ANALYSTS SAY: Buy, Sell, Hold (21 Sept 2017)

Raffles Medical Group (RFMD SP)

Upgrade To Buy On Long-term Growth

While earnings outlook for the next two years will likely be crimped by start-up losses in China, we believe growth over the next 10 years will be significantly enhanced where capacity will more than quadruple. Since our downgrade in April, share price has declined nearly 22% on expansion cost concerns. RMG is trading at a 2018 15% discount to regional peers. This could be an accumulation opportunity for investors with a horizon of three years or more. Upgrade to BUY with a DCF target price of S$1.28.

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Cityneon Holdings

The Jurassic blockbuster

On stronger footing with the acquisition of a third IP

With the acquisition of Jurassic World, Cityneon is now on a stronger and firmer growth path. Together with the existing two Intellectual Property rights (IPs) – Avengers and Transformers - Cityneon has added a third growth leg, to help the group to propel to even greater heights. We continue to expect Cityneon to deliver explosive FY16-FY18F EPS CAGR growth of c.200%. Trading at a low PE to growth ratio of 0.2x FY2018F earnings, Cityneon is attractive to investors seeking unique ideas in the entertainment industry

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Singapore Press Holdings:

Price correction overdone

Since SPH announced 3QFY17 results that tracked below expectations on 14 July 2017, its share price has dipped 15.4% to the last close of S$2.63. This cumulates to a 34.3% decline since 15 Jul 2016, which translates to a remarkable 47.3% underperformance versus the STI’s 13.0% appreciation over the period. While residual uncertainties continue to hang over the group’s core media business, we believe that the price correction is likely overdone at this point. We note that the 45.2% YoY decline in the group’s last reported 3QFY17 PATMI was primarily due to a sizeable one-time impairment (S$37.8m) related to the magazine business, without which the group’s recurring earnings would have declined only 19.2% YoY.
Also, given that SPH completed the sale of 701Search on 30 June 2017, we expect the group to recognize a profit of c.S$150m from the divestment in the next quarter’s results to be reported in mid Oct 2017. We leave our fair value estimate unchanged at S$3.25; upgrade the stock to BUY on valuation grounds.