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Investors’ Corner (DBS, Sakari, GLP, RafflesMG )
Investors' Corner | 04 November 2011
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By: Daxx Chong
Articles (58) Profile

DBS Group Holdings
Price – $11.98
Target – $13.30

DBS Group Holdings (DBS) reported 3Q11 profit of $762m, a 4% improvement q-o-q. 9M11 profit was 77% of our FY11 estimate of $3b (78% of consensus $2.944b). Notwithstanding distortion from sharp fall of S$, net interest income inched up 1% on loan. Net interest margins, however, fell 7 basis points (bps) q-o-q to 173bps, driven by a weaker loan-to-deposit spread of 2.05%. DBS cut S$ savings rates in early Oct and has re-priced US$ loans to try to support margins in 4Q11, but with three-month S$ swap offer rate still at 41bps (S$ SIBOR: 38bps), it may still be too early to view that margins can recover materially from here. Non-performing loans fell 3% q-o-q, accounting for 1.3% of total, improving across all geographies aside Hong Kong. Tier-1 capital ratio came in at 12.6%, of which core capital comprised 10.7%, while capital adequacy ratio stood at 15.5%. BUY.
– Citigroup (2 Nov)

Sakari Resources
Price – $2.39
Target – $2.90

Sakari Resouces’ (SAR) 3Q11 PATMI grew 46% y-o-y to US$34m (-8% q-o-q) while revenue rose 21% y-o-y to US$223m (-1% q-o-q). We adjusted our FY11-12 PATMI by -7% and -5% respectively as we factor in higher costs. Mining at the Northern Leases has begun, while Jembayan reserves reported a 23% increase to 142m tonnes serving as a share price catalyst. We expect higher production from both Jembayan and Sebuku in 4Q11. The average Newcastle benchmark thermal coal prices of US$122/tonne from Jan-Oct 2011 is within our FY11 forecast of US$125/tonne. We see limited downside risk to our coal price assumptions given the production ramp-up and renewed buying interest from Japanese utilities for the higher valued Sebuku coal. SAR currently trades at 13.6x FY11 P/E and is attractive given its 70-90% earnings growth potential for FY11-12. Our target price is based on 16.5x FY11 P/E and is a 7% premium to peers. Upgrade to BUY.
– DMG & Partners (1 Nov)

Global Logistic Properties
Price – $1.76
Target – $2.50

Global Logistic Properties (GLP) has commenced work on the 93,831sqm GLP Misato III development, a large-scale multi-tenant logistics facility located in Misato City, Saitama prefecture, Japan. This is the first development of the Japan Development Fund, a 50/50 JV between GLP and the Canada Pension Plan Investment Board. Pre-leasing for the property has already started, and construction will commence in Apr-12, with completion targeted by May-13 with total estimated cost of US$155m (¥11.8b). Management indicates existing customers indications of more than 3 times the leasable space in Misato III. We estimate the property, the sixth largest property within the GLP Japan portfolio, could increase GLP Japan’s EBIT by 2.3% in FY14E, the first year of operations (10 months’ contributions), and a 17% unlevered pre-tax IRR on our initial calculations. Meanwhile, any further clarification on the group’s bid for Jones Lang LaSalle’s Japan portfolio would be a share price catalyst. Maintain OVERWEIGHT.
– JP Morgan (31 Oct)

Raffles Medical Group
Price – $2.25
Target – $2.35

Raffles Medical Group delivered 3Q11 results in line with our estimates, with revenue up 14% y-o-y and net profit up 10% y-o-y to $11.8m. The 9M11 revenue and net profit achieved 75% and 69% of our full-year forecasts, respectively. During the quarter, operating margin was 20.9%, down from 21.5% a year ago. We believe that operating efficiency gains were likely dampened by start-up costs in China, and recruitment in line with growth plans (staff costs up 14% y-o-y). The planned Specialist Medical Centre at Thong Sia Building is now expected to commence operations in 1H13, while construction for the additional hospital capacity at its flagship hospital is likely to commence in 2H12 and be completed in late-2014. Meanwhile, rationalisation in corporate office functions added 15k sqf and raised hospital capacity by about 5%. We remain positive on its fundamentals (defensive growth profile), but see limited upside to valuation at 20x FY12 P/E. Maintain NEUTRAL.
– Credit Suisse (31 Oct)

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

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DBS Group Hldgs  25.060 -0.14 -0.56%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More

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