Brokers' Digest April 23 2018

CSE Global (April 18: 42.5 cents)

• Maintain Hold.  New major shareholder Serba Dinamik (SDH) heralds new contract opportunities, but more details are needed for further earnings rerating
• SDH’s main presence is in Malaysia and the MiddleEast and it provides engineering solutions mainly to downstream oil and gas and power generation industries
• We lift our price target to 44 cents, now based on 13.5x CY2019F PER versus 12x previously

Keppel DC REIT (April 18: $1.43)

• Maintain Hold.  Keppel DC REIT (KDCREIT) reported its 1Q2018 results, which met our expectations.
• Given limited debt headroom, coupled with its end-2018 asset under management target of $2 billion and long-term aggregate leverage target of 30%, we believe there are potential dilution risks in the near future
• We do not find current valuations appealing, with a FY2018F distribution yield of 5.3% and P/BV ratio of 1.5x, as at closing price of $1.46 on April 16
• Fair value estimate of $1.50

Keppel Infrastructure Trust (April 18: 54.5 cents)

• Maintain Buy.  Keppel Infrastructure Trust (KIT) maintained its record of steady DPU of 0.93 cent in 1Q2018, as expected
• Share price dampened, owing to negative news flow from the Basslink asset.  We believe KIT is sufficiently ring-fenced from possible legal penalties at Basslink
• Based on our dividend discount model-based valuation methodology, we derive a valuation of 60 cents for KIT

Kimly (April 18: 34.5 cents)

• Buy (initiating coverage).  Kimly operates and manages coffee shops and food courts locally, which have a defensive nature accompanied by rich cash flows
• Management intends to declare an annual dividend of not less than 50% of net profits attributable to shareholders as dividends, which suggests a yield of 2.9% for FY2018F
• We think that the new outlets it invested in during 2017 and coming up in 2018 are likely to be profitable in 2019-2020
• DCF- derived price target of 43 cents

Lippo Malls Indonesia Retail Trust (April 18: 33 cents)

• Downgrade to Sell.  Lippo Malls Indonesia Retail Trust (LMIRT) announced that Indonesia has passed new tax regulations on income received/earned from land and building leases in the country, which is effective from Jan 2
• Assuming the new regulations were in effect as at Jan 1, 2017 instead, the REIT manager calculates that FY2017 DPU would have been 7.2% lower at 3.19 cents
• We believe the multiple challenges that have come to light will continue to plague the REIT’s operations, despite respectable efforts on the part of management
• Our fair value decreases 23.5%, from 40.5 cents to 31 cents

M1 (April 18: $1.78)

• Maintain Hold.  M1’s 1Q2018 revenue rose 0.5% y-o-y to $254.1 million, driven mainly by fixed services and mobile postpaid revenues, but partly offset by weaker handset sales and international call services
• Over the medium to longer term, we do expect M1 to scale up its ICT capabilities and solutions to capture opportunities relating to IoT and Smart Nation initiatives.
• We keep our forecasts and fair value estimate of $1.70

Manulife US REIT ( April 18: 92.5 US cents)

• Maintain Buy. Manulife US REIT  announced the acquisition of 1750 Pennsylvania Avenue (Penn) in Washington DC and Phipps Tower (Phipps) in Atlanta for an aggregate purchase cost of US$387 million
• The net property income (NPI) yields for the acquisitions of Penn and Phipps are 5.2% and 5.9% respectively
• While we note that there is some concern o the REIT’s rapid pace of acquisition led growth, we believe that acquisitions have not compromised unitholders’ interests and would ultimately benefit them
• Price target revised to US$1 (98 US cents previously)

SATS (April 18: $5.45)

• Maintain Buy.  SATS and Capital Airports Holding will inject a US$28 million equity in Beijing Aviation Ground Services (BGS),  but the shareholding structure is inequitable
• SATS is very likely to book unrecognised losses of $7 million to $9 million from BGS in FY2019, arising from the increased investment. 
• We lower our FY2019 net profit estimate by 4.4% after factoring in lower associate earnings arising from the $8 million loss assumption
• Our price target is consequently lowered to $5.80

Soildbuild Business Space REIT (April 18: 65.5 cents)

• Maintain Hold.  Gross revenues for 1Q2018 stood at $19.4 million, representing a y-o-y decline of $2.5 million (or 11.5%)
• We estimate revenue impact from the divestment of KTL Offshore to be about $2 million for FY2018F.  For 1Q2018, distributable income of $14 million was 10.4% lower versus 1Q2017’s
• Occupancy fell lower to 87.5%, outlook remains challenged
• Price target of 62 cents

(Source:  TheEdgeSingapore April 23 2018)