Compiled by Navin Sregantan
SOILBUILD BUSINESS SPACE REIT | HOLD (MAINTAINED)
SEPT 3 CLOSE: $0.54
TARGET PRICE: $0.58
OCBC Investment Research, Sept 3
Soilbuild Business Space Reit (Soilbuild Reit) announced a non-renounceable preferential offering of 192,135,040 new units at an issue price of 53 cents on the basis of 18 new units for 100 existing units.
The offer price represents an 8.6 per cent discount to Aug 21's closing price (the date before the offer was first made).
Soilbuild Reit plans to raise gross proceeds of around $101.8 million to fund the proposed acquisition of a property in Adelaide, Australia.
The acquisition is expected to be distribution per unit (DPU) dilutive, with pro-forma FY2018/H1FY2019 DPU falling 3.3 per cent and 2.4 per cent respectively, assuming 74 per cent equity and 26 per cent debt mix for the preferential offering of $101.8 million.
Post-acquisition gearing is expected to fall from 39.4 per cent to 38.3 per cent.
After adjustments, our fair-value estimate drops from 60 cents to 58 cents. For existing shareholders, we recommend accepting the offer to avoid share-dilution.
Potential catalysts for re-rating is an earlier-than- expected recovery in industrial rents at multi-tenanted assets. Risks include tenant defaults at master-leased assets.
SIA ENGINEERING (SIAEC) | BUY (UPGRADED)
SEPT 3 CLOSE: $2.48
TARGET PRICE: $2.85
Maybank Kim Eng, Sept 2
Market chatter over a possible privatisation of SIAEC has faded and consequently, the stock has fallen 14 per cent in the past two months.
Q1 FY2020 earnings was in line with our expectations with core profit after tax and minority interests achieving 25 per cent of our FY2020 forecast.
We see no change to our outlook for operating fundamentals to justify this share price decline.
SIAEC's franchise strengths are somewhat under-appreciated, we believe.
We expect Changi to maintain its position as the leading aviation hub in South-east Asia.
And although structural changes to the maintenance, repair and overhaul (MRO) business have posed various challenges, SIAEC's cost control, service diversification and efficiency improvement initiatives are starting to show results.
Its maintenance market share in home base Singapore has held steady at about 78 per cent in recent years, providing scale advantages that we believe other operators will find hard to compete with.
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