Ascott Residence Trust | Hold
Target price: $1.16
April 19 close: $1.14
Broker: CGS CIMB Research, April 18
While the first quarter is seasonally the weakest, we consider Q1 2018 distribution per unit (DPU) of 1.35 cents (+15 per cent year on year), which formed 19 per cent of our full-year forecast, to be a slight miss. Adjusting for the realised forex gain of $1.6 million, Q1 2018 DPU would have registered a 9 per cent year-on-year improvement.
Results continued to be a mixed bag with particular organic weakness in Japan, the Philippines, Vietnam and the United States. China achieved healthy operating performance.
We note that Ascott Residence Trust (ART) has net gain proceeds of $51.6 million from divestment of the two Chinese properties. We note its more disciplined and prudent approach towards acquisitions. Our "hold" call is intact given limited catalysts. Upside risks could come from a pickup in core markets; downside from higher rate hikes.
First Reit | Buy
Fair value: $1.48
April 19 close: $1.37
Broker: OCBC Investment Research, April 19
First Real Estate Investment Trust's (First Reit) Q1 2018 results were well within our expectations.
We reiterate our base case of two to three acquisitions in FY18 (albeit late in the year), with each asset in the $20 million to $30 million range. We believe that PT Siloam International Hospitals TBK's assets would be likely targets.
Nonetheless, we believe that management would still be disciplined by making only DPU-accretive acquisitions, with the initial rental yield being around the 9 per cent to 10 per cent handle. As at March 31, only around 51 per cent of First Reit's debt is on fixed rate or hedged, but we believe management is working on bringing this towards 75 per cent to 80 per cent.
Separately, there has been some concern about rising receivables, which we think could be due to tighter liquidity at the sponsor's end.
We keep our assumptions and estimates unchanged, and maintain our fair value of $1.48. First Reit currently trades at a FY18F yield of 6.4 per cent.
Soilbuild Business Space Reit | Buy
Fair value: 71 cents
April 18 close: 65.5 cents
Broker: OCBC Investment Research, April 18
Soilbuild Reit's Q1 2018 results were within expectations.
Gross revenue dropped 11.5 per cent year on year to $19.4 million or 24.4 per cent of our initial full-year forecast, mainly due to lower contributions from 72 Loyang Way, West Park BizCentral, Eightrium, as well as KTL Offshore, which was divested in February this year.
Q1 2018 distribution per unit dropped 11.1 per cent to 1.324 cents or 25.9 per cent of our initial full-year forecast.
We expect the operating environment in the industrial space to remain challenging for much of this year. Yet, while bearing in mind this backdrop, we see upside to our fair value as of last Tuesday's close.
Singapore grocery retail | Buy
Broker: DBS Group Research, April 17
Earnings for Asean grocery retailers in the quarter ended December saw Thailand exceeding expectations, Singapore-listed grocers' earnings in line, Indonesian and Philippine grocers underperforming. The varied country performances were largely a function of domestic consumption fundamentals and operating environments. Domestic fundamentals for grocery retail in Singapore and Thailand remain strong, while that for Indonesia and the Philippines were weaker.
In Singapore, there is more room for growth as the Housing Board has lined up at least 11 new supermarket properties for bidding over the next six months. Although online grocery retail is a fast-growing segment, its market share remains low at less than 3 per cent of the whole grocery market. Sector valuations are at 27 times forward price-to-earnings ratio.
Top picks in Singapore are Dairy Farm and Sheng Siong. We upgraded Dairy Farm's target price to US$9.77 from US$9.54 previously.