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CIMB Fu Yu Corp Integrated precision injection provider ■ One-stop solutions provider of precision injection moulds and plastic parts. ■ Management sees potential growth in medical, automotive and solar segments, and possible reversal of revenue decline from FY17 onwards. ■ Gross margin expansion from FY11’s 7.1% to 16.7% in 1H16 could be sustained via various initiatives, according to management. Cash-generative business; 1st ■ DPS of 1.5Scts in FY15 translates into 7.9% yield. ■ Trades at 9.5x FY16 P/E (peers’ average: 9.7x), based on Bloomberg consensus. |
UOB KayHian Keppel Telecommunications & Transportation (KPTT SP) Developer Of The Future Landscape Keppel T&T’s Investment arm alone makes up 75% of the group’s market cap while its DCs are some of the best in the business, offering superior performance with ROIC in the high teens. There is huge growth potential in being a proxy to the growing digital economy and with the Alpha Fund, the rate of current DC development could double. Initiate coverage with BUY and SOTP target price of S$2.28, offering a 2016 dividend yield of 3.3%.
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OCBC Oil & Gas sector: Don’t forget the downstream players Demand for oil storage facilities PEC’s net cash level close to market cap
The market has been overly focused on low oil prices and beleaguered companies such that certain segments of the broader industry have been forgotten. In the midst of all the doom and gloom, companies catering to the downstream segment are still operating well, a few even turning around from previous years’ negative results. The oil glut has led to a shortage of storage facilities around the world, and while the biggest beneficiaries are likely the domestically entrenched EPC providers and terminal owners, there remains a chance that SGX-listed companies such as PEC Ltd, Rotary Engineering, Mun Siong Engineering and Hiap Seng Engineering can benefit as well. Valuations are generally low and among the list, we find that PEC’s market cap is about the same as its net cash level. As for the broader oil and gas sector, we maintain our NEUTRAL rating with Sembcorp Industries [BUY, FV: S$3.07] as our preferred pick.
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MayBank Kim Eng Keppel Corp (KEP SP) Evaluating divestment opportunities O&M may not be cash generative soon In our view, capital locked in O&M may not be monetised soon as market conditions are still not conducive for rig owners to take delivery. O&M has historically been a major cash generator to fund investments in other segments and dividends. We assess if Keppel needs more cash, whether it could sell non-core assets or take on more debt. Other than possibly selling M1 (M1 SP, SELL, TP SGD2.04) and the T27 data centre, we see low odds of Keppel divesting traditional suspects near term. Thus, ‘value unlocking’ seems limited for now. Maintain SELL on O&M headwinds, asset write-down risks and lack of re-rating catalysts. SOTP-TP lifted from SGD4.50 to SGD4.54 on changes in market values of listed entities. |
