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Thai Beverage

3Q16 first take: spirits drinking issues and hungover on costs

■ 3Q16 core net profit (+8.5% yoy) came in below expectations. Spirits was the big disappointment, but the group was at least lifted by associates’ contribution.

■ 3Q’s spirits sales decline (-7.2%) outpaced the drop in volumes (-2.4%) as consumers traded down to cheaper white spirits. Margins were therefore also hit.

■ We maintain our forecasts and target price


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SG Hospitality: Top picks – current price levels attractive

For the hospitality counters we cover, 3Q16 DPU growth ranged from -2.5% to -7.4% YoY, after adjusting for oneoff items and equity financing. Growth in Hotel revenue per available room (RevPAR) ranged between -5.8% to -7.8% in 3Q16, with all the REITs citing poor corporate demand as the reason for declines. Looking forward to FY17, with a forecasted 6.1% growth in hotel rooms and tepid economic growth outlook, RevPARs are expected to continue their decline, in our view, and especially so for hotels that rely on corporate demand. RevPARs are only expected to improve in FY18 with better supply-demand dynamics. While we expect single-digit RevPAR declines next year, current price levels look very attractive for some of the REITs under our coverage – we are positive on Ascott Residence Trust (ART) [BUY; FV: S$1.24], and CDL Hospitality Trust (CDLHT) [BUY; FV: S$1.48] and OUE Hospitality Trust (OUEHT) [BUY; FV: S$0.73]. Maintain NEUTRAL on the sector.


Ezion Holdings Limited

Darkness before dawn


 5 or 6 additional units will be put to work in FY17, lifting up average fleet utilisation from 65% to 78%. Utilisation rates may have seen a bottom.

 Working fleet replenishment is expected to offset negative impact from possible further drop in charter rates.

 Conversion of units into more economical Mobile Offshore Production Units (MOPUs), together with offshore wind sector redeployment, is expected to create new demand for these new fleet.  Temporary liquidity crunch will be alleviated.

 We initiate coverage on Ezion with a Buy rating and a target price of S$0.48 based on discounted free cash flow to firm (FCFF) valuation with weighted average cost of capital (WACC) of 8.9%, implying an upside of 57.4%.


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LionelLim8.16Check out our compilation of Target Prices

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