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Investors’ Corner
Investors' Corner | 14 January 2011
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By: Ong Qiuying
Articles (131) Profile

ComfortDelGro Corp
Price – $1.59
Target – $1.98
The industry outlook for ComfortDelGro Corp (CD) looks good with recent developments: 1) CD’s reduction of fuel subsidies should buffer margins; 2) stronger-than-expected regional expansion may surprise inorganic earnings growth. The new bid for Adelaide bus operations will be known in Mar-11, if successful, could replicate the success of the Kefford acquisition in late 2008; and 3) the Certificate of Entitlement price increased 40% y-o-y. Quota reduction reaffirms the government’s push for use of public transport services. Furthermore, CD is the cheapest stock in terms of P/BV in the sector, based on Bloomberg estimates. Unlike SMRT (which faces the risk of cost overrun for Circle Line operations), CD is exposed only to normal operating risks. We raise our longer-term growth assumptions due to CD’s favourable change in revenue mix, as we expect the higher-margin overseas businesses to outshine domestic operations from 2011. Upgrade to BUY. – BNP Paribas (10 Jan)

Price – $2.86
Target – $3.31
SATS is expected to close 3Q11 on a positive note, driven by broad-based growth across its business segments. The number of visitor arrivals to Singapore increased 16.1% y-o-y in Nov-10. Passenger and freight traffic also registered 8.2% and 5.4% y-o-y growth respectively. We expect Daniels Group to boost UK operations with the seasonally stronger 2H11. While pressure on food pricing continues, SATS has several measures (e.g. longer contracts for some commodities) to tackle inflationary pressures. SATS’ recent cash acquisition of Japan Airlines International’s 50.7% stake in TFK Corporation for JPY7.8b ($122m) also provides SATS with access to Japanese airline catering market, especially at Narita and Haneda Airports, which will see significant increase in arrival/departure slots in the coming years. We raise FY12 revenue by 4.3% and maintain BUY. – OCBC Investment (10 Jan)

Wilmar Int’l
Price – $5.70
Target – $5.20
Wilmar Int’l (Wilmar) has recently announced a new venture into property development in China. It has formed a joint venture with two related parties and has successfully bid for two projects, requiring a total investment of US$530m over the next 10-15 years. Maiden earnings contribution is only expected in FY13. It is also expected that Wilmar will commit further resources in land bank acquisition in second and third-tier cities in China, despite its mainstay in agribusiness. Given this diversification, we cut our FY11 earnings forecasts on the core divisions by 7% due to higher raw material costs and price intervention in China. In addition, we ascribe a 10% discount to our valuation to account for the risk of investment into non-core assets. The risks to our call are removal of price intervention measures, higher-than-expected margins due to timely purchase of raw materials and sizeable investment into non-core assets. Maintain HOLD. – Deutsche Bank (10 Jan)

Amtek Engineering
Price – $1.27
Target – $1.46
Amtek Engineering (Amtek) has repositioned itself under new management as a specialist in the manufacture of complex metal precision components, broadening its product lineup, clientele and end-market applications. The restructuring has given Amtek more efficient operations, a leaner cost structure and cleaner balance sheet giving it a 15% upside potential. Amtek is differentiated by enriched value-added services and will be able to gain market share in segments with high entry barriers (from HDD and consumer electronics to auto and electrical and electronics), expanding overall margins. After a net loss in FY09 and modest profits in FY10, net income should jump 177% y-o-y in FY11 despite sales growth of only 11%. Its key risks of volatility in end-demand, potential product transition and market share losses could weigh on Amtek’s top line while wage increases and customer-pricing pressures could squeeze margins. Initiate at OUTPERFORM. – Morgan Stanley (11 Jan)

Qiuying oversees the construction and real estate investment trusts sectors at Shares Investment.

Please click here for more information about this author.

ComfortDelGro Corp  2.450 -- --   
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
SATS  4.790 -- --   
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
Wilmar Int'l  3.840 -0.06 -1.54%   
Business: Co's integrated agribusiness model encompasses the entire value chain of the agricultural commodity processing biz, from origination and processing to branding, merchandising and distribution of a wide range of agricultural pdts.

Insight: May-19, 1Q19 revenue fell 6.2% to US$10.4b driven ... Read More

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