Compiled by Stephanie Luo, The Business Times
FIRST REIT | BUY
TARGET PRICE: $1.44
OCT 24 CLOSE: $1.38
OCBC Investment Research, Oct 24
First Reit has completed the acquisition of Siloam Hospitals Buton and Lippo Plaza Buton for a consideration of $28.5 million on Oct 10.
This transaction will be DPU-accretive from Q4 17 onwards and is duly incorporated into our model.
Separately, First Reit is also seeking to conduct a joint acquisition of a DPU-accretive integrated development in Yogyakarta. While these should wrap up this year's transactional activity nicely, we believe more could be in store for next year.
Based on our estimates, First Reit's gearing level of 32.6 per cent as at Sept 30 should translate into around $172 million of debt headroom before reaching 40 per cent, which should comfortably support potential acquisitions from its sponsor's pipeline of about 40 hospitals.
Positive base rental revisions should also be achievable, with the latest reported inflation for Jan-Sept coming in at a 0.6 per cent year-on-year increase.
BUMITAMA AGRI | BUY
TARGET PRICE: $1.03
OCT 24 CLOSE: $0.755
UOB Kay Hian, Oct 24
We visited Bumitama Agri's (BAL) estates in Palangka Raya, Central Kalimantan, Indonesia.
The 100,000 ha estate is nine years old. We remain positive on BAL's short- and long-term outlook. We forecast fresh fruit bunches (FFB) production growth of 18 per cent year-on-year for this year, lower than management's guidance of +25 per cent yoy. Should we adjust our FFB production growth to 25 per cent yoy, our 2017 net profit forecast will rise 2.8 per cent.
SINGAPORE OFFSHORE AND MARINE SECTOR | OVERWEIGHT
Credit Suisse Research, Oct 24
One of the key pushbacks from investors is lacklustre new orders, driving concerns on earnings downgrades.
While we have seen Keppel's order book recovering to $3.9 billion in Q3 17 from $3.4 billion in Q2 17, we believe a growing tender pipeline for production units and gas solutions could lead to more orders for Singapore yards.
Sembcorp Marine has been selected as Shell's preferred bidder for the engineering, production and construction contract for a semisub production platform at the Vito oil development in the US Gulf of Mexico.
The contract covers the construction of both the hull and topsides and their integration, and could be awarded upon the final investment decision of the project early next year.
Sembcorp Marine is also well positioned to win construction packages for Maersk's Tyra gas hub, with both likely to be awarded early next year. The letter of intent for two compressed gas liquid carriers could also be finalised.
Our preferred picks are Keppel and Sembcorp Marine.
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