2 reasons why Olam International investors should take caution
Despite EBITDA growth across all segments.
Olam International grew its core profit by 28% yoy to S$42.3m in 1QFY14, slightly beating expectations, but DBS Vickers cautioned that investors that "we would like to monitor its earnings delivery and sustainability of cash flow improvement for another quarter or two before turning positive on the counter.
" Still, management insisted on a positive outlook ahead, claiming that while operating environment remains challenging, Olam is expected to see earnings growth stemming from previous investments.
Net gearing, which stayed at 1.93x as of end Sept, will be kept below its 2x ceiling.
Olam generated positive free cash flow to firm (FCFF) of S$46m (vs deficit of S$707m in 1Q13) this quarter, said DBS.
"Further unlocking value of past investments, slower capex pace and higher operating cash flow should keep its positive FCFF in check," said DBS.
"The recently announced sale and leaseback of Australoia Almond Orchards is expected to free up A$200m cash and generate one-time post tax capital gain of A$45m when finalised by 3Q14," it added.
GLP - Global Logistics Properties bullish despite 30% net profit dip to $136.8m
First 3% positive rental reversion since 2002.
Despite Global Logistics Properties reporting 30% y-o-y lower net profit (after capital securities distribution) of $136.8m on a 19% drop in revenue to $140m due to divestment of assets into GLP J-REIT, it was in reality a strong quarter, according to DBS Vickers.
"On a more comparable q-o-q basis, revenue improved 2% while net profit showed a 30% decline, impacted by lower revaluations and forex gains. Excluding revaluations and forex, PATMI was actually 17% higher q-o-q," DBS Vickers said.
The research firm said the strong performance was underpinned by a 2% pt increase in China occupancy to 90% and higher average rents of Rmb1.1/sm/day. In Japan, occupancy was 99%.
"More importantly, the group was able to enjoy 3% positive rental reversion, its first since 2002. In Brazil, lease up rates was a healthy 95%. During the quarter the group tied up new leases of 575,000sm in China, bringing 1H take up rate to 0.7msm and on track to achieve a lease up rate of 1.1msm for the year. Renewal rents continue to grow at 6.9% on year," reckoned DBS Vickers.
"Looking ahead, the group is en route to delivering strong portfolio expansion as operating environment remains robust with strong take up in China while in Japan, positive rental reversion is underpinned by a strong appetite for space. With 1.1msm of development starts in 1HFY14, the group is on track to achieve development starts of up to 2.5msm for the year. This will underpin its NAV expansion," it added.
Overseas Education's net profit dropped 10% to $5.6m
Here's what to blame.
According to DBS, despite higher expenses, Overseas Education Limited's 3Q13 net profit grew 9% y-o-y but fell 10% q-o-q to S$5.6m.
Here's more from DBS:
Revenue grew 5% y-o-y (flat q-o-q) to S$26m as OEL raised tuition fees by 8.5% on average across all grades for the academic year starting August 2013. As a result, operating margins were 26.5%, up from 24.4% in 3Q12 but lower than 29.2% in 2Q13. Personnel expenses which formed the bulk of costs rose 6% y-o-y and 4% q-oq.
Effective tax rate was higher at 17.5% in 3Q13 vs 14% in 3Q12 mainly due to a tax refund last year. The results were in line as 9M13 earnings met 78% of our FY13F.
Net cash rose to S$113.9m. OEL finished the quarter with net cash of S$113.9m, up from S$94.5m as of 31 Dec 2012, mainly due to IPO net proceeds and tuition fees collected less payment of land premium and development of the new campus in Pasir Ris.
As the construction of the new campus progresses, we expect net cashflow to turn increasingly negative as the required capex is estimated to be around S$260m in total.
SingTel eyes shelling out $2b for digital business
It's for next 3 years.
According to OCBC, SingTel posted 2QFY14 revenue of S$4163.1m, down 9% YoY and 3% QoQ, again weighed by weaker regional currencies (AUD, IDR and INR depreciated 10% YoY against SGD).
Reported net profit was flat YoY and down 14% QoQ at S$870.4m; excluding exceptional items, core earnings was flat YoY and +1.4% QoQ at S$884.0m.
Here's more from OCBC:
1HFY14 revenue slipped 7% to S$8456.4m, meeting 50% of our FY14 forecast, while reported net profit gained 4% to S$1881.4m; core earnings rose 3% to S$1781.0m, or 48% of full-year forecast.
SingTel declared an interim dividend of 6.8 S cents, same as 1HFY13, representing a payout ratio of 61%.
SingTel has kept its guidance for FY14 unchanged. As before, SingTel expects revenue from Group Consumer to decline by a high singledigit level, with lower revenues from Optus, and EBITDA to decline by a low single-digit level. Group Enterprise revenue should remain stable; but EBITDA to see a low single-digit decline.
Its Group Digital Life revenue should grow by at least 50% on an organic basis; but it will continue to see startup losses. As such, it expects consolidated group revenue to decline by a mid-single digit level and EBITDA to decline by a low single digit level; EBIT will also fall by a mid-single digit level.
Capex will remain at S$2.5b to support LTE coverage expansion; and the group will invest up to S$2b for digital business over the next three years.
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