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PHILLIP SECURITIES |
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Offshore & Marine Brazilian rigs set free
■ We estimate a range of US$102m to US$316m of new contracts each for KEP and SMM to complete the Sete Brasil (SB) rigs for Magni Partners. ■ KEP will have full titles of the remaining uncompleted 4 SB rigs which may allow it to sell to potential buyers. This could add US$695m-1bn of work. ■ The above development is positive for the yards. Maintain Add for KEP (TP: S$8.41) and Hold for SMM (TP: S$1.26).
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First REIT Good quality assets - but still requires Sponsor’s support
We visited four of First REIT’s assets in Jakarta – three hospitals and a hotel-country club asset – on the 26th of September 2019. Three of the assets we visited, Siloam Hospitals Lippo Village (SHLV), Siloam Hospitals Kebon Jeruk (SHKJ) and Imperial Aryaduta Hotel & Country Club (IAHCC) have leases expiring in December 2021 (figure 2 and 3), the second earliest lease expiry in the portfolio. These three assets contribute 23.3% to FY18 revenue and are leased out to subsidiaries of Sponsor, PT Lippo Karawaci (LPKR). The last asset visited was Mochtar Riady Comprehensive Cancer Centre (MRCCC) which has a December 2025 lease expiry.
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MAYBANK KIM ENG |
RHB |
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ST Engineering (STE SP) Like to like again
We met with STE for an update; Its various strategic and growth initiatives appear to be on track, which would suggest the 8% share price decline the past quarter is unwarranted. Additionally, its long term capital structure will likely have a higher level of gearing than we expected which drives down our WACC assumption and increases our TP increase to SGD4.50 from SGD4.30. With 17% upside to our revised TP and 15% return potential, we upgrade rating to BUY from HOLD.
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Technology Change In Sector Dynamics
Staying NEUTRAL. Our approach has remained unchanged, focusing on key selection of stocks that have sound fundamentals, as well as those that can potentially benefit from the relocation of production. Among our Top Picks: Venture Corp, Fu Yu Corp, and Frencken. We keep our sector call and stick with our picks for FY19 while awaiting a conclusion to the US-China trade war, as both sides are scheduled to resume talks next month.
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Check out our compilation of Target Prices
