SINGAPORE OFFSHORE AND MARINE | OVERWEIGHT
Credit Suisse, July 18
Despite market concerns of further earnings cuts with low new orders year-to-date, we believe there could be some green shoots in the Q2-2017 results.
Also, we expect interim dividends to be largely maintained, suggesting that the worst might be over.
We expect Keppel to show improving cash flow in Q2-2017, driven by US$275 million (S$376.5m) of downpayment collected from the sale of five jackups to Borr Drilling. O&M profit is also likely to be slightly boosted from the gain on the sale of Keppel Verolme for 23.5 million euros (S$39.5m).
Sembcorp Industries' utilities division is likely to see an improvement in profit particularly in India. We expect Sembcorp Marine's operating margin to improve from 1.8 per cent in Q1-2017.
However, net gearing is likely to remain high pending payment collection for the Cosco sale.
KEPPEL DC REIT | BUY
JULY 18 CLOSE: $1.33
TARGET PRICE: $1.39
OCBC Investment Research, July 18
Keppel DC Reit reported its Q2-2017 results which met our expectations, with distribution per unit (DPU) growing 4.2 per cent year on year to 1.74 Singapore cents.
While management has secured agreement in-principle for two of the major leases expiring in 2017, for the lease at Basis Bay Data Centre, the tenant has decided to return one data centre floor.
As a result of this downsizing, the property's occupancy fell to 63.1 from 100 per cent, while portfolio occupancy slipped two percentage points quarter on quarter to 93.1 per cent, as at June 30. Notwithstanding this disappointing development, we do not expect a significant impact to its financials.
We lower both our FY17/FY18F net property income (NPI) forecasts by 0.7 per cent, and our FY17/FY18F DPU projections by 0.9 per cent, as we factor in the lower occupancy in our model.
VIVA INDUSTRIAL TRUST | BUY
JULY 18 CLOSE: $0.915
TARGET PRICE: $0.97
RHB Research Institute, July 18
Viva has announced the completion of its asset enhancement initiative (AEI) and the opening of Harvey Norman's first ever factory outlet at Viva Business Park (VBP). We are positive on the rejuvenation of VBP (white space) and expect a positive spill-over effect on its business park component.
Additionally, a favourable ruling on the tax transparency treatment for rental support would lift our DPU estimates by about three per cent.
Maintain "buy", with a target price of S$0.97 (from S$0.85, six per cent upside).
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