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CIMB  MAYBANK KIM ENG

Sheng Siong Group

Gross margins remain high

■ 3Q16 net profit (S$15.7m, +8% yoy) was in line with our and consensus expectations. 3Q/9M formed 25%/74% of our FY16F.

■ Sales growth (+1.2% yoy) was entirely driven by new stores as same-store-sales growth (SSSG) was negative at -1.2%, made worse by the store closure at Loyang.

■ The positive was the company’s ability to maintain high gross margins (25.9%), mostly driven by lower input prices from higher rebates.

■ Slight delay in China, expected opening in 2Q17F now vs. 4Q16F previously.

■ Maintain Add. We raise our FY18F EPS on better margin assumptions.

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Innovalues (IP SP)

First Low Offer On The Table

Hold on or buy more depending on your risk profile

Innovalues has received a privatisation offer of SGD1.01 a share from Northstar Private Equity, valuing it at 9x historical EV/EBITDA and c.18x P/E. This is at the low end of our SGD1-1.20 (9-11x EV/EBITDA) valuation range. Recommended action: The shareholders’ circular will only be sent out in two weeks, following which the shareholder and court meetings will likely take place in Jan 2017. There will be two months for existing shareholders to consider it and await further developments. More aggressive investors could also buy below the offer price to bet on the possibility of competing bids. The key risk is failure to secure 75% of minority shareholders to approve.

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OCBC SECURITIES

Singtel: Partners with Japanese firm to offer cyber security services

Singtel yesterday announced a partnership with TIS Inc (TIS), a subsidiary of the Japanese systems integration company TIS Intec Group, to offer cyber security services in Japan to help businesses build cyber resilience and protect critical infrastructure. As part of the partnership, Singtel’s subsidiary Trustwave, will establish in Tokyo a new Security Operation Centre (SOC) to provide TIS Managed Security Services, powered by Singtel’s subsidiary Trustwave. Trustwave’s new SOC will enhance its ability to offer TIS’ customers round-the clock monitoring of their networks and rapid response to cyber-attacks. We believe this partnership is positive for Singtel over the longer-term as it continues to diversify away from being just a telco towards providing cyber security services, which in our view, is a growing industry with the increasing digitalization of data around the world. We believe this partnership will also help Singtel establish its presence in the region as a cybersecurity service provider. With Singtel expected to announce its 2QFY17 results during the second week of Nov 16, maintain HOLD on the stock, with an unchanged FV of S$4.26.

 

CREDIT SUISSE  DBS VICKERS

Mapletree Commercial Trust

Maintain OUTPERFORM

1H FY17 above expectations with strong retail rent reversions

●  MCT's 1H FY17 DPU of S¢4.08 rose 1.2% YoY, and accounted for 49-50% of CS and consensus FY17E. However, 2H FY17 DPU will be stronger with the full impact of the accretion from the acquisition of MBC Phase 1 (MBC I).  

●  1H FY17 retail reversions remained strong at +13.8% with most renewals for the year now done. We understand that anchor tenant reversions were significantly above the average reversions, and about 9.5k sq ft will be taken back to be leased to specialty tenants which should result in further upside to rents.

●  VivoCity tenant sales rose 1.5% YoY for 1H FY17 (1Q: +0.3% YoY), as shopper traffic also improved by +1.8%. This was stronger particularly in the months of August and September, given the launch of Pokémon Go in Singapore.  

●  Maintain OUTPERFORM: We like the strong asset quality in VivoCity where we believe reversions will remain above peers. The addition of MBC Phase 1 will also add to the strong organic growth profile, given its built-in annual step-ups of 3% p.a. We have raised our DPU forecasts by 1.0-1.4%.

ARA Asset Management

Hitting the Jackpot Positioned to grow, BUY.

We maintain our BUY call and TP of S$1.76 on ARA Asset Management (ARA). The closure of a new fund - Harmony Fund VI - in our view exceeds its original assets under management (AUM) target of S$2bn per annum. We believe the stock is attractive at 15x FY17E PE, at the lower end of historical range, and implied EV/AUM multiple of 4.2x, below -1SD of its historical range.

Valuation: Our target price of S$1.76 is derived from sum-of-the-parts valuation (SOTP) which is based on (i) market price of the group stakes in its REITs, (ii) market value of its stakes in the unlisted property funds and (iii) 18x PE multiple on its recurring income base.

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