Compiled by Lee Meixian
ESR-REIT | BUY (MAINTAINED)
JAN 21 CLOSE: S$0.53
TARGET PRICE: S$0.59
DBS Group Research, Jan 21
We believe that the worst could be over for ESR-Reit. We see synergies that the manager can extract post-consolidation, which will be the focus this year.
We see low-hanging fruit coming from cost synergies from an enlarged platform that can be tapped, and stronger access to capital markets backed by a strong sponsor in ESR.
Our estimates are lower than consensus on the back of more conservative reversion assumptions. Despite the current market uncertainty, we find comfort in ESR-Reit's ability to deliver higher earnings organically on the back of expected positive rental reversions this year.
We understand that passing rents across its portfolio (except the light industrial space) are generally at or below market levels, ensuring that earnings downside risk is minimised.
There is also untapped potential for ESR and Viva Industrial Trust's respective asset portfolios - including at least two assets with unutilised gross floor area and several others with potential for conversion into higher-spec facilities.
One of the immediate benefits arising from the merger would be the enlarged Reit's ability to be more active on this front, which can boost shareholder value.
THAI BEVERAGE | BUY (MAINTAINED)
JAN 21 CLOSE: S$0.735
TARGET PRICE: S$0.80
UOB Kay Hian Research, Jan 21
This year looks set to be a big year for ThaiBev, with expectations of a domestic consumption recovery along with the Thai elections.
Initial signs from various internal and external factors bode well in lifting ThaiBev's prospects as seen in the recent price rally.
The counter remains attractive with value to be unlocked from Sabeco, as well as a decent yield of 3.3 per cent.
Beer volume in Thailand rose in the last quarter to 169 million litres (+15 per cent y-o-y) and 227 million litres (+16.1 per cent y-o-y) in October and November 2018 respectively, said the Office of Industrial Economics. Towards the year-end, volumes are usually seasonally stronger, and due to a low-base effect, there looks to be some festive cheer in domestic consumption.
According to Bangkok Post, the Commerce Ministry is pledging to shore up key farm products this year if their prices fall below the targets set by the ministry.
These include introducing measures such as linking with fresh markets to assist in product distribution. While only certain farm produce is affected, the measures may alleviate farmers' fears of depressed prices, and in turn, slow the slide in rural consumption.
Meanwhile, the Thai elections have been earmarked for Feb 19.
However, recent developments indicate that a delay can be expected with the 150-day deadline set on May 5. The elections have been a key event in spurring consumption, as in the case for beer.
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