational metrics as occupancy remained resilient, supported by positive mid-single-digit rental reversions in 1Q20
• Preferred sector to ride the gradual reopening of Singapore’s economy, earlier-than-anticipated mall openings will bode well for both landlords and tenants in 3Q20
• Acquisitions poised for a return in 2H20 if trading metrics support such activities. Frasers Centrepoint Trust (FCT), Lendlease (LREIT) may be prime candidates as the managers look to steer them back to the growth path
• Despite recent rally, the retail S-REITs still trade below NAV at 0.95x vs 10- year average of 1.11x. Prefer Frasers Centrepoint Trust, CapitaLand Mall Trust, Lendlease Global REIT, Mapletree Commercial Trust
Check out our compilation of Target Prices