Monday, 30 October 2017

[Singapore Stocks] Yoma Strategic Holdings Update

  • Healthy margins
  • Lingering uncertainties in real estate
  • Maintain HOLD

Healthy 2QFY18 Scorecard

Yoma’s 2QFY18 revenue increased 32.9% YoY to S$33.1m, driven largely by growth in its Automotive & Heavy Equipment and Consumer businesses. Notably, the group’s Automotive & Heavy Equipment business grew 109.9% YoY to S$14.6m on the back of healthy sales of its New Holland tractors.

We note that the group has entered into an agreement to buy back the development of Galaxy Towers (Zone C) at cost, entitling it to the share of profits in relation to the sales of units made previously. We believe that this contributed, in part, to the 3.3%pts YoY increase in gross margins to 44.7%, as the group’s real estate business generally commands higher margins relative to the other business segments.

PATMI fell 56.8% YoY to S$3.7m due largely to the absence of a S$14.7m fair value gain on the telecommunications towers investment which was recognized in 2QFY17.

Non-real Estate Businesses Picking Up Momentum

Yoma has successfully grown its KFC store footprint from 12 in March 2017 to 16 in September 2017, and is also exploring the possibility of acquiring and developing new brands. We think it is also possible for Yoma to consider a domestic brand, given that this could unlock greater efficiencies as the business scales up.

In the Automotive & Heavy Equipment space, Yoma is expected to deliver another 651 tractors from sales that were organized by the government’s Agriculture Mechanisation Department. Potential retail tractor sales might also materialize as Myanmar heads into the peak dry season.

Guarded Optimism on Real Estate Sector

Looking ahead, while we believe that the real estate market is starting to stabilize, it still remains broadly slower than before, especially in relation to the mid-market segment. To that end, we note that management is looking at redesigning its units at StarCity to cater to the mass market segment, which we understand to still see relatively robust demand.

Separately, the uncertainties over the Condominium Law passed in 2016 have yet to be clarified, and this could continue to rein in further optimism in the local property market, in our opinion. We maintain our HOLD rating and our fair value estimate of S$0.58.
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  • AEM
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Friday, 27 October 2017

Singapore Stocks Market Overview

- The market could extend its blue-chip rally on positive momentum as the 3Q earnings season gets underway, with robust Sep industrial production data providing more ballast to the economy.
- Technically, STI is hovering at its 3,355 resistance level with the next objective at 3,380 and downside support seen at 3,320.

*Suntec REIT
- 3Q17 DPU of 2.483¢ (-2.1%) was in line despite dilution from an enlarged unit base (+4.6%) arising from its bond conversion.
- Revenue (+10.6%) and NPI (+11.6%) were lifted mainly by full-quarter contribution from 177 Pacific Highway office building in Sydney, which opened in Aug '16.
- Occupancy at its office (98.6%, -0.1ppt q/q) and retail (98.8%, -0.2ppt q/q) portfolios slipped slightly.
- Aggregate leverage dipped 0.7ppt q/q to 35.4%.
- Trades at annualised 3Q yield of 5.1% and 0.91x P/B.

*Viva Industrial Trust
- 3Q17 DPU rose 5% to 1.9¢ despite a larger unit base (+11.7%). This brought 9M17 distribution to 5.615¢ (+8%), coming in at the higher end of estimates.
- For the quarter, gross revenue and NPI leapt to $28.3m (+16.8%) and $20.6m (+18.3%) on contribution from recently-acquired 6 Chin Bee Avenue, as well as higher takings at two business parks.
- Portfolio occupancy ticked up by 0.3ppt q/q to 90.9%, while aggregate leverage crept 0.5ppt q/q higher to 39.6%.
- Last traded at annualized 3Q yield of 7.9% and 1.2x P/B.

*CDL Hospitality Trusts
- Post rights 3Q17 DPS of 2.29¢ (-3%) came in below expectations.
- Revenue and NPI jumped to $54.8m (+20.7%) and $40.4m (+15.9%), mainly from maiden contributions from recently-acquired The Lowry Hotel in UK and Pullman Hotel Munich in Germany.
- But domestic RevPAR of $166 (-1.4%) remained under pressure from the competitive environment.
- Aggregate leverage fell to 33.3% (-5.4ppt q/q).
- Trades at annualised 3Q yield of 5.6% and 1.12x P/B.

