MARKET PULSE: KepLand, ART, CCT, FCT, PARD, First REIT, Tiger Airways (24 Jan 2013)

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.37

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.80

Stock Name: FrasersCT
Company Name: FRASERS CENTREPOINT TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.13

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.98

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.86

MARKET PULSE: KepLand, ART, CCT, FCT, PARD, First REIT, Tiger Airways

24 Jan 2012

KEY IDEA Keppel Land: Well positioned for FY13; upgrade to BUY Keppel Land (KPLD) announced 4Q12 PATMI of S$527.3m, down 55.4% mostly due to the S$480.3m gain from the sale of stake in Ocean Financial Center in 2011. Excluding divestment gains and revaluation gains, we estimate FY12 PATMI to be S$451.5m - up 61.4% YoY and mostly within expectations. We see KPLD to be well positioned for FY13 given its strong balance sheet (S$1.6b cash, 22% net gearing), significant exposure to the Chinese property sector (35% asset exposure as of end FY12) and potential divestment gains from MBFC T3 as the asset stabilizes. Upgrade to BUY with a higher fair value estimate of S$4.53, versus S$3.49 previously, as we lower the RNAV discount to 25% to reflect a mid-cycle valuation and incorporate the latest valuations of Keppel REIT. (Eli Lee) MORE REPORTS Ascott Residence Trust: Compressed margins in 4Q12 Ascott Residence Trust registered 4Q12 DPU of 2.00 S cents, above consensus but slightly lower than our estimate. 4Q12 revenue climbed 1% YoY to S$75.9m, with contributions from acquisitions (partially offset by decrease from divestments). Notably, gross profit fell by 4% YoY to S$38.5m. Management attributed the compression in gross profit margin to higher expenses in China, the Philippines and Vietnam (staff cost, and also utilities cost in the Philippines), and expects these cost pressures to persist. Currency movements led to a S$4m drop at the FY12 gross profit level to S$159.1m (~2.5% negative effect, 4Q12 displayed a similar percentage). We maintain our fair value of S$1.37 and downgrade ART to a HOLD. (Sarah Ong) CapitaCommercial Trust: Potential for more growth ahead CapitaCommercial Trust (CCT) reported 4Q12 distributable income of S$58.3m - 7.0% higher YoY. This cumulates to a FY12 distributable income of S$228.5m, up 7.4% YoY, which is within expectations and make up 101% of our forecast. FY12 DPU is 8.04 S-cents; distribution yield is 4.7% based on last closing price. With net gearing at a relatively low 30.1%, we note that CCT has significant debt headroom of ~S$1bn for acquisitions and asset enhancements. Though management would likely be cautious on the acquisitions front due to the criteria for yield accretion, with financing costs at low levels currently and CCT trading at 4.7% yield, we believe that acquisitions are workable in current conditions and that there is meaningful growth potential ahead. Maintain BUY with a higher fair value estimate of S$1.80, versus S$1.75 previously, as we update our model for firmer cap rates. (Eli Lee) Frasers Centrepoint Trust: Still benefitting from AEI Frasers Centrepoint Trust (FCT) reported DPU of 2.40 S cents for 1QFY13, representing a YoY growth of 9.1%. This is largely in line with expectations, given that the quarterly DPU met 22% of both our and consensus FY13F DPU estimates. Causeway Point (CWP) and Northpoint remained the key drivers for the quarter, generating 12.3% and 6.7% YoY increase in NPI. Operationally, we note the overall portfolio occupancy improved from 93.6% in prior quarter to 97.2%. This was boosted by an 8.7ppt QoQ improvement in occupancy at CWP to 96.4% following the completion of its AEI. Management revealed that several new tenants are still in the process of fitting out at CWP and expects the occupancy to trend up further when more tenants commence their operations from Jan onwards. FCT currently boasts a strong aggregate leverage of circa 30.9% and extended debt maturity of 3.6 years following the recent issue of S$70m MTN. This is likely to put it in good