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Investors’ Corner
Investors' Corner | 30 July 2010
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By: Cassandra Sim
Articles (14) Profile

ComfortDelGro Corp
Price – $1.55
Target – $1.73
Adding to its profitable Australia bus and China taxi franchises, a strong GDP recovery is helping Singapore, especially in rail and ridership numbers. At S$1.55, ComfortDelGro (CMDG) trades at 1.8x 2010E P/B vs projected ROE of 13.8%. Our S$1.73 target values CMDG at 14.8x PER and a mid-cycle 2x P/B. CMDG’s North-East Line (NEL) is now enjoying 15% ridership growth and a c.21% EBIT margin. Winning the forthcoming Downtown Line (DTL) would be a key boost. In regards to the Australian bus growth, a stable c.15% margin business, ComfortDelGro Cabcharge (CDC) could benefit from bus market liberalization to increase share. Then, in China, despite being a collection of top 3 taxi operators in 11 cities, license scarcity makes this a hefty 30% margin business. These 3 businesses account for 19% of 1Q10 group revenues but 33% of group EBIT. Upgrade to BUY. – Citi Investment Research (26 Jul)

Raffles Medical Group
Price – $1.87
Target – $2.10
Raffles Medical’s 2Q10 results were strong, with revenue growing at 9% y-o-y, while earnings jumped 20% y-o-y to S$10.6m. 1H10 revenue and net profit achieved 48% and 46% of our FY10 estimates, respectively. Operating profit margins improved to 22.2% (from 20.4% in 2Q09), led by 11% y-o-y growth at its hospital, while the healthcare segment grew 4% y-o-y. Its cash hoard rose to S$61.6m at end June-2010, and the company declared a S1ct interim dividend, similar to the previous year. Raffles Medical has received approval from the URA to expand its flagship hospital site by 30%. Raffles Medical also separately announced that it has begun managing a medical centre in Shanghai. We have raised forecasts by 1-4% on stronger growth assumptions for its hospital operations. Valuations remain undemanding, given its growing franchise and earnings profile. Maintain OUTPERFORM. – Credit Suisse (26 Jul)

Singapore Airlines
Price – $14.76
Target – $18.00
With a net income of S$253 m for 1Q10, we think Singapore Airlines (SIA) is on-track to beat our full year net profit estimate of $1.13b. SIA reported an EPS of 21 cents for 1Q10 compared with an EPS loss of 26 cents for 1Q09, and soundly beat our EPS estimate of 14 cents. In addition, operating profit of $284m for 1Q10 was significantly above our estimate of $157m. The sharp recovery in cargo yield – up 42% y-o-y and up 5% q-o-q – was a key revenue contributor. Premium and economy yield rose sharply in 1Q10, driving passenger yield to rise by 15% to 11.7 cents. We believe premium passenger revenue will drive the next leg of SIA’s earnings recovery as the exceptional cargo revenue growth slows in 2H10. Our price target of $18.00 is based on a F2010E EV/EBITDA of 5.5x, which equates to our F2010E BV of 1.5x. On a 2-year investment horizon, we think SIA share could trade up to $21 on mid-cycle normalized earnings. OVERWEIGHT. – Morgan Stanley (26 Jul)

Fraser & Neave
Price – $5.67
Target – $6.25
Temasek Holdings has sold its entire 14.7% stake in Fraser & Neave (FNN) to Kirin Holdings, for $6.50/share or $1.34b. This is a premium of 15% over the last closing price of FNN and FY11 P/E of 14.3x. We have a TP of $6.25, pegged at a 10% discount to our new SoTP estimate of $6.95/share for FNN. We believe there are synergies to be drawn between FNN and Kirin in future collaborations as Kirin owns and distributes alcohol beverage brands such as Kirin Beer, Johnnie Walker Black Label and San Miguel. Furthermore, Kirin is not new to FNN and has been a distributor for some of Kirin products here in Southeast Asia. With Kirin as a substantial shareholder, we could expect further collaboration between the two in expanding their products in Asia. We believe a restructuring of the board will take place soon with Kirin being represented. With the news of the new shareholder and the potential future collaboration between FNN and Kirin, we believe FNN’s share price will surge above $6.00/share in the near term. BUY. – BNP Paribus (27 Jul)

ComfortDelGro Corp  2.430 -0.01 -0.41%   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More
Singapore Airlines  9.140 -0.02 -0.22%   
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
Fraser & Neave  1.700 -- --   
Business: [FY18 Turnover] Dairies (60%), beverages (25.4%), printing & publishing (14.6%).

Insight: Apr-19, 1H19 revenue inched 1.9% to $931.8m underp... Read More

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