ANALYSTS SAY: Buy, Sell, Hold (19 July 2017)

Sunningdale Tech (SUNN SP)

Plastic Fantastic

Industry leading capabilities with a global footprint SUNN is one of the leading precision plastics engineering companies in Asia. It has an extensive manufacturing presence worldwide (currently in 19 sites across nine countries in Asia, Europe, N. America, S. America and a new plant in Malaysia in the pipeline) serving a long roster of clients, many of them prominent MNCs in their respective sectors. Management has a cautiously optimistic growth outlook despite the pricing and cost pressures faced by the industry.

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First REIT

Business as usual after CEO succession plan

SINGAPORE | REAL ESTATE (REIT) | 2Q17 RESULTS

 Accretive acquisition in Labuan Bajo in December 2016 boosted 2Q17 DPU by 1.4%.

 1H17 gross revenue, net property income and DPU were within 47-49% of our FY17e numbers.

 Acquisition pipeline remains healthy with stabilised hospitals ready for acquisition.

 Maintain NEUTRAL with unchanged target price of S$1.32.

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M1 Ltd: Owners’ strategic review bears no fruit

M1 Ltd’s (M1) 2Q17 revenue grew 4.7% YoY to S$251.6m on the back of higher fixed services revenue and handset sales but partly offset by weaker mobile revenue and international call services. 2Q17 operating expenses, however, rose at a faster pace of 9.9% to S$210.1m, driven mainly by higher handset costs, and higher wholesale costs of fixed services. Consequently, 2Q17 NPAT fell 20.8% YoY to S$32.5m. For the half year, NPAT declined 17.6% to S$68.6m and EBITDA fell 7.8% to S$152.4m, which formed 49.0% and 48.0% of our FY17 forecasts, respectively. In our view, M1’s share price has been largely supported by this potential takeover transaction but as its major shareholders have decided not to proceed with the strategic review, we believe M1 should trade based on its fundamentals. Looking ahead, we expect the competitive landscape to worsen with TPG’s entry and also with MyRepublic’s intent to launch mobile services as MVNO in Singapore. On weak earnings outlook, which translates to lower dividends ahead, we downgrade M1 from Hold to SELL with FV of S$1.75 (prev: S$1.96).

Best World International Ltd

Site visit: growth in China has only just begun

■ We reiterate our Add call on Best World (BWL), with the 13% share price decline from its recent peak of S$1.56 on 8 Jun offering an attractive entry price.

■ Its sales in China grew by strong 103% yoy in 1Q17. China is now the group’s largest market. Our on-the-ground checks give us conviction the growth can be sustained.

■ Further upside could come from full conversion from export sales to direct sales in 4Q17F/1Q18F, which is not yet fully reflected in our estimates.

■ We lift our TP, now based on 18x CY18F P/E (global peers’ average) vs. previous 16x

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Keppel REIT

Fully Valued

K-REIT’s 2Q results were slightly below our expectations due to a lower contribution from BJT and the absence of an one-off income. Rent reversions turned slightly positive for the quarter, reflecting a potential market bottom. However, positive impact from potential rent rebound on K-REIT’s portfolio is minimal, due to a high occupancy and minimal lease expiries. With gearing likely to cross 40% levels post recent acquisitions, we believe there is a possibility of an equity fund raising. The stock currently offers modest FY17-18F yields of 5.0%/5.2%. Maintain NEUTRAL.

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