Brokers' call

CAPITALAND LIMITED

  • Broker: DBS Group Research
  • Call: Buy
  • Target price: $4.11

CAPITALAND announced that it is selling its stake in DBS China Square to DBS Group Holdings for a cash consideration of $150 million.

DBS China Square owns a 28-storey office building also known as PWC Building, with a committed occupancy of 97 per cent and which is valued at $673 million. The consideration seems low at first glance at $1,400 psf, but the actual transacted price after accounting for underlying debt would be closer to $1,892 psf, in line with valuation.

Assuming a rental rate of $9 psf, this implies a yield of close to 4 per cent, which is in line with office market valuations and transactions.

EZION HOLDINGS

  • Broker: DBS Group Research
  • Call: Buy
  • Target price: $1.50

THE price of the stock will soon recover to the $1.20 level following withdrawal of a lawsuit by rig-operator Atlantic Marine Services, and as both companies look to continue the partnership in North Sea.

Ezion is also well positioned to benefit from the rising popularity of liftboats in the region, capitalising on its first-mover advantage.

Ezion also has a prudent business model with its fleet expansion backed by long-term charters of three to five years. Demand is relatively resilient.

COMFORTDELGRO

  • Broker: Maybank Kim Eng
  • Call: Sell
  • Target price: $2.70

TRADING at a lofty 23 times the price earnings ratio and 2.8 per cent yield, ComfortDelGro has priced in upside from the impending transition at its Singapore bus business.

It is also trading at a hefty 60 per cent premium to the market. Its stub value has also surged despite no material positives for the rest of the business.

The market is complacent on three fronts: threats to the taxi business due to the growing presence of Uber; a sale of bus assets to the Government may not be a done deal; and a weakening Australian dollar.

A version of this article appeared in the print edition of The Straits Times on June 29, 2015, with the headline 'Brokers' call'. Print Edition | Subscribe