12 Nov 2013 ~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day :Part of growing up is just taking what you learn from that and moving on and not taking it to heart.
- BEVERLEY MITCHELL
Singapore: The Day AheadSINGAPORE DAYBOOK :Closer scrutiny of Reits, trusts IPOs if rates rise. But market players see current window for more of such deals in upcoming IPO pipeline. [SINGAPORE] Real estate and business trust offerings may be a harder sell in the coming months, as the market shifts towards expectations of higher interest rates.
While there is still an appetite for the initial public offerings (IPOs) of real estate investment trusts (Reits) and business trusts, interest will become more selective given the overhang of a future reduction in US monetary stimulus.
The quality of sponsors and assets and the growth profile of the trust will be more closely scrutinised, said investment bankers.
"There's no denying the fact that we are in a new environment, and risk-free rates are going to go up," said Edward Lee, Deutsche Bank's head of South-east Asia equity capital market.
(Source: The Business Times)
MARKET SCOOP
Metro's 2QFY14 net profit up 54 per cent
Yongnam makes a $3.4 million loss in Q3
Super Group Q3 profit down 17%
Sim Lian Q1 net profit falls 26%
Centurion Q3 profit surges 30%
Vicom's profit rises 6.1% to $6.8m
QAF net profit down 11% to S$3.8m
UOB selling perps, 4.9% indicative
MAS casts eyes on F&N'sspat with bondholders
(Source: The Business Times)
UOB KAY HIAN says ...
OVERSEA UNION ENTERPRISE | BUY | TP: 3.12
Revenue was up 16.7% yoy to S$119m in 3Q13 due to higher revenue recognition from the sale of units at Twin Peaks and revenue contribution from newly-acquired US Bank Tower (USBT)
OUE also recognised a one-off loss of S$4.8m from the sale of Meritus Shankou and Meritus Mandarin Haikou, and a fair value loss of S$72m on the revaluation of OUE Bayfront
Excluding the exceptional items, core 9M13 net profit of S$49.8m came in below our expectations (65% of full-year's), mainly due to lower-than-expected contribution from OUE Downtown (former 6 Shenton), higher finance expenses following the acquisition of US Bank Tower (+26% yoy to S$25.3m), higher administrative expenses due to the listing of OUE Hospitality Trust and a disposal loss on the sale of China hotels
The hospitality division bucked the weakness in the hotel sector, with Revpar for Mandarin Orchard Singapore up 11% yoy to S$280 while Revpar for Crowne Plaza Changi Airport (CPCA) also rose 8% yoy to S$263 due to a shift away from wholesalers to corporate and transient bookings
The hospitality division accounted for 50% of total revenue (3Q12: 57%) followed by the investment property segment at 33%
Net gearing ratio stood at 0.47x, while NAV/share was down 2% yoy at S$3.43
Potential listing of OUE Commercial Trust is the next key catalyst in 2014 with assets including OUE Bayfront (S$1.08b) and Lippo Plaza in Shanghai
Ms Tan Shu Lin, the former head of Capital Markets at Ascendas REIT, will be the CEO of the proposed OUE Commercial Trust
Management has reiterated that a successful listing could mean yet another similar special dividend, such as that for OUE Hospitality REIT (10- 20 cents/share) and a vehicle to realise value for its other commercial properties in Singapore (OUE Downtown and One Raffles Place)
Asset enhancement plans for US Bank Tower are being finalised, with the proposed development of restaurants and an observation deck on the top four storeys, serviced apartments and hotels, a retail podium and a refurbished lobby with separate entrances for different facilities
Diversification into Indonesian residential investment is a possibility with low capital requirements (US$40m) and potential for collaboration with OUE Hospitality Trust (OUEHT) to jointly acquire plots of land in Jakarta
Other investment destinations include California and New York in the US, and Japan
Look ahead to asset enhancements at ORP retail podium due to complete by 1Q14 (with H&M as an anchor tenant), while work at the retail podium at OUE Downtown (150,000sf of retail space) is underway (S$140m capex, estimated completion: 2016)
The potential conversion of 163,000sf of space at OUE Downtown into serviced apartments (163,000sf, S$50m capex) and the construction of a new annex at Crowne Plaza (S$70m) is pending final approval from the authorities
Maintain BUY with a lower target price of S$3.12 (from S$3.63), pegged at a 30% discount (from 20%) to our RNAV of S$4.55/share
The increased discount factors in the higher risk associated with overseas exposure
OUE is trading at a deep 48% discount to our RNAV
OCBC Securities says ...
