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Investors’ Corner (Ascendas REIT, SIA Engrg, Keppel Corp, ARA Asset Mgt)
Investors' Corner | 11 October 2013
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By: Shane Goh
Articles (99) Profile

Ascendas REIT
Price – $2.27
Target – $2.45
Ascendas REIT (A-REIT) is likely to benefit from incremental rental income from The Galen, continued positive rental reversions and the completion of its various investment projects. The conclusion of the asset enhancement initiatives at 5 of its portfolio properties in 2H13, coupled with the recent acquisition of A-REIT City@Jinqiao, China, and temporary occupation permit for Nexus@one-north obtained, is likely to boost A-REIT’s rental income in the months ahead. While the industrial property market was relatively static in 3Q13, the demand in the high-tech and business park segments has continued to hold up well. For 2013 and 2014, DTZ projects the business park rental rates to increase by 3% and 4% respectively, placing A-REIT (with 62% of its asset value in these sub-markets) in a better position to shield off any fatigue in the industrial rental market. At an aggregate leverage of 28.6% as at 30 Jun-13, A-REIT has one of the strongest financial positions within the industrial REIT space. With approximately 68.1% of its interest rates fixed/hedged, the potential impact of rising interest rates is limited. Maintain BUY. OCBC Investment (8 Oct)

SIA Engineering
Price – $4.90
Target – $6.19
VietJetAir’s recent decision to expand its fleet by up to an additional 100 Airbus A320s aircraft means there is scope for SIA Engineering (SIAEC) to extend the service contract under its Fleet Management Programme to the future fleet, given that VietJetAir is an existing customer. Total landings and take-offs at Changi Airport in Aug-13 was up 8.2% y-o-y, driven by a sustained uptrend in traffic growth momentum over the past few months. Traffic growth at the airport will remain highly visible as Singapore aims to double its terminal handling capacity by mid-2020s. Over the past 2 years, we note that SIAEC has been hoarding cash and believe that it should increase its dividend distribution to shareholders. We think that SIAEC should return the excess cash to its parent company, which can then be redeployed to fund future capital expenditure as well as conduct a review of its conservative balance sheet and consider a more aggressive capital structure. Reiterate BUY. Maybank Kim Eng (7 Oct)

Keppel Corporation
Price – $10.50
Target – $12.10
Keppel Corporation has signed a memorandum of understanding with Mexico’s national oil company, Pemex to jointly develop, own and operate a 35ha yard facility in the port of Altamira, Mexico, which is connected to 125 ports around the world through several shipping lines. The proposed yard will help to further develop Mexico’s offshore hydrocarbon potential, meeting both the growing needs of the local oil and gas industry and the international clientele operating in the Gulf of Mexico. The total yard cost will be US$400m, which will be used to support the construction of the order for 6 jack-up rigs secured from Pemex. Mexican orders currently account for about 15% of Keppel’s $14b estimated order book but could be boosted to $3.6b or 27% after the 6 jack-ups are in by 2014. Execution risk appears to be low given that it is a state-owned project and Keppel has experience in managing Mexican workers in its Brownsville yard in US. Reiterate OUTPERFORM. CIMB Securities (6 Oct)

ARA Asset Management
Price – $1.69
Target – $1.89
Management began the year with an asset under management (AUM) growth target of $2b in 2013 and initiatives are underway to meet that target. With combined AUM of $16.8b, ARA Asset Management offers an attractive proxy for REITs, without the interest rate risk, as fees derived from its REITs are resilient, transparent and growing. In addition to contributing to its ever-growing base of recurring income, fees from the proposed acquisition of Kinswood Ginza Plaza by Fortune REIT will boost 2H13’s earnings. ARA private funds continue to offer strong growth potential as the recently upsized China Investment Partners Fund, from US$500m to US830m, will contribute positively to earnings growth in 3Q13 while ARA plans to start marketing activities on its Asia Dragon Fund 3 in 2014 after deploying most of its Asia Dragon Fund 2’s capital. Backed by a strong cash flow-generating and scalable business that is growing steadily, we believe that ARA offers an attractive investment proposition at current levels. Upgrade to BUY.  DBS Vickers (4 Oct)

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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Ascendas REIT  3.000 -0.03 -0.99%   
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
SIA Engineering Co  2.770 -0.02 -0.72%   
Business: A leading aircraft maintenance, repair and overhaul (MRO) company providing total maintenance solutions to a client base of international airlines. [FY18 Turnover] Airframe and Line Maintenance (97.5%), Engine and Component (2.5%).

Insight: May-19, FY19 revenue was 6.8% lower at $1b largely... Read More
Keppel Corp  6.490 -0.08 -1.22%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More

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