Brokers' Call

CapitaLand Retail China Trust

Broker: OCBC Investment Research

Call: Buy

Target price: $1.56

CapitaLand Retail China Trust (CRCT) currently has three multi-tenanted malls and two master-leased malls in Beijing. Colliers' Beijing retail report for January suggests that because of limited land supply and government restrictions on developing new shopping centres in major downtown areas, new supply growth is expected to slow and the market should continue to favour landlords.

The report said vacancy rates in malls are expected to stay at a low level of around 5 per cent up to the end of the year, and rent is expected to increase by 1.5 per cent year on year by end-2017.

Last year, Beijing's gross domestic product increased 6.7 per cent while retail sales grew 6.5 per cent. Urban disposable income and expenditure per capita grew 8.4 per cent and 4.4 per cent respectively.

Given the thus-far stable outlook for the Beijing retail market, CRCT is an attractive share at current price levels.


Delfi

Broker: OCBC Investment Research

Call: Hold

Target price: $2.37

Delfi has entered into a conditional sale and purchase agreement with Meiji and Meiji Seika (Singapore) to sell 50 per cent of shareholding interest in Ceres Meiji Indotama (CMI).

CMI was incorporated as part of a joint venture (JV) agreement in December 2000 to engage in the manufacturing and sale of confectionery products in Indonesia. Delfi believes CMI is best suited to continue growing under the stewardship of Meiji, hence discussions between the parties have led to a mutual and amicable agreement to terminate the venture.

The proposed disposal's total consideration is US$8.3 million (S$11.6 million), and Delfi will recognise a gain of around US$4.9 million.

Exiting the JV will also allow Delfi to redeploy its resources to focus on growing its core business.

A version of this article appeared in the print edition of The Straits Times on March 20, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe