Thai Beverage
Price targets:
CGS-CIMB Research ‘add’ 67 cents
DBS Group Research ‘buy’ 72 cents
Reduction in alcohol tax
Analysts from CGS-CIMB Research and DBS Group Research are keeping their “add” and “buy” calls on Thai Beverage Y92 after the Thai government announced that it would reduce its domestic alcohol tax for a year on Jan 2. The move comes as the Thai government seeks to boost tourism and the economy.
Approved measures include exempting import tariffs on wine, reducing excise taxes on wine and eliminating taxes on local spirits. The excise tax on entertainment venues will also be halved. The measures are expected to take effect shortly and will expire at the end of this year.
“The tax cuts came as a positive surprise to us as we had previously thought an excise tax rate hike for alcoholic beverages in 2024 was likely in a bid to fund the Thai government’s economic stimulus measures,” write CGS-CIMB analysts Ong Khang Chuen and Kenneth Tan. However, they expect ThaiBev to pass on the lowered taxes to its consumers only partially.
“While we await the publication of ministerial regulations for more clarity on the approved tax cuts, we carried out a sensitivity analysis on FY2024 ending Sept 30 net profit growth (assuming nine months’ impact) to estimate the potential impact from incremental volume growth, and incremental margin expansion, of ThaiBev’s spirits segment,” they state.
For FY2024, Ong and Tan estimate ThaiBev’s net profit to come in at THB29.12 billion ($1.13 billion). While they have kept their target price unchanged at 67 cents, the analysts expect to see a positive share price reaction for the counter. “We expect [ThaiBev’s] spirits strength to drive [its] FY2024 earnings growth,” they write.
The DBS team has also kept its target price of 72 cents as they see the tax cuts as a positive development for alcoholic consumption, thereby providing a positive share price catalyst for ThaiBev.
“The cut in alcohol tax, albeit temporary till the year-end in 2024, indicates the authority’s stance to promote tourism and consumption. This cut in alcohol taxes could also douse market concerns of an increase in excise taxes on alcohol to fund the government’s recently announced fiscal measures,” says the team.
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“We retain our positive view on the counter with it trading at [around] 12x on FY2024 P/E, which is at about –1.5 standard deviations (s.d.) below its 15-year historical P/E,” adds DBS. — Felicia Tan
ComfortDelGro
Price target:
Maybank Securities ‘buy’ $1.60
Higher taxi revenue seen
Following a counter-market trend move to increase its taxi booking commission rate, plus a move to beef up its presence in Australia, Maybank Securities analyst Eric Ong has kept his “buy” call on ComfortDelGro C52 .
Given the higher ebit of 2%–3% seen this year and next from its taxi businesses, Ong, in his Jan 2 note, has raised his target price to $1.60 from $1.55.
“To our surprise, ComfortDeGro raised its taxi booking commissions by 2ppt to 7% from Jan 1 despite competition from peers, while making the existing 10% rental waiver permanent for its drivers,” states Ong.
In another recent development, ComfortDeGro announced on Dec 22 that it is acquiring shares it did not already own in taxi network operator A2B Australia for A$165.1 million or A$1.45 per share. ComfortDelGro now holds 9.3% in the Australia-listed company.
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As described by ComfortDeGro, A2B has over 8,000 vehicles in its national network and is also a major technology and payment solutions provider for the personal transport industry.
A2B runs taxis under brands such as 13cabs and Silver Service, a taxi and booking dispatch platform, MTI, and the Cabcharge payment solution.
“Management believes the deal is complementary to its Australian business and is in line with the group’s strategy to scale its point-to-point (P2P) mobility business in the country,” says Ong.
When completed by the end of the first half of this year, the acquisition will add around 2% to its bottom line on a full-year basis, estimates Ong.
Separately, ComfortDelGro’s move to raise taxi booking commissions to 7% from 5%, while making the existing 10% rental waiver permanent for its drivers, is still seen to help generate more revenue that can “more than” the rising cost of maintaining and upgrading technology systems, as well as financial charges for cashless transactions.
