Compiled by Navin Sregantan
FRENCKEN GROUP | OUTPERFORM (UPGRADED)
SEPT 11 CLOSE: $0.695
TARGET PRICE: $0.81
KGI Securities, Sept 10
Frencken's share price has fallen 10 per cent since our last update. The discount to peers has once again widened to 20 per cent to 30 per cent and we now believe risk-reward dynamics are favourable.
Furthermore, our technology-supply chain analysts in Taiwan are calling for a bottom in earnings for the global electronics manufacturing services companies in Q3 2019.
We upgraded Frencken as its share price now offers a good entry point, with an improved inventory level among top EMS players as the basis for a recovery of earnings in the technology supply chain.
A possible share price catalyst is that Frencken is an attractive takeover target for a larger company given its diverse client and product base.
Risk to our call are that Frencken's main business segments are cyclical in nature.
A spending slowdown in its key business segments - namely semiconductor, automotive and analytical machines - may impact margins and new orders.
However, its track record has shown revenue resilience which may be due to the well-diversified mix of its business.
ASCENDAS REIT | HOLD (MAINTAINED)
SEPT 11 CLOSE: $3.15
TARGET PRICE: $3.25
UOB Kay Hian, Sept 11
Ascendas Reit is better able to weather the uncertainties created by escalation in trade conflict due to its focus on business parks and high-specification buildings, where rents were on a gradual uptrend (53 per cent of portfolio valuation).
An estimated 2.5 million square feet of new business park spaces is expected to come on stream in 2019-2020, representing 10.5 per cent of total stock.
Moreover, 59 per cent of the new supply for business parks in 2020 and 2021 are already pre-committed.
Ascendas Reit will develop a built-to-suit building located at one-north business park to serve as Grab's new headquarters. Grab will lease the building for 11 years with the option to renew for another five years.
The lease has built-in annual rental escalations.
Ascendas Reit will redevelop two existing light industrial buildings at 25 and 27 Ubi Road 4 into a high-specification building. Share price catalysts include its resiliency from business parks and high-specifications industrial segments, and contributions from development projects and asset enhancement initiatives.
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