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Investors’ Corner (ARA, CapitaLand , MIDAS, STXOSV)
Investors' Corner | 17 June 2011
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By: Ho Lee Peng
Articles (2) Profile

ARA Asset Management
Price – $1.66
Target – $1.90
ARA’s recurring income increases in-line with the increase in assets under management (AUMs) of real estate investment trusts (REITs) (45% of 2010 revenue) and private funds (25% of 2010 revenue). During a property up-cycle, private funds increase their AUMs by acquiring highrisk assets with potential for capital appreciation. During a property down-cycle, REITs increase their AUMs by acquiring high-yielding properties. Hence, giving ARA a stable income growth across business cycles. ARA currently manages $16.9b of assets through six REITs and two private funds. AUM have reported 30% CAGR over the past five years, and the group plans to reach an AUM target of $20b by end-2012. Assuming no growth in REITs AUM and raising of US$1.1b of committed capital for ADF II, we estimate 2012 year-end AUM at $18.2b. Initiate ADD – IIFL Securities (13 June)

Price – $2.96
Target – $3.50
CapitaLand shares have been sold down in recent sessions, largely due to residential property-market concerns in China and Singapore. We believe the sold down of CapitaLand shares has reached a level where nearly all of the future policy risk for both markets has been priced in. Home prices might stagnate or even decline in its key markets and the company might miss its new-launch targets of 4,000 units in China and 1,700 units in Singapore, but with about $3.2b of its market cap wiped out ytd, the selling looks overdone. We have lowered our SOTP-based six month target price to $3.50 from $3.93 after assuming impairments of 20% of the adjusted asset value in China and 20% of the ASPs for all unsold residential units in its Singapore land bank. At this stage, we view our new target price as conservative and believe any prolonged price weakness should be an opportunity to accumulate the shares. Maintain OUTPERFORM – Daiwa (13 June)

Midas Holdings
Price – $0.63
Target – $1.10
Midas Holdings has secured a Rmb62m contract from CNR Changchun Railway Vehicles Co for the Shanghai Metro Line 12 Project. It is scheduled to be delivered from 2011 to 2013. Prior to the announcement, Midas’ order book stood at Rmb1.2b. While we are encouraged by Midas’ latest contract success, we opine that this contract win is relatively small-scale in nature and we are expecting order book momentum to pick up more strongly in 2H11. This is because China’s Ministry of Railways has recently recommitted its intention to invest Rmb745.5b in 2011 following the corruption scandal surrounding its Minister of Railways. We believe that current share price weakness of Midas represents a favourable entry point. Midas is currently trading at 11.7x FY11F PE, a large 53.2% discount to its historical average 25x PE; it is also comparable to its peers’ 11.8x PE despite commanding stronger margins. We are keeping our estimates intact as our projections allow for such contract wins. Maintain BUY – OCBC Investment Research (13 June)

STX OSV Holdings Ltd
Price – $1.20
Target – $1.80
STX OSV is well positioned to benefit from increased demand for Offshore Support Vessels (OSVs) in Brazil due to its established position in the market. STX OSV is constructing a new shipyard, which will effectively triple its production capacity in Brazil, from 2-3 vessels to 7-9 vessels. According to Upstream, 19 companies have submitted bids in a Petrobras tender for order up to 20 OSVs. We note that one of the companies, Norskan Offshore has a good relationship with STX OSV, and hence, we expect the contract to build the vessels to be awarded to STX OSV if it were to win the tender. In addition, Technip has submitted proposals for lot C in Petrobras tender of six flexible pipelaying vessels, and has nominated STX Brazil for its construction. We expect the announcement of NOK3.2b of contracts with Transpetro following financing approval from Merchant Marine Fund to drive the stock’s re-rating. Maintain OUTPERFORM – Credit Suisse (13 June)

CapitaLand  3.510 -0.03 -0.85%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
Midas Hldgs  -- -- --   
Business: Manufacturer of aluminium alloy extrusion products for China's rail transportation sector. [FY16 Turnover] Aluminium alloy (99.3%), polyethylene pipe (0.7%).

Insight: Jan-18, Co announced that its JV company, CRRC Nan... Read More

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