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5 January 2022: Mapletree Commercial Trust (MCT SP), CNOOC Limited (883 HK)

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Mapletree Commercial Trust (MCT SP): Buy the dip

  • BUY Entry – 1.82 Target – 1.98 Stop Loss – 1.74
  • MCT is a Singapore-focused real estate investment trust (REIT) that comprises five properties in Singapore. Its properties include VivoCity (Singapore’s largest mall), Mapletree Business City, mTower (previously known as PSA building), Mapletree Anson and Bank of America Merrill Lynch HarbourFront. Its portfolio has a total Net Lettable Area (NLA) of 5mn square feet, valued at S$8.8bn. 
  • Oversold. Units of MCT dropped by as much as 10% over the last two trading sessions, triggered by the REIT’s announcement of its merger with Mapletree North Asia Commercial Trust (MNACT). We think this is likely due to MNACT’s geographical diversified asset base in North Asia, which is a significant contrast to MCT’s focus on the Singapore market. Furthermore, investors may have reservations over MCT’s higher gearing after the merger. Post-merger, MCT’s gearing is estimated to increase from 33.7% to between 38.0% (scrip-only) and 39.2% (cash-and-scrip), depending if unitholders were to elect to receive a combination of cash and scrip. 
  • Third largest REIT post-merger. Assuming MCT receives 50% of total number of votes cast for the proposed merger to proceed, the merged REIT entity will be Singapore’s third-largest REIT by market capitalisation, just below CapitaLand Integrated Commercial Trust (CICT) and Ascendas REIT (AREIT). 
  • Consensus forecast and valuations. After the 10% drop, MCT now trades at a 10% discount to the 10-year P/B average of 1.18x. MCT is forecasted to provide a 5.1% and 5.4% dividend yield for FY2022 and FY2023 (March YE). After the announcement of the merger, consensus estimates are mixed with 7 BUYS, 6 HOLDS and 1 SELL. The 12m average TP is S$2.24, implying a 23% upside potential. 

Ascendas REIT (AREIT SP): Big, Bigger, Biggest

  • REITERATE BUY Entry – 2.96 Target – 3.20 Stop Loss – 2.88
  • AREIT is among the largest REIT in Singapore by market cap (S$12.5bn), second only to CapitaLand Integrated Commercial Trust (S$13.4bn market cap) It is Singapore’s largest industrial REIT with investments spanning from business parks to industrial facilities. Its assets include 220 properties in Singapore, US, Australia and in the UK. As at end 2020, the REIT had S$15bn in assets. It completed S$973mn of acquisitions in FY2020 and plans an additional S$535mn worth of investments over the next two years. 
  • Still huge expansion potential. AREIT’s gearing of 37% is well below the 50% regulatory limit, giving the REIT more than S$4bn of acquisition debt headroom. This is important for REITs who can capitalise on size and scale to achieve better DPU vs smaller sized peers, while simultaneously offering diversification within their portfolio. 
  • The trend is your friend. Despite the pandemic, AREIT achieved 3.7% positive rental reversion in 3Q21, driven by healthy demand in business space, high-specification industrial buildings & data centres and logistics and distribution centres. Singapore’s economy is forecasted to expand by 7% in 2021 and grow by another 3-5% in 2022, according to official forecasts by the Ministry of Trade and Industry.
  • Attractive yields and consensus estimates. offers a dividend yield of 5.3%/5.6%/5.8% for FY 2021/22/23F, according to Bloomberg consensus forecasts. Consensus has a target price of S$3.48 compared to its current unit price of S$2.96. 
AREIT SP (Source: Bloomberg)

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CNOOC Limited (883 HK): Inflation hedge amid the rate hike cycle

  • BUY Entry – 8.0 Target – 9.0 Stop Loss –7.5
  • CNOOC Limited is a Hong Kong-based investment holding company principally engaged in the exploration, production and trading of oil and gas. Its businesses include conventional oil and gas businesses, shale oil and gas businesses, oil sands businesses and other unconventional oil and gas businesses. The company mainly operates businesses through three segments. The Exploration and Production segment is engaged in the exploration, development and production of crude oil, natural gas and other petroleum products. The Trading segment is engaged in the trading of crude oil, natural gas and other petroleum products. The company mainly operates businesses in China, Canada, the United Kingdom, Nigeria, Indonesia and Brazil, among others.
  • Oil and gas is one of the 2022 top sector picks globally. We have headed into the third year since the COVID-19 outbreak. With most people vaccinated, death rate and inpatient rates have been dropping substantially. Health specialists believe the pandemic will probably end by the end of 2022. Hence, the reopening of borders and economies is destined to come. Accordingly, the demand for oil is expected to rise, driven by the recovery of production and travelling activities. Due to the insufficient investments in exploration and production in the oil and gas sector over the past few years, we will see an imbalance of supply and demand dynamics, but this time there is insufficient supply rather than glut. 
  • Oil prices resume the uptrend. Brent and WTI rebounded from low US$60s to current high US$70s per barrel. The upcoming OPEC+ meeting could bring another 400,000 bbls/d output hike for February. Meanwhile,  The OPEC+ Joint Technical Committee, which analyzes the market on behalf of ministers, sees a surplus of 1.4mn bbls/d in 1Q22, about 25% less than it estimated a month ago.
  • The updated market consensus of the EPS growth in FY22/23 is 7.1%/-0.65% YoY respectively, which translates to 3.9x/3.9x forward PE. Current PER is 6.2x. Bloomberg consensus average 12-month target price is HK$12.44.

