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Gaming industry
UOB KAY HIAN, Aug 24
WE had a teleconference with Las Vegas Sands on its subsidiary Marina Bay Sands (MBS), one of the Singapore's two integrated resorts (IR) currently under construction.
MBS targets opening in mid-Feb 2010 and is anticipating a visitorship of 14 to 15 million in the first year. Investors remain sceptical about the impact of Singapore's IRs, but the man in the street believes otherwise, judging from the astounding residential property sales over the last three months. This suggests that the stock market possibly has not fully recognised the benefits of the IRs.
IR operators: We prefer Malaysia's Genting over Genting Singapore given the former's cheaper valuations. We also recommend investors to look for better values in indirect plays to the IRs which include the following sectors.
Property stocks: The IRs were the major catalysts of the last property boom in 2005-2007. We see the property sector as the largest IR play by market capitalisation. Our top stock picks are Ho Bee Investment, City Developments, Allgreen Properties and Wing Tai Holdings.
Tourist arrival recovery plays: We forecast tourist arrivals to rebound 20 per cent in 2010 after a 12 per cent contraction in 2009. MBS and Resorts World@Sentosa will require external room supply to support their businesses. CDL Hospitality Trusts is among our top 10 stock picks for H2 2009. As the opening of the IRs looms close, we expect investor interest to shift to other hotel stocks such as Amara Holdings, Fragrance Group and Hotel Properties.
Media: A recovery in advertising spending from the multiplier effect of the IRs on the property and services sectors will be positive for Singapore Press Holdings.
Other services: Transport plays will also benefit. We prefer non-airline stocks such as SMRT Corporation, ComfortDelgro and Singapore Airport Terminal Services.
Singapore
Reits
DBS VICKERS SECURITIES, Aug 24
RESULTS were generally in line. S-Reits continued to put on a good showing in Q2 2009, with y-o-y revenue, net property income (NPI) and distribution income growth of 9.2 per cent, 11.7 per cent and 8.2 per cent respectively. On a q-o-q basis, revenue remained flat while NPI and distribution income remained in positive territory. The key driver to this set of better results was the ability of retail and office landlords to retain high occupancies despite falling rents as well as better cost management; hospitality players were able to partially offset a weaker topline with more prudent expense control measures.
Outlook for retail landlords appears to be stabilising amid a moderated GDP projection and improving, but still lower y-o-y, retail sales. FY2009 income had been largely secured with only a small quantum of renewals left for the rest of 2009. For office landlords, rentals are expected to be renewed positively in 2009, although negative reversions are expected to start kicking in from 2010 on weak supply/demand fundamentals. Hospitality landlords expect a better H2 2009 versus H1 2009 with improved forward-booking patterns.
Sector has been substantially recapitalised, focus moving to acquisition opportunities. S-Reit sector gearing has declined to 31 per cent with the $3.7 billion of capital raising issued year-to-date. At this point, we believe any further capital-raising exercises would be opportunistic or to fund new acquisitions given the current much lower cost of capital. In addition, the credit environment is starting to ease. We believe that S-Reits that are likely to be better placed to benefit from acquisition growth as driver, would be those with sponsor-backing as well as S-Reits in the industrial segment.
S-Reit sector is currently yielding a weighted average 7.5 per cent on our FY2010 estimates and trading at 0.76 times price-to-book, net asset value. Within the sector our top picks would be those with near term catalysts such as CDL Hospitality Trusts and Ascott Residence Trust, which are key beneficiaries of the IRs and is projected to experience a recovery in earnings on the back of a better tourism outlook. We continue to favour retail landlords such as Frasers Centrepoint Trust for its suburban retail exposure and strong asset injection pipeline as well as Suntec on valuation grounds. Among industrial players, we prefer Mapletree Logistics Trust for its higher than average yield of 9.4 per cent and attractive P/NAV multiples.
Compiled by JAMIE LEE
Glossary:
FY - fiscal/financial year
H1, H2 -
first or second half
q-o-q - quarter-on-quarter
y-o-y -
year-on-year
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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