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STI Dips… Chance To Grab Frasers Centrepoint And Raffles Medical?
Tradeable Ideas | 26 February 2014
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O39
By: Justin Harper
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By: Louis Kent Lee
Articles (199) Profile

The STI is suffering much like other Asian bourses from any sort of dynamism. Trading sessions continue to be low in volume and fairly uneventful. It has been in the red for the past few days, and coupling this with the weak economic data released by the US last night, STI opened in the red this morning and has continued staying in red waters since.

Frasers Centrepoint has produced a set of stellar 1Q14 results which showed year-on-year gains in all segments, where its overseas development segment was the main driver of the group. Average analysts’ ratings on its share price sees an average uplift of 39 percent.

The Budget 2014 speech last Friday revealed an $8 billion pioneer fund consisting of health care benefits, and a proposal to bump up health care contributions by employers to meet rising healthcare costs in Singapore. Although largely good news to the healthcare industry, impact for private healthcare players seems relatively muted.

OCBC has a more upbeat view on private healthcare player, Raffles Medical Group, with a target price of $3.61. Other brokers expect an average uplift of some seven percent rise in Raffles Medical’s share price.

Making A Point About Frasers
Frasers Centrepoint Ltd (FCL) is the fourth largest listed developer and has a market cap in excess of $4 billion and asset value of $11.5 billion. Its core markets are Singapore, China and Australia.

FCL optimises risk and return with geographical and business diversification, and a strong balance sheet to support value creation activities. The key risk is its small free float, with major shareholders, TCC Group and Thai Beverage holding a total 87.9 per cent.

FCL’s strong set of 1Q14 results showed year-on-year gains in all segments. Overseas development was the key driver and is expected to remain so in FY14, backed by strong sales.

Australia was the key driver for the quarter. But in Singapore, development revenue declined by 18 per cent, year-on-year as most of FCL’s inventory has already been sold.

Investment property revenue rose 12 percent year-on-year due to the higher contribution from One@Changi City and rental rates. Its commercial portfolio is at full occupancy while the development of Waterway Point is on track to completion in 2015.

Recent media reports suggest that FCL will launch a hospitality trust, which could raise about $600 million. This would be a re-rating catalyst but it remains uncertain given the current market conditions.

FCL could recycle assets of around $1 billion in 2014. This would fund potential new acquisitions and/or initiatives to revitalise its commercial property portfolio.

CIMB has a target price of $2.06 while DBS has a Buy rating and a target price of $2.08. The average uplift among analysts is for a 39 percent rise in the share price.

Good Health To Raffles
The Singapore government’s Budget 2014 announced an $8 billion pioneer fund consisting of health care benefits for some 450,000 pioneers for the rest of their lives. Also included were measures to help older workers and elderly Singaporeans.

This could be very positive to the health care sector.

The government has also proposed to raise the employer’s CPF contribution by one percent across the board, and 0.5 percent to one percent additional contributions for older workers (above 50 years old) from January 2015.

The bulk of the increase will be channelled to the employee’s Medisave account. This will affect labour intensive industries in the service sectors such as banks, hotels, construction and marine.

In addition, half of the first year’s additional CPF cost will be subsidized by the government. While positive for the healthcare industry, the impact on listed private healthcare players is relatively muted.

The thrust of the budget is to provide healthcare support for the lower, middle-income households, as well as the aged – Pioneer Generation. Traditionally, the target markets for the private health care players are the more affluent patients, and international patients.

For these reasons DBS maintains its Hold call with a target price of $3.15. But OCBC is more upbeat with a Buy call and a target price of $3.61. The average uplift among brokers is for a 7 percent rise in the share price.

Daily Chart of Osim based on CSI Trading System

Singapore Stock New CSI Buy Signal – OSIM

The CSI Trading System has issued a Buy arrow signal previously on the 16/01/2014 with a trigger price of $2.4.

Four weeks ago, we talked about a pullback entry for OSIM at an even cheaper price of $2.37. As of now, price is currently trading at $2.37; which is about breakeven.

Based on the system, we are still in the position until an exit is shown. We will continue to monitor OSIM and update on the position weekly.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Frasers Centrepoint Trust  2.710 -0.04 -1.45%   
Business: Co is a developer-sponsored retail real estate investment trust.

Insight: Apr-19, 1H19 NPI rose 3.6% to $71.8m, as gross rev... Read More
Oversea-Chinese Banking Corp  10.850 -0.10 -0.91%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More


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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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