KEPPEL CORP | BUY
JULY 21 CLOSE: $6.58
TARGET PRICE: $7.34
RHB Research Institute, July 21
Keppel registered core earnings of $251 million for H1 2017, coming in below our and consensus estimates.
Property and offshore and marine slowed down in Q2 2017, but we believe these two segments will start to pick up in H2 2017, as both segments will start to deliver more projects.
Recurring income coming from the infrastructure segment and investments will continue to provide support to earnings.
For H1 2017, 36 per cent of its net profit came from a recurring income base, mainly from Reits and trusts, asset management, infrastructure services, operations and maintenance, as well as rental and charters.
We make no changes to our earnings forecasts.
We maintain "buy" with an unchanged sum of parts target price of $7.34 (12 per cent upside).
ASCOTT RESIDENCE TRUST | HOLD
JULY 21 CLOSE: $1.21
TARGET PRICE: $1.10
OCBC Investment Research, July 21
Ascott Residence Trust's (ART) Q2 2017 results were within expectation.
After clarifications on the calculation of Q2 2016, we estimate that excluding the $11.9 million one-off forex gain, distribution per unit (DPU) would have been around 1.54 Singapore cents or 25.2 per cent of our initial full-year forecast.
The acquisitions of DoubleTree by Hilton Hotel New York and Ascott Orchard Singapore are expected to be completed in August this year and Q4 2017, respectively.
Gearing is expected to increase from 32.4 per cent to about 36 per cent after the completion of these transactions.
We note the possibility that divestment proceeds from the asset sales in Japan (and later China) may be used to top up ART's distributable income, a decision that management says will be made at year end.
Given the uncertainty surrounding this, we choose not to incorporate such a possibility into our forecasts.
After adjustments, our fair value increases from $1.095 to $1.10. Against yesterday's closing price, ART is trading at 5.1 per cent FY17F yield and 6 per cent FY18F yield.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.