Compiled by Navin Sregantan
SINGAPORE POST (SINGPOST) | HOLD (MAINTAINED)
JULY 2 CLOSE: $0.96
TARGET PRICE: $1.04
UOB Kay Hian, July 2
SingPost reiterated its focus on service enhancements from its new chief executive officer of postal services, Mr Vincent Phang.
The group aims to address shortcomings in service lapses in recent years, with a spate of fines by the authorities for failing to meet delivery standards.
SingPost was fined $300,000 and $100,000 for failing to meet delivery standards in 2018 and 2017 respectively.
It has focused on its service reliability, doubling on the hiring of postmen with enhanced service initiatives.
With costs already in place, it will take some time before efficiency in deliveries enables volume growth to take effect, especially with some of the service trials commencing later this year.
Operational changes remain in focus as fixed costs are gradually built in and remain a near-term drag. Parcel delivery continues to face competitive pressures as well as the logistics segment. The suggested entry price is $0.88.
SUNTEC REIT | HOLD (MAINTAINED)
JULY 2 CLOSE: $1.95
Jefferies Singapore, July 1
Suntec Reit has entered into an agreement to acquire the entire interest of a currently under- development freehold property in Pyrmont, Sydney.
The acquisition is expected to be completed in Q1 2020, conditional upon the property achieving practical completion and occurrence of the commencement date of the lease of anchor tenant.
This will be the Reit's second acquisition in Sydney, with 14 per cent of assets under management will now be in Australia. It is a central business district fringe asset with 91.2 per cent pre-committed occupancy and more than 10 years of weighted average lease expiry.
The net property income yield, including rental support, is 5.5 per cent.
The acquisition will be debt and/or equity funded with marginal distribution per unit accretion and net asset value dilution on pro forma basis.
Singapore office fundamentals remain sunny.
The expected acquisition would help address the usage of proceeds of recent equity issuance but would still fall short of plugging the 4 per cent dilution.
Suntec Reit's valuations are comparatively cheaper to peers CapitaLand Commercial Trust and Keppel Reit but gearing continues to inch up and retail, while improving, still continues to be in twilight, in our view.
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