Brokers’ take
Compiled by Navin Sregantan
CAPITALAND MALL TRUST (CMT) | BUY (UPGRADED)
MAY 27 CLOSE: $2.45
TARGET PRICE: $2.65
UOB Kay Hian, May 27
CMT is a prime beneficiary of growth from the Jurong Lake District (JLD) as Singapore's second central business district. JLD comprises commercial hub Jurong Gateway and leisure precinct Lakeside.
CMT owns three retail malls, IMM Building, JCube and Westgate (located within Jurong Gateway and adjacent to Jurong East MRT station), which in aggregate currently accounts for 20 per cent of CMT's portfolio valuation.
The Reit's Funan, which is 85 per cent larger than its predecessor Funan DigitaLife Mall (closed since July 2016), is scheduled to open in June.
Funan is about 90 per cent pre-committed for retail space and 98 per cent pre-committed for office space.
The manager of CMT expects Funan to provide yield-on-cost of 5 per cent.
We estimate Funan to contribute rental income of $16.5 million in the third quarter, representing 8 per cent of total gross revenue.
We have revised our forecast for distribution per unit higher by 12 per cent for fiscal 2019 to factor in contribution from Funan.
VALUETRONICS HOLDINGS | NEUTRAL (MAINTAINED)
MAY 27 CLOSE: $0.605
TARGET PRICE: $0.67
RHB Research Institute, May 27
As Valuetronics' factories are all in China, we think the ongoing trade war and increase in tariffs will continue to dampen the company's outlook.
Customers that face higher tariffs may likely request further cost-down from the whole supply chain, as well as even delay product launches - which will weigh on its margins and profitability.
Management said it has secured manufacturing orders for smart lighting products for the rest of the world, excluding the US.
We understand that US orders comprise over 50 per cent of the company's smart lightning orders.
This is quite significant as smart lighting accounted for 10 per cent to 15 per cent of its topline as of the first nine months of FY2019.
As a result, we expect revenue to be impacted by 9 per cent to 11 per cent from FY2020 onwards.
We lower margin assumptions for both its consumer electronics and industrial and commercial electronics divisions.
Key downside risks are an economic slowdown, FX risks, raw material prices increasing, and further earnings downside if trade war escalates.
The inverse of such conditions present key upside risks.
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.
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