1. business and industrial
2. company
3. earnings

Regional Daily, 20 January 2015
5
Regional Daily
Ideas Troika
Top Stories
Anton Oilfield (3337 HK)
Energy & Petrochemicals - Oil & Gas Services
SELL HKD1.60 TP: HKD0.95
Mkt Cap : USD457m
Pg3
Anton’s profit warning came in worse than we had expected amid
cancellation of orders by clients. We cut earnings forecasts for FY14 and
FY15 to negative, and FY16 by 97%. Maintain SELL with a lower TP of
HKD0.95 (0.8x FY15F P/BV).
Analyst: Charles Zhang ([email protected])
M1 (M1 SP)
Communications – Telecommunications
BUY SGD3.62 TP: SGD4.40
Mkt Cap : USD2,532m
Pg4
M1 reported 10% core earnings growth in FY14 (4Q14: +10%),
meeting expectations. Maintain BUY and SGD4.40 TP (7% WACC),
supported by a 2-year core EPS CAGR of 11%. M1 remains our Top
Pick for exposure to the Singapore telco sector.
Analyst: Jeffrey Tan ([email protected])
Inari Amertron (INRI MK)
Technology – Semiconductors
BUY MYR2.72 TP: MYR3.41
Mkt Cap : USD508m
Pg5
Inari’s share price is set to go ex-rights today. Maintain BUY with our exrights TP adjusted to MYR3.41 (17.5x CY15F P/E, 25.3% upside). We advise
investors to subscribe for the cash call as the exercise will help to fund its
expansion plans and hence propel earnings growth over the medium term.
Analyst: Kong Heng Siong ([email protected])
Pg6
Major News For Thai Telcos & Indo Cement Players
Other Key Stories
Regional
Weekly Spices
Analyst: Leng Seng Choon CFA ([email protected])
Malaysia
Axis REIT (AXRB MK)
Property – REITS
NEUTRAL MYR3.52 TP: MYR3.55
Pg7
Analyst: Alia Arwina ([email protected])
Eastern & Oriental (EAST MK)
Property- Real Estate
NEUTRAL MYR2.48 TP: MYR2.12
Pg8
Quill Capita Trust (QUIL MK)
Property – REITS
NEUTRAL MYR1.22 TP: MYR1.25
Pg9
Singapore
Keppel REIT (KREIT SP)
Property – REITS
NEUTRAL SGD1.23 TP: SGD1.18
REITS
NEUTRAL
No Surprises
Penetrating Further Into London
Analyst: Loong Kok Wen, CFA ([email protected])
Organic Growth Still Flattish
Analyst: Alia Arwina ([email protected])
Pg10
Expiry Of Rental Support Dents DPU
Analyst: Ong Kian Lin ([email protected])
Pg11
The REITs Pulsebeat: Weekly Review Report
Analyst: Ong Kian Lin ([email protected])
See important disclosures at the end of this report
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1
Regional Daily, 20 January 2015
Thailand
Ananda Development (ANAN TB)
Property - Real Estate
BUY THB3.48 TP: THB4.20
See important disclosures at the end of this report
Pg12
Second-Highest Condo Presales In 2014
Analyst: Wanida Geisler ([email protected])
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2
Company Update, 20 January 2015
Anton Oilfield (3337 HK)
Sell (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD457m
Target Price:
Price:
HKD0.95
HKD1.60
Macro
Risks
Disappointment Continues
Growth
Value
Anton Oilfield Services Group (3337 HK)
Relative to Hang Seng Index (RHS)
132
5.90
112
4.90
92
3.90
72
2.90
52
1.90
32
0.90
180
160
140
120
100
80
60
40
20
12
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Pro Development Holdings
Corp
Schlumberger NV
56.9m/7.30m
9.4
-40.6
1.41 - 6.02
50
2,212
30.6
19.1
YTD
1m
3m
6m
12m
(4.2)
(9.1)
(27.3)
(65.8)
(73.2)
(78.5)
(7.4)


Likely to incur net loss in 2014. Anton Oilfield Services Group (Anton)
expects its FY14 revenue to decline by over 20%, and its FY14 profit to
fall by over 140%, which translates into a net loss. The company
attributes the net loss to sluggish domestic and international markets
amid low oil prices, which led to cancellation of projects and downward
pricing pressure. This is much worse than our revenue forecast of +6%
and net profit forecast of CNY62m for FY14.
Orders backlog cut amid cancellation of orders. As major clients
cancelled and downsized projects, Anton reduced its orders backlog in
3Q14 by CNY200m to CNY1,956m. Orders backlog at the end of 2014
stood at CNY1,707m, down 13% QoQ. New orders won in 4Q14
amounted to only CNY458m, down 30% QoQ, mainly due to cancellation
and postponement of clients’ projects.
Strategy update offers no assurance on earnings. Anton depicted a
gloomy picture for 2015 as sales and margins may not improve amid
difficult market conditions. Anton will continue its reduction in workforce
in 2015 after a 10% cut in 2014 to control cost.
Bumpy road ahead. Anton has lowered its guidance twice in less than
three months. We think Anton’s business may continue to be under
pressure in 2015 amid low oil prices. We cut our earnings forecasts for
FY14 and FY15 to negative, and FY16 by 97%.
Maintain SELL with a lower TP of HKD0.95. Given the high volatility in
Anton’s earnings, we change our TP to P/BV from P/E-based. Our lower
TP of HKD0.95 (vs HKD1.30) is based on 0.8x FY15F P/BV, 1SD below
its forward P/BV mean. We maintain our SELL call in light of Anton’s net
loss for 2014 and the tough FY15 operating outlook amid low oil prices.
Forecasts and Valuations
Share Performance (%)
Relative


Source: Bloomberg
Absolute
0
0
.
1
0
0
Anton released a series of announcements during the weekend, .
0
including a profit warning, 2015 strategy update and 4Q14 operational 0
update. Maintain SELL with a lower TP of HKD0.95 (0.8x FY15F P/BV, 0
40.6% downside). The profit warning came in worse than we had
expected amid cancellation of orders by clients. We cut our earnings
forecasts for FY14 and FY15 to negative, and FY16 by 97%.

