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Investors’ Corner (Nam Cheong, SaizenREIT, Ying Li, CDL HTrust)
Investors' Corner | 23 November 2012
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By: Nicholas Tan
Articles (71) Profile

Nam Cheong
Price – $0.23
Target – $0.28

Nam Cheong is set to leverage on its strong market position (estimated at 75% domestic market share for OSV shipbuilding) to be a key beneficiary of Petronas’ RM300b capital expenditure plans for FY11-15. We believe this would likely trigger increased investments across the broad Malaysian oil and gas sector and Nam Cheong could benefit from rising OSV demand. The group derived its market leader position due to various factors and one such factor is its effective outsourcing strategy, where it offloads the construction for the majority of its vessels to third-party yards in Fujian, China. This enables it to scale up its production capability quickly without having to incur additional capital expenditures. Also it is able to take advantage of the lower labour costs in China. Among others, Malaysia’s cabotage laws and Nam Cheong’s ability to issue “letters of authorisation” that allows operators to bid for Petronas’ contracts before acquiring the necessary vessels, make the firm the choice OSV yard in Malaysia. Hence, we are bullish based on the above factors and a comparison with its direct competitors in the region. Initiate BUY. – OCBC Investment (20 Nov)

Saizen REIT
Price – $0.17
Target – $0.212

Enjoying stable occupancy and average rental rates since 2008, Saizen REIT’s 135 residential properties portfolio in Japan shows clear resilience against macroeconomic uncertainties. Offering a high yield of 7.3%, Saizen not only stands out among its S-REIT peers but also its J-REIT comparables. Amalgamated with cheap valuation as the stock has been trading at a massive 40% discount to its net asset value (NAV), we opined that Saizen is undeniably an attractive buy. We note that Saizen’s unutilised warrant proceeds of around ¥1.4b are sufficient to offset its loan amortisation till FY14. In addition, we believe it will face minimal refinancing risks and have factored in the assumptions of a successful refinancing of loans in FY15-17. Saizen has also renewed its share buy-back mandate on 17 Oct-12 to buy-back 10% of its outstanding shares by the next AGM, thus providing some price support given its steep discount to NAV. Initiate BUY. – AmFraser Securities (20 Nov)

Ying Li Int’l Real Estate
Price – $0.34
Target – $0.42

Ying Li Int’l Real Estate posted a net profit of Rmb54.6m for 9M12, a reversal from a loss of Rmb33.4m in 9M11, as revenue rose on strong property sales. However, we expect FY12 earnings to fall, though cash flow is projected to improve. We postpone the profit recognition of Ying Li’s International Plaza to FY13-14 as the group intends to accelerate its construction for presales instead of handing over the booking in the profit this year. This will hit the profit and loss statement; however, we view the postponement as positive, as it will alleviate concerns over whether the company can refinance the $200m convertible bonds due Mar-13. With the cash in hand, a $100m loan facility by Standard Chartered Bank and trade receivables of Rmb278m, Ying Li has more than adequate cash to meet its obligations, if necessary. We maintain BUY backed by strong sales of office units in the IFC and retail units in San Ya Wan, and expect revenue of Rmb651.5m for FY12 with a core profit of Rmb125m (excluding non-recurring property revaluation gains). – UOB-Kay Hian (20 Nov)

CDL Hospitality Trusts
Price – $1.88
Target – $1.91

CDL Hospitality Trusts (CDLHT) reported that RevPAR for its Singapore hotels fell 0.9% y-o-y for 3Q12, versus RevPAR growth of 7.5% in 1H12. This was in-line with industry murmurs about lacklustre performance for hotels in 3Q12 and likely in 4Q12 as well. While taking a cautious stance about 1Q13, we note that the top 4 places of origin for Singapore’s visitor arrivals are projected to have real GDP growth rates of at least 4.9%: Indonesia (+6.3%), China (+8.1%), Malaysia (4.9%) and India (6%). And also, the sovereignty tussle surrounding the Diaoyu/Senkaku Islands between China and Japan has allowed neighbouring tourist destinations to be the net beneficiaries while tensions persist. For 1H12, Singapore arrivals climbed 11.4% to 7.1m, in line with Singapore Tourism Board’s (STB) projection of 13.5-14.5m arrivals for 2012. STB has set a target of 17m annual visitors by 2015, which implies an increase of 6.6% p.a. Based on our projection, hotel demand will grow at 6.4% p.a. for 2012-2014, outstripping room supply increase of 4.8% p.a., hence we remain optimistic about longer term sustained growth till 2015 but maintain a HOLD view on CDLHT. – OCBC Investment (19 Nov)

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

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Nam Cheong  0.006 -0.002 -25.00%   
Business: An offshore marine group specialising in the building of offshore support vessels. [FY18 Turnover] Shipbuilding (59.2%), vessel chartering (40.8%).

Insight: May-19, 1Q19 revenue jumped multiple times to RM29... Read More
Ying Li Int'l Real Estate  0.102 -0.004 -3.77%   
Business: Property developer based in Chongqing. [FY18 Turnover] Property development (74.6%), property investment (25.4%).

Insight: May-19, 1Q19 revenue fell 53.8% to Rmb143m attribu... Read More
CDL Hospitality Trusts  1.630 -- --   
Business: A stapled group comprising CDL Hospitality REIT and CDL Hospitality Business Trust.

Insight: Apr-19, 1Q19 gross revenue and NPI dropped 10.6% a... Read More

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