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Investors’ Corner (DBS Group Hldgs, Nam Cheong, Cambridge Industrial Trust, Del Monte Pacific)
Investors' Corner | 02 January 2014
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By: Peter Ng
Articles (81) Profile

DBS Group Holdings
Price – $17.03
Target – $19.09
With the start of quantitative easing tapering which could mean a revival of interest rate cycles, the potential for higher loan pricings stands to benefit the bank with the strongest deposit franchise, where among the 3 local banks, DBS is best positioned with the highest current and savings account ratio and dollar liquidity. We remain unchanged on our view that liquidity levels still remain healthy for all 3 banks, notably DBS which has the most liquid dollar balance sheet. Growth of fees and commission continues to be favoured by the banks since it is less capital intensive and thus favoured in view of Basel III capital requirements. Given that we believe that Greater China holds the most potential for fees and commission growth, we favour DBS for its advantage in this area on the back of its strong foothold in Hong Kong and higher penetration rate into China, compared to the other 2 local banks. At the current price, DBS is valued the lowest among its 2 other peers at a forecast FY14 P/E ratio of 11 coupled with a P/BV ratio of 1.1. Maintain ACCUMULATE. - Phillip Securities (30 Dec)

Nam Cheong
Price – $0.29
Target – $0.45
We expect Nam Cheong (NC) to give shareholders a New Year present with new orders. If the pattern of selling vessels in batches holds, the last platform supply vessel for FY13 delivery should have been sold, together with some vessels for delivery in FY14. This will bring FY13 vessel sales equal or more than 22, exceeding FY12’s record of 21. NC’s orderbook is at a record of RM1.7b (Jan-13: RM1.3b). It delivered its strongest ever quarterly earnings (RM58.7m) in 3Q13 and its strong orderbook offers a high level of baseline activity that secures future quarters’ profitability. Meanwhile, the large rig orderbook and the tightening of global offshore support vessel (OSV) supply present positive dynamics for NC. NC’s stock price target combines a high 24% growth with an undemanding 6.7 times FY14 P/E, 6.8 times enterprise value to EBITDA, 0.1 times net gearing and expected increase in dividend yield to 3-4.2% over FY13-15F. Maintain BUY. – DMG & Partners (30 Dec)

Cambridge Industrial Trust
Price – $0.68
Target – $0.80

Cambridge Industrial Trust (CIT) has just announced the proposed acquisition of 11 Chang Charn Road for $32m. This property is a 6-storey multi-tenanted purpose-built warehouse cum light industrial building with a gross floor area of 9,062 sqm. It is located in the Bukit Merah district near Leng Kee Road and well connected to major roads and expressways. The acquisition is expected to be fully funded via cash on hand and existing debt facilities. With an initial net property income (NPI) yield of 4.5% and a 75% occupancy rate, we believe CIT could potentially raise the level of return from this property via an increase in occupancy rate and rental from the current $2 psf/mth to the surrounding market rent of $2.5 psf/mth. Through these activities, we expect NPI yield of this asset to rise to 7-7.5%. However, given the property’s limited scale, we believe the positive impact on FY14 dividend to be constrained to 0.8%.  In addition, assuming 100% of this acquisition is funded via existing debt facilities, gearing is expected to grow by 1.7%. Maintain ADD. – CIMB Securities (23 Dec)

Del Monte Pacific
Price – $0.59
Target – $0.82
Since reaching a high of $0.99 in Oct-13, Del Monte Pacific’s share price has dropped more than 30%. This could stem from the market’s concern on its proposed US$1.7b acquisition of Del Monte Food’s Consumer Food Business (CFB). According to media reports, CFB has raised US$970m in LIBOR-based loans where average blended interest rates are estimated at 5.6%, lower than the 7.5% rate we had previously anticipated. The loan quantum points to a lower amount of equity funds needed (US$110m, from US$150m). Based on our forecast FY15 earnings, we estimate that the acquisition could provide 12% EPS accretion to common equity holders. We have not factored in potential contribution from CFB given the lack of detailed information. We believe the recent sell-off has more than priced in the uncertainty at this juncture. At the current price, we consider the combined entity’s forecast FY15 P/E ratio of 9 times to be attractive. Maintain BUY. – DBS Vickers (18 Dec)

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

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DBS Group Hldgs  24.700 -- --   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Nam Cheong  0.008 -0.001 -11.11%   
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
ESR-REIT  0.505 -0.005 -0.98%   
Business: REIT established with the objective of investing in real estate assets used mainly for industrial purposes.

Insight: Jan-19, FY18 gross revenue rose 43% and NPI rose 4... Read More
Del Monte Pacific  0.141 +0.001 +0.71%   
Business: Co produces processed & non-processed fruit & food pdts, beverages & food ingredients.

Insight: Mar-19, 9M19 turnover fell 10.4% to US$1.5b largel... Read More

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