Singapore REITs (SREITs), Civmec Ltd, Surya Semesta Internusa, Airports of Thailand

🏢 Singapore REITs – Rates Fall, SREITs Rise

Recommendation: UPGRADE to Positive
Target Companies: CapitaLand Integrated Commercial Trust (CICT), CapitaLand Ascendas REIT (CLAR), Frasers Centrepoint Trust (FCT), Lendlease REIT (LREIT), Mapletree Logistics Trust (MLT), OUE Commercial REIT (OUEREIT)
Date of Recommendation: 2nd September 2024
Broker: Maybank Research Pte Ltd

Investment Thesis: Singapore REITs are set to benefit significantly from the anticipated rate cuts by the Federal Reserve. With the discount rate expected to decrease and borrowing costs likely to follow, the overall sentiment in the sector is projected to improve. Lower cost of capital should help to stabilize asset values, reignite the transaction market, and accelerate capital recycling.

Interest Rate Sensitivity: SREITs are sensitive to interest rate movements. A decrease in rates will lower their cost of borrowing, improve distribution per unit (DPU), and make them more attractive compared to other income-generating assets.
Core Picks: CICT, CLAR, and FCT remain the core picks due to their resilient revenue streams and strong credit metrics. Additionally, LREIT, MLT, and OUEREIT are highlighted for their sensitivity to rate/FX changes and favorable valuations.

Valuation and Financials:
The expected improvement in market sentiment and the potential for lower borrowing costs position SREITs favorably. These REITs are expected to see a stabilization or even an increase in asset values, supported by a lower discount rate.

Share Price Catalysts:

Sustained rate cuts leading to lower borrowing costs.
Improved sentiment and increased capital inflows into the sector.
Enhanced capital recycling and transaction volumes.

🏗️ Civmec Ltd – Strong Execution Driving Growth

Recommendation: BUY
Target Price: SGD 1.05
Date of Recommendation: 2nd September 2024
Broker: Maybank Research Pte Ltd

Investment Thesis: Civmec Ltd continues to demonstrate strong execution capabilities, with its financial performance in 2H24 coming in within expectations. The company’s net cash balance sheet and potential for increased dividends make it an attractive investment.

Financial Performance: Civmec reported a 10.6% YoY increase in PATMI to AUD 32.5 million for 2H24, bringing its full-year earnings to AUD 64.4 million, a YoY increase of 11.7%. The company declared a final dividend per share (DPS) of AUD 0.035, taking the total DPS for the year to AUD 0.06.
Dividend Potential: Given its strong net cash position, there is room for Civmec to increase its dividend payout ratio, which would enhance shareholder returns.

Valuation and Financials:
Civmec’s valuation remains compelling, with a target price of SGD 1.05 based on a 10x FY25E P/E ratio. The company’s strong execution and solid financial position underpin its growth prospects.

Share Price Catalysts:

Continued strong execution in project delivery.
Potential for higher dividend payouts.
Positive market sentiment and increased investor interest.

🏭 Surya Semesta Internusa – Monetizing Subang Industrial Estate

Recommendation: BUY
Target Price: IDR 1,500
Date of Recommendation: 2nd September 2024
Broker: Maybank Research Pte Ltd

Investment Thesis: Surya Semesta Internusa (SSIA) is well-positioned to benefit from its strong growth in the industrial estate sector, coupled with stable revenues from its supporting segments. The company’s healthy balance sheet, bolstered by its partnership with PBL, makes it a compelling investment.

Financial Health: SSIA has achieved its lowest debt-to-equity ratio (DER) ever at 14%, reflecting its strong financial health. The company’s main business, industrial estates, continues to grow robustly, supported by stable revenues from its construction and hospitality segments.

Valuation and Financials:
SSIA is trading at a favorable valuation with a target price of IDR 1,500. The company’s strong balance sheet and growth prospects make it an attractive buy.

Share Price Catalysts:

Continued strong growth in the industrial estate business.
Stability in supporting revenue segments.
Positive market sentiment and increased investor interest.

✈️ Airports of Thailand – Plenty of Upside

Recommendation: BUY
Target Price: THB 71.0
Date of Recommendation: 2nd September 2024
Broker: Maybank Research Pte Ltd

Investment Thesis: Airports of Thailand (AOT) is expected to benefit from the recovery in tourist arrivals, with additional upside potential from new revenue streams. The company is well-positioned as a top pick in the sector.

Revenue Growth: AOT is projected to see a 5-6% upside to its FY26-27 core profit forecasts due to a new transit-transfer passenger charge and higher concession revenue from a new ground and cargo service provider, likely to begin in November 2024.
Tourism Recovery: As the main beneficiary of increasing tourist arrivals, AOT is expected to see significant revenue growth. The potential for duty-free space reclamation and surging operating costs could lead to earnings cuts, but the overall outlook remains positive.

Valuation and Financials:
AOT’s target price is set at THB 71.0, with the company’s strategic initiatives and recovery in tourism providing strong growth potential.

Share Price Catalysts:

Recovery in tourist arrivals boosting revenue.
New revenue streams from transit charges and concessions.
Positive market sentiment and increased investor interest.
Thank you