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Investors’ Corner (Q&M Dental Group, ComfortDelGro Corp, Triyards Hldgs, Keppel REIT)
Investors' Corner | 23 April 2015
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By: Tan Jia Hui
Articles (82) Profile

Q&M Dental Group (Singapore)
Price – $0.72
Target – $0.78

Q&M Dental Group (Singapore) has expanded from 1 clinic in 1996 to 60 dental outlets by end-2014 in Singapore. We expect it to grow by another 5 stores per year for FY15 and FY16. Additionally we see headroom for dentists and higher government expenditure on healthcare. China is expected to be Q&M’s next growth phase. It offers positive signs: 1) increased healthcare expenditure, 2) shortage of dentists for its population verus other developed nations, and 3) opening up of the healthcare industry to private players. Q&M has entered China’s dental landscape mainly via acquisitions. We expect this to continue. With recent acquisitions, Q&M has diversified into manufacturing and distribution of dental equipment supplies. These segments are expected to grow at a faster pace than its mainstay dental and medical clinics. We initiate with an ACCUMULATE rating based on a P/E ratio of 46.7x. Phillip Securities (20 Apr)

ComfortDelGro Corporation
Price – $2.93
Target – $3.54

We think the government is likely to purchase SBS Transit’s (SBST) (75.1%-owned by ComfortDelGro Corporation (CDG)) Singapore bus assets by mid-2016, estimated at $969m based on 1x P/B (or $559m net of debt repayments). To upstream the “trapped cash” to CDG, we believe SBST may declare a special dividend and/or capital reduction in 2016. Our base case is for CDG to pay a $0.105 special dividend in 2016 (adding 3.6% to yield), assuming it distributes 100% of the cash received. We factor in a greater reduction in annual capital expenditure (capex) from 2016 onward, from an average annual bus capex of $254m to $70m or less after the government contracting model is implemented, resulting in substantially higher free cash flows and a sustainable improvement in CDG’s ability to pay dividends. Other positive catalysts include the securing of new bus or rail contracts at favourable margins; acquisitions of businesses overseas; and a transition to a new rail financing framework on terms favourable for operators. Upgrade to BUY. UBS Securities (16 Apr)

Triyards Holdings
Price – $0.52
Target – $0.77

In our opinion, Triyards Holdings’ yards rank among the most organised in the region, with clean, well-planned production lines. Workers specialise in their respective roles to increase productivity and most of the fabrication areas are sheltered, allowing work to continue even during the rainy seasons. Triyards has 3 yards in Vietnam with average utilisation rate of approximately 60%, which provides headroom to take on new projects immediately. New investments have been made to improve automation, and there is a new in-house furniture workshop that will provide the furnishings for the group’s vessels going forward. The cost savings potential is clear – third-parties’ quotes are up to 4x Triyards’ cost in this respect – and can help maintain margins even in the low-price environments. Valuations are attractive at 4.2x/3.5x FY15/FY16F P/Es with 8%/20% earnings growth in the respective years. Maintain BUY. RHB Research (16 Apr)

Keppel REIT
Price – $1.23
Target – $1.25

Keppel REIT (KREIT) is seeing rising competition for tenants from landlords of both existing buildings and future supply. Apart from competitive rents, competitors have been giving longer rent-free or fit-out periods. KREIT expects competition to emerge soon from Marina One, which has not aggressively commenced pre-leasing efforts. Demand remains soft, particularly from tenants with larger space requirements. Nonetheless, KREIT has successfully review two-thirds of its leases due in 2015 with positive rent reversions, left with only 5% of its portfolio expiring this year. Tenant retention will be KREIT’s key focus going forward as it attempts to actively forward renew leases expiring in 2016 (17% of portfolio) and 2017 (15.1%), which coincides with sizable supply. At P/B of 0.87x and 5.9% yield, the stock looks fairly priced. Maintain NEUTRAL. JP Morgan (15 Apr)

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.

Q&M Dental Group (S'pore)  -- -- --   
Business: Co is a private dental healthcare provider in Asia. [FY18 Turnover] Primary healthcare (93.1%), dental equipment & supplies distribution (6.9%)

Insight: May-19, 1Q19 total revenue inched up 4.2% to $29.9... Read More
ComfortDelGro Corp  -- -- --   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More
Triyards Hldgs  -- -- --   
Business: Co provides engineering & fabrication services for the worldwide offshore & marine industries.

Insight: Dec-17, FY17 revenue fell 64.2% to US$116.2m mainl... Read More
Keppel REIT  -- -- --   
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

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