Money Talk: Ascott Residence Trust, Cordlife Group, SPH Reit

SPH Reit has performed well recently. The share price now factors in the positivity from the upcoming asset enhancement initiatives at Paragon that could add 10,000 sq ft of net lettable area, and high valuations relative to its peers. -- PHOTO: ST F
SPH Reit has performed well recently. The share price now factors in the positivity from the upcoming asset enhancement initiatives at Paragon that could add 10,000 sq ft of net lettable area, and high valuations relative to its peers. -- PHOTO: ST FILE

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Ascott Residence Trust (ART)

Broker: OCBC

Ascott Residence Trust announced last week that it has completed the acquisitions of a serviced residence property in Malaysia and two in China for a total property value of $173.9 million.

With the completion of these acquisitions, we note that ART's earning base will not only be strengthened, but its asset size and portfolio would also be broadened.

Looking into the second half of th eyear, we also believe a seasonal uplift, coupled with the completion of its asset enhancement initiatives at several of its serviced residences such as Ascott Raffles Place Singapore, is likely to drive ART's revenue per available unit upwards.

We maintain our Buy rating and $1.33 fair value on ART.

2. Cordlife Group

Broker: OSK-DMG

Cordlife Group reported in-line full year FY2014 results with a 41.5 per cent year-on-year increase in revenue to $49 million. Revenue growth was aided by Cordlife's recent expansion into India, Indonesia and Philippines, which helped to boost Cordlife's client deliveries to 15,880 in FY2014 from 7,700 in FY2013.

Cordlife's reported net profit increased to $30 million in FY2014 from $13.5 million a year earlier. Excluding non-core and one-off items, Cordlife's FY2014 net profit was $6.4 million.

Cordlife's selling, marketing and administrative expenses increased significantly due to one-off costs related to its expansion into India, Indonesia and Philippines (growth markets). Low industry penetration rates in growth markets should result in higher client deliveries for Cordlife and continue to drive earnings growth going forward.

Margins should also improve, aided by 1) more efficient cost management, 2) lack of one-off cost related to venturing into new markets, and 3) higher royalty income from its partners Stemlife and China Cord Blood Corporation.

Maintain Buy with a target price of $1.50.

3. SPH Reit

Broker: CIMB

SPH Reit has performed well recently. The share price now factors in the positivity from the upcoming asset enhancement initiatives at Paragon that could add 10,000 sq ft of net lettable area, and high valuations relative to its peers.

We downgrade SPH Reit from Add to Hold with an unchanged target price of $1.09.

Re-rating could be sparked by upside surprises on the retail front and/or other yield-accretive acquisitions.