ANALYSTS SAY: Buy, Sell, Hold (14 Sept)

CGS CIMB

Parkway Life REIT
Expanding Japan footprint

■ PREIT to acquire three nursing homes in Hokkaido for S$26.1m
■ We estimate the purchase will boost its FY22-24F DPU by 0.27-0.48%
■ Reiterate Hold, with a slightly higher DDM-based TP of S$5.06

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Frasers Centrepoint Trust
Taking another bite of Waterway Point

■ FCT to acquire an additional 10% stake in WWP, bringing its stake to 50%.

■ We estimate FY23F/24F DPU accretion of 0.2%/1.0% if the acquisition is fully debt funded, and 1.1%/1.9% if internally funded.

■ Gearing could rise from 33.9% at end-Jun to 36.6% if the acquisition is fully debt funded, and 35.8% if internally funded, based on our estimates.

■ Reiterate Add as acquisition lifts FCT’s suburban mall exposure.

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UOB KAYHIAN

REITs – Singapore
Logistics REITs Riding On E-commerce Growth Within ASEAN

Its strategic location and well-developed maritime and aviation infrastructure positions Singapore as an ideal hub to support e-commerce fulfilment. Logistics companies serving e-commerce platforms need a base in Singapore to be close to consumers within ASEAN.

The transition to just-in-case supply chains is expected to increase inventories by 5-10%. BUY MLT (Target: S$2.08) and FLT (Target: S$1.60), which provide FY23 distribution yields of 5.2% and 5.6% respectively 

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REITs ‒ Malaysia
Less Appealing Risk-to-reward

2Q22 results were in line with our expectations, boosted by the festivities and additional cash from EPF withdrawals. 2H22 earnings may be at risk but should be buoyed by the holiday season.

Additionally, the rising interest rate environment coupled with high inflation poses near-to-medium term headwinds. With the narrowing yield spread to MGS, the risk-to-reward looks less appealing. Downgrade the sector to MARKET WEIGHT. Top pick: Sunway REIT.

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Tenaga Nasional (TNB MK)
A balanced transition

Managing the energy tri-lemma
TNB’s increasingly public energy transition plans will be balanced against Malaysia’s energy equity and security. ESG scrutiny on TNB has largely taken a backseat in the past year, in our view, as the market focuses on the sanctity of the pass-through mechanism.

Maintain HOLD with an unchanged MYR8.70 TP (DCF-based). We prefer Mega First (MFCB MK, BUY, CP: MYR3.43, TP: MYR4.30) in the electricity space. 

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AEON Thana Sinsap (AEONTS TB)
NPLs likely rose in 2Q but should ease in 2H

Attractive valuation; expect asset quality to improve in 2HFY23
We expect economic reopening to improve personal loan demand and credit card spending in 2HFY23 (Feb year-end). However, rising inflation should reduce household income and ability to service debt, which could have led to a higher NPL ratio in 2Q23 (Jun-Aug).

We like AEONTS for its cheap valuation (1.9x FY23E P/BV and 10.5x PER vs 2.8x P/BV and 22.7x industry average PER) and high NPL coverage. BUY with TP of THB240, implying 2.6x FY22E P/BV, 14.3x PER and 19.2% ROE. Key risk is deterioration in asset quality.

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