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Investors’ Corner (GoldenAgr, RafflesMG, UtdEnvirotech, VizBranz)
Investors' Corner | 12 October 2012
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By: Daxx Chong
Articles (58) Profile

United Envirotech
Price – $0.35
Target – $0.50

The group’s 70%-owned subsidiary has signed a deal to acquire, upgrade and expand an existing industrial waste-water treatment plant in Weifang City, Shandong Province, China; this would make it the group’s 4th acquisition in the industrial treatment space in Shandong. The deal also comes with a 30-year concession to operate the plant once the upgrading works are completed in Jan-13. As before, management intends to pursue more such industrial wastewater projects in China, especially in Shandong, Jiangsu and Liaoning. Just last year, the Chinese government committed to invest some Rmb4t on water resources by 2020. For its 12th 5-Year Plan (2011-2015), Beijing will invest Rmb1.8t on water conservation projects, with the central government contributing Rmb800b and the rest from the local governments. And with China facing a severe water crisis, we believe that the spending goes beyond the traditional “pump priming” for the country’s slowing economy. As such, we maintain BUY and see room for upward revisions on more contract wins.
- OCBC Investment (9 Oct)

Viz Branz
Price – $0.71
Target – $0.74

Viz Branz’s current CEO, Chng Beng Beng, sold 57m shares (16.1% ownership stake) to Lam Soon Cannery at a price of $0.735/share, which reduces his stake from 35.9% to 19.8%. In addition, Lam Soon purchased a further 14m shares in a series of married trades from smaller shareholders to bring its total current stake to 19.8%. Lam Soon is a major Fast Moving Consumer Goods player in Southeast Asia with substantial operations in Singapore, Malaysia, Thailand and Vietnam. Some of the more prominent brands under its extensive portfolio include “Knife” brand cooking oil, “ISOMAX” isotonic beverage, and “Zip” dishwashing liquid. The move represents a transitional platform for Lam Soon to come onboard (with possible board representation) and work hand-in-hand with current management. We view this development as a positive and an important first step for an eventual overall takeover, however, valuations are likely to be capped at $0.735/share. Maintain HOLD.
- OCBC Investment (9 Oct)

Golden Agri-Resources
Price – $0.645
Target – $0.725

Crude palm oil (CPO) prices dropped by 18% over the past 3 weeks and it is currently trading below US$800/mt. We believe the recent decline in CPO price is partly attributable to the fall in crude oil (-4%) and soybean (-11%) prices. Crude oil has fallen due to concerns on rising stocks and the anemic global economic outlook, while soybean oil has dropped on better-than-expected soybean harvest in the US. Furthermore, Malaysia’s September palm oil inventory hit an all-time high of 2.46m tonnes, no thanks to the seasonally strong production and weak demand. We expect CPO prices to remain weak in the near term until production starts to fall towards the end of the year. We believe 4Q12 earnings will be affected by the low CPO price, given that more than 90% of GAR’s earnings come from its upstream palm oil business. We cut our FY12-14E earnings forecast by 1-10% to account for our new CPO price assumptions. We retain ACCUMULATE as we still like the group’s plantation age profile and long term fundamentals..
- Phillip Securities (8 Oct)

Raffles Medical Group
Price – $2.44
Target – $2.96

There have been murmurings that the group would no longer be the medical service provider to the Singapore Prison come Dec-12, when its present contract expires. The estimated value of the new contract from the Ministry of Home Affairs is roughly $300m, for 5+3 years, starting 2013. From a revenue-profit perspective, we think there is not much operating leverage from its previous public contract. Actual contribution to group revenue is roughly 4%, while net contribution is less than 2.5%. We believe new branches opened in recent years have more than replaced this source of revenue. Also, from a cost perspective, the manpower and resources spent do not favour the economics now unlike the past. With tighter restriction of the employment of foreign labour and new initiatives for expansion (new specialist centre, new wing and various new branches), management would be better off focusing its resources on its current private healthcare business. With readjustments in its inpatient billings, we see ample room for catching up of rates, albeit gradually initially (5-10% in 4Q12). Maintain OUTPERFORM.
- CIMB (5 Oct)

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

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Golden Agri-Resources  0.270 -0.005 -1.82%   
Business: Co is engaged in cultivating & harvesting oil palm trees, processing fresh fruit bunches (FFB) into crude palm oil (CPO) & palm kernel (PK), & refining CPO into industrial & consumer pdts.

Insight: May-19, 1Q19 revenue fell 11% due to softer crude ... Read More

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