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Investors’ Corner (CSE Global, Yanlord Land Group, Ascendas REIT, Sembcorp Industries)
Investors' Corner | 17 December 2015
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By: Tan Jia Hui
Articles (82) Profile

CSE Global
Price – $0.46
Target – $0.54

At a meeting on 4 Dec-15, Organization of the Petroleum Exporting Countries failed to agree on reducing oil production, as the cartel looks to eliminate players with higher production costs in a low oil price environment. Even with more uncertainty over oil & gas (O&G) outlook, we still think CSE Global’s earnings will likely remain largely resilient given its exposure to recurring brownfield maintenance jobs, which contribute about 50% of its annual revenue. While we do acknowledge that new greenfield projects will likely slow down further but at least for FY15, we forecast for a 5% decline in PATMI, as any cuts in budget by its customers will likely reach the maintenance-related expenses in the later stages, if low oil prices sustain for a prolonged period. Despite cutting our forecast, the stock is still supported by a decent FY15F dividend yield of 6% and we think the recent price decline is overdone. Maintain BUY. OCBC Investment (11 Dec)

Yanlord Land Group
Price – $1.04
Target – $1.22

Yanlord Land Group reported Nov-15 sales of Rmb3.8b, up 46% y-o-y. For the first 11 months, the group’s sales rose 152% y-o-y to Rmb25.9b, versus industry average of 19% growth. With another Rmb6.2b of subscription sales pending conversion, we expect Yanlord’s full year sales to reach Rmb32b. According to the news, Yanlord and Ping An partnered to acquire a mixed-use land parcel in Tianjin that has a gross floor area of 261k sqm, for Rmb2,374m. Land cost is Rmb9.6k per sqm while average selling prices of neighbouring projects is around Rmb19k per sqm. Investors have been concerned about land replenishment and the group said that it has been negotiating JV projects with major developers in top tier cities. We expect more land acquisitions to meet the Rmb6b land budget this year. We note Yanlord’s high exposure to Tier 1 and 2 cities as well as high-end products targeting upgraders, who will be most sensitive to credit easing and rising upgrading demand. Maintain OUTPERFORM. Macquarie Research (11 Dec)

Ascendas Real Estate Investment Trust
Price – $2.38
Target – $2.50

Ascendas Real Estate Investment Trust (AREIT) has announced the acquisition of business park building, One@Changi City, for $420m. The purchase will translate into a yield of approximately 6% and will be half funded by issuance of units, with the balance paid via cash. We think the transaction is fairly-priced and note that the asset is poised to benefit from its close proximity with an existing as well as future mass rapid transit (MRT) stations. AREIT is doing an equity fund raising exercise that will raise at least $480m that would be mainly used for the acquisition of One@Changi City, to partially fund purchase of a logistics property in Australia as well as for debt repayments and future acquisitions. As we factor in the acquisition and the larger unit base, we think that it would not be yield-accretive. However, we still think there is potential upside base to our valuation and like AREIT’s exposure to the business park space. Maintain BUY. RHB Research (10 Dec)

Sembcorp Industries
Price – $3.03
Target – $3.80

We expect Sembcorp Industries to maintain similar payout of $0.16 in FY15 (including $0.04 interim dividend) despite the decline in recurring PATMI. The successful divestments of SembSita and Bournemouth Water, are expected to contribute $0.065 to dividend per share (DPS), assuming a 30% payout ratio. Thereafter, DPS should normalize to $0.12 per annum, representing a decent 4% dividend yield. SCI’s first India power plant is likely to break even this year and contribute to bottom line from 2016 onwards, helping mitigate earnings decline from Singapore power plants. SCI has also made its foray into other emerging markets, underpinning the longer-term growth prospects of its utilities segment. SCI share price has corrected 7% following 60.6%-owned Sembcorp Marine’s profit warning. We see value emerging at current undemanding valuation of 0.8 times FY16 price-to-book value. Maintain BUY. DBS Vickers (9 Dec)

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.

CSE Global  0.470 +0.010 +2.17%   
Business: A global technologies company offering cost-effective, totally integrated solutions to industries various sectors. [FY16 Geographical] The Americas (63.4%), Asia-Pacific (34.3%), Europe/Middle East/Africa (2.3%).

Insight: Feb-19, FY18 revenue increased by a moderate 4%, m... Read More
Yanlord Land Group  1.170 -0.020 -1.68%   
Business: A real estate developer. [FY18 Turnover] Property development (95.2%), others (2.7%), property investment & hotel operations (2.1%).

Insight: May-19, 1Q19 revenue were halved to Rmb3.6b due to... Read More
Ascendas REIT  3.140 -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
Sembcorp Industries  2.100 +0.01 +0.48%   
Business: Primarily engaged in the production and supply of utilities services. [FY18 Turnover] Utilities (55.9%), marine (41.8%), others/corp (2.2%), urban development (0.1%).

Insight: May-19, 1Q19 revenue fell 10.1% to $2.5b due to lo... Read More

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