Jan-14
Vol m
Price Close
6.90
(14.4)
(33.1)
(69.6)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
2,005
2,534
1,923
2,353
2,824
Reported net profit (CNYm)
303
383
(162)
(3)
20
Recurring net profit (CNYm)
295
369
(171)
(23)
287.7
25.1
(146.2)
(86.6)
Recurring EPS (CNY)
0.14
0.17
(0.08)
(0.01)
0.00
DPS (CNY)
0.05
0.06
0.00
0.00
0.00
9
7
1.39
1.21
1.38
1.35
1.33
Total turnover (CNYm)
Recurring net profit growth (%)
Shariah compliant


2

.
2
0
.
2




Recurring P/E (x)
na
na
5
na
513
Charles Zhang +852 2103 5842
P/B (x)
[email protected]
P/CF (x)
7.8
7.3
7.1
26.2
15.2
Dividend Yield (%)
3.6
4.3
0.0
0.0
0.0
EV/EBITDA (x)
5.9
5.1
20.2
10.5
9.6
16.6
18.0
(7.5)
(0.1)
1.0
24.2
50.5
69.9
87.9
(261.7)
(111.3)
(98.1)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash
Source: Company data, RHB
See important disclosures at the end of this report
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3
Results Review, 20 January 2015
M1 (M1 SP)
Buy (Maintained)
Communications - Telecommunications
Market Cap: USD2,532m
Target Price:
Price:
SGD4.40
SGD3.62
Macro
Risks
A Strong Close
Growth
Value
M1 (M1 SP)
Price Close
Relative to Straits Times Index (RHS)
3.90
114
3.80
112
3.70
110
3.60
107
3.50
105
3.40
103
3.30
101
3.20
98
3.10
7
96
6
0
0
.
2
0
0
M1 reported commendable 10% core earnings growth in FY14 (4Q14: .
0
+10%), meeting expectations. Maintain BUY and SGD4.40 TP (7% 0
WACC, 21.6% upside), supported by a 2-year core EPS CAGR of 11% 0
from more subscribers ‘tiering-up’ and enhanced revenues from new
smart and cloud solutions. M1 remains our Top Pick for exposure to the
Singapore telco sector. Capital management remains a key catalyst.


5
4
3
Nov-14
Sep-14
Jul-14
May-14
Mar-14
1
Jan-14
Vol m
2

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Axiata Group
Temasek Holdings
SPH Multimedia
3.22m/2.46m
3.9
21.6
3.24 - 3.83
37
931
28.6
19.3
13.5


2

.
1
0
.
1






In line. M1’s FY14 core earnings grew 10% YoY (flat QoQ) to
SGD175m, 2-3% ahead of our and consensus forecasts. Seasonality
and strong iPhone 6 sales explained the 38% QoQ (+24% YoY) surge in
overall revenue. M1 sustained its 100% dividend payout with a final DPS
declared of 11.9 cents/share (FY13: 21 cents/share). This compares with
the previous practice of a special dividend on top of a final payout.
Key highlights. Mobile revenue grew 5.3% YoY in 4Q14 (+4.2% YTD),
led by stronger postpaid growth (+6% YoY) as more subscribers recontracted to tiered data plans (66% of postpaid subscribers on tiered
plans), which saw a SGD2-3/month ARPU increase in Oct 2014. Mobile
internet traffic made up 65% of data traffic as average data consumption
grew to 3GB/month in 4Q14 from 2.5GB/month in 4Q13.
SAC is counter-intuitive. M1 said it is subsidising less on the iPhones
compared to a year ago. Although subscriber acquisition cost (SAC)
climbed 11% YoY in 4Q14, this was attributed to the significantly higher
volume sales of the iPhones vs lower-priced Android handsets.
Capex set to moderate. M1’s capex of SGD140m (4Q14: SGD39m)
was slightly ahead of its guidance of SGD130m due to lumpy
investments in a new data centre and the upgrade to its billing system. It
is guiding for capex to moderate to SGD120m in FY15 which includes
some investments in fibre. The capex excludes the spectrum payment of
SGD64m for the 1,800MHz (FY14: SGD40m for 2,500MHz).
Forecast. We make no changes to our FY15-16 forecasts. Key earnings
risks are: i) stronger-than-expected competition, ii) higher-than-expected
SAC, and iii) adequate spectrum resources.
Share Performance (%)
Dec-12
Dec-13
Dec-14
Dec-15F
Dec-16F
1,077
1,008
1,077
1,179
1,287
Reported net profit (SGDm)
147
160
176
192
211
Recurring net profit (SGDm)
147
160
176
192
211
(10.7)
9.3
9.7
9.0
10.2
Recurring EPS (SGD)
0.16
0.18
0.19
0.21
0.23
DPS (SGD)
0.15
0.21
0.19
0.21
0.21
Jeffrey Tan +603 9207 7633
Recurring P/E (x)
22.4
20.5
18.7
17.1
15.6
[email protected]
P/B (x)
9.44
8.32
8.33
8.16
8.23
P/CF (x)
12.0
10.9
13.6
10.0
10.1
4.0
5.7
5.2
5.7
5.7
EV/EBITDA (x)
11.9
11.3
10.8
9.9
9.3
Return on average equity (%)
43.7
43.1
44.5
48.1
52.6
Net debt to equity (%)
74.6
49.4
70.6
60.2
56.4
5.6
10.7
YTD
Absolute
Relative
0.3
2.2
1m
2.5
1.9
3m
3.1
(1.1)
6m
0.0
0.3
12m
Forecasts and Valuations
10.7
Total turnover (SGDm)
5.8
Shariah compliant
Recurring net profit growth (%)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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4
Company Update, 20 January 2015
Inari Amertron (INRI MK)
Buy (Maintained)
Technology - Semiconductors
Market Cap: USD508m
Target Price:
Price:
MYR3.41
MYR2.72
Macro
Risks
Going Ex-Rights Today
Growth
Value
Inari Amertron (INRI MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.80
3.30
179
2.80
155
2.30
131
1.80
107
1.30
25
83
0
0
.
2
0
Inari’s share price is set to go ex-rights today based on a ratio of 1-for- 0
.
8. Maintain BUY with our ex-rights TP adjusted to MYR3.41 (17.5x 0
0
CY15F P/E, 25.3% upside). We continue to advise investors to subscribe 0
for the cash call as the exercise will help to fund its expansion plans
and hence propel earnings growth over the medium term.

