CWT | HOLD
TARGET PRICE: $1.95
APRIL 5 CLOSE: $2.06
OCBC INVESTMENT RESEARCH, APRIL 5
It has been more than 1½ years since CWT announced that the shareholders of C&P Holdings are considering a strategic review of business and assets.
C&P entered into exclusive negotiations with HNA Group on May 16 last year that may or may not lead to any transaction.
On March 21 this year, HNA Group announced that it is planning to buy at least a 35 per cent stake in an Asia-focused Reit that will list in Singapore and will also take a 75 per cent stake in the Reit's management company formed with Singapore-based AEP Investment Management. The latter owns commercial and industrial real estate properties.
If this new Reit has the mandate to acquire industrial properties, there is the possibility for HNA to unlock potential synergy between the Reit and CWT - HNA will be able to recycle capital by divesting CWT's logistics properties into the Reit.
The new mega logistics hub is still on track to complete in 1H17, but it will take time to ramp up occupancy, possibly pressuring margins in the near-term.
SINGAPORE TELCOS | NEUTRAL
RHB, APRIL 5
The Infocomm Media Development Authority netted $1.14 billion from the just-concluded General Spectrum Auction, which saw 175MHz of bandwidth at the 700MHz, 900MHz and 2.5GHz bands assigned to four operators.
Singtel won the biggest chunk of the 700MHz/900MHz. StarHub and M1 netted 15MHz/10MHz of the 700MHz.
The 700MHz band is deemed as prime real estate given its superior propagation (reach and in-building penetration), which also allows for significant capex savings on 4G. We do not rule out M1 and StarHub pooling spectrum resources as part of their network collaboration study. A merger between them will consolidate and strengthen the overall spectrum portfolio.
As for TPG Telecom, it now boasts a good mix of high and low band spectrums, in support of its network deployment.
Based on the spectrum fees to be borne by the respective telcos, M1's net debt/Ebitda stands to be the most impacted, with FY17 net debt/Ebitda set to rise to 1.76x from 1.1x.
This is followed by StarHub's 1.5x (from 0.97x) and Singtel's 0.94x (from 0.87x). We estimate that the impact on M1's TP to be the greatest, potentially knocking off 11.2 per cent, followed by StarHub's -7.5 per cent and Singtel's marginal -0.9 per cent impact.
Our preferred exposure to the Singapore telco sector remains Singtel, given its relatively more diversified earnings base.
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