In contrast, other smaller players such as Ryde and Gojek have reduced their commission rates by varying levels. “We expect its taxi and private hire segment to continue to grow as demand for P2P trips stays firm on recovery of inbound tourism to Singapore, especially from China with the implementation of the 30-day mutual visa-free entry,” says Ong. — The Edge Singapore
IREIT Global
Price target:
RHB Bank Singapore ‘buy’ 47 cents
Divestment of Spanish property a plus
RHB Bank Singapore analyst Vijay Natarajan has upgraded IREIT Global UD1U to “buy” from “neutral” after the REIT announced that it had agreed to divest Il-Lumina for EUR24.5 million ($35.7 million) on Dec 22, 2023. He has also lifted his target price estimate to 47 cents from 42 cents previously.
Il-Lumina is a freehold office building located in the mixed-use office and industrial area, Esplugues de Llobregat, 5km from Barcelona, Spain.
The building has a total lettable area of 225,202.53 sq ft with 310 parking spaces. The property had a gross rental income (GRI) of EUR2.4 million for FY2022 ended Dec 31, 2022. The asset accounted for 3% of the REIT’s portfolio value in FY2022 and 4% of its NPI in the same FY.
The property valuation stood at EUR23.3 million as of June 30 based on independent property valuer, BNP Paribas Real Estate Consult GmbH’s calculations.
“IREIT Global’s latest move to divest its Spanish office asset at a premium to valuation is a positive step. The divestment will improve portfolio weighted average lease to expiry (WALE) and further strengthen its balance sheet position with low gearing, providing debt headroom for opportunistic acquisitions ahead,” says Natarajan in his Jan 2 report. IREIT’s gearing after the divestment is expected to fall to 33% from 34.4% in 3QFY2023, with 96% of its debt remaining fully hedged till 2026.
“With a low gearing profile and recent fall in rates, we believe the REIT could opportunistically tap into yield-accretive acquisition opportunities. Management had earlier guided its interest to broaden IREIT’s asset class profile by acquiring industrial (logistics) and differentiated retail assets to achieve a better diversification profile for the REIT,” he adds.
Based on the analyst’s estimates, IREIT’s exit net property income or NPI yield based on its divestment price is around 8%.
Following the divestment, the REIT will book a gross divestment gain of EUR1.2 million, some of which Natarajan believes may be used to top-up its distributable income in the interim.
“Key reasons for divesting the asset include its short WALE profile of 2.8 years vs the portfolio’s 4.9 years and secondary office location that could likely pose leasing risks upon expiry. Completion of divestment is expected by January,” he says.
In addition, the recent slide in the Eurozone bond yields provides tailwinds for the REIT. Based on the latest official data, the Euro area’s annual inflation fell more than expected to 2.4% in November 2023, down from October 2023’s 2.9%.
“This has resulted in economists forecasting that rates have peaked, with rate cuts anticipated starting early 2Q2024. In our view, this provides tailwinds to the REIT by making its current yield spreads attractive. In addition, with risk-free rates receding, we believe the capitalisation rate expansion cycle for European assets is likely over, and further asset devaluations are unlikely,” says the analyst.
Despite the upgrade and higher target price, Natarajan has lowered his distribution per unit (DPU) estimates from FY2024 to FY2025 by 2% to 3% to factor in the loss of income from Il-Lumina’s divestment.
He has also lowered his cost of equity (COE) assumption by 70 bps, factoring in reduced risks from IREIT’s low gearing profile and fall in risk-free rates.
In FY2024, Natarajan sees any DPU rebound from the REIT’s Darmstadt leases and acquisition contributions. — Felicia Tan
Daiwa House Logistics Trust
Price target:
DBS Group Research ‘buy’ 80 cents
Maiden acquisition outside Japan
DBS Group Research is positive on Daiwa House Logistics Trust DHLU ’s (DHLT) planned acquisition of a cold storage facility in Vietnam, which, when completed, will mark its debut presence outside Japan.
On Dec 29, DHLT announced it is acquiring the property from its sponsor Daiwa House Industry for VND483 billion, or some $26.5 million. The selling price is around 3% lower than the average independent valuation of VND498 billion.
