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Investors’ Corner
Investors' Corner | 08 May 2008
Related stocks:
F83
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By:

ASCENDAS REIT
PRICE – $2.35
TARGET – $3.07

Gross revenue was $322.3m in FY08, up 13.9% y-o-y. Although this was marginally below our expectation, lower-than-expected interest rates brought FY08 distributable income to $187.3m and DPU to $0.141, in line with consensus and our estimates. Warehouse retail posted the strongest y-o-y growth in net property income, up 343%. At development costs of about $121m, net yields from this segment were 9%, above average acquisition yields of 6-7%. As at 31 Mar 08, A-REIT’s short-term debt of $238m was 15% of its total borrowings of $1.6b.

Management addressed concerns over its growing short-term liabilities with the assurance that a 3-year term loan facility for $200m would be finalised in about two weeks. Management indicated that it may acquire overseas properties in about two years. We adjust for a higher rental base for the warehouse retail segment, increasing our FY09 DPU forecast to $0.153 (+2.9%) and FY10 forecast to $0.164 (+0.3%). Maintain OUTPERFORM.
– CIMB-GK (21 Apr)

CREATIVE TECHNOLOGY
PRICE – $6.10
TARGET – $4.34

Creative reported an operating loss of $19.7m in 3Q08. Despite maintaining gross margins above 20%, revenue fell faster than operating costs. Adjusted for non-operating items, Creative suffered a net loss after tax of $10m. Again, speakers were the only growth category with revenue in the other categories falling 23-26% y-o-y. Although Creative intends to cut operating costs further to be more in-line with its lower revenue and gross margin, it expects to incur restructuring charges in the next two quarters. With the economic headwinds in its major markets, it is obviously not easy to restart topline growth. European markets were particularly hard hit, with revenue down to its lowest level in more than two years. Despite extensive restructuring efforts in the past two years, which included spinning off production plants and adopting an outsourcing model, Creative now intends to cut overheads further, which may affect operations. Downgrade to SELL.
– Kim Eng (21 Apr)

GUOCOLAND
PRICE – $3.55
TARGET – $2.87

GuocoLand’s (GLL) 3Q08 results showed a 93% y-o-y decrease in net profit for the quarter to $2.6m on the back of lower revenue recognised for its property development projects in Singapore and China. More critically, it highlighted some disturbing legal issues surrounding its current Dongzhimen Project in Beijing (DZM Project), which it has a 90% stake. GLL has detailed a string of legal issues, including two lawsuits, levied by two Chinese banks against the Chinese company holding the land titles to the DZM Project. This Chinese company is 90%-owned by Hainan Jing Hao Asset (Hainan Co), which was acquired by GLL in Nov 2007. Complicating this issue further is the announcement that GLL has received a notice issued by the Hainan Trade Bureau purporting to revert ownership in Hainan Co back to its original shareholders. On the back of these concerns, we have factored in potential loss provisions arising from a worst-case scenario, and reduce GLL’s RNAV from $4.76 to $3.36. Downgrade to FULLY VALUED.
– DBS Vickers (21 Apr)

MOBILEONE
PRICE – $1.93
TARGET – $2.33

MobileOne (M1) posted a pretty decent set of 1Q08 results, with operating revenue up 3.8% y-o-y at $203.9m, meeting nearly 25.4% of our FY08 revenue forecast. Although net profit fell 23.7% y-o-y to $38m, meeting about 22.2% of our full-year earnings estimate, we note that the decline was mainly due to a higher tax. On the operating front, M1 managed to add another 19,000 new subscribers, but we note that the bulk came from the competitive prepaid segment, while the more lucrative postpaid segment gained 0.8%. On a more positive note, mobile data Average Revenue per User has not only remained fairly stable at $31.7, its contribution of service revenue has risen to 12.4% in 1Q08. Going forward, we expect the data segment to increase its contribution, given the recent incentives by M1 to focus on the mobile broadband space. We continue to like M1 for its defensive nature, given its stable earnings stream and high dividend payout. Maintain BUY.
– OCBC Investment (21 Apr)

COSCO CORP (S)
PRICE – $3.24
TARGET – $4.00

We visited Cosco’s shipyards in Guangzhou, Lianyungang, and Nantong. We remain upbeat that capacity expansion at ship repair and offshore engineering will reduce the group’s exposure to shipbuilding. Improved efficiency at Cosco Guangzhou will more than double its shipbuilding capacity from 5 in 2009 to 12 vessels in 2010. The ship repair yard at Lianyungang, added in January this year, is capable of undertaking 40 vessels for repair per year, adding 10% to the group’s ship repair revenue, and free Cosco Nantong to focus on offshore projects. Qitong, a greenfield yard under development, will have capacity to build 8 offshore projects when operational in 2009. The recent selldown has brought valuations to attractive 14.9x FY08 and 12.6x FY09 earnings. However, key risks to the share price are the possibility of steel prices rising again in 2Q, and the weakening US$, which will impact FY09 margins. Maintain BUY.
– DBS Vickers (22 Apr)

