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Investors’ Corner (Ezion Hldgs, Genting Singapore PLC, Parkway Life REIT, Overseas Education)
Investors' Corner | 26 March 2015
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By: Tan Jia Hui
Articles (82) Profile

Ezion Holdings
Price – $0.94
Target – $2.18

Even with our worst-case scenario modelled on a 20% cut to liftboat revenue, Ezion Holdings is still estimated to earn US$160m in FY15, with the implied P/E being 6.7x and an interest coverage ratio of 8.5x. Channel checks suggest that Ezion is currently in talks for 2 liftboat contracts. While discussions could take some time, it shows that the liftboat market is far from dead. The market seemed to have focused on Brent Crude prices having halved since 1H14, but has probably completely ignored the fact that the US dollar (USD) has appreciated by about 10% against the Singapore dollar (SGD) over the same period. Ezion earns income almost exclusively in USD, and net effect is actually positive, with the strong currency benefitting near-term earnings in SGD terms and the potentially weaker long-term charter rates being offset by the operational fleet doubling in size. We believe capital loss potential over the next 12 months is low, versus a 132 % upside to our target price, pegged to merely 8x FY15 to FY16F P/E. Maintain BUY. RHB Research (20 Mar)

Genting Singapore PLC
Price – $0.91
Target – $1.08

Genting Singapore PLC’s Resorts World Sentosa (RWS) will scale back on credit extension, which is expected to lower its VIP volume. Additionally, the recent weakening of the Malaysian Ringgit and Indonesian Rupiah against the SGD poses risk to RWS’ mass-market and non-gaming revenue from its 2 largest sources of mass-market foreign gamblers and visitors. That said, the strengthening Thai Baht and Chinese Yuan against the SGD should provide some buffer. The opening of Genting Hotel Jurong in May and the appointment of David Sisk (previously from Sands China) as new chief operating officer, with a focus to market to new premium-mass and grind-mass gamblers is expected to mitigate the group’s risks. While its expansion into Japan is uncertain, we expect a higher dividend if the plan falls through. At the same time, we turn more optimistic on Resorts World Jeju, projected to open in 2H17. Catalysts are expected from success in its mass-market initiatives. Upgrade to BUY. Maybank Kim Eng (18 Mar)

Parkway Life REIT
Price – $2.32
Target – $2.66

Parkway Life REIT (PLife) announced the acquisition of 5 health-care related properties (nursing and group homes) in Japan for a total of JPY5,997m ($69.7m). The properties have long lease arrangements of 19 years, which further strengthens its income stream and lengthens its weighted average lease expiry to 9.9 years (previously 9.5 years). Initial yield is estimated to be about 6.6%, which is in line with recent transactions executed by PLife. The acquisition should be completed by 1Q15 and will be funded from the proceeds from the recent divestment of 7 properties from its Japan portfolio. While there could be marginal earnings volatility in the interim due to timing of capital deployment, we expect it to continue to offer steady earnings going forward. PLife’s manger has also taken a 5-year hedge to lock in cashflows from the new target acquisition. Catalysts will hinge on further acquisitions given a conservative gearing of 37%. Maintain BUY. DBS Vickers (18 Mar)

Overseas Education
Price – $0.81
Target – $0.94

2015 will mark an important milestone for Overseas Education, as the company moves to a new campus in Pasir Ris set to be completed on 30 Apr-15, which will increase student capacity by 25%. We expect the increase in enrolment to take time as new term will only start in Aug-15. Capacity is 4,800 at the moment but we think the group could apply for an increase in student numbers. We estimate that earnings growth will ensue in 2016 as the projected increase in enrolment and fees will more than offset the higher operating costs. The firm shared that it still receives enquiries every now and then and sees room to increase fees (currently 10% below peers) as they move into the new campus. We are confident of its cash flow generation capabilities and see no risk in repaying the $150m bond due 2019. This is despite the 50% planned dividend payout ratio of the company going forward. Upgrade to BUY. UOB-Kay Hian (16 Mar)

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

Please click here for more information about this author.

Ezion Hldgs  -- -- --   
Business: Co develops, owns, and charters offshore assets to support the offshore energy markets. [FY17 Turnover] Liftboats (49.7%), Jack-up Rigs (39.5%), Offshore Support Logistic Services (10.8%).

Insight: Aug-18, 1H18, Co returned to the black with a net ... Read More
Genting Singapore  0.895 -0.005 -0.56%   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More
Parkway Life REIT  3.050 +0.01 +0.33%   
Business: Invs REIT specialising in healthcare ppties.

Insight: Jul-18, 1H18 gross revenue rose 2.3% to $55.9m lar... Read More
Overseas Education  -- -- --   
Business: Co operates a private foreign system school in Singapore. [FY18 Turnover] Tuition (96.7%), registration (1.4%), school shop (0.7%), enrichment programme (0.7%), interest & other (0.5%).

Insight: May-19, 1Q19 revenue slid 3.4% mainly due to weake... Read More

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