Today’s Focus
SREITs underpinned by lower long bond yield & stronger
2H performance - MCT, FCT, CRCT, FCOT & Magic
Goodpack – Possible takeover talks are progressing
Vard secures newbuild PSV contract from repeat customer
Our analyst says S-REIT prices might turn higher as expectations
of lower 10-year bond yields spark another re-rating. With
bond yields 30-40bps off its peaks back in Sept’13 and DBS
economists believing it could tighten further, we expect this to
be net positive for S-REIT prices in the immediate term. The
strong start to 1Q14 sets the stage to a stronger 2H. Trends
and data points observed over the 1Q14 results season have
led us to tweak our estimates and TPs upwards by c.3% and
c.2% respectively, on average. We project S-REITs to deliver a
FY14-15F DPU CAGR of 4.0%. Looking ahead, we believe
investors should focus on S-REITs with (i) good asset quality and
(ii) the ability to drive earnings at a sustainable rate and with
potential to deliver surprises. Our picks are MCT, FCT, CRCT,
FCOT and Magic. We have removed CDL HT and Suntec REIT
from out top picks given their strong relative outperfomance
YTD
Goodpack announced that discussions with 3rd party
pertaining to a possible take over have progressed since its
April 17th announcement and are still ongoing. Latest news
has it that KKR & Co is nearing a deal to buy Goodpack. The
U.S. private equity firm is reportedly working with at least 2
investment banks on a debt package for the purpose. Both
parties were believed to have been in discussions for nearly a
year, but talks have now progressed to advanced stage.
Vard has secured another newbuild contract for the design and
construction of one Platform Supply Vessel (PSV) for repeat
customer Carlotta Offshore. This is the third similar vessel
contract that Vard has secured from Carlotta Offshore. We
estimate the contract to worth about NOK500m, bringing
Vard's YTD win to NOK6bn, representing 43% of our FY14
assumption of NOK14bn. Order win momentum has been
strong this year, in line with recovery in OSV market as well as
continued strength in subsea construction vessels space. We
maintain our BUY call with TP of S$1.21. Improving earnings
execution on a sequential basis hereon will be the key catalyst.
US Indices Last Close Pts Chg % Chg
Dow Jones 16,511.9 20.5 0.1
S&P 1,885.1 7.2 0.4
NASDAQ 4,125.8 35.2 0.9
Regional Indices
ST Index 3,262.4 (0.2) (0.0)
ST Small Cap 542.1 0.3 0.1
Hang Seng 22,704.5 (8.4) (0.0)
HSCEI 9,915.3 (40.1) (0.4)
HSCCI 4,190.6 (15.9) (0.4)
KLCI 1,887.1 3.7 0.2
SET 1,410.6 5.4 0.4
JCI 5,015.0 (16.6) (0.3)
PCOMP 6,870.9 53.2 0.8
KOSPI 2,015.1 1.7 0.1
TWSE 8,899.9 11.4 0.1
Nikkei 14,006.4 (90.1) (0.6)
STI Index Performance
Singapore
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 2,324
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
19 May
Target Price
(S$)
ComfortDelgro Buy 2.310 2.30
Global Logistic Properties Buy 2.840 3.31
Keppel Corp Buy 10.560 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
19 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180 1.20
Nam Cheong Buy 0.365 0.47
Centurion Corporation Buy 0.735 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Singapore’s 1Q GDP expanded more than consensus
estimates as manufacturing grew even as the government
warned a tight labour market will constrain some industries.
GDP rose an annualized 2.3% (consensus 1.2%) q-o-q, the
trade ministry said in a statement today. That compares
with an April estimate of a 0.1% expansion. The Singapore
government reiterated its 2-4% GDP growth forecast this
year.
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