Highlights

SGX Stocks and Warrants

Author: kimeng   |   Latest post: Wed, 22 May 2019, 9:02 AM

 

CSPC Pharmaceutical: Innovative Drugs Led Growth

Author: kimeng   |  Publish date: Wed, 22 May 2019, 9:02 AM


  • Strong set of 1Q results
  • Guiding for same 20-30% growth
  • Maintain FV of HK$14.81

Innovative Drugs Rose 54%

CSPC Pharmaceutical Group [1093 HK] posted 1Q19 net earnings of RMB952m, up 28.7% YoY. Revenue grew 25.6% to RMB5493m. Finished Drugs generated strong double-digit revenue growth of 33.7% to RMB4245m which accounted for 77% of total group revenue. Bulk Drugs saw a 4.1% rise in revenue to RMB1248m and accounted for the remaining 23% of group revenue.

Gross profit margin improved from 64.3% in 1Q18 to 69.9% in 1Q19. Operating profit margin also improved from 27.0% to 29.4%. With substantially higher Research & Development (R&D) expenses this quarter, up 77% YoY to RMB461m, pretax profit margin was flat at 21.1%. Its Innovative Drugs did well, generating revenue growth of 54.4% to RMB2954m.

As the group’s operation is mainly in China, with transactions mainly in RMB, the group has decided to present the financial statements in RMB with effect from 1 Jan 2019.

Management Is Still Optimistic

Management is still fairly positive about its outlook and is retaining its guidance of 20-30% growth. Its key innovative drug, NBP (butylphthalide soft capsules and injections), is expected to continue to enjoy strong growth momentum, largely from the increase in its sales force from 1500 to 1800. However, the Vitamin C market remains challenging and prices are expected to ease.

Profit margin for Vitamin C has dropped from an estimated 38.4% in 1Q18 to 31.6% in 1Q19. Of its business segments, only Finished Drugs (which included Innovative Drugs) reported improved margin from 19.6% in 1Q18 to 21.5% in 1Q19. Management has also guided for full year R&D expenses of RMB1.7-1.8b.

In Line Results; No Change to FV

As its 1Q19 results are fairly in line with our full year expectations, we are maintaining our earnings projections. With the uncertainty on the global front over the current trade situation, there will be a near term cap on its share price performance. We are maintaining our fair value estimate of HK$14.81.

Source: OCBC Research - 22 May 2019

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Singapore Airlines: Returning to Trough Valuations

Author: kimeng   |  Publish date: Tue, 21 May 2019, 10:03 AM


  • S$0.30 FY19 dividend as expected
  • Most fuel needs hedged
  • Undemanding valuations

FY19 Results Within Expectations

Singapore Airlines (SIA) reported a 3.3% YoY increase in revenue to S$16.3b and a 47.6% YoY fall in net profit to S$682.7m for FY19, dragged by higher fuel costs; the group had also recognised its share of losses (S$116m) arising from Virgin Australia’s non-cash accounting adjustments in prior quarters.

Results were within expectations as full year net profit was just 2% higher than our full year forecast. The group has declared a final dividend of S$0.22/share, bringing the full year dividend to S$0.30/share (vs. S$0.40/share a year ago), which was in line with our expectations, as per our earlier reports.

69% of FY20 Fuel Needs Hedged

Fuel cost headwinds may persist on supply risks in the oil market, but SIA’s significant fuel hedges will help to mitigate the effect of higher prices. For FY20, the group has hedged 64% of its fuel requirement in MOPS (Mean of Platts) and 5% in Brent at weighted average prices of US$75 and US$53 per barrel, respectively. Longer-dated Brent hedges with maturities extending to FY25 cover up to 46% of the group’s projected annual fuel consumption, at average prices ranging from US$58 to US$63 per barrel.

