Broker's Digest 19 Mar 2018

City Developments (March 13: $13.52)

- Maintain Buy.  City Developments is the developer with the largest amount of unsold inventory on the books

- The strong pre-sales of the upcoming launch - The Tapestry - will be a catalyst for further re-rating.

- Price target of $15.40, based on a parity to revised net asset value (RNAV), which implies 1.2x P/NAV

Dairy Farm Int'l Holdings (March 13: US$8)

- Downgrade to Hold.  CY2017 sales grew by a merger 0.8%, while core earnings before interest and taxes narrowed by 3.9% y-o-y

- The main culprits for the lower revenue and Ebit were the Southeast Asia supermarket and hypermarket businesses.

- We cut our FY2018/FY2019F EPS by 5.9%.0.8% to reflect slower sales growth and lower margins.  We also introduce our FY2020F forecasts.

- A lower price target of US$8.40 (from US$9.18) on a lower PER of 21x (from 23.7x)

Jubilee Industries Holdings (March 13: 4.2 cents)

- Add (initiating coverage).  Jubilee is set to swing back into full-year positive net profit after two years of net losses post-restructuring, based on our estimates.

-Overall gross margin improved to 6.4% in 1HFY2018 from 4% in 2HFY2017 as a result of leaner manufacturing and better product mix with higher margin and commission

- Our price target of 5.1 cents is derived from sum-of-the-parts valuation

Netlink NBN Trust (March 13: 82 cents)

- Buy (initiating coverage).  With the increasing usage of fibre broadband services for day-to-day activities, driven by growing demand for connectivity and rapid broad-based growth in data consumption, we believe NLT BNN has a resilient business model

- All considered, given its stable earnings outlook coupled with policy to distribute 100% of its cash available for distribution, we value NLT NBN based on a dividend discount model.  Fair value estimate of 91 cents

Keppel Corp (March 13: $7.90)

- Buy.  Following the letter of intent signed at end-February, Keppel has firmed up the contract with Awilco worth US$425 million

- The contract accounts for 19% of our order win assumption of $3 billion this year.

- Price target of $10.20.  Keppel is a safer bet to ride on both offshore and marine recovery and property re-rating while offering a decent dividend yield of 3%

Mermaid Maritime (March 13: 14.8 cents)

- Maintain Hold.  Mermaid's order book has declined q-o-q to about US$148 million as of 4Q2017.

- Overall we think Mermaid's risk reward trade-off is neutral at this point: the lacklustre near-term outlook and downside risks are offset by undemanding valuation levels

- We based our valuation of Mermaid's core subsea business on a P/BV peg of 0.6x and ascribe zero value to associate AOD, giving us a price target of 14 cents.

Perennial Real Estate Holdings (March 13: 87.5 cents)

- Maintain Add.  PREH announced that it will purchase the remaining 50% stake in The Capitol Singapore from Chesham Properties.

- We view the deal positively as it signals the resolution of the deadlock on the project and progress  can now be made to unlock value and returns from this iconic development.

- Our RNAV estimate is raised by 5% to $1.97 as the acquisition cost is below the current market replacement cost.  Our FY2019-FY2020F EPS is raised by 2% to 18% to factor in the additional income post-consolidation and better asset performance

- A slightly higher price target of $1.18 pegged to a 40% discount to RNAV

Raffles Medical Group (March 13: $1.19)

- Maintain Buy.  We forecast RMG's net profits to decline gradually and are expected to trough in 2019 upon the opening of its Shanghai hospital.  Thereafter, we expect a gradual recovery and the utilisation of its new hospitals in Chongqing and Shanghai to rise after their opening in 4Q2018 and 2H2019 respectively

-For investors with a longer-term horizon, RMG's relative underperformance over the past year is an accumulation opportunity.  DCF-based price target of $1.32

Singapore Tech Engineering (March 13: $3.51)

- Upgrade to Buy. After three lacklustre years owing to tough market conditions and restructuring costs, growth catalysts are falling in place.

- We adjusted FY2018/FY2019/FY2020F profit by 5%.+7%/+14% and raised our DCF-based price target by 31% to $4.15 from $3.17

(Source:  TheEdgeSingapore March 19 2018)