Brokers' Digest April 16 2018

AEM Holdings (April 11: $6.29)

•          Maintain ADD.  As at April 1, AEM said its sales orders received for delivery in FY2018 increased to $192 million.  This represent a rise of 67% over the last sales order update of $115 million on Feb 1, and a 30% incrase over the sales order of $148 million received on April 1, 2017 for delivery in FY2017
•           AEM highlighted that sales could seasonally peak in 2QFY2018 and 3QFY2018
•           Price target of $8.19, based on 10x (15.3% discount to sector average) FY2019F EPS

Cromwell European Real Estate Investment Trust (April 11: €0.60)

•          Buy (initiating coverage).  With an improving European economy, CERT is well positioned to benefit from an uplift in rents.  In addition, with European property yield spreads being above the historical 10-year average, CERT is poised to gain from increases in property values
•           While there is a lack of familiarity with CPG by some investors, we believe well-known real estate fund manager ARA Asset Management’s taking a 19.5% interest in CPG should give investors confidence in CPG’s execution capability
•           DCF based price target of €0.63

Frasers Commercial Trust (April 11: $1.44)

•          Upgrade to Buy.   While Grade-A CBD Core landlords in Singapore are the immediate beneficiaries from the broader office recovery, we believe that their Grade-B CBD Core peers should also enjoy some upside, albeit belatedly
•           Separately, we believe FCOT’s FY2018F yield of 7% is still quite a distance away from the 5.5% yield seen during the start of the last rental recovery cycle in 1HFY2013
•           Fair value estimate of $1.51

Genting Singapore (April 11: $1.13)

•           Maintain Buy.  Since Genting Singapore reported 4QFY2017 Ebita fell 20% q-o-q, its share price has tumbled 14%
•           Currently, Genting Singaporeis tarding at only 9x FY2018 enterprise value/Ebitda or -1 standard deviation to the 12-month forward EV/Ebitda mean.  The last time the sotck traded at these valuations was when the company suffered larget derivative losses, foreign-exchange losses and impairments of trade receivables
•           Unchanged price target of $1.46, based on 12x FY2018 EV/Ebitda

Moya Holdings Asia (April 11: 9.9 cents)

•           Maintain Buy.  Moya’s founding shareholder, Moya Holding, sold out its stake.  First, it did so to its majority shareholder, Tamaris Infrastructure, on Jan 25 at 10 cents a share.  It followed with sale to Gateway Partners on April 6 at 11 cents a share or a 10% permium
•           With further cost savings, volume expansion and the recovery of its non-revenue water providing strong organic growth and possibly additional acquisitions in the pipeline to further boost its earnings we think the outlook is bright for Moya
•           Unchanged price target of 15 cents

Perennial Real Estate Holdings (April 11: 86 cents)

•           Buy.  PREH has announced that that group has entered into a 40:60 joint venture with Qingjian Group to develop a freehold residential site of up to 720 units, with a gross development value of up to $1 billion
•           While Qingjian can be seen as sharing the project risk with PERH, we do note that the consortium has placed two bids for the Holland Village Government Land Sales site.  If awarded, it will add significant exposure to the Singapore property market
•           Price target of $1.05 (23% upside)

SPH REIT (April 11: 98.6 cents)

•           Hold.  Our forecasts are unchanged for SPH REIT, following 2QFY2018 results that were in line with our expectations and consensus
•           We estiamate a potential Seletar Mall acquisition adds 10% to 12% to FY2018DPU, assuming the purchase of a 100% stake that is fully debt-funded, given its low gearing of 25.4%
•           SPH REIT is looking to firm up strong local partnerships in Australia as it focuses on overseas diversification
•           Dividend discount model-based price target of $1

StarHub (April 11: $2.29)

•           Upgarde to Hold.  Starhub adopted the new revenue recognition standard Singapore Financial Reporting System (I) 15 effective from Jan 1, with full retrospective approach for active contracts from January 2017
•           Having corrected about 20% YTD (April 9, 2018 close), Starhub’s share price in the near term will be supported by a decent 7% forward yield
•           Unchanged fair value of $2.20

Wilmar International (April 11: $3.18)

•           Maintain Buy.  China has retaliated against the US imposition of tariffs on its exports, by imposing 25% tariff on soybeans imported from the US.  If the tariff takes effect, the long-term impact on Wilmar will be negative-to-neutral
•           Price target of $3.45 (12% upside) on Wilmar, as the group may see some short-term upside with the decline in soybean future prices

