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Ho Bee Land - Enlarged London office portfolio

Shared By Stock Fanatic on Tuesday, August 4, 2015 | 4.8.15

Ho Bee recently announced the acquisition of two London office properties for £190m at a net yield of 4.1-4.5%, in line with the firm’s strategy of building higher recurring rental income.

We like the move as
1) there is mid-term upside potential as we estimate the passing rent to be 20-30% below market,

2) it is earnings accretive, and

3) offers a good buffer for earnings before overseas project completion and contribution begins from FY16 onwards.

We raise our FY15-17 EPS forecasts by 2-6% with a slightly higher RNAV-based target price (30% discount) as we factor in the acquisition. Maintain Add. Potential catalysts are earnings delivery in FY16 from overseas projects or further accretive acquisitions.

Asian Pay Television Trust - Delivering on stability

2Q EBITDA growth of 2.4% yoy brought 1H EBITDA to 48% of our full-year estimate, which was in line with expectations. Dividends of 2.0 Scts were declared for 2Q and guidance for 8.25 Scts for FY15 reaffirmed. Operationally, the economic weakness in Taiwan remained a drag but premium cable TV and broadband subscribers began to grow again as management adjusted marketing strategies. We reiterate our Add call and our target price rises, still based on DCF (COE 9.1% vs. 9.7% previously, LTG 0%). We have raised estimates slightly for higher EBITDA. APTT remains an attractively stable income play in the current volatile markets.

ASEAN Plantations - Preview of Jul palm oil stocks

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CIMB Futures team’s survey of 20 planters suggests that Malaysian palm oil output grew 2.6% mom and 7.4% higher yoy at 1.81m tonnes in Jul 15. Palm oil exports were weak, falling by 6-9% mom in Jul 15, according to cargo surveyors ITS and SGS. Overall, we estimate that palm oil stocks may have increased by 4% mom (+33% yoy) to 2.27m tonnes as at end-Jul 15. We are negative on the higher palm oil stock level, which suggests that there is a good buffer against any near-term shortfall in supply. We maintain our Neutral sector rating, with a preference for First Resources and Genting Plantations.

UMS Holdings Ltd - Stronger 2Q15, reiterate Add

UMS reported a stronger 2Q15, with core EPS increasing 12.4% yoy and 26.9% qoq. 1H15 core net profit was broadly in line with our forecast at 54%. Given the stable outlook for semiconductor equipment spending guided by industry forecasters and management, we keep our numbers unchanged and reiterate our Add rating and target price of S$0.63. This is based on 1.38x CY15 P/BV. We continue to like the highly-sustainable base-case DPS of 5 Scts, translating into an attractive FY15-17 dividend yield of 9.8%. Potential catalysts are earnings momentum, new customers and strong cash flow. A key risk is a further sell down by its major shareholder.

Top pick for the day - Canadian Dollar

Still heading higher from here

Canadian Dollar (CAD) looks poised for higher prices in the longer term but in the near term, some form of consolidation could be on the cards.

The CAD has a close and direct relationship with the weakness in crude oil.

Singapore Market Strategy - Reporting season scorecard: More earnings cuts

Following a 660 bp outperformance since June 2015, we believe MSCI Singapore’s weakness in the past week was driven mainly by lacklustre 2Q15 corporate earnings, compounded partially by macroeconomic concerns with muted employment data.

With 66% of MSCI Singapore reporting so far, consensus 2015 EPS for MSCI Singapore were cut by 0.6% in July 2015, following an 8.1% reduction since January 2014. Stocks that have seen the most negative revisions to 2016E EPS are GLP (-4.1%), SMM (-3.4%), HPHT (-3.4%), SGX (-2.9%) and Keppel (-2.2%). Stocks that have seen earnings raised so far are SIA (+1.1%), CMT (+0.9%), SPH (+0.5%) and OCBC (+0.1%).

