Market Pulse: Keppel Corp, First REIT, Fortune REIT, Starhill Global REIT (25 Jan 2013)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

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

Research House: OCBC

Price Call: HOLD

Target Price: 1.00

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.84

MARKET PULSE: Keppel Corp, First REIT, Fortune REIT, Starhill Global REIT

25 Jan 2013

KEY IDEA Keppel Corporation: Results in line; proposes Keppel REIT div in specie Keppel Corporation (KEP) reported a 38.5% increase in revenue to S$13.96b and a 15.0% rise in net profit to S$2.24b in FY12. Excluding revaluations gains from the property segment, the group turned in net profit of S$1.9b, in line with our expectations. Operating margin in the O&M segment also remained stable at 12.9% in 4Q12. The group's O&M net order book stood at S$12.8b as at end Dec. Looking ahead, we are expecting new order wins of about S$5b in 2013. Meanwhile, KEP has proposed a distribution of 72.4 S cents/share for the year; this includes a dividend in specie of Keppel REIT units. After incorporating a higher fair value estimate of S$4.53 for Keppel Land and the proposed dividend in specie, our fair value estimate rises slightly from S$12.49 to S$12.68. Maintain BUY. (Low Pei Han) MORE REPORTS First REIT: On the lookout for more acquisitions First REIT (FREIT) reported 4Q12 results which were within our expectations. 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, and translates into a yield of 6.8%. Looking ahead, we expect FREIT to aggressively seek inorganic growth opportunities in Indonesia, its core market. We raise our fair value to S$1.00 (previously S$0.98) as we incorporate lower discount rate assumptions for FREIT's Indonesian assets in our model. But we maintain HOLDgiven FREIT's rich valuations. (Wong Teck Ching Andy) Fortune REIT: Excellent FY12 results as expected FRT's had a solid FY12, with revenue climbing 22.5% YoY to HK$1.11b and NPI rising 22.8% YoY to HK$788.3m. The two properties acquired on 17 Feb 2012 accounted for 12.4% of NPI growth. The remaining 10.4% of NPI growth from the original portfolio of 14 properties was from strong reversion and AEI results. Overall rental reversion was high at 19.8%, partially because of the low base in 2009 when the leases due to be renewed were signed. We understand from management that, since 2010 provides a higher base, 2013's rental reversions are likely to be in the mid-teen percentages. FY12 DPU of 23.35 HK cents was up 23.0% YoY, representing the highest growth trend in the REIT's 9-years history. The results were in line with ours and consensus expectations. (Sarah Ong) Starhill Global REIT: Acquires property in Australia Starhill Global REIT (SGREIT) yesterday announced the proposed acquisition of Plaza Arcade in Perth, Australia. The purchase consideration was at A$48.0m (~S$61.9m), translating to $2,476 psf NLA. Plaza Arcade is a freehold retail property located in the city centre (next to SGREIT's David Jones Building) and enjoys a high occupancy of 97.6%. According to management, the property has an NPI yield of 7.8% and is expected to contribute 0.08 S cents to SGREIT's DPU. SGREIT intends to fund the acquisition through a combination of cash raised via its rights issue in 2009 and borrowings. Gearing in effect is likely to increase from 31.2% to 32.0% upon completion of the transaction. We now place our Buy rating and S$0.84 fair value under review pending the release of its 4Q12 results on next Tuesday, 29 Jan. (Kevin Tan)

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NEWS HEADLINES - US stocks ended mixed on Thu, with the Dow gaining on positive economic data but the Nasdaq suffering losses, dragged down by heavyweight Apple, which slumped 12%. The Dow rose 0.3% to 13,825.33, the S&P 500 index ended flat at 1,494.82 and the Nasdaq slid 0.7% to 3,130.38. - The sudden burst of activity in the commercial property sector has caught the government's eye, and the Urban Redevelopment Authority said it may introduce measures to cool this sector if required, BT reported. - A unit of Chip Eng Seng Corp has placed the top bid for a mixed commercial and residential development site in Yishun. Its bid of S$212m, or S$794 per square foot per plot ratio, was the highest of 13 bids. - Rubber processor Halcyon Agri has launched its initial public offering for a Catalist listing. The firm is seeking to raise S$13.8m for the expansion of its Indonesian processing plants and general working capital. - Four directors of SNF Corp, which was the subject of an investigation in 2006 by the Commercial Affairs Department, and five other individuals have been charged with violating the Securities and Futures Act and the Companies Act. - Asia Power Corp and Moya Asia have each separately requested for a trading halt, pending the release of an announcement.