Brokers' Call

Hyflux Innovation Centre in Bendemeer Road.
Hyflux Innovation Centre in Bendemeer Road.PHOTO: ST FILE

HYFLUX

  • Broker: OCBC Investment Research
  • Call: Hold
  • Target price: 96 cents

Hyflux has an agreement with Tuspark Technology Services Investment to set up an investment holding company (investco). Hyflux Capital will have a 25 per cent shareholding interest in the investco, which intends to hold strategic investments in water projects in China.

We think the cooperation bodes well for Hyflux and should go some way in addressing its seeming lack of progress made in China over the past few years. Another wholly owned subsidiary of Hyflux - Spring China Utility - will divest its entire equity interests in five water plants in China worth 890 million yuan (S$194 million).

As Hyflux would account for these transactions by the second quarter of this year, a one-time gain of $42 million is expected.

MAPLETREE LOGISTICS TRUST

  • Broker: CIMB
  • Call: Buy
  • Target price: $1.31

Mapletree Logistics Trust proposes to acquire Coles Chilled Distribution Centre in Sydney for A$253 million (S$256 million), its first in Australia. Coles Group, Australia's second-largest supermarket chain, has agreed it will sign a 20-year lease with MLT (till June 2034) with an annual rental escalation close to consumer price index upon completion of the acquisition.

The site could also yield an additional gross floor area of 7,000 sq m for future expansion needs.

Management expects this property to achieve an initial net property income yield of 5.6 per cent.

FRASERS COMMERCIAL TRUST

  • Broker: DBS Group Research
  • Call: Buy
  • Target price: $1.79

At its current price ($1.535), Frasers Commercial Trust offers investors a dividend yield of 6.6 to 6.9 per cent, which is compelling. We have raised our target price to $1.79 to account for earnings accretion from the acquisition of 357 Collins Street and interest savings as the trust pares down debt using its $44.3 million proceeds from the sale of the CSC hotel. After the expiry of the Alexandra Technopark master lease last August, the expected net property income yield for the property is set to jump 60 per cent in financial year 2015. This is the result of taking in full underlying income contribution from the asset and significant rental reversions .

A version of this article appeared in the print edition of The Straits Times on July 06, 2015, with the headline 'Brokers' Call'. Print Edition | Subscribe