Brokers’ take
Compiled by Navin Sregantan
KEPPEL REIT | BUY (MAINTAINED)
JULY 16 CLOSE: $1.27
TARGET PRICE: $1.37
UOB Kay Hian, July 16
Keppel Reit, which released Q2 FY 2019 earnings after Monday's market close, declared a distribution per unit (DPU) of 1.39 cents, which is in line with our expectations.
Property income declined 22.7 per cent year-on-year due to a high base as a result of one-off income of $12 million received from the early termination of leases in Q2 FY2018.
We expect Keppel Reit to maintain positive rental reversion for its Singapore office portfolio. 311 Spencer Street will start contributing upon completion in first half of 2020.
The real estate investment trust (Reit) manager has undertaken measures to extend debt maturity and manage interest costs and has managed to refinance all 2019 loans.
Keppel Reit has capital gains of $105 million available to top-up distribution to unitholders or to be deployed in its share buyback programme.
Share price catalysts include higher office rentals here and in Australia, and compression in office capitalisation rates.
Positive newsflow on leasing activity, employment and economic growth are also catalysts.
SHENG SIONG GROUP | SELL (MAINTAINED)
JULY 16 CLOSE: $1.09
TARGET PRICE: $0.95
Maybank Kim Eng, July 15
May's retail sales continued to disappoint for the fourth consecutive month, down 2.1 per cent year-on-year.
This contrasted with food and beverage sales growth of 2 per cent year-on-year.
Bright spots included a slight rebound in supermarket sales of 0.6 per cent year-on-year.
Still, we think it is too early to call for a recovery in demand for supermarket goods.
Sheng Siong will be releasing results for the second quarter of FY2019 at the end of the month.
We forecast revenue for Q2 of $234 million, a 9.9 per cent year-on-year growth from Q2 of the preceding year.
Profit after tax and minority interests is forecasted at $18.3 million, a 6.8 per cent increase. The increases are mainly due to new-store contributions.
While Sheng Siong opened three new stores in May, we remain concerned about same-store sales weakness. Risks to our view include higher-than-expected new-store and same-store sales contributions and improved consumer sentiment.
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.
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