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Keppel T&T

Expect a stronger 2H

■ KPTT’s 1Q17 net profit was broadly in line at 20% of our FY17 forecast. Net profit fell 13% yoy in 1Q17 due to previous sales of stakes in profit generating assets.

■ The shortfall in group operating profit (1Q17: -S$1.7m vs. 1Q16: +S$6.7m) was partly offset by higher associates contributions (1Q17: S$19.5m vs. 1Q16: S$16m).

■ 2H17 should benefit from 1) fresh contribution from KDC SGP4, 2) higher profit at its Tianjin logistics project and 3) the start of operations at its Lu’an logistics project.

■ KPTT is undertaking a strategic review of its 19% M1 stake. A possible divestment would unlock significant capital and fund its core business growth.

■ Maintain Hold call, with a slightly higher FY17F SOP-based target price of S$1.73.


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First REIT: DPU profile remains stable

First REIT (FREIT) reported a steady set of 1Q17 results which met our expectations. Gross revenue and NPI both rose 2.5% YoY to S$27.2m and S$26.9m, respectively. DPU edged up 1.4% YoY to 2.14 S cents, and was partly boosted by the REIT Manager’s decision to take a bigger percentage of its management fees in units. Looking ahead, FREIT will continue to seek growth from Indonesia as its key focal market. This is buttressed by its right-of-first-refusal agreement with its sponsor, Lippo Karawaci, over its expanding pipeline of more than 40 hospitals. We have not factored in any potential acquisitions in our forecasts. Hence we see room for upward revision to our DPU estimates should management pursue accretive acquisitions for the remainder of the year, supported by its healthy gearing ratio of 30.8%, as at 31 Mar 2017. We maintain HOLD and S$1.32 fair value estimate on FREIT. We believe a more favourable entry point would be S$1.25 and below.


M1 (M1 SP)

More Weak Results Ahead

Maintain SELL post in-line 1Q17 results 1Q17 net profit (adjusted for one-off gain from fixed asset sale) fell 20% YoY to SGD34m, its weakest in six quarters. Mobile revenue and margins were weak as ARPUs were sacrificed for subscriber gains. Management would not commit on either guidance for profits and dividends beyond FY17 or a maximum gearing that it is comfortable with. The risk, in our view, is on the downside. The wild card lies in the on-going shareholder strategic reviews but our current position is to sell into any strength. DCF-based TP maintained at SGD1.75 (WACC 5.2%, LTG 0%).


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Keppel Infrastructure Trust

Steady DPU to start the year off Infrastructure platform with steady cash earnings.

Keppel Infrastructure Trust (KIT) maintained its record of steady DPU of 0.93Scts in 1Q17, as expected. KIT generated distributable cash flow of S$34.2m in 1Q17, slightly lower than expected owing to time lag between tariff adjustments and costs at City Gas. Most of the assets derive revenue from availability-based payments, independent of actual offtake. Hence, cash flows are highly predictable and not exposed to economic cycles. Concession agreements are long term in nature, of up to 20 years, and mostly with government entities, thereby minimising risk.


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LionelLim8.16Check out our compilation of Target Prices

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