In this briefing:
- Tuan Sing: Beneficiary of Exuberant Demand for Prime Office Investment Properties
- ICT (ICT PM): Beneficiary of Higher Trading Activity
- Infosys Ltd (INFO IN): Another Buyback Coming? Not a Bad Idea, but How Much It Can Really Help?
- SoftBank Corp (9434 JP) & Arteria Networks (4423 JP): A Tale of Two IPOs
- GUNKUL (GUNKUL TB): Solar to Drive Top-Line Growth
1. Tuan Sing: Beneficiary of Exuberant Demand for Prime Office Investment Properties
Gaw Capital is said to be paying a CLSA-managed fund S$710 mn for 77 Robinson, which is just 3 minutes’ walk away from Tuan Sing-owned prime freehold office building, Robinson Point. This works out to around S$2,300 psf based on NLA. 77 Robinson has a balance lease of 74 years.
Evidently, institutional buying interest in Singapore’s prime commercial buildings remains strong as the Singapore office market is now still a “landlords’ market”. Grade A CBD office rents are expected to continue their upward growth trajectory into 2019. Tuan Sing is a beneficiary of the strong office rental upturn as its prime freehold commercial assets in Singapore – 18 Robinson, Robinson Point, and 896 Dunearn – make up more than two-third of its total property portfolio value. Tuan Sing’s share price is down 17% in the last six months and lately, the company has been busy buying back its own shares at around S$0.33-0.345/share.
2. ICT (ICT PM): Beneficiary of Higher Trading Activity
- Low downside risk, low correlation with Western stock markets, and good price momentum relative to its sector
- Growing demand from emerging markets as seen by increase in trading activities e.g. Asia sales increased 10% YoY in 3Q18
- Planned terminal expansions in Manila, Mexico, Iraq, and Honduras are underway and should provide about 7% capacity growth by end 2019
- Trades below ASEAN Transportation at 19CE* 17.1x PE and offers much better EPS growth
- Risk: Foreign exchange risk, disruption from US-China trade war
* Consensus Estimates
3. Infosys Ltd (INFO IN): Another Buyback Coming? Not a Bad Idea, but How Much It Can Really Help?
As per reports, Infosys Ltd (INFO IN) may consider a proposal for a share buyback of $1.60 billion very soon. The buyback announcement is likely to be made on January 11 when the company board meets to consider the 3Q FY19 results. Before this, in November 2017, Infosys Ltd (INFO IN) had announced a buyback and spent Rs130 bn to buy a total of 113mn equity shares. This fresh buyback could be an important development and could be an important support for the stock, it is also sensible for other reasons.
There are no major acquisitions in recent times by Infosys Ltd (INFO IN) and if this is likely to be the trend for near future, share buyback is not a bad idea. The company is still struggling with some of the legacy issues and the priority as of now is to streamline the organic growth. We think Infosys Ltd (INFO IN) is also cautious with inorganic growth opportunities as the company had serious issues with acquisitions in the past. What could be another key driver behind this is that in valuation terms, Infosys Ltd (INFO IN) is not very expensive.
4. SoftBank Corp (9434 JP) & Arteria Networks (4423 JP): A Tale of Two IPOs
During the second half of December 2018, Japan saw two telecom companies list on the Tokyo Stock Exchange: Softbank Corp (9434 JP) and ARTERIA Networks (4423 JP). After years of industry consolidation, which saw several stocks delist, this felt like a Christmas miracle (at least for those watching the sector’s stocks).
It would be hard to find two companies in the same industry that are so different – both in their business models as well as in how their IPOs were positioned to investors. One stock is 100 times larger than the other, but this is not a story of David and Goliath. It is two unique stories in parallel.
While each company took a very different approach to selling its stock, both have suffered from the subsequent broader market weakness, irrespective of company specifics. We can’t say it has been the worst of times, but it certainly has been a tough time with SoftBank Corp down 13% and Arteria down 20% from their IPO prices.
In this Insight we explore how each company approached its IPO and how each has fared since.
5. GUNKUL (GUNKUL TB): Solar to Drive Top-Line Growth
- Good payout ratio, good growth in core profit, and strong long-term sales growth relative to its sector
- Acquisition of 49% stake in a 30MW solar farm in Malaysia with a commercial operation date (COD) set for 1Q20 to support revenue growth
- High volume of solar rooftop installation projects planned for Charoen Pokphand Foods Pub (CPF TB) and other private firms to boost GUNKUL’s construction revenue
- Attractive at 19CE* PEG ratio of 0.5 relative to ASEAN Industry at 1.6
- Risk: Lower than expected electricity demand, unfavorable weather conditions
* Consensus Estimates
