Market Strategists SG & US Equity Analysts - UniPhillip 2015-06-0… · Commercial Mkt. Cap (S$mn) Price (S$) P ... CAPITALAND RETAIL CHINA TRUST 1481 1.765 1.07 5.5 9.3 ... LIPPO

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Market StrategistsKenneth Koh, Market & Equity Analyst

Soh Lin Sin, Macro | Equities Economist

Osama Bakhteyar, Macro | Equities Economist

SG & US Equity Analysts Richard Leow, Transport & Logistics

Dehong Tan, REITs

Shane Goh, Consumer

By Phillip Securities ResearchMr. Chan Wai Chee, CEO

Jaelyn Chin, Operations Exec

2nd June 15, 8.15am/11.15am Morning Call/Webinar



Disclaimer

2

This presentation is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to subscribe

for, purchase or sell the investment products mentioned herein. It does not have any regard to your specific investment objectives, financial

situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss

arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks including the

possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. Access to

services and your account may be affected by market conditions, system performance and other reasons.

The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and

any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such

information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is

made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research

contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made

available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect,

incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been

advised of the possibility of such damages.

You may wish to seek advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase

any of the investment products mentioned. In the event that you choose not to seek advice from a qualified financial adviser, you should

consider whether the investment product is suitable for you before proceeding to invest and we do not offer advice in this regard unless

mandated to do so by way of a separate engagement.

You are advised to read the Conditions governing Phillip Securities Trading Accounts and the Risk Disclosure Statement carefully before

investing in this product.



REITs Sector Report

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• Overweight on S-REITs even though we acknowledge valuations are catching up.

• Sector outperformance vs STI to slow; stick to REITs operating within resilient

industries/geographical regions.

• Fundamental growth drivers for our top picks remain intact.

• Impending rise in 10y bond yields to lead to compressing spreads, but S-REITs still

offer better spreads vs US and Japan peers. S-REITs also offer better exposure to

more diversified sectors and geographical regions vs HK-REITs.

• Headwinds remain across the sectors such as looming huge supply of commercial

space, lacklustre general retail sales and slow rebound in tourist arrivals.



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Source: Bloomberg (Updated: 27 May 2015)

Commercia l Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

FRASERS COMMERCIAL TRUST 1067 1.565 0.99 6.1 10.6

MAPLETREE COMMERCIAL TRUST 3223 1.525 1.23 5.2 8.2

OUE COMMERCIAL REIT 721 0.825 0.75 6.9 2.5

KEPPEL REIT 3793 1.190 0.85 5.7 -2.5

CAPITALAND COMMERCIAL TRUST 4791 1.625 0.94 5.2 -7.4

SUNTEC REIT 4519 1.800 0.85 5.0 -8.2

IREIT GLOBAL 341 0.810 1.11 7.9 -9.0

Reta i l Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

MAPLETREE GREATER CHINA COMM 2910 1.065 1.01 6.4 12.1

FRASERS CENTREPOINT TRUST 1915 2.09 1.13 5.7 10.3 ACCUMULATE (TP $2.14)

CAPITALAND RETAIL CHINA TRUST 1481 1.765 1.07 5.5 9.3 ACCUMULATE (TP $1.90)

CAPITALAND MALL TRUST 7689 2.22 1.21 4.8 8.8

STARHILL GLOBAL REIT 1863 0.865 0.94 5.8 8.1

LIPPO MALLS INDONESIA RETAIL 991 0.365 0.86 10.0 7.4

CROESUS RETAIL TRUST 492 0.950 1.17 11.4 2.7 BUY (TP $1.08)

SPH REIT 2664 1.055 1.13 5.3 1.4

FORTUNE REIT HKD14678m HKD7.81 0.66 5.3 0.6

Industria l Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

KEPPEL DC REIT 945 1.070 1.22 6.0 9.7

SOILBUILD BUSINESS SPACE REIT 790 0.850 1.06 7.8 7.6 BUY (TP $1.00)

MAPLETREE INDUSTRIAL TRUST 2778 1.590 1.20 6.7 7.1

ASCENDAS INDIA TRUST 808 0.875 1.46 5.6 6.7

VIVA INDUSTRIAL TRUST 521 0.835 1.12 9.1 5.0

AIMS AMP CAPITAL INDUSTRIAL 935 1.480 0.96 7.9 4.6

CAMBRIDGE INDUSTRIAL TRUST 909 0.710 1.04 6.9 4.4

ASCENDAS REAL ESTATE INV TRT 5967 2.48 1.19 5.9 4.2

CACHE LOGISTICS TRUST 908 1.160 1.19 7.4 0.0 ACCUMULATE (TP $1.31)

MAPLETREE LOGISTICS TRUST 2932 1.185 1.16 6.2 0.0

SABANA SHARIAH COMP IND REIT 627 0.860 0.79 8.3 -8.5

Healthcare Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

FIRST REAL ESTATE INVT TRUST 1069 1.440 1.48 5.7 14.7 ACCUMULATE (TP $1.55)

