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Investors’ Corner
Investors' Corner | 06 May 2011
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By: Xavier Lim
Articles (51) Profile

Noble Group
Price – $2.23
Target – $3.00
Noble Group has just announced that Korea’s sovereign wealth fund KIC (Korea Investment Corp) is acquiring slightly over 1% stake in the company, valuing the transaction at $132.2m at 29 Apr-11′s close of $2.23. In addition, KIC and Noble Group establish a co-operative business and strategic partnership for the purposes of jointly investing in infrastructure assets and supply chain management activities. What Noble Group aims to achieve from this transaction seems to be more interesting. One possibility is investing in supply chain infrastructure in Korea – this would help Noble gains greater market share of the commodity flows towards North Asia, and would at the same time support the Korean government pushes to develop Busan, already one of the world’s largest transshipment container ports. Another possibility is a joint investment in supply chain infrastructure in another country, where KIC might have strong relationships with the local governments, and be interested to share the project risks. We reiterate our BUY rating with 35% upside potential to our TP. – RBS (02 May)

Price – $1.90
Target – $1.96
SMRT’s results reflected difficult operating conditions. Circle Line ridership rose to 181K/day at end 3Q11, narrowing losses to about $4m in 4Q. But CCL ridership is still far from breakeven, which we estimate is ~220K/day. Moreover, its $600m capex guidance comes as a surprise to us and the market. This is about 4.5x more than typical. Most of the capex relates to mandatory investment in trains. We expect significant debt financing. SMRT generates annual operating CFof ~$300m. Of this, $130m is returned in dividends, which mgmt indicates will not be cut. We thus expect SMRT to partly draw down on its net cash of $126m and utilise its $1b MTN programme. At 2.5% cost of debt, $400m additional debt will impact SMRT’s profits by about $10m. We believe FY12 will remain difficult as we expect pressure on operating costs – particularly wages, fuel and interest – to erode revenue gains from higher ridership on MRT and buses, which we forecast at about 8%. Maintain NEUTRAL. – UBS Investment Research (02 May)

Raffles Education Corp
Price – $0.67
Target – $0.80
We believe Raffles Education (RLS) is currently undergoing the worst operating period in history particularly for its OUC (Oriental University City) and China NES (National Education System) operations and expect to see dismal performance in the next two quarters. The findings in our recent visit to OUC suggest that more management and financial resources need to be injected to realize the monetization potential of OUC. Given the poor mix of vocational schools located within OUC make it difficult to attract top-tier schools to set up campus there. On the other hand, RLS could produce NPV of $52m earnings from the 260k sqm residential land on OUC, equivalent to $0.06/share. Outside China, we expect to see very gradual recovery on its ex-China PES operations and incremental reduction in the start-up operating losses. We lower target price but maintain BUY. – BNP Paribas (03 May)

Venture Corp
Price – $9.65
Target – $12.00
We gathered that business was generally slow in 1Q11, though we are optimistic that our earnings estimates are still achievable as business is expected to pick up in 2H11. This is supported by projects in the pipeline and Venture’s relentless efforts to expand its value-added services to existing and new customers. That said, we would need to monitor VeriFone’s acquisition of Hypercom as the former currently uses other contract manufacturers. We understand that VeriFone currently uses Sanmina for its manufacturing requirements, and VeriFone may switch from Venture to Sanmina for Hypercom’s requirements after its acquisition. On the other hand, Venture does not derive sales from Japan directly. It had also stocked up sufficient inventories at the end of last year, and does not foresee problems till end-May. Nevertheless, it has been facing tight supplies of certain components such as tantalum capacitors and power chips, even before the earthquake. Maintain OUTPERFORM. – CIMB (03 May)

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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Raffles Education Corp  0.075 -- --   
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
Venture Corp  15.040 -0.19 -1.25%   
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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