We expect more earnings cuts for companies yet to report their 2Q15 results. In particular, earnings for Sembcorp Industries (low Singapore power spreads), Noble (fall in commodity prices) and STE (no turnaround in aerospace) are likely to be weak.

With a lack of significant drivers, we expect upside to MSCI Singapore to be limited in the near term. However, we expect valuation support from attractive P/B and a dividend yield of 3.6%. Our top picks are DBS, SGX, CMT and Raffles Medical.

Singapore Public Transportation - Impact from fare reduction

Transport Minister, Mr. Lui Tuck Yew, has announced a fare reduction of up to 1.9%, effective by end-15, to account for the lower fuel prices. While the specific size of the reductions has yet to be finalised by the Public Transport Council (PTC), we conduct a sensitivity analysis to show the potential impact of the fare cut on CDG and SMRT. In the worst-case scenario (i.e. the 1.9% fare cut), CDG’s FY16-18 core EPS estimates are cut by 2.4%, 0.7% and 0.8% respectively, while SMRT’s FY16-18 estimates are cut by 4.1%, 11.5% and 8.6%, respectively. CDG’s DCF-based target price is cut from S$3.42 to S$3.39 and SMRT’s from S$1.42 to S$1.28. CDG remains an Add and SMRT a Reduce. We maintain Overweight on the sector on account of its structural reforms.

Singapore rigbuilding - Dividend yield still good for KEP/SMM; 15-19% lower DPS for both yards for FY15F likely, as estimated core net profits to fall y-y

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Action: Reduce Keppel Corp (KEP), and Buy Sembcorp Marine (SMM)
We maintain our Buy rating on SMM and Reduce on KEP, due to the former’s relatively better order win visibility in 2H15F, and the latter’s greater exposure to the protracted jackup rig downcycle. However, we cut our TP for SMM to SGD3.33 and for KEP to SGD6.63, mainly due to new order estimate cuts.

Vard Holdings - Deepwater Becoming Marginalised

We expect shale oil all-in production costs to fall below that of ultradeep water on the global marginal cost curve, which makes the latter the highest-cost marginal producer in demand. Maintain SELL, with a lower SGD0.36 TP (21% downside, from SGD0.47) based on 0.6x P/BV. The economics suggest a prolonged period of asset price depression, asset under-utilisation and low global order flows as oil majors freeze (ultra)deepwater projects in favour of onshore/shallow-water ones.

Biosensors International - A slow start for FY16

Missing expectations again; business environment remains challenging
Biosensors reported sales/non-GAAP EPS of USD67m/0.61cents for 1QFY16, representing YoY growth of -16%/5%, and missed DBe by 19% and 9%, respectively. On a constant currency basis, product revenue declined by 3% YoY. The company achieved decent OP growth of 21% from cost reduction. However, we remain cautious on the business environment as the company indicated double-digit price erosion for DES in China in different provinces. Biosensors maintained guidance of revenue growth in FY16, but competition, pricing pressure, and FX movements remain key headwinds.

Singapore Airlines - Reality check

■ Management warns that market expectations are too optimistic.

■ Earnings recovery solely premised on lower fuel price.

■ Maintain HOLD with lower target price of SGD11.85 on softer load factor outlook

CWT Limited - Weak momentum

CWT’s 1H15 core net profit of S$52.7m was below expectations at 44% of our and consensus full-year forecasts due to lower commodity logistics volumes and higher start-up costs associated with the new integrated logistics hub. We cut our FY15-17 EPS by 2-8% and our SOP-based target price falls slightly to S$1.76. The only bright spot was the surprise interim DPS of 3 Scts. While CWT has confirmed that its controlling shareholders are potentially exploring the sale of their stake in the company, we believe this may take time to unfold, especially amid poorer underlying business momentum in the logistics segment. As CWT’s share price has seen a good run on expectations of a potential buyout, we believe there may be near-term downward pressure on the share price if such an event is delayed, hence our downgrade from Hold to Reduce.
**** Recommendation ****
Modified by : Stockfanatic
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