DBS’ acquisition of 30% of Marina Bay Financial Centre Tower 3 is more of a strategic exercise to hedge against rental step-ups ahead, CIMB says.
“It could potentially be a better use of capital as yield on investment is around 40bps higher than NIM, though risks lie in upward rate revisions.” It views the acquisition as a mild positive and raises its FY13-14 earnings estimates by 0.7% after accounting for associate contributions from MBFC-3.
It estimates the investment’s incremental yields could be 1.97%-2.23%, assuming 100% occupancy, around 31-57bps above 3Q12’s NIM of 1.66%. It keeps a high-conviction Outperform call with $17.36 target.
“We continue to like DBS for its deposit strength and robust fee income trends. DBS’s 1.08x 2013 P/BV valuation is also the cheapest in the region.” The stock is up 0.1% at $14.82.
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