Top Stock Highlights of the Week: Sembcorp Industries, CDL Hospitality Trust and OTS Holdings

Once again, we feature snippets of news and earnings from several companies.

Sembcorp Industries Limited (SGX: U96)

Sembcorp Industries Limited, or SCI, is an energy and urban solutions provider.

The group has an energy portfolio of over 12,800 MW, out of which 3,300 MW is in renewable energy such as solar and wind energy.

On Monday, SCI announced the launch of Singapore’s first sustainable financing framework for sustainability-linked transactions in the energy sector.

This framework outlines SCI’s strategic approach, lays down key performance indicators (KPI) and sets sustainability performance targets for the group.

Based on this new framework, the group may now issue sustainability-linked bonds, loans or other securities.

Back in June, SCI unveiled a bold plan to transform its portfolio to shift towards renewable energy, with a target to grow profit contribution from such investments to 70% from the current 40% in four years.

Three of the KPI under this framework include greenhouse gas emission intensity, absolute greenhouse gas emissions and gross installed renewable energy capacity.

This new framework is positive for SCI as it demonstrates its commitment to be a leading provider of sustainable solutions and can act as a beacon to guide other companies towards a more sustainable future.

CDL Hospitality Trust (SGX: J85)

CDL Hospitality Trust, or CDLHT, is a leading hospitality trust with assets under management of S$2.9 billion as of 30 June 2021.

The REIT owns a portfolio of 15 hotels and two resorts, as well as a retail mall. These properties are located in Singapore, Australia, Japan, New Zealand, the UK, Germany and Italy and Maldives.

Last Tuesday, CDLHT announced its maiden investment in the residential build-to-rent (BTR) sector for around S$136 million in Manchester, UK.

This acquisition is expected to provide the REIT with a more diversified and stable revenue stream.

The move comes after the REIT revised its investment mandate to include properties used for rental housing and co-living, among other purposes in July.

The new acquisition consists of 352 apartment units with a net internal area of around 219,600 square feet.

The target completion date for the property is around May 2024.

This property is estimated to have a stabilised net property income yield of 5.1% based on the total project cost and will increase distribution per unit by 2.2% to S$0.0506 for the fiscal year 2020.

Construction will be funded monthly and the REIT’s pro-forma gearing will rise to 42.3% by the time construction is completed.

Once completed, the property will be rented out to a mix of individual residential tenants or families for one year or more (i.e. short stays).

The build-to-rent (BTR) market also has growth potential and is poised to take market share away from the buy-to-let (BTL) sector.

The BTL market is facing strong headwinds due to regulation changes and thus, BTR presents a better proposition for both landlords and renters.

CDLHT’s CEO Vincent Yeo believes the REIT can enjoy good growth and that the property can benefit from steady rental growth over time due to its superior location.

OTS Holdings Ltd (SGX: OTS)

OTS is a food manufacturing business that produces ready-to-eat (think: luncheon meat) and ready-to-cook meat products.

The group has more than 1,100 products spread across 13 product types and sold under six house brands. It also owns and operates three food manufacturing facilities in Singapore and Indonesia.

For the fiscal year 2021, the newly-listed group reported an 11.5% year on year increase in revenue to S$38.5 million.

Gross profit jumped by 15% year on year to S$11.8 million and adjusted net profit (excluding IPO expenses) rose by 13.9% year on year to S$4.05 million.

A final dividend of S$0.007 was proposed.

OTS is currently developing its plant-based food products such as plant-based canned luncheon meat and intends to launch this by early 2022.

The group is manufacturing and distributing non-halal Chinese sausages for distribution in Indonesia through its associate company PT Delta Bridge Foods.

And in the Philippines, OTS has started operations on 1 July and intends to import its food products via a subsidiary to be sold to the Filipino market.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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