OUE Hospitality Trust(OUEHT SP)
Proposed Merger; Accept Offer
TAKE PROFIT (previously Buy) and accept offer. OUE Commercial REIT’s proposed merger offer is fair, in our view, as the effective offer price is close to our adjusted fair value. With room for upside from a larger diversified asset base, cost savings and inorganic growth potential, we recommend investors to accept offer. Investors seeking a pure-play on hospitality should TAKE PROFIT and switch to CDL Hospitality Trusts (CDREIT SP, BUY, TP: SGD 1.80).
Ascott Residence Trust
Best of both worlds - stability and growth
SINGAPORE | REAL ESTATE (HOSPITALITY) | INITIATION
Income stability through geographic diversification and lease structure
Inorganic growth from S$880mn debt headroom, ROFR pipeline of 20 properties and tapping on sponsor’s growth trajectory
Less Capex and Opex intensive requirements for Serviced Residences
Initiate coverage with BUY rating and S$1.36 target price, implying a 21.5% upside
Soft commodities: CPO recovery
After a 35% fall from early 2017 to end 2018, crude palm oil prices are up about 6% this year. Related stocks have also seen more interest and better price performance in the past few trading sessions. On 27 Mar, Reuters reported that a senior Indonesia minister had warned that the country could consider exiting the Paris climate deal if the EU goes ahead with its plan to phase out palm oil in renewable transportation fuel. Following this and coupled with a likely decline in Malaysian CPO inventories in Mar, CPO prices have risen steadily MTD. Looking ahead, OCBC Treasury Research and Strategy are forecasting CPO to average RM2,400/MT in 4Q19. This would mean a ~13% upside from current levels, and are likely to support CPO related stocks as well. Though Golden-Agri [HOLD, FV: S$0.29] which is more exposed to the CPO sector may move more in tandem with CPO prices, its stock is currently trading at 0.72x forward P/B, close to the +1 s.d level over the past five years. In comparison, Wilmar [HOLD, FV: S$3.44] is trading at 0.93x P/B, close to its five-year historical mean. A proposed spin-off of its China business operations would also unlock value and inject more transparency to valuations.
Koufu Group (KOUFU SP)
Beneficiary Of MBS Expansion Plans
LVS announced a S$4.5b commitment to expand MBS by adding a 1,000-suite hotel tower, a 15,000-seat entertainment arena and additional MICE space. LVS expects a lift in visitor volume and spending once the expansion is completed. With its existing food court within MBS, Koufu will be a potential beneficiary. Reiterate BUY and PE-based target price of S$0.95.
Check out our compilation of Target Prices