20

15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
5
Jan-14
Vol m
10

Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Insas Berhad
9.07m/2.67m
25.5
25.3
1.55 - 3.34
69
630
31.2
Share Performance (%)

Salient details. The rights price of MYR1.50 represents a discount of
44.8% to its ex-rights price of MYR2.72, based on its last closing. At its
existing share base of 629.6m shares, we estimate that the rights
issuance could raise gross proceeds of over MYR115m. This would help
to partially fund its FY15-17F capex, of which management is looking to
allocate MYR80m for the radio frequency (RF) division, MYR20m for
transceiver research and development (R&D), and MYR40m for potential
new business set-up.
RF growth to propel earnings. On its existing RF division, we had
previously highlighted that the existing capacity is almost fully occupied
at an average utilisation rate of over 85%. Management is currently in
the midst of setting up a new production plant known as P13 to cater for
future growth opportunities within this segment. This new facility will host
additional 80-100 test handlers (from 460 units currently). We expect
commercial production to commence in 2QCY15 upon obtaining a
qualification notification from its customer by Feb 2015.
In-the-money warrants. The exercise price of the warrants at MYR2.00
implies a discount of 26.4% over its ex-rights price of MYR2.72. This
would entice investors to subscribe for the rights as the warrants will be
issued deep in the money. Based on our calculations, Inari Amertron’s
(Inari) share price ex-rights and ex-warrants (given that it is deep in the
money) would be adjusted to MYR2.65 (from its ex-rights price of
MYR2.72).
Maintain BUY. We continue to advise investors to subscribe for the cash
call as we believe the exercise will help to fund its expansion plans and
hence propel earnings growth over the medium term. All in, we maintain
our BUY call with our ex-rights TP adjusted to MYR3.41 (17.5x CY15F
P/E, 25.3% upside). Upon completion of the rights issue and assuming
full conversion of the new warrants, Inari’s fully-enlarged share base
would increase to 804.5m, while we would tweak our TP accordingly to
MYR3.07.
YTD
1m
3m
6m
12m
Absolute
13.0
8.7
12.5
(12.0)
66.9
Forecasts and Valuations
Relative
13.9
7.0
14.9
(5.2)
70.7
Total turnover (MYRm)
Shariah compliant
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
241
794
931
1,099
1,385
Reported net profit (MYRm)
42
101
130
152
218
Recurring net profit (MYRm)
42
101
129
152
217
113.8
142.1
28.7
17.4
42.8
Recurring EPS (MYR)
0.09
0.19
0.18
0.21
0.30
DPS (MYR)
0.05
0.07
0.07
0.08
0.12
Recurring P/E (x)
30.6
14.7
16.1
13.7
9.6
P/B (x)
8.05
5.69
3.75
3.20
2.61
P/CF (x)
17.9
34.2
11.4
13.4
10.4
1.6
2.4
2.5
2.9
4.2
EV/EBITDA (x)
21.6
11.3
11.4
9.5
6.6
Return on average equity (%)
34.8
48.4
35.1
28.4
32.1
Recurring net profit growth (%)
Kong Heng Siong +603 9207 7666
[email protected]
Dividend Yield (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
2




