|MAYBANK KIM ENG||
SATS (SATS SP)
In a spending mood
Investments and capex to materially ramp-up. BUY
The key takeaway from SATS’ recently held Capital Markets Day was the guidance of spending to rise to c2.5x the level witnessed in recent years. While positive for medium term growth, profits will be weighed for a couple of years with upfront costs during the gestation period characteristic in new investments. Hence we cut our FY20E/21E PATMI by 13-15% but our DCF based TP has increased 5% to SGD6.10 factoring medium term contributions and a more efficient balance sheet.
Assessing Scope For Valuation Expansion Among NonREIT Stocks
High-yield stocks under our coverage offer dividend yields of 3.8-6.2 %. While some of these stocks appear attractive relative to 10-year SGS, we believe only ComfortDelgro and Netlink NBN Trust offer scope for appreciation beyond our respective target prices due to higher dividend yields. We have BUY ratings on both stocks.
Robust Outlook Despite Trade War; Stay BUY
Stay BUY, SGD0.82 DCF-based TP, 30% upside with 4.4% FY19F yield. Frencken has been unaffected by the US-China trade war, since most of its factories and business activities are in Europe. Management’s outlook remains positive, and 2Q should see robust YOY growth for its industrial automation division, as well as continued expansion in the analytical and medical segments. We expect FY19F PATMI to surge 12.7% YoY. At 6.9x FY19F P/E (peer average: 9.9x), this stock is an undervalued gem.
• CRCT proposed the acquisition of three fast-growing retail assets in China from CAPL-managed funds
• Move is mutually beneficial, leading to improved financial metrics for both, in our opinion
• CRCT to benefit from immediate yield and DPU accretion; a larger market cap also awaits
• CAPL on track to meet divestment and ROE targets while demonstrating in-house recycling capabilities
Check out our compilation of Target Prices