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Ideas: Cambridge Industrial Trust & Keppel Corporation
Tradeable, Tradeable Ideas | 26 December 2013
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By: Justin Harper
Articles (23) Profile

While the Santa rally that traditionally happens to world stock markets largely passed Singapore by this year, it did enjoy a last-minute snowfall. On the lead-up to the Christmas break, the STI enjoyed a four-day winning streak which has helped it cut its losses to just 1.3 percent for 2013.

The upbeat mood was sparked after the Fed finally announced it would be scaling back its asset-buying programme, designed to stimulate the US economy. Since then, the local market has gained slightly more than 2 percent.

The STI could still manage to scrape back into the black during the last four trading days of 2013.

New lease of life for Cambridge?
Cambridge Industrial Trust (CIT) is in the news having put in a bid for a six-storey warehouse at 11, Chang Charn Road in Bukit Merah for $32 million. This would give it the chance to boost returns by raising occupancy and rental rates.

CIMB estimates this will add 0.8 percent to CIT’s FY14 dividend. The acquisition is expected to be fully funded with cash reserves and existing debt facilities.

CIT had also previously announced a 5.9 percent and 0.7 percent year-on-year rise in revenues and net property income. The higher performance was mainly due to the contribution of four new properties and development/asset enhancement projects.

These more than offset the income vacuum from the recent sale of four properties which were still contributing to the topline in 3Q13. CIT has a healthy occupancy rate of about 97 percent across its portfolio and saw a rise in distributable income of 6 percent year-on-year to $15.4 million.

The trust has also paid down $108m of an existing loan, funded by its sale proceeds. As a result, gearing ratio fell to about 28 percent, as of end 3Q13.

DBS Vickers says CIT continues to offer a steady, resilient and growing growth and returns of about 5 percent to 6 percent are ‘’transparent and easily achievable.’’ The average expected uplift among brokers is 13 percent.

Keppel continues to cruise ahead
Oil-rig builder Keppel Corp announced that it was powering ahead with the building of its new differentiated “CAN DO” drillship which is due to be completed in 2016.

This could imply that it has received strong positive feedback and enquiries from major oil companies across the globe. One of the key differentiators of the new Keppel vessel is its larger deck space which will aid “production drilling” alongside “exploration drilling”.

This will also allow the drillship to be used for “development and completion drilling” too, increasing its attractiveness.

Macquarie Research expects orders to come in during early 2014 from major oil companies/contractors, which could put a dent in the Koreans’ dominance of the segment. The vessel may be cheaper given less steel will be used while labour costs are lower in Singapore.

The average share price uplift expected among analysts is 12 percent.

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Justin Harper is an experienced financial journalist who previously worked on the business desks of the Daily Mail, The Telegraph and Financial Times Business in London.

Please click here for more information about this author.

ESR-REIT  0.535 -- --   
Business: REIT established with the objective of investing in real estate assets used mainly for industrial purposes.

Insight: Jan-19, FY18 gross revenue rose 43% and NPI rose 4... Read More
Keppel Corp  6.040 -0.04 -0.66%   
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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