Source: Company data, RHB
net cash
net cash
net cash
net cash
(5.5)
(5.5)
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net cash
6.1
5
Regional Weekly, 19 January 2015
Weekly Spices
Major News For Thai Telcos & Indo Cement Players
We like Thai telcos as they have superior earnings vs
regional peers
Major developments include the Thai mobile operators moving to a ‘per
second billing’ structure, which we believe will have limited ARPU
downside. The Indonesian president announced a cut in cement sales
price, an intervention we feel is negative for the industry. In China, we
remain bullish on stocks related to infrastructure construction.
The Thai telco sector saw a major development. On 7 Jan, the National
Broadcasting and Telecommunications Commission (NBTC) directed all
mobile operators to move to a ‘per-second billing’ structure from the current
practice of charging on a ‘per-minute’ basis. We expect the downside to
ARPU and earnings to be mitigated by higher data usage and acceleration in
smartphone adoption. We are OVERWEIGHT on the sector, based on
superior earnings growth of the telcos vs regional peers. DTAC (DTAC TB,
BUY, TP: THB132.92) is our Top Pick. Telecommunications : Going For
‘Seconds’
Source: Bloomberg
We like CNR, which is merging with CSR.
Source: Bloomberg
Leng Seng Choon, CFA +65 6232 3890
[email protected]
Hong Kong Research
Indonesia Research
Malaysia Research
Singapore Research
Thailand Research
See important disclosures at the end of this report
Thailand’s aviation landscape will see more competition in 2015 on the back
of new carriers set up in Thailand and around the region. This could cap the
yield recovery for Thai carriers. On a positive note, the slump in jet fuel
prices could boost earnings. Stronger earnings prospects are priced in,
notably Asia Aviation (AAV TB, NEUTRAL, TP: THB4.73) and AOT (AOT TB,
TAKE PROFIT, TP: THB251.00). Nok Airlines (NOK TB, BUY, TP:
THB15.96) is our only BUY, given its attractive FY15 P/E and dividend
yields. We also like Thai Airways (THAI TB, TRADING BUY, TP:THB20.64)
as its earnings turnaround could gain traction on its commitment to cut costs
and boost productivity. Thailand Aviation - Be Selective In Picking Winners
Over to China, which is entering its last year of China’s 12th 5-year plan, we
expect the Government to increase infrastructure construction. We forecast
CNY950bn railway fixed assets investment (FAI), representing an 18.8%
YoY growth. China’s active overseas investment through its One Belt One
Road initiative will benefit Chinese construction and equipment companies’
orderbooks from FY15 and P&L from FY16. We upgraded CSR (1766 HK,
BUY, TP: HKD14.66) to BUY after the announcement of the merger with
CNR (6199 HK, BUY, TP: HKD16.28). We maintain BUY on China Railway
Group (CRG) (390 HK, BUY, TP: HKD7.78) and China State Construction
International (CSCI) (3311 HK, BUY, TP: HKD14.63) on their leading position
in China’s railway and affordable housing construction industry respectively.
Our new Top Picks are CNR, CSR and CSCI, given their lagged share price
performance in the past three months. Ride The Wind – Chase The
Laggards
Indonesian president Joko Widodo announced on 16 Jan that the sales price
of cement produced by state-owned cement companies will be reduced by
IDR3,000/sack, equivalent to 8.1% of the ex-factory price. The lower sales
price was likely triggered by the fall in energy costs. We see this as having
limited impact on cement companies’ EBITs, as this is likely partially offset by
lower energy costs that account for 45-50% of cost of goods manufactured
(COGM). However, we view the Government’s intervention on cement
pricing as negative to the industry. Maintain NEUTRAL on the cement sector,
as we expect stiffer competition given a significant increase in cement supply
and new entrants into the industry. We like Semen Indonesia (SMGR IJ,
BUY, TP: IDR18,150), whose energy cost accounts for 51% of COGM.
IND_Basic Materials-Building Materials_Sector News Flash_20150119
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6
Results Review, 20 January 2015
Axis REIT (AXRB MK)
Neutral (Maintained)
Property - REITS
Market Cap: USD540m
Target Price:
Price:
MYR3.55
MYR3.52
Macro
Risks
No Surprises
Growth
Value
Axis REIT (AXRB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.90
136
3.70
129
3.50
123
3.30
116
3.10
109
2.90
103
2.70
3
96
0
0
.
2
0
0
Axis REIT’s 4Q14 results came in within our estimates but slightly .
0
below consensus. Maintain NEUTRAL and MYR3.55 TP (0.8% upside), 0
pending a briefing later today. The REIT announced total FY14 DPU of 0
19.75 sen, up 6.8% YoY. It has also completed some of its proposed
acquisitions back in December, and we expect these assets to start
contributing positively from FY15 onwards.


3
2
2
Nov-14
Sep-14
Jul-14
May-14
Mar-14
1
Jan-14
Vol m
1
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
EPF
KWAP
1.71m/0.49m
-4.8
0.8
2.85 - 3.70
57
548
13.6
7.2


2

.
2
0
.
2






Within expectations. Axis REIT’s 4Q14 core net profit of MYR19.3m
(+2.3% QoQ, -9.9% YoY) brought FY14 core net profit to MYR81.3m (3.8% YoY), in line with our estimates but slightly below consensus. The
REIT announced a distribution per unit (DPU) of 4.15 sen for 4Q14,
bringing total FY14 DPU to 19.75 sen, up 6.8% YoY. The REIT also
announced a revaluation gain of MYR5.1m this quarter.
Updates on new acquisitions. Axis REIT announced in December that
it has completed the acquisitions of Axis MRO Hub, Axis Shah Alam
DC3 and the sale and leaseback of the industrial facility in SiLC, Johor.
In addition, it has also completed the placement of 83.6m new units as
part-funding for the said acquisitions. Recall that Axis REIT has accepted
a letter offer to purchase an industrial facility in Prai for a total
consideration of MYR38m. Given that the acquisitions were only
completed in December, we expect the assets to only contribute
significantly from 1Q15 onwards. 4Q14 gearing was stable at about
32.8%, still below Axis REIT’s internal gearing cap of 35%.
Earnings forecast. We revise our FY15/16 earnings forecasts by less
than 5% after updating our FY14 numbers. We also introduce our FY17
figures.
Maintain NEUTRAL. Our DDM-based TP is maintained at MYR3.55,
pending a briefing later today. We believe that more yield-accretive
acquisitions could be in the cards going forward to further drive earnings
growth.
Share Performance (%)
YTD
1m
3m
6m
12m
Forecasts and Valuations
Dec-13
Dec-14
Dec-15F
Dec-16F
Dec-17F
Absolute
(2.8)
(2.8)
(3.0)
(0.9)
25.7
Total turnover (MYRm)
144
140
175
178
180
Relative
(1.8)
(4.4)
(0.5)
6.0
29.5
Net property income (MYRm)
123
118
151
153
155
Reported net profit (MYRm)
87
82
106
109
111
Total distributable income (MYRm)
87
82
106
109
111
DPS (MYR)
0.19
0.20
0.19
0.20
0.20
DPS growth (%)
(0.5)
6.8
(1.5)
2.2
1.7
Recurring P/E (x)
18.5
21.5
18.1
17.7
17.4
P/B (x)
Shariah compliant
Alia Arwina +603 9207 7608
[email protected]
1.56
1.45
1.62
1.62
1.62
Dividend Yield (%)
5.3
5.6
5.5
5.6
5.7
Return on average equity (%)
8.6
7.0
8.5
9.1
9.3
Return on average assets (%)
5.4
4.4
5.3
5.6
5.6
4.61
4.39
4.66
4.67
4.65
(5.6)
(5.8)
0.0
Interest coverage ratio (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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7
Company Update, 20 January 2015
Eastern & Oriental (EAST MK)
Neutral (Maintained)
Property- Real Estate
Market Cap: USD772m
Target Price:
Price:
MYR2.12
MYR2.48
Macro
Risks
Penetrating Further Into London
Growth
Value
Eastern & Oriental (EAST MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.30
173
3.10
163
2.90
153
2.70
143
2.50
133
2.30
123
2.10
113
1.90
103
1.70
30
93


