Daily Morning Note – 6 May 2020


Stocks in Asia looked on course for a mixed start Wednesday, following a late-day swoon for U.S. equities, as investors weighed optimism that more economies are moving toward easing lockdowns against cautionary comments from Federal Reserve officials. Oil extended its rebound. Equity futures were modestly higher in Hong Kong, while contracts slipped in Australia. The S&P 500 earlier rose for a second day, though a gain of almost 2% was cut in half in the last hour of trading after Fed Vice Chairman Richard Clarida warned the economy will need more government support.


The amount available for distribution by OUE Commercial Real Estate Investment Trust (C-Reit) rose 44.5 per cent year on year to S$37.63 million for the first quarter ended March 31, 2020, on the back of contributions from Mandarin Gallery, Mandarin Orchard Singapore and Crowne Plaza Changi Airport following the merger with OUE Hospitality Trust in 2019.

Revenue was up 40.5 per cent at S$77.73 million, while net property income was 42.5 per cent higher at S$62.07 million. The Reit’s manager said it will review OUE C-Reit’s financial results for both Q1 2020 and Q2 2020 to determine the level of distribution for H1 2020.

LENDLEASE Global Commercial Reit has posted a distribution per unit (DPU) of 1.28 Singapore cents for the third quarter ended March 31, 0.7 per cent higher than the manager’s initial public offering (IPO) forecast of 1.27 cents. Gross revenue stood at S$21.7 million for the quarter, up 2.2 per cent from the IPO forecast of S$21.2 million. This was mainly driven by rental income from 313@somerset and higher contributions from Sky Complex in Milan due to the pick-up in the euro against the Singapore dollar, the manager said in the Reit’s financial results release on Tuesday.

FIRST Ship Lease Trust’s (FSL Trust) board has approved a distribution per unit (DPU) of 1.5 US cents for its first quarter ended March 31. This is the business trust’s second consecutive distribution payment in more than seven years, its manager announced on Monday after market close. The vessel owner did not provide a distribution in the year-ago quarter. Net profit more than doubled to US$6.7 million for the quarter, from US$3 million a year earlier.

DARCO Water Technologies’ deputy chairman Wang Zhi is launching a mandatory conditional cash offer for the shares he does not own in the company, at S$0.17 per share. According to the offer announcement released to the Singapore Exchange on Tuesday night, he has acquired about 13.39 million ordinary shares, or a 14.27 per cent stake, in Darco at S$0.17 per share from Wuhan Liankai Investment Co for about S$2.28 million. Before this, he already held or controlled about 27.68 million shares, or a stake of 29.5 per cent in Darco.

AGRI-FOOD giant Olam International has decided to terminate the sale and revenue sharing arrangement of its onion and garlic facility in Gilroy, California. This comes after the company announced last year that it would sell the real estate assets of the facility to Chicago-based investment management firm, Mesirow Financial, for some US$110.3 million. The mainboard-listed company also entered into a tiered revenue sharing arrangement with Mesirow, with whom it was supposed to share a part of the annual revenue from operating the assets for a period of 25 years.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR


CapitaLand Mall Trust – Veteran managers in retail may emerge stronger

Recommendation: BUY (upgraded), Last Done: S$1.82

Target Price: S$2.22, Analyst: Natalie Ong

– 1Q20 revenue was in line with our forecast, DPU of 0.85 cents was 70.5% lower YoY due to retention of distributions.

– Tenant sales down 7.5%, full impact of circuit breaker will be felt in 2Q20.

– c.$114mn in tenant reliefs translates to 100% rebate for April and May for retail tenants. 2 to 4 months of security deposits remain.

– We lower our forecast to reflect the rental rebates and weaker retail outlook. The rental rebates will lower FY20e DPU by 14.2%. FY20e DPU is cut from 12.51 cents to 10.78 cents representing a DPU yield of 5.9%. We upgrade our call to BUY on attractive valuations – P/NAV at 0.87x is attractive compared to the 1.09x to 1.29x range CMT has been trading at in the last 3 years.

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