ANALYSTS SAY: Buy, Sell, Hold (6 Apr '18)

Genting Singapore

Better casino odds now

■ At 7.3x forward EV/EBITDA, the market is likening GENS’s FY18F to FY15 (adjusted EBITDA fell 29.9% yoy, EBITDA margin below 40%). This is unwarranted, in our view.

■ The market has overly discounted GENS despite its improved margins and balance sheet prowess, in our view. Higher DPS is a highly likely catalyst.

■ FY18F VIP GGR growth is likely to be supported by Singapore VIP growth and easing VIP credit policies. Mass market share sustained by stronger RM/S$.

■ WE expect EBITDA margins to be preserved by tight cost controls, especially lower FY18/19/20F trade receivables impairment of S$38.1m/41.0m/43.6m.

■ Maintain Add, with marginally lower target price of S$1.40 (from S$1.49), based on 11.5x FY19F EV/EBITDA (12x previously) for flattish forward earnings growth.

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Memtech International (MTEC SP)

Fundamentals Intact But Fairly Valued; Further Overhang From Trade War

Since our initiation at S$0.79 in Apr 17, the stock has returned a healthy 102%. We still like the company for its strong balance sheet, entrenched position in the automobile precision engineering segment and minority shareholder-friendly management. However, at current prices, we believe the company is fairly valued. Trade war fears remain, which may continue to be an overhang on the stock. Downgrade to HOLD with PE-based target price of S$1.50. Entry price: S$1.35.

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ComfortDelGro: Navigating through a dynamic competitive landscape

ComfortDelGro's (CDG) taxi business remains in the midst of a dynamic competitive landscape as Grab announced on 26 Mar 18 the acquisition of Uber’s Southeast Asia operations. However, on 30 Mar 18, the Competition Commission of Singapore (CCS) said that it was not notified of the merger and has commenced an investigation, with reasonable grounds for suspecting that this transaction has infringed the Competition Act. As a result, CCS has directed both parties not to take any action that will lead to the integration of both businesses. In addition, it was also recently reported in the media that two other private-hire car (PHC) operators are looking to launch PHC services in Singapore as well. Given such fluid situation, we see several possible outcomes depending on the decision of CCS and how CDG’s proposed acquisition of Uber’s rental company turns out. In our view, even if CCS approves the merger, it is likely there will be restrictions on Grab to ensure they do not take any action that will result in further decline of the taxi industry so as to maintain a fair level of competitiveness of both industries. Hence, on abovementioned reasons, we see more upside than downside to CDG’s outlook, and reiterate BUY on CDG with unchanged FV of S$2.25.

Perennial Real Estate Holdings (PREH SP) : BUY

A lucky break in Singapore residential market

• Enters JV with Qingjian to jointly redevelop Goodluck Gardens

• Estimated project cost at S$800m; gross development value of up to S$1.0bn

• New partner in deepening its Singapore presence and have jointly bid for Holland V site

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