6% Passenger Capacity Growth in the Year Ahead

Issues related to the Boeing 737 MAX 8 fleet as well as the Rolls-Royce Trent 1000 TEN engines powering Boeing 787s have affected SIA Group’s passenger capacity growth, which is now expected to be 6% in the year ahead. Going forward, growth in forward passenger bookings in the months ahead is tracking positively against capacity injection, with robust premium cabin demand. However, China’s international traffic growth rates have softened at a time of increased supply in the market.

Trading at 0.8x P/B

After rising 11% to its peak in end Feb 2019 since we upgraded to BUY in Oct last year, the share price (as at 17 May) is down about 9% post the grounding of Boeing 737 Max 8 fleet and the recent market correction. SIA is now trading at about 0.8x P/B, close to trough valuations. We maintain our BUY rating and fair value estimate of S$11.02 on SIA.

Source: OCBC Research - 21 May 2019

Labels: SIA
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Singapore Airlines: Results in Line

Author: kimeng   |  Publish date: Fri, 17 May 2019, 4:57 PM


Singapore Airlines (SIA) reported a 3.3% YoY increase in revenue to S$16.3b and a 47.6% YoY fall in net profit to S$682.7m for FY19, dragged by higher fuel costs; the group had also recognised its share of losses (S$116m) arising from Virgin Australia’s non-cash accounting adjustments in prior quarters. Results were within expectations as full year net profit was just 2% higher than our full year forecast.

The group has declared a final dividend of S$0.22/share, bringing the full year dividend to S$0.30/share (vs. S$0.40/share a year ago), which was in line with our expectations. Going forward, growth in forward passenger bookings in the months ahead is tracking positively against capacity injection, with robust premium cabin demand. However, ongoing trade disputes and slowing economic growth in key markets pose uncertainties.

Pending an analyst briefing, we maintain our BUY rating but put our fair value estimate of S$11.02 under review.

Source: OCBC Research - 17 May 2019

Labels: SIA
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SATS Ltd: Steady Set of Results

Author: kimeng   |  Publish date: Fri, 17 May 2019, 4:56 PM


SATS Ltd reported an 11.3% YoY rise in revenue but saw a 23.7% fall in net profit to S$49.9m in 4QFY19, mainly due to a 62.9% fall in share of associates and JVs. This brought full year net profit to S$248.4m, which was a 5.0% fall from a year ago.

Excluding one-off items, reported core earnings grew 2.2% to S$241.4m for FY19, which was within our expectations. For the full year, Food Solutions saw a 4.4% increase in revenue while Gateway Services reported a 7.9% growth. Free cash flow remained healthy.

The group has declared a final dividend of S$0.13/share, bringing the full year dividend to S$0.19/share, compared to S$0.18/share last year. Pending an analyst briefing, we maintain our HOLD rating but put our fair value estimate of S$5.23 under review.

Source: OCBC Research - 17 May 2019

Labels: SATS
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Frasers Centrepoint Trust: Watering Your Way to Our Hearts

Author: kimeng   |  Publish date: Fri, 17 May 2019, 4:54 PM


  • Acquisition of 1/3 stake in Waterway Point
  • FY18 NPI yield of 4.7%
  • Good fit to portfolio Proposed acquisition of 33.3% interest in

Waterway Point

Frasers Centrepoint Trust (FCT) has proposed to acquire a 33.3% stake in Waterway Point (WP) from its sponsor Frasers Property Limited. The purchase consideration is based on an agreed property value of S$1.3b (100% basis), which implies that the 33.3% stake will be acquired at S$433.3m. Both independent valuers adopted a cap rate of 4.5% in their valuation. The purchase consideration comes in at a premium of 6.6% to WP’s valuation as at 30 Sep 2018. Although the transaction price of S$3,502 psf on NLA does not come cheap, in our opinion, the implied FY18 NPI yield on cost of 4.7% is decent.

