Keppel Infrastructure Trust, China Life Insurance, Industrial and Commercial Bank of China, CapitaLand Integrated Commercial Trust
Keppel Infrastructure Trust (KIT SP) – Post Equity Fundraising Overhang Lifted
Recommendation: BUY
Target Price: SGD 0.51
Current Price: SGD 0.438
Stop-Loss: Not Mentioned
Broker: OCBC Investment Research
Date of Recommendation: 6th September 2024
Investment Thesis
Keppel Infrastructure Trust (KIT) has lifted the overhang caused by its recent equity fundraising (EFR). The private placement exercise was closed at SGD 0.438 apiece, raising around SGD 200 million from the issuance of 456.6 million new units. Proceeds will be used for the partial repayment of debt and to fund the acquisition of Ventura Motors Pty Ltd.
The recent equity issuance, alongside subordinated perpetual securities, is expected to have a positive accretive impact on the distribution per unit (DPU) for FY23 and 1H24, with a projected increase of 6% and 4.1% respectively. Despite the larger unit base, the acquisition of solar energy assets and bus operations, along with existing cash flows, position KIT for growth in the coming years.
Valuation and Results:
Following the equity placement, OCBC has revised its fair value (FV) estimate from SGD 0.55 to SGD 0.51, reflecting the enlarged unit base. While the larger portfolio of assets provides diversification, it also introduces operational risks. Despite this, KIT’s capital management and entry into new sectors offer significant growth potential.
Share Price Catalysts:
- Increased exposure to renewable energy and transportation assets
- Reduction of debt through raised funds
- Growing distributions as new assets start contributing to earnings
China Life Insurance (2628 HK & 601628 CH) – Solid Performance Amidst Growth
Recommendation: BUY (HK) / SELL (CH)
Target Price: HKD 14.95 (HK) / CNY 27.90 (CH)
Broker: OCBC Investment Research
Date of Recommendation: 6th September 2024
Investment Thesis
China Life Insurance delivered robust performance in 1H24, with profit after tax and minority interests (PATMI) growing 6% YoY to CNY 38.3 billion. The insurer introduced interim dividends for the first time, distributing CNY 0.20 per share. The company’s new business value (NBV) saw impressive growth of 19% YoY, driven by a boost in gross written premiums and strong sales through its individual agent channel.
Although there was a slight decline in core solvency and comprehensive solvency margins, China Life remains well-capitalized with solvency ratios well above regulatory thresholds. The company also reported gains in embedded value, with a rise of 11.4% in the first half of the year.
Valuation:
OCBC maintains a fair value estimate of HKD 14.95 for the H-share and CNY 27.90 for the A-share. Although the fundamentals are strong, the valuation for the A-shares presents downside risks, hence the divergent recommendations.
Share Price Catalysts:
- Strong growth in new business value
- Continued focus on improving agent productivity
- Interim dividends supporting investor confidence
Industrial and Commercial Bank of China (ICBC) (1398 HK & 601398 CH) – A Mixed Bag
Recommendation: BUY
Target Price: HKD 5.50 (HK) / CNY 6.60 (CH)
Broker: OCBC Investment Research
Date of Recommendation: 4th September 2024
Investment Thesis
ICBC posted a mixed set of results for the first half of 2024, with stable earnings growth offset by a slight contraction in its net interest margin (NIM). Despite this, ICBC remains a strong player in China’s banking sector, with a large customer base and growing fee income. The bank’s balance sheet is strong, and its capital adequacy remains well above the regulatory minimum, providing a solid foundation for future growth.
Valuation:
With a target price of HKD 5.50 for the H-shares and CNY 6.60 for the A-shares, ICBC offers a potential upside based on its dominant market position and resilient earnings profile.
Share Price Catalysts:
- Recovery in NIM as interest rates stabilize
- Fee income growth through wealth management products
- Stable asset quality amidst economic recovery
CapitaLand Integrated Commercial Trust (CICT SP) – Sizeable Acquisition with DPU Accretion
Recommendation: BUY
Target Price: SGD 2.32
Current Price: Not Provided
Broker: OCBC Investment Research
Date of Recommendation: 4th September 2024
Investment Thesis
CICT’s recent acquisition of Grade A office properties is expected to contribute positively to the trust’s DPU. The sizeable acquisition, funded through a mix of debt and equity, is projected to be accretive, adding to CICT’s already strong portfolio of commercial assets across Singapore and the Asia-Pacific region.
With steady tenant demand and positive rental reversions, CICT is well-positioned to continue delivering growth, supported by its high-quality assets and proactive management.
Valuation:
CICT is valued at SGD 2.32, reflecting the expected accretion from the acquisition and the trust’s stable earnings outlook.
Share Price Catalysts:
- DPU growth from recent acquisitions
- Positive rental reversions
- Continued demand for Grade A office space in Singapore
Conclusion
These companies—Keppel Infrastructure Trust, China Life Insurance, Industrial and Commercial Bank of China, and CapitaLand Integrated Commercial Trust—are strong contenders for investors looking for growth in infrastructure, insurance, banking, and real estate. With solid fundamentals, attractive valuations, and robust earnings growth, these stocks offer promising investment opportunities.
Thank you
