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Investors’ Corner (Bumitama, CoscoCorp, THBEV, UOB)
Investors' Corner | 12 July 2013
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By: Choo Hao Xiang
Articles (151) Profile

United Overseas Bank
Price – $20.33
Target – $21.35
After the recent correction, United Overseas Bank (UOB) is now trading at its 5-year historical mean PB of 1.33 times. UOB’s local peers are however trading above their mean PB. We think that UOB should be trading above its mean PB, similar to its local peers. This is because of the firm’s high quality earnings growth potential which is supported by stabilising net interest margins, healthy loans growth, and strong growth of fees and commission. In particular, we like the strong growth in fees and commission, which has been largely driven by growth of wealth management. We maintain our FY13 earnings forecast. FY13E EPS remains at $1.78, and book value per share remains at $15.85. Upgrade to ACCUMULATE. – Phillip Securities (8 Jul)

Bumitama Agri
Price – $1.00
Target – $1.23
Fast-growing Indonesian oil palm planter Bumitama Agri continued its commitment to expand by 13k hectare (ha) per annum over the next 4 years. New planting would ensure future production growth. The reiteration came despite the weak CPO (crude palm oil) prices. While the firm expects CPO prices to improve by the end of the year, it is prepared for various price scenarios. Bumitama is guiding for 25% FFB (fresh fruit bunches) production growth and 20% CPO volume growth this year, and FFB yield is expected to reach 20.5 metric ton per ha. Also, the firm is currently expanding its milling capacity. On the cost side, the projected rise in labour and fertiliser cost is expected to be partially offset by projected rise in CPO volume. Capital expenditure this year will remain at about US$200m; 57% will be spent on palm oil estates. We expect Bumitama’s earnings to expand at 31% compound annual growth rate (CAGR) over the next 3 years, driven by CPO price recovery and 9.8% CPO sales volume CAGR. Maintain BUY. – DBS Vickers (5 Jul)

COSCO Corporation (S)
Price – $0.75
Target – $0.60
The 14% fall in COSCO Corporation’s (Singapore) share price since our last update do not warrant an upgrade in our rating. The macro environment is looking increasingly gloomy. The hovering of China’s Purchasing Managers’ Index figures for several quarters around 50 implies that the growth trajectory is uncertain. China’s growth forecasts have been cut by the IMF and OECD to 7.75% and 7.8% respectively. Meanwhile, an unexpected credit squeeze in the Chinese interbank market raised concerns over the fragility of the Chinese banking system. Should the credit conditions deteriorate, we think that COSCO, with its large debt burden, will be vulnerable. We estimate about half of its existing debt ($3.4b) would need to be refinanced within the next 12 months. COSCO’s free cashflow is also likely to remain negative for the next few years, due to its low net profit margin and increasingly back-end loaded contracts in its order-book. Maintain SELL. – OCBC Investment (5 Jul)

Thai Beverage Public Company
Price – $0.61
Target – $0.75
Fraser & Neave’s (F&N) capital reduction plan which mainly consists of a disposal gain of $4.8b from the sale of Asia Pacific Brewery, was unanimously passed. This could raise Thai Beverage Public Company’s (Thai Bev) cash balance by $1.4b. F&N, in which Thai Bev has a 29% stake, also appointed new senior management and corporate advisors to recommend “strategic options to unlock shareholder value”. We think these developments could be a prelude to a restructuring which we see a 75% chance of happening. TCC Assets, which owns both Thai Bev and F&N, would inject F&N’s food and beverage business into Thai Bev; in return, Thai Bev would sell its 29% stake in F&N to TCC. The restructuring could unleash THB8b of synergies for Thai Bev and could enhance value. In such a scenario, Thai Bev’s discount to the regional beverage sector’s PE ratio average may widen. Maintain OUTPERFORM. – Stanchart (5 Jul)

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

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United Overseas Bank  25.760 +0.06 +0.23%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More
Bumitama Agri  0.585 -0.020 -3.31%   
Business: Co produces and trades in crude palm oil (CPO), palm kernel (PK), and related products for refineries in Indonesia.

Insight: Feb-19, FY18 revenue increased 3.1% mainly due to ... Read More
COSCO Shipping Int'l (S)  0.285 -0.005 -1.72%   
Business: Engaged in shipping and other logistics services. [FY18 Turnover] Logistics (69.7%), property management (11.9%), Shipping (9.5%), ship repair and marine related activities (8.9%).

Insight: Mar-19, FY18 revenue jumped 340% to $163.7m and gr... Read More
Thai Beverage Public Co  0.895 -0.010 -1.10%   
Business: [FY18 Turnover] Spirits (46.1%), beer (41.1%), non-alcoholic beverages (7%), food (5.8%).

Insight: May-19, 1H19 revenue rose 26.1% to THB142.6b mainl... Read More

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