Compiled by Lynette Tan
EC WORLD REIT | BUY (INITIATE)
TARGET PRICE: $0.81
JAN 8 CLOSE: $0.70
RHB Research Institute, Jan 8
EC World Reit's seven logistics assets in China cater to a thriving e-commerce, logistics and supply chain segment that is expected to remain resilient despite trade tensions.
As its properties largely cater to domestic consumption, we see minimal impact from the US-China trade war and could benefit from the government's push to boost domestic growth.
Also, about 70 per cent of EC World's income is backed by sponsor Forchn's master leases, which we expect will continue beyond 2020.
Our recent site visit showed that master lease assets are steadily ramping up, with Forchn likely to extend them for another term.
We also understand that total income from underlying leases is above the lease payments.
Last April, Forchn signed a framework agreement with YCH that gives it the option to acquire the latter's 13 logistics assets across South-east Asia and China when available.
As both regions are touted to be the world's fastest-growing e-commerce and logistics markets, this represents attractive future growth opportunities.
EC World's gearing is low at 30.5 per cent, presenting a good, roughly $250 million debt headroom, assuming 40 per cent as comfortable.
EC World's FY2019 forecast yields are a good 230 basis points and 300 basis points above the industrial Reit and S-Reit averages. Our target price is based on a five-year dividend discount model.
M1 | ACCEPT OFFER (REVISED)
TARGET PRICE: $2.06
JAN 8 CLOSE: $2.07
OCBC Investment Research, Jan 8
As a recap, Konnectivity (offeror), a company jointly owned by Keppel Corporation and Singapore Press Holdings, announced a pre-conditional voluntary general offer for M1 back in September at $2.06 a share.
The offeror has since satisfied the pre-condition of obtaining approval from the Infocomm Media Development Authority and has despatched the formal offer document to shareholders on Jan 7, 2019, for the voluntary conditional general offer of M1.
Shareholders have up to Feb 4, 2019, to accept the offer, or such later date(s) as may be announced.
Our Dec 10, 2018, sector report stated that it would be remiss of the market to discount the effect of TPG Telecom's effect on average revenue per unit, despite the somewhat modest capex spend in Singapore.
As seen from TPG Telecom's subsequent aggressive trial plan as well as generous offerings by incumbents, we believe our cautious outlook remains very much valid.
In the absence of the above offer, we believe that M1 shareholders would continue to be exposed to further downside risks in such a competitive environment.
The offer price also comes at a 24.8 per cent premium over our $1.65 fair value prior to the pre-conditional offer, which we believe is fair, given the headwinds.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.
The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.