PLANTATION - REGIONAL | OVERWEIGHT
UOB Kay Hian, May 8
Indonesia is expected to consume up to 1.35 million kilolitres (1.19 million tonnes) of biodiesel in May-Oct 17.
This is lower than expectations as the market was expecting a volume similar to that of the third biodiesel contract.
This is negative to the sector as the market had been expecting Indonesia's biodiesel demand to absorb the excess supply which will come on stream in 2H-FY17.
Meanwhile, we reckon the old biodiesel pricing of crude palm oil base price (US$125 a tonne) will remain for now. Maintain "overweight".
FRASERS LOGISTICS & INDUSTRIAL TRUST | BUY
TARGET PRICE: $1.12
MAY 8 CLOSE: $1.025
OCBC Investment Research, May 8
Frasers Logistics & Industrial Trust (FLT) reported its Q2 FY17 results which beat its initial public offering (IPO) prospectus forecast and was also slightly above our expectations.
Distribution per unit (DPU) of 1.75 cents exceeded FLT's forecast by 6.7 per cent due largely to lower-than-expected finance costs.
Operationally, FLT's portfolio occupancy remained high at 99.3 per cent (unchanged quarter-on-quarter).
Although negative rental reversions came in at 4.85 per cent for Q2 FY17 and 1.68 per cent for 1H-FY17, this is understandable as FLT's average fixed rental escalation of about 3.2 per cent per annum is typically higher than market rental growth, and hence, the rental rates are usually reverted to market rates upon the signing of renewal and new leases.
Looking ahead, we expect FLT's portfolio to remain resilient, as it only has 0.2 per cent and 3.6 per cent of lease expiries (by gross rental income) for the remainder of FY17 and FY18, respectively.
We raise our FY17 and FY18 DPU forecasts by 2.8 per cent and 3.3 per cent, respectively. Maintain "buy" with a higher fair value estimate of $1.12 (previously $1.08).
RIVERSTONE HOLDINGS | BUY
TARGET PRICE: $1.07
MAY 8 CLOSE: $0.97
DBS Group Research, May 8
Upgrade to "buy" as we raise target price to $1.07; earnings catalysed by strong cleanroom demand and new three-year expansion plan.
Riverstone surprised in Q1 FY17, as the uptick in cleanroom demand (20 per cent year-on-year - which carry higher margins) held up profits better than expected.
With demand in the cleanroom segment mainly stemming from the semiconductor and mobile tablet sectors, we see Riverstone as an indirect beneficiary of the current semiconductor up cycle.
We arrive at a higher target price of $1.07 after rolling forward our earnings base to FY18 forecast and raising our profit estimates by 8 per cent/5 per cent for FY17F/FY18F.
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