20
15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
5
Jan-14
Vol m
10

Source: Bloomberg
4.57m/1.34m
33.1
-14.5
1.91 - 3.18
54
1,112
22.0
10.6
7.3
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
10.2
5.5
(4.3)
(17.1)
27.2
Relative
11.2
3.9
(1.8)
(10.2)
31.0
Shariah compliant
Loong Kok Wen, CFA +603 9207 7614
[email protected]


Another project in London. Eastern & Oriental (E&O) announced its
proposed acquisition of two multi-storey office buildings located on a site
of 1.2 acres in London at a purchase consideration of GBP57m (or
MYR308.9m).
Further diversification. According to the announcement, the potential
redevelopment of the two connected buildings could be worth GBP129m
based on a total net internal area of 135,000 sqf (about GBP952 psf).
Hence, this suggests that the acquisition cost is about 44% of GDV,
slightly higher than the previous acquisition of Esca House (about 34%),
but we think there could still be some upside potential to the ASP and
hence GDV. Nevertheless, given the challenging market conditions
locally, we think it makes sense for the local developers to diversify out
of Malaysia.
Funding is crucial. While this new London project will bring in higher
development GDV to E&O’s portfolio, we are cautious on the funding
commitment. The balance of the acquisition cost (85%) will be payable to
the vendor on 31 Mar, being the completion of the proposed acquisition.
E&O indicates that 70% of the purchase consideration will be funded via
bank borrowings. Hence, given the additional MYR216.3m new debt, we
estimate that E&O’s net gearing will rise to about 0.5x.
Earnings forecasts. We maintain our earnings projections as this
redevelopment project may start only in FY17, as design and conceptual
works as well as obtaining the planning permission could take up to one
year. Interest expense and rental income from one of the buildings
should roughly offset each other.
Maintain NEUTRAL. The ex-date (20 Jan) for the 1-for-10 bonus issue
may have contributed to the recent strength in share price. Given the
incremental RNAV and the adjustment for bonus issue, our TP is revised
to MYR2.12 (from MYR2.27 prior to ex-date), based on an unchanged
50% discount to RNAV. Maintain NEUTRAL.
Forecasts and Valuations
Mar-13
Mar-14
Mar-15F
Mar-16F
Mar-17F
Total turnover (MYRm)
606
497
528
655
889
Reported net profit (MYRm)
130
113
106
134
173
Recurring net profit (MYRm)
120
83
106
134
173
Recurring net profit growth (%)
84.5
(30.6)
27.6
25.6
29.4
Recurring EPS (MYR)
0.11
0.07
0.09
0.11
0.14
DPS (MYR)
0.03
0.03
0.03
0.04
0.04
Recurring P/E (x)
23.4
33.8
27.8
23.2
17.9
P/B (x)
2.03
1.91
2.01
1.90
1.77
Dividend Yield (%)
1.4
1.2
1.4
1.5
1.6
Return on average equity (%)
9.7
7.9
7.0
8.4
10.2
Return on average assets (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


3

.
3
0
.
2
0
0
.
2
0
0
While E&O’s new purchase in London should bring in higher .
0
development GDV, we are cautious on the overall funding commitment 0
for this acquisition as well as the reclamation for Seri Tanjung Pinang 2, 0
which is due to start in 2Q15. Maintain NEUTRAL with a revised TP of
MYR2.12 (6% downside vs ex-dividend price). Post-acquisition, we
expect E&O’s net gearing to rise to about 0.5x from 0.31x as at 2QFY15.
25
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Sime Darby
Dato' Terry Tham
GK Goh




Source: Company data, RHB
5.6
4.6
3.9
4.3
5.1
34.3
29.7
46.4
42.7
54.2
(28.1)
(35.7)
(16.8)
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8
Results Review, 20 January 2015
Quill Capita Trust (QUIL MK)
Neutral (Maintained)
Property - REITS
Market Cap: USD133m
Target Price:
Price:
MYR1.25
MYR1.22
Macro
Risks
Organic Growth Still Flattish
Growth
Value
Quill Capita Trust (QUIL MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
1.30
112
1.25
108
1.20
105
1.15
101
1.10
97
1.05
93
1.00
90
0.95
86
0.90
6
82
0
0
.
1
0
0
QCT’s full-year results came in within expectations. Maintain NEUTRAL .
0
and DDM-based MYR1.25 TP (2.5% upside). The Platinum Sentral 0
acquisition has been further delayed until end-March or early April, 0
although both QCT and MRCB remain committed to sealing the deal.
We continue to expect flattish organic growth going forward due to the
soft office rental market.

In line. Quill Capita Trust’s (QCT) MYR34.2m FY14 core net profit (1.1% YoY) was in line with our/consensus full-year forecasts. Full-year
earnings growth remained flattish due to the persistent soft office rental
market, while higher repair and maintenance costs incurred squeezed
FY14 net property income margins slightly to 75.9% (FY13: 77.2%). A
4.28 sen dividend was declared for 2H14, bringing total DPU to 8.38 sen,
similar to last year’s distribution. Renewals remained decent, as almost
all tenancies due to expire in FY14 were renewed. QCT has also
renewed 2% of the 26% due to expire in 2015. That said, we expect
rental reversions to remain flattish, given the persistent challenging office
market. Gearing ratio remained stable at 35.1%. QCT also recorded a
MYR6.1m revaluation gain on its assets.