CHUNGHONG HLDGS
PRICE – $0.21
TARGET – $0.41

We believe ChungHong (CH) is well positioned to grow remarkably within the most dynamic segments of the electronics consumer product industry. We project substantial revenue growth of 40% in FY08 and 35% in FY09, driving substantial cash flow and earnings. We are setting a 12-month target price of $0.41 based on a 6.5x FY08 PER. The multiple we peg to FY08 EPS is based on a valuation band that is constructed by using three key determinants – long-term growth, current PE and market capitalization – of a group of technology counters. We estimate CH’s revenue to grow at 40% in FY08 and maintain the gross margin at 15%. Our estimate is based on (i) historical performance of 52% CAGR in revenue from 2004 to 2007, (ii) revenue contribution from Poland Investment, (iii) new customers adding into top line performance, and (iv) its customers’ prospects. Initiate with a BUY.
– Westcomb (22 Apr)

LIPPO-MAPLETREE INDONESIA RETAIL TRUST
PRICE – $0.565
TARGET – $0.70

Lippo-Mapletree Indonesia Retail Trust (LMIR) is the first Singapore-listed REIT to provide exposure to Indonesia’s burgeoning retail sector. We believe there is a strong investment case for Indonesia, especially its growing consumer market. LMIR came to the market with a clear and ambitious acquisition pipeline. However, we believe acquisitions may be made at a slower pace than originally planned due to present uncertain global environment. Exchange rate volatility is potentially a concern, but LMIR has entered into forex hedges that should minimize IDR-SGD volatility and protect investors’ DPU. However, the threat to NAV remains. In line with the weak S-REIT universe that is trading at deep discounts to NAV as investor appetite weakens, our fair value estimate of $0.70 prices in a 20% discount to our RNAV value. Nevertheless, this offers a 24% upside for investors who can enjoy a high distribution yield of more than 10% at current prices. We initiate coverage on LMIR with a BUY rating.
– OCBC Investment (22 Apr)

TIONG WOON CORP HLDG
PRICE – $0.58
TARGET – $1.45

TWC’s pipelay barge contract with NORce remains on track for completion by Jan 09. TWC is also moving into repair services, targeting offshore and marine equipment, given their better margins, sizeable contract values of US$30m-50m and faster turnaround. Management disclosed that all the start-up costs at the Bintan yard would be booked in FY08 and that activities would be ramped up from FY09 onwards. Thus, we estimate that the Bintan yard would incur a $5m pretax loss in FY08. We estimate that TWC’s machinery net fixed assets of $131m can be conservatively revalued up by at least 20%, as a significant number of its 270 cranes have been fully depreciated. Due to the start-up expenses at the Bintan yard, we have cut our FY08 forecast by 13%. Our new FY08 net profit forecast is $23.3m vs. $27.1m previously. We continue to view TWC as a good proxy for both the construction and oil & gas sectors. Maintain OUTPERFORM.
– CIMB-GK (22 Apr)

Lippo Malls Indonesia Retail Trust  0.235 -- --   
Business: REIT that is engaged in invs in retail ppties in Indonesia.

Insight: Apr-19, 1Q19 gross rental income slid 7.1% due to ... Read More
COSCO Shipping Int'l (S)  0.295 -- --   
Business: Engaged in shipping and other logistics services. [FY18 Turnover] Logistics (69.7%), property management (11.9%), Shipping (9.5%), ship repair and marine related activities (8.9%).

Insight: Mar-19, FY18 revenue jumped 340% to $163.7m and gr... Read More
GuocoLand  -- -- --   
Business: Co is a ppty dvlpr. [FY18 Geography] S'pore (87.8%), M'sia (6.5%), China (0.5%), Vietnam (0.2%), Others (5%).

Insight: Apr-19, 9M19 revenue slid 37.3% due to lower sales... Read More
Ascendas REIT  3.100 -0.01 -0.32%   
Business: Co invests in the real estate markets of Singapore and Australia.

Insight: Apr-19, FY19 gross revenue and NPI inched up 2.8% ... Read More
Creative Technology  2.880 -- --   
Business: [FY18 Turnover] Audio, speakers & headphones (94.3%), personal digital entertainment (3.1%), other products (2.6%).

Insight: Feb-19, 1H19 net sales decreased by 20% due to the... Read More


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