MARKET PULSE: S-REIT, A-REIT, Consumer Sector, CMT (18 Jul 2012)

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.18

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.04

Stock Name: Fortune Reit HK$
Company Name: FORTUNE REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 5.22

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.27

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.02

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.49

MARKET PULSE: S-REIT, A-REIT, Consumer Sector, CMT

18 Jul 2012

KEY IDEA Singapore REITs: Yield to the yields With the onset of heightening concerns in the Eurozone and fears of slowdown in the macroeconomic activity in early Apr, defensive plays, particularly the S-REITs, have emerged as outperformers. In the second half of 2012, we believe S-REITs will retain their shine as investors continue to incorporate them into their portfolios. In general, S-REITs appear to be on track to post a relatively sturdy set of results, underpinned by healthy operating metrics, improved yields from asset enhancement initiatives and inorganic growth. We are reiterating our OVERWEIGHTview on the S-REIT sector, as most of the REITs have a positive outlook. We continue to favour the industrial, retail, hospitality and healthcare REITs. We are currently NEUTRAL on the office REITs. Among the subsectors, we like S-REITs with strong financial positions, robust portfolios, strong track records and growth potential. In this respect, we choose CACHE [BUY, FV: S$1.18], CDLHT [BUY, FV: S$2.04], and FRT [BUY, FV: HK$5.22] as our top picks for the sector. (Kevin Tan) MORE REPORTS Ascendas REIT: Positive start to FY13 Ascendas REIT (A-REIT) delivered a commendable set of 1QFY13 results that came in line with our expectations. During the quarter, A-REIT signed new leases (including expansions) amounting to 46,314 sqm NLA (+16.7% YoY), reflecting continued demand for industrial space. For the rest of FY13, we note that A-REIT has 9.1% of its revenue due for renewal. Given that the current market rents are 16-35% higher than the average passing rents for the area due for renewal, we remain positive that A-REIT may continue to benefit from favourable rental reversions in the coming quarters. In our view, A-REIT looks set to deliver another year of robust growth, supported by full-year contribution from its recent investments. We maintain BUY on A-REIT, with a higher fair value of S$2.27 (S$2.22 previously) after tweaking our rental rate assumptions and completion dates for various projects in FY14 (FY13 forecasts unchanged). (Kevin Tan) Consumer sector: Weakness to persist The pullback in retail sales continued in May with lingering weakness in global economies affecting consumer spending patters. Both retail sales volume and value have persisted on their downward trend on a MoM basis, and given the developments in May, a similar trend has now emerged on a YoY basis. While initial estimates on GSS spending could provide a slight boost to retail sales figures for June/July, we deem any positive impact to be temporary in nature, and sales figures would most likely revert subsequently. With positive catalysts (global stimulus) unlikely to emerge until late 2012, we maintain an UNDERWEIGHT rating for the sector. However, certain segments within the sector should remain stable and hold up well against this weakening backdrop. One of these segments is the supermarket segment (Sheng Siong Group [HOLD; FV: S$0.49]), which exhibits defensive qualities as consumers eat in more. (Lim Siyi) CapitaMall Trust: 2Q12 results within expectations CapitaMall Trust (CMT) announced 2Q12 distributable income of S$79.6m or a DPU of 2.38 S-cents - up 0.8% YoY. This is mostly in line with our expectations, and YTD distributable income now makes up 52% of our FY12 forecast. 2Q12 topline was S$165.5m, which was up 3.7% mostly due to JCube which opened for operations in Apr 12, and continued positive rental reversions in the portfolio. CMT also booked a S$84.3m divestment gain during the quarter for the sale of Hougang Plaza. We saw a healthy occupancy rate of 98.6% across the portfolio as of end 2Q12, with most of the slack mostly due to the Atrium@Orchard (70.7% occupancy) which is currently undergoing enhancement works. We would meet with management later this morning, and in the meantime, put our Buy rating with a fair value estimate of S$2.02 UNDER REVIEW. (Eli Lee)

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NEWS HEADLINES - US stocks climbed on Tuesday after comments from Fed Chairman Bernanke and with solid results from Goldman Sachs Group Inc. and Coca-Cola Co. lifting confidence. The S&P 500 Index and the Dow advanced 0.7% and 0.6% respectively. - Keppel T&T reported a 19.2% YoY fall in net profit to S$14.25m despite a 21.9% increase in revenue to S$34.6m. - C&G Environmental Protection Holdings expects to record a loss for 2Q12. One reason is that the overall operations of the four new plants, which are still undergoing ramp-up, have not yet achieved their efficient levels of capacity utilisation and power generation. - Novo Group Ltd is selling half of its stake in indirectly wholly owned subsidiary, Novo Development (Tianjin) Limited, for RMB25m.