KEPPEL CORPORATION | OUTPERFORM
JULY 4 CLOSE: $6.34
TARGET PRICE: $8.70
Credit Suisse, July 3
Keppel hosted a tour of the Golar Hilli vessel, which is undergoing commissioning before its scheduled completion next month.
Management presented on its strategy to grow the gas business, which is seen as a revenue opportunity to offset weakness in the rig-building market.
We believe risk-reward appears attractive as the stock is trading close to trough valuation, while potential recovery in non-rig orders and property segments could drive a re-rating. In a grey-sky scenario, we estimate the trough valuation for Keppel to be $6.00, based on 0.9 time price-to-book for its property business and no value for offshore and marine.
SINGAPORE RETAIL | NEUTRAL
RHB Research, July 4
Singapore's retail market is facing significant challenges, with overall retail sales growth falling into a year-on-year decline in Q1 2017.
Retail occupancy and rent have also been on a declining trend since 2015, while the significant capacity coming on-stream over the next few years will likely exacerbate the problem.
Many market watchers are asking the valid question of whether there is too much shopping mall space in Singapore.
We believe the underlying issue is not the amount of space, but what mall owners and retailers have to do in order to revive the retail scene here.
With the rising supply of retail space, we expect the retail rental market to remain soft, though suburban malls are likely to outperform in this respect compared to their central counterparts. Our top pick is Frasers Centrepoint Trust.
On the other hand, Singapore retailers may get a boost to profitability from the softening rental market. We have "buy" recommendations on consumer non-cyclical companies - Dairy Farm and Sheng Siong, where businesses are unaffected by economic cycles, as well as food retailer, BreadTalk, where we expect to see an earnings recovery this year.
CAPITALAND | ADD
JULY 4 CLOSE: $3.51
TARGET PRICE: $4.19
CIMB Research, July 3
We found robust leasing activities amid high take-up rates for the newly opened CapitaLand properties in China.
The company's China properties have strong recurrent income generation with good longer-term visibility, in our view.
CapitaLand is gaining traction in its asset-light retail management contract activities. We maintain our "add" call with an unchanged target price of $4.19, based on a 20 per cent discount to revised net asset value.
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