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Investors’ Corner
Investors' Corner | 04 November 2010
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By: Gerald Teo
Articles (40) Profile

Indofood Agri Resources
Price – $2.60
Target – $2.96
9M10 core net profit was below expectations, accounting for only 57% of our FY10 forecast and 52% of consensus. The main disappointments were weaker-than-expected crude palm oil (CPO) sales and earnings from its cooking oil & fats division. Our new target is based on a 20% premium (10% previously) to our market P/E target to reflect potential upside to our CPO price forecasts from rising supply risks. We are bullish on CPO prices in the mid-term, which could provide stock catalysts. We are lowering our FY10 net-profit forecast by 10% to account for lower CPO production, weaker cooking oil & fats earnings and lower sugar earnings. We expect stronger earnings in 4Q10 from higher CPO production and better selling prices. Cooking oil and fats profit margins are also expected to improve when the group raises its selling prices in the coming weeks. Maintain TRADING BUY. CIMB (01 Nov)

Price – $2.05
Target – $2.10
2Q11 net profit of $45.8m came in above expectations, forming 30% of our FY11 estimate. De-rating catalysts likely to come from lingering cost concerns and unattractive valuations of 18x calendar year 2011 P/E against peers. 2Q11 EBIT fell 11% y-o-y as higher operating expenses (+11% y-o-y) outpaced 7% revenue growth with improvements across almost all segments. Weaker train, bus and engineering services, partially offset by growth in rental and advertising, dragged operating profit down y-o-y. We expect operating expenses to tick up in 2H11 in preparation for Circle Lines 4 and 5. While operating profit will continue to be hurt by a loss making Circle Line, growth in NSEWL ridership, rental and advertising should offer some respite. Electricity costs should also rise with higher consumption expected from the next quarter. Maintain UNDERPERFORM. – CIMB (01 Nov)

Singapore Post
Price – $1.18
Target – $1.16
Singapore Post (SingPost) reported a 5.6% y-o-y rise in revenue to $137.6m and a 2.5% drop in net profit to $39.5m in 2Q11, accounting for 50.9% and 48.3% of our full year estimates, respectively. Held-to-maturity financial assets comprising higher-yielding instruments such as credit-linked notes and equity-linked notes (related to dividend-yielding Singapore blue chip companies) remained at $38m as of Sep-10 (same as Jun-10). Compared to the group’s cash and cash equivalents of about $335.7m, this represents about 11%, which we think is a manageable percentage. SingPost is strengthening its focus on expanding the regional business to further grow its overseas contribution. The group is also seeing traction in the areas of e-commerce logistics and mailroom management. We continue to like SingPost’s stable and resilient business, and its emphasis on innovation on new products, such as its recently launched SmartPac Domestic (a next day doorstep delivery service). Maintain HOLD. – OCBC Investment (01 Nov)

Venture Corp
Price – $9.06
Target – $11.98
3Q10 core net profit of $50.6m was 8% below our estimate but in line with consensus. The variances were lower-than expected sales, gross profit margins, and foreign exchange loss of $2m, partially offset by lower-than expected operating expenses and taxation. 9M10 reported net profit represents 71% and 72% of consensus and our FY10 forecasts, respectively. EBITDA margins up 3.8% points y-o-y and 60 basis points q-o-q to 9.5%, as Venture’s move into more value-added, greater design and engineering solution projects bore fruit. Despite a slight increase in inventory and capex, Venture managed to generate $45m of positive free cash flow, lifting its net cash position to $237m. The management expects a further easing of supply for most electronic components and mechanical parts, which should further help to improve cash cycle days. Maintain OUTPERFORM. – CIMB (01 Nov)

Indofood Agri Resources  0.290 -0.015 -4.92%   
Business: Diversified agri-business mfg & retailing cooking oil, with oil palm, rubber & sugar plantation in Indonesia. [FY18 Turnover] Edible oil & fats (75.4%), plantations (24.6%).

Insight: Apr-19, 1Q19 revenue rose 5.3% due to higher sales... Read More
Singapore Post  1.000 -0.010 -0.99%   
Business: [FY19 Turnover] Post and Parcel (47.8%), logistics (31%), eCommerce (15.5%), property (5.7%).

Insight: May-19, FY19 revenue rose 2.9% to $1.6b largely du... Read More
Venture Corp  15.420 -0.12 -0.77%   
Business: Co provides technology services, products and solutions. [FY18 Turnover] Advance Manufacturing & Design Solutions (AMDS) [74.6%], technology products & design solutions (TPS) [25.4%].

Insight: Apr-19, 1Q19 revenue rose 8.5% to $928.8m due to b... Read More

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