Opportunities in Foreign Markets by OSK (CDL, Cambridge REIT, SMRT, Genting)

I went down Singapore last week and met up with a few old friends. As expected, they are very Singaporean after 10 years working there. "boh lah, where got impact... i don feel recession here...shopping mall, lang muar muar", "Singaporean buying power sih beh gao lat...." i missed those lines, sound very very familiar and warm ;) But one fact, most of the people talked about investment nowsday. It is either investment in equity or some on going "hu ha" project at Singapore like Genting, LVS and some other shopping mall. "There is one saying in Singapore, only poor like us invest in stock, all rich people invest in property"... Well, no matter what type of investment, i think let me probably share some of the information i got during the OSK seminar right before i went down to SG.

The presenter, Jonathan Ng, highlighted supply over demand issue for REIT in Office sector. But there is a new dawn for retail sector.

Singapore Outlook:

Weighting on Singapore REITs: NEUTRAL
Sector Focus: office, industrial, retail, hospitality
Top picks: CDL Hospitality Trust and Cambridge Industrial Trust

Weighting on Land Transport: OVERWEIGHT
Top picks: SMRT

CDL:

• Only hotel REIT listed on SGX – Owns 5 4-star hotels/1 retail mall in Singapore, and 1 hotel in New Zealand.
• Pays at least 90% of earning as dividends – offers investor 7% yield based on FY10 earnings estimates
• Best proxy to a structural revival in Singapore tourism.

Cambridge REIT:

• Highest yielding industrial REIT listed on SGX – Owns 43 industrial properties in Singapore.
• Pays at least 90% of earnings as dividends – offers investor 12% yield based on FY10 earnings estimates
• Dividends well supported by rental guarantee (16 months security deposits), long leases and step-up rent agreements (+2% pa); interest costs are hedged till 2012.

 Singapore MRT:

• Core business included rail, bus and taxi operation in Singapore. Pays at least 70% of earnings as dividends – offers investors 5% yield based on FY10 earnings estimates.
• Opening of circule line and strong population growth will underpin ridership growth.
• Defensive plays with low beta, strong earnings resilience and trading at lower range of its 14-20x trading band. Currently trading at 14.5x FY10 P/E multiple.

Singapore Genting:

• Trading Buy on Genting Singapore. Fair value and recommendation: Target Price at SGD 1.25
• Genting Singapore will enjoy a duopoly casino market structure in Singapore until Jan 2019
• Benign competitive environment, low casino tax rate and excellent accessibility should help accord the stock a scarcity premium
• Key risk: i) Economic downturn and/or health pandemic will lead to decline in visitors arrivals and lower gaming spend, ii)intense regional competition, iii)volatility in asset pries and hence wealth effect
• Current valuation of 16.8x FY11 EV/EBITDA is at a premium to industry average of 8x-14x. Las Vegas Sands valuation peaked at 37x EV/EBITDA 3 months after the opening of Venetian Macau vs Genting Singapore’s current 16.8x. On a fundamental perspective, Genting Singapore valuation are already trading at a 40%-50% premium to the industry average 11x EV/EBITDA
• Any downside is earning delivery could result in a relatively steep de-rating as share price has performed favorably YTD (+87%)

Dear investor, check out below pictures i took at ION Mall Orchard Road. Long queue for Louis Vuitton and Prada shop. But i do not see those long queue at Malaysia. Is REIT a good investment for you? What is your thought?