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SHENG SIONG
BUY (Maintained); TP S$1.75, Last close: S$1.53
- 1Q22 revenue/PATMI was within expectations at 28%/31% of our forecast. We have modelled a decline in sales in 2H22.
- Margins continue to climb. The 28.7% gross margin in 1Q22 is the highest for a festive laden quarter where promotions are more prevalent.
- We maintain our FY22e earnings. Our BUY recommendation and target price of S$1.75 are unchanged. Our valuation is pegged to 23x PE, a 10% discount to the 5-year historical average of 25x PE the reopening of borders and group restrictions is expected to reduce home dining. This will negatively impact the consumption of groceries. The return of Malaysian workers who were temporarily residing in Singapore is another potential loss of customers. A possible implication of rising inflation is consumers downgrading to home dining or shopping more in value grocers such as Sheng Siong. FY22e will be a transition year but valuations have turned more attractive and the resumption of new store openings will help drive earnings growth.
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Far East Hospitality Trust (FEHT SP)
1Q22: Preparing To Welcome The Return Of Business And Leisure Travellers
Outlook has improved with the rapid reopening of international borders in Apr 22. Three hotels under government contracts were redeployed to serve business and leisure travellers in 1Q22 while serviced residences benefitted from the sustained increase in long-stay corporate and project groups. We forecast that FEHT’s distribution yield will improve to 5.7% in 2023. FEHT trades at P/NAV of 0.80x. Maintain BUY. Target price: S$0.82
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Cosco Shipping Int'l (Spore) (COS SP):
Watch for inorganic growth [HOLD, Initiating coverage, TP S$0.26]
• Initiate with HOLD and TP of S$0.26
• Well positioned in the logistics business as one of Singapore’s largest one-stop logistics service providers
• Upside to earnings could come from acquisitions given that the company has a strong balance sheet
• Current price appears fairly valued at 0.9x FY22F P/B
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Starhill Global REIT (SGREIT SP): 3Q FY21/22 Operational Update
– More opportunities for positive reversionary retail rents in FY22/23 [BUY, TP S$0.75]
•3Q FY21/22 revenue up 4.2% to S$48.4m and NPI up 8.7% to S$38.5m, trailing behind full year estimates
•Key positives: (i) Singapore occupancy back to a high of 96.1%, (ii) Opportunities to capture positive reversions in SG retail in FY22/23 with 10.5% of leases up for renewal, (iii) The Starhill welcomes several high profile luxury tenants including Rolex boutique and luxury fashion label Off-White
•Datapoints to look out for: (i) Impact of weak AUD to extend to coming quarters and impact AUD-denominated rents (22% revenue exposure), (ii) Stronger traction for tenant sales and traffic at Wisma Atria in 4Q FY21/22 with workers back in office and dine-in cap lifted from end April
•Maintain BUY with unrevised TP of S$0.75
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