Excerpts from latest analyst reports.....
SIAS Research maintains 'invest' call on KIAN ANN ENGINEERING
Analyst: Ng Kian Teck
Kian Ann Engineering Ltd (KA) posted an impressive 1Q FY12 results with revenue and PATMI rising 17.1% and 39.7% YoY to S$44.2m and S$5.3m respectively.
We had previously expected the gross margin to taper off in FY2012 but it seems that demand for spare parts continues to be firm with no sign of weakness.
KA’s buoyant sales is also shared by industry bellwether Caterpillar, which recorded over 40% YoY increment in sales and profit after tax in the recent 3Q results. The latter also expected 20% sales growth in FY2012.
On the back of robust 1Q results and optimistic outlook from Caterpillar, we are revising our FY2012F revenue and profit after tax to S$180m and S$19.1m respectively. Maintain Invest with a valuation of S$0.300.
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DMG maintains 'buy' on CHINA MINZHONG, lowers target to $1.38
Analysts: Tan Han Meng, CFA, CPA, & Terence Wong CFA
1QFY12 net profit of RMB93m (+78% y-o-y, -3% q-o-q) was ahead of our RMB80m projection due to MINZ’s continued pursuit of a higher value product mix that saw a) a 37% revenue increase to RMB361m on strong fresh and processed vegetable growth and b) a 8ppt GPM gain to 41%.
However, we note a cautious management tone during the results briefing, with a scaling back of its planned FY12F capital expenditure to ~RMB500m from RMB1.9b in FY11 to manage its working capital needs.
In general, we welcome this decision as new farmlands are capital intensive and make minimal contributions in the initial years.
Our corresponding FY12 net profit estimate remains at RMB768m but that of FY13 is revised down by 3% to RMB1,068m.
We expect headwinds from an uncertain USA/Europe demand and share overhang to remain and hence, reduce our target multiple to 5x FY12F PER (old: 6x) and derive a lower TP of S$1.38 (old: S$1.68). Maintain BUY.
CIMB says REITS are "outstanding investments"
Analyst: Kenneth Ng, CFA
Valuations still look compelling. Attractive yield spreads may remain supported by depressed risk-free rates over the next 12 months.
Our top picks are now CDLHT, AREIT and PLife. CDLHT has fallen 24% YTD (vs. average 11% fall for the sector) and is now trading marginally above book value (vs. its 5-year average of 1.3x P/BV). We believe its valuations are compelling in view of sustained visitor arrivals into Singapore and rising RevPAR.
Our comfort level for CDLHT remains high with its strong balance sheet, a highly-disciplined management when it comes to acquisitions, and high market transaction values for its hotels such as Park Regis (S$916,000/room key vs. CDLHT‟s average of S$585,000 for its Singapore portfolio), which should provide strong underlying support for CDLHT‟s asset values.
Additionally, the possible listing of another hospitality trust, M&L REIT, early next year could attract attention to the sector. We continue to be partial to the retail and industrial sectors for their more resilient earnings and organic growth prospects. Among large-cap REITs, we like AREIT and CMT.
We still advocate CCT as a good Trading Buy despite negative macro indicators for offices on account of its low asset leverage and undemanding valuations. Among the smaller caps, we like FCT, Cache and PLife.
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