Asia Pacific Equity Research | Singapore
MARKET
PULSE
Key Idea
Key Singapore Indices
STI
Catalist
Finance
Property
Electronics
Vol(m)
Val(S$m)
Close
3243.7
143.1
854.9
738.4
392.9
1337.3
1238.4
Chg
16.4
-0.2
3.4
-2.2
1.6
-33.8
-125.8
% Chg
0.5
-0.2
0.4
-0.3
0.4
-2.5
-9.2
Close
17778.2
4748.4
2061.2
6466.0
1700.0
22832.2
17210.1
1516.8
1897.5
8878.6
Chg
421.3
104.1
48.3
129.5
18.1
246.4
390.3
36.6
-2.7
50.3
% Chg
2.4
2.2
2.4
2.0
1.1
1.1
2.3
2.5
-0.1
0.6
World Indices
Dow Jones
Nasdaq
S&P500
FTSE
KLCI
Hang Seng
Nikkei
SET
KOSPI
TWSE
Morning Call
19 Dec 2014
Singapore REITs: Better prepared for volatility ahead
2014 has been a relatively solid year for the S-REITs sector
in terms of both share price and financial performance.
Looking ahead, market expectations point towards a hike in
the Fed Funds target rate in 2Q15. This could result in
volatility in the share prices of S-REITs. On a positive note,
most REITs have buffered up their balance sheets, while
hedging strategies have also been put in place. From a
valuation standpoint, the FSTREI is trading above historical
levels on a P/B basis, while the current yield spread of
4.0% is below the 7-year average of 4.7% (4.3% if we
exclude the GFC period). We have OVERWEIGHT ratings
on the office and retail REITs sub-sectors, and
NEUTRAL ratings on the industrial, hospitality and
healthcare REITs sub-sectors. Overall, we maintain
NEUTRAL on the S-REITs sector. Our top picks are
CapitaMall Trust [BUY; FV: S$2.20], Frasers
Centrepoint Trust [BUY; FV: S$2.08] and Starhill
Global REIT [BUY; FV: S$0.90].
More reports:
-
Singapore Airlines: Vistara to take off on in Jan-15
Market Statistics (SG)
STI
No.
No.
No.
52-week range
of gainers
of losers
of unchanged
2,953
3,388
271
191
164
 LMIR Trust has issued 118.4m Consideration Units today at
S$0.38/unit.
 Mermaid Maritime's subsidiary was awarded a two year
subsea construction contract in the Gulf of Thailand worth
~US$50m.
 Singtel's Australian subsidiary will acquire 100% stake of
Ensyst Pty Limited for ~A$13m.
Economic Statistics
S$/US$
Yen/US$
3-mth S$ SIBOR
3-mth US$ SIBOR
Crude futures (US$)
News Headlines
1.3
119.0
0.4
0.2
55.1
Research Team
(65) 6531 9800
e-mail: [email protected]
0.0
0.1
0.0
0.0
1.0
 Keppel Land entered into a JV with Array Holdings, which is
incorporated in Hong Kong, by acquiring a 75% stake in
retail management company Array Real Estate.
 CSC Holdings entered into an investment agreement with
New Hope Singapore, where the former will acquire a
minority stake in NH Singapore Biotechnology Pte Ltd.
 CapitaLand has established a wholly-owned subsidiary
Beijing Jiade Xinyuan Commercial Property as part of its
business development plans.
 Enviro-Hub Holdings proposed the disposal of 100% interest
in its indirectly owned subsidiary QF 10 Pte Ltd at S$1.95m
after deducting debts and liabilities.
Sources: MasNet, Bloomberg, Business Times, Straits Times and other media
Please refer to important disclosures at the back of this document.
MCI (P) 006/06/2014
OCBC Investment Research
Market Pulse
19 Dec 2014
Singapore REITs: Better prepared for
volatility ahead
7-year average of 4.7% (4.3% if we exclude
the GFC period). We have OVERWEIGHT
ratings on the office and retail REITs subsectors, and NEUTRAL ratings on the
industrial, hospitality and healthcare
REITs sub-sectors. Overall, we maintain
NEUTRAL on the S-REITs sector. Our top
picks are CapitaMall Trust (CMT) [BUY;
FV: S$2.20], Frasers Centrepoint Trust
(FCT) [BUY; FV: S$2.08] and Starhill
Global REIT [BUY; FV: S$0.90]. (Wong
 Focus in 2015 will be on interest
rates
 Sector valuations not cheap
 CMT, FCT and Starhill Global REIT
our top picks
Year in review
2014 has been a relatively solid year for the
S-REITs sector. The FTSE ST REITs Index
(FSTREI) has shown an appreciation of 7.8%
YTD, outperforming the STI’s 2.4% increase
during the same period. Operationally, we
note that most REITs under OIR’s coverage
have managed to report decent financial
results for 9MCY14. Overall NPI, distributable
income and DPU growth came in at 7.6%,
6.5% and 2.2%, respectively. From a
regulatory standpoint, MAS released a
consultation paper in Oct with proposals
aimed at fostering stronger corporate
governance practices, better aligning the
interests of REIT managers and unitholders,
as well as to provide REITs with more
operational flexibility.
