ANALYSTS SAY: Buy, Sell, Hold (27 June 2017)

UOL Group Ltd (UOL SP)

A Paper Exercise

Maintain BUY and SGD9.05 TP UOL will be increasing its stake in UIC to 48.94% from 44.71% via a share swap with Haw Par. We see this deal among the related parties of Dr Wee Cho Yaw as a paper exercise with minimal impact on UOL. Nonetheless, eventual control of more than 50% of UIC could unlock hidden value within the group and could be a catalyst to watch. We keep our estimates pending deal completion. Maintain BUY and SGD9.05 TP, at a 15% discount to our RNAV of SGD10.66. UOL remains our top sector pick with catalysts expected from property price rebound. Risks to our view include overpaying for land and sharp fall in property prices.

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ComfortDelGro Corporation (CD SP)

Assessing The Downside Risk On Singapore Taxis

Given the structural decline of the taxi industry as competitive pressure from private hire cars mounts, we assess the downside risk on Singapore taxis. Our scenario analysis under various methodologies and assumptions suggests a valuation range of S$1.98-2.37/share for CD. We reduce our earnings forecasts by up to 5.4% to reflect a higher rate of fleet decline. Maintain HOLD with a lower target price of S$2.37 (previously S$2.47). Entry price: S$2.20.

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ComfortDelGro Corporation (CD SP)

Assessing The Downside Risk On Singapore Taxis

Given the structural decline of the taxi industry as competitive pressure from private hire cars mounts, we assess the downside risk on Singapore taxis. Our scenario analysis under various methodologies and assumptions suggests a valuation range of S$1.98-2.37/share for CD. We reduce our earnings forecasts by up to 5.4% to reflect a higher rate of fleet decline. Maintain HOLD with a lower target price of S$2.37 (previously S$2.47). Entry price: S$2.20.

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UOL Group: Swap for UIC shares an accretive move

UOL announced an option agreement with Haw Par Corporation Ltd (Haw Par) under which UOL will have a call option and Haw Par a put option for UOL to allot and issue approximately 27.3m new shares of UOL in exchange for 60m UIC shares that Haw Par owns. Upon completion, UOL’s interest in UIC will increase from 44.71% to 48.94% and we understand that the SIC has waived UOL’s obligation to make a mandatory general offer as long as it does not cross the 49% threshold. We believe UOL’s move makes strategic sense. This swap will enable UOL to acquire a significant UIC minority interest which is otherwise not available given the lack of trading liquidity. More importantly, from our analysis, the transaction will be accretive for UOL, which will deepen its effective ownership stake in desirable UIC assets, such as Singapore Land Tower and Marina Square, that it already understands well. We update our valuation model for the swap, firmer residential ASPs and also reduce our RNAV discount from 25% to 20%. As a result, our fair value estimate increases from S$7.30 to S$8.39. Upgrade to BUY.

Jadason Enterprises

On-Track Expansion Paves The Way For a Strong 2H17

With Jadason’s turnaround in 1Q17, we look forward to a stronger 2Q17 and a period of explosive growth in 2H17. As of 2Q17, utilisation is already at 60+% (same as 4Q16) vs 40+% in 1Q17. We understand that plans to ramp up for its new mobile product from the US are on track, and the new project would commence in Jul 2017, with full utilisation expected by end-3Q17. With projected bumper profits ahead, coupled with positive key macro data on the electronics sector, we maintain our BUY call, with an unchanged DCF-derived TP of SGD0.15 (67% upside).

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