Strong Operating Metrics and Good Fit to Portfolio

WP is located at the heart of Punggol Central and thus has a strong residential catchment area, including a condominium with ~ 1k units right above it. Other investment merits of this deal include i) excellent connectivity to public transport nodes, ii) strong tenants such as FairPrice Finest, Shaw Theatres, Daiso and H&M, iii) robust operating metrics such as having a high committed occupancy of 98.1% (as at 31 Mar 2019), strong tenants’ sales growth of 10% to S$379.1m in 2018 and 3.9% increase in footfall to 29.1m in 2018, iv) healthy occupancy cost of 16-18%, and v) reduced concentration risks from FCT’s other key malls.

Equity Fund Raising Exercise to Partially Fund Acquisition

FCT has correspondingly launched an equity fund raising exercise to raise ~S$437.4m in gross proceeds. This comprises a private placement at an issue price of S$2.382 per new unit to raise gross proceeds of ~S$369.6m and a pro rata and non-renounceable preferential offering at an issue price of S$2.35 per new unit to raise gross proceeds of ~S$67.7m. The gross proceeds will go towards financing the proposed WP acquisition and paring down bridging loans taken up for the acquisition of a stake in PGIM Real Estate AsiaRetail Fund Limited (PGIM ARF).

FY18 pro forma DPU is expected to increase by 0.3% for the WP acquisition, and by 0.65% for both the WP and PGIM ARF transactions. We maintain our S$2.61 fair value for now.

Source: OCBC Research - 17 May 2019

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Yanlord Land Group: Disappointing start but improvement to come

Author: kimeng   |  Publish date: Thu, 16 May 2019, 11:46 AM


  • 1Q19 PATMI fell 59.5% YoY
  • Momentum to gather pace
  • Keeping to RMB40b contracted sales target

1Q19 results missed expectations

Yanlord Land Group Limited (Yanlord) reported a weak set of 1Q19 results which fell short of ours and the street’s estimates. Gross revenue and gross profit dipped 49.6% and 61.4% YoY to RMB3,622.9m and RMB1,546.0m, respectively, with the latter forming 14.2% of our FY19 forecast. The weaker performance was attributed to both a decline in GFA delivered (-18.0% to 68.7k sqm) and ASP (-44.4% to RMB44,550 psm).

The lower ASP was partly due to a change in product mix, as 1Q18 included a significant amount of GFA delivered for its Shanghai Yanlord on the Park project, which commands ASPs of close to RMB100k psm. 1Q19 PATMI came in at RMB323.1m, representing a dip of 59.5% YoY, and this constituted 9.6% and 10.1% of ours and Bloomberg consensus’ full-year forecasts, respectively.

More launches to come; RMB40b pre-sales target intact

Looking ahead, Yanlord has RMB11.8b of accumulated pre-sales still pending recognition (as at 31 Mar 2019), of which ~90% is expected to be recognised in FY19. Hence we are expecting an improvement for the rest of the financial year. Yanlord achieved pre-sales of RMB8.4b for 4M19, with momentum picking up in Mar (RMB3.4b) and Apr (RMB3.2b).

As it has more launches lined-up in Jun and Jul, including projects in Shenzhen and Zhuhai which are expected to fetch healthy ASPs, management has reiterated its RMB40b contracted sales target for 2019.

Keeping a close watch on gearing

In terms of financial position, Yanlord’s net gearing ratio rose from 96.8% as at end-FY18 to 103.9% as at 31 Mar 2019. Although it acquired no land bank in 1Q19, the increase was attributed to higher borrowings for the payment of land premium (~RMB2b). Once Yanlord’s launch momentum picks up pace, it would be able to bring down its gearing ratio with the cash collection from the sales proceeds.

We lower our core PATMI forecasts for FY19 and FY20 by 10.4% and 2.7%, respectively, and now base our valuation on 5x blended FY19/20F core EPS. Correspondingly, our fair value estimate moves from S$1.75 to S$1.68. Maintain BUY.

Labels: Yanlord Land
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