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Investors’ Corner (CapitaLand Commercial Trust, IPS Securex Hldgs, GuocoLand, Venture Corp)
Investors' Corner | 27 August 2015
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By: Tan Jia Hui
Articles (82) Profile

CapitaLand Commercial Trust
Price – $1.33
Target – $1.75

CapitaLand Commercial Trust (CCT) offers the most resilient office portfolio, as 34% of income is attributable to the volatile finance sector, of which major tenants’ leases expire beyond 2018 where supply risk should subside. We expect the acquisition of CapitaGreen’s remaining 60% stake to occur in 4Q15 to 1H16. Assuming capital value of $1b and funding structure of 80% to 90% debt and 10% to 20% equity, distribution per unit (DPU) accretion and gearing works out to 1% to 3% and 36% to 37%, respectively. Post maiden DPU contribution from CapitaGreen in 1Q16, we think CCT would redevelop Golden Shoe Car Park, which could yield 0.7m sqf of Grade A office space upon completion in 2020 to 2021 where supply is limited. CCT’s share price is implying 5.2 percent capitalisation rate, overly negative in our view. Upgrade to OVERWEIGHT on valuations. JP Morgan (21 Aug)

IPS Securex Holdings
Price – $0.80
Target – $1.15

IPS Securex Holdings’ (IPS) FY15 net profit surged 102% to $2.3m, while turnover rose 25.9% to $15.7m due to a 19.8% increase in the security solutions business and a 38.7% rise in the maintenance and leasing business. Due to operating leverage, net margins also improved 5.4 percentage points to 14.4% in FY15. IPS declared a $0.0075 dividend for 2H15, bringing total FY15 dividend to $0.015. Going into FY16, we expect IPS to have a 1,054% surge in net profit mainly due to the US$50m PepperBall contract that is to be recognised. Management mentioned that it is keen to reward its shareholders with a higher payout or special dividends if it delivers strong results in FY16, which we estimate to lead to a 6% FY16F yield, based on a 30% dividend payout. The spate of riots around the region helps to reinforce the need for more effective non-lethal weapons like PepperBall. In addition, we are also confident that IPS will go ahead to secure more orders, especially for its Hyperspike and cargo scanner products, with the expansion of 6 airports in Thailand. Maintain BUY. RHB Research (21 Aug)

Price – $2.04
Target – $2.78

GuocoLand has entered into an agreement with China Cinda Asset Management Co to sell its 90% stake in the Beijing Dongzhimen mixed development. The consideration of Rmb10.5b, which comprises Rmb4.6b of project rights and Rmb5.9b of project liabilities, will be satisfied in cash. GuocoLand is expected to realise a $480m net gain from the disposal. We believe the removal of the overhanging uncertainty of the outcome of this project, realising value from the development, deleveraging its balance sheet and ability to recycle capital going forward are major positives of the transaction. Although the selling price is lower than our assumption of Rmb12.9b, we believe investors would remain focused on the positive outcomes. Post transaction, we reckon GuocoLand’s net debt-to-equity ratio could dip to a healthy 0.8 times from its present 1.5 times. Reiterate ADD. CIMB Securities (20 Aug)

Venture Corporation
Price – $8.13
Target – $9.00

Street forecasts are not fully factoring in the impact of a 15% decline in the Singapore dollar (SGD) to Malaysian ringgit (MYR) exchange rate over the last one year. Almost 60% of Venture Corporation’s staff costs are denominated in MYR and each 2% decline in MYR is estimated to have a 1.5% positive impact on Venture’s profits. US dollar (USD) to SGD exchange rate has also appreciated 12% over the last one year. 100% of the group’s sales are denominated in USD and while a strong USD can also dampen demand from Europe and Asia (approximately 50% of sales), we project that that each 1% rise in USD would have a 1% positive impact on profit. We have not factored in the impact of any additional business which Venture could secure arising from the lower cost of production due to the weaker MYR. In constant currency terms, we expect Venture to register 4% to 5% earnings growth in FY16F. Upgrade to BUY. DBS Vickers (19 Aug)

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

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CapitaLand Commercial Trust  2.050 -0.02 -0.97%   
Business: Co is a real estate investment trust in the office space.

Insight: Apr-19, 1Q19 gross revenue and NPI rose 3.5% and 3... Read More
GuocoLand  2.030 -- --   
Business: Co is a ppty dvlpr. [FY18 Geography] S'pore (87.8%), M'sia (6.5%), China (0.5%), Vietnam (0.2%), Others (5%).

Insight: Apr-19, 9M19 revenue slid 37.3% due to lower sales... Read More
Venture Corp  15.570 +0.19 +1.24%   
Business: Co provides technology services, products and solutions. [FY18 Turnover] Advance Manufacturing & Design Solutions (AMDS) [74.6%], technology products & design solutions (TPS) [25.4%].

Insight: Apr-19, 1Q19 revenue rose 8.5% to $928.8m due to b... Read More

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