The property, D Project Tan Duc 2, is a built-to-suit cold storage facility located in Long An Province. It was completed in September 2023 and is leased to a for 20 years from October 2023.
According to DHLT, the tenant is a group company of a Tokyo Stock Exchange-listed entity which specialises in cold chain logistics for food products. The tenant runs two other facilities and it distributes food and beverage products to local supermarkets.
DHLT plans to finance the acquisition, which includes the assumption of a shareholders’ loan, via debt. On a pro forma basis, this will nudge its aggregate gearing from 36.2% as at Sept 30 to 38.2% on a pro forma basis. It will also be accretive to its FY2022 DPU by 1.9% on a pro forma basis.
At the agreed property value, the implied NPI yield of D Project Tan Duc 2 is 8.3%, which is higher than the blended NPI of the existing properties in the portfolio of DHLT of 5.3%.
“The acquisition reinforces the importance of a strong developer sponsor which can support DHLT by providing a pipeline of high-quality properties such as D Project Tan Duc 2,” says DHLT.
Jun Yamamura, CEO of the manager, describes this acquisition as a “landmark acquisition” as it is the first property outside Japan to be under its portfolio. “The entry into Vietnam, a growing economy in Southeast Asia, will see a high-quality property added to the existing portfolio of DHLT to further enhance its quality.
“The property is strategically located in a gateway province that connects Ho Chi Minh City, a key economic centre, to the Mekong Delta region, an important aquaculture hub,” he adds. “We are confident that the property will contribute positively to the portfolio of DHLT,” says Yamamura.
From the perspective of DBS Group Research, this acquisition is positive for DHLT. Besides the yield of 8.3%, the 20-year lease will provide income stability in the coming years and long leases of this nature will include some form of rental escalations that will drive earnings further.
While DHLT has to take on additional loans to fund the acquisition which will push up gearing from 36.2% to 38.2%, DBS believes this is still at a “healthy” level.
“Although the size of the acquisition is relatively small, we see this as a positive for DHLT as it continues to tap on its sponsor’s pipeline to drive incremental earnings growth while allowing the REIT to maintain a relatively healthy leverage ratio,” says DBS, which is keeping its “buy” call and 80 cents target price.
“Moreover, the foray into Vietnam helps to diversify DHLT’s earnings outside of Japan, and creates an opportunity for future growth as they scale up their portfolio into fast-growing economies in Southeast Asia,” adds DBS. — The Edge Singapore
Uni-Asia Group
Price target:
SAC Capital ‘buy’ $1.14
Possible recovery of charter rates
With a possible recovery of charter rates and a spotlight on sustainability, SAC Capital analyst Nicole Lim has maintained her “buy” call on Uni-Asia Group CHJ . Lim has a target price of $1.14.
As the Baltic Handysize Index (BHSI) reached US$831 ($1,098) in December 2023, the highest level this year and more than double the trough of US$389 in August 2023, this upward trend has provided support to the index in 2H2023 as global demand recovers, says Lim.
The analyst notes that minor bulk trades, a major user of handysize vessels, is likely to record higher growth in 2024–2025, as the rerouting of trade flows towards longer voyages similar to the Panama Canal restrictions would further act to boost tonne-mile vessel demand.
“Notwithstanding, improvements to the macroeconomic backdrop and sector recovery could bolster the index above US$1,000 (about +20% from current levels), driving about 15% upside to shipping top line,” Lim notes.
Uni-Asia’s investment of JPY100 million ($930,200) in Good Kaisha GH Property, a fund established for real estate development and operation of five group homes for persons with disabilities, is in line with the company’s commitment to good corporate citizenship and sustainable business practices, the analyst says.
Lim highlights the group’s Japan’s business, Uni-Asia Capital Japan (UACJ) which led a consortium that won a bid from the government to develop and operate a private finance initiative consisting of fitness facilities and bathhouses which will reuse residual heat from an existing waste treatment plant.
UACJ also started managing JPY1.3 billion solar power property assets in 3Q2023.
A possible net cash inflow is also on the horizon for Uni-Asia, as Lim notes that management is considering the further disposal of older fleet vessels to freshen the portfolio. — Nicole Lim
