JP Morgan upgrades NOL to ‘Overweight’

Analyst: Corrine Png

Incumbent CEO Ng Yat Chung

JP Morgan has upgraded NOL to ‘Overweight’ and says the worst is over for the container shipping, terminals and logistics giant.

Its target price for the next 12 months is S$1.35 based on 1 time price to book value.

At its recent close price of S$1.11, this translates into upside of 22%.

NOL’s share price has fallen by over 20% since its peak in Feb and it has also under performed the Straits Times Index year-to-date.

The company posted a net loss of US$254 million for 1Q2012 but the analyst believes that NOL will progressively turn around, helped by its US$500 million target to cut cost from restructuring this year, falling bunker fuel prices (down 6% month-on-month) and recovering freight rates.

Risks: 1) global demand recovery stalls, 2) industry capacity discipline weakens, putting pressure on freight rates, 3) cost-cutting targets do not materialize, 4) rising fuel prices, 5) potential equity-raising, 6) potential value-destroying M&A, 7) uncertainty over NOL's longterm strategy given numerous CEO changes in the past ten years.

Bloomberg Wed 20 Jun

Credit Suisse upgrades M1 to ‘Outperform’

Analyst: Chate Benchavitvilai

Subscriber take-up rate for next generation national broadband network (NGNBN) is likely to accelerate in Singapore, according to Credit Suisse analyst Chate Benchavitvilai.

m1-stk-tableNGNBN’s structural and operational separation is leading to an increase in competition in fixed-line services by opening up of the market on both the residential (currently dominated by SingTel and StarHub) and corporate (currently dominated by SingTel) front.

The analyst believes that M1 is a key beneficiary of the industry development, given its ability to leverage on its existing costs and relationships and (prevailing limited exposure to fixed-line.

M1 is also offering an attractive yield at 6.1% for FY12E assuming that it pays out 80% of its earnings.

He upgraded M1 to ‘Outperform’ and increased its target price to S$3 in a report dated 20 June.

Based on its recent close price of S$2.52, this translates into upside of 19%.

The Clementi Mall is jointly owned and managed by SPH and NTUC.

CIMB upgrades SPH to ‘Outperform’

Analyst: Tan Siew Ling

Investors seeking exposure to retail S-REITs should consider SPH, according to CIMB analyst Tan Siew Ling, who recently upgraded the media company to ‘Outperform’.

Its target price is S$4.19, translating into 10% upside at its recent close price of $3.82.

SPH’s growing retail property arm and stable cash flow from its media business gives it a return profile of a retail REIT and with limited cash-call risks, according to CIMB.

Newspapers & magazines contributed 79% of its revenue in 2QFY12 while retail rentals contributed 16%.

Starting out with just Paragon, SPH has since added a 60% stake in Clementi Mall and a 70% stake in the greenfield Sengkang Mall.

Although SPH does not have a formal dividend policy, it has been paying out close to or above 90% of recurring earnings (statutory level for S-REITs) consistently, with the exception of FY08-10 when it was developing and recognising earnings from Sky@Eleven.

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