ANALYSTS SAY: Buy, Sell, Hold (6 July 2017)

CITIC Envirotech (CEL SP)

Share Price At Attractive Levels; On Track To Delivering Record Results

CITIC Envirotech’s share price has dipped to attractive levels, opening up an opportunity for investors to acquire shares close to the strategic shareholder’s entry levels. The company is on track to delivering its ambitious internal target of securing S$1b in new project wins. Also, with shareholders approving a share purchase mandate in May 17, share buybacks could support share price. Maintain BUY and DCF-based target price of S$1.10.

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CapitaLand (CAPL SP)

A Banner Year

Boots on the ground

We recently visited three integrated developments, two shopping malls and one office building owned by CapitaLand. Worth a combined CNY24.6b (SGD4.9b), these newly-completed properties are located in the Chinese cities of Wuhan, Shenzhen, Hangzhou and Shanghai. Development gains from the phased opening of these projects will provide a one-off lift to earnings this year and add to its recurring income stream in the years beyond. Going forward, shareholder returns will be boosted as the share of projects under development looks set to fall by 3ppt (from 13%) as the mega integrated projects move beyond the capital intensive construction phase. Maintain HOLD and RNAV-based TP of SGD3.75 as valuations appear fair following its strong rally YTD.

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Memtech International: Potential beneficiary from Tesla developments

Tesla recently announced that it is in exploratory talks with the Shanghai municipal government in relation to the possible establishment of a Chinese manufacturing plant. We believe that this would allow Tesla to be more competitive in the electric vehicle space, given the possible elimination of a 25.0% import tariff. As such, we believe that Memtech stands as a direct beneficiary should Tesla make further inroads into the Chinese market. All in all, we believe that Memtech’s automotive segment should still have further room for growth, notwithstanding overall passenger car market conditions in China. However, on a YTD (total return) basis, Memtech has returned 47.7%, outpacing the STI’s 13.9% increase, benefiting in part from the U.S. technology sector rally despite the recent pullback. As such, we would wait for a more opportune moment to accumulate and thus maintain our HOLD rating and fair value estimate of S$0.85.