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Top 5 Analysts’ Calls For The Week
In the Spotlight | 06 June 2014
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By: Jonathan Khoh
Articles (26) Profile

China Merchants Holdings Pacific (Target Price:$1.06) BUY

  • After successfully exiting a nonperforming property business in New Zealand, China Merchants Holdings Pacific (CMH) has become a pure toll road-focused business. CMH is expected to benefit from the expanding income from its toll assets in the region. Strong parentage firmly supports future expansion CMG is one of the largest SOEs directly under China’s State Council.
  • Through its toll roads arm, Huajian Highway Investment, CMG holds an investment portfolio comprising toll roads, bridges and tunnels with an aggregate length of approximately 6,700 km in 14 provinces and two municipalities. This provides CMH with plenty of options to expand its toll asset base through acquisitions.
  • Optimally geared, CMH is worth $1.52 and has the lowest borrowing cost at 3 percent (peers’ at 4.5-6.0 percent). This gives it unparalleled advantage to potentially ramp up its toll asset investment returns. Its net gearing level of 21 percent is very docile compared to the maximum 60 percent that management is comfortable with.

By: CIMB Research

Sembcorp Industries (Target Price:$6.00) BUY

  • Sembcorp Industries has signed a joint-venture agreement to acquire and upgrade a wastewater treatment plant in China’s Jiangsu province. The company’s intention is to strengthen its presence in the region.
  • Under the agreement, Sembcorp’s wholly owned subsidiary, Sembcorp (China) Holding Co, will hold an 80 percent stake in the joint venture, while Shenghai Wastewater Treatment Plant Co (a wholly owned company by Lianyungang Lingang Industrial Area Administration Committee), will hold the remaining stake.
  • The upgrading of the plant is targeted to be completed by the end of next year. In addition, Sembcorp mentioned that the total project cost of RMB130 million .


United Envirotech (Target Price:$1.30) HOLD

  • United Envirotech Ltd (UEL) posted a disappointing end to FY14, with net profit falling 31.9 percent to $20.1 million, and only met 58.2 percent of our FY14 estimate.
  • Going forward, management continues to maintain a pretty positive outlook for the water industry in China. UEL’s EPC order book of $230 million will also be largely completed in FY15; it is still on the lookout for more waste water treatment plants to add to its portfolio.
  • As we believe that things will improve in FY15 – we bump up our revenue forecast by 7.5 percent; while we expect core earnings to double to $41.9 million, it is still 13 percent lower than our previous estimate. However, the recent interest in water treatment plays warrants a higher 28x peg (versus 20x before), and our fair value only eases to $1.30 (from $1.36).

By: OCBC research

ParkwayLife Reit (Target Price:$2.41) HOLD

  • PREIT has de-rated 5 percent to more reasonable valuations since our downgrade. Fundamentally, it remains one of the most stable REITs with long leases, downside protection and CPI-linked rental reviews.
  • There is further room for acquisitions given a healthy balance sheet at 35 percent gearing and debt headroom of $131 million-$287 million at 40 percent -45 percent gearing. We maintain our DDM-based target price (discount rate: 7 percent) and upgrade PREIT on valuation grounds
  • We have yet to factor in any acquisitions but estimate that a $100 million acquisition at NPI yield of 7 percent could lift our target price by 5 percent to $2.53. Re-rating catalyst will be yield-accretive acquisitions 

By: CIMB Research

Yangzijiang Shipbuilding (Target Price:$1.04) HOLD

  • Following Chinese news reports that Yangzijiang Shipbuilding’s (YZJ) Chairman, Mr. Ren Yuanlin, has been accused of illegal activities by Tianjin Guoheng Railway Holding (Tianjin), YZJ’s share price fell 10.6 percent last Friday but subsequently rose 3.0 percent to close at $1.04 yesterday after Mr. Ren dismissed the allegations.
  • This development demostrates that a protracted battle may weigh on the sentiment of the stock. More importantly, this development only goes to show the difficulty in controlling companies that may land on YZJ’s plate in the future by virtue of its financing business.
  • Ascribing a 0.5x P/B on YZJ’s held-to-maturity assets in our SOTP-based valuation, we lower our fair value estimate on the stock from $1.26 to $1.04. Downgrade to HOLD

By: OCBC Research

Driven by passion in investments, Jonathan’s research emphasizes in incorporating critical thinking with value and income investing surrounding companies listed in Singapore. Well trained in banking and finance, Jonathan has intern experience at various industry players including GIC Pte Ltd.

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Sembcorp Industries  2.100 -0.01 -0.47%   
Business: Primarily engaged in the production and supply of utilities services. [FY18 Turnover] Utilities (55.9%), marine (41.8%), others/corp (2.2%), urban development (0.1%).

Insight: May-19, 1Q19 revenue fell 10.1% to $2.5b due to lo... Read More
Parkway Life REIT  3.230 +0.01 +0.31%   
Business: Invs REIT specialising in healthcare ppties.

Insight: Jul-18, 1H18 gross revenue rose 2.3% to $55.9m lar... Read More
Yangzijiang Shipbuilding (Hldgs)  0.950 -0.020 -2.06%   
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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