| UOB KAYHIAN |
OCBC |
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Valuetronics (VALUE SP) FY19: Results In Line; Huge War Chest For Expansion
FY19 results were in line; net profit met 98% and 99% of consensus and our forecasts. VALUE ended FY19 with a net profit decline of 2.6% yoy, mainly due to the weaker CE segment and higher operating expenses that were partially offset by the robust growth in the ICE segment. We cut our FY20 EPS by 11% to account for a weaker CE segment and our target price falls 8% to S$0.80. Good value has emerged as VALUE now trades at FY20F ex-cash PE of 3.2x. Maintain BUY.
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Soilbuild REIT: A look at the NK Ingredients issue
The moratorium for Soilbuild REIT’s tenant, NK Ingredients,has been extended for a period of eight weeks expiring 22Jul 2019, subject to NK Ingredients paying the rent for Jun2019 and Jul 2019 on the 1 s t day of the respective months.What would happen if NK Ing redients vacates the assetafter the moratorium? The asset is currently being used asa fully automated lanolin, lanolin derivative and cholesterolproduction facility and we understand that the managementhas looked for potential back up tenants including thosefrom the same industry. We believe that alternatively, themanagement could choose to market the asset for sale oreven potentially redevelop it to other specifications. Ourcurrent assumption is that NK Ingredients makes the rentalpayments necessa ry for Jun and Jul, but that no furthermoratorium extension is granted and a replacement for theanchor tenant is found three months later. As at 30 May’sclose, Soilbuild REIT is trading at 7.9% FY19F dividendyield. We maintain HOLD with an unchanged fa ir value ofS$0.62. |
| CGS CIMB | DBS VICKERS |
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SATS Ltd The S$1bn dollar question
■ We like SATS’s S$1bn capex/investment plan for the next three years which should add 6% to our FY22F EPS and imply a TP of S$6.39 at 21x P/E. ■ Digitalisation is the buzz word to scale its business and optimise costs. SATS also expects to sustain dividends with a 30% D/E ratio in 3-5 years. ■ Maintain Add and TP of S$5.46 on 21x CY20F P/E. Sizeable M&As and successful integration are key catalysts. Ideal target entry level:
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mm2 Asia
Upgrade to BUY as value emerges Value emerging; upgrade to BUY. Share price has shed 27% since our downgrade to HOLD after the release of 3QFY19 results in February. At current level, we see value emerging. Based on sum of the parts valuation, and stripping out its stakes in UnUsUaL and Vividthree, the market is valuing the core production and cinema segment at only S$144m, which works out to P/EBITDA of slightly over 2x, which is too low in our view. mm2 paid 13.8x for the Cathay cinema chain in Singapore and about 8-9x for the Malaysia cinemas while peers are trading at about 5.5x P/EBITDA. Though the group still needs to deleverage given the swing to 0.8x net gearing at end-FY19 and high interest expense, we believe the negatives are already priced in. We see value emerging at the current level with 43% upside to our revised TP of S$0.34. Upgrade to BUY.
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Check out our compilation of Target Prices
