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Investors’ Corner
Investors' Corner | 04 July 2008
Related stocks:
M01
600
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T39
By:

Metro Hldgs
Price – $0.78 Target – $1.20

Metro Hldgs, long a conservative tight-lipped company, has begun to be more communicative with investors. We expect share price to respond positively, which is critical to Metro’s ambitions to build up its property assets in PRC. With property rental income forming 70% of profits, Metro, today is more a property player than a retailer and should be better valued. It has a portfolio of retail and commercial properties in PRC’s top tier cities, strong financials and extensive retailing experience. Cash on hand of more than $173m as at Mar-08 will be further fortified by a $200m debt-raising exercise. Our RNAV of $1.50 uses company’s Mar-08 valuation for its completed investment properties in Shanghai, Beijing, Guangzhou; properties under-construction are valued using JLL’s capital values for Beijing Grade A office space and Prime retail space. Our price target assumes a 20% discount to account for execution and market risks. Initiate with BUY. – Kim Eng Securities (30 Jun)

Hyflux
Price – $2.98 Target – $3.44

Hyflux, with Hyflux Water Trust (HWT), jointly announced the first portfolio of qualifying projects earmarked for potential injection into HWT. Although the timing of this announcement was earlier than expected, we understand the phased execution may be at end-08 or early-09, depending on the review process and shareholders’ approval. Valued at $180m, the 9 plants have a total designed capacity of 290k cu m/day. Of the lot, two brownfield projects were newly added and not from the pipeline list as of Nov-07. The majority of the projects will reach operational commencement in 2H08-1H09 and the acquisitions may be executed in tranches as HWT expects to acquire operational projects. Funding will be primarily by debt. Based on a sensitivity analysis of 1.2x P/B, we estimate a gain of $20m for Hyflux and a net earnings boost of at least 4-5% over next 2 years (assume partial execution in 2008). Maintain NEUTRAL. – Credit Suisse (1 Jul)

KS Energy Services
Price – $1.89 Target – $2.59

KS Energy announced a renounceable 2-for-5 rights issue, with each right share priced at $1.60. This is estimated to bring net gearing down to 0.5x by end-08, vs a previous projection of 1.2x. We believe KS Energy will embark on a more aggressive exercise to add 2 land rigs p.a., at about US$40-60m, or an older jackup rig (>15 years old) at > US$120m in the secondary market. KS Energy has indicated that it might add 2 onshore/offshore drilling rigs per year. As KS Energy has not announced any new vessels purchase, we expect news flow on new assets acquisition and related back-to-back charters to emerge before end-08. Our net profit estimate is raised by 1.9% to $69.4m in FY08, and 4.2% to $84.5m in FY09, accounting for the lowered interest expenses. Our fair value uses 8x blended FY08/09 PE for KS Energy’s distribution business, and 15x PE for long-term chartering business using onshore/offshore assets and includes consideration of possible dilution. Maintain BUY. – DBS Vickers (1 Jul)

Singapore Press Hldgs
Price – $4.25 Target – $5.11

Singapore Press Hldgs (SPH) is raising ad rates for 8 newspapers from Sep-08. Base rate for display ads in the company’s flagship The Straits Times will increase by 3.5-4.7%. With advertisers typically preparing their ad budgets on a calendar-year basis, top-line impact of the rate card hike is not expected to kick-in at least until Jan-09. Given the expected slowdown in economic growth, we only tweaked our newspaper ad revenue forecast marginally to reflect the rate card hike. We also revisited our earnings forecasts to take into account of rising operating costs. Consequently, we have cut our FY08 and FY09 earnings forecasts by 3%. Separately, SPH announced that the latest independent valuation for its Paragon investment property is $2b (from $1.82b). Our revised target price represents 20% potential upside from current levels. Together with a projected dividend yield of 7%, SPH has an expected return of 27%. Maintain OUTPERFORM. – Credit Suisse (1 Jul)

Metro Hldgs  0.940 +0.005 +0.53%   
Business: Invests in property & manages retail businesses. [FY19 Turnover] Retail (80.3%), property (19.7%).

Insight: May-19, FY19 revenue rose 26.1% as the property di... Read More
Hyflux  -- -- --   
Business: Provides integrated water management & environmental solutions. [FY17 Turnover] Municipal (82.5%), industrial (16%), others (1.5%).

Insight: Mar-19, 9M18 revenue sank 75% due to lower enginee... Read More
KS Energy  -- -- --   
Business: An integrated oilfield supply & services providers. [FY18 Turnover] Drilling (98.4%), engineering (1.6%).

Insight: May-19, 1Q19 revenue slid 58.7% due to decreased r... Read More
Singapore Press Hldgs  2.110 +0.03 +1.44%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More


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