SGX Stocks and Warrants

Author: kimeng   |   Latest post: Fri, 16 Nov 2018, 11:43 AM


Singapore Airlines: Tata SIA Airlines to Merge With Jet Airways?

Author: kimeng   |  Publish date: Fri, 16 Nov 2018, 11:43 AM

According to The Economic Times, the Tata Group and Naresh Goyal-promoted Jet Airways are inching towards a two-step transaction, the first leg of which could see the merger of Jet Airways with Tata SIA Airlines (JV between Tata and SIA that operates Vistara). The second step could involve the purchase of the Goyal family’s stake in the combined entity by SIA.

According to sources, Jet Airways may first merge with Tata SIA through a share swap. If successful, the transaction will give Tata SIA Airlines (51% owned by Tata, 49% by SIA) landing rights, routes and related infrastructure amenities of Jet.

Cash strapped Jet has been in talks with investors to sell assets to stay afloat – it has made a profit in only FY16 and FY17 since FY08 (year end in Mar).

Meanwhile, the market is likely to focus on the structure of the deal (should there be one), as well as the plans of Tata SIA Airlines to turn the combined entity into a profit-making one.

We maintain our BUY and FV estimate of S$10.71 on SIA given its low valuations.

Source: OCBC Research - 16 Nov 2018

Labels: SIA
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Wilmar: Whither Soybean Crush Margins

Author: kimeng   |  Publish date: Fri, 16 Nov 2018, 11:42 AM

  • Good set of 3Q results
  • Soybean crush margins to soften?
  • China IPO maybe in 4Q19

Solid 3Q18 Results

Wilmar registered a 4.3% YoY fall in revenue to US$11.6b and a 10.7% rise in net profit to US$407.4m in 3Q18, bringing 9M18 net profit to US$927.1m or 82% of our full year estimate. Results were better than expected. Core net profit increased by 35.1% YoY to US$434.7m in 3Q18, driven by better results in the Tropical Oils and Oilseeds & Grains segments.

Tropical Oils benefitted from improved margins in the downstream businesses while strong soybean crushing margins and good performance from the Consumer Products business lifted the performance of Oilseeds & Grains.

Oilseeds & Grains, which accounted for 58% of 9M18 pretax profit, saw a 46% rise compared to a 40% increase in Tropical Oils (which contributed 31% of 9M18 pre-tax profit). Sugar, which posted a pre-tax loss of US$66.1m in 9M17, narrowed the loss to US$8.9m in 9M18.

Expecting Softer Soybean Crushing Margins

Post an analyst briefing that was held yesterday, management mentioned that global soybean crushing margins are softer now and its margins may be impacted as well. However, some of its plants can be used to process not just soybean but also rapeseeds (a decline in soymeal demand in China may happen as the country reduces the percentage of it in animal feed, but alternatives such as rapeseeds may step in). China may also choose to release some of its soybean stocks next year should it deem necessary, amidst the trade tensions.

IPO of China Operations Around 4Q19?

Looking ahead, management expects most of its operations to continue to do well in the coming quarter. Meanwhile, we estimate that the IPO of its China operations could be around 4Q19.

Wilmar remains a well-run company with a clear long term strategy, but in the meantime uncertainty over soybean crushing margins may grow as the trade dispute between the US and China becomes more prolonged.

We update our USD/SGD assumptions and also lower our P/E slightly from 13x to 12.5x such that our FV estimate slips from S$3.51 to S$3.42. With limited upside, we downgrade our rating to HOLD.

Source: OCBC Research - 16 Nov 2018

Labels: Wilmar Intl
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KSH Holdings: PATMI Up 11.6% YoY

Author: kimeng   |  Publish date: Thu, 15 Nov 2018, 09:46 AM

KSH Holdings’ (KSHH) 2QFY19 PATMI increased 11.6% YoY to S$4.4m, lower than our expectations due to a decrease in construction margins. Revenue increased 58.2% to S$35.2m while profit from operations (before share of results from associates and JVs) dropped by S$1.4m YoY to S$1.2m mainly due to a higher cost of construction.

However, the share of results from JVs and associates increased by S$1.5m YoY to S$3.4m due to an increase in profit recognised from High Park Residences, and the gain from disposal of subsidiaries by an associated company, which held strata units in Prudential Tower.

PBT ended flat at S$4.7m (up 1.6% YoY) while PAT increased 9.9% YoY to S$4.5m on the back of lower income tax. KSH’s order book stands at >S$553.0m as at 30 Sept 2018, and is to be progressively recognised up to FY2022.

Looking ahead, the group is cautiously optimistic on the outlook of its performance for FY2019. We maintain BUY but place our fair value S$0.94 under review.

Source: OCBC Research - 15 Nov 2018

Labels: KSH
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Singapore Airlines: Impacted by Virgin AU as Expected

Author: kimeng   |  Publish date: Thu, 15 Nov 2018, 09:45 AM

  • 1HFY19 operating profit 47% of full year
  • Interim div of S$0.08/share
  • 58% of fuel hedged for 2HFY19

2QFY19 Results Impacted by Virgin AU

Singapore Airlines (SIA) reported a 5.6% YoY rise in revenue to S$4.1b in 2QFY19 and net profit of S$56.4m, impacted by S$117.1m share of losses of associated companies. This was mainly due to the recognition of SIA’s share of loss from Virgin Australia, which we had highlighted in our earlier report on 17 Oct.

1HFY19 revenue and operating profit were 49% and 47% of our full year estimates, within expectations. Operating profit was 44% YoY lower, but if one-off items were to be excluded, it would be 27% lower, mainly due to higher fuel costs.

