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
CCT saw a 3.2 per cent year-on-year rise in both second-quarter and first-half revenue, bolstered by higher income from all properties except One George Street. Its balance sheet remained strong, with a low gearing of 28.8 per cent. Portfolio occupancy also remained strong at 99.4 per cent.
CapitaGreen has secured another 14,200 sq ft of lease commitments since its topping-out on July 2, boosting its NLA take-up rate from 21 per cent to 23 per cent. We expect the new tenants to be signing up at rentals north of $10-11 per sq ft per month (psf pm) vs 'loss-leader' Cargill, who contracted for 51,000 sq ft previously at a likely rental of $9-10 psf pm.
GIC will be renewing its leases at Capital Tower next year, with significant reversion, given its low base, according to management. CCT stands to benefit from higher office spot rents given its favourable lease expiry profile: about 49 per cent of office leases, by monthly gross rental income, are expiring in 2014-2016.
Reiterate Buy with an unchanged target price of $1.83.
2. Ascott Residence Trust (ART)
Second-quarter net property income and distribution per unit (DPU) came in at $46.5 million and 2.19 cents, respectively. This set of results was in line with our estimates, with Q2 DPU accounting for 26 per cent and H1 forming 46 per cent of our full-year estimate.
During the analyst briefing, it was highlighted that the Singapore portfolio reported stronger occupancy (more than 90 per cent) in July and should fare better in the seocnd half. In addition, the recently completed asset enhancement initiatives at Ascott Raffles Place Singapore are expected to further boost revenue.
Further growth is expected from the $28 million worth of ongoing asset enhancement initiatives that are expected to be completed in 2014 and 2015.
Though earnings are expected to remain stable, ART appears to be fairly valued given its higher leverage ratio, coupled with a lower dividend yield vs. its peers. Maintain Hold with a slightly higher target price of $1.30 as we roll forward our earnings estimates.
M1's results were in line with forecasts. It is seeing good traction in monetising data while roaming revenue weakness and the competitive headwinds in broadband appear to have stabilised. M1 is also closing in on content carriage milestones, having met a key prerequisite.
We believe M1 continued to gain revenue market share in Q2. Its mobile revenue grew 3 per cent quarter-on-quarter, the strongest sequential expansion in three quarters as more tiered data customers are exceeding their data caps.
We raise our target price to $4.30 (from $3.65) after lowering our weighted average cost of capital assumption to factor in lower competitive risks and its stronger mobile traction. M1 stays as one of our top regional telco picks.