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Investors’ Corner (Keppel REIT, Hi-P Int’l, SPH, Midas Hldgs)
Investors' Corner | 27 November 2014
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By: Shane Goh
Articles (99) Profile

Keppel REIT
Price – $1.24
Target – $1.28

We downgrade our rating on Keppel REIT (KREIT) given the upcoming expiry of income support from Ocean Financial Centre and persistently high gearing of 42.1%, which puts the company at risk of de-leveraging if the authorities lower gearing limits to 45%, as per proposed REIT rule changes. The Marina Bay Financial Centre Tower 3 acquisition from Keppel Land will boost KREIT’s portfolio size to $8b, from $6.8b, and provides it with greater pricing power in the Marina Bay / Raffles Place area. Although we expect KREIT to benefit from rising office rents in 2015, we are concerned that income support could taper in 2015, and rental increases may be insufficient to offset the losses. Following the 3Q14 results, we have lowered our FY14-16 distribution per unit forecasts by 3.5% to reflect weaker than expected operations and cut our target price by 10.5%. Downgrade to HOLD. BNP Paribas (21 Nov)

Hi-P International
Price – $0.66
Target – $0.87

Given its robust pipeline of projects, supported by the ramping up of Xiaomi, the world’s third-largest mobile phone maker, and the upcoming worldwide launch of YotaPhone 2, we believe Hi-P International is poised for a turnaround and reinstate our bullish view of a record 4Q14. YotaPhone 2, the first smartphone with dual-screens, will be launched in most parts of the world by 1Q15. As its original design manufacturer partner, Hi-P should stand to benefit from the ramping up of this potentially revolutionary phone. We believe YotaPhone will be a key player in the Chinese market in the next few years, especially judging from how resolute Russian President Vladimir Putin was in confirming that his country will cooperate with China on the device. With a new factory in place to accommodate a shift in its product mix from plastic to metal components, we believe the gloomy days impacted by Motorola and Blackberry are over, with a brighter outlook ahead. Maintain BUY. DMG & Partners (20 Nov)

Singapore Press Holdings
Price – $4.28
Target – $4.20

Singapore Press Holdings’ (SPH) media business has faced challenges from recent policy measures to curb property price inflation and vehicle ownership. In FY14, display and classified advertising revenues were down 7-8% y-o-y. Our current view is that while policy environment continues to remain tough with several measures still in place in Singapore, the risk of incremental measures has subsided and we see an increased possibility of policy reversal in 2H15. Also, given the expected rise in residential property supply in 2015-16E, we expect developers to increase their advertising budgets to sell these properties during the period. We note that SPH offers a 2015E yield of 5.4%, which is comparable to the average yield in our Singapore coverage universe of 5%. However, SPH is more expensive, trading at a 26% premium to the average price-to-earnings ratio of selected yield stocks in our Singapore coverage. Remain UNDERWEIGHT. HSBC (20 Nov)

Midas Holdings
Price – $0.30
Target – $0.30

While 3Q14 revenue grew 7.7% y-o-y to Rmb324.2m on the back of higher revenue from its aluminium alloy extruded products division, Midas Holdings’ net profit plunged 91% to Rmb1.5m due to higher start-up and finance costs arising from its new plants. These were due to higher administrative and finance expenses, which eroded the 6.2 percentage points gain on gross profit margin to 27%. Out of the 2 new plants in Luoyang and Liaoyuan, the latter was part of its strategy to diversify away from its reliance on China railway projects by going into aluminium plates and sheets production. Midas is targeting to commence production for its Luoyang and Liaoyuan plants in 2Q15 and 4Q15 respectively. Until then, start-up expenses will continue to drag down earnings without topline revenue contributions. Downgrade to HOLD. OCBC Investment (19 Nov)

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

Please click here for more information about this author.

Keppel REIT  1.250 -- --   
Business: Real Estate Invs Trust. Invs in a portfolio of quality real estate and real estate related assets.

Insight: Jul-19, 1H19 property income declined 12.5% mainly... Read More
Hi-P Int'l  1.160 -0.010 -0.85%   
Business: Co is an integrated contract manufacturer catering to various industries. [FY18 Turnover] Precision plastic injection moulding (PPIM) (67.3%), assembly (25.8%), mould design & fabrication (MDF) (6.9%).

Insight: May-19, 1Q19 revenue inched up 2% but gross profit... Read More
Singapore Press Hldgs  2.110 +0.03 +1.44%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More
Midas Hldgs  -- -- --   
Business: Manufacturer of aluminium alloy extrusion products for China's rail transportation sector. [FY16 Turnover] Aluminium alloy (99.3%), polyethylene pipe (0.7%).

Insight: Jan-18, Co announced that its JV company, CRRC Nan... Read More

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