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Investors’ Corner
Investors' Corner | 03 April 2009
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By: Lai Wyai Kay
Articles (53) Profile

Keppel Land
Price – $1.41           Target – $1.77

Keppel Land’s (KepLand) deferment of its Madison Residences (MR) project in mid-March comes across as rational. Holding cost for this Bukit Timah land is low and demand for high-end projects is unlikely to return in the near future. If construction for MR proceeds, KepLand may have to carry the 55 unsold units on its balance sheet. In light of this, we are cutting our FY09 and FY10 PATMI estimates by 3.6% and 7.7% to $241.4m and $296.2m respectively, lowering our FY09 RNAV estimate to $3.67. KepLand currently trades at an estimated 62% discount to our RNAV estimate. While KepLand’s exposure to the office sector in Singapore and limited diversification in its operations carries higher risk, we believe that the bulk of it has already been priced in, as its price to RNAV discount is higher relative to the 35.2% of its peers. Despite the strong recovery since hitting a low of $0.985 in mid-March, we still see an upside potential of 25.5%. Maintain BUY. – OCBC Investment (31 Mar)

Koh Brothers Group
Price – $0.135           Target – $0.165

Although hotel room and rental rates have eased, operations at Koh Brothers Group’s (KBG) Oxford Hotel and Sun Plaza is expected to stay profitable. However, its real estate development arm is at the mercy of the current downturn. Of the four residential projects, two have been shelved and are currently being rented out to cover some of the expenses. The tangibility of the assets has also allowed it to gear up its balance sheet, although net gearing at 170.6% as of Dec-08 is relatively high. We derived our target price using sum-of-the-parts methodology to value its three business segments, applying a 20% discount to provide for the potential depreciation in property valuations. While the valuation of the hotel and Sun Plaza may decline, cash flow from them will likely remain positive. KBG’s vertically integrated structure also imparts better cost control. Public infrastructure spending and a $690m construction order book will provide support to its top-line. Initiate with BUY. – SIAS Research (31 Mar)

LMA Int’l N.V.
Price – $0.15           Target – $0.27

LMA Int’l N.V. (LMA) FY08 core earnings of US$10.2m are 34% down y-o-y, and below our expectations of US$16m. Margins were also below expectations as major markets saw intense price competition throughout the year. Within LMA’s core airway management business, the decline in the number of elective surgical procedures, continued intense price competition and tight liquidity are expected to inhibit growth and gross margins. Outlook, however, remains positive, despite a tough economy and sustained price competition. With strong brand equity, full year contribution of its patient warming product in FY09 and the just concluded worldwide distribution agreement for the LMA StoneBreaker, we expect the group’s revenue going forward to grow. The group’s substantial cash reserves and healthy cash flow will also allow them to capitalise on new growth opportunities that may become available in this economic recession. Maintain BUY. – CIMB-GK (31 Mar)

Singapore Airport Terminal Services
Price – $1.23           Target – $1.23

Singapore Airport Terminal Services’ (SATS) has, as of 23 Mar-09, acquired a 98.6%-stake in Singapore Food Industries (SFI). Following the acquisition, our FY10-11 core EPS estimates are raised by 4-5% to account for the contribution from SFI. Despite the increase to earnings estimates, we maintain that the SFI acquisition is expensive, and raises the risk profile of SATS. Swissport’s announced withdrawal from Changi Airport has allowed SATS to bag contracts from Tiger Airways and Swiss International. While the new customer wins are positive, we do not think that the impact to SATS will be significant, given the relatively smaller operating scale of the new customers as compared to key customer, SIA, which accounts for 65% of SATS’ revenue. The dim outlook for SIA is more crucial, with additional capacity cuts likely if the situation does not improve. Hence, there remains downside risk to our earnings estimates for SATS. Maintain UNDERPERFORM. – CIMB-GK (31 Mar)

Koh Brothers Group  -- -- --   
Business: [FY18 turnover] Construction & building materials (97.7%), real estate (1.5%), leisure & hospitality (0.8%).

Insight: May-19, 1Q19 revenue rose 17% due to higher contri... Read More
SATS  4.870 +0.09 +1.88%   
Business: Asia's leading provider of gateway services and food solutions. [FY19 Turnover] Food solutions (54.1%), gateway svcs (45.8%), others (0.1%).

Insight: May-19, FY19 revenue rose 6% to $1.8b driven by hi... Read More

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