RELIGARE HEALTH TRUST 822 1.035 1.16 7.0 3.5

PARKWAYLIFE REAL ESTATE 1416 2.34 1.37 5.5 -1.7

Res identia l Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

SAIZEN REIT 247 0.870 0.80 7.1 1.2

Hospita l i ty Mkt. Cap (S$mn) Price (S$) P/NAV (x) yield (%) YTD (%) RECOMMENDATION

OUE HOSPITALITY TRUST 1261 0.950 1.05 6.8 5.0

ASCENDAS HOSPITALITY TRUST 792 0.710 1.03 7.2 4.4

ASCOTT RESIDENCE TRUST 1979 1.285 0.95 6.6 1.2

CDL HOSPITALITY TRUST 1692 1.720 1.06 6.7 -1.1

FAR EAST HOSPITALITY TRUST 1416 0.795 0.82 5.4 -2.5

FRASERS HOSPITALITY TRUST 1036 0.860 1.03 4.3 -3.4

FSSTI INDEX 1.6

FST REIT INDEX 2.6

REITs Sector Report



REITs Sector Report

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Key takeaways from 1Q CY15 results

• Commercial: Office rental index still going up, underpinning Commercial Reits’

rental reversions, but growth is slowing

• Industrial: Risk involved in sale and leaseback transactions.

• Retail: General local retail sales remain sluggish. Malls in certain suburban areas

start to get hit.

• Hospitality: Weak tourist numbers and corporate demand weighed on earnings.



REITs Sector Report: Commercial

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Outlook for the sector

• Looming surge in supply increases bargaining power of tenants.

• Large supply of office space in 2016 to limit rental growth.

• CBD office rental growth could be subdued until 2018 as the market works off

excess supply. Slowing demand to further weigh on rents.



REITs Sector Report: Healthcare

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Outlook for the sector

• Weak CPI may weigh on Parkway Life REIT (PLIFE)’s Singapore property rental

reversions.

• Japanese nursing homes remain in tight supply. Positive on Indonesia

healthcare reforms.

Strategy

• Ongoing healthcare reforms in Indonesia to drive First REITs’expansion plans in

Indonesia. (First REIT. Accumulate)

• Explore REITs that are exposed to healthcare sectors where the macro picture is

supportive. For instance, REITs expanding hospital networks in countries which have

a clear lack of hospital beds eg. Indonesia and India. (Religare Health Trust: Non-

Rated)



REITs Sector Report: Industrials

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Outlook

• Downward pressure on rents for factory space expected.

• Demand for Business Park to remain healthy.

• 1.18 million sqm of Warehouse supply but… c.73.5% is pre-committed.

• Keen competition among landlords to secure qualifying tenants.

Strategy

• Add exposure to REITs with Business Park spaces in the portfolio. (Soilbuild REIT:

BUY)

• Be selective on Warehouse REIT: Choose a portfolio of warehouses with good

locations (near to ports and airports) and superior design (modern ramp-up type vs.

legacy cargo-lift type). (Cache: Accumulate)

• Explore REITs that will have DPU growth through BTS projects in the pipeline.

(Cache: Accumulate; Mapletree Industrial Trust: Not-rated)



REITs Sector Report: Retail

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-1.0 -2.6 -2.6

-4.0

-2.2 -2.5 -0.6

3.4

1.2

-0.3

-8.3

13.6

-2.7

-10.0

-5.0

0.0

5.0

10.0

15.0

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-15 Feb Mar

Singapore Retail Sales (ex Motor Vehicles) y-y growth (%)

Occupancy Rate of Private & Public Sector Retail Space (%) Rental Index of Private Sector Retail Space

119.8 120.8 120.2

111.8 111.8 111.7

100

105

110

115

120

125

1Q2013

2Q2013

3Q2013

4Q2013

1Q2014

2Q2014

3Q2014

4Q2014

1Q2015

Source: URA, PSR

Central Area Fringe Area

93.5 94.2

93.2

92.3 93.4

92

96.295.9

95.8

90

92

94

96

98

100

1Q2013

2Q2013

3Q2013

4Q2013

1Q2014

2Q2014

3Q2014

4Q2014

1Q2015

Whole Island Central Region Outside Central Region

Source: URA, PSR



REITs Sector Report: Retail

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Outlook

• Weak tourist numbers negatively affect high-street portfolio.

• Retail sales to remain flat y-y.

Strategy

• Maintain exposure on resilient heartland malls in Singapore, especially those with

little upcoming competing supply (Frasers Centrepoint Trust: Accumulate)

• Capitalise on countries with growing middle class affluence/consumer spending power

such as China and Japan (CapitaLand Retail China Trust: Accumulate, Croesus

Retail Trust, BUY)



REITs Sector Report

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Top ideas

• Croesus Retail Trust (Buy). Pro-growth Abenomics/growth in Japanese consumer

confidence and wages to boost consumption spending.

