Brokers’ take

Compiled by Navin Sregantan

CAPITALAND | BUY (MAINTAINED)

TARGET PRICE: $4.40

DEC 3 CLOSE: $3.22

UOB Kay Hian, Dec 3

CapitaLand made its first foray into US multi-family properties via the acquisition of 16 freehold properties for US$835 million (S$1.1 billion), which was completed on Oct 18.

The group also expanded its exposure to China, via its effective stake of 20.85 per cent in the 12.8 billion yuan (S$2.5 billion) acquisition of Shanghai's tallest twin towers.

CapitaLand acquired the portfolio of 16 Class B multi-family properties across Seattle, Portland, Greater Los Angeles and Denver in the US, which have yields of 5 per cent to 5.5 per cent.

The total acquisition cost amounts to US$845 million, which will include the purchase consideration of US$835 million and transaction expenses of US$10 million. Since it will be fully funded by fixed-rate debt, we expect only mild earnings accretion of about 0-1.6 per cent between 2018-20.

According to media reports, about 90 per cent of retail space at the Jewel Changi Airport has been pre-committed.

The Jewel Changi is scheduled to open early next year.

For the retail component, our channel checks suggest that the tenant mix will be geared towards affordable/accessible luxury segments to prevent repetition of tenants from other terminals.

Average signing rents are estimated at around $20 to $35 per square feet a month, with close to 90 per cent of the retail spaces having been pre-committed.

Jewel will have more than 280 tenants.

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SINGAPORE REITS | NEUTRAL

OCBC Investment Research, Dec 3

The Singapore Reits (S-Reits) under our coverage recently reported flat year-on-year distribution per unit (DPU) for Q3.

Looking ahead, we are expecting positive DPU growth next year, and this view is also shared by the street.

From a balance sheet perspective, the S-Reits under our coverage have remained prudent on their capital management.

In terms of sub-sector preference, we rank retail Reits as our most preferred, followed by industrial Reits, hospitality Reits and office Reits.

Valuations for the S-Reits have become more reasonable, although not yet at attractive levels, in our opinion.

However, with increasing concerns and uncertainties over global economic expansion next year, we opine that quality defensive yield plays can provide investors an avenue to weather the uncertainties ahead.

Heading into 2019, we maintain neutral on S-Reits, but with a bias to the upside.

Our preferred picks are Mapletree North Asia Commercial Trust (Buy; fair value: $1.34), Keppel DC Reit (Buy; fair value: $1.48), Frasers Centrepoint Trust (Buy; fair value: $2.50) and Frasers Logistics & Industrial Trust (Buy; fair value: $1.19).

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.
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