Brokers' Call

MAPLETREE LOGISTICS TRUST

Broker: DBS Group Research

Call: Buy

Target Price: $1.28

Despite the recent rise in its share price, there are reasons to remain vested in Mapletree Logistics Trust (MLT) as it offers investors a diversified but rising exposure to growth in the Asia-Pacific region's logistics sector.

MLT remains on a growth path, with the manager scouting for opportunities across its main markets of Singapore, Hong Kong, South Korea and Australia.

MLT recorded another strong quarter in the first quarter of financial year 2018, as it kept up the positive growth momentum from a quarter ago, with distribution per unit (DPU) up 2 per cent year on year.

Earnings are bottoming out and the Singapore warehouse subsector will be approaching a cyclical bottom by the year end, when new supply will fall off significantly after that.

Brighter prospects are seen in MLT's major markets of Hong Kong, China and Australia, and the group is poised to reverse its downward trend in DPU seen in the past two years. Acquisitions will be a key catalyst for consensus to re-rate earnings.


CACHE LOGISTICS TRUST

Broker: Maybank Kim Eng

Call: Hold

Target Price: 95 cents

Cache saw sequential improvements in revenue and net property income in the second quarter of this year from its portfolio reconstitution efforts, as momentum from its Australian expansion helped mitigate weaker fundamentals at its Singapore core.

Its revenue for the quarter was $27.9 million and net property income was $21.7 million, driven by contributions from the DHL Supply Chain Arc and Laverton North Spotlight warehouse in Australia. These helped offset lower revenue from 51 Alps Avenue and Changi Districentre 3. Portfolio occupancy improved quarter on quarter to 98.3 per cent, while distribution per unit stayed at $1.80.

Management remains sanguine towards acquisition growth opportunities (in Brisbane and Melbourne) but, given limited debt headroom, will likely need to intensify its portfolio rebalancing efforts. A more challenging outlook is seen for warehouses, as new 2017 supply adds 9.7 per cent to total stock versus 4.4 per cent for factories and 0.2 per cent for business parks.


SIA ENGINEERING

Broker: CIMB

Call: Sell

Target Price: $3.86

The first-quarter results of SIA Engineering were in line with expectations, as subsequent quarters could see some lumpiness in jobs, lifting revenue. The key positive was steady revenue, in line with the volume of flights handled at Changi Airport.

Costs have been relatively well contained, with staff costs up 1 per cent year on year to $254 million. Material costs were down by 16 per cent quarter on quarter and 7 per cent year on year to $43 million, which is likely due to weak airframe maintenance, repair and operations.

Earning before interest and taxes margin was steady year on year at 11.7 per cent. Associates' profit contribution dropped 24 per cent quarter on quarter to $17 million, while joint venture contribution was on a downward trend of minus 14 per cent quarter on quarter and minus 42 per cent year on year to $4 million.

A version of this article appeared in the print edition of The Straits Times on July 31, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe