Compiled by Navin Sregantan
COMFORTDELGRO (CDG) | BUY (UPGRADED)
OCT 2 CLOSE: $2.41
TARGET PRICE: $2.76
Maybank Kim Eng, Oct 1
CDG has de-rated and under performed on the STI over the past one to three months with no major unexpected news.
The share price implies a "no fare hike" scenario for Singapore public transport which we think is not justified.
Aside from the Transport Minister indicating in July 2019 that rail operators such as CDG may receive some form of grant, the public transport council has also indicated a potential 7 per cent fare hike recently.
We previously upgraded our forecasts for the former but not the latter. We believe it is reasonable for at least one of these events to take place in FY2020 and optimistic for both and hence maintain our current forecasts.
The Singapore taxi business remains under pressure from ride hailing as CDG continues to lose fleet share every month up to July. Furthermore, during the recent results management indicated a potential sacrifice of second half of FY2019 taxi margins in order to win back and retain drivers.
Meanwhile, the company's strategic shift to a more regulated return bus contracting type model and continued demand for public transport services will continue to mitigate and outpace such risks. Worse than expected taxi business erosion and/or no fare hikes is the downside risk to our outlook.
EAGLE HOSPITALITY TRUST (EHT) | OUTPERFORM (INITIATE)
OCT 2 CLOSE: US$0.675
TARGET PRICE: US$0.84
KGI Securities, Oct 2
The EHT initial public offering (IPO) portfolio ticks many boxes.
Its properties are well-positioned in prime submarkets, they have been recently refurbished, are actively managed, and diversified for revenue resilience.
We like that the 100 per cent master lease arrangement fixes majority (66 per cent) of rents through a revenue floor, while allowing variable upside should assets outperform.
EHT continues to trade below its IPO price and is currently at 0.8 times its FY2019 price-to-book (PB) value as opposed to the industry average of 1 time for hospitality S-Reits.
From a dividend yield perspective, EHT's forward annualised 10.3 per cent dividend yield looks attractive from a risk-to-reward perspective, and is ranked the highest amongst all S-Reits (average 6.2 per cent).
Key risks include the finalisation of US tax regulation (Section 267A) anticipated at year end, recession worries and foreign exchange risk.
On the operational front, we see disruption to the six assets identified for further asset enhancement initiatives as a risk, alongside, declining RevPAR and occupancy numbers in line with macroforecasts.
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