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. CapitaCommercial Trust (CCT)
Broker: Maybank Kim Eng
We attended the topping-out ceremony of CapitaGreen, which is on track to complete by year-end. CCT also announced that it has secured pre-commitment of 21 per cent of total net lettable area for CapitaGreen.
The new leasees include Jardine Lloyd Thompson (an insurance/reinsurance firm; currently at One Raffles Quay) and Jones Day (a law firm; presently at Samsung Hub), alongside Cargill, Bordier & Cie (moving out of GB Building along Cecil Street) and an international gym operator. CCT had previously stated that it was in discussions with other prospects and was optimistic of achieving 50 per cent pre-commitments by year-end.
We expect the new insurance and business service tenants to be signing up at rentals north of $10-11 per sq ft (psf) per month. Being one of two major prime office developments in the CBD due to complete this year and next, we expect CapitaGreen to be fully occupied by end-2015, with higher rentals of $11-12 psf per month progressively signed in 2H14-2015.
CCT is poised to benefit from higher office spot rents as it has one of the most favourable lease expiry profiles among office Reits. Reiterate Buy with an unchanged target price of $1.83.
2. Sinarmas Land (SML)
SML has one of the largest and most diversified landbanks in Indonesia and offers steady and resilient growth. Its 51.5 per cent-owned subsidiary, Bumi Serpong Damai, is the largest property company in Indonesia by sales and market capitalisation. SML also owns 2000ha of industrial real estate and has an overseas property portfolio worth some $800m.
SML is in a net cash position and generates more than $300 million in operating cash flows per annum. Management intends to leverage on its strong balance sheet to embark on an international expansion, adding to its portfolio of prime commercial properties in gateway cities.
With the exception of its office property in West End London acquired last year, the rest of SML's overseas properties in Singapore, Malaysia and China are legacy assets that are still carried at nominal cost in the balance sheet. We estimate the group could unlock as much as $600m from these properties.
We initiate coverage on the stock with a Buy and a target price of $1.01, based on a sum-of-the-parts valuation. We believe the stock is misunderstood due to under-coverage and offers scope for re-rating as investors get acquainted with its deep value.
3. Hotel Properties (HPL)
We initiate coverage on HPL with a Buy rating and $5.32 fair value estimate. We took into account a potential redevelopment of its West Orchard assets (Forum, Hilton, Four Seasons and HPL House).
From our calculations, assuming relevant approvals from authorities, a redevelopment of HPL's assets in West Orchard could could yield as much as $1.25 billion in surplus net present value.
In particular, given the recent general offer for HPL made by a consortium of strategic shareholders, it seems plausible that unlocking value from HPL's prime Orchard assets could feature in management's plans ahead.
To reflect the uncertainty of the redevelopment scenario, however, we opt to assign a punitive 35 per cent discount to HPL's revalued net asset value of $8.20 per share.