(Source:  TheEdgeSingapore, April 16 2018)

Brokers' Digest April 9 2018

 CapitaLand Retail China Trust (April 3: $1.57)

•         Upgrade to Buy.   As at the closing price on March 27, CRCT is trading at a 6.8% FY 2018F yield.
•           Going forward we expect retail sales growth in China to remain healthy for both online and offline stores
•           We have kept our forecasts for CRCT largely intact and our fair value remains at $1.66

ComfortDelgro Group (April 3: $2.05)

•           Maintain Buy.  Grab announced that it had acquired Uber’s Southeast Asia operations and Uber will take a 27.5% stake in Grab.
•           We are keeping our earnings forecasts for now, as the situation remains fluid and we had not factored in the potential upside from the proposed ComfortDelgro and Uber alliance
•           Our price target of $2.25 is based on a long-term 10 year PER average of 16.6 x

Dairy Farm Int’l Holdings (April 3: US$8.13)

•           Maintain Buy.  We turn more positive on DFI’s recent deal with Robinson’s Retail Holdings (RRHI) to spin off Rustan Supercenter for an 18% stake in RRHI.
•           We see earnings turnaround going forward, as a stock catalyst and swapping Rustan for RRHI shares are part of this process.
•           Our price target of US$9.77 is derived from the sum-of-the-parts valuation methodology

M1 (April 3: $1.74)

•           Upgrade to Hold.  Following TPG’s teaser announcement on March 19 to offer free SIMs, unlimited voice and 3GB/month data for senior citizens for 24 months, the Singapore focused M1 share price has de-rated by 2% and has underperformed the Straits Times Index (STI) by 25% on a 12 month basis
•           We assume M1’s wireless service revenues will decrease by a 3% compound annual growth rate over 2017-2020E.
•           Price target of $1.63

Mapletree Greater China Commercial Trust (April 3: $1.16)

•           Upgrade to Add.  MAGIC announced it is acquiring a 98.47% stake in a portfolio of six Japan commercial properties from MFOJ, a private real estate fund managed by its sponsor
•           We tweak our FY2019-2020F DPU estimates up by 0.4% to 2% to include the new contributions
•           Our dividend discount model-based price target is lifted to $1.30, with the additional income and a change in our blended cost of equity to 8.5% (from 8.9% previously)

Sembcorp Marine (April 3: $2.20)

•           Maintain Buy.  Sembcorp Marine has announced that it has secured the engineering, procurement and construction contract for the hull and living quarters of a new build floating production, storage and offloading vessel from Energean’s engineering, procurement, construction, installation and commissioning contractor – Technip FMC
•           We believe the order flow could be stronger than expected, given the robust pipeline
•           Price target of $2.90, based on 2.4x FY2018 P/BV

Sheng Siong Group (April 3: 94.5 cents)

•           Buy.  Excessive concerns about e-commerce disruptions led to Sheng Siong Group’s (SSG) 12 month underperformance of 10% against the STI
•           We expect 4% y-o-y revenue growth for FY2018E.  We resume coverage with a “buy” rating, expecting catalysts from: (1) further improvements in consumer spending, (2) SSG’s further market share wins from convenience stores and traditional market grocers (3) a potential surge in new stores in 2018 and (4) continued good sets of results, supporting high ROEs and dividends
•           Our DCF price target is $1.20

Tianjin Zhongxin Pharmaceutical Group (April 3: 99.5 US cents)

•           Buoyed by strong margin expansion, TJZX 4Q2017 Patmi surged 63.7% y-o-y to RMB118.2 million, bringing full year Patmi to RMB473.3 million, which is a 4.5% above our forecast
•           We tweak our 2018-2019 attributable net profit to RMB569.4 million and RBM670.6 million, respectively
•           Price target of US$1.66, pegged to peers’ average of 14.1x2018F PER and based on an exchange rate of RMB6.29 per US$

Y Ventures Group (April 3: 57.5 cents)

•           Buy (initiating coverage). Y Ventures Group distributes products from third party brands over some of the largest e-commerce platforms across 10 countries
•           YVEN stands out for its provision of value-added data analytics service to brand partners, allowing them to adapt their products to the market needs.
•           Ebita projected to grow at 92% CAGR over FY2018F-FY2020F.  Price target of 77 cents, based on 20x FY2019F enterprise value (EV)/Ebitda, at a 15% discount to larger peers’ 23x, owing to YVEN’s smaller scale.

(Source:  TheEdgeSingapore April 9 2018)

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)