DISA Ltd | Buy
Target price: $0.02
June 22 close: $0.008
Broker: KGI Securities (Singapore), June 22
Since it invented the world's first anti-theft protection technology using encrypted codes on consumer electronic products, DISA has focused its resources on its anti-theft business and ramped down its other businesses.
Given that Walmart is using DISA's technology, it is time to boost market penetration. As the first mover providing a digital point-of-sale activation solution, it should get at least three top US retailers on its platform.
The key risks are that slow user adoption and a breach in DISA's encryption could lead to reputational damages and a fall in revenue. The concern is if DISA fails to scale and to cover its burn rate. It is at an inflection point and must convince retailers and suppliers to adopt its technology as the industry standard. If it cannot do so, debt and equity financing solutions could dry up as investors lose faith.
There could also be unexpected costs to improve its information technology infrastructure, and these may add to the cash burn rate. Like most tech firms at an inflection point, it is critical DISA maintains investors' trust.
CapitaLand Commercial Trust | Buy
Target price: $2.11
June 22 close: $1.64
Broker: UOB Kay Hian, June 22
The acquisition of 94.9 per cent of Galileo Property has been completed, extending CapitaLand Commercial Trust's (CCT) footprint to the Frankfurt prime central business district (CBD) area with 5 per cent exposure to Germany. The management has guided for acquisitions of core commercial assets in key cities, targeting an allocation of 10 to 20 per cent of its deposited property overseas.
At home, CapitaSpring has secured JP Morgan as anchor office tenant, and is well positioned to ride the cyclical recovery in the Singapore office segment. CCT expects office rents to continue growing steadily on the back of higher committed occupancies in newly completed office buildings and limited new supply in the CBD from 2018 to 2020.
We revise our 2018 to 2020 distribution per unit forecasts as we factor in contributions from the Galileo Property acquisition. Maintain "buy" with a higher target price of $2.11 based on dividend discount model, from $2.09 previously.
Mapletree Logistics Trust | Buy
Fair value: $1.34
June 21 close: $1.22
Broker: OCBC Investment Research, June 21
The ongoing trade friction between the US and China has undoubtedly spooked equity markets and cast a pall over the outlook of global trade and, correspondingly, logistics-related securities.
Mapletree Logistics Trust (MLT) completed the acquisition of a 50 per cent interest in each of 11 logistics properties in China on June 6 for a total acquisition cost of one billion yuan (S$209 million). Sponsor Mapletree Investments holds the remaining 50 per cent stake. Following the acquisition, China is expected to contribute 9 per cent of its pro forma portfolio valuation and 11 per cent of its pro forma FY2018 net property income, compared with 5 per cent and 6 per cent previously, respectively.
While this may raise concerns over MLT's exposure to China amid the trade spat, a significant portion of its underlying end-user revenue from China is derived domestically. Hence, we see limited impact on earnings.