OCBC Report 25 Apr 14

KEY IDEA

Suntec REIT: Pure operational boost in 1Q14
Suntec REIT posted a strong recovery in its 1Q14 results, with NPI and distributable income rising 42.7% and 7.0% YoY to S$43.8m and S$50.9m respectively. The increase was due mainly to the opening of Suntec City Phase 1 and contribution from its recent acquisition in Sydney. Over the quarter, Suntec REIT continued to make significant progress on its leasing activities. On its capital management, we note that it has also signed a S$800m five-year unsecured loan facility to refinance the outstanding balance of its S$1.1b loan facility due in 2014 and 2015. Together with the recent private placement to pre-pay its S$350m debt due in 2015, Suntec REIT no longer has any refinancing needs till 2016. We maintain BUY with unchanged S$1.85 fair value on Suntec REIT. (Kevin Tan)


MORE REPORTS

Sheng Siong Group: Margin improvement drives 1Q14 results
Sheng Siong Group’s (SSG) 1Q14 revenue increased by 5.7% YoY to S$190m, forming 26.3% of our FY14 forecast. This is within expectations as 1Q results are typically stronger due to Chinese New Year. As a result of better gross profit (GP) margin, 1Q14 operating profit increased proportionally higher by 20.7% to S$12.5m (vs. 5.7% YoY increase in revenue), forming 29.0% of our FY14 forecast. GP margin improved from 22.5% in 1Q13 to 23.8% in 1Q14, which we identify as the key driver for the significant YoY increase in operating profit as COGS made up 82.1% of operating costs in the quarter. We see limited downside to the share price at the last close of S$0.60 as FY14F dividend yield at 4.8% is expected to lend strong support. Maintain BUY with fair value estimate of S$0.68. (Yap Kim Leng)

Roxy-Pacific Holdings: Acquiring commercial asset in Sydney Australia
Roxy announced yesterday that it has acquired, for AUD90.2m, a property located at 59 Goulburn Street, Sydney, NSW, Australia. This is located in the central CBD opposite the World Square development and is also adjacent to Sydney’s Chinatown. The freehold asset has 18.9k and 546 sqm of commercial and retail net lettable area, respectively, with 126 car park spaces. The current occupancy stands at 89%, with a passing net income of S$6.6m which translates to a NPI yield of 7.3% - a reasonable price in our view. Given continued uncertainties in the Singapore housing space, we like that management is growing its recurring income streams, in addition to recurring contributions from the Grand Mercure Roxy hotel asset in Singapore, and diversifying its portfolio geographically. Maintain HOLD with an unchanged fair value estimate of S$0.61 per share. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- The US stock market finished Thu generally higher as positive earnings and stronger-than-expected data outweighed worries over military escalation near Ukrainian border.

- Businesses in Singapore may not face more months of sharp increases in industrial prices and rents as a huge supply of completed industrial space comes onstream from now until 2016.

- Shares of SMRT Corp yesterday rocketed up 19 cents, or 18.5%, to a four-month high of S$1.215 on a high volume of 14.6m shares, prompting a query from SGX.

- Thakral Corporation has unveiled new growth plans across its divisions in the hopes of bringing positive returns to shareholders.

- A tough macro environment in Singapore has led Hong Leong Finance to post a 5.4% decline in net profit to S$14.43m for 1Q14.

- Temasek Holdings' offer for Olam International has been declared unconditional, as the level of acceptances crossed the 50% mark of Olam's maximum potential share capital.

- Negotiations are under way for a potential sale of Equity Plaza, a landmark quadrant-shaped office block beside Republic Plaza in the Raffles Place financial district.

- The outgoing chairman of Asiasons Capital has sold his one-third stake in two vehicles through which he jointly controlled a deemed 49.3% stake in the investment firm, leaving him with just a 3.8% direct interest.