Singapore Market - OCBC Investment 2016-06-21: STAYING CAUTIOUS AHEAD OF THE BREXIT VOTE

Singapore Market - OCBC Investment 2016-06-21: STAYING CAUTIOUS AHEAD OF THE BREXIT VOTE ASCOTT RESIDENCE TRUST A68U.SI KEPPEL DC REIT AJBU.SI CDL HOSPITALITY TRUSTS J85.SI COMFORTDELGRO CORPORATION LTD C52.SI SEMBCORP INDUSTRIES LTD U96.SI

Singapore Market - STAYING CAUTIOUS AHEAD OF THE BREXIT VOTE

  • Cautious stance ahead of vote
  • Watch out for CDL, ART, KDCREIT, CDLHT
  • CDG could also be affected



Advocate cautious stance ahead of Brexit referendum

  • As book makers slashed the odds of a Brexit scenario from a high of 44% to 31% after the tragic death of a UK law-maker, markets went into a risk-on mode with global equities rallying firmly. 
  • The STI Index put in a strong performance yesterday – closing up 1.36% at 2,800.9 – while Asian markets in Hong Kong, Shanghai and Japan similarly closed higher. 
  • While our base case is for a non-Brexit scenario, we emphasize that the results of the Brexit referendum remain uncertain, and market jitters may yet trigger volatility before the referendum on 23 June. This being so, we advocate that investors remain cautious on companies with significant UK exposure. 
  • Singapore banks and telcos are mostly focused in Asia and have limited direct UK exposure. This is also the case for major players in the Oil and Gas segment, for which the key driver will likely continue to be order book visibility, and the only noteworthy exception is perhaps Sembcorp Industries, which attributed 4.9% and 1.7% of its FY15 revenues and assets, respectively, to the UK.


Real estate players with UK exposure include CDL, ART, KDCREIT and CDLHT

  • City Developments (CDL) has 10.8% of its assets based in the UK as at end FY15, including recent acquisitions of Teddington Studios and Stag Brewery land sites. 11% of the group’s debt is denominated in GBP (net currency exposure of S$382.6m) and we understand that a 10% strengthening of GBP against SGD would have resulted in additional S$38.2m PBT over the year. 
  • Ascott Residence Trust (ART) owns four serviced residences in UK, which constituted 12.4% of ART’s total asset valuation as at end FY15 and 13.0% of FY15 total gross profit. 
  • Keppel DC REIT (KDCREIT) owns one data centre in London, which formed 7.5% of the trust’s total assets as at 31 Dec 2015. We estimate that this UK data centre contributed 6.6% to KDCREIT’s NPI in 2015. 
  • Finally, for CDL Hospitality Trust (CDLHT), as at end 1Q16, 5.4% of assets (Hilton Cambridge City Center) and 3.9% of 1Q16 NPI were derived from the UK. The trust also has a S$126m floating bridge loan in GBP due Aug 2016 (13.7% of total debt)


Comfort Delgro could be affected by a Brexit scenario

  • Comfort Delgro (CDG)’s operations in the UK and Ireland contributed a significant 24.9% and 20.5% of total revenues and operating profits, respectively, in FY15 and 13.8% of the group’s total non- current assets were also attributed to the UK/Ireland as at end FY15. 
  • While we understand that the group’s exposure to changes in GBP is minimal and that its operations are naturally hedged, earnings sourced from the UK may be affected ahead due to the translation to reporting currency in SGD.







Singapore Research Team OCBC Securities | http://www.ocbcresearch.com/ 2016-06-21
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.07 Same 3.07
BUY Maintain BUY 3.40 Same 3.40
HOLD Maintain HOLD 1.38 Same 1.38
BUY Maintain BUY 1.29 Same 1.29
BUY Maintain BUY 1.24 Same 1.24


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