Frasers Logistics & Industrial Trust: No surprises in 2QFY18
Frasers Logistics & Industrial Trust’s (FLT) 2QFY18 results came in within our expectations. DPU in SGD terms grew 3.4% YoY to 1.81 S cents due to a currency hedge rate of A$1: S$1.0647 which FLT entered into (2QFY17: A$1: S$1.0014). There were three leases renewed/signed in 2QFY18. Although rental reversions were negative at 7.3%, the three leases carry annual rent increments of 3.15%-3.25%, while two of the leases have long tenure of 7.1 and 10 years, thus providing visibility. Occupancy continues to be high at 99.4%, while WALE is healthy at 6.75 years. As FLT has a policy of hedging its FX on a rolling six months basis, we believe its currency hedges rate for its 2HFY18 distributions are likely to come in lower than its 1HFY18 hedges. We now incorporate a weaker AUD-SGD assumption in our model (FY19-FY22F: A$1: S$1.01). Correspondingly, our fair value declines to S$1.21 from S$1.25. As of the closing price on 8 May, FLT is offering an attractive FY18F distribution yield of 7.0%. Maintain BUY.
Sembcorp Industries Ltd Expecting a turnaround in India operation
SINGAPORE | CONGLOMERATE | 1Q18 RESULTS
1Q18 revenue met our expectation while net profit missed substantially, due mainly to weak performance from the marine segment.
Utilities’ Singapore operation remained flat, encountering margin compression.
Utilities’ India’s performance was negatively impacted by SGPL and SGIL, due to a majority or short-term PPAs were contracted at lower tariffs under SGPL and low wind season in 1Q18 for SGIL.
Marine segment continued to weaken the group’s profitability.
We tweak down the FY18e EPS from previous 19.8 SG cents to 18.9 SG cents, due to prolonged weak profitability from SMM. After incorporating a lower target price of S$1.85 for SMM, based on sum-of-the-parts method, and we upgrade our call to BUY with a lower target price of S$3.83 (previous S$3.86) due to the higher expected return from last closing price
Decent Start To The Year
We maintain our BUY call and TP on Bumitama, as we believe it is an undervalued company with good growth prospects. 1Q18 earnings were in line with expectations, as FFB grew at an admirable 20% YoY, while FFB costs fell 16% YoY. We expect FFB output and earnings to be skewed towards 2H18 as is seasonally the case. Our unchanged TP of SGD0.85 is based on historical average 2018F P/E of 12x. Bumitama is currently trading below its historical P/E averages, while its implied EV/ha of USD7,400/ha is below replacement values.
A Superb 2Q18
Maintain BUY and DCF-based SGD0.43 TP, 23% upside. Kimly reported a superb 2Q18, with revenue steadily growing at 3.8% YoY and PATMI surging 20.2% YoY. This was on an increased number of coffeeshops and third-party brands outlets, as well as a 10.2% decrease in administrative costs due to the absence of listing expenses. We expect such a performance to continue into subsequent quarters. An interim dividend of SGD0.0028 has been declared. Management has also managed to open a new coffeeshop in Ghim Moh and added another four food stores to Kimly’s network.
Ramping Up For Growth
Maintain BUY, with an unchanged TP of SGD1.00 offering an upside of 25%. MindChamps’ 1Q18 results came in below our estimates. This was due to the seasonal effect on preschools and higher operating costs that stemmed from an increase in its number of centres and staff to support the group’s overseas expansion. We expect revenue and earnings to catch up over the next three quarters – as its student count increases, and the Woodlands MindChamps Preschool and four new Australia preschools’ accounts are consolidated into the group’s numbers.
Forex weakness priced in, capacity to drive growth
1Q18 profits of RM31.1m within expectations as forex was the key earnings drag
Industry headwinds persist, but Riverstone can outperform peers as it ramps up on new cleanroom capacity from 2H18, which carries higher margins
Trading at attractive valuations, Riverstone could be a prime acquisition target given its enviable cleanroom portfolio
Reiterate BUY and TP of S$1.27
Check out our compilation of Target Prices