Brokers' call: Keppel T&T

KEPPEL T&T

Broker: CIMB

Call: Buy

Target Price: $1.83

KPTT posted a net profit of $18.8 million in the second quarter of this year, up a marked 41 per cent quarter on quarter.

Logistics are expected to see more meaningful growth starting in the second half of the year, despite a hit in logistics earnings since financial year 2015 caused by a slowdown in Asean and start-up costs for new projects.

The Tianjin and Luan projects will be operational in the third quarter of this year and the first quarter of next year, respectively. KPTT is also seeing growth in Vietnam and Indonesia, and gaining traction with pharmaceutical clients in Singapore from which it commands higher margin for value-added services provided.

KPTT has just signed on $144 million in data centre contracts. Fit-out for the committed space will be completed by the fourth quarter this year, which will boost occupancy to 100 per cent.


VARD HOLDINGS

Broker: OCBC Investment Research

Call: Hold

Target Price: 20 cents

Vard Holdings reported a 10.9 per cent year-on-year fall in revenue to 2.2 billion Norwegian kroner (S$349 million) and an operating loss of 78 million kroner in the second quarter of this year versus an operating loss of 21 million kroner in the second quarter of last year.

This resulted in a net loss of 53 million kroner in the second quarter of this year, compared with a net profit of 58 million kroner in the second quarter of last year. Results were generally within expectations.

Revenue was lower due to reduced activity, especially at the European yards and Vard Niteroi. Earnings before interest, taxes, depreciation and amortisation and margin was also lower at 0.5 per cent in the second quarter of this year versus 1.8 per cent in the second quarter of last year, affected by a provision for the assumed cancellation of one vessel by a subsidiary of Rem Offshore.

As at the end of the second quarter of 2016, the group's orderbook amounted to 11.93 billion kroner, supported by a new order intake of 6.22 billion kroner in the quarter.

However, client restructurings continue to put stress on the offshore order book.


ASCOTT RESIDENCE TRUST

Broker: DBS Group Research

Call: Buy

Target Price: $1.31

Amid the volatility in the Singapore hospitality market, ART's diversified portfolio with serviced residences and rental housing across 14 countries in the Asia-Pacific region, Europe and United States provides investors with a more resilient distribution per unit outlook.

ART's resiliency and cash-flow visibility also come from having 40 per cent to 50 per cent of its income sourced from master leases and management contracts with minimum guaranteed income.

ART has announced about $1.2 billion worth of acquisitions over the last two years, increasing the value of its assets under management by one-third to $5 billion. Combined with completed and ongoing average earnings incomes, ART should progressively realise the benefits from the acquisitions over the next few years.

ART's headline gearing of approximately 41 per cent is slightly elevated, and adjusted gearing stands at 42 per cent to 44 per cent. However, this is temporary as ART is reviewing its portfolio mix, and looking to divest some of its lower-yielding properties. To that end, headline gearing should drop to approximately 40 per cent in the next quarter upon repayment of bank loans using proceeds from the recent sale of units at Fortune Garden Apartments in Beijing.

A version of this article appeared in the print edition of The Straits Times on July 25, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe