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Aviation – Singapore
Recovery On Track But Outlook Not All Rosy; Interest Hikes Weigh On Valuations
The May 22 operation data of SIA reaffirms the sector’s strong recovery momentum in the near term. However, beyond the near-term optimism, high fuel costs and uncertainties of COVID-19 policies in China may limit the extent of the sector’s recovery. The aggressive rate hikes by the Fed and the resultant higher risk-free rates would weigh on companies’ valuations. Maintain MARKET WEIGHT and lower our DCF-based target prices for SIA Engineering and SATS.
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REITs – Singapore
S-REITs Bi-Weekly Updates (1-15 Jun 22)
Financial markets are battered by fear of elevated inflation and slowdown in economic growth. Although having corrected, S-REITs outperformed the broader market due to their defensive characteristics and stable cash flows. Focus on recovery from
reopening plays. BUY ART (Target: S$1.25), FCT (Target: S$2.79), FEHT (Target: S$0.78) and LREIT (Target: S$0.96). Maintain OVERWEIGHT.
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Keppel DC REIT
Deepens footprint in China
■ KDC REIT is acquiring two data centres in Guangdong for S$297.1m
■ Deal to be DPU accretive, acquisition to be funded by debt and equity
■ Reiterate Add with a slightly higher DDM-based TP of S$2.63
Acquiring two DCs in China for S$297.1m KDCREIT has entered into agreements with Guangdong Bluesea Data Development Co Ltd (Bluesea) and its parent company Guangdong Bluesea Mobile Development Co Ltd to acquire two data centre (DC) facilities, on a fully fitted basis, in Jiangmen, Guangdong for Rmb1,380.6m (c. S$297.1m) or at a 0.6% discount to independent valuations. The two DCs will be named Guangdong DC2 and Guangdong DC3, upon completion of the deal.
We expect the acquisition to strengthen KDCREIT’s foothold in China, Asia’s largest data centre hub. The properties will be leased to Bluesea on a triple-net basis for 15 years. With
the long lease term, KDCREIT’s weighted average lease to expiry would lengthen to 8.8 years (from 7.7 years as at 1Q22) and portfolio occupancy increased marginally to 98.9%.
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Singapore tech tour
Together with our US partner Raymond James, we hosted a group of US-based fund managers for the Singapore leg of their Asian Tech Tour over 13-15 June 2022.
The visit covered 6 companies in our universe (ISDN, AEM, Venture, Nanofilm, Grand Venture & UMS), where these investors had a chance to learn about the companies and the current industry dynamics.
Venture Corporation is our large-cap alpha pick for 2022F with an Add recommendation and a TP of S$23.32 as earnings normalise in a post-Covid-19 world.
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Gamuda (GAM MK)
Wins 2nd Australian E&C job
Orderbook lifted to MYR12.5b
Gamuda’s 2nd Australia project win - main package for the Coffs Harbour Bypass – has lifted its outstanding orderbook to MYR12.5b, based on its 50% stake in the JV which won the project (worth AUD1.35b) and its MYR10.4b outstanding orderbook as of early-Mar 2022. This latest win brings Gamuda closer to its MYR20b E&C orderbook target by mid-2023.
We have a BUY on the stock with an unchanged MYR4.28 RNAV-TP.
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