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Investors’ Corner
Investors' Corner | 19 December 2008
Related stocks:
600
T39
By:

Hyflux
Price – $1.83 Target – $2.63

Hyflux (HYF) had, in its second asset injection into Hyflux Water Trust (HWT), divested 5 plants with a total capacity of 160,000 cu m/day valued at $88m. We estimate that divestment gains for HYF to be around $14m, based on 1.3x P/B. This re-affirms HYF’s capital recycling model, and provides an additional source of funding in the current credit environment to allow HYF to further strategically capitalise on growth, especially in Algeria as well as China, where a Rmb350b was allocated to environmental protection from the stimulus programme. Our SOTP target price is tweaked, following a change in HWT’s target price (to $0.60 from $0.74). Within Singapore’s water sector, HYF remains our top pick for its diversified exposure to the water value chain, track record and credit availability. Key catalysts include continued order flow to drive share price, especially larger-scale construction projects, better-than-expected order wins and improved cost controls. Maintain OUTPERFORM. – Credit Suisse (17 Dec)

Singapore Press Hldgs
Price – $3.15 Target – $4.01

We believe that Singapore Press Hldgs’ (SPH) core media earnings are less at risk from the recession than many Asian media stocks, due to its near monopoly position in Singapore. While industry advertising expenditure is likely to contract, SPH should benefit from the trading down of television advertising. We expect print ad revenue to decline 8% yoy in FY09 and flatten in FY10. Retreating commodity prices are also positive for SPH while media earnings contraction is likely to be cushioned by its Sky@eleven residential project, and Paragon. For Sky@eleven, we believe that buyers’ default risk is fairly low, as it is not considered a high-end project. While the Deferred Payment Scheme can be transferred to second buyers, ASP at $975psf is more than 20% in excess of the original purchase price. We cut our earnings estimates by 12-14% in view of the expected decline in ad revenue and investment income. Expect SPH to pay $0.26-0.27/share in FY09-10, with yields of more than 8%. Maintain OUTPERFORM. – CIMB-GK (17 Dec)

Suntec REIT
Price – $0.91 Target – $0.68

Suntec REIT (S-Reit) has 56.5% of office leases expiring from now until 2010, which could prove challenging to renew. Prime-A office rents, which declined 18.8% in 4Q08, surprised on the downside, with further downgrades possible due to shadow office spaces. Its retail segment also faces declining tourism and consumer receipts and, for 2009-12, a total of 6 msf of new retail supply space is expected. With $700m due for refinancing in Dec-09, S-Reit’s current leverage of 33% leaves it room to absorb a 200bp to 320bp cap rate expansion before it hits 50% and the regulatory 60% limit – a 35% to 46% devaluation in its asset portfolio respectively. We believe this buffer to be sufficient for the next 12 months. For now, S-Reit is likely to trade in line with the STI Index. We reduced our rental forecasts by 5-19%; our DCF-NAV value falls from $0.91 to $0.77 as our base case, $0.33 for our bear case. Our price target assumes a 20% probability of the bear case emerging. EQUAL-WEIGHT. – Morgan Stanley (17 Dec)

United Envirotech
Price – $0.11 Target – $0.15

United Envirotech (UE) was awarded a Rmb72m contract to modify, build and operate a 15,000 cu m/day membrane based industrial wastewater treatment facility. As a result, we adjust FY09 revenue by $6.5m to $54.4m; net profit is revised up from $4.7m to $6.2m. As this contract is on a BOT basis, the wastewater treatment will be undertaken by UE. Its maiden contribution is expected in 1Q10. On an annualised basis, we expect additional profit contribution from the JV to be nearly $0.6m based on 80% utilization, tariff of Rmb5.50/cu m, conservative estimated profit margin of 25% and the 50% stake ownership. We continue to adopt NTA multiple as our core valuation model and increase the multiple from 0.6x to 0.7x due to increased ROE and improved earnings visibility as a result of higher contribution from the treatment business from FY10 onwards. Our target price represents an upside potential of 36%. Upgrade to BUY. – Westcomb (17 Dec)

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
Singapore Press Hldgs  2.070 +0.02 +0.98%   
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
Suntec REIT  1.910 -0.020 -1.04%   
Business: Real Estate Invs Trust. Ppties incl Suntec Office Towers, Suntec City Mall & Park Mall. [FY18 Turnover] Office (46.8%), Retail (34%), Others (Ad space, car park income , convention & exhibits) (19.2%).

Insight: Jan-19, FY18 gross revenue rose 2.6% to $363.5m du... Read More


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