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Investors’ Corner (CapitaMalls Asia, First Resources, Goodpack, Yangzijiang Shipbuilding)
Investors' Corner | 13 September 2013
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By: Wilfred Ng
Articles (6) Profile

CapitaMalls Asia
Price – $1.815
Target – $2.51
CapitaMalls Asia’s (CMA) share price may have corrected by 11% since Bernanke’s Congressional Testimony, but we see this as an excellent buying opportunity for the stock. In the near-term, new malls, Bedok Mall and Westgate, which are set to open in 4Q13, have already achieved approximately 100% committed occupancy and more than 80% committed occupancy respectively. By our estimates, these 2 malls will contribute about $20m of net property income per annum on a stabilised basis. CMA has also signed a Memorandum of Understanding with the Changi Airport Group to jointly develop the concept and plans for Project Jewel. Furthermore, we remain positive on CMA’s presence in China as we believe that the urbanisation process will continue to spur domestic consumption. Besides benefiting from the 10 malls and 2 extensions which are expected to be completed within the next 4-5 years, CMA will continue to scale up in presence. Maintain BUY, suggesting an attractive upside of about 40%. – Maybank Kim Eng (6 Sep)

First Resources
Price – $1.91
Target – $2.22
First Resources posted a 28% m-o-m jump in fresh fruit bunches (FFB) output in Jul-13, thanks to better FFB yields – in line with seasonal trends. This brings its 7M13 FFB production to 1.05m tonnes, a 1.1% improvement from last year. However, July and 7M13 FFB yields are 22% lower y-o-y. Even if output is slightly disappointing, we believe that the Indonesian rupiah’s current weakness versus the US$ will partially offset this. We estimate that the sensitivity of our FY13 earnings to every 5% change in the rupiah is 1.5%. We are advising investors to add to their positions in First Resources as we expect 2H13 earnings to benefit from higher production, while the weaker rupiah may temper the y-o-y rise in labour costs in US$ terms. The group is also relatively sheltered from a rising interest-rate scenario as we estimate that 96% of its debt are on fixed rate. Maintain OUTPERFORM. – CIMB (6 Sep)

Price – $1.64
Target – $2.00
Goodpack’s earnings growth has been rather muted in the past 2 years, growing at mid-to-high single digits due to challenging operating environment. We believe the tide is changing for Goodpack and project a 2-year CAGR of 17% in FY13-15F, driven by market share gain in synthetic rubber segment and cost-saving initiatives. This is augmented by the recovery in US/Europe (45% of Goodpack’s revenue) and bottoming out of the rubber industry, which is expected to grow at 2-6% in the same period. The crystallisation of an autopart contract from a major OEM in Europe will prompt us to further re-rate. Besides, Goodpack should not be affected by any potential rate hikes as about 90% of its debts are fixed rate. Goodpack also offers 3-4% dividend yields based on a 45% dividend payout ratio. Goodpack is trading at near the replacement cost of its intermediate bulk containers (IBC) fleet, which is not a fair reflection of Goodpack. Reiterate BUY, with a potential total return of 24%. – DBS Vickers (5 Sep)

Yangzijiang Shipbuilding (Holdings)
Price – $0.93
Target – $1.15
Consolidation of the Chinese shipbuilding sector should see government-related shipyards and healthy private yards become stronger, while weaker and/or smaller yards could eventually exit the industry. The impending industry shakeout should benefit Yangzijiang Shipbuilding (YZJ). The rise in new orders YTD has been channelled largely to state-owned yards and some stronger private yards such as YZJ. New order wins have been healthy for YZJ (YTD at US$1b versus US$0.3b in FY12) and we expect this to continue as the industry consolidates. We have raised our FY13-15F net income for YZJ on higher new orders. We believe the potential exercise of 47 options worth US$2.54b may drive the stock price in the coming quarters. Upgrade to BUY, with target price raised from $1.00. – Deutsche Bank (5 Sep)

First Resources  1.580 -0.020 -1.25%   
Business: Co engages in the cultivation and maintenance of oil palm plantations. [FY18 Turnover] Refinery and processing (95.5%), plantations & palm oil mill (4.5%).

Insight: Feb-19, FY18 revenue dipped 2.1% due to lower aver... Read More
Yangzijiang Shipbuilding (Hldgs)  1.370 -0.010 -0.72%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More

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