Towards Financial Freedom
DBS Equity Research: Wired Daily 23 Feb 2015
Courts Asia - Valuations have bottomed; upgrade to HOLD with S$0.45 TP
A recap of our STI view - We see the index heading towards 3530 by end of 1Q in light of the positive earnings revision thus far in this 4Q14 results season. Attention for local investors will be on the Singapore Budget 2015 later this afternoon. Changes to the CPF system, focus on middle income group, aging population and more efforts to boost productivity are expected.
3Q15 results for Courts Asia may have shown signs of bottoming out. Core earnings surged by 136% q-o-q to S$5.6m, from S$3.3m in 2Q15, and y-o-y growth declined by a smaller extent (-36% y-o-y compared to 76% y-o-y drop seen in 2Q15). Sales and margins have recovered from 2Q15. Singapore and new Indonesia stores are expected to fuel growth. We have lowered FY16F/FY17F earnings by 34%/22% to factor in more conservative estimates. Valuations have bottomed; upgrade to HOLD with S$0.45 TP.
Cambridge REITannounced the proposed acquisition of 160A Gul Circle for S$16.2m. The property is well located in the mature industrial estate in Jurong and comprises of a single storey factory and a newly completed four storey factory with ancillary office. The property has a total GFA of 7,997 sqm (21,492 sqft) and a remaining land tenure of 26 years. Upon completion of the acquisition (estimated in 2Q15), the vendor, Unicable Pte Ltd will lease the property back for 5 years, with annual rental escalations, offering good earnings stability. Initial yield is estimated to be c. 8.0%, while seems high in today's highly competitive industrial market. Maintain TP of S$0.73 and hold call.
AusGroup announced that it was conducting a strategic review of its fabrication business in Australia, which includes the reshuffling of some key personnel. The group also explained that the implemented changes to the operating and cost structure of the fabrication business will position it to better manage overheads at a level that will continue to support its maintenance strategy going forward.
IFS Capital is expected to report a higher loss for Q4 2014 and FY 2014 as compared to the corresponding periods of last year. The Group has decided to make full provisions in Q4 2014 for the following: (i) Loan loss due to a recent court decision against a client of an overseas subsidiary; and (ii) Claims liabilities for a client of its insurance subsidiary.
The supply of housing in Singapore will increase by about 11% in about three years with the addition of more than 100,000 HDB and 67,000 private units, according to Minister for National Development Khaw Boon Wan. By early 2018, the stock of housing in Singapore would have grown to 1.43 million units and that the residential market in Singapore has achieved a better balance between sellers and buyers. The current stock of about 1.28 million housing units consists of 960,000 HDB units and the remaining 320,000 in the private sector.
US markets rallied on Friday after Eurozone ministers agreed to extend Greece's bailout by 4 months. The bailout will be extended as long as Greece sets out key reform commitments by Monday. Optimism that the Federal Reserve will keep rates lower for longer also underpinned sentiment. The strife over Greece's debt was among risks to the US economy cited by Fed officials as an argument for keeping rates low for longer, this according to Bloomberg citing the minutes from the FED's latest meeting released on Feb. 18. Policy makers said after the gathering that they "can be patient" as they consider when to raise borrowing costs, even as they described the labor market as "strong." Investors will receive further clues on the central bank's assessment of the economy and the timing of a rate increase when Fed Chair Janet Yellen gives two days of testimony to Congressional finance committees starting Feb. 24.
Source: DBS
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