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Ascott Residence Trust (Oct 25: $1.63) TP: $1.94
UPGRADE TO BUY. Revenue was $42.3 million (9 % above forecast) and distributable income was $12 million (9% above forecast) due due to outperformance in Singapore, the Philippines and Vietnam. Distribution per unit (DPU) was 1.99 cents, better than our estimate of 1.70 cents. In light of the good performance, we are adjusting our FY2007 and FY2008 forecast from 6.8 cents and 6.9 cents to 7.65 cents and 8.01 cents, respectively. Since our last report, ART has corrected from $1.85 to its last traded price of $1.58. More importantly, the price correction means that ART's price-to-book ratio has come down from 1.34x (April) to the present 1.14x. Fair value of $1.94. - OCBC Investment Research (Oct 25)
Guocoland (Oct 25: $5.45) TP: $6.16
MAINTAIN BUY. Net profit growth of 241 % to $27.1 million y-o-y for 1Q2008 is within expectations, mainly driven by contributions from the West End Point project. It is expected to launch the Goodwood Residence project this year. We expect strong sales and selling prices, and raise our selling price assumptions from $2,200 to $3,000 psf, raising our net present value surplus from Singapore development projects by $187 million. We have re-worked our assumptions for the integrated projects with more insights after the site visit, higher capital value assumptions for Tung Centre, Goodwood Residence as well as factoring in the Toho Garden site. Target price of $6.16 with 10% premium. - DBS Vickers Securities (Oct 22)
Qian Hu (Oct 25:19.5 cents) TP: 25 cents
MAINTAIN BUY. Qian Hu reported 3QFY2007 revenue growth of 19.6% from $18.9 million to $22.7 million. The growth was backed by strong performance from Qian Hu's ornamental fish and accessories sales. As a result, net profit attributable to shareholders doubles from $600,000 in the same period a year ago to $1.2 million in the current period. Contributions from ornamental fish and accessories account for 88% of total revenue while the plastic business accounts for the other 12 %. We project a three-year CAGR revenue growth of 17% in our estimates. Our fair value of 25 cents is pegged to a 15x blended FY2007/2008 earnings. - Phillip Securities Research (Oct 23)
CapitaMall Trust (Oct 25: $3.68) TP: $4.56
MAINTAIN BUY. CMT announced 3Q2007 distribution income of $53.2 million. 3Q2007 DPU was 3.4 cents. CMT has continued to reap the benefits of its successful asset-enhancement initiatives. We expect its results to be even better in 4Q as income from its recently acquired CRS malls is progressively booked. We have added two new AEI (asset-enhancement initiatives) projections for Lot One ($40 million) and Tampines office ($69 million). Management has a target AUM (asset under management) of $8 billion by 2010. Our one-year forward DCF price target of $4.56 is unchanged and offers 24 % potential upside with CY2008E DPU yield of 4.0%. - UBS Investment Research (Oct 23)
Keppel Land (Oct 25: $8.30) TP: $8.97
MAINTAIN HOLD. For 3QFY2007, Keppel Land reported net earnings of $81.8 million, equivalent to a 30% q-o-q rise and doubling from a year ago. Revenue was up 6.4% q-o-q and 49% y-o-y. Including the $125.5 million reported in 1H2007, net earnings YTD amounted to $207.3 million, largely in line with our forecast of $277.7 million for the full year (excluding the sale of One Raffles Quay). Property sales performed strongly from projects in Singapore and overseas, with net attributable profit rising 48% q-o-q and 136% y-o-y. Sale of ORQ to add $221.6 million to net profit in 4Q. We maintain our target price of $8.97. - Citigroup Research (Oct 23)
Raffles Medical Group (Oct 25: $1.53) TP: $2.05
BUY (initiating coverage). Raffles Medical Group (RMG) is an integrated private healthcare provider. Raffles Hospital has stepped up the pace of expansion adding 25 beds in 1H2007 and making plans to add another 25 beds in 2H2007 to bring the total to 200 beds. RMG operates the largest network of 60 family medicine clinics in Singapore. It leverages on this extensive network to build up a base of 5,000 corporate clients. Corporate clients account for 65 % of patient volume at its chain of clinics. RMG is the prime beneficiary of the liberalisation of Medisave. Our target price is $2.05 based on our three-stage DCF model. - UOB KayHian (Oct 23)
Delong Holdings (Oct 25: $3.04) TP: $3.67
MAINTAIN OUTPERFORM. Delong's recent profit warning for 3Q2007 was its second consecutive one. The surge in iron ore prices had been faster than HRC selling-price increases in 3Q, squeezing margins. We now expect gross margins to decline from 16.3 % in 2Q to 12% in 3Q, with a $433.2 million revenue and $32.7 million net profit. We have cut our FY2007-2009 earnings forecasts by 35% to 43%, producing a new target price of $3.67 (previously $4.70), based on a new CY2008 PER target of 10x (previously 12x) to reflect higher execution risks and Delong's inability to mitigate exposure to higher raw material prices. - CIMB-GK Research (Oct 23)
Man Wah Holdings (Oct 25: 72 cents) TP: 41 cents
MAINTAIN SELL. Man Wah Holdings announced on Oct 16 that Schieder Cheers GmBH, a company that is 40% -owned by Man Wah and 60% by the Schieder Group, has been declared insolvent by the German courts as a result of its parent company, the Schieder Group being declared insolvent. We have revalued our fair value estimate to 41 cents per share, derived from a PER of 7x (based on the Group's P/E band) pegged to FY2008 earnings, implying a 42.25 % downside. Our negative view is based on the technical outlook of the Group's shares, insolvency of the German subsidiary and the Group's exposure to the US housing industry. - Phillip Securities Research (Oct 22)
Silverlake Axis (Oct 25: 67 cents) TP: 83.5 cents
UPGRADE TO BUY. Silverlake Axis (SAL) has signed a non-exclusive licensing agreement with Silverlake International Capital Market Solutions Limited for its back-end Silverlake Integrated Banking Solution software platform. Under the deal, SAL will also receive US$7.35 million ($10.7 million) in license fees, which SAL expects to have a positive impact on its FY2008 earnings. This deal will bump up our FY2008 revenue estimate by nearly 15.7% to RM182.1 million ($79.05 million), our net profit estimate will get a larger 18.7% boost to RM108.0 million. Our fair value also improves from 71 cents to 83.5 cents, although still based on 20x FY2008F earnings. - OCBC Investment Research (Oct 23)
Elec & Eltek Int'l (Oct 25: US$1.97) TP: US$3.32
MAINTAIN HOLD. We expect yield issues at Elec & Eltek's (ELEC) Kaiping plant to have improved further in 3Q2007, but do not think they have been completely resolved. We expect marginal improvement of GPM (gross processing margin) to 16 % in 3Q2007 (15.3 % in 2Q2007), and estimate revenue of US$141.8 million (flat y-o-y, + 7.6% q-o-q) and net profit of US$8.7 million (-47.3 % y-o-y, + 21.5 % q-o-q) for the third quarter. We expect a payout ratio of 60% or 10.9 US cents for FY2007, or 5.6% net yield on the latest close, although we suspect full-year net dividend could be higher than our estimate. We retain our fair value of US$3.32 based on 10x FY2008E EPS. - CPhillip Securities Research (Oct 25)
Miyoshi Precision (Oct 25: 24.5 cents) TP: 31 cents
BUY (initiating coverage). Miyoshi Precision, a manufacturer of top covers for HDD, offers an opportunity to ride the growth potential of the other OEM HDD makers, namely the Japanese makers such as Hitachi CST. Miyoshi posted a very positive set of 1H2007 results ended Feb 28, with revenue up 25.7% y-o-y and 19.6% h-o-h at $81.7 million, while net profit jumped 81 % y-o-y and 61.8% h-o-h to $6.8 million, aided by strong demand from its Data Storage segment. Miyoshi also branching out into other areas to tap the growing demand for metal stamping and precision engineered components. Fair value estimate of 31 cents based on undemanding 9x FY2008 earnings. - OCBC Investment Research (Oct 23)
Sim Lian Group (Oct 25: 71.5 cents) TP: $1.03
BUY. The outlook of the local residential property market is expected to remain positive. The buoyant interest bodes well for Sim Lian Group (SLG) which has land parcels for the development of mid-tier and mass homes. We favour SLG for its strong balance sheet which enables the Group to embark on development projects single-handedly, providing management with nimbleness in decision-making. ROE is attractive at about 30% (FY2006/2009). Taking into account the launch of four projects in Singapore and two in Malaysia, SLG is valued at RNAV per share of $1.03. At 71 cents, Sim Lian is trading at a steep 31 % discount to valuation. - NRA Capital (Oct 24)
Frasers Centrepoint Trust (Oct 25: $1.49) TP: $1.96
MAINTAIN BUY. For 4QFY2007, FCT announced a DPU of 1.67 cents (flat q-o-q) translating to a FY2007 DPU of 6.55 cents. Northpoint 2 (NP2) acquisition is likely in 4QFY2008. Anchorpoint will be fully opened in December 2007. Lowered FY2008E and FY2009E DPU estimates due to potential income decline during the AEI works at Northpoint. We have raised our target price marginally as future income stream (post-AEI) from NP will more than offset the decline, and we have also factored in the NP2 acquisition. FCT is worth some $2.03, including a 12-month DPU of 6.8 cents. Target price raised to $1.96. - Citigroup Research (Oct 22)
Nera Telecommunications (Oct 25:40 cents) TP: 54 cents
MAINTAIN BUY. Net profit of $3 million was 20% above our expectations of $2.5 million. Net profit was up 40% compared to recurring net profit of $2.1 million in 3Q2006. In 3Q2006, $28.78 gain came from divestment of Nera Electronics. Inventory although lower than 2Q2007, is relatively high and indicates strong topline for 4Q2007. We are likely to revise our earnings upwards for FY2007 and FY2008. Orders secured till date in FY2007 for transmission equipment are $130 million better than our estimate of $100 million. Target price of 54 cents is pegged at 15x FY2008 earnings based on peer average. - DBS Vickers Securities (Oct 19)
United Engineers (Oct 25: $4) TP: $6.16
OUTPERFORM (initiating coverage). UE is known for its infrastructure engineering and facility management capabilities. The group has been able to keep its order book at between $600 million and $1 billion in the last five years. We estimate that property development and investment properties will comprise 79 % of the group's end-CY2008 RNAV, with the rest lying in construction and engineering projects. UE paid out 50% of its earnings as dividends last year, representing a DPS (dividend per share) of eight cents. We expect payout this year to fall to around 25%. Target price of $6.16, based on end-CY2008 RNAV. - CIMB-GK Research (Oct 24)
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