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Investors’ Corner (ARA, Genting SP, F&N, SuperGroup)
Investors' Corner | 17 August 2012
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By: Choo Hao Xiang
Articles (151) Profile

ARA Asset Management
Price – $1.425
Target – $1.72

ARA’s 1H12 PATMI (profit after tax and minority interest) of $35.3m (up 20% y-o-y) formed about 48% of our full year estimate. Earnings were largely recurrent in nature. Higher operational costs, in line with expanding business operations, led to a slight decline in margins to 60.2%. ARA proposed an interim dividend per share of $0.023, in line with previous years. ARA gave investors some reasons to cheer with the launch of a new private fund – ARA China Investment Partners (CIP) – and the final closing of ADF II. We note that ARA will invest in CIP and we expect this fund to grow significantly over time. We understand that both CIP and ADF II will complement each other in investing in China, with the former targeting stabilised assets compared to more opportunistic deals for the latter. Our target price is based on 18x PE on its recurring fee income business, and marking to market its stake in its various REITs. Maintain BUY. – DBS Vickers (13 Aug)

Genting Singapore PLC
Price – $1.28
Target – $1.66

Genting Singapore’s 1H12 revenue of $1489.2m and earnings of $378.2m met 42% and 38% of our FY12 forecasts respectively. The second quarter saw marginally lower casino business volume affecting revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), and earnings eventually. While its EBITDA margin was also affected by the start-up costs associated with the West Zone, the firm believes that the adjusted EBITDA margin of about 45% is the worst it will see and is confident that it will improve to stay between 45% and 50% once the West Zone reaches steady state. Currently sitting on a cash balance of $4.5b, Genting Singapore believes that the weaker economic outlook presents acquisition opportunities (only keen to look at sizable investments of more than $500m and can clear its hurdle rate of 15%). In view of the more depressed economic outlook, we pared our fair value; but we maintain our BUY call. – OCBC Investment (13 Aug)

Fraser & Neave
Price – $8.57
Target – $9.16

F&N’s 9M12 net profit accounted for 70% of our full year forecast but only 60% of consensus. The firm’s 3Q12 net profit of $136m was affected by a change in accounting policy for overseas properties. The adjustment along with higher marketing expenses led to a 35% drop in property development profit. Meanwhile, beer profits continued to see strong performance for the quarter with Asia Pacific Breweries (APB) posting strong EBIT (earnings before interest and tax) growth of 25% underpinned by stronger demand from Indochina (up 15%), Oceania (up 20%) and South East Asia (up 16%). Soft drinks revenues fell 6% due to the loss of the Coca-Cola contract. Ex Coca-Cola, revenues improved 30% on stronger volumes but operating profit fell 81% after a restructuring charge. Revenues from dairies rose 9% on improved revenues from Thailand and a stable market in Malaysia. Our target price of $9.16 is pegged at a 5% discount to our Sum-of-The-Parts valuation. We recommend a NEUTRAL rating for the stock as the shares have been firm on the back of the potential sale of APB to Heineken. While F&N is expanding its F&B business to the size of its property business via organic growth and merger and acquisitions, we think the firm could eventually demerge its property and F&B activities. – Nomura (10 Aug)

Super Group
Price – $2.18
Target – $2.70

Despite a seasonally slower first half, Super Group turned in earnings of $36.6m for 1H12, making up 47% of our full year forecast. The strong results underscore our confidence in the earnings potential of Super, which is founded on sales growth with expanding margins from lower commodity prices. We expect Branded Consumer sales in Thailand to get stronger towards year-end, based on Super’s advertising and promotional activities there. Super declared a dividend of $0.02, or circa 30% of 1H12 earnings. This is comparable to 1H11. We continue to value Super at 20x EPS of $0.135. Given that 1H12 performance strongly suggests it is on track to meet or exceed our full year earnings estimates, and there is an over 20% of capital gains potential from current levels, we maintain our BUY rating. – AmFraser Securities (10 Aug)

Haoxiang manages and oversees the portfolio of stocks in the consumer goods and hospitality sectors at Shares Investment.

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Genting Singapore  0.870 -0.005 -0.57%   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More
Fraser & Neave  1.780 +0.050 +2.89%   
Business: [FY18 Turnover] Dairies (60%), beverages (25.4%), printing & publishing (14.6%).

Insight: Apr-19, 1H19 revenue inched 1.9% to $931.8m underp... Read More

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