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Investors’ Corner (Noble Group, Fraser & Neave, Ascendas REIT, CapitaLand)
Investors' Corner | 13 August 2015
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By: Tan Jia Hui
Articles (82) Profile

Noble Group
Price – $0.58
Target – $0.57

Impacted by US$19m of operating losses in the mining and metals division, Noble Group’s 2Q15 PATMI came in at US$61.7m (down 28%), below expectations. Earnings quality year to date (YTD) improved, with 1H15 unrealised gains included in the profit and loss from mark to market of Level 3 assets (related to long term offtake supply agreements) as a percentage of operating profits now at 4% (FY14: 6%, FY13: 19%). PricewaterhouseCoopers (PwC) gave Noble a clean bill of health, after reviewing 81% by value of derivative contracts with a maturity of over 2 years and 98% by value of Level 3 net assets. While we take comfort from the rigorous manner in which Noble conducts its valuations as disclosed in the PwC report, it may not be sufficient to regain the market’s confidence in the near term, given the lack of specific model assumptions, still weak cashflows (1H15: negative US$832m), and low ROE (2% on 12 month trailing basis). Maintain HOLD. DBS Vickers (11 Aug)

Fraser & Neave
Price – $2.30
Target – $1.85

Fraser & Neave’s (F&N) 3Q15 revenue rose 4% y-o-y, driven by soft drinks and dairies. After a weak 2Q15 for soft drinks (Malaysia floods, pre-goods and services tax effects), the segment bounced back in M’sia on Hari Raya promotions, distributors restocking and a re-packaging exercise for 100Plus. In contrast, beer did not do as well; beer revenue was up 5%, blunted by a weakening Burmese kyat that detracted from a still-solid volume growth of 14% and price hikes. Dairies Thailand also gave a boost to growth – better performance was underpinned by increased promotional, trade management activities and higher outlet penetration. However, it is difficult to ignore that the biggest driver of F&N’s value remains its 55%-stake in Myanmar Brewery, which the group has agreed to let go at US$560m. We estimate that beer accounted for half of 9M15 earnings before interest and tax, so there will be an earnings hole next year. Maintain REDUCE. CIMB Securities (9 Aug)

Ascendas Real Estate Investment Trust
Price – $2.41
Target – $2.60

Ascendas Real Estate Investment Trust (AREIT) announced that it was actively exploring investment opportunities in mature developed markets (including Australia and Germany), which could account for 20% to 30% of its portfolio. We are not surprised, given S’pore’s limited growth outlook. However, we note that 70% of its existing assets under management is exposed to business and science parks, hi-tech space and data centers, where demand-supply dynamics are the healthiest among the industrial sector. Furthermore, its sponsor’s sizeable pipeline of $2b could still be injected. The pace of expansion could be quicker than in China given its stronger balance sheet today (34.7% gearing implies ample debt headroom of $0.7b to $1.5b before hitting 40% to 45%) and the weaker currencies in the 2 mentioned markets. AREIT continues to be our top large-cap S’pore REIT pick, given its strong distribution per unit growth of 5.5%, under-rented portfolio, and improving occupancies. Maintain OVERWEIGHT. JP Morgan (6 Aug)

Price – $3.17
Target – $4.07

2Q15 PATMI increased 5.8% y-o-y to $464m, mostly due to fair value gains arising from the change of use of 2 Chinese projects from construction for sale to investment properties. Overall, results were mostly in line with expectations. Pace of home sales in China picked up significantly in 2Q15 with 2,764 units sold (up 162% y-o-y). However, gross margins for the Chinese residential segment have eased to around 20% and will likely continue to face downward pressure. Management continues to hold a cautious stance on the domestic residential space and expects persistent headwinds. Numbers from the group’s retail mall portfolio remain decent; 1H15 same-mall net property income in S’pore and China were up 2.8% and 9.1% respectively. The group seems keen to sharpen its focus on technology’s role in real estate and has recently invested US$50m in Tujia, a Beijing-based online apartment-sharing business. Maintain BUY. OCBC Investment (6 Aug)

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.

Fraser & Neave  1.730 -0.010 -0.57%   
Business: [FY18 Turnover] Dairies (60%), beverages (25.4%), printing & publishing (14.6%).

Insight: Apr-19, 1H19 revenue inched 1.9% to $931.8m underp... Read More
Ascendas REIT  3.100 -0.01 -0.32%   
Business: Co invests in the real estate markets of Singapore and Australia.

Insight: Apr-19, FY19 gross revenue and NPI inched up 2.8% ... Read More
CapitaLand  3.510 -- --   
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

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