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PHILLIP SECURITIES |
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Venture (VMS SP) Diversity driven resilience
Thesis intact; Maintain BUY 1H19 PATMI was in line/ slightly short of consensus/ our estimates. Considering the challenges from customers’ product transitions and heightened customer caution, 2Q19 PATMI of SGD90.8m (-7% YoY) is respectable. 2H19 performance is supported by new product introductions across multiple domains. Although FY19-21E EPS is trimmed by 4-5% due to increased customer caution, VMS remains our top pick as it is i) a beneficiary of the US-China trade war, and ii) leveraged to exciting megatrends across a diverse set of customers. ROE-g/COE-g TP falls to SGD18.88, on unchanged 2.2x FY19E P/B. BUY.
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Singapore Telecommunications Ltd Short-term pain from Bharti
1Q20 RESULTS 13 August 2019 Revenue and net profit disappointed by 7% and 28% respectively. Losses at Bharti Airtel widened to S$119mn this quarter due to investments in its network. The enterprise segment suffered pricing pressure from contract renewals and erosion in core carriage services. We saw robust revenue growth from cybersecurity and digital. There were positive mobile price revisions in Optus. Maintain ACCUMULATE with a lower TP of S$3.45 (prev. S$3.66). We lowered our FY20e earnings by 11%.
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RHB |
RHB |
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Food Empire (FEH SP) Better Margins Post Rationalisation; Still BUY
Stay BUY with a higher SGD0.73 TP from SGD0.69, 38% upside, 1.6% yield. Food Empire’s 2Q19 results beat our expectations. PATMI surged 140% to USD5.6m. Excluding FX impact, core PATMI grew 22% to USD5.2m. The tremendous improvement in results was largely attributed to the rationalisation of under-performing markets. We expect 2H19 to also show strong improvements following the rationalisation. As such, we raised our FY19F-21F earnings 6-8%, thereby increasing our TP.
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City Developments (CIT SP) Transformation In Progress
Stay NEUTRAL and SGD9.20 TP, 2% upside plus 2.2% yield. 2Q results were broadly in line, excluding one-off gains. Key positives: Healthy sales at City Developments’ high-end residential launches and a revised privatisation offer for its subsidiary, which is likely to gain minority approval. Yet, headwinds persist across CDL’s core operating markets in terms of high residential supply, Brexit uncertainty, and a slowing macro economy. While valuations are attractive – share price at a 42% discount to RNAV – it lacks clear catalysts.
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