FAR EAST HOSPITALITY TRUST | HOLD | TP: S$0.92
Far East Hospitality Trust (FEHT) announced 3Q13 results that were in line with ours and the street's expectations
9M13 distribution per stapled security of 4.22 S cents formed 74% of ours and 73% of the street's prior FY13 forecasts
Gross revenue for was S$31.5m or 9.4% lower than management's forecast (based on IPO prospectus and the circular for the acquisition of Rendezvous)
Net property income was 9.4% below forecast at S$28.5m
Income available for distribution was S$24.2m or 7.4% below forecast. 3Q13 distribution per stapled security was 1.41 S cents or 7.8% lower than forecast
However, we emphasize that the results were within expectations for the market
RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug), was S$167.1, 10.2% below forecast and down 2.7% YoY mostly due to price competition in the sector
Average room rates were lower by 1.9% YoY, while occupancy was ~0.7 ppt softer YoY at 86.7%
FEHT's mid-tier hotels saw RevPAR decline 0.4% YoY, while RevPAR for its upscale hotels fell 10.1%, affected by lower corporate spending
Management anticipates a subdued 4Q13, although RevPAR could show moderate growth in 2014
Rendezvous property is tracking in line with its expectations
FEHT's hotels continued to perform relatively well compared to the industry
Mid-tier and upscale categories in industry-level data demonstrated declines of ~2% and ~12% respectively
The serviced residences registered RevPAU that was higher by 2.3% YoY at S$227.1, although it was 0.6% lower than forecast
Management is seeing increased competition for stays of 6-months or longer, and is warns that competition could increase further next year
Management has plans for ~10% of their room inventory to undergo AEI starting from next year, and will spend ~S$10m in capital expenditure
This is also in line with our expectations
We maintain a FV of S$0.92 and HOLD rating on FEHT
We forecast a FY13 yield of 6.3%
UBS Securities says...
VENTURE CORPORATION | NEUTRAL | TP: S$7.50
3Q13 results tracking behind Venture reported higher Q3 gross margin of 23.9% against UBS-e of 23.2% partly benefiting from better product mix
Nonetheless, Venture's EBIT margin at 5.8% was lower than UBS-e of 6.1% impacted by higher R&D expenses
Venture's net income at S$35.1m was 12% lower than UBS-e despite the benefit of lower tax in the quarter
Venture's working capital increased by ~S$40m QoQ partly due to higher inventories
For the first three quarters, Venture generated cash from operations of S$92m and the total net cash position was ~S$206m in 3Q13 (vs. S$264m in 3Q12)
Oclaro transition to have limited impact Venture clarified that the ongoing transition at Oclaro (recently disposed its laser diode business in Zurich subsidiary to II-VI) will have limited impact
There could be some downside if II-VI takes some of potential businesses from Oclaro, however, Venture continues to focus on Shenzhen business that it acquired from Oclaro besides potential opportunity with Opnext (under discussions) which could mitigate the impact
Valuation: Maintain Neutral; adjust price target to S$7.5 We adjust '13E/14E/15E EPS to S$0.47/0.55/0.57 from S$0.50/0.56/0.59 factoring in the slightly weaker 3Q13 result and the Q4 revisions
We adjust our price target to S$7.5 from S$7.6
Our price target is DCF-based using UBS's VCAM tool (WACC of 7.90%)
We maintain our Neutral rating on Venture as we believe the stock is fairly valued and should be able to pay out consistent cash dividend
Venture's PT implies a PE of ~14x against a 5-year historical PE of 14.2x |
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