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Investors’ Corner
Investors' Corner | 28 October 2008
Related stocks:

Ascendas REIT
Price – $1.51 Target – $2.10

Ascendas REIT’s (A-Reit) 2Q08 results were within expectations. Gross revenues and NPI grew 21% y-o-y to $97.3m and $72.6m respectively. While we expect outlook to turn challenging moving forward, A-Reit should still be able to ride out these turbulent times given a long lease expiry portfolio of 5.5 years, of which 49% are Sale-Lease Back Buildings that were mostly signed on as long-term leases. While investors remain concern of the cost of re-financing, rises in interest rates will only affect the remaining 23% of debt. As of 30 Sept’08, 76.7% of A-Reit’s debt is fixed for the next 3.9 years. Our cost of debt assumptions raises debt cost by 50 bps in FY10, reducing our DPU estimates by 0.19 cents in FY10. Our rental & occupancy rates takes into account of a 10% cut in rentals. Our target is pegged at parity to our trough RNAV estimate. Based on price of $1.50, the stock is trading at average 10% FY09-11 DPU yield. Maintain BUY. – DBS Vickers (20 Oct)

Wilmar Int’l
Price – $2.06 Target – $3.50

Wilmar Int’l’s (WL) recent falls were mainly due to a CPO price correction, largely sentiment driven and should be temporary. On average, we have cut top-line estimates by 26% for FY2008-10 due to lower CPO and soybean OMV price; operating margin to average 6%, given favorable developments in the Chinese food and animal feed industries. WL’s projected operating cash flow of US$1,296m and US$359m of FCF during FY2008-10 means that it should be able to grow earnings during FY2009-10 without additional debt financing. Our revised target is 40% lower, reflecting increased investor risk aversion and a gradual tightening of the global CPO stock-to-usage ratio. The valuation is undemanding, considering that the current FY2009/10 P/E of 11x/9x is significantly below the stock’s mid-cycle P/E of 16x, based on its 1.5-year forward P/E band, which spans 12x to 19x. Maintain OVERWEIGHT. – Morgan Stanley (20 Oct)

City Developments
Price – $7.28 Target – $7.15

We expect the Singapore property market downturn to accelerate as a recession hits in 2009 but City Developments should be positioned to ride out the cycle. Gearing is low at 0.31x (on adj. book), and is forecast to fall to <0.2x as development projects unwind and on $478m of divestment proceeds. We trimmed FY08-10 core profit by 10-23% to reflect slower take-up for residential projects and a lower contribution from M&C, cutting hotel earnings by 16% (of 1H attributable to pretax) to reflect a global recession. Earnings and cash flow should be more resilient than average, given a pre-sales of $6.5b to be booked and recurrent earnings from rental properties. Revaluation deficits are unlikely and the land bank was mostly acquired at reasonable prices. Our target is set at a 35% discount to 2009E RNAV of $11.00, in line with the average discounts during the 1998/2001 crisis years. This also reflects GBP depreciation, lower commercial values and lower ASP. Downgrade to HOLD. – Deutsche Bank (21 Oct)

Suntec REIT
Price – $0.82 Target – $1.23

Suntec REIT’s (Suntec) price has de-rated sharply and is now below its IPO price of $1. We believe that the office sector faces the highest risk. 2Q08 office take-up was only 0.1msf (-62% q-o-q) and we expect grade A rents to sharply correct to $9psf from the current $18psf. We have modeled in a decline in its office rents from the current $11-13psf to $8psf by 2012 and lower our FY08-10 DPU by 2-16%. Save for the bridge loan due in Oct 08, no other major refinancing is due for FY08 and FY09. Gearing remains conservative at 31.4%. Our TP is set at parity to our 10-year DDM with cost of equity of 8.4% (3.2% risk free rate, 4% equity risk premium, 1.3x beta). The terminal period assumes 1% growth but at a lower 90% payout ratio to account for longer-term capex. We have fully diluted the number of units to include the deferred units. Suntec is now trading at a FY08 yield of 12% implying a generous 909bps spread over the 10-year government bond. BUY. – Deutsche Bank (21 Oct)

City Developments  9.870 +0.04 +0.41%   
Business: Co is an international property & hotel conglomerate. [FY18 Turnover] Property development (48.4%), hotel operations (39.8%), rental properties (8.5%), others (3.3%).

Insight: May-19, 1Q19 decreased 29.5% to $746.2m compared t... Read More
Wilmar Int'l  3.740 -0.06 -1.58%   
Business: Co's integrated agribusiness model encompasses the entire value chain of the agricultural commodity processing biz, from origination and processing to branding, merchandising and distribution of a wide range of agricultural pdts.

Insight: May-19, 1Q19 revenue fell 6.2% to US$10.4b driven ... Read More
Ascendas REIT  3.130 +0.02 +0.64%   
Business: Co invests in the real estate markets of Singapore and Australia.

Insight: Apr-19, FY19 gross revenue and NPI inched up 2.8% ... Read More
Suntec REIT  1.930 -- --   
Business: Real Estate Invs Trust. Ppties incl Suntec Office Towers, Suntec City Mall & Park Mall. [FY18 Turnover] Office (46.8%), Retail (34%), Others (Ad space, car park income , convention & exhibits) (19.2%).

Insight: Jan-19, FY18 gross revenue rose 2.6% to $363.5m du... Read More

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