Investors’ Corner (CapitaLand Commercial Trust, Aspen (Group) Holdings, DBS Group Holdings, Singapore Medical Corporation)

CapitaLand Commercial Trust
Price – $1.66
Target – $1.80

CapitaLand Commercial Trust’s (CCT) 3Q17 revenue dipped 0.4% due to the divestments of One George Street, Wilkie Edge and Golden Shoe CP, but offset by stronger performance from CapitaGreen. However, distributable income rose 7% with a $3.3m top up from divestment gains. 170k square feet leases were signed in the quarter lifting portfolio occupancy to 98.5%, although rental reversions were still negative which would most likely persist in 2018. Nevertheless, Grade A office average rents has rebounded 1.7% to $9.1 per square feet per month after 9 consecutive quarters of decline. This would help to mitigate the impact of negative rental reversions in FY18. Together with CCT’s cumulative unutilized tax-exempt income of $35.7m which may be used for future distributions as well as contribution from the recent acquisition of Asia Square Tower 2, we forecast a 3% increase in distribution per unit in FY18E. Maintain ACCUMULATE. Phillip Securities (23 Oct)

Aspen (Group) Holdings
Price – $0.22
Target – $0.31

Aspen (Group) Holdings (Aspen) is an early mover in the emerging Batu Kawan market, an upcoming growth area in Mainland Penang, with its flagship Aspen Vision City (AVC) project. AVC is a mixed-use development envisioned to become an eco-metropolis given its attractive pricing and close proximity to the Penang Second Bridge. The project will be jointly developed with Ikano, which owns the franchise rights to own and operate IKEA stores in South-East Asia and will be developing the first IKEA store in northern West Malaysia within AVC. Based on historical observations, the opening of IKEA outlets in Malaysia has boosted population density, property demand and values in the surrounding areas, and hence we expect a similar effect on Batu Kawan property prices. With around RM1b in unbilled sales, we estimate Aspen to rake in healthy 2017 net profit of RM70m and further earnings growth as earnings are progressively being recognised upon project completion. Initiate BUY. RHB Research (20 Oct)

DBS Group Holdings
Price – $21.70
Target – $24.48

DBS Group Holdings (DBS) loan growth in 3Q17 is expected to accelerate to 2.5% benefitting from broad-based expansion of corporate loans and residential mortgages, as well as consolidation of ANZ’s wealth management and retail banking businesses in Singapore and Hong Kong. Although the 3-month SIBOR and SOR have risen by 13bp and 20bp respectively q-o-q, but the positive impact on net income margin would only be felt in 4Q17 as loans are re-priced gradually over time. Meanwhile, we expect healthy contributions from investment banking driven by the completion of NetLink NBN Trust initial public offering (IPO), which is the largest IPO in Singapore year-to-date. Unfortunately, net profit is likely going to be hurt by higher specific provisions for new and existing non-performing loans. Notably, the Federal Reserve’s balance sheet reduction and interest rate hikes in the US will continue to be positive for DBS given its strong deposit franchise. Maintain BUY. UOB-Kay Hian (20 Oct)

Singapore Medical Corporation
Price – $0.62
Target – $0.78

Singapore Medical Group (SMG) will be acquiring its third paediatric clinic for $7.9m, which represents the group’s first hospital-based clinic at Mount Alvernia Hospital after its existing two paediatric clinics located at heartland areas. In line with the expansion of the paediatric segment, SMG will be recruiting a new paediatrician by 1Q18. Meanwhile, SMG will also be adding another senior obstetrics and gynaecology (O&G) specialist to its O&G segment where it already has 10 doctors and expecting to reach 16 specialists over the next three years. Last but not least, with the addition of an interventionist and electrophysiologist by 1Q18, SMG is ready to start its specialty practice in cardiology by cross-selling this segment with its health screening segment. Driven by both inorganic and organic growth, SMG’s two-pronged growth strategy is on track to allow better long-term sustainable earnings. Maintain BUY. Maybank Kim Eng (20 Oct)