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Investors’ Corner (SMRT Corporation, Singapore Exchange, Ascott Residence Trust, CDL Hospitality Trusts)
Investors' Corner | 06 August 2012
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By: Jade Lee
Articles (97) Profile

SMRT Corporation
Price – $1.62
Target – $1.30

SMRT’s 1Q13 revenue of $275.2m accounts for 25.1% of our full-year forecast. Excluding exceptional items for this period, net profit would have been $32m (down 8.2% y-o-y). Cost pressure continues to persist while core operations remained weak. About two-thirds of the $900m asset renewal plan are infrastructure related and management is optimistic that the government would lend support for infrastructure-related expenditure. However, SMRT guided that the grants and funding would come in after the asset has been bought and paid for, meaning that SMRT’s cash position is likely to remain constrained. SMRT’s capital expenditure (capex) requirements for FY13 should exceed its operating cash flow of some $300m a year. Management indicated that it has a medium-term note programme in place with $850m untapped. We expect SMRT to shift from a net cash position in the past 3 years to a net gearing of 0.7x over the next 3 years to fund its capital expenditure requirements. The weakened cash position could also have a negative impact on our dividend payout assumption of 80%. We maintain SMRT’s rating at SELL.
– UOB-Kay Hian (30 Jul)

Singapore Exchange
Price – $6.65
Target – $5.81

We expect little change to FY13 consensus given the key catalyst remains securities turnover, business models and strategic issues. In an effort to enhance connectivity, SGX has signed a cross-trading agreement with London Stock Exchange (LSE) and entered into a partnership with the Australian Securities Exchange to establish a presence in each other’s co-location data centre. SGX also remains open to more collaboration should the right products or opportunities arise but reiterated it is not in merger talks with LSE. We view such a deal would be contrary to SGX’s goal of capturing Asian growth; concerns would be 1) price multiple, 2) EPS dilution, gearing, and dividends, 3) size, type, timeline of business synergies, 4) P/E de-rating. We acknowledge several positives, including new revenue drivers and deepening of existing ones, and roughly 90% of annual earnings have been distributed as dividends. We rate SGX SELL.
– Citigroup (28 Jul)

Ascott Residence Trust
Price – $1.195
Target – $1.37

Ascott Residence Trust’s (ART) distribution per unit (DPU), revenue and gross profit exceeded our forecasts by 19%, 6% and 4% respectively. Notably, the markets where gross profit exceeded our forecast the most were the UK and China (28% and 35% respectively). Overall, ART’s diversification paid off in 2Q12. Ahead of the London Olympics, its UK portfolio was running at an occupancy rate of 85%, with average daily rates 25% above those of last year. ART enjoyed a portfolio revaluation gain of $127.9m, reflecting the sale consideration of $359m for Somerset Grand Cairnhill Singapore. We reiterate our BUY rating as we believe ART remains attractively valued, trading at 2012-14E DPU yields of 7.2-7.8%, compared with the S-REIT sector average of 6.3-6.9%, on our forecasts. It also trades at a discount to its book value per share of $1.42 as at 30 Jun-12. The major risk to our positive call is a sudden deterioration in the global macroeconomic outlook or renewed Eurozone concerns.
– Daiwa Securities Group (27 Jul)

CDL Hospitality Trusts
Price – $2.06
Target – $1.94

CDL Hospitality Trusts’ (CDLHT) 2Q12 revenue and net property income was lower by 7.7% and 8.4% respectively compared to our forecast. DPU of $0.0292 was 3.6% below our forecast. For 2Q12, the revenue per available room (RevPAR) growth was 5.9% y-o-y, a deceleration from 9.3% y-o-y for 1Q12. Although the government hotel statistics reported RevPAR growth of over 7% y-o-y for April and May, management believes the official data has been distorted by the performance of the integrated resorts. Moreover, management attributed the weak y-o-y revenue growth at some of its hotels to strong F&B sales a year ago. The most significant change is that bookings are now occurring later and later, which limits visibility and requires a different pricing strategy. CDLHT’s valuations no longer look attractive. We cut our 2012-14E DPU forecasts by 4.6-9.6% after lowering our 2012-14E RevPAR assumptions. We downgrade CDLHT’s rating to UNDERPERFORM. The major risk to our negative call would be a robust hotel sector performance for 2H12, bucking the current trend of decelerating RevPAR growth.
– Daiwa Securities Group (27 Jul)

Jade manages and oversees a portfolio of stocks which are mainly focused on the mining and property sectors at Shares Investment.

Please click here for more information about this author.

Singapore Exchange  8.470 -0.06 -0.70%   
Business: [FY18 Turnover] Equities & fixed income (48.2%), derivatives (40.2%), mkt data & connectivity (11.6%).

Insight: Jan-19, 1H19 operating revenue increased 5.7% to $... Read More
Ascott Residence Trust  1.310 -- --   
Business: REIT invests in income-producing real estate assets which are used or predominantly used, as serviced residences, rental housing properties and other hospitality assets.

Insight: Apr-19, 1Q19 revenue increased 3% due to stronger ... Read More
CDL Hospitality Trusts  1.640 +0.010 +0.61%   
Business: A stapled group comprising CDL Hospitality REIT and CDL Hospitality Business Trust.

Insight: Apr-19, 1Q19 gross revenue and NPI dropped 10.6% a... Read More

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