Brokers’ take

Compiled by Navin Sregantan

KEPPEL CORPORATION

| BUY (MAINTAINED)

APRIL 22 CLOSE: $6.90

FAIR VALUE: $7.83

OCBC Investment Research, April 22

Keppel Corporation saw a 4.1 per cent year-on-year increase in revenue to $1.5 billion but registered a 39.9 per cent drop in net profit to $202.9 million in the first quarter.

The latter accounted for 24 per cent and 21 per cent of ours and the street's full-year forecasts, respectively.

Net profit from the property division decreased by 65 per cent to $132 million in Q1, while Offshore and Marine (O&M) turned in net profit of $5.9 million compared to losses of $109 million and $23 million in Q4 2018 and Q1 2018.

This segment may be looking to add to its workforce this year, the first time since late 2014.

The group has announced a mid- to long-term return on equity (ROE) target of 15 per cent; its average ROE from 2009 to 2018 was 17.7 per cent.

Meanwhile, net gearing rose to 0.72 times in the quarter.`

CAPITALAND COMMERCIAL TRUST (CCT)

| BUY (MAINTAINED)

APRIL 22 CLOSE: $1.93

TARGET PRICE: $2.16

UOB Kay Hian, April 22

Results are in line as CCT continues to achieve stellar portfolio occupancy of 99.1 per cent.

There is more upside for CCT, given acquisition and asset enhancement initiative opportunities in Singapore (HSBC Building, call option for 55 per cent interest in CapitaSpring and ASB Tower).

CCT could also explore acquiring 29-storey ASB Tower - the former CPF Building - at 79 Robinson Road, given that CapitaLand's acquisition of Ascendas-SingBridge was approved by shareholders.

Management also continues to explore opportunities beyond Singapore, and is looking to increase depth in selected gateway cities of developed markets, such as Germany.

The target is for overseas assets to account for up to 20 per cent of the portfolio property value.

Management noted that prime office rent in Frankfurt is the highest among major German cities and also resilient through property cycles.

In particular, the banking district in Frankfurt, where Galileo is strategically located, boasts record low vacancy rates.

Share price catalysts include higher office rentals and positive news flow on leasing activities, and more accretive acquisitions in Germany or Singapore.

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