Consumer sector: Still an attractive space
The year started off on a broadly positive note, with the STI up 5.8% YTD, while the FTSE Consumer Goods Index and FTSE Consumer Services Index were up 3.9% and 1.1%, respectively. In our latest sector report in Nov-16, we noted that the consumer sector saw a series of privatisations and acquisitions, suggesting valuations have been generally reasonable, and as more consumer companies are reportedly seeking to list on SGX, our thesis remains unchanged. Against a backdrop of inexpensive valuations and sound long term growth fundamentals, consumer companies continue to execute regional expansion plans, while we expect some like BreadTalk to continue rewarding shareholders through dividends. With 4QCY16 results coming in this month, we maintain our NEUTRAL view for the sector and reiterate our call on Sheng Siong Group [BUY, S$1.15], particularly at current price levels, for the company’s management strength and largely stable, cash generative business.
Ascendas India Trust
Still has legs to run. We maintain our BUY call on Ascendas India Trust (a-iTrust), with a revised TP of S$1.13. While a-iTrust has rallied over 30% since we upgraded the stock to BUY in late January, and investor interest has picked up, we believe aiTrust’s growth story still has yet to gain recognition among investors at large. With Singapore-focused REITs increasingly facing headwinds translating into slowing DPU growth (average DPU CAGR of 1%), we anticipate investors will gravitate to aiTrust given its healthy 2-year DPU CAGR of 8% and a still decent 5.5% yield.
Wilmar International (WIL SP)
4Q16 Results Preview: Expect In-line Net Profit; ADM’s Stake Increase Boosts Investor Confidence
We expect Wilmar to report a stronger net core profit of US$430m-460m on: a) higher margins and sales volumes from tropical oils as well as the oilseeds and grains divisions; and b) profit recognition from the sugar division, which had been delayed. We think current share price should have factored in the earnings recovery and good commodity prices. Maintain SELL with a higher target price of S$3.50 (after 9- 11% upward profit adjustments).
Best World International
Check out our compilation of Target Prices