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Investors’ Corner (CoscoCorp, MapletreeCom, Q&MDental, SIA)
Investors' Corner | 03 June 2011
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By: Daxx Chong
Articles (58) Profile

COSCO Corp (S)
Price – $1.93
Target – $2.18

COSCO Corp (S) (COSCO) entered into a US$114m contract with ATP Oil Gas (UK) for the construction of “Octabuoy Topside Module” – Octabuoy Phase 2. Separately, it announced that the US$1.05b contract for two Sevan 650 drilling units from Sevan Drilling ASA has been made effective which dispelled worries that the orders will fall through. With these contracts, its year-to-date order wins have been lifted to approximately US$1.8b out of which US$1.6b is from rig construction. While COSCO has little direct exposure to the beleaguered Sevan Marine ASA, there is substantial exposure to the subsidiary Sevan Drilling ASA and implications might arise through cross default clauses.. Still, the implication is unlikely to be sizeable due to a variety of reasons: 1) Sevan Drilling may succeed in terminating cross default clauses; 2) Sevan Marine might be saved by white knight; 3) Payments received are covered by insurance; and 4) COSCO has built up a track record and can afford to be less reliant on its partnership with Sevan. Maintain HOLD – Phillip Securities (31 May)

Mapletree Commercial Trust
Price – $0.88
Target – $1.08

Mapletree Commercial Trust (MCT) is a Singapore-centric commercial REIT whose initial portfolio includes VivoCity, Bank of America Merrill Lynch Harbour Front (MLHF) and PSA Building, all located in Singapore’s Southern Corridor. We expect organic growth to be fuelled by: 1) An under-rented portfolio (key asset VivoCity) coupled with significant leases expiring in FY12-13; 2) The development of Alexander Retail Centre with increased footfalls expected after the completion of the nearby Labrador MRT Station; and 3) Step-up rent increases for MLHF in 2011. Acquisition growth could also come from rights of first refusal to its sponsor’s office, retail and business-space assets totalling 5msf gross floor area. Its sponsor Mapletree Investments, a wholly-owned subsidiary of Temasek Holdings, is likely to bring about incubation or joint development of greenfield projects and supports its future debt or equity fund-raising. MCT is in the process of obtaining a credit rating which would allow it to gear up to 60%, at its current asset leverage of 39.5%, there is debt headroom of $282m to fuel acquisitions and asset enhancement at 45% leverage. Initiate OUTPERFORM – CIMB (31 May)

Q&M Dental Group (S’pore)
Price – $0.865
Target – $0.98

Q&M Dental Group (S’pore) (Q&M) proposed to issue up to US$50m of Taiwan Depository Receipts to gun up its China JV. It has set a five-year target to list the JV separately in either Hong Kong or China upon achieving a combined profit of around Rmb80-90m. Its internal estimates suggested that another Rmb400m is needed to achieve the profit target, already plans are afoot to invest around Rmb200m over the next three years to build its presence in the nation. Q&M aims to grow into a larger operating entity with exposure to growth markets and a wider spectrum of business within the dental healthcare industry. We believe such strategies will strengthen its long-term growth potential and enhance shareholder value. As a matter of fact, several significant developments has been achieved as it made inroads into the Malaysia and China markets on top of extending its presence in Singapore. Maintain BUY – CIMB (31 May)

Singapore Airlines
Price – $14.14
Target – $15.00

Singapore Airlines (SIA) looks to form a new low-cost budget medium-to-long haul carrier. Increased competition at its doors has led to a change in strategy and resulted in the tactical manoeuvre on the budget route. The move is deemed defensive, with primary aim in thwarting similar plans by Jetstar which has indicated intentions to fly to Europe (an important leg of SIA’s kangaroo route). While the general expectation is for SIA to use older B777-200s on the budget flights, it could utilise the Airbus A380s by reconfiguring seats. Our analysis shows that if A380 is reconfigured into 750 class seat, the airline could lower economy ticket prices by 30-40% and still be profitable. Though its primary aim is to fend off competition, yields will inevitably be impacted as it introduces a lower price point. Nevertheless, the trade-off between yields and potential traffic increase could potentially be revenue and profit accretive. Maintain HOLD – UOB KayHian(30 May)

With a long-standing interest in economics and finance, Daxx is the Senior Research Editor of Shares Investment.

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COSCO Shipping Int'l (S)  0.285 -0.005 -1.72%   
Business: Engaged in shipping and other logistics services. [FY18 Turnover] Logistics (69.7%), property management (11.9%), Shipping (9.5%), ship repair and marine related activities (8.9%).

Insight: Mar-19, FY18 revenue jumped 340% to $163.7m and gr... Read More
Singapore Airlines  9.240 +0.14 +1.54%   
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
Mapletree Commercial Trust  2.290 +0.02 +0.88%   
Business: Invest in income producing real estate used for office & retail purposes.

Insight: Apr-19, FY19 revenue inched up 2.4% due to higher ... Read More

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