Brokers' Call: Mapletree Industrial Trust

MAPLETREE INDUSTRIAL TRUST

Broker: Maybank Kim Eng

Call: Buy

Target price: $2.05

Mapletree's operating results for the financial year ended March 31, with year-on-year revenue up 4.5 per cent and net property income up 6.4 per cent, continue to reinforce the resilience of its multi-tenanted Singapore-focused portfolio.

Portfolio occupancy was 93.1 per cent, up from 92.1 per cent in the third quarter of last year, compared with 94.6 per cent a year ago. Rental growth was at 2.1 per cent year on year at $1.94 per square foot/month.

Mapletree stands tall on key balance-sheet metrics, with the lowest funding cost and gearing among the industrial Reits.

A $1 billion debt headroom (about 30 per cent of market cap) is expected for supporting potential inorganic growth opportunities.

The company is placing strong emphasis on tenant retention in order to maintain occupancies across its portfolio. This could dampen rental growth prospects.


CHINA AVIATION OIL

Broker: RHB

Call: Buy

Target price: $1.90

China Aviation Oil (CAO) remains on track to deliver steady earnings growth, aided by the rapidly growing Chinese aviation market and increased diversification into other related oil products.

A higher-than-estimated volume growth in the first quarter of this year has led to a rise in expectations of 5 per cent growth in profit for the 2017-2019 period.

CAO trades at undemanding valuations and potential earnings accretive acquisitions could re-rate the stock further.

China Aviation Oil Singapore registered a 29 per cent year-on-year volume growth at its middle distillates (largely jet fuel) business and 81 per cent year-on-year volume growth at its other oil products business during the first quarter.

Net profit of US$11.6 million (S$16.2 million) was 5 per cent ahead of estimates.

With US$226 million in net cash, CAO is well poised to undertake major acquisitions or investments. While its management remains focused on further expanding its aviation marketing business beyond China, it also has plans to diversify the business by acquiring synergistic oil-related businesses.


M1

Broker: DBS Group Research

Call: Buy

Target price: $2.54

In the light of the developments following M1 shareholders' strategic review announced in March and the ongoing news flow involving potential bidders for the company, there should be continued support for M1's near-term share price.

A partial or block sale of the 61 per cent stake held by M1's major shareholders is possible. In the event of a block sale, such a move will also lead to a general offer for minority shareholders.

Operating performance for the first quarter of this year was largely in line with expectations, as service revenues held up, driven by continued growth in fixed-services revenue, offset by expected declines in mobile revenue and international call-services revenue.

Pressure is expected in mobile ARPU, or average revenue per user, because of the impending entry of the fourth mobile player, TPG.

Key risks include bids falling through. Should there be no takeover of the company, the price could drop back to approximately $2, the level before the news of the shareholders' strategic review was announced.

A version of this article appeared in the print edition of The Straits Times on May 01, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe