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Investors’ Corner (UOL Group, First REIT, Sembcorp Industries, CITIC Envirotech)
Investors' Corner | 05 November 2015
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By: Joey Ho
Articles (30) Profile

UOL Group
Price – $6.56
Target – $8.47

UOL Group (UOL) derives a significant 47% to 58% of its revenues from its retail, office and hotel segments which should continue delivering stable cashflows in the coming years. While we see headwinds in both the retail and office segments, we believe that UOL’s portfolio positioning and location of commercial properties mainly along the fringe areas of the Central Business District will see lower volatility in rents. Thus, operational performance is likely to remain stable. We expect the operational performance for the group’s hotels and residences in Singapore and Malaysia to be weak, but partially offset by a better performance from its hotels in Australia. We believe that deep value lies in the group’s portfolio of well-located hotels and serviced residences which are held on a historical cost basis. We estimate potential upside of more than $1b if these properties are valued on marked-to-market basis. Maintain BUY. DBS Vickers (2 Nov)

First Real Estate Investment Trust
Price – $1.24
Target – $1.49

Since Lippo Group chief executive officer’s comments regarding the group’s plans to “shift their 2 real estate investment trust (REIT) listings in Singapore to Indonesia”, First REIT’s share price has taken a 13% beating over 2 days, dropping from $1.32 to as low as $1.15 on 30 Oct-15. Currently, First REIT pays a 10% withholding tax on dividends, and the tax payment would be eliminated by a direct listing on Jakarta. Such a move could have several potential implications such as the re-negotiation of the lease terms for the 11 hospitals, all of which are under master agreements where base rents are paid in Singapore dollars, increased financing costs and country risks in Indonesia. While we list various hurdles involved in shifting the listing back to Indonesia, we do not discount the fact that impending policy changes in Indonesia could make it more attractive for REIT listings going forward. However, in light of the potential hurdles of the Indonesia shift, we do not think the probability of that happening is high. Maintain ACCUMULATE. Phillip Securities (30 Oct)

Sembcorp Industries
Price – $3.58
Target – $4.02

Sembcorp Industries (SCI) reported a 21.8% y-o-y drop in revenue and a 37.8% fall in net profit in 3Q15, such that 9M15 core net profit accounted for 72% of our full year recurring net profit estimate, generally in line with expectations. In Singapore, after relatively low power spreads in 1H15, 3Q15 finally saw a spike in spreads of about 15% to 20%. However, management is more circumspect for 4Q15, expecting the last quarter to see spreads that are similar to 1H15. SCI has been expanding its operations steadily over the years in both the utilities and urban development segments, and we are positive on the long-term prospects of the group, given its good track record and sensible strategy of pursuing emerging market growth. Maintain BUY. OCBC Investment (30 Oct)

CITIC Envirotech
Price – $1.40
Target – $1.80

CITIC Envirotech’s 2Q15 revenue of $70.9m fell 32.7% y-o-y, largely due to a 62.9% y-o-y decrease in engineering revenue, slightly offset by higher membrane sales (up 96.3% y-o-y) and treatment income (up 28.9% y-o-y). While 2Q15 core net profit fell 16.5% y-o-y, we are not overly concerned about near-term earnings volatility due to the nature of the engineering business. In addition to China’s 13th 5-year plan, CITIC (its key stakeholder) has also announced on 24 Jun-15 it would invest more than Rmb700b to support China’s “One Belt, One Road” initiative. Given its strong presence in industrial wastewater treatment and membrane technology, there will be more opportunities for the group to partake in water infrastructure development projects along the trade routes. On account of the gradual ramp-up via the route of joint ventures and public private partnerships, we have adjusted our annual capital expenditure assumptions from $300m to $250m, and lowered our FY15 to FY17 forecasts for engineering income and membrane sales. Maintain ADD. CIMB Securities (29 Oct)

Equipped with a bachelor in banking and finance, Joey covers the finance, technology and healthcare industry in Singapore.

Please click here for more information about this author.

UOL Group  7.470 +0.09 +1.22%   
Business: Co engages in property development, property investments, and hotel businesses. [FY17 Turnover] Ppty devt (52.2%), hotel ops (23.6%), ppty invs (14.9%), invs & others (9.3%).

Insight: Aug-18, 1H18 revenue jumped 72.9% to $1.3b attribu... Read More
First REIT  1.060 -0.010 -0.93%   
Business: Co is a healthcare real estate investment trust. [FY18 Geographical] Indonesia (96%), Singapore (3.4%), Korea (0.6%).

Insight: Apr-19, 1Q19 gross revenue was slightly down by 0.... Read More
Sembcorp Industries  2.180 +0.03 +1.40%   
Business: Primarily engaged in the production and supply of utilities services. [FY18 Turnover] Utilities (55.9%), marine (41.8%), others/corp (2.2%), urban development (0.1%).

Insight: May-19, 1Q19 revenue fell 10.1% to $2.5b due to lo... Read More

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