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Investors’ Corner (Memtech Int’l, Overseas Education, Singtel, Wilmar Int’l)
Investors' Corner | 19 November 2015
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By: Tan Jia Hui
Articles (82) Profile

Memtech International
Price – $0.131
Target – $0.156

Memtech International reported 9M15 revenue of US$104m (up 4.4%) and core net profit of US$4.3m (up 0.2%). 9M15 top and bottom lines form 67% and 64% of our FY15F forecast; lower than expected. 3Q15 did better q-o-q with the resumption of some orders from automotive customers and the ramp up in production for consumer electronics products, in preparation for the year-end shopping season. Over the past few months, the group has been busy courting new customers and has won new customers such as “Beats by Dr Dre” and also managed to land 10 new projects from Continental, by replacing a supplier of the German auto parts maker. Memtech is also said to be undergoing a qualification process to become a supplier to another new customer that is in the midst of setting up a production base in China. We believe the group’s FY14 turnaround in results is just the beginning of a multi-year sequence and also fancy its diversified customer exposure to different industries. Maintain BUY. KGI Fraser (12 Nov)

Overseas Education
Price – $0.60
Target – $0.51

During 3Q15, revenue from tuition fees fell 5% to $22.5m despite higher tuition charges while registration fees dropped 34%. Weak student enrollment numbers may persist into FY16, as the industries that have a high expatriate ratio such as finance and oil & gas continue to contract in Singapore. As it stands, 60% of the students dropped out due to their families relocating. While we expected higher utilities expenses due to its larger school compound, Overseas Education’s depreciation expense was higher than expected (up 205% to $2.7m). Compounded with lower revenue, 3Q15 net profit fell 67% to $1.8m, significantly below our estimates. At the moment, we do not see any catalyst for an increase in expatriate numbers in Singapore. In view of the challenging operating environment, we cut our FY15F to FY17F profit by 18% to 20%. Maintain SELL. RHB Research (12 Nov)

Singapore Telecommunications
Price – $3.87
Target – $4.50

Singapore Telecommunication’s (Singtel) 2Q16 core net profit was largely flat y-o-y as higher associates earnings were offset by weaker Optus earnings due to a 12.8% softer Australian dollar (A$) against the Singapore dollar. Earnings were in line with expectations, with 1H16 at 50.2% of our FY16 forecast (consensus: 48.3%). Singapore EBITDA was steady with growth in consumer offset by decline in enterprise, while Optus’s EBITDA rose 8.2% in A$ terms. Associates earnings grew y-o-y, largely driven by Telkomsel and Globe. We have maintained our earnings forecasts but raised our sum-of-parts-based target price after rolling over the base year to FY17. Singtel trades at FY17F enterprise value to operating free cash flow of 16.3 times and offers decent FY16 to 18F dividend yields of 4.5% to 5.1%. Maintain ADD. CIMB Securities (12 Nov)

Wilmar International
Price – $3.05
Target – $3.27

Wilmar International reported a 7.6% slide in 3Q15 revenue, mainly due to lower commodity prices. Net profit for the quarter tumbled 34.7% mainly due to marked to market losses of US$78.9m arising from its investment securities. 9M15 revenue fell 9.2%, while earnings slipped 4.8% to US$718.9m; but core earnings rose 1.1% to US$816m. Management remains modestly upbeat on 4Q15 performance, noting that refining and downstream product margins for Tropical Oils business should improve with the biodiesel mandate in Indonesia; also expects the recent rise in crude palm oil prices to improve Plantation margins. While management notes that the overall commodities sector could continue to face headwinds over the medium term, the group remains upbeat about the agricultural sector, citing the growth of the swelling middle class here in Asia. With its ample war chest, Wilmar says it will be keeping an eye out for bargain buys. We believe that the fundamentals remain relatively sound; hence, a dip below $3 presents a buying opportunity. Maintain BUY. OCBC Investment (12 Nov)

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.

Overseas Education  0.360 +0.005 +1.41%   
Business: Co operates Overseas Family School, a leading private foreign system school in S'pore with an operating history of more than 20 yrs. [FY15 Turnover] Tuition (96.5%), registration (1.5%), school bookshop (0.9%), enrichment programme (0.6%), interest & other (0.5%).

Insight: Nov-16, 9M16 total revenue declined 4.4%, on the b... Read More
Singtel  3.810 -0.02 -0.52%   
Business: Asia's leading communications group. [FY16 Turnover] Mobile Comm (39.6%), Data & Internet (18.5%), Infocomm Technology (15.6%), Sale of Eqmt (10.6%), National Telephone (6.7%), Int'l Telephone (3.2%), digital biz (2.8%), Pay-TV (1.7%), others (1.3%).

Insight: Nov-16, 1H17 operating revenue dropped 4.8% mainly... Read More
Wilmar Int'l  3.750 -0.03 -0.79%   
Business: Co's integrated agribusiness model encompasses the entire value chain of the agricultural commodity processing biz, from origination and processing to branding, merchandising and distribution of a wide range of agricultural pdts.

Insight: Dec-16, Co announced that that a search & seizure ... Read More


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