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Keppel Corporation Strategic review of O&M unit and divestments to drive potential re-rating
SINGAPORE | CONGLOMERATE | INITIATION Reaffirmation of capital recycling to unlock S$17.5bn a potential re-rating catalyst. 100-day programme to provide greater clarity on Keppel O&M and remove key overhang. Longer-term ROE target of 15% intact. Initiate with BUY and SOTP TP of S$6.12, with a 10% holding-company discount. Our TP translate to about 1.0x FY21e book value, a slight discount to their 5-year average of 1.05x
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Prime US REIT (PRIME SP) Primed For Resilience; BUY For 9% Yield
Initiate coverage with BUY and USD1.00 TP, 30% upside and c.9% yield. Prime US REIT derives rental income from a portfolio of 12 freehold office assets in the US. Despite the US’ severe COVID-19 situation, we expect the company to see stable rental income, due to its strong asset and tenant quality, and limited near-term lease expiry. Its sustainable yield of 9% is among the highest in the REIT sector, and is unjustified, in our view, compared to the 5.4% S-REIT peer average.
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CGS CIMB |
UOB KAYHIAN |
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BRC Asia Ltd Out of the woods
■ BRC Asia posted a core net profit of S$7m in 4QFY9/20, which was above expectations as we previously expected losses in 4Q. ■ Construction activities have returned to c.70% of pre-Covid-19 level. We see strong recovery in FY21F, with its healthy order book and stronger margins. ■ Its leadership position in the reinforced steel industry makes it a good proxy to the construction sector recovery. Reiterate Add with a higher TP of S$1.90.
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REITs – Singapore S-REITs Bi-Weekly Updates (16-30 November)
S-REITs eased 0.9% during 16-30 November, with large cap blue chip S-REITs encountering resistance and light profit-taking. Recovery is on track, with approval for emergency usage of COVID-19 vaccines from Pfizer, Moderna and AstraZeneca in sight. Switch to recovery plays and laggards. Maintain OVERWEIGHT. BUY AREIT (Target: S$3.68), FCT (Target: S$3.15), LREIT (Target: S$0.97), FEHT (Target: S$0.74) and SUN (Target: S$1.75), which provides distribution yields of 5.2%, 5.9%, 7.1%, 4.5% and 6.3% respectively.
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Check out our compilation of Target Prices