*Sheng Siong
- 3Q17 net profit jumped 25.7% to $19.7m on better operating leverage. Excluding an one-off tax impact, its results would have met expectations,
- Revenue rose 4.2% to $210.9m on higher same store sales growth (+1.7%) and contribution from new stores.
- Operating margin widened to 10% (+0.6ppt) on lower distribution (-2.9%) and admin (-0.5%) expenses.
- Bottom line benefitted from a tax refund of $2.2m (3Q16: nil).
- Last traded at 21.1x forward P/E.

*Indofood Agri
- 3Q17 core net profit slumped 25.3% to Rp97b, in line with estimates.
- Revenue inched 4.6% higher to Rp3.72t on improved sales volume of palm products but offset by lower average selling prices in CPO (-3%) and palm kernel (-16%).
- EBITDA margin declined 4.5ppt to 21.2% due to higher fertilizer application and increased operating expenses (+24.3%).
- Bottom line was dragged by a negative Rp61.7b swing into FX loss, although partly mitigated by a spike in JV income of Rp70.5b (+51.9%) and lower associate loss of Rp2.6b (3Q16: Rp18.5b loss).
- NAV/share at $0.875.


- 2QFY18 net profit tumbled 56.8% to $3.7m, bringing 1HFY18 earnings of $6.4m to just 23% of FY18 street estimate.
- Quarter revenue jumped 32.9% to $33.1m, lifted by a spike in automotive & heavy equipment sales (+109.9%) and the consumer segment (+20.1%), while sale of residences & land development rights (-0.6%) and real estate rental and services (+0.9%) remained flattish.
- Gross margin improved 3.3ppt to 44.7% due to higher profitability achieved in StarCity Zone C and Zone B.
- Bottom line was partly weighed by absence of fair value gain (2QFY17: $14.7m), although partly offset by lower JV/ associate loss of $0.9m (2QFY17: $1.9m loss).
- NAV/share at $0.3789.


- 3Q17 results came below estimates as core net profit dived 71% to US$12.1m.
- Revenue grinded 3% higher to US$814.3m, bolstered by Indonesia animal protein (+5.8%), dairy (+26.7%), and consumer food (+10.5%) segments, but was doused by the continued decline in swine selling prices in Vietnam.
- Operating margin collapsed 6.5ppt to 6.9% due to weaker margins from poultry and beef businesses, absence of one-off gain from disposal of beef cattle business, and Vietnam swine prices remained below costs.
- Bottom line was further impacted by a US$2.9m jump in finance cost.
- Net gearing jumped to 0.68x from 0.45x in Dec '16.
- NAV/share at US$0.44.

*Tuan Sing

- 3Q17 net profit declined 9% to $5.9m, partially due to a $3.6m spike in finance cost.
- Revenue rose 12% to $101m, underpinned by stronger property (+18%) and industrial services (+16.1%) segments.
- Gross margin shrank 6.8ppt to 16.7% amid a shift in sales mix.
- Bottom line was also hurt by higher distribution cost stemming from the launch of Kandis Residence.
- Last traded at 0.57x P/B.

*Samudera Shipping
- 3Q17 results turned around to net profit of US$0.5m (3Q16: US$3.8m loss).
- Revenue jumped 14.2% to US$69.7m as improvement from container shipping (+18%) led by higher volume handled was outweighed by weakness in bulk & tanker business (-13.8%) due to a shrinking fleet.
- Gross profit margin expanded to 5.8ppt from breakeven, amid higher container freight rates and tanker charter rates.
- Bottom line was also helped by absence of a US$2.4m provision.
- Net gearing was pared 0.11x from 0.12x in Dec '16.
- Last traded at 0.38x P/B.

- Awarded a contract worth $6.6m in the Middle East to undertake ballistic protection works to a firearm training facility.
- Work is expected to begin in Jun '18 and be completed in Sep '19.
- Last traded at 3.2x P/B.

*Ley Choon
- Secured contracts worth $2.6m for closed-circuit television survey of sewers and resurfacing of roadworks.

- Trades at 2.1x trailing P/E and 1.46x P/B.

- Signed letters of intent with RINGLING Bros and Feld Entertainment to jointly present 48 "Disney On Ice" shows across South Korea and Taiwan.
- 12 "Disney on Ice "Let's Party" shows may take place in Oct 18, while 36 "Disney On Ice 'Frozen'" shows may take place in 3Q19.

