| CIMB | OCBC |
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Keppel DC REIT Time to upsize your data ■ We upgrade KDCREIT from Hold to Add following recent unit price weakness. In terms of total return, the stock is offering 10%, one of the meatiest in our coverage. ■ We believe that recognition of an additional one-month contribution from SGP 3 in 1Q17 could lend some support to unit price strength. ■ Renewal risks for FY17 are reduced and there are minimal lease expiries thereafter. ■ FY17F and FY18F foreign-sourced distributions are already hedged. Based on our sensitivity analysis, a 10% appreciation in S$ could lead to a 5.2% decrease in BV. ■ A 100bp increase in interest rate could lead to a 0.8% decrease in FY17F DPU; a 50bp rise in discount rate could lead to a 7.9% decrease in our DDM-based TP.
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MIDAS HOLDINGS | HOLD FY16 BEAT EXPECTATIONS Midas Holdings Limited’s (Midas) FY16 revenue fell 1.8% YoY to RMB1485.7m, mainly due to a 13.8% decline from its core Aluminium Alloy Extruded Products (AEP) segment to RMB1293.3m on fewer high-speed train orders, but partially offset by contributions from its recently acquired Aluminium Alloy Stretched Plates (AASP) business. However, AEP’s FY16 GPM rose 3ppt to 30.0%, and led to a 2.8ppt increase in overall GPM to 29.7%. Coupled with a 10.5% growth in its share of profits of associate, FY16 PATMI beat our expectations as it surged 76.3% YoY to RMB100.8m, and formed 148.2% of our FY16 forecast. Looking ahead, we expect AEP revenue to pick up along with a jump in revenue contributions from its new businesses. Consequently, with this shift in business mix, we forecast for a decline in overall GPM over the next two years. While we factor in further share dilution given that Midas is expected to issue an additional 271.3m new shares relating to its AASP acquisition (earn-out consideration), we maintain HOLD with a slightly higher FV of S$0.255 (prev: S$0.245) as we introduce our FY18 forecasts and roll-forward to 0.6x FY17F P/B (3-year mean). |
| DBS VICKERS | |
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Olam International Waiting on the sidelines Investors still on the sideline for now. We maintain our HOLD call on Olam International (Olam) with a revised TP of S$2.12. While Olam appears to have successfully integrated the US$1.2bn acquisition of ADM Cocoa, we have yet to see consistent delivery of positive free cash flow and earnings growth. In addition, with return on equity (ROE) still suboptimal, we believe a re-rating beyond its average PE multiple of 16x is unlikely at this stage, and Olam’s share price is likely to trade range bound in the near term. However, with Olam periodically conducting buybacks, risk of a significant fall in its share price is mitigated.
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| MAYBANK KIM ENG | RHB |
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Singapore Medical Group (SMG SP) Turnaround sustainable; More opportunities await Robust results; TP raised 14% We have raised our TP 14% after rolling forward the valuation base year to FY18E, with an unchanged P/E of 27x, pegged to the average two-year forward mean of small-cap healthcare peers in Singapore. FY16 net profit was in line with our estimate, led by robust growth in two key segments: healthcare and newly-formed diagnostic & aesthetics. FY16 core earnings were SGD2.0m, up from a loss of SGD0.2m in FY15. Operating cash flows also improved, at SGD4.3m vs. SGD0.4m. The turnaround was more apparent, as 2H16 core earnings more than doubled from 1H16 to SGD1.3m. With the recently proposed capital injection and strategic tie up with CHA, a leading medical group in Asia, SMG is well-positioned to explore more growth opportunities across Asia.
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CapitaLand Asset-Light Strategies To Boost Returns Maintain NEUTRAL, with a revised TP of SGD3.60 (from SGD3.15, 1% downside) as we expect limited upside post the recent run-up in its share price (+20% YTD). We see two key reasons for its recent outperformance: 1. CapitaLand’s focus on asset-light strategies to enhance returns; 2. Renewed interest in developers amidst a spate of privatisation talks. Recurring income is set to receive a boost, with contributions from the Ascott acquisitions and the opening of eight retail malls in 2017. Still, operating conditions continue to remain challenging in its core markets.
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