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Investors’ Corner (CapitaLand, COSCO Corp, Global Testing Corp, SMRT Corp)
Investors' Corner | 07 May 2015
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By: Tan Jia Hui
Articles (82) Profile

Price – $3.69
Target – $4.11

1Q15 profit after tax and minority interests (PATMI) from continuing operations was $161.3m (up 9.4% y-o-y) mainly driven by higher operating income from CapitaMalls Asia (CMA) and portfolio gains. However, operating PATMI remained flattish at $155.3m after stripping out fair value gains. Residential sales continue to improve as the group moved 69 units in Singapore. In China, the group sold 1,306 units (up 11% y-o-y), representing a sales value of Rmb2.2b and looks to launch 7,600 new units in 2015, a third from Tier 1 cities. EBIT from CMA and Ascott rose a steady 8.1% and 3.4% y-o-y respectively. For CMA, performance was driven by higher rental income from Bedok Mall and Westgate, supported by higher yields for its portfolio of China malls, while Ascott’s was mainly driven by higher fee income and an expanded portfolio. We continue to expect steady improvement in earnings with catalysts coming from the deployment of cash to new investments, better sales for its projects in China and asset recycling to its real estate investment trusts. Maintain BUY. DBS Vickers (4 May)

COSCO Corporation (Singapore)
Price – $0.61
Target – $0.43

1Q15 PATMI of $0.8m (down 93.9% y-o-y and 105.8% q-o-q) was in line, at 8% of our FY15 estimates, as we expect lumpiness. However, at only 2% of consensus, it was a significant miss. 1Q15 gross margins dipped to 7.4% after what we said was an unsustainably high 15.1% in 4Q14, adjusting for write-downs. Orders secured year-to-date were US$255m, plus 7 containerships from Maersk whose values were not disclosed (we estimate it to be between US$250m and US$280m). Although gross order book was US$8.1b, we believe this is at risk of further write-downs from contract terminations. Order intake is under duress from double offshore and shipbuilding weakness. Worryingly, the group does not appear to have a strategy for navigating this downturn. While it has been striving to improve efficiency and reduce costs, margins remain consistently weak. Maintain SELL. Maybank Kim Eng (4 May)

Global Testing Corporation
Price – $0.14
Target – $0.20

Despite a 6% y-o-y drop in revenue, mainly due to the decrease in demand from semiconductor/computer, communication and consumer electronic industries, net profit after tax surged 543.2% to US$0.7m due to impressive cost management and enhanced operational efficiencies. With its capital reduction programme approved, shareholders can finally look forward to a one-off windfall of $0.075 per share. Going forward, shareholders can also look forward to regular dividends once accumulated losses are removed. According to Gartner, worldwide semiconductor sales are expected to reach US$358b in 2015, reflecting a 5.4% growth from 2014. In addition, Global Testing Corporation’s main customer, Taiwan Semiconductor Manufacturing (TSMC), has also been releasing excellent results. We believe the group will continue to ride on TSMC’s strong earnings and the general positive sentiment in the semiconductor space in 2015. Maintain BUY. RHB Research (4 May)

SMRT Corporation
Price – $1.68
Target – $2.43

Ridership continues to increase for both train (up 2.4% y-o-y) and bus (up 3.6% y-o-y) businesses. However, SMRT Corporation’s higher-than-expected depreciation from the capitalisation of new taxis and an enlarged train fleet were the key reasons for the slight miss in net profit in FY15 (96% of consensus). We were surprised by the positive bus margin in 4Q15 after 17 quarters of losses. Management foresees higher operating expenditure from a larger headcount, larger fleet of trains and network expansion, in addition to intensifying maintenance work on the rail system. Hence, we cut FY16 to FY17 earnings by 3 to 5%. The group is looking to grow its non-fare business, having announced that it would work with OMGTel in connection with the fourth wireless telco carrier license bid in Singapore. We expect lower fuel cost, a 2.8% gross fare rise from Apr-15 and increase ridership to drive FY16 earnings growth. 3Q17 bus reforms would result in higher bus margins and a potential $300m bus asset sale to the government. Maintain BUY. Deutsche Bank (1 May)

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.

CapitaLand  3.510 -0.03 -0.85%   
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
COSCO Shipping Int'l (S)  0.290 -- --   
Business: Engaged in shipping and other logistics services. [FY18 Turnover] Logistics (69.7%), property management (11.9%), Shipping (9.5%), ship repair and marine related activities (8.9%).

Insight: Mar-19, FY18 revenue jumped 340% to $163.7m and gr... Read More

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