Compiled by Stephanie Luo, The Business Times
OCBC BANK | BUY
TARGET PRICE: $12.80
OCT 25 CLOSE: $11.55
DBS Group Research, Oct 25
OCBC is due to release its Q3 '17 results today before market opens. Taking the cue from Great Eastern Holdings' results, OCBC's non-interest income should be decent.
Although insurance income contribution would likely be lower q-o-q, this would be offset by the improved wealth management business during the quarter, which we understand, should remain strong.
H2 '17 non-interest income would likely be softer versus H1 '17 in the absence of big fund launches. There will be small gains booked for the sale of its shares in United Engineers. There should be no surprises in its expense trends with cost-to-income ratio ranging at 40-45 per cent. Its NIM (net interest margin), however, could be flattish.
CACHE LOGISTICS TRUST | NEUTRAL
TARGET PRICE: $0.82
OCT 25 CLOSE: $0.845
Phillip Securities Research (Singapore), Oct 25
The outlook is stable. This is due to the use of proceeds from the rights issue to pare down debt.
At the Trust level, debt headroom is now higher and this is favourable for acquisitions.
Debt headroom is about $110 million by our estimate (assuming 40 per cent target leverage), potentially growing the portfolio by 9 per cent.
For unitholders, FY18e DPU from operations is expected to be lower y-o-y due to the 18 per cent dilution from the rights issue. However, this can be mitigated if the manager utilises the debt headroom to make acquisitions. Our forecast remains largely unchanged.
MAPLETREE LOGISTICS TRUST | HOLD
TARGET PRICE: $1.25
OCT 25 CLOSE: $1.29
Maybank Kim Eng Research, Oct 25
We adjusted our model estimates to factor in the Tsing-Yi acquisition, dilutive effects of its financing initiatives and lower borrowing costs.
NPI (net property income) margins are expected to stabilise with minimal subsiding conversion pressures, with single-user assets just 1.8 per cent of expiring leases in FY '18.
We have raised revenue by 6 to 12 per cent, with DPU up 1 per cent. Earlier-than-expected pickup in leasing demand for logistics space driving improvement in occupancy.
Prolonged slowdown in economic activity could reduce demand for logistics space, resulting in lower occupancy and rental rates. Significant volatility in AUD, JPY, MYR and KRW could impede hedging efforts and impact DPU estimates.
Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations.
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