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Investors’ Corner (CapitaMallsAsia, DBS, Ezra, Olam)
Investors' Corner | 16 March 2012
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By: Simeon Ang
Articles (125) Profile

CapitaMalls Asia
Price – $1.54
Target – $2.19

We believe CapitaMalls Asia (CMA)’s extensive retail mall network in Asia offers a distinct and significant advantage in lease management. CMA’s skill-set in retail management has helped to bolster its strong tenant database and leasing network, especially in China. Although China’s net property income (NPI) disappointed investors, we believe that this will improve as about 62% of its China malls are now operational (as opposed to 29% prior to 2011). CMA continues to believe that the China consumption story is intact, it feels that slower department store sales merely reflects the shift of consumer demands to shopping mall formats as consumers get more used to malls. We feel that the market has underestimated the strength of CMA’s retail network and in extension, its valuation. We anticipate that NPI will grow with increased occupancy rates, positive rental revisions and share of tenant sales. Maintain OUTPERFORM. – Macquarie Research (12 Mar)

DBS Group Holdings
Price – $14.25
Target – $17.30

We project that DBS’s FY12E net interest income will grow at a strong rate of around 17%. Contributors to this growth could come from several segments. We view that the chief contributor will be loans-growth, which might slow. There could however be upside risks stemming from sustained regional credit demand as well as increasingly diversified liquidity base. We opine that the franchise-restructuring initiatives that were launched in 2010 are reaping significant benefits. We see this in the revamped Global Transaction Services platform which has recorded 7 straight quarters of growth and will contribute significantly to group liquidity. The ongoing roll-out of new branch operating models locally has also seen service standards rise and consequently, increased cross-selling revenue. There are thus favourable risk-rewards to the group. BUY. – Nomura (12 Mar)

Ezra Holdings
Price – $1.21
Target – $1.25

Ezra Holdings said that it had successfully placed 110m new shares at $1.10 each on 9 Mar-12. The successful placement of shares raised about $121m in gross proceeds in which the company intends to bolster its balance sheet as it continues to execute its growing order backlog. While the placement will be dilutive to existing shareholders, we opine that this placement also comes with the promise of new contracts to come. We thus expect to hear more contract wins in the next two months as Ezra’s tender book remains strong. In FY12, Ezra has secured more than US$300m of subsea contracts, we are thus optimistic and forecast 44% earnings growth in FY12, with a stronger 2H12 from more subsea contracts due for execution. Investors should take opportunity to accumulate the stock when its share price pulls back after the placement. Stronger-than-expected orders and quarterly earnings could be valuation catalysts. Maintain OUTPERFORM. – CIMB-GK (12 Mar)

Olam International
Price – $2.29
Target – $3.10

A formal announcement is expected from India’s Commerce Ministry regarding its decision to reverse a ban on cotton exports. Accordingly, this about-turn has brought cotton futures back to below US$0.90 per pound. While supply chain managers have taken this most recent ban in their stride, uncertainty from frequent changes in ground rules are unwelcomed. Under current circumstances, supply chain managers such as Olam are under pressure due to cotton sourcing and trading concerns as well as cotton’s extreme price volatility. The perception of raised risk premiums has impacted Olam’s valuations which are currently at levels seen during the global financial crisis. We point to 2 key factors that investors should look out for: 1) Price volatility (FY11’s key negative) and 2) curtailment of credit either for Olam’s customers or itself. However, we remain optimistic in Olam’s ability to cope with such distracting headlines. Recommend BUY. – Citigroup (12 Mar)

Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

Please click here for more information about this author.

DBS Group Hldgs  25.030 -0.27 -1.07%   
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
Ezra Hldgs  -- -- --   
Business: Co is a provider of integrated offshore solutions to the oil & gas industry. [FY16 Turnover] Marine Services (68.9%), offshore support and production services (25.7%), subsea services (5.4%).

Insight: Oct-17, The US Bankruptcy Court approved the appli... Read More
Olam Int'l  1.820 -0.020 -1.09%   
Business: Co is engaged in sourcing, processing, packaging and merchandising agricultural products. [FY18 Turnover] Food staples & packaged foods (47.6%), confectionery & beverage ingredients (23.4%), industrial raw materials, infrastructure & logistics (14.9%), edible nuts & spices (14.1%).

Insight: May-19, 1Q19 revenue rose 16.7% due to increased t... Read More

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