Encouraging Performance From Passenger Flown Revenue

Flown revenue rose by S$422m, contributed by passenger flown revenue (+S$346m or +5.8%) and cargo flown revenue (S$76m or +7.4%). Passenger flown revenue was lifted by an 8.8% increase in traffic, outpacing growth in capacity of 5.4%, driving passenger load factor to rise 2.6% points to 83.6%. Passenger unit revenue (in revenue per available seat-km) grew 1.3% as transformation efforts yielded positive results.

58% of Fuel Hedged for 2HFY19; 52% for FY20

Bookings in the coming months are expected to be stronger YoY, but headwinds continue to persist in the form of cost pressures arising from elevated fuel prices and keen competition. For 2HFY19, SIA has hedged 58% of its fuel requirements in MOPS (jet fuel) at a weighted average price of US$71, against the current MOPS price of US$87. For FY20, 52% is hedged with 17% at US$79 on average for jet fuel) and 35% at US$56 on average for Brent.

Interim Dividend of S$0.08/share

Looking ahead, the projected capacity growth (in ASK) for FY19 vs. FY18 is 5% for SIA, 4% for SilkAir, 16% for Scoot and 7% for the whole group. For cargo, it is expected to be flat (in CTK). The group has declared an interim dividend of S$0.08/share, compared to S$0.10/share a year ago, which is not a surprise to us – our FY19 dividend forecast remains at S$0.30 compared to S$0.40 in FY18.

Meanwhile, valuations remain low at about 0.85x forward P/B. We maintain our FV estimate of S$10.71.

Source: OCBC Research - 15 Nov 2018

Labels: SIA
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CapitaLand Limited: Expect Christmas Presents From China in 4Q18

Author: kimeng   |  Publish date: Thu, 15 Nov 2018, 09:45 AM

  • 3Q18 operating PATMI grew 13.3% YoY
  • Active portfolio reconstitution
  • Bumper quarter from China in 4Q18

3Q18 Results In-line With Expectations

CapitaLand’s 3Q18 results met our expectations. Revenue declined 16.9% YoY to S$1,260.0m but gross profit jumped 15.3% to S$583.7m. The dip in revenue was largely due to lower contributions from development projects in Singapore and China, but partially offset by higher rental income. PATMI and operating PATMI rose 13.6% and 13.3% YoY to S$362.2m and S$233.7m, respectively.

For 9M18, CapitaLand’s revenue jumped 16.8% to S$3,978.0m; PATMI was down marginally by 0.4% to S$1,286.8m, while operating PATMI fell 13.1% to S$658.4m and this formed 71.3% of our FY18 forecast. If we further strip out the gain of S$160.9m from the sale of 45 units of the Nassim in 1Q17, CapitaLand’s 9M18 adjusted operating PATMI would have grown 10.3%.

Active Capital Recycling; Expect Strong 4Q Recognition From China

CapitaLand has been active on reconstituting its portfolio, making total investments of S$6.1b YTD. This has been partially balanced by divestments amounting to S$4.0b, which generated gains of S$288.7m. Some of the investments include the acquisition of 16 freehold multifamily properties in the U.S. for S$1.14b, joint acquisition of its third Raffles City integrated development in Shanghai (21% effective stake) with GIC and two prime residential sites in Guangzhou.

Looking ahead, CapitaLand has close to 3.5k residential units which are ready to be released in China in 4Q18. It also expects to recognise ~RMB6.4b of revenue (100% basis) from China in 4Q18, which is significant given that 9M18 value recognised was RMB6.2b.

On Track to Meet >8% ROE Target

Given CapitaLand’s active capital recycling strategy and continued efforts to boost the value of its properties, it generated a ROE of 6.9% for 9M18 (annualised ~9.2%). This puts it well on track to deliver its annual ROE target of at least 8%.

CapitaLand’s balance sheet also remains strong, with a net gearing ratio of 0.51x. If we exclude the REITs which are consolidated, net gearing would be ~0.38x. After updating the FV/share prices of CapitaLand’s listed entities and net debt assumptions in our RNAV model, our fair value on CapitaLand moves from S$4.09 to S$3.96, still based on a 20% RNAV discount applied.

Source: OCBC Research - 15 Nov 2018

Labels: CapitaLand
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Yanlord Land Group: Another Strong Quarter

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

Yanlord Land Group Limited (Yanlord) reported a solid set of 3Q18 results, with PATMI beating our expectations. Revenue jumped 51.7% YoY to RMB5,711.6m, underpinned by a 40.1% increase in GFA delivered (147.1k sqm) and 3.1% increase in ASP to RMB33,758 psm.

Gross profit increased 66.4% YoY RMB2,616.1m, and this translated into a gross profit margin of 45.8% (+4.0 ppt). For 9M18, Yanlord’s revenue rose 57.1% to RMB22,562.6m, forming 75.5% of our FY18 forecast.

PATMI of RMB3,287.7m represented an increase of 62.4% and this accounted for 87.8% of our full-year projection due largely to lower-than-expected noncontrolling interests (PAT accounted for 78.4% of our FY18 forecast).

Looking ahead, Yanlord has RMB11.3b of accumulated pre-sales pending recognition, as at 30 Sep 2018, with advances received amounting to RMB9.0b. It has a land bank of 7.79m sqm, which is sustainable for development for approximately five years.

If we were to pick one negative from this set of results, it would be the increase in Yanlord’s net gearing ratio from 78.3% in 2Q18 to 91.2%, as at 30 Sep 2018.

We will provide more details after the analyst conference call. For now we have a BUY rating and S$2.13 fair value estimate.

Source: OCBC Research - 14 Nov 2018

Labels: Yanlord Land
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