Money Talk: CapitaLand, CDL Hospitality Trust, King Wan

Mock-up of the new rooms at Grand Copthorne Waterfront Hotel, which is planning to launch 24 new extended-stay rooms. -- FILE PHOTO: CDL HOSPITALITY TRUSTS
Mock-up of the new rooms at Grand Copthorne Waterfront Hotel, which is planning to launch 24 new extended-stay rooms. -- FILE PHOTO: CDL HOSPITALITY TRUSTS

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. CapitaLand

Broker: OCBC

CapitaLand reported Q1 net profit of $182.8 million, down 1.7 per cent year-on-year mostly due to the absence of a one-time $58.7m divestment gain in Q1 2013. Q1 2014 net profit now constitutes 20.8 per cent of our full year forecast and we judge Q1 performance to be mostly in line with expectations.

An anemic 34 residential units were sold in Singapore over the first quarter this year, down significantly year-on-year from the 544 units sold in Q1 a year ago, due to continued headwinds in the domestic housing segment and a lack of new launches over the quarter. We expect the run-rate to pick up ahead, however, as the group pushes to sell remaining inventory by adjusting prices at slower projects.

Management reports that newly operational assets Raffles City Chengdu and Raffles City Ningbo are gaining good traction. The retail components for both assets are already 98 per cent and 92 per cent committed, respectively, with tenant sales and shopper traffic showing firm double-digits year-on-year growth.

Maintain Buy with an unchanged fair value estimate of $3.79.

2. CDL Hospitality Trust (CDL-HT)

Broker: CIMB

CDL-HT's Q1 results were largely in line with our forecasts, demonstrating a more positive hotel market than a year ago. Its stronger performance was partly due to the Singapore Airshow in February and the better-than-expected performance of the trust's Maldives portfolio.

With an expected stronger recovery in corporate spending in FY2014, we expect CDL-HT to benefit from this trend as about 55 per cent of its earnings are from corporate spending. Furthermore, earnings are likely to be further boosted by a fully packed calendar and multiple MICE (meetings, incentives, conventions and exhibitions) events this year.

However, the potentially more intense competition as the market digests the new supply of hotel rooms is likely to limit any expected upside to revenue per available room in FY2014.

We keep our Add rating with a higher target price of $1.97 as we raise our distribution per unit estimates for FY2014-FY2016, factoring in the stronger performance of both Maldives and Singapore portfolios.

3. King Wan

Broker: OSK-DMG

King Wan has received 116.32 million shares of Kaset Thai Industry Sugar (KTIS) worth $45.3 million, which will begin trading on the Stock Exchange of Thailand today. King Wan will recognise a $24 million profit, and we continue to expect a one cent special dividend to be declared for FY2014, increasing to 1.5 cents for FY2015 and beyond.

Further, there may be long-term capital gain potential from the KTIS shares due to rebounding sugar prices and KTIS' investment in two new biomass electricity plants with its initial public offering proceeds, which is expected to drive earnings growth.

We estimate King Wan's sum-of-the-parts valuation to be $0.49 per share. Interestingly, King Wan's price of $0.335 today implies a core price/earnings ratio of 0.5 times. Alternatively, the share price implies 7.75 times core price/earnings and zero value for the entire KTIS stake.

We maintain Buy with $0.43 target price based on a 7 per cent required yield, though a lower required yield is arguable.