Further delays in Platinum Sentral’s acquisition. The acquisition of
Platinum Sentral from Malaysian Resources Corp (MRCB) (MRC MK,
NEUTRAL, TP: MYR1.40) is now targeted to only be completed in endMarch or early April. This is because there have been some delays in the
fulfilment of the condition precedents. That said, management is
confident that this is unlikely to be a deal breaker and has reiterated that
both QCT and MRCB remain committed to sealing the deal.
5
4
3
Nov-14
Sep-14
Jul-14
May-14
Mar-14
1
Jan-14
Vol m
2
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
CapitaCommercial Trust
Quill Group
0.20m/0.06m
3.3
2.5
1.01 - 1.24
40
390
30.0
30.0
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
4.3
5.2
6.1
2.5
2.5
Relative
5.3
3.6
8.6
9.4
6.3
Shariah compliant


1

.
2
0
.
1






Forecasts. We revise our FY15-16 numbers by less than 5% after
factoring in the delay in the completion of the acquisition as well as after
updating our FY14 numbers. We also introduce our FY17 forecasts.
Maintain NEUTRAL. We reiterate that QCT may continue to face some
underlying risks over the short term. These include: i) the office space
oversupply situation, ii) high post-acquisition gearing, and iii)
uncertainties arising from a change in management. Hence, we maintain
our NEUTRAL call and DDM-based TP of MYR1.25 for now.
Forecasts and Valuations
Dec-13
Dec-14
Dec-15F
Dec-16F
69
70
107
122
124
Net property income (MYRm)
53.2
53.3
83.8
94.8
96.3
Reported net profit (MYRm)
34.5
34.1
55.9
60.4
61.7
Total distributable income (MYRm)
34.5
34.1
55.9
60.4
61.7
DPS (MYR)
0.08
0.08
0.09
0.09
0.09
Total turnover (MYRm)
Dec-17F
Alia Arwina +603 9207 7608
DPS growth (%)
0.0
0.0
5.1
(0.3)
2.2
[email protected]
Recurring P/E (x)
13.8
14.0
10.9
12.8
13.1
P/B (x)
0.89
0.88
0.82
0.88
0.88
Dividend Yield (%)
6.9
6.9
7.2
7.2
7.4
Return on average equity (%)
6.5
6.3
7.7
6.6
6.8
Return on average assets (%)
4.0
3.9
4.5
3.7
3.8
3.47
3.38
3.45
3.09
3.13
14.1
(13.4)
0.0
Interest coverage ratio (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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9
Results Review, 20 January 2015
Keppel REIT (KREIT SP)
Neutral (Maintained)
Property - REITS
Market Cap: USD2,929m
Target Price:
Price:
SGD1.18
SGD1.23
Macro
Risks
Expiry Of Rental Support Dents DPU
Growth
Value
Keppel REIT (KREIT SP)
Price Close
Relative to Straits Times Index (RHS)
1.35
108
1.30
106
1.25
104
1.20
102
1.15
100
1.10
98
1.05
96
1.00
60
94
0
0
.
2
0
0
4Q14/FY14 DPUs fell 23.4%/8.2% YoY on lower rental support as well as .
0
higher borrowing costs. Reiterate NEUTRAL and DDM-based SGD1.18 0
TP (CoE: 7.3%, TG: 1%), implying a 2.1% total return. All eyes are now 0
on OFC to hit its breakeven rent when its first tranche income support
depletes in 1Q15 for the 87.51% stake of the property acquired from
Keppel Land on 14 Dec 2011. We have factored in the MBFC Tower 3
acquisition into our estimates.

50
40
30

Nov-14
Sep-14
Jul-14
May-14
Mar-14
10
Jan-14
Vol m
20
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Keppel Land
Bank of New York Mellon
DBS Group Holdings
4.87m/3.73m
3.3
-4.1
1.11 - 1.31
58
3,170
42.2
3.4
1.2
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
0.8
2.9
2.9
(3.2)
6.5
Relative
2.7
2.3
(1.3)
(2.9)
1.6
Shariah compliant
Ong Kian Lin +65 6232 3895
[email protected]

4Q14/FY14 results in line. Keppel REIT (KREIT) posted a 23.4%/8.2%
YoY decline in 4Q14/FY14 DPU, meeting 18.7%/96.1% of our full-year
estimates. The decrease came on the back of the expiry of rental
support for Marina Bay Financial Centre (MBFC) 1 and 2, lesser support
contributions from Ocean Financial Centre (OFC), and higher borrowing
costs. Portfolio occupancy rate remained unchanged QoQ at 99.3%, but
aggregate leverage edged up to 43.3% (3Q14: 42.1%) on the MBFC 3
acquisition. All in, financing cost remained flattish at 2.23%. It renewed
and reviewed ~450k sq ft of leases in FY14 at 17% positive rental
reversion, with 55.4% of the new leasing demand from tenants outside
the financial sector. KREIT will be refreshing 420,000 of leases in FY15.
Room to minimise potential income shortfall. The first tranche
income support for the 87.51% stake of OFC acquired from Keppel Land
(KPLD SP, BUY, TP: SGD3.88) will deplete in 1Q15. Management
previously cited the monthly breakeven rent for OFC at SGD12.60-12.70
psf, higher than our estimated average passing rent of SGD9.32 psf for
4Q14. Given the lack of new Grade-A office supply in the central
business district from now until 2017, we see room for KREIT to
progressively minimise this potential income shortfall.
MBFC 3 acquisition completed on 16 Dec. We have factored in the
MBFC 3 acquisition into our estimates. We assume a passing rent of
SGD9.11 psf/month vis-à-vis the rental support breakeven rent of
SGD10.80 psf/month. In addition, we forecast a DPU CAGR of 0.3%
over FY14-17, with the expiry of the second income support tranche for
OFC (the remaining 12.49% stake) in 2016. Reiterate NEUTRAL with a
TP of SGD1.18. Risks to our TP include unfulfilled tenancy replacement
for Standard Chartered Bank at MBFC 1 and Royal Bank of Scotland at
One Raffles Quay (ORQ), and a further dip in FY15-16 DPU, following
early depletion of OFC’s second tranche rental support.

