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Investors’ Corner (Soilbuild REIT, OCBC, Keppel Land, NOL)
Investors' Corner | 07 November 2013
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By: Peter Ng
Articles (81) Profile

Soilbuild Business Space REIT
Price – $0.77
Target – $0.82
Soilbuild Business Space REIT’s 3Q13 net property income came in at $6.9m, 2% higher than its prospectus forecast of $6.8m due to higher income contribution and lower property expenses. Distributable income of $6.1m was also 3.1% above the prospectus forecasts. As a result, distribution per unit (DPU) stood at $0.0076, 3% above its prospectus forecast. Soilbuild has fully addressed its lease expiries for the year by renewing 3 leases at rental rates 7.9% higher than the preceding average passing rents. Due to the influx of industrial space supply, the industrial property market may potentially face pressures in rental and occupancy rates. Nevertheless, as only 17.3% of Soilbuild’s portfolio net lettable area is due for renewal in 2014, its financial performance is likely to stay firm. Soilbuild’s aggregate leverage and all-in interest costs are currently robust at 29.4% and 3.1% respectively, where 75% of its debts are also hedged into fixed rates. This provides Soilbuild with ample firepower for future acquisitions, while limiting its exposure to interest rate volatility. Maintain BUY. OCBC Investment (4 Nov)

Oversea-Chinese Banking Corporation
Price – $10.40
Target – $12.30
Oversea-Chinese Banking Corporation saw a rebound in insurance contribution for its earnings in 3Q13 that was above expectations as non-interest income (NII) improved q-o-q, mainly from Great Eastern Holdings’ non-par fund performance. Net interest margin (NIM) remained stable and within expectations at 1.6%, while loans grew 2% q-o-q and 16% y-o-y, largely driven by its non-Singapore dollar portfolio. With a corresponding growth in deposits, loan-to-deposit ratio stayed below 90%. Subsequently, there was also a slight uptick in non-performing loans which came mainly from its Malaysian steel industry portfolio. Elsewhere, capital ratios were lower due to the redemption of its $1b preference shares, which offset lower risk weighted assets. Going into 2014, loan growth is expected at high single-digit with a potential NIM uptick, while credit cost and asset quality should remain stable. Furthermore, regional business remains a focus and NII drivers should continue to support growth. Maintain BUY. DBS Vickers (1 Nov)

Keppel Land
Price – $3.72
Target – $4.64
Valuation of Keppel Land appears to have been overly discounted by as much as 15%, due to the slow initial development progress of Tianjin Eco-City. However, this has prompted both the governments of China and Singapore to introduce favourable policies in order to promote the project, the latest being the proposed study for cross-border renminbi flow between Singapore and the eco-city. Coupled with discounted prices, incentives may have contributed to the sales pick-up at Seasons Park Phase 1 in 9M13. Keppel also has the benefit of having acquired its land bank in Tianjin Eco-City at a relatively low cost, which represents a cheap call option on the project’s longer-term prospects. In sum, favourable policies such as lower criteria to obtain residential status and income tax rebates for specialised skilled labour introduced in 2012, tied up with greater promotion by both governments could provide further catalysts for the counter. Reiterate BUY. Nomura (30 Oct)

Neptune Orient Lines
Price – $1.07
Target – $1.35
Neptune Orient Lines’ (NOL) 3Q13 net profit came in at US$20m and was below our and consensus expectations of around US$50m. The key driver was weaker than expected volume, which fell 5% y-o-y. Liner performance rebounded from losses in 1H13 to a core EBIT profit of US$3m, mainly attributable to a 6% y-o-y decline in cost of sales. However, overall liner conditions remain weak with falling 3Q13 revenue and volume, driven by a weaker intra-Asia market. The logistics division reported net revenue growth of 2% in 3Q13. The segment saw strong growth in the international services segment of 8% y-o-y, offsetting a weak contract logistics segment. With over 14 new vessels delivered this year and another 10 more scheduled in 2014, we believe NOL’s fleet has become and will continue to be more cost effective as the average size of NOL’s vessels has increased. Maintain OUTPERFORM. Macquarie Research (30 Oct)

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

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Soilbuild Business Space REIT  0.530 -0.005 -0.93%   
Business: S'pore real estate investment trust with a focus on biz space ppties.

Insight: Jan-19, FY18 gross revenue fell marginally by 1.2%... Read More
Oversea-Chinese Banking Corp  10.860 +0.08 +0.74%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More

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