Guangzhou Baiyunshan Pharmaceutical Holdings Co. Ltd. (874 HK): Traditional Chinese Medicine in play 

  • REITERATE BUY Entry – 21.5 Target – 25 Stop Loss – 20
  • Guangzhou Baiyunshan Pharmaceutical Holdings Co Ltd is engaged in the pharmaceutical and healthcare industry. The Company’s segments are Great Southern TCM, Great Commerce, Great Health and Great Medical Care. The Company’s Great South TCM includes research, development, manufacturing and sales for Chinese and western medicine, chemical raw medicine, natural drug, biological medicine and intermediates of chemical raw medicine. The Company’s Great Health segment includes the research, development, manufacturing and sales of beverages, foods, health products and other products. The Company’s Great Commerce segment includes wholesale, retail, import and export for western medicine, Chinese medicine and medical apparatus and instruments. The Great Medical segment is engaged in medical services, traditional Chinese medicine health preservation, modern pension and medical equipment industry.
  • The year-end rally of the TCM sector shall continue. The sector in A-share recognised an average 25% rally from November to December 2021. Several catalysts are in play: 19 provinces announced the TCM procurement list, paving the path for centralized procurement of TCM in 2022. TCM makers hiked the retail drug prices due to the increase in raw material prices. Favourable policies including increasing new drug approvals and supporting more facilities establishments are expected to continue in 2022.
  • Sector valuation at historically low levels. TMC sector is at 10x to 20x PER as of the end of 2021. The situation of the ageing population in China in the mid-and-long term is a key factor to uphold the sector valuation as older people are more prone to take TCM. The Baiyunshan’s PE is trading at lows currently, and hence, the risk-reward is more attractive now. 
  • The updated market consensus of EPS growth in FY22/23 are 4.26%/1.46% YoY respectively, which translates to 8.0x/7.9x forward PE. Current PER is 8.3x. Bloomberg consensus average 12-month target price is HK$23.70.

Baiyunshan’s 10-year PER record

  • The updated market consensus of EPS growth in FY22/23 are 4.26%/1.46% YoY respectively, which translates to 8.0x/7.9x forward PE. Current PER is 8.3x. Bloomberg consensus average 12-month target price is HK$23.70.
874 HK (Source: Bloomberg)

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United States

Top Sector Gainers

SectorGainRelated News
Oil & Gas Production+4.1%Oil ends up at $80/bbl as OPEC+ sticks with Feb output hike
Banks+2.7%U.S. 10-year Treasury yield extends gains above 1.6% as investors monitor data, auctions
Coal+0.6%Coal Price Set To Surge As Major Producer Indonesia Bans Exports

Top Sector Losers

SectorLossRelated News
Aluminum-2.8%Chinese focus on environmental policy forces shift in western aluminium market: 2022 preview
Biotech-2.6%WHO sees more evidence that Omicron causes milder symptoms
Semiconductors-0.6%Global Semiconductor Sales Increase 23.5% Year-to-Year in November
  • Ford Motor Company (F US) shares surged 11.7% yesterday to its highest level since 2001 after the Detroit automaker said it will nearly double production capacity for its red-hot F-150 Lightning electric pickup to 150,000 vehicles. It said the model has already attracted nearly 200,000 reservations ahead of its arrival this spring at U.S. dealers.
  • General Motors Company (GM US) shares rose 7.5% a day ahead of its public debut of the Chevrolet Silverado electric pickup, which is slated to go on sale in early 2023. GM CEO Mary Barra is set to unveil the Silverado EV at the Consumer Electronics Show in Las Vegas. The rally in GM shares came even after Japanese automaker Toyota Motor Corp released data showing it outsold GM in the United States in 2021, marking the first time the Detroit automaker has not led US auto sales for a full year since 1931.
  • Occidental Petroleum Corp (OXY US), Exxon Mobil Corporation (XOM US) shares rose 7.5% and 3.8% respectively, in tandem with rising Crude and Brent oil prices. Global benchmark Brent crude jumped on Tuesday to $80 a barrel, its highest since November, as OPEC+ agreed to stick with its planned increase for February based on indications that the Omicron coronavirus variant would have only a mild impact on demand.
  • Boeing Company (BA US), Marriott International Inc (MAR US) shares gained 2.8% and  2.5% respectively. According to the news yesterday, WHO sees more evidence that Omicron causes milder symptoms. More evidence is emerging that the Omicron coronavirus variant is affecting the upper respiratory tract, causing milder symptoms than previous variants and resulting in a “decoupling” in some places between soaring case numbers and low death rates, a World Health Organisation official said on Tuesday.


