Cache Logistics Trust Would it be a case of déjà vu?
■ CACHE has announced a rights issue to raise gross proceeds of S$102.7m. Proceeds would be used to pare down debt.
■ We expect gearing to decrease to 35.3%. Factoring in S$3.5m interest cost savings p.a. plus the rights issue, we cut our FY17F-19F DPU forecasts by 3.5-10.5%.
■ Judging from its previous equity fund raising in 2015, we would not be surprised if CACHE acquires Australian assets in the next couple of months.
■ In the near-term, we expect unit price to come under pressure from this pre-emptive rights issue. Maintain Reduce with a lower DDM-based target price.
SG Hospitality: Leisure demand looks to remain healthy
Wheelock Properties (WP SP)
Ready To Pounce
We see good value in Wheelock that is trading at a deep 33% discount to its RNAV of S$2.74, despite its net cash position with S$448m in the coffers and no outstanding debt. It is a key beneficiary of the property sector turnaround and rotational interest, deriving over 80% of its value from Singapore. It offers a stable dividend yield of 3.3% supported by a strong recurring income stream from its investment properties. Resume coverage with a BUY and a target price of S$2.33. Deployment of S$2b in acquisition headroom will be a key re-rating catalyst.
ST Engineering Ltd
There Is Growth Beyond 2017
We initiate coverage on ST Engineering with a BUY and SGD4.07 TP (13% upside). Its exposure to the commercial and defence industries across four segments creates a defensive business model that is tough to beat. It is world’s largest MRO service provider for aircraft and Asia’s leading provider of ICT solutions. Aircraft fleet size growth, rising demand for P2F conversions and more spending on Smart Nation initiatives should lead to strong 2018 growth. While a 4% yield could support the stock, strong order wins and accretive M&As may act as near-term catalysts.
A Missile over September
Eyes on central banks’ policy meetings, Merkel victory anticipated
STI downside to 3210 amid an uncertain September
Yield stocks in focus – SREITs KREIT, AREIT, FLT, CDL HT, Far East HT & MAGIC. Non-SREITs Breadtalk, Hong Leong Finance & Frasers Centrepoint Ltd
Top slice UOB, Suntec REIT & Riverstone
Check out our compilation of Target Prices