FCT and MLT added to Equity Pick Dividend Category


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Group Research14 Aug 2019
  • Market View Update: Christmas before tariffs
  • DBS Equity Picks: Add Frasers Centrepoint Trust to Dividend category
  • DBS Equity Picks: Add Mapletree Logistics Trust to Dividend category
  • DBS Euity Picks: Add City Developments to Blue Chips category
  • China Everbright Water: Results first look – 1H net profit forms 55.7% of full year forecast
Photo credit: AFP Photo


Market View Update

Christmas before tariffs
• LATEST: US delays some tariffs on the additional USD300bn China imports till December 15 to lower the impact on consumers ahead of the Christmas shopping season that includes cellphones, laptops and other consumer goods
• Reaction: Relief trade as US stocks rallied, oil price rebounded, and yields inched slightly higher to 1.7%
• Our thoughts:
- Near-term positive knee jerk reaction for technology stocks such as Hi-P, Frencken
- US latest move signals an ‘unspoken’ truce that hopefully can last till mid-Dec
- But we think Trump may not get his wish for China to ‘buy big’ from American farmers just yet - Because to the Chinese, the tariff delay is temporary, and it is not as if the Chinese can buy now and ‘seek a full refund’ on agricultural goods come 15 Dec

Ideas of the Day

Stocks to Watch

ComfortDelGro : HOLD
Last Traded Price: S$2.62; Price Target (12-mth): S$2.59 (Downside 1.1%)

Tracking at half-time, though not compelling to opt in
• 2Q19 results within expectations with net profit at S$75.9m
• Public transport offsets weaker taxi contribution
• Interim DPS of 4.5 Scts declared
• HOLD and TP of S$2.59 maintained

China Everbright Water : BUY
Last Traded Price: $0.32; Price Target (12-mth): $0.49 (Upside 53%)

Results first look – 1H net profit forms 55.7% of full year forecast
• 1HFY19 revenue rose 5% y-o-y to HKD2.48bn, net profit rose 12% to HKD420m, gross profit margin rose 4ppts to 37%
• 1HFY19 net profit forms 55.7% of our current full-year forecast
• Interim dividend of 0.65Scts vs 0.49Scts last year
• Separately, CEW entered into an agreement relating to the Inner Mongolia Tongliao Development Zone Waste Water Treatment Project Upgrading and Expansion worth about RMB169.4m

DBS Equity Picks

Recall we had pared down our SREITs exposure back in June but will the recent pullback in stock prices and the US 10-year yield falling further to 1.7% (from c.2% previously), we are adding 2 SREITs. We also add City Developments to the Blue Chips category.

Add Frasers Centrepoint Trust 3,200 shares to Dividend category
Fraser Centrepoint Trust (FCT)’s suburban malls have displayed defensiveness even with competition from Jewel. Portfolio occupancy reached a three-year high of 96.8%. FCT is also set to enjoy contributions from Waterway Point from 4Q19. A share price re-rating could be on the cards as well due to increased visibility from a possible inclusion in the EPRA NAREIT Developed Asia Index in Sep 2019.

Add Mapletree Logistics Trust 5,500 shares to Dividend category
Mapletree Logistics Trust (MLT) boasts of a strong average occupancy level of 97.6% across regions and offers a yield of c.5.3%. We believe that the market has not priced in S$500m worth of acquisitions that will be funded by debt and divestments as management is on the hunt for value-accretive projects. In addition, as major markets continue to offer organic growth, we expect a steady DPU growth of c.3.0% CAGR during FY20-21F.

Add City Developments 1,500 shares to Blue Chips category
We add the stock as the commercial properties sector continued to be stable (Office occupancy: 92.1%, Retail occupancy: 95.1%) while the luxury market has remained buoyant. City Dev made an estimated S$587m in strategic acquisitions to build development pipeline and recurring income portfolio. Together with the uplift in RNAV from the privatisation of M&C, we believe the stock will trade higher supported by current low valuations of almost 1SD below historical average during the last property cycle (FY13-17).

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