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Today’s Focus - STI – Near-term support 3170, 3400 by year-end
OCBC: SG: MARKET PULSE: Cache, Hospitality Sector, Rowsley (19 Aug 2013) | | | | | |
MARKET PULSE: Cache, Hospitality Sector, Rowsley
19 Aug 2013
KEY IDEA
Cache Logistics Trust: Not resting on laurels
Summary: After staying quiet for over four months following the completion of the Precise Two acquisition, we believe Cache Logistics Trust (CACHE)
may now be close to striking another acquisition deal in the near term. On last Friday evening, CACHE announced the incorporation of four
wholly-owned subsidiaries, including a 100% stake in Cache Polar Logistics Warehouse (Shanghai) Co., Ltd. While no further details were given
regarding the purpose of these entities except they are either investment holding or warehousing and logistics service companies, we are of the view
that CACHE may be looking to acquire a warehouse facility in Shanghai, China. We note that CACHE’s financial position is one of the strongest among
the S-REITs space. This gives CACHE the financial resources and flexibility to take on attractive acquisitions as they arise, in our opinion. We are
keeping our forecasts unchanged for now, but as we transition our RNAV valuation method to the dividend discount model, our fair value is trimmed to
S$1.30 from S$1.40. We maintain our BUY rating on CACHE. (Kevin Tan)
MORE REPORTS
Hospitality Sector: Raise hotel room supply growth forecast
Summary: We understand from sources that Jul and Aug may have been showing reasonably RevPAR growth on a YoY basis for the industry as whole, in
contrast to YoY contractions for 1H12. Industry sources indicate that on a same-store basis, 2-star hotels and 3-star hotels are performing the
best, followed by 5-star hotels. 4-star/4.5-star hotels are doing poorly, being squeezed by competition from 3-star and 5-star hotels. This relative
performance was already observed in 1H13. We remain NEUTRAL on the hospitality sector. We forecast that hotel room supply will grow at 6.5% p.a. for
2013 to 2015 (higher than the 5.8% p.a. we previously estimated), outstripping estimated hotel room demand growth of 5.4% p.a. Our top pick is
Global Premium Hotels [BUY, FV: S$0.33], which is chiefly represented by the more favorable Economy category, which will see fairly low supply
growth of 3.6% p.a. (Sarah Ong)
Rowsley Ltd: A scenario-based analysis of value
Summary:Last Thursday, Rowsley received the approval in-principle from SGX for its proposed acquisitions of RSP Group and the Vantage Bay site in
Iskandar, and a 2-for-1 bonus issue of warrants. Management reports that it would dispatch a circular and convene an EGM to seek shareholder
approval in due course. We note that, on 2 Aug 2013, management announced that “barring unforeseen circumstances, the deal should complete in the
second half of 2013 after regulatory and shareholders’ approval.” In our research piece, we carry out an analysis of Rowsley’s value under a
successful RTO scenario, and also under a failed RTO scenario. If Rowsley’s proposed deal fails, we value each existing Rowsley share at
approximately S$0.034 – its book value per share as at end Jun 2013. However, if the deal succeeds, we calculate from our analysis a value of S$0.67
to S$0.85 for each existing Rowsley share (before the 2-for-1 warrant issue ex-date). (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US stocks face continued challenges and a further push off recent highs as more retailers report earnings this week and Federal Open Market
Committee meeting minutes are released.
- Gold traders are the most bullish in five months on signs that demand for coins and jewellery increased during a price plunge that prompted John
Paulson to cut his holding for the first time since 2011.
- Prime Minister Lee Hsien Loong mapped out moves in key areas like infrastructure, healthcare and education in what he described as "acts of faith"
in Singapore and its people.
- An 800 ha (8 sq km) area larger than Bishan or Ang Mo Kio will be freed up for new homes, offices, factories and parks once Paya Lebar Air Base
relocates to a Changi site.
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This message was edited by stand up n wake up on 19-Aug-2013 @ 9:26 AM
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