stead to take any attractive acquisition opportunities as they arise. Maintain BUY with an unchanged fair value of S$2.13 on FCT. (Kevin Tan) Pacific Andes: Ceasing coverage Pacific Andes Resources Development (PARD) has underperformed the market despite the recent rally in the equity market. Its share price has stayed below its pre-FY12 results level in Nov 2012 when it posted a disappointing set of 4Q and FY12 results. As a recap, it also slashed its dividend payout from 1.08 S cents (about one-third of its earnings) to 0.3 S cent (14.5% of earnings). PARD's earnings growth trend is now limited by several key challenges ahead, including growing its fishing operations and ensuring increases in catch volumes/entitlements in all its fishing grounds for the near to medium term. We projected flat FY13 earnings of HK$638m, which is a decline from the recent high of HK$773m in FY10. As such, we are CEASING COVERAGE on the stock due to the lack of medium-term price drivers and muted earnings outlook. (Carmen Lee) First REIT: FY12 results in line with expectations First REIT (FREIT) reported 4Q12 results which were within our expectations. Gross revenue increased 10.7% YoY to S$15.4m, driven by maiden contributions from two new properties which were acquired in Nov 2012 and higher rental income from its remaining portfolio. Distributable amount to unitholders declined 8.7% YoY to S$11.1m, but this was due to a special distribution of S$2.2m in 4Q11. Excluding this, distributable amount to unitholders would have increased by 11.3% instead. For FY12, gross revenue rose 6.7% to S$57.6m and was just 0.2% below our full-year projection. Distributable income to unitholders rose 4.8% to S$46.0m, and formed 98.8% of our FY12 forecast. DPU for FY12 was 7.26 S cents, versus 7.01 S cents in FY11, which translates into a yield of 6.8%. Looking ahead, we expect FREIT to seek further acquisition opportunities in Indonesia given the nation's robust healthcare dynamics. We will provide more details after the analyst briefing. We maintain our HOLD rating but our S$0.98 fair value estimate is under review. (Wong Teck Ching Andy) Tiger Airways: Finally a profit Tiger Airways (TGR) finally turned in a profitable quarter, after reporting six consecutive quarters of losses. For 3Q13, the group saw revenue jump 47.1% YoY (+25.9% QoQ) to S$247.7m following increases in passenger demand, outpacing the growth in operating expenses, which grew 26.7% YoY to S$229.8m (+12.4% QoQ). This led to an adjusted operating profit of S$20.8m for the quarter versus a loss of S$9.8m and S$7.9m for 3Q12 and 2Q13 respectively. The turnaround for the Group was largely attributed to the stellar performance by Tiger Singapore during the quarter as Tiger Australia continued to suffer yield deterioration from intense competition. We view this set of results favourably as revenue growth met our expectations, and TGR's first net profit validates our turnaround view for 2H13. We will be speaking to management later this morning but raise our fair value from S$0.81 to S$0.86 in the meantime. Maintain BUY. (Lim Siyi)

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NEWS HEADLINES - US stocks rose on Wed, on news that lawmakers had agreed to extend the country's debt limit to 19 May. The Dow increased 0.5% to 13,779.33, the S&P 500 index gained 0.2% to 1,494.81 and the Nasdaq ended 0.3% higher at 3,153.67. Apple shares, which rose before the market close, slumped 10% in after-hours trading on disappointing earnings. - Consumer prices in Singapore rose a faster-than-expected 4.3% YoY in Dec, driven by higher accommodation and private road transport costs. - Businesses are pessimistic about the business outlook for 1Q13 and expect sales, profits and inventories to decline from 4Q12, a survey by Dun & Bradstreet showed. - The government is standing firm on the rule that all units in property projects with any foreign ownership must be sold within two years of the project receiving its temporary occupation permit, despite developers' efforts to lobby the government to extend the timeframe.