  • Nutryfarm (NUF SP) shares plunged 5.2% yesterday after the durian and health food distributor announced changes to its board. Its non-executive director, Xu Hai Min, stepped down from his role on 30 December last year to focus on other business interests. 
  • Golden Energy Resources (GER SP) and Geo Energy (GERL SP) shares climbed 1.7% and 1.5% respectively yesterday, likely on bargain hunting. It was announced on the prior day that the Indonesian Ministry of Energy and Mineral Resources has imposed a temporary ban on all coal export sales by Indonesian coal miners for the whole of January. However, Geo Energy Resources said the export ban will not affect its overall production quota and production plans as stated in its work plan and budget for the year of 2022.
  • Capitaland Investment Ltd (CLI SP) shares gained 5.2% yesterday, as DBS reinitiates a BUY recommendation on CapitaLand Investment with a target price of S$4. In its report, the DBS research team highlighted CLI’s positive performance since its demerger. Potential catalysts include the launch of new fund products and real estate investment trust acquisitions, with the group’s aim to grow FUM to S$100bn by 2024, up 19% from 2021. The research team also expects a recovery of CLI’s lodging business, The Ascott, to drive a turnaround in cash flows for the group following the reopening of international borders.
  • RH Petrogas (RHP SP) and Rex International Holdings Ltd (REXI SP) shares gained 4.1% and 3.2% respectively yesterday, in tandem with rising Crude and Brent oil prices. WTI crude futures steadied above $76 per barrel on Tuesday while Brent crude futures steadied above $79 per barrel, ahead of an OPEC+ meeting, where it is set to agree to a planned output hike. The group is expected to stick to its existing policy of modest monthly output increases as it sees a mild and short-lived impact on fuel demand from the omicron variant.

Hong Kong

Top Sector Gainers

SectorGainRelated News
Agricultural, Poultry & Fishing Production+7.42%Commodities 2022: Ukrainian corn prices likely to be strong on demand, rising costs
Airline Services+3.33%China’s Xian to end Covid-19 lockdown if it reaches ‘zero social transmission’
Food Additives & Flavouring+2.7%Coronavirus: Hong Kong vaccine bubble roll-out for restaurants, leisure venues and schools delayed to February 24, Carrie Lam reveals

Top Sector Losers

SectorLossRelated News
Electricity Supply-3.65%China coal futures surge on supply worries amid Indonesia export ban
Electric Equipment-2.75%Indonesia warns coal supply crunch not over as China prices rally
  • Shimao Group Holdings Ltd (813 HK), CIFI Holdings Group Co Ltd (884 HK). Property sector shares rose yesterday. Shares gained 9.7% and 7.8% respectively. On Monday, it was announced that China Evergrande Group shares would be suspended from trading. Meanwhile, Chinese developer Cifi Holdings offered to buy the outstanding notes of China Evergrande at $1,000.5 for 1,000 in principal with accrued and unpaid interest. The offer will expire at 4 PM London time on 7 January 2022. Meanwhile, Shimao Group shares likely rebounded as RSI entered the negative territory below 30.
  • China Lesso Group Holdings Ltd (2128 HK) shares gained 7.1% yesterday.   Zhongtai Securities stated that leading pipe material companies are actively engaged in municipal administration and hydropower business, with expectations that approximately 20% of municipal business income will contribute to the revenue of leading pipe material companies. In addition, the price of building materials and raw materials have fallen, expecting to ease cost pressure on enterprises.
  • Aac Technologies Holdings Inc (2018 HK) shares rose 6.8% yesterday after Goldman Sachs released a research report stating that it maintains a BUY rating on AAC Technologies with a target price of HK$66. According to the report, the expansion of mobile phone lenses, camera modules and the expansion of comprehensive products (3P/4P/5P/6P, hybrid lenses, camera modules) are potential catalysts for the company. In addition, the main customers of AAC’s mobile phone lens in 2021 are Honor and Xiaomi Group , followed by Vivo, OPPO and Samsung. The bank also predicts that the company’s mobile phone lens shipments will increase quarterly in the fourth quarter of 2021, and resume YoY growth in the second quarter of 2022.
  • China Resources Power Holdings Co Ltd (836 HK), Huadian Power International Corp Ltd (1071 HK). Green power concept stocks fell collectively yesterday. Shares declined 11.7% and 8.1% respectively. There was no company or industry specific news and shares likely declined due to profit-taking. Green power stocks have rallied since the end of November last year and have entered the overbought territory with RSI above 70.

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