SIA ENGINEERING COMPANY

Broker: OCBC Investment Research

Call: Hold

Target Price: $3.63

SIA Engineering Company (SIAEC) announced last week the completion of the amalgamation of joint ventures it has with Rolls-Royce Singapore (RRS), namely Singapore Aero Engine Services (SAESL) and International Engine Component Overhaul (IECO).

SAESL will be the surviving entity.

SIAEC had, earlier this year, completed the divestment of its 10 per cent stake in Hong Kong Aero Engine Services Limited, which is a joint venture between Hong Kong Aircraft Engineering Company and RRS.

As IECO also overhauls and repairs aero engine components, SIAEC said that the amalgamated company will be able to generate greater operational efficiencies, enjoy better economies of scale and result in potential cost savings through streamlining of business processes.

As this amalgamation is not new, it is not expected to have a material impact on SIAEC's financials next year.

HO BEE LAND

Broker: RHB

Call: Buy

Target Price: $4.13

Despite a gloomy office market with a glut of new office space coming on stream, Ho Bee Land's office property in Buona Vista, The Metropolis, is fully leased with renewals at $7.50 per sq ft per month against average portfolio rents of $6.50 psf per month.

Ho Bee's six office property acquisitions in London, made in the course of the last three years at a cost of £600 million, have further bolstered the group's gross rental income to $135 million per annum.

While Brexit has resulted in translation losses due to fluctuations in the exchange rate, the London portfolio is backed by solid blue-chip tenants and an average lease term to expiry of more than five years.

The group remains cautious on the local residential market, given the impact of the cooling measures on foreigner demand, and has fully sold down its exposure on the mainland.

In China, the completion of its Shanghai project and commencement of profit recognition of its Zhuhai project from this year, both in partnership with Yanlord, will drive profit growth on the development front.