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MAYBANK KIM ENG |
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YHI International Ltd The world is its market
■ YHI is a global distributor of automotive and industrial products. The Yokohama brand of tyres was its major revenue contributor in FY17. ■ YHI also has an alloy wheel manufacturing business. ■ YHI has restructured its alloy wheel manufacturing business but this business continues to face pressure from high raw material cost and possible tariff impact. ■ YHI trades at a historical FY17 P/BV of 0.48x against ROE of 3.52%. Its net gearing at end-FY17 was 0.12x.
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ST Engineering (STE SP) A Big LEAP
Making the biggest acquisition in its history STE’s proposed acquisition of 100% of MRAS from General Electric (GE US; USD12.68; NR) for USD630m on a cash-free, debt-free basis holds multiple positives in our view. The purchase will be earnings accretive immediately when closed in 1Q FQ2019. We raise FY19E/FY20E PATMI by 10%/9% to factor in the event and our DCF-based TP by 5% to SGD4.35 from SGD4.15 (WACC 8.1%; TGR 2% unchanged).
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| DBS VICKERS | UOB KAYHIAN |
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ESR-REIT
Better together Maintain BUY with lower TP of S$0.59. Post consolidation, ESRViva to emerge as the fourth largest industrial REIT with c.S$3bn (+79.8%) in assets. The implied acquisition yield of 5.8-5.9% for VIT’s portfolio is at the lower end of peers’ range of 5.1- 6.8% - possibly reflecting the acquirer’s optimism over longerterm prospects and synergies that the REIT can extract. While temporary near-term dilution from the absence of income support for VIT starting FY19F and issue of new units takes our DCF-based TP slightly lower to S$0.59, we believe the merits of an enlarged vehicle will prevail over time. Maintain BUY.
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NetLink NBN Trust (NETLINK SP) The Ultimate Defensive Stock
NetLink has dominant market share of 90% for residential and 35% for non-residential fibre connections, where growth is projected at a three-year CAGR of 6.2% and 8.5% respectively in FY18-21. It is the most defensive stock listed on the SGX due to: a) low volatility but high liquidity, b) its catering to basic necessities, c) stable and recurrent revenue streams, d) beneficiary of higher domestic interest rates, e) high barriers to entry, and f) blue-chip customer base. Maintain BUY. Target price: S$0.95.
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UOB KAYHIAN |
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Keppel Telecommunications & Transportation (KPTT SP) Takeaways From KDC SG4 Site Visit
Our visit of KDC SG4 indicates that the outlook for hyperscale datacentres remains bright. Demand remains strong and continues to outstrip projections. However, KPTT’s growth has been limited by the availability of developable assets. Growth is likely to come from overseas developments in the meantime. ADCF could allow KPTT to more than double the number of projects being developed at the same time, from each of which KPTT can reap development fees. Maintain HOLD with target price at S$1.51. Entry price: S$1.30.
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Check out our compilation of Target Prices
