Brokers' take

Compiled by Jamie Lee,
The Business Times

SINGAPORE REITS | NEUTRAL

OCBC Investment Research,
March 23

The Fed's dot plot diagram indicates that the committee is still expecting three rate hikes this year, unchanged from the December 2016 FOMC meeting.

Looking ahead, given more encouraging economic data points arising not only from the US, but also from other key economies such as China, coupled with the recent robust performance of the equity markets, we believe the likelihood of a faster-than-expected pace of rate increase remains a possibility at this juncture. We project softer distribution per unit growth in FY17.

While we believe S-Reits still warrant a strategic position in investors' portfolio in light of uncertainties surrounding the geopolitical and macroeconomic environment, valuations are no longer compelling.

As such, we downgrade the S-Reits sector from "overweight" to "neutral". Based on current price levels, our top picks are Keppel DC Reit, Frasers Centrepoint Trust, and Frasers Logistics & Industrial Trust.

THAI BEVERAGE | ADD
TARGET PRICE: $1.07
MARCH 23 CLOSE: $0.935

CIMB RESEARCH, MARCH 22

The F&N/FCL restructuring is to propel the group into a regional beverage player. Management reiterated its expectation of completing F&N/FCL's restructuring by September 2017. Its tone on timeline guidance has never been so confident.

We think the key is to divest FCL and utilise the proceeds to further the group's ambition of becoming a regional beverage player across multiple products.

However, we estimate earnings dilution of about 9 per cent from restructuring F&N/FCL. We expect the group to mitigate this with other acquisitions.

Without equity fund-raising, we estimate it will be able to undertake a US$1.5-US$2 billion acquisition. For perspective, Sabeco, a potential target, is worth US$5.8 billion. Maintain Add as ThaiBev evolves into a regional and total beverage player.

CITY DEVELOPMENTS | BUY
TARGET PRICE: S$11.30
MARCH 22 CLOSE: $10.22

RHB RESEARCH, MARCH 23

Our recent site visit to the newly completed South Beach Project reinforces our positive view on CDL's project management capabilities.

Post-policy relaxation, sales momentum has picked up across its Singapore residential projects, which should lower inventory risk. Additionally, its strong balance sheet offers healthy headroom (more than S$3 billion) for acquisitions. Despite a share price outperformance, CDL remains our preferred pick for its asset monetisation ability, nimble capital management and acquisition potential.

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