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Investors’ Corner
Investors' Corner | 11 February 2011
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By: Choo Hao Xiang
Articles (151) Profile

Singapore Exchange
Price – $8.44
Target – $9.40

Despite its expanded product platform, the Singapore Exchange (SGX) is still heavily-reliant on its securities trading turnover. Bolstered by a surge in average daily value traded (DVT) for ETFs, commencement of ADR trading via GlobalQuote and new listings, the said segment took SGX’s 2Q11 earnings to their highest in 5 quarters (ex-exceptionals). While SGX has promising initiatives and sizeable IPOs in the pipeline, supported by comprehensive technology platforms (Reach initiative) and continuous all-day trading from 1 Mar-11, revenue generation will likely be progressive. Regarding the proposed acquisition of ASX, we estimate SGX’s EPS accretion to be around 30%. While merger downside appears largely discounted given the stock’s recent underperformance, we see timing and valuation uncertainty, as well as weak underlying market DVT momentum, as overhangs. Maintain NEUTRAL. – Nomura (8 Feb)

CapitaCommercial Trust
Price – $1.47
Target – $1.47

CapitaCommercial Trust (CCT) has obtained provisional permission for the redevelopment of Market Street Carpark, possibly turning it into an office block with GFA of some 850k sq feet. Among the considerations, the total additional costs (differential premium, lease top-up premium and construction costs) are estimated to be around $0.9b to $1b, with 45% coming from the differential premium. Given that development activities are capped at 10% of CCT’s asset base, being about $600m, another hurdle is the potential structure of undertaking the redevelopment, which includes having a JV partner or making an outright sale followed by right of first refusal for purchase. Assuming an outright sale, our analysis on the differential premium payable suggests the accretion to NAV to be between $0.18 to $0.25. In view of the loans amounting to $242.6m, paid down in Dec-10 and Jan-11, our DPU estimates are lowered by 2-3% as any bulk repayment of debt is unlikely this year, resulting in higher interest expenses incurred. Maintain HOLD. – Citigroup (7 Feb)

China Fishery Group
Price – $2.18
Target – $2.55

China Fishery Group’s (CFG) 1Q11 revenue grew 13% y-o-y to US$115m, driven by higher sales from South Pacific and Mauritania which offset weaker trawling and fishmeal revenues due to lower average selling prices (ASP), a change in product mix and lower inventory available for sale. However, CFG’s net profit came in at US$19.7m, missing our estimates, dragged down by lower fishmeal sales and a US$4.7m expense for the closure of a fishmeal plant. Nevertheless, fishmeal prices has been lifted to US$1,560/tonne from around US$1,350/tonne. Our FY11-13 EPS estimates have been reduced by 0-15% as we lower our ASP assumptions for North Pacific trawling operations and fishmeal sales volume for FY11, while raising profit assumptions for South Pacific operations. We expect the Peruvian anchovy catch volume to recover, with robust soft commodity prices underpinning fishmeal prices. OUTPERFORM. – CIMB (7 Feb)

Raffles Education Corp
Price – $0.315
Target – $0.40

Raffles Education Corp (REC) has affirmed its plan to venture into property development in China. Following the approval from relevant authorities to convert about 280k sqm of land area in Oriental University City (OUC) for residential development, REC is currently looking to form a JV to co-develop the site. We see the move as being pragmatic despite the shift away from its core business, as it allows REC to leverage on its low land cost when it acquired OUC back in Oct-07. REC is likely to take a minority stake in the JV given that property development is not its core expertise. Our base case scenario implies that REC may generate a total return of Rmb355.1m, based on our estimated development profit, assuming all residential units are fully sold out. On the other hand, student enrolments are expected to remain challenging in the near-term given the structural issues facing China’s education sector. Upgrade to BUY. – Kim Eng (7 Feb)

Haoxiang manages and oversees the portfolio of stocks in the consumer goods and hospitality sectors at Shares Investment.

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Singapore Exchange  8.500 -0.04 -0.47%   
Business: [FY18 Turnover] Equities & fixed income (48.2%), derivatives (40.2%), mkt data & connectivity (11.6%).

Insight: Jan-19, 1H19 operating revenue increased 5.7% to $... Read More
CapitaLand Commercial Trust  2.130 +0.03 +1.43%   
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
China Fishery Group  -- -- --   
Business: An integrated industrial fishing co managing fishing vessels, sells marine catch & produces fish products. [FY14 Turnover] Peruvian fishmeal (68.9%), contract supply (24.4%), china fishery fleet (6.7%).

Insight: Oct-15, Co announced that in line with its assessm... Read More
Raffles Education Corp  0.081 +0.001 +1.25%   
Business: Co is the largest private education group in Asia-Pacific. [FY18 Turnover] Education (81.6%), education facilities rental service (13.6%), real estate investment (4.8%).

Insight: Feb-19, 1H19 revenue fell 0.3% to $48.7m due to ch... Read More

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