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Investors’ Corner (ECS Holdings, Frasers Centrepoint,Venture Corporation, ComfortDelGro Corporation)
Investors' Corner | 12 June 2014
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By: Shane Goh
Articles (99) Profile

ECS Holdings
Price – $0.62
Target – $0.61

Despite on-going macroeconomic uncertainties, market watcher Gartner Inc. still expects total global IT spending to increase by 3.2% to reach US$3.8t in 2014, with the strongest growth poised to come from enterprise software (up 6.9%). This trend is likely to benefit ECS Holdings, which counts on application software and middleware as 1 of its key products and services offerings. Although ECS’ 1Q14 results fell short of our expectations, this was partly due to a transition in strategy for its Apple business in China towards more focus on the commercial instead of the consumer market. The former carries higher margins but volume is smaller. ECS has secured more distributorship agreements from companies such as Symantec and Beats. We believe these developments are a strong testament to the firm’s leading capabilities as an IT distributor in the region. Maintain HOLD. OCBC Investment (6 Jun)

Frasers Centrepoint
Price – $1.85
Target – $2.09

Frasers Centrepoint (FC) announced a non-binding conditional proposal to acquire up to 100% of Australand’s shares via an off-market takeover cash offer of A$4.48 per share. The offer price is at 1.2 times Australand’s net tangible assets, above peer average and its historical price-to-book-value of around 1 to 1.1 times. We believe the move makes strategic sense as it is in line with management’s strategy of building up recurring income and scale in core markets. If 100% of Australand is acquired, FC would more than double its recurring income, and Australia would form around 40% of its total assets. Assuming full debt funding, gearing could rise significantly from 0.5 times in Mar-14 to around 1 time and potential equity fund raising may lead to dilution. However, Stockland has an existing all-scrip offer that values Australand at A$4.35 per share and we do not rule out a counter bid. We will revisit our call if a bidding war occurs. Maintain ADD. CIMB Securities (5 Jun)

Venture Corporation
Price – $7.37
Target – $8.64

Venture Corporation’s 1Q14 results showed the best signs yet of a return to growth with y-o-y revenue growth at its best since FY07 while profit-after-tax-and-minority-interest (PATMI) registered its third consecutive quarter of y-o-y improvement. This reinforces our view that Venture is on track for a 12% per annum earnings-per-share growth in FY14 after 4 years of earnings decline. Already, Venture has delivered 5 consecutive quarters of y-o-y revenue growth, accompanied by 3 quarters of y-o-y PATMI growth. We expect the momentum to strengthen beyond FY14. We are also encouraged by the fact that its customers are seeing improved business visibility. While mergers and acquisitions (M&A) among its customer base is a risk, we expect a milder impact compared to 2011 to 2012 when there were as many as 4 M&A events affecting Venture at the same time. History has also shown that most acquirers return to Venture. Reiterate BUY. Maybank Kim Eng (5 Jun)

ComfortDelGro Corporation
Price – $2.40
Target – $2.57

On 28 May, the Land Transport Authority announced further details on the new Government Contracting Model (GCM) pertaining to the first package being put up for tender in 2H14. The first package will comprise of 24 existing services (SMRT: 8, SBS Transit: 16) originating from Jurong East, Bukit Batok and Clementi bus interchanges, and operating out of the new Bulim bus depot. The shift to GCM is a positive development for ComfortDelGro as its domestic fare-revenue bus business has been registering operating losses since 2Q11. New GCM is without ridership risk and should see revenue keeping pace with costs. However, due to lower barriers to entry, from 2021 onwards, SBS will have to bid competitively in order to retain market share. We continue to have a positive business outlook for ComfortDelGro due to its existing profitable businesses overseas. The company also has prior experience in the contracting model for buses and is relatively under-valued compared to its peer. Maintain ACCUMULATE. Phillip Securities (4 Jun)

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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Frasers Property  1.760 -- --   
Business: Co operates as a real estate company. [FY18 Geographical] Australia (41.1%), Singapore (33.2%), Europe (14.1%), China (7.2%), others (4.4%).

Insight: May-19, 1H19 revenue grew 27% due to significant c... Read More
Venture Corp  15.620 -0.14 -0.89%   
Business: Co provides technology services, products and solutions. [FY18 Turnover] Advance Manufacturing & Design Solutions (AMDS) [74.6%], technology products & design solutions (TPS) [25.4%].

Insight: Apr-19, 1Q19 revenue rose 8.5% to $928.8m due to b... Read More
ComfortDelGro Corp  2.450 -- --   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More

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