Money Talk: Yoma Strategic, SIA Engineering, Ascendas Reit

An artist's impression of Star City in Thanlyin, in Yangon’s south-east, by Yoma Strategic Holdings. -- PHOTO: YOMA STRATEGIC HOLDINGS
An artist's impression of Star City in Thanlyin, in Yangon’s south-east, by Yoma Strategic Holdings. -- PHOTO: YOMA STRATEGIC HOLDINGS

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. Yoma Strategic Holdings

Broker: OCBC

Yoma reported first-quarter net profit of $1.4 million, which increased 243 per cent year-on-year mostly due to fair value gains ($6.4 million) recognised from completed units in Building A5 in Star City Zone A which have been retained as investment properties.

Overall, we judge these figures to be mostly in line with expectations, after taking into account the lumpy nature of progress recognition due to the rainy season from May/June which decelerated the pace of construction.

In terms of the topline, first-quarter revenue increased 13.9 per cent to $17.3 million as the group recognised higher sales from property developments and land rights mostly from Star City. Sales in Star City remain firm; as at end March 2014, 528 units have been sold in Zone A. We also understand that 724 units have been sold in Zone B at Star City.

Maintain Buy on Yoma with an unchanged fair value estimate of $0.82.

2. SIA Engineering

Broker: CIMB

Weak contribution from associates and joint ventures in Q1 FY2015 (-33 per cent year-on-year, -15 per cent quarter-on-quarter) caught us by surprise.

This, coupled with higher subcontractors' costs, drove Q1 FY2015 below expectations at 19 per cent of our and consensus full-year forecasts. We cut our FY2015-2017 earnings per share by 16 per cent to reflect the poor quarter and slower associates' and joint ventures' growth.

Not only is SIA Engineering struggling with margin pressure from high labour costs in Singapore, the loss of earnings momentum from associates and joint ventures dampens the investment attractiveness of the stock. We downgrade from Hold to Reduce.

Switch to ST Engineering for a similar yield profile but lower cost pressure given its diversified geographical spread. We lower our target price to $4.50 from $4.95.

3. Ascendas Reit (A-Reit)

Broker: Maybank Kim Eng

A-Reit's Q1 FY2015 revenue grew 8.1 per cent year-on-year to $163.2 million, bolstered by acquisitions, positive rental reversions and income support for A-Reit City @ Jinqiao. Distributions per unit rose 2.5 per cent year-on-year to 3.64 cents.

An 11.8 per cent positive rental reversion was achieved for leases renewed in Q1 FY2015. Management expects mid- to high single-digit overall positive reversions for FY2015.

Portfolio occupancy stayed high at 88.1 per cent and 15.4 per cent of its property income is due for renewal this year. A-Reit's financing cost remained flat quarter-on-quarter at 2.70 per cent with an average term of debt of 3.7 years.

With a tenant base of around 1,330 in a portfolio of 105 properties, and no single asset accounting for more than 4.4 per cent of monthly gross revenue, A-Reit is well diversified in terms of rental income. Reiterate Buy with an unchanged target price of $2.65.