Forecasts and Valuations
Dec-13
Dec-14 Dec-15F Dec-16F Dec-17F
Total turnover (SGDm)
174
184
179
195
206
Net property income (SGDm)
312
336
215
235
248
Reported net profit (SGDm)
726
568
245
274
285
Total distributable income (SGDm)
214
206
248
230
237
0.08
0.07
0.08
0.07
0.07
DPS growth (%)
1.4
(8.2)
7.3
(8.0)
2.3
Recurring P/E (x)
4.6
6.4
16.0
14.4
13.9
0.88
0.87
0.93
0.94
0.95
6.4
5.9
6.3
5.8
5.9
Return on average equity (%)
19.7
13.6
5.6
6.5
6.8
Return on average assets (%)
11.2
8.0
3.3
3.5
3.6
Interest coverage ratio (x)
4.76
4.70
1.60
2.04
2.10
DPS (SGD)
Ivan Looi +65 6232 3841
P/B (x)
[email protected]
Dividend Yield (%)
See important disclosures at the end of this report


2

.
2
0
.
2




Source: Company data, RHB
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10
REITS
19 January 2015
REITS
NEUTRAL
Macro
Risks
The REITs Pulsebeat: Weekly Review Report
Growth
Value


2

2

2




2
S-REITs segmental performance
Office:
Retail:
Industrial:
Hospitality:
Healthcare:
S-REITs:
STI:
Outperf.
1D
(%)
2D
(%)
3D
(%)
5D
(%)
0.7
0.8
1.0
1.0
3.9
9.2
3.9 18.7
1.5
1.5
0.6
1.8
1.9
2.9
5.2
8.0
6.3 17.8
4.1
6.1
(6.9)
(0.1)
1.0
(0.9)
1.2
3.7
4.9
2.5 12.1
2.1
1.8
(10.1)
(0.0)
0.3
0.1
(0.1) 1.9
3.7
3.6
0.7
1.3
(16.8)
0.2
0.9
0.4
1.1
3.2
5.8
0.0 10.4
1.1
1.1
(11.2)
0.4
1.1
0.7
1.6
4.0
6.9
3.5 14.7
2.5
2.5
(7.6)
(1.1) (0.8) (1.2) (1.1) 0.6
4.2
(0.3)
4.9
(1.9)
(1.9)
(4.4)
2.7
3.8
9.8
4.4
4.4
(3.2)
1.5
1.9
1.9
2.8
1M 3M
(%) (%)
3.4
6M 12M MTD YTD
(%) (%) (%) (%)
(2.1)
22
May
2013
(2.0)
Blue denotes best-performing; Red denotes worst-performing
Source: Bloomberg
The continual flattening of the yield-curve will benefit more REITs than
developers in our view. Most REITs have hedged their interest rates risk
(usu. 3-yr SOR) to fixed rates over the coming 1-3 years. According to
their sensitivity analysis, a 50bps increase in interest rate will hit their
DPU by circa 1-3%. On the other hand, residential mortgage loans are
typically pegged to 3-mth SIBOR. Its recent spike is likely to dampen
private home sales even further, posing downside risk to developers.
For 1H15, we do not expect any major roadblock that may derail the low
SG 10-yr govt yields (risk-free rate); already turning south of 2%. Low
DPU growth may persist, but we do not expect a significant downside
risk to property prices in 1H15, especially in the office and retail
subsectors.

S-REITs segmental spreads
(bps)
800
700
0.85
600
0.72
0.80
493
491
0.94
0.81
500
400
350
300
375
375
3.08
2.77
2.66
2.55
3.66
200
100
181
181
0.95
0
Risk-f ree
181
Retail
181
1.41
1.13
Office
Healthcare
Yield Spreads
Adj. Beta
181
0.97
1.18
Hospitality
Industrial
Cost of Borriwng (%)
P/B

Source: Bloomberg
Most geared S-REITs
50%
45.7%
45%
42.1%
41.7%
39.8%
40%
38.2%
38.0%
37.7%
35%
30%
25%
20%
15%
10%
MAGIC
MCT
ASHT
OUTCT
FHT
KREIT
0%
VIT
5%
Source: Companies
*All prices as of morning 19 Jan 2015

