Wilmar International

Price – $3.63

Target – $4.21

Wilmar International (Wilmar) has leading market shares in essential food items with over 90% of its revenues generated in the world’s largest and fastest growing emerging markets. Hence, the group has a defensive moat to benefit from the rising affluence and increasing demand for food quality and safety, as well as a shelter against the US-China trade war and tech war. Between 2013 till 2018, Wilmar’s volumes have grown at a 4% CAGR and we conservatively forecasted just 2.6% CAGR for 2018 – 2021E. Although the African Swine Flu had lowered demand for soymeal from reduced hog production in the near term, it also opened doors for opportunities by hastening the pace of small farm consolidation and shift towards industrial feeding which should boost volumes in the medium term. Meanwhile, higher Indonesian bio-diesel mandates should also contribute towards better margins and rising ROEs. Initiate BUY. Maybank Kim Eng (28 Jun)

Frasers Commercial Trust

Price – $1.66

Target – $1.65

As widely anticipated, Frasers Commercial Trust (FCT) announced that Google Asia Pacific will take up 344,100 sqft of space in the newly-revamped Alexandra Technopark (ATP) for five years from 1Q20 onwards. The signing of the lease removed a key overhang and should help fill the earnings void following anchor tenant HP Enterprise’s exit. Post lease signing, FCT’s committed occupancy rate stood at 93.7% which improved significantly from 59.2% as at Mar-19. Based on a rental rate assumption of $4.20 psf, the Google lease is expected to contribute about $10.6m in net property income annually. FCT’s current gearing of 29.1% is one of the lowest among the S-REITs which gives it debt headroom for acquisitions. We lifted FY20-21F DPU by 1-3% factoring in the higher occupancy rate at ATP. Nevertheless as the stock has already gained 13% over the past month, we believe that most of the news is priced in and recommend investors to buy on dips. Maintain NEUTRAL. RHB Research (27 Jun)

Keppel Corporation

Price – $6.67

Target – $8.41

Keppel Corporation’s (Keppel) YTD orders of $1.8b have surpassed the past four years trend since the oil price crisis. We think that the group is on track to see steady earnings recovery and hence increased our order target to $3b for FY19. Keppel O&M ventured into the offshore wind market in 2010 with a US$220m contract to build a wind turbine installation vessel for Seafox in the North Sea, and has secured $700m of windfarm-related orders YTD. While the momentum for windfarm-related projects is likely to be more moderate, we expect contract values to be sizeable from US$150m to US$200m. Investors should not be overly concerned about the q-o-q drop in 2Q19 as we believe that 2H19 could be stronger supported by land sale in SSTEC, further strength in O&M and asset recycling exercises. In addition, we understand from management that the consolidation of M1 is unlikely to lead to drastic restructuring costs but upside could come from successful transformation leveraging on the latter’s 2.2m subscriber base and enterprise business. Maintain ADD. CIMB Research (27 Jun)

Wing Tai Holdings        

Price – $2.05

Target – $2.41

It has been reported that Wing Tai Properties, an associate of Wing Tai Holdings (Wing Tai), is looking to sell its units at OMA OMA in Tuen Mun at discounted prices. However we believe that the benign interest rate outlook and low unemployment rate could still support the market despite the macro headwinds. Last week, Wing Tai announced the acquisition of Red Planet Hotel Asakusa Tokyo which is not unexpected as management has previously expressed interest in acquiring investment properties for recurring income. Concurrently, Wing Tai was awarded a prime Middle Road land parcel at a bid of approximately $492m for residential and commercial development. We believe that Wing Tai remains in a good position to weather through the residential headwinds in Singapore given its healthy net cash position as compared to the average net gearing ratio of 65.8% for its peers. At a forward P/B of 0.45 times, the group is trading at 0.7 standard deviations below the 10-year mean. Maintain BUY. OCBC Investment (27 Jun)

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