Author: kktan
SPH – CIMB
Pseudo retail REIT
With a growing retail property arm and stable media business, SPH is increasingly like a retail REIT with limited cash-call risks, in our view. Offering forward yields of 6.4% vs.6.1% for retail S-REITs after its YTD underperformance, we think it offers a cheaper alternative.
We raise our EPS marginally on property rental adjustments and our SOP target price after rolling one year forward. We also raise DPS on less conservative payout assumptions. Upgrade from Neutral to Outperform. We see catalysts from higher-than-expected ad growth.
Retail malls for growth
With a stable and mature print business, we expect SPH’s growth to come increasingly from its retail malls. Revenue CAGR for SPH’s gem asset, Paragon, had been an impressive 8.3% over 2006-11, outstripping that for comparable assets under retail S-REITs. We expect similar success for its Clementi Mall during its first renewal cycle; with the success extending to its Sengkang Mall on completion.
Stable media business to underpin cashflows
We expect its newspaper & magazine segment to remain dominant and underpin SPH’s cashflows. We expect a seasonally stronger 3QFY12, as strong property, auto and telco display ads mitigate lukewarm GSS ad demand and weaker recruit and classifieds.
Pseudo retail REIT
With typical payouts of >90%, we believe SPH is akin to a retail REIT. Against retail REITs, SPH stands out for its stronger balance sheet and thus limited cash-call risks, in our view. 2Q12 net gearing is low at 35% with property asset values booked at historical costs less depreciation. With a growing property arm, we do not dismiss the possibility of a spin-off or sale of assets to a REIT over the longer term.
Cheaper alternative
SPH has underperformed retail S-REITs YTD and during the recent flight to safety. Yields are now 6.4% vs. an average of 6.1% for retail S-REITs. We see SPH as a cheaper alternative for investors seeking exposure to retail S-REITs.
SPH – CIMB
Pseudo retail REIT
With a growing retail property arm and stable media business, SPH is increasingly like a retail REIT with limited cash-call risks, in our view. Offering forward yields of 6.4% vs.6.1% for retail S-REITs after its YTD underperformance, we think it offers a cheaper alternative.
We raise our EPS marginally on property rental adjustments and our SOP target price after rolling one year forward. We also raise DPS on less conservative payout assumptions. Upgrade from Neutral to Outperform. We see catalysts from higher-than-expected ad growth.
Retail malls for growth
With a stable and mature print business, we expect SPH’s growth to come increasingly from its retail malls. Revenue CAGR for SPH’s gem asset, Paragon, had been an impressive 8.3% over 2006-11, outstripping that for comparable assets under retail S-REITs. We expect similar success for its Clementi Mall during its first renewal cycle; with the success extending to its Sengkang Mall on completion.
Stable media business to underpin cashflows
We expect its newspaper & magazine segment to remain dominant and underpin SPH’s cashflows. We expect a seasonally stronger 3QFY12, as strong property, auto and telco display ads mitigate lukewarm GSS ad demand and weaker recruit and classifieds.
Pseudo retail REIT
With typical payouts of >90%, we believe SPH is akin to a retail REIT. Against retail REITs, SPH stands out for its stronger balance sheet and thus limited cash-call risks, in our view. 2Q12 net gearing is low at 35% with property asset values booked at historical costs less depreciation. With a growing property arm, we do not dismiss the possibility of a spin-off or sale of assets to a REIT over the longer term.
Cheaper alternative
SPH has underperformed retail S-REITs YTD and during the recent flight to safety. Yields are now 6.4% vs. an average of 6.1% for retail S-REITs. We see SPH as a cheaper alternative for investors seeking exposure to retail S-REITs.
SingPost – Kim Eng
Parcel Is the New Mail
All the right moves, reiterate BUY. As its restructuring continues, we believe that SingPost is making all the right moves to fend off the negative impact from the sustained decline in global physical mail volume. Our visit to the company last week reaffirmed our view that investors stand to benefit in the long term from its transformation while being protected in the short-to-medium term by its stable dividend payout. We reiterate our BUY call with a target price of SGD1.10 based on 5.7% yield, the average of the top 15 dividend yield stocks in the Maybank Kim Eng coverage universe.
Five pillars, over 20 initiatives. In the face of dwindling global mail volume, newly-minted CEO Dr Wolfgang Baier has introduced the “five pillars” concept, which encompasses over 20 initiatives, in his bid to move SingPost to a new business model. At the core of the strategy is diversification both geographically and product-wise. In our view, the parcel business has a better chance of taking off first, as the investments in Quantium and vPOST are starting to pay off.
Large-scale acquisitions this year or next to surprise the market. SingPost currently sits on a cash balance of SGD617m after the issue of perpetual securities worth SGD350m in Mar 2012. The market has been slightly disappointed that its acquisitions since 2009 have all been small in scale. But it is possible that SingPost would spring a surprise this year – or next – with some large-scale acquisitions.
More cost efficient than peers. While cost pressure will persist in the next few years, we believe that SingPost is one of the most cost-efficient postal organisations among its peers, thanks to its investments in automation and geographical divestment.
Sufficient cash flow to support dividend payout. SingPost has committed to a minimum dividend payout of SGD5cents per share pa. However, based on its operating cash flow generation and recent fund-raising, we believe that it is well able to maintain its track record of SGD6.25cents per share.
SATS – Kim Eng
Cruise or Fly, Still a Buy
Tourism boom in Singapore. Recent visitor statistics have shown an encouraging uptrend despite the volatile economic situation stemming from the European debt crisis. Tourists have not only continued to make Singapore one of their preferred destinations (2011 visitor arrivals +13% YoY), but also increased their spending, leading to an 18% YoY growth in tourist receipts to SGD22.3b for 2011. Together, these figures support the notion of a sustainable tourism boom that Singapore is currently experiencing and which SATS is well-placed to benefit from.
Aviation passengers dominate growth. The aviation visitor segment has shown standout growth of 15% YoY to breach the 10m visitor mark for 2011, backed by the proliferation of budget airline flights to-and-from Singapore. SATS’ key market segment remains the aviation-related space (84% of FY3/12 revenue), and with the Singapore Tourism Board forecasting a further 10% increase in visitor arrivals for 2012, the outlook remains rosy for the company.
Cruise terminal in infancy but a good complement. SATS’ JV with Creuers (SATS-Creuers) to operate Singapore’s newest Marina Bay Cruise Centre welcomed its first vessel on 26 May 2012. While we believe that significant earnings contributions will only accrue to SATS in the medium term, we remain positive that this foray into the cruise terminal operating business will only serve to widen its expansion capabilities within the gateway services space.
Maintain BUY, don’t miss the bumper dividend. Though mindful of the risks ahead for SATS, our optimism continues to be buoyed by its resilient earnings, healthy balance sheet and attractive dividend yields. We maintain our BUY recommendation and target price of SGD3.04, based on 17x FY3/13F earnings. Investors buying in now stand to enjoy the bumper dividend of SGD0.21 per share, which goes ex-dividend on
31 July.
SATS – Kim Eng
Cruise or Fly, Still a Buy
Tourism boom in Singapore. Recent visitor statistics have shown an encouraging uptrend despite the volatile economic situation stemming from the European debt crisis. Tourists have not only continued to make Singapore one of their preferred destinations (2011 visitor arrivals +13% YoY), but also increased their spending, leading to an 18% YoY growth in tourist receipts to SGD22.3b for 2011. Together, these figures support the notion of a sustainable tourism boom that Singapore is currently experiencing and which SATS is well-placed to benefit from.
Aviation passengers dominate growth. The aviation visitor segment has shown standout growth of 15% YoY to breach the 10m visitor mark for 2011, backed by the proliferation of budget airline flights to-and-from Singapore. SATS’ key market segment remains the aviation-related space (84% of FY3/12 revenue), and with the Singapore Tourism Board forecasting a further 10% increase in visitor arrivals for 2012, the outlook remains rosy for the company.
Cruise terminal in infancy but a good complement. SATS’ JV with Creuers (SATS-Creuers) to operate Singapore’s newest Marina Bay Cruise Centre welcomed its first vessel on 26 May 2012. While we believe that significant earnings contributions will only accrue to SATS in the medium term, we remain positive that this foray into the cruise terminal operating business will only serve to widen its expansion capabilities within the gateway services space.
Maintain BUY, don’t miss the bumper dividend. Though mindful of the risks ahead for SATS, our optimism continues to be buoyed by its resilient earnings, healthy balance sheet and attractive dividend yields. We maintain our BUY recommendation and target price of SGD3.04, based on 17x FY3/13F earnings. Investors buying in now stand to enjoy the bumper dividend of SGD0.21 per share, which goes ex-dividend on
31 July.