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Investors’ Corner (IHH Healthcare, ISOTeam, Straco Corp, Hankore)
Investors' Corner | 04 September 2014
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By: Tan Jia Hui
Articles (82) Profile

IHH Healthcare
Price – $1.92
Target – $1.80

IHH Healthcare’s 2Q14 net profit grew 33% y-o-y to RM209.1m. Excluding forex gains on net borrowings and other exceptional items, core net profit increased by 20% y-o-y to RM191.8m, on the back of an 11% expansion in revenue to RM1.9b. Top line growth was driven by increased patient volume and revenue intensity, coupled with contribution from opening of 2 new hospitals – Pantai Manjung and Acibadem Atakent. EBITDA grew 16% y-o-y to RM434.9m, largely from Parkway Pantai’s robust contribution arising from ramp up of Novena hospital, higher revenue intensities and price increases. Management indicated that inpatient admissions continue to grow within Novena, and the recent opening of an obstetrician and gynaecological ward contributed partially to it. We note that IHH is trading at 50x/42x FY14F/15F P/E, which suggests that the positive aspects of the counter have been priced in. Maintain HOLD. DBS Vickers (29 Aug)

Price – $0.465
Target – $0.57

Revenue grew 45% y-o-y to $69.9m in FY14, driven by the defensive repairs and redecoration (R&R) segment that saw revenue jump 83.2% y-o-y. The firm has strong cash flow generation, with $5.7m free cash flow (FCF) generated in FY14 (FCF yield: 10.4%). Gross margin for its addition and alteration (A&A) segment dropped from 15.4% in FY13 to 12.4% in FY14 due to higher subcontracting and labour costs. Going forward, we expect margins to improve as ISOTeam passes on the cost increase to customers through higher bids. With R&R revenue growing, ISOTeam has started to enjoy some economies of scale as gross margin for the segment expanded to 22.2% (FY13: 18.3%). With the demand for R&R and A&A remaining strong, and ISOTeam’s venture into untapped sectors such as educational institutes, we are confident FY15 will be an even better year for ISO. We continue to like ISOTeam for its market leader position in a growing defensive industry. Maintain BUY. UOB-Kay Hian (29 Aug)

Straco Corporation
Price – $0.82
Target – $0.79

Straco Corporation announced that it has acquired a 90% stake in the Singapore Flyer, the iconic giant observation wheel, for $126m. The acquisition will be funded via cash and bank debt. The total purchase consideration of $140m represents a 42% discount to the Singapore Flyer’s initial cost of $240m. The asset is expected to bring in positive cash flows immediately but we estimate that it is mildly dilutive for EPS in the near term (2-3% dilution) and will only be accretive in FY17 and beyond as visitor arrivals pick up. The Singapore Flyer has seen declining business over the last 6 years and a strong turnaround may be difficult in the near term. We expect the share price to react negatively to this news. We will turn more positive when visitor arrivals gain traction and bring efficiency gains. Downgrade to REDUCE. CIMB Securities (28 Aug)

HanKore Environment Tech Group
Price – $0.87
Target – $1.19

HanKore Environment Tech Group booked an accounting loss for FY14, which came up to Rmb114.7m, due to accounting for non-cash fair value losses on contingent consideration payable and warrants in 3Q14, as well as non-recurring expenses in the year. Without these, profit before tax would be Rmb84m. HanKore is awaiting shareholder and stock exchange approval for its merger with China Everbright (CEI), which will see the latter injecting all its existing waste water treatment (WWT) assets for Rmb5.8b (or $1.2b). With state-backed CEI as a major shareholder, HanKore would reap advantages in the form of cheaper access to financing and a strong network for securing WWT projects. We peg our valuation to 30x FY16 P/E – which is a 20-25% premium to the average P/E of state-backed peers (20x-28x; average of 24x), due to its lower gearing post CEI merger (less than 30% as opposed to the peer average of 116%). Maintain BUY. DMG & Partners (27 Aug)

Armed with a bachelor in mathematics, Jia Hui keeps close tabs on the oil & gas, and manufacturing sectors in Singapore.

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IHH Healthcare  1.840 +0.010 +0.55%   
Business: One of the largest listed private healthcare providers in Asia and worldwide. [FY18 Turnover] Parkway Pantai (64.7%), Acibadem Hldgs (31.9%), IMU (2.2%), PLife REIT (1.2%).

Insight: May-19, 1Q19 revenue rose 27.6% as a result of the... Read More
ISOTeam  0.230 +0.005 +2.22%   
Business: Engaged in the building maintenance & estate upgrading industry. [FY18 Turnover] Addition & alteration works (43.2%), Repairs & redecoration works (23.6%), others (21.4%), coating & painting (11.8%).

Insight: May-19, 9M19 revenue rose 62.8% with significantly... Read More
Straco Corp  0.735 -0.015 -2.00%   
Business: Co's core biz is the devt of tourism related pjts in PRC. [FY18 Turnover] Aquariums (68.7%), giant observable wheel (27.1%), others (4.2%).

Insight: May-19, 1Q19 revenue jumped 30.8% to $24.6m as 1Q1... Read More
China Everbright Water  0.315 +0.005 +1.61%   
Business: Co is involved in the environmental water business, including wastewater treatment, reusable water projects and wastewater heat pump projects in PRC.

Insight: Feb-19, FY18 revenue rose 33% mainly due to increa... Read More

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