Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST
Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED
Market Pulse: Ascendas REIT, Raffles Medical & Rotary Engineering (9 Dec 2011)
FOCUS
Ascendas REIT: Acquisition of two Singapore assets
Summary: Ascendas REIT (A-REIT) yesterday announced that it had completed the acquisition of two Singapore assets, namely Corporation Place and 3 Changi Business Park Vista, for a purchase consideration of S$99m (S$159.6 psf NLA) and S$80m (S$487.0 psf NLA), respectively. The acquisitions are expected to be yield accretive, adding an annualized 0.10 S cents per unit to its DPU. We estimate that the blended NPI yield for the acquisitions to come in at around 7% (above the overall FY11 NPI yield of 6.5%), and the group's aggregate leverage to rise to around 36%, up from 31.5% as at 30 Sep. Factoring in the contributions from the two acquisitions, our DDM-based fair value is now raised marginally to S$2.24 (S$2.23 previously). We maintain our BUY rating on A-REIT. (Kevin Tan)
Raffles Medical Group: Strong track record; still a BUY
Summary: Raffles Medical Group's (RMG) consistent core earnings growth places it in a good position to weather the macroeconomic uncertainties in 2012. RMG's earnings are fairly defensive, although not entirely immune to an economic slowdown. This is underpinned by demographic changes and rising affluence in the region. Growth will come from higher patient load and revenue intensity as well as expansion of its specialist services. The creation of ~15,000 sf of new medical space in 1H12 would also assuage some of the space constraints faced by the group before its new Specialist Medical Centre and Raffles Hospital expansion comes on stream. While competitive pressures are intensifying with two new hospitals in Singapore, we reckon that this could raise Singapore's reputation as a medical hub. Given undemanding valuations, we maintain BUY and S$2.61 fair value estimate on RMG. (Wong Teck Ching Andy)
Rotary Engineering: To jointly develop oil terminal in Johor
Summary: Rotary Engineering (Rotary) has signed a memorandum of understanding (MOU) with Benalec Holdings Bhd to develop an independent deepwater storage terminal for oil products in Tanjung Piai, which is located at the south-western tip of Johor. The proposed terminal will have an initial capacity of 1m cubic metres, along with subsequent phases to increase capacity to 3m cubic metres. Rotary will form a JV with Benalec Holdings to own the terminal as well as other projects. Details such as the contract value and the time in which work will commence for Rotary have not been disclosed and it is likely that more time would be needed for the terms to be firmed up. Pending further details from the management, we maintain our HOLD rating and fair value estimate of S$0.61 on the stock. (Chia Jiun Yang)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- According to latest US Commerce Department figures, inventories at US wholesalers rose by 1.6% (the biggest increase in five months) during October.
- The European Central Bank announced yesterday that the benchmark rate will be cut to 1% and it will offer banks long term funding with loosened collateral rules.
- China Environmental Resources Group announced that it has signed a sale and purchase agreement to acquire a forest plantation business in Guangdong, China for HK$180m.
- Construction services firm, Keong Hong Holdings has launched its IPO for a listing on SGX's Catalist board. The firm is offering 27m placement shares at S$0.24 to raise S$6.48m and the issue has a historical P/E of about 3.8x based on FY10 earnings.
Company Name: ASCENDAS REAL ESTATE INV TRUST
| Research House: OCBC | Price Call: BUY | Target Price: 2.24 |
Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
| Research House: OCBC | Price Call: BUY | Target Price: 2.61 |
Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED
| Research House: OCBC | Price Call: HOLD | Target Price: 0.61 |
Market Pulse: Ascendas REIT, Raffles Medical & Rotary Engineering (9 Dec 2011)
FOCUS
Ascendas REIT: Acquisition of two Singapore assets
Summary: Ascendas REIT (A-REIT) yesterday announced that it had completed the acquisition of two Singapore assets, namely Corporation Place and 3 Changi Business Park Vista, for a purchase consideration of S$99m (S$159.6 psf NLA) and S$80m (S$487.0 psf NLA), respectively. The acquisitions are expected to be yield accretive, adding an annualized 0.10 S cents per unit to its DPU. We estimate that the blended NPI yield for the acquisitions to come in at around 7% (above the overall FY11 NPI yield of 6.5%), and the group's aggregate leverage to rise to around 36%, up from 31.5% as at 30 Sep. Factoring in the contributions from the two acquisitions, our DDM-based fair value is now raised marginally to S$2.24 (S$2.23 previously). We maintain our BUY rating on A-REIT. (Kevin Tan)
Raffles Medical Group: Strong track record; still a BUY
Summary: Raffles Medical Group's (RMG) consistent core earnings growth places it in a good position to weather the macroeconomic uncertainties in 2012. RMG's earnings are fairly defensive, although not entirely immune to an economic slowdown. This is underpinned by demographic changes and rising affluence in the region. Growth will come from higher patient load and revenue intensity as well as expansion of its specialist services. The creation of ~15,000 sf of new medical space in 1H12 would also assuage some of the space constraints faced by the group before its new Specialist Medical Centre and Raffles Hospital expansion comes on stream. While competitive pressures are intensifying with two new hospitals in Singapore, we reckon that this could raise Singapore's reputation as a medical hub. Given undemanding valuations, we maintain BUY and S$2.61 fair value estimate on RMG. (Wong Teck Ching Andy)
Rotary Engineering: To jointly develop oil terminal in Johor
Summary: Rotary Engineering (Rotary) has signed a memorandum of understanding (MOU) with Benalec Holdings Bhd to develop an independent deepwater storage terminal for oil products in Tanjung Piai, which is located at the south-western tip of Johor. The proposed terminal will have an initial capacity of 1m cubic metres, along with subsequent phases to increase capacity to 3m cubic metres. Rotary will form a JV with Benalec Holdings to own the terminal as well as other projects. Details such as the contract value and the time in which work will commence for Rotary have not been disclosed and it is likely that more time would be needed for the terms to be firmed up. Pending further details from the management, we maintain our HOLD rating and fair value estimate of S$0.61 on the stock. (Chia Jiun Yang)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- According to latest US Commerce Department figures, inventories at US wholesalers rose by 1.6% (the biggest increase in five months) during October.
- The European Central Bank announced yesterday that the benchmark rate will be cut to 1% and it will offer banks long term funding with loosened collateral rules.
- China Environmental Resources Group announced that it has signed a sale and purchase agreement to acquire a forest plantation business in Guangdong, China for HK$180m.
- Construction services firm, Keong Hong Holdings has launched its IPO for a listing on SGX's Catalist board. The firm is offering 27m placement shares at S$0.24 to raise S$6.48m and the issue has a historical P/E of about 3.8x based on FY10 earnings.
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