Highlights

SGX Stocks and Warrants

Author: kimeng   |   Latest post: Wed, 17 Jan 2018, 09:14 AM

 

Singapore Press Holdings: Near-term Reprieve for Ad Spending

Author: kimeng   |  Publish date: Wed, 17 Jan 2018, 09:14 AM


  • Operating revenue dropped 7.0% YoY
  • Improved retail ad spend
  • FV estimate revised to S$2.51

1QFY18 PATMI Grew 32.1% YoY

SPH’s 1QFY18 results were broadly within expectations. Operating revenue fell 7.0% YoY to S$258.8m, on the back of a 13.9% YoY drop in media revenue. This was on the back of 16.7% and 7.3% YoY drops in advertisement and circulation revenues, respectively.

The property segment delivered revenue growth of 1.2% YoY to S$61.2m, on the back of higher rental income from the group’s retail assets. The group also clocked in revenue growth of 48.2% YoY from its other businesses, especially from its aged care business.

We note that operating costs have dropped 5.5% YoY to S$199m, with staff costs falling 4.9% YoY to S$85.8m, on the back of a decrease of 7.9% in headcount (excluding new acquisitions) as at end-November. Average newsprint charge-out prices have been increasing over the last 2 quarters (from US$484 to US$490), and we believe this should exert some pressure on margins moving forward.

This quarter also saw a gain of S$5.9m being registered from the dilution of interest on Mindchamps’ IPO listing, as well investment income of S$12.4m comprising primarily divestment gains. All in, PATMI grew 32.1% YoY to S$60.4m.

Short-term Boost to Ad Revenue

Disruption in the media business has been an ongoing theme, and 1QFY18 was no different. However, while newspaper ad revenue registered decreases across all 3 sub-segments (Display/Classified/Newspaper Ad) of between 12.5% and 17.9% YoY, we note that this negative variance has now narrowed on a YoY basis in comparison to the preceding quarters.

We understand that this was on the back of improved retail ad spend, while the recent enbloc fever (and resultant property launches) should grant further respite moving forward. However, we prefer to remain cautious and await the unfolding of further initiatives to reposition the media business.

We adjust some of our assumptions, and value SPH’s Orange Valley Healthcare business at 20x FY18 PE, while applying a 20% RNAV discount to the group’s Bidadari site. We also apply a 10% conglomerate discount, and revise our fair value downwards from S$2.93 to S$2.51. SPH currently trades at a 20.8x forward consensus PE, which is just about the 5-year average. Maintain HOLD.

Source: OCBC Research - 17 Jan 2018

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Longfor Properties: Recent Correction Presents Buying Opportunities

Author: kimeng   |  Publish date: Wed, 17 Jan 2018, 09:13 AM


  • Preparing for FY18
  • Expansion into Zhuhai
  • Raising our FV and maintain BUY

Saving Some Bullets for FY18

Longfor Properties Co. Ltd. recently reported its operating statistics for Dec 2017, whereby it reported a mild 1.3% YoY decline in contracted sales to RMB7.64b. This was a sharp contrast compared to the 12th consecutive months of YoY growth registered from Dec 2016 to Nov last year. Longfor’s share price has corrected 3.6% following this data release, but is still up 30.5% since our ‘Buy’ rated initiation report on 8 Dec 2017.

We believe investors should not be overly concerned with the soft contracted sales for Dec, as management may have been holding back inventory in preparation for 2018 rather than aggressively push out its sales in Dec. This is because overall contracted sales for 2017 still hit RMB156.08b, which not only represents a strong growth of 77.1%, but also exceeded Longfor’s upward revised target of RMB150b.

This was inline with our forecast of RMB156.9b. Furthermore, the full-year contracted sales growth figure came in stronger than most of the Chinese developers which we tracked.

Continuing Its Land Bank Acquisition Drive

Longfor also announced that it had acquired a number of projects in Dec. This includes making its maiden penetration into the Zhuhai market, thus entrenching its footprint across 33 cities nationwide. Other projects acquired were in Baoding, Chengdu, Hangzhou, Jiaxing, Jinan, Ningbo and Xi’an. It has also opened 26 shopping malls as of the end of 2017, which would support its recurring income streams ahead.

Maintaining Our BUY Rating

We factor in higher contracted sales (20% growth versus 15% previously) and a slightly higher gross profit margin for FY18, and correspondingly bump up our core PATMI forecast by 4.0%. Given the re-rating in share prices of the Chinese developers YTD, driven in part by improved optimism on the relaxation of some housing policy restrictions, we also revisit our valuation assumptions.

Longfor’s peers set is currently trading at a market-cap weighted average forward P/E ratio of 9.3x for FY18. As before, we ascribe a premium to Longfor and assign a target peg of 10x to our FY18 core fully diluted EPS forecast. Our fair value estimate increases from HK$20.63 to HK$25.25. Maintain BUY.

