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Investors’ Corner (Keppel DC REIT, SIIC Envt Hldgs, Singapore Press Hldgs, Yangzijiang Shipbuilding (Hldgs))
Investors' Corner | 22 October 2015
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By: Tan Jia Hui
Articles (82) Profile

Keppel DC REIT
Price – $1.04
Target – $1.07

Keppel DC REIT’s 3Q15 results were in line with our forecasts, with 9M15 adjusted distribution per unit representing 75% of our full-year forecast. 9M15 net property income of $69.5m was 1.7% above its IPO forecast. Portfolio occupancy rose to 95.1% while weighted average lease to expiry increased to 8.9 years. Management remains committed to acquiring assets in Asia Pacific and Europe, where demand has been strongest for data centre outsourcing. It targets 1H16 for the acquisition of its sponsor T27 asset (currently 60% occupied, with additional commitments in place). Management reaffirmed its long-term target gearing of 30%, but estimates that it has approximately $180m in additional debt headroom before reaching 35% leverage. With a strong balance sheet, we believe there are considerable growth opportunities via acquisitions − from its sponsor and via third parties. Maintain BUY. Deutsche Bank (15 Oct)

SIIC Environment Holdings
Price – $0.85
Target – $1.50

SIIC Environment Holdings remains disciplined to grow with quality, in terms of project location, population flow, and higher potential for upgrade. We expect the firm to benefit from China’s waste water treatment plant upgrade, especially on the back of the 13th five-year plan. Based on our projections, we estimate 25% in earnings improvement and 13% in valuation. The progress of the Longjiang acquisition and Hong Kong listing are still the key events for the stock. We think Longjiang is under a due diligence study and awaiting approval by early 2016E, a potential addition that could possibly boost earnings by 3% to 13% in 2016E to 2017E, while the Hong Kong listing is postponed to 1H16E. We expect continued profit growth from operations at a compound annual growth rate of 48% for 2015E to 2017E, driven mainly by water treatment volume growth with unit profit improvement from plant upgrade. Maintain OUTPERFORM. Credit Suisse (14 Oct)

Singapore Press Holdings
Price – $4.00
Target – $3.85

FY15 saw positives from the maiden contributions from Seletar Mall, higher other operating income as well as lower materials, production and distribution costs. However, these positives were doused by contraction in media revenue as advertisement and circulation revenue fell. While operating profit rose 1.3%, the figure was masked by the presence of one-off costs. Excluding these one-off charges, we estimate that operating profit would have fallen 1.8%. The media segment (77% of revenue, 61% of profit before tax) continues to face headwinds from the soft advertising market and we continue to forecast a decline of 3% to 4% in media revenue in FY16 to FY17. While Singapore Press Holdings has also tried to derive other income by hosting events, these income streams are less meaningful and sustainable and we expect a 3% to 5% fall in operating profit in FY16 to FY17. Maintain REDUCE. CIMB Securities (13 Oct)

Yangzijiang Shipbuilding Holdings
Price – $1.25
Target – $1.18

Newbuild orders have slowed substantially in China and this can be explained by China’s large exposure to the declining bulker sector, with year-to-date orders of 0.5m compensated gross tonnage (CGT) compared to 0.9m CGT in 2014. Yangzijiang Shipbuilding Holdings’ (YZJ) large exposure to dry bulk risks order cancellation to its US$4.1b outstanding order backlog (around 61% is for construction of bulk carriers) as segment outlook remains subdued as a result of falling global commodities demand. YZJ intends to re-focus its efforts on garnering more containership orders. However, such efforts might be futile, in our view, as the containership sector is also facing its own overcapacity crisis and we expect negative impact on margins if the firm secures contracts through aggressive pricing strategy. The current shipbuilding downturn is expected to result in significantly lower operating margins for YZJ’s core shipbuilding segment. Reiterate UNDERPERFORM. Daiwa Securities Capital Markets (13 Oct)

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.

Keppel DC REIT  2.100 +0.03 +1.45%   
Business: Invests in income-producing real estate assets which are used for data centre purposes.

Insight: Jul-19, 1H19, gross revenue rose 19.5% mainly cont... Read More
SIIC Envt Hldgs  0.245 +0.005 +2.08%   
Business: Co is an integrated player in the China's environmental investment industry. [FY17 Turnover] Water treatment & supply (92.5%), construction and others (4.3%), waste incineration (3.2%).

Insight: May-18, 1Q18 revenue increased 17.8% to Rmb1.2b ma... Read More
Singapore Press Hldgs  2.110 +0.03 +1.44%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More
Yangzijiang Shipbuilding (Hldgs)  1.040 -0.010 -0.95%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More

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