Brokers' Call: Soilbuild Reit

SGX is set to report its quarterly results after Wednesday's market close. Trading volumes have remained challenging and market activity is expected to stay subdued going into a seasonally weak quarter.
SGX is set to report its quarterly results after Wednesday's market close. Trading volumes have remained challenging and market activity is expected to stay subdued going into a seasonally weak quarter.ST PHOTO: JAMIE KOH

SOILBUILD REIT

Broker: OCBC Investment Research

Call: Buy

Target Price: 77 Singapore cents

Soilbuild Reit's third-quarter results for this year were within expectations. Gross revenue fell 4.7 per cent year on year to S$19.7 million, while distribution per unit (DPU) dropped 13.9 per cent year on year to 1.399 Singapore cents because of an enlarged unit base from its one-for-10 preferential offering exercise.

While a quarter-on-quarter improvement is expected in the Reit's results for the fourth quarter, a lower DPU is forecast for this year and next, largely because of lower occupancy rate assumptions for Tuas Connection and West Park BizCentral.

Further downside risks could stem from management's failure to secure replacement tenants at its 72 Loyang Way property once the security deposit is exhausted next year.


DUTY FREE INTERNATIONAL

Broker: CIMB

Call: Add

Target Price: 61 Singapore cents

Duty Free International reported first-half sales of RM350 million (S$116 million) for financial year 2017 (FY2017), up 20.7 per cent year on year, thanks to a strong first quarter when the company launched aggressive promotions to clear old inventory.

Second-quarter sales growth of 4.7 per cent came partly from two new duty-free retail openings at Kuala Lumpur International Airport 2.

The firm recorded a strong operating cash flow of RM35.8 million for the second quarter of FY2017 versus RM7.7 million for the first quarter. Together with the RM139.3 million in proceeds from new share issuances and the disposal of a 10 per cent equity stake, the company pared down its short-term borrowings of RM30.7 million.


SINGAPORE EXCHANGE

Broker: CIMB

Call: Reduce

Target Price: $7.24

The Singapore Exchange (SGX) will report first-quarter earnings for financial year 2017 after Wednesday's market close. Net profit is expected to come in at $81.3 million. Despite a recovery in the Straits Times Index post-Brexit, trading volumes have remained challenging.

Derivative traded volume slipped 6 per cent quarter on quarter to 40.1 million contracts, as demand fell for China A50 futures, Nikkei 225 futures, Nifty futures, iron ore futures and forex futures.

Derivative revenue is expected to decline 3 per cent quarter on quarter to $72.6 million.

SGX's $153 million acquisition of the Baltic Exchange is expected to close at the year end. The Baltic Exchange's latest annual report shows its operating margin at 9-11 per cent for financial year 2015-16, far below SGX's 50 per cent.

SGX's share price has fallen 8 per cent since the peak in April, but downside risks remain amid sustained weakness in securities and derivative volumes. In the near term, market activity is expected to stay subdued going into a seasonally weak quarter. A key risk would be a series of big market events that could trigger panic selling.


GLOBAL LOGISTIC

Broker: OCBC Investment Research

Call: Buy

Target Price: $2.37

Global Logistic Properties (GLP) recently announced it is expanding its partnership with Walmart, with a 32,000 sq m build-to-suit agreement in South China, which will boost Walmart's presence at an existing location.

Walmart is a global client of GLP and leases about 210,000 sq m from it in nine cities in China, Japan and the United States.

GLP's management indicated that domestic consumption growth in China is driving an expansion of store networks and supply chain infrastructure to support increasing retail sales, and that GLP's leading national network in China provides significant leverage for its customers to enhance their operational efficiency.

A version of this article appeared in the print edition of The Straits Times on October 17, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe