Author: kktan
SPH – DBSV
Commercial land at Sengkang West/Fernvale Rd receives good response
A commercial site put up for tender by HDB at Sengkang West Avenue/Fernvale Rd met with good response, attracting 12 bidders. The top price of 328m or $1,155psf ppr was submitted by a consortium made up of SPH and UE. It beat the second bidder Alpro management (JHan Chee Juan, developer of Iluma) with a $959psf ppr price tag. The 94,619sf site can house 283,856sf of GFA. Located at the Fernvale LRT station, the site is seamlessly linked to the Sengkang MRT/LRT station and Sengkang bus interchange and will cater to the lifestyle needs of the growing Sengkang residents as well as those in the north eastern regions of Hougang, Punggol and Serangoon Central.
Based on our estimates, we reckon breakeven cost of the development is $2,300-2,350psf. Based on stabilized monthly rental estimates of $12-14psf, the development can yield 4.3-5.1% return when completed and fully tenanted.
The response continues to support our view of the more resilient nature of suburban retail malls as they cater to more non-discretionary spending patterns. We reiterate our positive stance and maintain Buy call on landlord CMT.
SPH/UED’s top bid for Sengkang retail site – a long term perspective in retail malls
Additional comments on SPH’s bid for retail site at Sengkang West/ Fernvale
• SPH’s continued move in retail mall investment not surprising
• Bid seems optimistic, but likely to adopt a long term perspective given area’s potential
• Do not expect any impact on its DPS (24 Scts)
• Maintain Hold recommendation & TP
SMRT – DBSV
Disembark and move on
• A lower DPS could be additional de-rating catalyst for the counter in light of challenges faced
• Lowered our FY13F yield projections to 4.1%
• Negative profit growth, regulatory risks, management changes are reasons not to hold on
• Cut earnings by 11%/12%; Downgrade to Fully Valued, TP lowered to S$1.50
Lowering our DPS in FY13F. We believe prospective dividend payout could have downside risk on the back of lower profits, higher repair and maintenance costs, and possibly regulatory policy changes. We have lowered our FY13F DPS to 7.25 Scts (interim and final payout) equating to a payout ratio of c.79%, similar to FY07 to FY10. This would bring the prospective dividend yield down to c.4.1%; and, could be an additional de-rating catalyst for the stock, in our view.
Many reasons not to hold on. We project earnings to register -15%/ 1% growth in FY12F/ 13F after trimming forecasts by 11%/12% on higher expenses and lower ridership growth. Higher regulatory risks going forward, as well as the numerous management departures over the last 14 months add to reasons for not holding this counter.
Downgrade to Fully Valued, cut earnings and TP. We lowered our PE/DCF-based TP to S$1.50 given lower earnings, and a lower target PE valuation peg of 13x (-0.5 std dev from average) given sub-par earnings growth. We are cautious on the counter and downgrade SMRT to Fully Valued.
SMRT – DBSV
Disembark and move on
• A lower DPS could be additional de-rating catalyst for the counter in light of challenges faced
• Lowered our FY13F yield projections to 4.1%
• Negative profit growth, regulatory risks, management changes are reasons not to hold on
• Cut earnings by 11%/12%; Downgrade to Fully Valued, TP lowered to S$1.50
Lowering our DPS in FY13F. We believe prospective dividend payout could have downside risk on the back of lower profits, higher repair and maintenance costs, and possibly regulatory policy changes. We have lowered our FY13F DPS to 7.25 Scts (interim and final payout) equating to a payout ratio of c.79%, similar to FY07 to FY10. This would bring the prospective dividend yield down to c.4.1%; and, could be an additional de-rating catalyst for the stock, in our view.
Many reasons not to hold on. We project earnings to register -15%/ 1% growth in FY12F/ 13F after trimming forecasts by 11%/12% on higher expenses and lower ridership growth. Higher regulatory risks going forward, as well as the numerous management departures over the last 14 months add to reasons for not holding this counter.
Downgrade to Fully Valued, cut earnings and TP. We lowered our PE/DCF-based TP to S$1.50 given lower earnings, and a lower target PE valuation peg of 13x (-0.5 std dev from average) given sub-par earnings growth. We are cautious on the counter and downgrade SMRT to Fully Valued.
SPH – CIMB
Tops bid for Sengkang site
Coming in at a 21% premium over the next highest bid, we believe that SPH/UE JV’s bid for the Sengkang retail site is aggressive, notwithstanding the site’s good attributes. Implied 5%yields on breakeven costs are also below cap rates for suburban retail.
We keep our estimates and SOP target price unchanged pending an award of the tender. Maintain Neutral as decent yields of 6% remain balanced by risks of receding ad growth and investments.
What Happened
SPH in a 70:30 JV with United Engineers has come out tops in a bid for a greenfield Sengkang retail site at S$328m (S$1,156 psf ppr) or 21% above the next highest bid. The 99-year leasehold site attracted a total of 12 bidders. Site is targeted for a retail development with maximum GFA of 283,856sf.
What We Think
Management appears to be pricing in a premium in its bid. Factoring in development and other costs, breakeven is estimated at about S$2.5k psf, which translates to yields of about 5.1% assuming rentals of S$15 psf. This compares negatively with typical yields of 5.5-5.6% expected on suburban malls. While the site is well-located near the Fernvale LRT station with potential good rental growth and catchment, we see some competition from Compass Point (next to Sengkang MRT station). A redeeming factor could be its partnership with United Engineers, which could cap or even lower its development costs and risks–we understand that SPH has an agreement with United Engineers whereby the latter bears cost overruns during construction. Funding is not expected to be a problem given its strong balance sheet.
What You Should Do
We see the positive of utilising its balance sheet outweighed by the slight negative of a fairly high bid price. Maintain Neutral as decent yields of 6% remain balanced by risks of receding ad growth and investments.
SPH – CIMB
Tops bid for Sengkang site
Coming in at a 21% premium over the next highest bid, we believe that SPH/UE JV’s bid for the Sengkang retail site is aggressive, notwithstanding the site’s good attributes. Implied 5%yields on breakeven costs are also below cap rates for suburban retail.
We keep our estimates and SOP target price unchanged pending an award of the tender. Maintain Neutral as decent yields of 6% remain balanced by risks of receding ad growth and investments.
What Happened
SPH in a 70:30 JV with United Engineers has come out tops in a bid for a greenfield Sengkang retail site at S$328m (S$1,156 psf ppr) or 21% above the next highest bid. The 99-year leasehold site attracted a total of 12 bidders. Site is targeted for a retail development with maximum GFA of 283,856sf.
What We Think
Management appears to be pricing in a premium in its bid. Factoring in development and other costs, breakeven is estimated at about S$2.5k psf, which translates to yields of about 5.1% assuming rentals of S$15 psf. This compares negatively with typical yields of 5.5-5.6% expected on suburban malls. While the site is well-located near the Fernvale LRT station with potential good rental growth and catchment, we see some competition from Compass Point (next to Sengkang MRT station). A redeeming factor could be its partnership with United Engineers, which could cap or even lower its development costs and risks–we understand that SPH has an agreement with United Engineers whereby the latter bears cost overruns during construction. Funding is not expected to be a problem given its strong balance sheet.
What You Should Do
We see the positive of utilising its balance sheet outweighed by the slight negative of a fairly high bid price. Maintain Neutral as decent yields of 6% remain balanced by risks of receding ad growth and investments.