Towards Financial Freedom
DBS Equity Research: Wired Daily 14 Mar 2016
Del Monte Pacific - Turned profitable but 3Q16 results below expectations. Maintain HOLD.
Last week's STI pullback from a high of 2850 that found support at 2770 was within our expectations. We keep our view that with short-term sentiment underpinned by central's policy easing and the expectation that the FED will hold rates steady, the STI should head up to 2900. We believe that unlike the broad based gains enjoyed over the past 3 weeks, gains from here will be more selective. However, underpinned by yield, we do not expect any major sell-down similar to January. Instead, we peg a STI range from 2720 to 2920 over the next few weeks. Stick to dividend yield plays. Capitaland, ST Engineering and SIA Engineering offer potential dividend upside. We also like Sheng Siong and Thai Bev.
3Q16 earnings for Del Monte were below expectations. US operations were impacted by loss of government contract and higher expenses. Post 3Q16 results, we trimmed our revenue and EBITDA forecasts lower for the group, particularly dragged by its US operations. Maintain HOLD, TP revised slightly up to S$0.39 (Prev S$0.35) as we roll forward our valuations based on average of FY16F/17F earnings. While we expect Del Monte to be on track to post an earnings turnaround in FY16F following two consecutive years of losses, the pace is not as fast as we previously envisaged.
Petra Foodsis proposing to change name to "Delfi Limited". Following the divestment of the Group's Cocoa Ingredients business, the Group is now focused on the sales and marketing of its own brands of chocolate confectionery products.
SBI Offshorehas terminated the US$24m design and engineering contract between the Group and a consortium of six Middle East-Chinese parties.
More companies may consider selling off assets considered less crucial to growth as companies seek to improve valuations and bolster their balance sheets amid the economic gloom that has cast a pall over markets. Divestments of "non-core" assets could be more likely now for sectors such as oil & gas, where prospects are dim, and industries where the rules of the game are changing - such as telecommunications, transport and banking, market watchers say. Selling such assets, which may be less well integrated into the group or loss-making, could help companies reduce any drag on valuations and give them more funds to invest in other opportunities that may bring in juicier returns, they note.
Units at two residential developments launched for sale over the weekend drew healthy interest from buyers. CapitaLand sold 134 of the 200 units released from its 268-unit Cairnhill Nine in Orchard, while buyers scooped up 116 of the 138 units at The Wisteria offered for sale by developer Northern Resi. The Wisteria is located at the junction of Yishun Ring Road and Yishun Avenue 4. Both residential projects were fairly priced, making it a draw for investors as well, market watchers said. The price range for Cairnhill Nine is between S$2,200 psf and S$2,800 psf. Over at The Wisteria, the average price range is from S$1,030 to S$1,050 psf.
Source: DBS
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