STARHILL GLOBAL REIT | BUY
TARGET PRICE: $0.81
MAY 26 CLOSE: $0.76
OCBC Investment Research, May 26
Starhill Global REIT (SGREIT) recently divested its entire beneficial interests in the Harajuku Secondo Property for a cash consideration of 410.2 million yen (S$5.1 million), which is at an attractive premium of 22.4 per cent to the property's latest independent valuation.
Management has been seeking opportunities to streamline its portfolio and pare its non-core assets.
Looking ahead, we expect operational challenges to persist in the near-term, although we believe this would be mitigated by a higher rental uplift of 6.12 per cent from August 2017 as a result of the next lease review with David Jones.
We pare our FY17 and FY18 distribution per unit forecasts by 2.4 per cent and 1.5 per cent, respectively, as we factor in lower rental assumptions in our model.
We believe its softer growth prospects have been priced in by the market, with the stock trading at blended FY17/FY18 forecast distribution yield of 6.6 per cent and price-to-book ratio of 0.8 times.
NEO GROUP | NEUTRAL
TARGET PRICE: $0.61
MAY 26 CLOSE: $0.60
RHB RESEARCH, MAY 26
Neo Group announced its full-year result yesterday. Excluding one-off items, FY17 (March) core profit after tax and minority interest of $3.9 million is in line with our expectation.
The strong result was led by turnaround of its food manufacturing business (DoDo business), full-year contribution from the acquisition of CT Veg and narrowing losses in the food retail segment.
We note that growth from its core business, food catering, has remained stagnant mainly on the lack of SG50 celebration for FY17.
Neo Group is mitigating the slower growth by introducing a new catering arm Gourmetz to cater to the elderly and childcare segment.
We think the Group would need a few more quarters to digest its newly acquired U-Market as well as to turn its food manufacturing profitable at the bottom line.
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