Brokers' Call: Viva Industrial Trust

VIVA INDUSTRIAL TRUST

Broker: OCBC Investment Research

Call: Buy

Target Price: 75 cents

Viva Industrial Trust (VIT) is a Singapore-focused Reit which primarily invests in business parks and industrial real estate assets.

The combined market valuation of VIT's portfolio is $1.2 billion, including its latest acquisition of 30 Pioneer Road in April, with the majority in business park assets.

VIT's distributable income is projected to increase by 27 per cent in financial year 2016 and 6.2 per cent in financial year 2017. Distribution per unit is expected to decrease 1.2 per cent to 6.916 cents in financial year 2016, before increasing 6.9 per cent to 7.392 cents the next year.


BEST WORLD INTERNATIONAL

Broker: CIMB

Call: Buy

Target Price: $1.61

Best World has just announced that it has been granted a direct selling licence in China by the country's Ministry of Commerce. This comes earlier than our expectations. The next milestone is to set up the requisite service centres in Hangzhou by Dec 16, after which the company can commence direct selling.

The company is expected to gradually move away from its current export model, with full direct selling in the first half of next year.

It has already registered all of its products and established a network via export agents, and has a network of Taiwanese distributors that will form the first level in China.

Capital expenditure is expected to be minimal - mostly only renovation of service centres. The group's new factory facility in Singapore should also support supply chain management.


M1

Broker: DBS

Call: Buy

Target Price: S$3.30

M1 has declined approximately 30 per cent since April 2015 and will benefit the most if Singapore remains a three-player market. M1's prospects brighten as likelihood of a new entrant is getting lower.

Interested players face difficulty in raising sufficient funds due to factors including lowering of the additional data price by 25-50 per cent in March by Singapore telcos, and potential launch of 5G in four to five years which will lead to another round of capital expenditure for new entrants.

According to press reports, MyRepublic has raised $130 million in debt funding as of late June, approximately 50 per cent of its target of $250 million to $300 million.

M1 will see flattish earnings over the next two to three years due to the effects of data price declines, accompanied by lower handset subsidies. However, higher capital expenditure is predicted from financial year 2020 onwards due to 5G rollout.


EZION HOLDINGS

Broker: CIMB

Call: Buy

Target Price: 53 cents

Ezion's fully underwritten rights issue at 29 cents is expected to raise $137.5 million (net of expense) of new capital. This will increase its share base by 30 per cent to 2,073 million shares.

Chief executive Chew Thiam Keng and his spouse, Madam Chan, have jointly provided an irrevocable undertaking to subscribe up to $50 million, or 35 per cent, of the total rights issue. The commitment could signal to the market that the company's outlook could turn positive in the medium term.

Up to 70 per cent of the proceeds will be used to fund new marine assets and to upgrade service rigs/liftboats, while 30 per cent will be used for general working capital, in order to prepare for an oil price recovery.

The capitalisation also leaves more room to gear up to fund new partnerships. If oil prices remain stagnant, windfarm may be Ezion's next play. It has formally entered the China offshore wind farm market. Share price could be depressed in the short term as investors are jittery on small-cap cyclicals, with more fund-raising by other players to come.

A version of this article appeared in the print edition of The Straits Times on July 11, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe