05th april 2014 market outlook 2q2014 - uniphillip · snapple and starbucks as potential candidates...
TRANSCRIPT
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
05th April 2014 – Market Outlook 2Q2014
Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market Analyst & Equities
Soh Lin Sin, Macro Economist
Osama Bakhteyar, Research Assistant
SG & US Equity AnalystsNicholas Ong, O&M & CPO
Lucas Tan, Real Estate
Wong Yong Kai, US Equities
Colin Tan, Telcos
Caroline Tay, Real Estate
Ben Ong, Financials
Richard Leow, Research Assistant
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jermaine Tock, Operations Exec
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
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India – Upgrade from NW to OW
GDP growth remains stagnant at 4.7%y-y with reduced
downside risk due to a good monsoon season translating
into a better than expected agriculture sector growth.
Inflation remains at the high end but trending lower at
8.1% after RBI took measures by increasing the interest
rates. WPI index looking better at 4.7%.
Current Account Deficit surprisingly much reduced now
after cutting gold and oil imports which roughly accounts
for 35 % and 11% of the total imports respectively.
Key Financial Summary
2011 2012 2013 2014F Average
EPS %y-y 22.74 21.4 19.6 26.35 22.52
P/E, year avg 19.02 17.7 17.4 14.23 17.09
USD:IDR, year avg 46.61 53.36 58.53 62 55.13
Real GDP %y-y 7.88 4.9 4.39 4.7 5.47
Inflation %y-y 8.87 9.69 10.07 9.5 9.53
Policy Rate, year avg 7.58 8.13 7.52 8 7.81
C % GDP 67.03 68.27 67.03 - 67.44
G % GDP 6.99 7.6 8.45 - 7.68
GFCF % GDP 31.14 30.23 28.37 - 29.91
X % GDP 16.19 16.12 16.67 - 16.33
M % GDP -24.83 -26.95 -24.94 - -25.57
CA % GDP -3.36 -4.97 -2.63 -2.05 -3.25
Budget % GDP -4.45 -5.56 -4.81 -4.8 -4.91
Total Govt. Debt % GDP
42.7 44.76 44.88 - 44.11
Govt. Ext/ Debt % GDP 14.99 15.13 14.39 - 14.84
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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4
India – Upgrade from NW to OW
Election season is underway and it looks like BJP
might turn out to be an imminent ruling party. The
BJP candidate Narendra Modi is heavily supported
by the business and investment community.
Currency depreciation has stabilized and FDI has
rebounded as well.
Stock Market has already started to pick up and
YTD has managed to earn returns of 5.86%.
Forward valuations of 14.2x P/E are cheap relative
to the historical average of about 17.1x.
Key risk would be post-election reform promises
not going through.
Unit Trust that proxy India
Aberdeen – India Opportunities SGD
Fidelity – India Focus A SGD
Lion Global – India Acc SGD
ETFs that proxy India
MSCI India – I98 SGX
DBX India – LG8 SGX
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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SodaStream (Accumulate, CP: US$39.9 TP: US$46)
Rumor on major drink company buying a 16% stake at $52
• Israeli financial news Calcalist reported (citing no sources) that SS was in early talks
to sell up to 16% of the company at $52. Specifically mentioning Pepsi, Dr Pepper
Snapple and Starbucks as potential candidates – causing price to spike 8% on
Wednesday.
• Still a rumor as SS has declined comment.
Growth plans in place – Investor brief (Apr 9th, 2014)
• Plans to expand into Mexico and India in near future
• Samsung to have 4 “powered by SS” refrigerators
• US grocery stores push in 2014, in process to build 1-million sq foot production
facility to meet forecasted demand
• Del Monte flavor partnership starting this month in UK, then Italy.
Investment actions
• Despite the recent 8% gap up, market sentiment on SS is still volatile - accumulate
on pullbacks. TP S$46.
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Results update: M1
(S$3.37, Accum. TP S$3.68)
• 1Q14 revenue down 1.2%y-y due to lower handset sales volume.
• However, service revenue (excl. handset sales) up 2.1%y-y at S$240m.
• Net profit grew 4.4% y-y to S$42.8m on:
increasing subscribers and higher mobile data usage,
offset from lower int’l call services (more calls to lower-rate countries).
• Avg data usage per smartphone user at 2.8GB/mth
• 54% of postpaid now on tiered plans; 16% exceeded data allowances.
• Future developments:
Network enhancements: VoLTE (better voice quality), LTE-advanced(faster speed)
Build up enterprise offerings in fixed services segment
On track to 10K subs target on MiBox by mid 2014 BPL cross-carry?
• Catalyst: 4G re-pricing (StarHub to charge 4G at S$2.14/mth from 1-Jun 14)
• Attractive dividend yield > 4%; trading at fwd PE ~18.9x
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Keppel Corp (Neutral, TP: S$11.35)
1Q14: Another quarter of steady O&M margins
• 1Q14 sales of S$3.0bn (+9% YoY, -17% QoQ) and net profit of S$339mn (-5% YoY,
-51% QoQ), with decline due to higher taxation expense at O&M division in 2014
and write-back of tax provision at Property division in 1Q13.
• Excluding reversal of provision due to the sale of the power barge and Property’s
write-back of tax provision from 1Q13 results, net profit would be largely in line.
• Record O&M net order book as of end-1Q14 – S$14.4bn (4Q13: S$14.2bn).
• 1Q14 O&M margin of 14.2% (vs. 14.2% in 4Q13 and 14.0% in 1Q13) remains
stable at a healthy level, despite conservative profit recognition for the 2nd Sete
Brasil semi-submersible unit, where initial recognition begun in 1Q14
Potential upside risks
• Better-than-expected O&M cycle
Investment actions
• Maintain Neutral, TP S$11.35.
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CROESUS RETAIL TRUSTUnique opportunity: Japan Real Estate – Retail
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Overview
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Share Price: S$0.880
52W Range: $0.845 – S$1.180
Market Cap: S$ 377.3 mil
P/B: 0.98x
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Company Background
• First Asia Pacific Business Trust with initial portfolio of Japan retail real estate assets
• Pays out 100% of distributable income in FY14 and FY15 (from listing date-10 May 2013 till 30 June 2015)
• Thereafter, pay out ≥90% of distributable income
• Aim: deliver a competitive return on investment to unit holders of CRT through
• (i) regular, growing distributions &
• (ii) long-term capital value growth of CRT’s portfolio of assets
• Current Portfolio: 6 retail assets in Japan
10
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Japan Macro Outlook
11
• Ranks third in the world – US$5.96 trillion GDP in 2012
• December 2012: Liberal Democratic Party won the election
• Shinzo Abe (Japan’s Prime Minister and the leader of LDP) immediately
established a range of fiscal and monetary policies to stimulate the
economy
• Notable measures: 1) JPY 10.3tn stimulus bill, 2) mandate to bring a ~2
percent inflation rate through quantitative easing
USD 0.00 TnUSD 2.00 TnUSD 4.00 TnUSD 6.00 TnUSD 8.00 Tn
USD 10.00 TnUSD 12.00 TnUSD 14.00 TnUSD 16.00 TnUSD 18.00 Tn
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Japan Macro Outlook
12
JPY vs. USD Nikkei 225
TOPIX
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Japan Retail Sector
• 2nd largest retail market in the world
• Consistent spending patterns & resilience annual growth
• Strong economic growth – indicative of purchasing/spending ability
• Consumption tax hike
• April’14: 5% 8%
• Oct’14: 8%10%
• Rental rates: bottom out in 2012
• Expect reversion to longer term average
• Current: JPY 30000/tsubo/mth (S$10.60 psfpm)
• Long term average: JPY 35,900/tsubo/mth (S$12.60 psfpm)
• In line with broader economy
13
128.0 Tn
130.0 Tn
132.0 Tn
134.0 Tn
136.0 Tn
138.0 Tn
140.0 Tn
30.0 Tn
31.0 Tn
32.0 Tn
33.0 Tn
34.0 Tn
35.0 Tn
36.0 Tn
37.0 Tn
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Yr
Re
tail
Sa
les
Qtr
Re
tail
Sa
les
Retail Sales (Yr) Retail Sales (Qtr)
20000
25000
30000
35000
40000
45000
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
JPY
/Tsu
bo
/mo
nth
Tokyo RV LT Avg
Retail Sales Rental Value - Retail
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
Japan Retail Sector
• Final consumption expenditure
contributes approximately 60% of
Japan’s national GDP.
• Do not foresee a highly variant
change to this ratio in the
foreseeable future.
• Expect the total consumption
expenditure to show a sustainable
increase as the global economy
improves and ratio of job offers to
job seekers expand.
14
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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Japan Retail Sector
Location Net Opr Inc.
Cap Rate
10yr-Gov
Bond Yld
Spread
(bps)
Tokyo 5.75% 0.79% 496 bps
Washington 6.00% 1.76% 424 bps
Los Angeles 5.75% 1.76% 399 bps
London 5.75% 1.85% 390 bps
Singapore 5.00% 1.30% 370 bps
Hong Kong 4.25% 0.61% 364 bps
Munich 4.75% 1.32% 343 bps
Seoul 6.00% 3.03% 297 bps
Sydney 6.00% 3.29% 271 bps
Shanghai 6.00% 3.59% 241 bps
• Cap rate compression
expected
• Downward potential of cap
rate:
• Investment capital inflow
• Heighten commercial real
estate assets demand
15
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Portfolio Assets
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Portfolio Assets
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Aeon Town
Moriya
Luz
Shinsaibashi
Luz Omori
Aeon Town
Suzuka
Mallage
Shobu
NIS Wave I
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Portfolio Assets Summary
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PropertyNLA
(sqm)Tenure
Occu-pancy
Appraised Value
Purchase Price
NPI WALE
Aeon Town Moriya 68,047 Freehold 100% JPY 12,800 M JPY 12,154 M JPY 820 M 14.5
Aeon Town Suzuka 43,501 Freehold 100% JPY 8,790 M JPY 8,439 M JPY 592 M 14.5
Luz Shinsaibashi 2,342 Freehold 100% JPY 9,380 M JPY 9,021 M JPY 448 M 9.2
Mallage Shobu 66,732 Freehold 100% JPY 21,500 M JPY 20,584 M JPY 1,430 M 6.1
Luz Omori 9,285 Freehold 97% JPY 3,560 M JPY 3,530 M JPY 214 M 16.6
NIS Wave 1 7,141 Freehold 100% JPY 11,400 M JPY 10,898 M JPY 652 M 4.8
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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Investment Merits: Above Market Yields
• Compare to J-REITs:
• Assets located in Japan
• Similar tax treatment
• Similar operating environment
• CRT providing above market yields
• Expect cap rate compression
19
+1 std
-1 std
+2 std
-2 std
mean
CRT
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Location Net Opr Inc. Cap Rates 10yr Gov Bond Yld Spread (bps)
Tokyo 5.75% 0.79% 496
Washington 6.00% 1.76% 424
Los Angeles 5.75% 1.76% 399
London 5.75% 1.85% 390
Singapore 5.00% 1.30% 370
Hong Kong 4.25% 0.61% 364
Munich 4.75% 1.32% 343
Seoul 6.00% 3.03% 297
Sydney 6.00% 3.29% 271
Shanghai 6.00% 3.59% 241
vs. Japan REITs Yields
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
Investment Merit: Expect strong recurring income
20
22%
16%
12%
33%
4%
13%Aeon Town Moriya
Aeon Town Suzuka
Luz Shinsaibashi
Mallage Shobu
Luz Omori
NIS Wave 1
-
5
10
15
Aeon TownMoriya
Aeon TownSuzuka
LuzShinsaibashi
MallageShobu
Luz Omori NIS Wave 1
WALE (yrs) Portfolio-WALE
1. CRT acquires assets with the aim todeliver stable recurring dividend toits shareholders
2. Current portfolio has anextraordinary weighted averagelease expiry profile (~11 years)
3. Mallage Shobu (biggest asset):strong upside, expect substantialincrease in rental income
4. Strong portfolio occupancy; all arefully occupied except Luz Omori(97.2%)95.00%
95.50%96.00%96.50%97.00%97.50%98.00%98.50%99.00%99.50%
100.00%
Aeon TownMoriya
Aeon TownSuzuka
LuzShinsaibashi
MallageShobu
Luz Omori NIS Wave 1
Asset Occupancy Portfolio Occupancy
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Investment Merit: Further Growth!
