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Interest Rate Threatening to Inch Even Higher?

MARKET OVERVIEW
– The market could come under pressure after US stocks tumbled more than 1% as 10-year Treasury yield broke above the psychological 3% mark for the first time since Jan 2014, reigniting worries that higher borrowing costs could slow the economy and hurt corporate earnings later this year.
– Technically, the STI is poised for a pullback from overbought levels and could find support at 3,510.

CORPORATE RESULTS
* Frasers Centrepoint Trust
– 2QFY18 DPU of 3.10¢ (+2.0%) brought 1HFY18 payout of 6.10¢ (+2.9%) to 50% of full-year consensus forecast
– For the quarter, gross revenue and NPI rose 6.3% and 6.9% to $48.6m and $34.8m on a 31.7% jump in contribution from Northpoint City North Wing after the completion of AEI works.
– 37 leases accounting for 6.2% of total NLA were renewed with positive rental reversion of 9.1%.
– Portfolio occupancy increased 1.4ppt q/q to 94.0%, lifted by significant improvement at Northpoint City North Wing.
– Aggregate leverage was stable at 29.2% with debt maturity of 2.5 years and all-in cost of borrowings of 2.4%.
– Trades at annualised 2Q yield of 5.6% and 1.1x P/B.
– MKE last had a Buy with TP of $2.55

*Suntec REIT
– 1Q18 DPU of 2.433¢ (+0.3%) was supported by higher capital distribution of 0.244¢ (+106.8%), in line with estimates.
– Gross revenue and NPI climbed 2.6% and 1.9% to $90.7m and $63m on higher convention and retail takings but partially offset by lower contribution from its offices.
– Office committed occupancy slipped 0.6ppt q/q to 99.1%, while retail committed occupancy dipped 0.4ppt to 98.4%.
– Aggregate leverage remained at 36.6% (+0.2ppt).
– Trades at annualised 1Q yield of 5.2% and 0.9x P/B.

*Mapletree Commercial Trust
– 4QFY18 DPU of 2.27¢ (+0.4%) brought FY18 payout to 9.04¢ (+4.9%), meeting 102% of full-year estimate.
– For the quarter, gross revenue and NPI edged up to $108.9m (+1.3%) and $84.3m (+1.2%) on higher contributions and step-up rents from VivoCity, Mapletree Business City I and BoA-ML HarbourFront (MLHF).
– But tenant sales dipped 0.9% on slower shopper traffic (-2.2%) at VivioCity.
– Achieved overall occupancy of 96.1% (+1.5ppt q/q) but committed occupancy rose even higher to 99.5% (+0.8ppt), while WALE was 2.7 years (office: 3.2 years, retail: 2.1 years)
– Aggregate leverage eased 1.8ppt q/q to 34.5%, with lower all-in interest costs of 2.66% (-7ppt) and debt tenor of 4 years.
– Trades at annualised 4Q yield of 5.7% and 1.1x P/B.
– MKE upgrades to Hold with upwardy revised TP of $1.50.

*AEM Holdings
– 1Q18 net profit almost doubled to $8.2m on strong sales and margin expansion, meeting 19% of full-year estimate, with seasonally stronger 2Q and 3Q expected.
– Revenue surged 56% to $65.7m amid continued robust sales of test handlers and consumables to its key semiconductor client.
– Gross material margin expanded 5.9ppt to 34.1% on cost reduction initiatives.
– Reaffirmed guidance of at least $255m in revenue and $42m in pretax operating profit for FY18.
– Last traded at 9.9x forward P/E.

April 25, 2018

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