Local Brokerages Stock Call 22 April 2013

Sorry for being late in putting out the local brokerages
stock call. I wasn't available today for most of the day/

OCBC:
CapitaMall Trust: Results from AEIs now apparent
CapitaMall Trust (CMT) turned in a strong set of 1Q13 results last Friday. DPU increased by 7.0% YoY to 2.46 S cents, despite a retention of S$8.4m in income for the quarter. This is slightly ahead of our expectations, as S$6.6m in taxable income may be distributed in FY13 (1Q DPU already formed 25.2% of our FY13F DPU). Operationally, we note that CMT continued to deliver on various fronts. CMT also updated that the repositioning of IMM Building has been gaining traction, while the space vacated by Carrefour in 4Q12 at Plaza Singapore has been leased to Cold Storage and John Little and British retailer George. As previously guided, CMT announced a new AEI at Bugis Junction, which is expected to last from 2Q13 to 3Q14. We remain positive on CMT’s performance going forward, in view of these positive developments. We maintain BUY on CMT with a higher fair value of S$2.43 (previously S$2.32).

CapitaCommercial Trust: 1Q13 DPU up 3.2% YoY
CapitaCommercial Trust (CCT) reported 1Q13 distributable income of S$55.7m – up 3.3% YoY. This translates to a 1Q13 DPU of 1.96 S-cents, which is 3.2% above the 1.90 S-cents paid in 1Q12. We see this to be in line with expectations and 1Q13 distributable income now makes up 24% of our full year forecast. The growth in distributable income was mainly due to a full contribution from 20 Anson (acquired in Mar-12) and higher rentals at HSBC Building. CCT’s portfolio occupancy remained fairly stable at 95.3% in 1Q13, down marginally from 97.2% in 4Q12, mainly due to Cisco’s relocation from Capital Tower. We continue to see positive rental reversion in the portfolio – average monthly portfolio rents increased from $7.64 psf in 4Q12 to $7.83 psf in 1Q13. In addition, CapitaGreen remains on track for completion in 4Q14. Maintain BUY with a fair value estimate of S$1.80.

CapitaRetail China Trust: 1Q13 in line
CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. On a QoQ basis, NPI at CapitaMall Minzhongleyuan (MZLY) fell 32% to RMB4.7m. We expect NPI from MZLY to dip further in the coming quarters since the AEI there is being fast-tracked, with temporary closure of the mall from Jul 2013 to 2Q14. According to management, CRCT has secured offers at favorable terms to refinance S$150.5m due in Jun 2013. Adjusting our estimates slightly, we increase our fair value from S$1.72 to S$1.76 but we maintain our HOLD rating on CRCT on valuation grounds.

From CIMB:

CapitaMall Trust

Searching for growth

UNDERPERFORM - Maintained | S$2.26 - Tgt. S$2.23

CMT’s operating metrics picked up in 1Q, with the ongoing completion of AEIs. Management retained a higher sum in 1Q, including S$6.6m which will be released in FY13 for income-smoothening. We think that CMT’s current valuations price in the positives. At 24% of our FY13 forecast, 1Q13 DPU broadly met our and market expectations. We raise FY13 DPU for reduced interest cost and retained earnings but lower FY14-5 for occupancy and rental changes. We keep our DDM-based target price (discount rate: 6.7%) and Underperform call. De-rating catalyst from over-paying for acquisitions.

From UOB KH:
Weekly Watch - Dividend-paying stocks will remain
attractive in this low interest rate environment.
Keppel REIT, with the best Grade-A office portfolio in
Singapore, will benefit from the bottoming out of office rentals
this year. Fraser Centrepoint Trust’s (FCT) Causeway Point
asset enhancement initiative (AEI) emerged as its best AEI todate
and Hafary Holdings’ (Hafary) earnings will be supported
by strong construction demand.

CapitaCommercial Trust- 1Q13: Lease renewals match
full-year renewals in 2012. (CCT SP/BUY/S$1.66/Target:
S$2.00)
Maintain BUY with target price raised to S$2.00 (from S$1.79),
based on DDM (required rate of return: 6.4%, terminal growth:
2.0%). We have lowered our required rate of return assumption
by 50bps to factor in the improving outlook in the office sector
and the anticipated higher growth dynamics going forward.

CapitaMall Trust- 1Q13: New AEI at Bugis Junction.
(CT SP/BUY/S$2.26/Target: S$2.54)
We maintain BUY with an unchanged target price of S$2.54. We
use the dividend discount model (required rate of return:
6.15%, terminal growth: 2.0%) to value CMT.
Sabana Shari’ah Compliant REIT- 1Q13: Watch for
acquisitions. (SSREIT SP/HOLD/S$1.37/Target: S$1.40)
Maintain HOLD with a higher target price of S$1.40 (from
S$1.30), based on DDM (required rate of return: 7.45%,
terminal growth: 2.0%). Entry price is S$1.22.