Source: OCBC Research - 17 Jan 2018

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Golden-Agri Resources: CPO Prices Expected to Stay Supported Into Early 2Q18

Author: kimeng   |  Publish date: Tue, 16 Jan 2018, 09:28 AM


After droughts in 2015-2016 due to a super El Nino, a sector-wide production uptrend has resulted in lower crude palm oil (CPO) prices which are now around RM2,500/MT compared to about RM3,300/MT during its Feb 2017 peak. Nevertheless, positive catalysts on CPO prices include the wet weather La Nina (heavy rainfall may hamper harvesting) currently, and potential support from better crude oil prices.

Along with seasonally lower production into early 2018, CPO prices are likely to stay supported till early 2Q18 before trending lower. Though there may be trading opportunities in the short term, the industry remains challenged by stiff market competition, rising operating costs, and negative campaigns against palm oil in certain countries.

Maintain HOLD with S$0.37 fair value estimate on Golden-Agri Resources.

Source: OCBC Research - 16 Jan 2018

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SATS Ltd: Wait for Better Entry Levels

Author: kimeng   |  Publish date: Tue, 16 Jan 2018, 09:27 AM


  • Traffic growth at Changi Airport still strong
  • Unclear over any potential pricing pressure
  • Longer-term outlook still positive

Encouraging Operating Statistics at Changi Airport

Singapore’s Changi Airport posted yet another set of encouraging operating statistics for Nov 17 as passenger throughput grew 8.1% YoY, aircraft movements rose 4.8% and air freight movements surged by 10.7%. For the period from Jan-Nov 17, YoY growth remained strong across all three categories – passenger throughput (+6.3%), aircraft movements (+3.6%) and air freight movements (+8.1%).

As highlighted before, strong traffic growth at Changi Airport is positive for SATS as we estimate SATS to handle close to 80% of the traffic throughput there. In addition, the opening of Terminal 4 on 31 Oct 17 provides room for longer-term traffic growth at Changi Airport, which we believe will benefit SATS as the dominant ground handling provider at Changi Airport.

That said, it remains unclear whether the pressure on yields faced by airlines will be translated to pricing pressure for SATS.

Positive Longer-term Outlook Intact

Over the longer-term, we remain positive over SATS’ outlook driven by its strategy to diversify out of Singapore as well as into non-aviation business segments, through several overseas partnerships. More notably, we remain positive on its partnership with:

  1. AirAsia as it opens up opportunities for SATS in Indonesia, Philippines and Thailand, and
  2. Wilmar to supply quality and safe food in China, enabling it to leverage on Wilmar’s distribution network in China.

In addition, we also like its potential partnership with Turkish Airlines (THY) to provide in-flight catering services to THY and other airlines at Istanbul New Airport.

Higher FV of S$5.50 But Re-engage Closer to S$5.05

Consequently, on aforementioned reasons, we raise our FY18F-FY22F EPS by 2%-8%, and increase our FV to S$5.50. However, SATS’ share price has appreciated ~25.0% (15 Jan 18 close) since we upgraded the stock to BUY on 2 Oct 17. All considered, while we remain positive over its longer-term outlook, we believe investors should position themselves to accumulate at better entry levels, closer to S$5.05 and lower.

Source: OCBC Research - 16 Jan 2018

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Singapore Press Holdings: Continued Weakness in Media Segment

Author: kimeng   |  Publish date: Mon, 15 Jan 2018, 12:29 PM


SPH reported a 7.0% YoY drop in operating profit for 1QFY18 to S$258.8m, due primarily to continued weakness in the media segment. In particular, advertisement and circulation revenue dropped 16.7% and 7.3% YoY, respectively.

The group’s property segment continued to show steady results, with revenue rising 1.2% YoY to S$61.2m on the back of higher rental income from the group’s retail assets. The group’s other businesses saw revenue growing 48.2% YoY to S$23.6m with contributions from the aged care business.

A gain of S$5.9m was registered from the dilution of interest on an associate’s IPO listing. PATMI rose 32.1% YoY to S$60.4m, boosted also by investment income of S$12.4m, comprising mainly divestment gains.

We maintain our HOLD rating, but put our fair value estimate of S$2.93 under review.

Source: OCBC Research - 15 Jan 2018

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Singapore REITs: Robust Nov Singapore Retail Sales

Author: kimeng   |  Publish date: Mon, 15 Jan 2018, 12:28 PM


According to the Department of Statistics of Singapore, retail sales jumped by a robust 5.3% YoY and 5.1% MoM for the month of Nov. Excluding motor vehicles, retail sales improved 4.7% YoY.

Growth was largely driven by Computer & Telecommunication Equipment (+16.6% YoY) and Supermarkets (+9.7% YoY). This was also the second strongest YoY growth (excluding motor vehicles) in a month for 11M17 (Apr: +4.8% YoY), which we believe is a reflection of the more positive consumer sentiment on the ground.

The share prices of retail REITs have been laggards within the REITs sector due to concerns over the e-commerce threat and softer rental reversion figures. We still see value in selective names, and highlight our preference for Frasers Centrepoint Trust [BUY; FV: S$2.40] and CapitaLand Mall Trust [BUY; FV: S$2.20].

Maintain NEUTRAL on the broader S-REITs sector.

Source: OCBC Research - 15 Jan 2018

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