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Investors’ Corner (OUE, Riverstone Holdings, Starburst Holdings, Japfa)
Investors' Corner | 02 October 2014
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By: Jonathan Khoh
Articles (26) Profile

Price – $2.18
Target – $2.69

OUE announced that it has agreed to invest US$200m in Nuvest Real Return Fund, a Cayman Islands domiciled exempted mutual fund. The fund, launched in 2012 with seed capital from GIC, seeks to achieve stable annual returns above inflation through diversification across a range of investment classes and active management styles. OUE will be subscribing for Tranche X participating shares, which is made available only to key cornerstone investors. Management sees this investment as part of its treasury operations and believes this will allow optimal returns on funds held in the current low interest rate environment through leveraging the expertise of the fund. Overall, we are neutral on this move and prefer management to return excess capital. That said, taking into account the investment size and terms, this investment appears fairly liquid, which can yield cash should acquisition opportunities arise ahead. Maintain BUY. OCBC Investment (29 Sep)

Riverstone Holdings
Price – $0.94
Target – $1.15

Phase 1 of Riverstone Holdings’ new facility, will add another 1b in capacity, bringing its total capacity to 4.2b annually. It consists of 6 lines, expected to commence production between Oct-14 and Dec-14. Riverstone has already secured orders for half of its production lines for Phase 1, with 3 new customers from Germany, US and Japan signing fixed contracts for 2 years to take up 1 line each. With the big 4 Malaysian glove makers aggressively expanding capacity, we expect intense competition to pressure average selling prices. Additional costs for the new plant would be incurred in 3Q14, with no production as it has yet to hire and train new workers. Still, we expect its 4Q14 performance to make up for any potential shortfall. We are excited and remain positive over its expansion plans ahead. Phase 2 of its expansion could add another 1b to its total capacity, with full production slated to commence by end-FY15. Maintain BUY. DMG & Partners (29 Sep)

Starburst Holdings
Price – $0.59
Target – $0.77

Starburst Holdings is 1 of very few integrated suppliers that design, manufacture, install and maintain anti-ricochet ballistic protection systems for firearm training facilities. The company is likely to be a beneficiary of higher defence spending in Southeast Asia (SEA) and the Middle East. SEA is actively upgrading and modernising facilities, partly to protect critical infrastructures whereas in the Middle East, the implementation of compulsory military services is propelling demand for new shooting ranges in Qatar, UAE and Kuwait. Most of all, Saudi Arabia, the biggest spender on defence, continues to push up military budget by 21% in 2014. Starburst is bidding for ten contracts worth over $100m over the next 2 to 3 years and its recurring maintenance income will expand along with a higher installed base. We believe its niche capability and higher barrier to entry would support net margins of more than 30%. Initiate BUY. DBS Vickers (26 Sep)

Price – $0.86
Target – $1.25

Japfa produces and sells animal protein in Indonesia (gross domestic product (GDP) per capita: $3,375), Vietnam (US$1,910) and China (US$6,807). It also plans to sell meat in India and Myanmar. These are Asia’s most populous developing nations, where animal protein consumption is already outpacing GDP growth. Japfa also produces raw milk in China, which faces a domestic supply shortage. China’s milk output growth has stagnated, even as demand rose by 5% CAGR since 2008. Large, industrialised dairy farms (like Japfa) are investing in new capacity as small farms exit. The large farms form only 15% of the market and their milk output is of higher quality. They are the answer to both China’s milk quality issues and supply shortage. We initiate ADD, with the roll out of its 5 new farms in China over the next 3 years as an earnings catalyst. CIMB Securities (25 Sep)

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.

Please click here for more information about this author.

OUE  1.460 -0.020 -1.35%   
Business: An integrated property developer with real estate portfolio located in prime locations in the US & Asia. [FY18 Turnover] Inv ppties (43.7%), hospitality (37.7%), development ppties (10.5%), healthcare (4.6%), fund management & others (3.5%).

Insight: May-19, 1Q19 revenue rose 1.2% due to higher contr... Read More
Riverstone Hldgs  0.965 -0.005 -0.52%   
Business: Glove manufacturer specialised in production of nitrile & natural rubber clean room gloves. [FY18 Geographical] M'sia (92.4%), Thailand (3.6%), China (3.3%), others (0.7%).

Insight: May-19, 1Q19 revenue rose 14.6% to RM240.5m due to... Read More
Starburst Hldgs  -- -- --   
Business: Co engages in the design and engineering of firearms-training facilities. [FY18 Turnover] Maintenance services & others (94.4%), firearm shooting ranges (5.6%).

Insight: May-19, 1Q19 revenue remained flat at $1.6b which ... Read More
Japfa  0.475 -0.015 -3.06%   
Business: Co is an agri food company that produces multiple types of protein foods. It is headquarterd in Singapore and has operations in China, India, Myanmar and Vietnam.

Insight: Apr-19, 1Q19 revenue rose 7.8% lifted by broad-bas... Read More

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