Investors’ Corner (OUE Hospitality Trust, Singapore Airlines, Yoma Strategic Holdings, Frasers Centrepoint Trust)

OUE Hospitality Trust
Price – $0.85
Target – $0.91

OUE Hospitality Trust (OUEHT) has refinanced $859m worth of debt expiring over the next 3 years. The average cost of debt post refinancing stood at 2.4%, 40bps lower than the current cost of 2.8% and resulted in finance cost savings of $3m – $4m per annum. With no loans expiring till Dec-20, the early refinancing puts OUEHT in a good position ahead of the potential rate hikes. Singapore’s visitor arrivals rose 5.1% in 9M17 while the opening of Terminal 4 increased passenger handling capacity by 25%. We expect airlines to add new destinations and increase flight frequencies with the higher capacity, which in turn drive passenger growth and visitor arrivals benefiting OUEHT’s Crowne Plaza Changi Airport Hotel. Meanwhile, Mandarin Orchard Singapore, OUEHT’s key asset, showed improved performance metrics with RevPAR rising 8% in 3Q17 driven by both higher occupancy and better room rates. Looking forward, RevPAR growth of 3 – 7% is expected in 2018 underpinned by continued demand growth coupled with lower hotel room supply. Maintain BUY. RHB Research (3 Jan)

Singapore Airlines
Price – $10.67
Target – $11.90

Singapore Airlines (SIA) underperformed the FSSTI by 7 percentage points in 2017 amid persistent worries over weak yields arising from intensifying competition. Nevertheless, slowing capacity growth in 2018 will be conducive to improving pax yield. Already we are seeing signs of stronger pax yield growth among several North Asian carriers in 4Q17, and expected the same for SIA. In mid-Dec, SIA introduced revisions to its advanced seat selection which we believed to be revenue accretive. With 41% of its fuel requirements for 2H18 hedged at about US$65/bbl and long-dated Brent contracts till FY23 at US$53 – 59/bbl, SIA will not be adversely affected by the relatively firm fuel prices. All these positive factors, together with a likely cargo recovery extending into 2018 underpinned by both rising volume and improving yields, imply a potential re-rating. Upgrade to BUY. UOB-Kay Hian (3 Jan)

Yoma Strategic Holdings
Price – $0.54
Target – $0.55

Yoma Strategic Holdings (Yoma) has completed the sale of its tourism related businesses through a reverse takeover of SHC Capital Asia, now renamed as Memories Group (Memories). Memories will be issuing approximately 167.1m new consolidated shares to Yoma at $0.263 per share as consideration shares representing 54.1% in the enlarged share capital of the group which will become an associated company of Yoma. Meanwhile Yoma has signed an agreement with Bouygues Construction and Taisei Corporation in Nov-17 for the construction of Yoma Central and The Peninsula Yangon with a combined contract value of over US$400m. We are encouraged by the involvement of 2 global construction companies with the 2 projects designed with an element of luxury in mind. We see Yoma’s announcements to be aligned with the intention of growing its core businesses and streamlining its non-core operations, while retaining meaningful exposure to Myanmar’s growing tourism business through its stake in Memories. Maintain HOLD. OCBC Investment (2 Jan)

Frasers Centrepoint Trust
Price – $2.24
Target – $2.45

Frasers Centrepoint Trust’s (FCT) 6 properties, being well-located in Singapore’s densely-populated city fringe and suburbs and concentrated in necessity trades, remained protected from retail headwinds. We expected the dominance of the trust’s 3 malls in the north – Causeway Point, Yew Tee Point and Northpoint – to strengthen supported by population growth projections. As an estimated 77% of its tenant portfolio is skewed towards necessity retail sectors, FCT is relatively resilient to competition from e-commerce. In addition, its Changi City Point asset could see stronger gains in occupancies and rentals given the limited competition from the upcoming Changi Airport Jewel and opening of DTL3. FCT boasts a strong AEI track record with $180m completed to-date and 11 – 17% ROI achieved, while current gearing at 29% supported potential acquisitions to further strengthen its suburban mall retail footprint. We believed that current valuations have not priced in the stronger rental reversions and possible upside from acquisitions. Initiate BUY. Maybank Kim Eng (1 Jan)