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Investors’ Corner(Frasers Hospitality Trust, Sembcorp Marine, M1, Mapletree Industrial Trust)

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Frasers Hospitality Trust
Price – $0.70
Target – $0.80

Frasers Hospitality Trust’s (FHT) 4Q18 Distribution Per Unit of $0.0122 was in line with our estimates. Properties performances in Singapore and Germany were stable mitigated by weaker results across Australia, Japan and Malaysia, especially the Westin KL which saw a sharper 14.8% and 21.6% decline in gross operating revenue and profit on slower corporate demand. FHT’s Singapore assets are positioned for a recovery in the hospitality sector driven by increased occupancies at the 2 properties and operating efficiency at Fraser Suites, even though we expect near-term RevPAR growth to be tempered by competitive supply-side pressures with room supply from new players – Andaz and JW Marriott – in the Bugis micro-market. Nevertheless, valuation remains undemanding versus history and peers at 0.8 times FY19E P/B, and FHT’s low gearing at 33.6% supports acquisition growth upside. Maintain BUY. Maybank Kim Eng (29 Oct)

Sembcorp Marine
Price – $1.72
Target – $1.73

Sembcorp Marine reported a 60.2% rise in revenue and a net loss of $29.8m in 3Q18 in contrast to a net profit of $100.7m in 3Q17. 9M18 net loss amounted to $80.1m and there was an operating loss of $21.3m in 3Q18 which did not really come as a surprise given management’s earlier guidance. Looking ahead, this trend of operating loss is likely to continue for 4Q18. Although the industry outlook has improved, management mentioned that “it will take some time” before there is a sustained recovery in new orders, while competition remains intense and margins are compressed. Hence, overall business volume and activity for the group is expected to remain low for the immediate quarters. Net order book excluding Sete Brasil orders stood at $3.3b as at end 9M18 while new orders secured YTD amounted to around $1b. Maintain HOLD. OCBC Investment (26 Oct)

Price – $2.06
Target – $2.10

M1 reported a net profit of $34.4m for 3Q18, down 5.2% y-o-y. Revenue from the group’s fixed services business is the main engine of growth which grew 26% with continued expansion of its fibre broadband subscriber base and contributions from IT solutions for enterprise customers. Axiata Group’s share price plunged by 27% in October which could have been triggered by uncertainties over telecommunications policy domestically. Hence, we believe that the crash in share price reduces the probability of a counter offer bid for M1 from Asiata. We judged that the offer price of $2.06 by Konnectivity is fair allowing investors a chance to avoid a painful period of intense competition from TPG Telecom and ARPU erosion that would occur in 2019 and 2020. Maintain ACCEPT OFFER. UOB Kay Hian (25 Oct)

Mapletree Industrial Trust
Price – $1.95
Target – $2.08

Mapletree Industrial Trust’s (MIT) Distribution Per Unit of $0.0301 in 2Q19 was in line with our forecast despite a marginal 0.4% dip in gross revenue. The decline was largely due to the higher previous base inclusive of the pre-termination compensation excluding which, gross revenue would have risen 3.1% with contribution from Phase 2 of the build-to-suit project for HP. Portfolio occupancy fell to 86.7% as the Singapore portfolio occupancy dropped to 86.2% while the US portfolio occupancy remained unchanged at 97.4%. The decline was attributed to the vacated HGST space and the early completion of Mapletree Sunview 1. Management believes that the occupancy drag is largely transitional as a result of the exit of large clients such as HGST and Johnson & Johnson. Structurally, MIT is still trying to adjust the profile of clients to have a more resilient tenant mix while maintaining higher overall portfolio occupancy. Gearing remained stable at 35.1% in 2Q19. Maintain ADD. CIMB Research (24 Oct)

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