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Investors’ Corner (Singapore Airlines, CapitaLand, Neptune Orient Lines, Sembcorp Industries)
Investors' Corner | 26 February 2015
Related stocks:

Singapore Airlines
Price – $12.13
Target – $12.60

Singapore Airlines’ (SIA) Jan-15 pax traffic growth was the lowest since 2013. The company has stated that the decline in pax traffic could be due to a later Chinese New Year this year. Still, the decline in load factors for Europe and the Americas since Jun-14 and Oct-14 suggests that increased competition is a key factor behind the decline in load factor and possibly even traffic. Sustainability of yields is a greater concern. Although pax yields in 3Q15 was the highest in 2.5 years, improving by 2.7 percent, there is a possibility that passengers on regional travel might gravitate towards SIA given the spate of airline disasters in the region. This is not yet evident in SIA’s January numbers but there is a possibility that yields could remain strong in 4Q15. The downside to this, is weakness out of Europe and increased competition from Middle Eastern carriers. Maintain HOLD. – UOB-Kay Hian (23 Feb)

Price – $3.63
Target – $3.98

Full year profit after tax and minority interest and operating profit are reported to be $1,160.8m and $705.3m, up 38% and 40% respectively, which are within our expectations. Full year revenue increased 12% to $3,924.6m due to Westgate divestment gains, improved performance from investment assets and development projects in Vietnam, offset by poorer numbers from developments in China. Sales in China may have fallen 35 percent from 7,688 units in FY13 to 4,961 units in FY14 but Chinese total sales value only dipped 13% to Rmb7,555m given a more favourable mix. The group has a steady pipeline in China with 9,000 units that are launch-ready and expects to complete 8,000 units in 2015. 2 of the group’s completed residential projects in Singapore, Urban Resort and The Interlace are subject to Qualifying Certificate penalties this year but total extension charges of $8.6m are unlikely to have a significant impact. Our fair value increases marginally from previous target of $3.79. Maintain BUY. – OCBC Investment (18 Feb)

Neptune Orient Lines
Price – $0.99
Target – $1.01

Neptune Orient Lines announced that it had entered into a US$1.2b sale and purchase agreement with Kintetsu World Express for APL Logistics. According to management, the divestment will unlock the full value of APL Logistics for shareholders and the cash consideration will be used to reduce debt and strengthen the balance sheet. If the proposed divestment is approved by shareholders and regulators, the company will be able to focus all its attention on the liner business and it will be in a better position during times of recovery as it now has more bandwidth to increase gearing for expansion purposes. We do not think the container shipping industry will see strong recovery in the near future. Although lower bunker prices may help, we expect depressed yields to continue due to overcapacity reason and uncertainty of how freight rates may be affected in the longer term. Upgrade to HOLD. – OCBC Investment (18 Feb)

Sembcorp Industries
Price – $4.20
Target – $5.20

Sembcorp Industries posted a net profit of $801m in 2014, 4% higher than our forecast of $772m due to better-than-expected marine earnings. Marine operating margin was sharply higher at 16.1% versus 11.1% in 4Q13 due to repeat orders and greater efficiency. Excluding a net exceptional gain of $69m in 2013 due to a $117.1m gain from the Salalah IPO and net of $48.5m impairment from UK Teeside, utilities net profit grew by 7% from $381m in 2013 to $408m in 2014. The company will continue to power ahead with 3,000MW (up 76%) of power and close to 1.5m m3 a day (up 21%) of water and wastewater treatment capacities which will come on stream in 2014 to 2016. The largest capacity additions are 2 power plants in India. Thermal Powertech Corporation India’s first 660MW unit has commenced commercial operations at end-14 and NCC Power Projects’ upcoming plant is more than half complete. Maintain BUY. – UOB-Kay Hian (18 Feb)

Singapore Airlines  9.240 +0.14 +1.54%   
Business: Co provides air transportation services to destinations spanning a network spread over 6 continents. [FY19 Turnover] SIA (80%), Budget Aviation (10.5%), SilkAir (6.2%), SIAEC (3.1%), others (0.2%).

Insight: May-19, FY19 revenue edged up 3.3% to $16.3b. Pass... Read More
CapitaLand  3.530 +0.02 +0.57%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
Sembcorp Industries  2.180 +0.03 +1.40%   
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

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