• CRT intends to provide further growth opportunities through value accretive acquisitions and better asset management.
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• Voluntary Right Of First Refusals (ROFR)
Sponsor
• contributed two, out of the four properties in the initial portfolio
• Voluntary ROFR
Daiwa House (Strategic Partner)
• Initial: provided 4 potential assets for acquisitions
• Acquired 2 assets
Marubeni (Strategic Partner) & Third Party Vendors
Property Prefecture Use NLA (Sqm) Status
Mallage Saga Saga Retail 46,566 -
Luz Omori Tokyo Public / Retail 9,271 Acquired
Kyoto-Kawaramachi Kyoto Entertainment 2,423 -
NIS Wave 1 Tokyo Retail 7,141 Acquired
Property Location Property
Type
Expected
Completion
Expected GFA
(sqm)
Shengyang Project (P1) Shenhe Shenyang, Liaoning, China Retail Dec-13 31,799
Maluzhen Retail Project Jiading, Shanghai, China Retail Dec-15 42,171
Japan Property:
China Property:
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Valuation
22
Total (JPY) Total (SGD) Per Share Percentage
Aeon Town Moriya 14,909 M 186 M 0.43 20.5%
Aeon Town Suzuka 10,755 M 134 M 0.31 14.8%
Luz Shinsaibashi 9,982 M 124 M 0.29 13.7%
Mallage Shobu 22,929 M 286 M 0.67 31.6%
Luz Omori 3,569 M 44 M 0.10 4.9%
NIS Wave 1 10,519 M 131 M 0.31 14.5%
Total GAV 72,663 M 905 M 2.11
Add: Cash 7,671 M 141 M 0.33
Less: Debt -39,727 M -554 M -1.29
RNAV 40,607 M 492 M 1.15
Discount to RNAV 10%
Target 36,546 M 442 M 1.03
Yield at TP 7.09%
AT-Moriya20%
AT-Suzuka15%
L. Shinsaibashi
14%
M.Shobu31%
L.Omori5%
N.Wave.I15%
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Recommendation
• Buy:
1. Above market dividend yield ~8.4%
2. Stable recurring income/distribution
• CRT will distribute 100% of distributable income in FY14/FY15
• Distribute 90% thereafter
• Core asset demonstrate strong fundamentals
3. Further value/yield accretive growth
• Pipeline assets from sponsors/strategic partners/3rd party vendors
• Target Price: S$1.03
• Expected annualized yield: ~8.34%
23
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
24
Ask Questions!
Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market Analyst & Equities
Soh Lin Sin, Macro Economist
Osama Bakhteyar, Research Assistant
SG & US Equity AnalystsNicholas Ong, O&M & CPO
Lucas Tan, Real Estate
Wong Yong Kai, US Equities
Colin Tan, Telcos
Caroline Tay, Real Estate
Ben Ong, Financials
Richard Leow, Research Assistant
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jermaine Tock, Operations Exec