Money Talk: SPH Reit, Frasers Centrepoint Trust, Ho Bee

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

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

1. SPH Reit

Broker: OCBC

SPH Reit reported second-quarter distribution per unit (DPU) of 1.39 cents, ahead of its prospectus forecast of 1.33 cents by 4.5 per cent. Together with its first-quarter distribution, DPU for the first half-year amounted to 3.25 cents... which we deem to be consistent with our expectations.

We note that SPH Reit's portfolio continued to exhibit resilience. For the first half of the financial year, SPH Reit achieved positive rental reversion of 10.8 per cent for its portfolio, driven by rental uplift of 13.6 per cent at Paragon and 5.1 per cent at Clementi Mall.

In addition, shopper traffic has held steady at Paragon, while that at Clementi Mall increased 2.7 per cent over a year ago. Looking ahead, SPH Reit is keeping its view that it will continue to deliver steady performance. We are keeping our forecasts and 99 cents fair value unchanged, as the results were in line with expectations. Maintain Hold.

2. Frasers Centrepoint Trust (FCT)

Broker: OSK-DMG

In a press release on Tuesday night, Frasers Centrepoint Trust announced the expected acquisition of Changi City Point at $305 million, in line with valuations from consultants. This acquisition is positive for unitholders in our view.

Acquisition of SGD305m accounts for approximately 20.8% of FCT current market cap, and will be the 6th suburban retail mall in its portfolio, adding 14% to its total assets which will increase to $2.4 billion post-acquisition.

We expect FCT to have sufficient debt capacity to absorb this

acquisition without substantial need for equity raising. Circular for the acquisition

should be out within 21 days and the EGM is expected to be held by June-14.

We urge investors to vote in favour of this deal. We are Neutral on FCT with a target price of $2.27.

3. Ho Bee

Broker: CIMB

We expect continued downward pressure on high-end properties and potential privatisation plays among the small-mid cap developers.

We continue to favour Ho Bee within the small-mid cap space because 1) its management has demonstrated foresight in its early entry into Sentosa, Metropolis and its current move to diversify into investment properties, 2) it is trading at an attractive valuation of c.40% discount to book and RNAV, and 3) it is a potential privatisation play, given its attractive valuation, majority shareholder and strong balance sheet with limited need for equity fundraising.

On top of that, we noticed that Ho Bee Holdings (owned by Mr Chua Thian Poh, Mdm Ng Noi Hinoy and Mr Chua Kong Chian) has been increasing its stake since 70.8 per cent in Apr 2013 to 72.6 per cent.

We note that its key risk lies with (its) unsold Sentosa developments but believe (this) is mitigated by their exemption from extension charge... (they also) are currently being rented out.