MARKET PULSE: Industrial REITs, SingTel (27 Sep 2012)

Stock Name: SingTel
Company Name: SINGTEL

Research House: OCBC

Price Call: BUY

Target Price: 3.61

MARKET PULSE: Industrial REITs, SingTel

27 Sep 2012

KEY IDEA Industrial REITs: Still hot on portfolio management activities Summary: Industrial landlords continue to be very engaged in their capital management activities. For 3Q to-date, we note that a number of industrial REITs have launched several debt facilities, where the proceeds will be used to refinance part of their existing borrowings. This is in line with our view that the industrial REIT subsector's debt maturity profile will remain healthy, with limited refinancing risks in the near term. We also observe that there was a pickup in investment activity during the period. We estimate that the total subsector acquisition value for 3Q will be at S$182.9m. This significantly exceeds the S$66.0m acquisition size clocked in 2Q, albeit still lower than the S$678.2m value registered in 1Q. We are currently maintaining our view that the subsector acquisition activity is likely to be skewed more towards smaller REITs. Reiterate OVERWEIGHTview on the industrial REIT subsector. Cache Logistics Trustremains our preferred pick, given its robust portfolio, healthy financial position and attractive forward DPU yield of 7.1%. (Kevin Tan) MORE REPORTS SingTel: Don't read too much into share sale - BUY Summary: Temasek Holdings has entered into an agreement to sell 400m shares in SingTel as part of its portfolio rebalancing, likely done at S$3.20 each according to newswires, or 3.9% discount to Tuesday's S$3.33 close. As expected, the news resulted in a negative knee-jerk reaction, causing SingTel's share price to open some 5.1% lower at S$3.16. But we believe that investors should not read too much into the share sale. Instead, we continue to like its defensive business and relatively decent dividend yield of ~5%. Maintain BUY with an unchanged S$3.61 fair value. (Carey Wong)

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NEWS HEADLINES - US stocks fell Wednesday, with the S&P 500 Index chalking a fifth day of losses, its longest such streak since Jul, with austerity unrest in Europe a concern for investors. The Dow fell 0.3% to 13,413.51. The S&P 500 slipped 0.6% to 1,433.32. - The Thai consortium seeking control over Fraser & Neave has declared that it will block a proposed capital reduction by F&N. - Hock Lian Seng, TA Corporation, King Wan Corporation and Far East Distillers have been jointly awarded a S$244.3m Dairy Farm Rd residential site, which is proposed for development into a mid-range condominium of ~400 units. - Ryobi Kiso Holdings said it has recently won contracts worth S$24m, bringing the total value of contracts secured since the start of the year to S$132m. - Xpress Holdings has advised that the company will record a consolidated loss for the 4th quarter and may record a consolidated loss for the FY ended 31 Jul 2012. - STATS ChipPAC will be divesting its entire 25% stake in Micro Assembly Technologies for HK$80.8m (S$12.8m).