Sasseur REIT
Price – $0.77
Target – $0.90

Sasseur REIT (Sasseur) offers a unique and compelling investment proposition with its portfolio of 4 outlet mall properties in China’s Tier-2 cities of Chongqing, Hefei and Kunming. Outlet malls are at the forefront of China’s fast-growing retail format and are potent draws for the burgeoning middle class with a combination of premium product offerings, discounted prices and malls that incorporate lifestyle elements. Hence, we foresee Sasseur’s market to grow at 24% CAGR from 2017 – 2021E. There is downside protection to Sasseur’s distributions as operational risks are transferred to its sponsor through embedded entrusted management agreements structures, which provide for minimum fixed rents with upside potential via a variable component linked to the sales performance of its retail tenants. In addition, acquisition outlook is supported by $700m – $850m of debt headroom as well as 2 right-of-first-refusal assets and 3 third-party pipeline properties which could potentially triple its existing net lettable area. Initiate BUY. Maybank Kim Eng (7 Jun)

City Developments
Price – $11.36
Target – $16.00

While the en-bloc market has already boosted the sentiment and accelerated some of the price recovery over the last 6 months, we believe that this residential cycle would sustain in the next 6 – 12 months driven by improvement in occupancy and the potential turnaround in rental market. Meanwhile, both Manulife Centre and 7 & 9 Tampines Grande under the Profit Participation Securities 2 structure have been put up for sale and we estimated that a successful sale of both assets would more than cover the contingent liability as well as an internal rate of return of over 12% for City Developments (CDL) even if Central Mall was sold at original cost. CDL is currently trading at over 30% discount to FY18E RNAV and 1x P/B in contrast to long-term average of 12% RNAV discount and 1.8x P/B. Hence, we see this as an attractive entry level while Singapore real estate is still in its early cycle. Reiterate BUY. Deutsche Bank (6 Jun)

Sunpower Group
Price – $0.48
Target – $0.77

China has listed environmental protection as a main concern. Identifying small inefficient coal boilers as the culprit of air pollution, strict regulations are set to replace these boilers with “central boilers” which is a potentially huge market estimated at Rmb500b. Sunpower Group (Sunpower) is set to ride on this boiler replacement wave with its proprietary technology advantages – its patented heat exchangers are one of the best in the world – and engineering experience. Furthermore, the ability to deliver steam at a lower price gave the group a competitive pricing edge and higher project capture rate. Apart from Rmb3.4b of committed projects and Rmb2b in its orderbook, Sunpower is on the verge of an explosive growth with another 28 projects in the deal pipeline. While Sunpower has taken an aggressive growth approach through high gearing, a successful execution will generate quality cash flow as evidenced from early projects. Initiate BUY. UOB-Kay Hian (6 Jun)

Sembcorp Industries
Price – $2.93
Target – $3.49

Sembcorp Industries (SCI) is acquiring UK Power Reserve (UKPR), the largest flexible distributed energy generator in the UK which operates a string of reciprocating gas and battery power plants that are in bite-size facilities of 20MW each across 32 locations in the UK. UKPR currently has 533MW of installed capacity and 480MW of new capacity in the pipeline to be gradually rolled out from Oct-18 to Apr-19. Upon full rollout, 15% of UKPR’s power would be backed by 15-year contracts, more than 30% for customers with high predictability and the remaining 40-50% is flexible power for short-term contracts and spot. We see this deal as relatively lower risk, as the smaller plants are cheaper to build and the gradual rollout of plants with an identical configuration is also easier to manage. Furthermore, the mandated shutdown of all coal power plants by 2025 will create structural demand for more flexible distributed power. Maintain ADD. CIMB Research (2 Jun)

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