Compiled by Navin Sregantan
MAPLETREE COMMERCIAL TRUST | HOLD (MAINTAINED)
TARGET PRICE: $2.10
SEPT 30 CLOSE: $2.29
Maybank Kim Eng, Sept 30
Mapletree Commercial Trust's (MCT) Mapletree Business City Phase 2 (MBC II) acquisition from its sponsor was widely anticipated - post-deal its assets under management (AUM) rises 21 per cent to $8.9 billion with a higher 18 per cent technology sector concentration.
Its units have outperformed the S-Reits by 23 per cent in the year up to Sept 27.
We estimate a 4 to 6 per cent distribution per unit (DPU) accretion but see this event as largely priced in at 4 per cent dividend yield on 3 per cent DPU growth; we will adjust forecasts after its (mid-October) EGM.
Its 32 per cent gearing post deal should support its 1.8 million square feet net leasable area (NLA) sponsor pipeline.
Plans to refresh Singapore's southern waterfront are underway, but the primarily office properties would suggest longer term upside.
Frasers Centrepoint Trust (Buy, target price: $2.80) is our preferred retail play, given its suburban mall footprint.
WILMAR INTERNATIONAL | BUY (MAINTAINED)
TARGET PRICE: $4.75
SEPT 30 CLOSE: $3.73
RHB Research Institute, Sept 30
We reiterate the buy call on Wilmar International with a higher target price.
This is due to our sector upgrade to "overweight", as we expect crude palm oil (CPO) prices to rerate upwards in the fourth quarter and continue their upward trend to the first half of 2020.
CPO prices are the leading indicator for plantation price-to-earnings (P/E) valuations. Being one of the largest oil palm owners, we expect Wilmar's upstream business to benefit from rising CPO prices.
We now value its plantations at a higher P/E level.
We expect upstream planters to benefit more from the rise in CPO prices than Wilmar, which is exposed to the entire supply chain of palm oil.
Although Wilmar is much bigger in the processing space, we note that management has highlighted its expectation of a CPO price recovery in the previous two briefings.
This leads us to believe the group has positioned itself to capture higher margins in the upstream segment, while keeping low-cost inventories for its mid-stream and downstream business for subsequent quarters when CPO prices rise.
As such, we have switched our Singapore plantation sector top pick to First Resources.
Wilmar remains one of our Singapore top picks, as the upcoming China IPO remains a key positive catalyst for its share price.
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