*Spackman Entertainment
- Completed acquisition of South-Korean based motion picture production start-up Take Pictures, via the issue of 54.1m shares.

*Samudera Shipping

- Disposing two vessels for US$9.2m, and expected to result in a net gain of US$0.8m.
- Proceeds will be used for working capital and future business expansion.

-Issued 10m drawdown shares at $0.058 each to GEM Global Yield Fund, which has committed $30m capital earlier.
- Proceeds earmarked for business development and growth.


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Keppel Corporation Active in China

  • S$290m net gain from divestment
  • Positive on asset recycling strategy
  • Up valuation on Tianjin Eco-City

Divests stake in Keppel China Marina Holdings

Keppel Corporation announced yesterday that Keppel Land China has entered into an agreement with Delight Prime Ltd (unit of HKlisted Logan Property) to divest its 100% stake in Keppel China Marina Holdings Pte Ltd (KCMH) for approx. RMB2.9b (~S$597.4m), subject to completion adjustments.

KCMH indirectly owns an 80% effective interest in Sunsea Yacht Club (Zhongshan), a JV which owns and develops Keppel Cove, an integrated residential cum marina lifestyle development on Modao Island in Zhongshan city, China. Recall that Keppel China Marina Holdings entered into a JV with Sunsea Yacht Club (HK) to develop its first integrated residential cum marina lifestyle development in Zhongshan in 2008.

Expects Gain of S$290m

The consideration was arrived at after taking into account the unaudited NAV of KCMH Group and the market value of the unsold inventories and remaining undeveloped land. With this divestment, a gain of about S$290m is expected to be recognised. Completion is expected to take place by the end of this year.

Land Prices in Tianjin Eco-City Have Increased Significantly

We are positive on the group’s strategy to recycle assets to seek higher returns and rebalance its portfolio to focus on selected highgrowth cities in China. KEP’s Tianjin Eco-City project is also bearing fruit, with average selling prices of Eco-City residential land having increased significantly since 2016 – RMB1,700/sm in 2014, RMB1,900/sm in 2015, RMB6,300/sm in 2016 and finally RMB13,800/sm this year.

Do note that land sales from this project (to either KepLand or other property developers for development) are accounted for under the “Investments” segment of KEP.

Recall that KEP has a 45% effective stake in SinoSingapore Tianjin Eco-City Investment and Development, which acquires land from the Chinese government based on prices that were fixed earlier in 2008.

We take this into account in our sum-of-parts valuation, and after adjusting our estimates, our fair value rises from S$7.73 to S$8.31. Maintain BUY.

Wednesday, 25 October 2017

Good time to BUY Wing Tai Holdings Ltd

  • 1QFY18 results in line
  • In net cash position
  • FV estimate increased to S$2.77

1QFY18 PATMI up YoY From S$1.1m to S$8.2m

Wing Tai’s 1QFY18 PATMI increased from S$1.1m to S$8.2m YoY mainly due to contributions from Le Nouvel Ardmore, Le Nouvel KLCC as well as disposal gains on the Huai Hai project in Shanghai. In addition, we also saw the group’s share of profits of associated and joint venture companies increased 17% YoY to S$6.7m given higher contributions from Wing Tai Properties Ltd in Hong Kong.

In terms of the topline, however, 1QFY18 revenues decreased 4% YoY to S$67.1m as the group recorded lower homes sales over the quarter. Overall, we judge 1QFY18 results to be broadly within expectations.

Fair Value Estimate Increased to S$2.77; Maintain BUY

To recap, in Aug 2017, the group together with Keppel Land acquired through a government land sales tender a 99-year leasehold residential site in Serangoon North Ave 1. The site, which has a gross floor area of 462,561 square feet in the Serangoon Gardens area, will be redeveloped into a new condominium development with over 600 homes.
As at end Sep 2017, Wing Tai continues to sit on a strong balance sheet in a net cash position with over S$1,011m in cash and equivalents. We now forecast for Singapore home prices to appreciate 1% in 2017 and 3% to 8% in 2018 and, given the group’s ample dry powder, we believe that Wing Tai is well positioned to benefit from the turnaround in the domestic housing sector.

Notwithstanding a 46% share price appreciation over the year to date, we see the group’s current price to be relatively undemanding at 0.57x price-to-book. After updating our valuation model with our latest assumptions and firmer average selling prices, our fair value estimate increases from S$2.37 to S$2.77. Maintain BUY.