Teck Ching Andy)
.
.
.
.
.
.
Singapore Airlines’ (SIA) joint venture (JV)
with Tata Sons Limited (Tata) – Vistara, is
set to launch its first flight from Delhi to
Mumbai and Ahmedabad on 9-Jan next year.
This came after the JV received its Air
Operator Permit on 16-Dec this year. The
airline’s 148-seater A320-200 will offer seats
in economy, premium economy and business
classes, with Delhi serving as its hub. Vistara
is the third full service carrier in India after
state-run Air India and Jet Airways; but it will
be the first to offer premium economy class.
SIA has already started to equity account in
its books for its share of Vistara’s start-up
costs since 2QFY15. With commercial
operations expected to start in Jan-15, we
are of the view that costs will increase
significantly from this JV as Vistara scales up.
Hence, we think the JV will continue to see
net loss position for at least the first year of
operations and likely even beyond that. Note
that SIA will record Vistara’s results under
the line item “share of losses of associated
and JV companies”. We opt to keep our FV
estimate of S$10.80 unchanged for now and
maintain our HOLD rating on SIA. (Eugene
Chua)
.
Maintain NEUTRAL on S-REITs sector
In terms of valuations, the FSTREI is trading
above historical levels on a P/B basis
(forward P/B of 1.02x is ~0.5 standard
deviation above its 7-year mean of 0.93x).
The yield spread of the FSTREI over the
Singapore Government 10-year bond yield
currently stands at 4.0%, which is below the
.
.
Singapore Airlines: Vistara to take off on
in Jan-15
All eyes on interest rate movements
During the most recent FOMC meeting this
month, the Fed maintained its dovish stance
on monetary policy. Nevertheless, market
expectations point towards a hike in the Fed
Funds target rate in 2Q15. Consequently, this
would likely influence the Singapore
Government 10-year bond yield and SIBOR
to increase, and could result in volatility in
the share prices of S-REITs. On a positive
note, most REITs have buffered up their
balance sheets to keep gearing ratios at
relatively comfortable levels post the Great
Financial Crisis (GFC), while hedging
strategies have also largely been put in
place. Moreover, evidence suggests that over
a longer time horizon, there is no clear-cut
inverse relationship between the Singapore
Government 10-year bond yield and the
share price performance of S-REITs. The
correlation of the two came in at only -0.11
from Sep 2002 to date.
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OCBC Investment Research
Market Pulse
19 Dec 2014
Calendar of key events
15-Dec-14
16-Dec-14
SG 3Q Unemployment rate
17-Dec-14
18-Dec-14
SG Nov NODX
CN Nov Property Prices
24-Dec-14
25-Dec-14
19-Dec-14
SG Oct Retail Sales
22-Dec-14
23-Dec-14
SG Nov CPI
29-Dec-14
30-Dec-14
26-Dec-14
SG Nov Ind Production
31-Dec-14
01-Jan-15
02-Jan-15
US Dec ISM Mfg
CN Dec Non Mfg PMI
05-Jan-15
06-Jan-15
07-Jan-15
08-Jan-15
US Dec ISM Non Mfg
Composite
09-Jan-15
CN Dec New Yuan Loans
US Dec Chg in Nonfarm
Payrolls
US Dec Unemployment Rate
12-Jan-15
13-Jan-15
14-Jan-15
SG 4Q GDP
US Dec Retail Sales
15-Jan-15
16-Jan-15
SG Dec NODX
US Dec CPI
US Dec Ind Production
Notes:
Sourced from Bloomberg
All US Tech results dates have been adjusted to Singapore dates.
US Initial jobless claims are released every Friday.
MBA mortgage applications are released every Wednesday.
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OCBC Investment Research
Market Pulse
19 Dec 2014
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Carmen Lee
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For OCBC Investment Research Pte Ltd
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