From Maybank KE:
CapitaMall Trust: Positive Start to the Year; Maintain BUY, TP $2.45
 CT SP | Mkt Cap USD6.3b | ADTV USD16.3m
 Following the completion of a number of major asset enhancements, plans
 are  afoot  for  a  medium-scale AEI at Bugis Junction. We remain sanguine
 about  CMT’s  growth potential and maintain our BUY recommendation, target
 price raised to SGD2.45.
 CMT’s  1Q13  DPU of 2.46 cts/unit was largely within expectations. The
 malls’  healthy  shopper  traffic  and sales growth had underpinned a 6.2%
 positive  rental  reversion  for  new  leases  or  renewals  signed in the
 quarter.
 No blockbuster AEI plans have been announced involving Tampines Mall
 and/or  Funan, but we have not ruled out the possibility that they will
 be  revealed  in  the coming months. Meanwhile, management will be kept
 busy with the Bugis Junction AEI and the active pre-leasing of Westgate
  Mall.
   
 CapitaCommercial Trust: Prepare for a Weaker Second Half; Sell TP $1.43
 CCT SP | Mkt Cap USD3.90b | ADTV USD10.7m
 We  maintain  our  contrarian  SELL recommendation on CCT as we see
 current valuations as unattractive with limited upside. Even though its
 1Q13  DPU of 1.96 cts/unit is in line with expectations, we expect more
  downside risks in 2H13.
 Despite  a  QoQ  increase in CCT’s average office portfolio rent to
 SGD7.83  psf,  we believe it will be challenging to keep up the pace of
 positive   rental   reversion   in  this  subdued  leasing  environment
 especially  after  Capital  Tower’s  occupancy  rate fell to 90.3% this
 quarter.  The  expiration  of One George Street’s yield support in July
 should lead to a weaker 2H.
 We prefer retail REITs as they offer organic growth potential via
 AEIs and positive rental reversion. Maintain SELL on CCT, target price
 unchanged at SGD1.43. 

From Phillip:

Wilmar International Ltd - Bird flu concerns likely less than initially feared
Recommendation: Accumulate
Previous close: S$3.34
Fair value: S$3.70

• Impact from China’s bird flu likely limited
• Vertically integrated model resilient to low CPO prices
• Upgrade to Accumulate with new TP of S$3.70

Golden Agri-Resources Ltd - Cutting 2013E CPO estimate
Recommendation: Neutral
Previous close: S$0.525
Fair value: S$0.55

• Lowering FY13E CPO estimate to US$820/MT
• Time needed for downstream growth
• Downgrade to Neutral from Accumulate

From OSK DMG:
CCT reported its 1Q13 results with a DPU of 1.96S¢ (3.2% y-o-y). Revenue and net property income for the period came in at SGD95.9m (+9.7% y-o-y) and SGD74.9m (+7.1% y-o-y) respectively; mainly attributed to a full quarter contribution from Twenty Anson and higher rent from HSBC Building. However, the higher NPI of 7.1% was partially offset by higher operating expenses and the normalisation of property tax. Given that the average passing rent of CCT’s portfolio is c.13% lower than average Grade A office market rent, CCT is well positioned to benefit from positive rental reversion through 2013. Having said that, as only 6.2% of leases within the portfolio (as a percentage of monthly grow rental income) is due to expire this year, we believe the upside to earnings from positive rental reversion in 2013 is limited from hereon. Although CCT’s earnings largely reflect a stable quarter, the concern on income support from One George Street remains. Based on an assumed passing rent of SGD8.90psf and an occupancy rate of 96%, we expect CCT to lose c.SGD6.1m in income, which translates to c.2% of NPI by the end of this year as the income support expires in mid-July. On this basis, together with high valuation (4.7% FY13 forecasted dividend yield) and a lack of clear growth driver in the near term, we have maintained our Neutral rating on CCT with an unchanged TP of SGD1.70.


CMT reported its 1Q13 results last Friday with a DPU of 2.46 cents (+7.0% y-o-y). Revenue for the period grew 14.8% y-o-y to SGD178.2m while net property income climbed 15.5% y-o-y to SGD125.1m. The strong 1Q13 result was mainly attributed to higher contributions from the well-executed asset enhancement works at JCube, Bugis+ and The Atrium@Orchard. As of 31st March 2013, the occupancy rates at these malls were 99.5%, 99.5% and 97.4% respectively. Going forward, with 20.8% of total portfolio (as a percentage of gross rental income) due to expire in FY13, we believe CMT will have minimal difficulties renewing majority of these leases with a mid-single digit positive rental reversion. Additionally, management announced the AEI at Bugis Junction will commence in 2Q13. This AEI will involve the recovery of c.70,000 sq ft of space from one the key tenants which will then be leased out to specialty stores. The projected capex for this AEI is SGD35m with a target return on investment of 9.0%, and is scheduled to be completed in 3Q14. Despite the strong quarter, we believe CMT is currently fairly valued as this counter trades at a forecasted FY13 dividend yield of 4.5% and 1.3x P/B. In view of these high valuations, we maintained our Neutral rating on CMT with a slightly revised higher DDM-based TP of SGD2.36 (COE: 7.1%, terminal growth: 2.0%). Our TP translates to a forecasted yield of 4.3%.