• Soilbuild Business Space REIT (Buy). Secular trend of decentralisation of

commercial activities outside of the City – Business Parks to rule.

• CapitaLand Retail China Trust (Accumulate). China’s move towards a

consumption-driven economy to drive spending power of Chinese consumers.

• First REIT (Accumulate). Indonesian health care reforms in progress, ramping up

hospital network at the most opportune time.

• Cache Logistics Trust (Accumulate). Portfolio of quality warehouses, positioned to

capitalise on Singapore's status as the regional logistics hub.

• Fraser Centrepoint Trust (Accumulate). Resilient heartland malls with little

upcoming supply competition.

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/CRT20150407.pdf

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/SoilbuildREIT20150414.pdf

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/CRCT20150427.pdf

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/FIRT20150428.pdf

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/Cache20150423.pdf

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/ResearchCoverage/SG/FCT20150423.pdf



Japan – Maintain Overweight

Fund Flows vs. Economic Fundamentals? Japanese equity has managed to break out to reach a 15-year high.

Consensus view on the Japanese economy is for continued stagnation.

Do fundamentals matter? Not really

We remain Overweight on Japan due to continuous fund flows into the equity market.

Three main factors for fund flow: foreign investors, asset allocation shift by Pension funds and BOJ ETF/JREITs buying program.

Unit Trusts that invests in Japan Nikko AM Japan Dividend Equity Fd SGD Hedged

LionGlobal Japan Growth Fd SGD Hedged

Schroder - ISF Japanese Equity A Hedged Acc USD

ETFs that invests in Japan WisdomTree Japan Hedged Equity Fund – DXJ

db X-trackers MSCI Japan Hedged Equity Fund -DBJP

Stocks with exposure in Japan Croesus Retail Trust

Accordia Golf Trust




BOJ and Pension Funds - structural demand BOJ would triple its purchases of ETF to 3tn yen

(US$24.8bn) annually GPIF, which has about US$1.3tn in assets would

double its domestic equity allocation from 12% to 25%.

More Japanese Pension Funds are copying the asset allocation model of GPIF The rest of the US$3.7tn Japanese pension market

has already started to copy GPIF’s asset allocation shift.

Three such smaller government funds; PMAC for Private Schools of Japan, PFA for Local Government Officials, and FEDERZ have already announced to imitate GPIF asset allocation.

Foreign Investors remain the key Currently, foreign investors dominate equity trading,

with a 60% share of volume on the Tokyo Stock Exchange.

They bought 1.7tn yen (US$14.2bn) of Japanese equities during last quarter.




Domestic Retail - Insignificant Japanese retail investors have been slow to change the allocations of their savings.

Corporate Reforms Corporate reforms are one of the important drivers for fund flows from foreign investors Reforms such as improving corporate governance, lowering the corporate tax rate, continuing

negotiations on the Trans-Pacific Partnership free trade agreement (TPP) would be the highlight for this year.

Equity Valuation Valuation still remains very much near to its long-term historical average P/E of 19.2 due to earnings

growth. The latest earnings season has continued to beat expectations. Corporate earnings are likely to be boosted by further economic stimulus.



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Technical: Singapore Equities (Tues)Focused on potential price reversals or continuations



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The Week Ahead

• US giving conflicting signals

• Europe still grappling with Grexit

• China home sales prices stronger in May

• Bonds, gold, dollar gain, stocks fall

• Asian stock markets split, Northeast/Southeast

—> Industrial/tech good, resources weak.

—> Play the midstream, and selectively consumer



Disclaimer

20

This presentation is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to subscribe

for, purchase or sell the investment products mentioned herein. It does not have any regard to your specific investment objectives, financial

situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss

arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks including the

possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. Access to

services and your account may be affected by market conditions, system performance and other reasons.

The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and

any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such

information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is

made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research

contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made

available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect,

incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been

advised of the possibility of such damages.

You may wish to seek advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase

any of the investment products mentioned. In the event that you choose not to seek advice from a qualified financial adviser, you should

consider whether the investment product is suitable for you before proceeding to invest and we do not offer advice in this regard unless

mandated to do so by way of a separate engagement.

You are advised to read the Conditions governing Phillip Securities Trading Accounts and the Risk Disclosure Statement carefully before

investing in this product.



21

Market StrategistsKenneth Koh, Market & Equity Analyst

Soh Lin Sin, Macro | Equities Economist

Osama Bakhteyar, Macro | Equities Economist

SG & US Equity Analysts Richard Leow, Transport & Logistics

Dehong Tan, REITs

Shane Goh, Consumer

By Phillip Securities ResearchMr. Chan Wai Chee, CEO

Jaelyn Chin, Operations Exec

Ask Questions!

Documents

Market Strategists SG & US Equity Analysts - UniPhillip 2015-06-0… · Commercial Mkt. Cap (S$mn) Price (S$) P ... CAPITALAND RETAIL CHINA TRUST 1481 1.765 1.07 5.5 9.3 ... LIPPO