OCBC Report 30 Jun 14

KEY IDEA Singapore REITs: Performing a reality check Summary: Our assessment of the recent performance of S-REITs show that their fundamentals have generally remained sound, and S-REITs continue to benefit from their past investments and higher secured rentals within their existing portfolios. On the capital management front, S-REITs have again stepped up their efforts to repay/refinance their borrowings ahead of their maturities and over a longer term, as well as hedge their interest rate exposure in anticipation of the potential hike in interest rates. We are retaining Suntec REIT [BUY, S$1.85 FV] and Starhill Global REIT [BUY, S$0.90 FV] as our sector picks. However, we now replace CapitaCommercial Trust with Frasers Centrepoint Trust [BUY, S$2.08 FV] as our preferred pick due to the former’s strong unit price run-up. Retain NEUTRAL on broader S-REITs sector. (S-REITs Team)

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NEWS HEADLINES - A late-afternoon rally on Wall Street led by tech and small companies sent US stocks into positive territory on Fri. - The Singapore government will commit ~S$4b in financial support over five years to the revamped national health insurance scheme that will offer lifelong coverage and better protection. - OCBC said all the pre-conditions to an agreement to buy Hong Kong's Wing Hang Bank Ltd had been satisfied. - SMJ International Holdings said on Fri that its IPO has been fully subscribed or purchased, with total proceeds of about S$5.67m. - The trading of shares of IPS Securex Holdings Limited, a provider of security products and integrated security solutions, starts on Mon after all its placement units were subscribed. - ICP is buying a 20% stake in Australian coal exploration company Tiaro Coal for A$3.05m, and selling off its 17% in another Australian gold exploration company for A$2m. - Jackspeed Corporation is selling its leasehold factory in Loyang Drive for S$6.5m under its ongoing efforts to redeploy capital more efficiently. - Vibrant Group, formerly known as Freight Links Express, recorded an 11.2% rise in full-year net profit on higher revenue.