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Investors’ Corner
Investors' Corner | 10 July 2009
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By: Lai Wyai Kay
Articles (53) Profile

CapitaCommercial Trust
Price – $0.825 Target – $0.94

CapitaCommercial Trust’s (CCT) $823m 1-for-1 rights issue has eliminated effectively, in our view, the rights-issue overhang. With a post-rights issue leverage ratio of 30.7%, which captures a 10% assetvalue decline, CCT is now one of the most well-capitalised S-REITs, in our view, with no debt-financing requirements for 2009 (2010: $885m; 2011: $990m). We believe a stabilisation of the spot-rent decline could trigger another round of outperformance. CCT’s rights issue has helped it to recapitalise, but has also diluted the potential valuation upside, based on our forecasts. We maintain our variant-GGMderived valuation, based on capitalising estimated FY08 core operating distribution (at an average passing rent of $6.84/ sqf/ month) at an effective cap-rate assumption of 6.5%. CCT’s target price to post-rights (pro-forma) book value of $1.51/ share is 0.62x. Maintain OUTPERFORM.
– Daiwa Institute of Research (6 Jul)

Olam Int’l
Price – $2.40 Target – $2.00

Olam’s share price strength comes largely from the hope of M&A activities and potential contributions from Temasek. This anticipation has been overplayed, and the earnings dilution/contribution disconnect (i.e.,immediate EPS dilution from the placement vs. the earnings lag from new acquisitions) shows that much has been discounted with the high valuations. M&A, while exciting, could raise overall risk as the number of moving parts increases. Our recent company visit indicates that the volume surge seen by the group in April/ May’09 was due largely to Chinese re-stocking and has not been sustained; relatively recession-resistant products of cocoa and dairy are also showing signs of weakness. At 23x FY10E PER, 3.3x P/B, and 11.4x EV/EBITDA, Olam is not only trading at a sizeable premium to its peers, but it is expensive versus its own trading history. Downgrade to SELL.
– Deutsche Bank (6 Jul)

Singapore Airlines
Price – $12.80 Target – $14.00

Although we remain bearish on near term outlook, we believe that its potential correction would provide a good opportunity to accumulate in preparation for a cyclical upturn. For more risk-averse investors, SIA has a well-capitalized balance sheet, strong track record at managing costs and the ability to unlock more value from subsidiaries/ associates. Shareholders are now entitled to 0.73 SATS share per SIA share. While the value of SATS may not be realized near term due to rise in free float, applying mid-cycle airport valuations on SATS of about 18x P/E, however, imply a potential fair value of about $2.40/share longer term. We factor in an improving earnings outlook in the next 12 months. Our price is based on 1.2x P/BV, SIA’s average valuation since 2003, when its competition intensified with the entry of low cost carriers and Emirates’ increased presence in Singapore. Upgrade to OVERWEIGHT.
– JPMorgan (7 Jul)

Wing Tai Hldgs
Price – $1.36 Target – $1.56

Interest in Wing Tai Hldgs was centered on its upcoming launch of Ascentia Sky. Our channel checks indicate ASPs post-discount starting from around $1,100 psf onwards. Our current valuation is based on an ASP of $1,200 psf for Ascentia Sky, which is close to the 2007 peak achieved at nearby Metropolitan. As Wing Tai only has a 40%-stake, our sensitivity analysis indicates every $100 psf increase in ASP translates to a $0.005 increase in RNAV. Its other 2009 offering for now is Belle Vue Residences. A total of 79 units out of this 176-unit project have been launched, with 61 units sold at between $1,700-1,900 psf. Our RNAV is revised to $1.95 (from $1.93); we maintain our 20% discount to RNAV. Accumulate this high-beta, purer residential play on expectations of recovery filtering up to the high-end. Upgrade to BUY.
– DBS Vickers (7 Jul)

CapitaLand Commercial Trust  2.130 -- --   
Business: Co is a real estate investment trust in the office space.

Insight: Apr-19, 1Q19 gross revenue and NPI rose 3.5% and 3... Read More
Olam Int'l  1.840 +0.020 +1.10%   
Business: Co is engaged in sourcing, processing, packaging and merchandising agricultural products. [FY18 Turnover] Food staples & packaged foods (47.6%), confectionery & beverage ingredients (23.4%), industrial raw materials, infrastructure & logistics (14.9%), edible nuts & spices (14.1%).

Insight: May-19, 1Q19 revenue rose 16.7% due to increased t... Read More
Singapore Airlines  9.110 -0.04 -0.44%   
Business: Co provides air transportation services to destinations spanning a network spread over 6 continents. [FY19 Turnover] SIA (80%), Budget Aviation (10.5%), SilkAir (6.2%), SIAEC (3.1%), others (0.2%).

Insight: May-19, FY19 revenue edged up 3.3% to $16.3b. Pass... Read More

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