Broker's take

Compiled by Navin Sregantan

COMFORTDELGRO | TAKE PROFIT

APRIL 3: $2.58

TARGET PRICE: $2.65

RHB Research Institute, April 3

We remain positive about ComfortDelGro's growth in the public transportation business, profit contributions from new acquisitions and likely improvement in taxi earnings amid a lack of competition from ride-hailing players.

The company also has ample debt head room that provides more inorganic growth opportunities.

However, after delivering around 21 per cent returns in the year-to-date period, ComfortDelGro seems fairly priced.

As at closing on April 2, ComfortDelGro traded at 17.3 times its 2019 price to earnings (P/E) ratio (it has a 5-year average of 15.4 times).

Investors could consider buying ComfortDelGro again, if the share price drops below $2.50.

Earnings-accretive acquisitions and higher-than-estimated improvements in its taxi business offer near-term upside risks.

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SASSEUR REIT | ADD

APRIL 3: $0.795

TARGET PRICE: $0.92

CGS-CIMB, April 2

Sasseur Reit is the first listed outlet mall Reit in Singapore which offers investors exposure to the most rapidly-growing part of the China retail value chain.

It has first-mover advantage in Tier-2 cities Chongqing, Bishan, Kunming and Hefei to capitalise on expanding private consumption appetite and rising number of middle-income households.

Similar to a master lease structure, Sasseur Reit derives rental income from a lease arrangement called entrusted management agreement with the entrusted manager.

This structure enables the Reit to deliver a balance of stability (with downside protection) from the fixed component and growth through tenant sales performance.

Sasseur Reit's gearing was 29 per cent at end-2018, and based on our estimates, has little refinancing needs in FY2019-2020.

As such, we believe it is well-placed to tap inorganic growth opportunities.

Based on the 45 per cent aggregate leverage ceiling, we estimate Sasseur Reit has debt headroom of S$283 million to fund potential new acquisitions.

We think Sasseur Reit would benefit from sponsor Sasseur Group's expertise in managing tenant mix and driving sales.

A slowdown in private consumption in China is a downside risk to the rating.

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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