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Investors’ Corner (Courts Asia, Jason Marine Group, CapitaLand, Keppel Corporation)
Investors' Corner | 05 December 2013
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By: Louis Kent Lee
Articles (199) Profile

Courts Asia
Price- $0.675

The electronics and furniture retailing market is highly fragmented, with scant opportunities for price or cost leadership, as such, we think Courts Asia is going in the right direction to create differentiation but its credit operations seem to be only its competitive edge. We expect operating margins, which are already down significantly year-to-date, to slip even further as it is unable to pass on most of the impending cost pressures. The 6% GST to be implemented in Malaysia from April 2015 will only affect Courts Asia from FY16 onwards. However, this is likely to increase tax burden on the company, a cost it may also not be able to fully pass on. With a gross credit book of $523m, funded against borrowings of $291m, it reflects management’s efforts to keep credit book’s integrity. However, upside value is already reflected in the lower provision allowances. On our less optimistic margin assumptions, we cut our FY14F-15F earnings by 3-5%. Downgrade to SELL. –MayBank Kim Eng (4 Dec)

Jason Marine Group
Price- $0.153
Target- $0.19

Jason Marine reversed 1H13 loss, reporting net profit of $1.1m in 1H14. This extends its trend of stronger performance since recording a $0.5m net profit in FY13. In addition, persistent strength in its recovery, exhibited by a 57% y-o-y growth in 1H14 revenue, was seen due to broad-based growth. We think the broad-based recovery will continue as the economic environment improves. A strong balance sheet remains a key strength for the firm. The group continues to be cash rich, with net cash of $14.2m, or 88% of its market capitalisation. The group remains in a strong position to pay dividends, and we maintain our forecast of $0.002 dividend per share for each of FY14-16. The company remains free of borrowings, and boasts a current ratio of 2.6x. We think the group’s focused strategy post reorganisation is showing results, reaffirming our more positive view on the firm’s outlook. A share price rerating could come from a full year of sustained profitability. Recommend BUY.– CIMB Securities (3 Dec)

Price- $3.03
Target- $4.10

Post-consolidation, 90% of CapitaLand China’s landbank will be focused on the mass market segment, targeting first-time homebuyers and upgraders. We view this positively as end-user demand remains underpinned by growing affluence and urbanisation, while the policy direction also remains fairly accommodative for this segment.
We noted that shopper traffic at RC Shanghai and CapitaMalls Asia’s (CMA) Hongkou Plaza remains very healthy (occupancy rates of 100% and 97.6% respectively). In addition, CMA’s most recent acquisition in Baiyun, Guangzhou, appears to be well-positioned to serve an affluent population catchment of at least 1.1m residents and office workers. To achieve its ROE target of 8-12%, CapitaLand aims to allocate 65-75% of its long-term capital to commercial developments, 50% of which will be for mixed developments. We believe most of these opportunities lie in China. Part of the remaining capital will be for residential development in China, which will provide the ROE upside. Maintain BUY. – MayBank Kim Eng (2 Dec)

Keppel Corporation
Price- $11.31
Target- $12.07

In terms of operational performance, we see positive surprise on Keppel Corp’s Offshore and Marine (O&M) margin, rising from 14.2% in 2Q13 to 16.5% in 3Q13, beating our expectation of ~14-15%. Management highlighted that this is mainly attributed from the delivery of 5 KFELS B Class jack-up rigs (which resulted in higher productivity and efficiency), as well as repair jobs (which typically yield higher margins). We continue to expect resilient O&M margins at 14-15% for 4Q13, as there will be another 4 jack-up rigs slated to be delivered by end of 2013. Despite fierce competition coming from the Chinese yards, we believe established drillers/operators still prefer established yards like Keppel Corp for its established rig designs, strong track record, and ability to deliver on-time. Rate BUY. – Phillip Securities (2 Dec)

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

Please click here for more information about this author.

Jason Marine Group  -- -- --   
Business: Marine electronics systems integrator & support services provider. [FY19 Turnover] Sales of goods (71.9%), rendering of svcs (21.2%), airtime revenue (6.9%).

Insight: May-19, FY19 revenue slid 8.4% with decreased reve... Read More
CapitaLand  3.520 -0.02 -0.56%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
Keppel Corp  6.170 -0.05 -0.80%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More

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