OSK-DMG Asia commentary. It was a mostly upbeat week for the
Regional REITs in its second full trading week in 2015. Except for
Australia and Korea, most markets saw weekly rises in price
performance. The upmarkets in descending order include JP (J-REITs:
+3.7% WoW), HK (HK-REITs: +3.4% WoW), SG (S-REITs: +1.6%
WoW), MY (M-REITs: +1.1% WoW) etc. The only down markets were
AU (A-REITs: -2.1% WoW) and KR (K-REITs: -1.3% WoW). Looking at
year to date performance, with the flattening of the yield curves, the
momentum carried forward from last year remained unabated, with
Western REITs charging up the league tables, while Asia-Pac REITs are
playing catch-up
On the S-REITs front, the Retail REITs outperformed again (+2.9%
WoW) for two consecutive weeks, this time driven by CMT, FRT, MAGIC
and SPH REIT, which were up 5.8%, 4.1%, 2.6% and 2.4% WoW
respectively. Hospitality REITs was the only down segment (-0.1%
WoW), dragged down by FHT and ART by -1.7% WoW and -0.4% WoW
respectively. CMT, which was up 5.8% WoW, was the best performing
S-REIT, while FHT, down 1.7% WoW, fared the worst. 5D ADTV at
SGD112m was much higher than last year’s average of SGD70-80m,
indicating keen investors’ interest following the regional dips in 10-yr
yields.
Macro Indicators. Risk-free rate for SG fell another 33.9bps WoW to
1.81%, while US was down 7.0bps WoW to 1.84%. 10yr yields have
effectively given back all of their taper tantrum gains and are
approaching near-term lows. The unabated drop in oil prices is one of
the reasons behind this.
Key rates and forex
3-mth SIBOR (%):
10-yr SG Gov yield (%):
USDSGD exchange:
0.64
1.81
1.3267
P/E (x)
P/B (x)
Yield (%)
Dec-14F
Dec-14F
Dec-14F
SGD2.50
13.0
1.1
6.6
BUY
SGD1.17
SGD1.21
14.2
1.2
7.5
NEUTRAL
CapitaCommercial Trust
SGD1.66
SGD1.85
35.4
1.0
4.9
BUY
CapitaMall Trust
SGD1.98
SGD2.10
13.1
1.1
5.6
BUY
CDL Hospitality Trusts
SGD1.70
SGD1.78
13.3
1.0
6.3
NEUTRAL
Keppel REIT
SGD1.23
SGD1.18
16.3
0.9
6.1
NEUTRAL
Mapletree Logistics Trust
SGD1.18
SGD1.22
9.0
1.2
6.4
NEUTRAL
OUE Hospitality Trust
SGD0.92
SGD0.97
14.0
1.0
7.5
BUY
Starhill Global REIT
SGD0.82
SGD0.91
15.3
0.9
6.2
BUY
Suntec Real Estate Investment Trust
SGD1.79
SGD2.00
19.7
0.9
4.8
BUY
Company Name
Price
Target
Ascendas REIT
SGD2.24
Cache Logistics Trust
Ong Kian Lin +65 6232 3895
[email protected]
Source: Bloomberg
Ivan Looi +65 6232 3841
[email protected]
See important disclosures at the end of this report
Source: Company data, RHB
*Prices as of morning of 19 Jan 2015
Rating
11
Company Update, 19 January 2015
Ananda Development (ANAN TB)
Buy (Maintained)
Property - Real Estate
Market Cap: USD354m
Target Price:
Price:
THB4.20
THB3.48
Macro
Risks
Second-Highest Condo Presales In 2014
Growth
Value
Ananda Development (ANAN TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
4.80
236
4.30
213
3.80
190
3.30
167
2.80
145
2.30
122
1.80
99
1.30
300
76

200
150

Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Vol m
50
Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Chanond Ruangkritya
Thai NVDR
47.5m/1.46m
35.6
20.7
1.59 - 4.36
42
3,333
50.1
4.1
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
6.1
7.4
(8.9)
18.4
91.2
Relative
4.4
3.2
(8.7)
18.9
74.2
Shariah compliant
Wanida Geisler +66 2862 9748
[email protected]

Meets 2014 presales target of THB20bn. Ananda Development
(Ananda) achieved 2014 gross presales of THB20.9bn (condominium
(condo): THB18.5bn, landed property: THB2.4bn). Nett presales, on the
other hand, came in 17% lower at THB17.3bn. We note that Ananda
raised its presales target to THB20bn from around THB10bn set in early
2014 after the successful launch of four new condo projects worth a
combined THB15bn in 3Q14 (73% take-up rate). For 2014, Ananda is
ranked no.2 in terms of condo presales, just behind LPN Development
(LPN TB, BUY, TP: THB27.00).
Optimistic 2015 guidance. Ananda plans to launch 12 new projects
worth a total of THB29bn in 2015, up from four projects worth a total of
THB15bn in 2014. Also, the company estimates full-year presales of
THB22.5bn-23.5bn (up from THB20.9bn in 2014). Revenue is set in the
range of THB12bn-12.5bn (up from THB9.5bn-10.5bn in 2014). In
addition, Ananda expects its gross margin to improve 1ppt to 34% in
2015 from 33% in 2014 (see Figure 3).
3-year bottomline CAGR of 24%. 2015 is likely to be another
challenging year. Its guidance looks bullish amid the current slowdown in
demand. Moreover, only 38% of its full-year revenue target is in hand as
backlog. We note that the majority of its current THB26.7bn backlog will
be realised as revenue in 2016-2017. Therefore, we opt for more
conservative
assumptions,
with
2015/2016
revenue
of
THB11bn/THB14bn respectively, 10%/20% lower than Ananda’s
guidance. Hence, our bottomline growth forecast is cut to 18.6% YoY for
2015 (from 24% previously). For 2016, we expect its earnings to surge
31% YoY mainly due to the completion of four projects worth a total of
THB13bn (including the THB6.8bn Ideo Q Chula-Samyan condo project
in a joint-venture with Mitsui Fudosan). We expect average 3-year
earnings growth of 24% per annum, higher than the sector’s 15%.
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (THBm)
5,661
5,103
9,173
9,694
11,097
Reported net profit (THBm)
(317)
(199)
811
991
1,176
Recurring net profit (THBm)
(122)
79
906
1,030
1,176
Recurring net profit growth (%)
104.9
1040.6
13.7
14.2
Recurring EPS (THB)
(0.12)
0.03
0.27
0.31
0.35
0.00
0.00
0.05
0.06
0.07
DPS (THB)
na
Recurring P/E (x)
na
117
13
11
10
P/B (x)
na
2.29
1.97
1.65
1.38
Dividend Yield (%)
Return on average equity (%)
Return on average assets (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


3

.
3
0
.
2
0
0
.
1
0
0
Ananda achieved the second-highest condo presales in 2014. Maintain .
0
BUY with a new THB4.20 TP (from THB3.70), implying 20.7% upside, 0
based on a higher 12x P/E (from 10x). It expects 2014 earnings to come 0
in higher than consensus estimates on its effective cost control. Our
2015/2016 revenue forecasts are 10%/20% lower than its guidance.
Nevertheless, we expect 3-year earnings CAGR of 24% per annum,
higher than the sector average of 15%.
250
100




Source: Company data, RHB
0.0
0.0
1.4
1.7
2.0
(442.8)
(8.0)
14.8
15.3
15.2
(3.4)
(2.2)
7.4
6.6
6.2
(5018.8)
0.1
(12.7)
89.6
94.8
(0.3)
(7.2)
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