LOCAL
ComfortDelgro
(Oct 2: $2.41)
UPGRADE TO BUY. ComfortDelGro (CDG) has de-rated and underperformed the index over the past one and three months on no major unexpected news. The share price is implies a “no fare hike” scenario for Singapore public transport which we think is not justified. The Singapore taxi business remains under pressure from ride hailing as CDG continues to lose fleet share every month up to Jul 2019. Furthermore, during the recent results management indicated a potential sacrifice of 2H19 taxi margins in order to win back and retain drivers. We believe these risks are largely captured in FY2019E consensus estimates; we are slightly below at -3%. If both fare hikes occur, our price target could rise by 5% to $2.90. Meanwhile, if both do not materialise this would reduce our price target by 11% to $2.45; i.e. not far off from current share price levels. Price target unchanged at $2.76 (15% upside). Worse than expected taxi business erosion and/or no fare hikes is the downside risk to our outlook. — Maybank Kim Eng (Oct 1)
Frasers Centrepoint Trust
(Oct 2: $2.71)
BUY. Frasers Centrepoint Trust (FCT) announced that it has increased its stake in the PGIM Real Estate Asiaretail Fund Limited (PGIM Retail fund) from 21.13% to 24.82% on Sept 30. Likewise, Frasers Property Ltd (FPL) has also announced that its stake in the fund has risen from 53.74% to 63.11%. The total combined ownership has risen from 74.87% to 87.93%. The increase in ownership is due to a redemption of 69,714 shares by the fund. One of the three retail malls under the fund, the consideration for the sale is RM153 million (c.$51 million), as announced by Ideal Group Bhd. We are excited about the bold and decisive steps taken by the entities of Frasers Group, to take significant control of the PGIM fund over a period of less than a year. The endgame is near and we see this as the key catalyst for both FPL and FCT if the group is able to gain further control of the properties and convert its stake into actual physical asset ownership. Price target of $2.95. — DBS Group Research (Oct 2)
Jumbo Group
(Oct 2: 37.5 cents)
MAINTAIN HOLD. Jumbo has opened a second Tsui Wah (Hong Kong-style “Cha Chaan Teng”) outlet in Singapore, known for its crispy buns served with condensed milk, at The Hereen along Orchard Road. The group plans to open a third outlet in Singapore in the next 12 months. F&B industry data remain healthy with F&B service index posting growth of 3.2% y-o-y in 7M19. Apart from the one-off drag as a result of closure of the outlet at The Riverwalk for renovation that impacted operating margins, 3QFY19 results were decent. We expect a better 4QFY19 from normalised earnings at the Jumbo Seafood restaurant at the Riverwalk which is now fully operational, as well as contributions from newly-opened Jumbo Seafood outlets at Jewel Changi and ION Orchard. No change to our earnings estimates. Price target of 37 cents, pegged to peers' average 2019F PE of 20.0x. — UOB Kay Hian (Sept 26)
Keppel Corp
(Oct 2: $5.87)
MAINTAIN ADD. Our visit to some of Keppel projects showed that on-the-ground activities are fairly vibrant. Vietnam contributed $84 million of net profit to Keppel Land’s earnings in 1H19, or one-third of the property division. Our ground checks showed that Keppel’s branding is high-quality and its breadth and depth in low-, mid-, high-end and luxury markets makes the group competitive vs. local players. It has established its presence in prime districts 1 & 2 and has solid expansion plans in up-and-coming precincts such as Thu Theim and Saigon South. Keppel has land bank of 17,100 residential homes with 5,700 launch ready until 2021. It has 405,600 sm in its prime commercial portfolio, of which 62% is under development. We believe Keppel can leverage robust demand and firm home price appreciation of 8-25% p.a. in Vietnam. Price target of $8.41. Keppel is trading at undemanding valuations of 0.9x CY19F, or -1 s.d. of its mean. — CGSCIMB (Sept 27)
Keppel Reit
(Oct 2: $1.26)
BUY. Keppel Reit (KREIT) announced the divestment of Bugis Junction Tower for $547.5 million ($2,200 psf), 6% premium to its last valuation. The exit NPI yield is 3%; expected capital gains of $378.1 million and accounting gain of $18.3 million. The divestment is expected to contribute capital gains of approximately $378.1 million (sale price of $547.5 million vs purchase price of $159.5 million, after taking into account capitalised expenditures and divestment costs). This adds to capital gains available for distribution to a total of $483 million. An estimated accounting gain of $18.3 million is expected to be recognised upon the completion of the divestment. Based on pro-forma numbers, DPU is expected to fall to 5.52 cents from 5.56 cents, based on the assumption that the cash proceeds will be used to repay loans. Sale proceeds will be used to i) continue its DPU-accretive unit buyback programme, ii) redeploy funds to higher yielding assets, iii) distribute capital gains, and iv) pare down debt. Price target of $1.45 (15% upside). — DBS Group Research (Oct 1)
Mapletree Commercial Trust
(Oct 2: $2.32)
DOWNGRADE TO HOLD. Mapletree Commercial Trust (MCT) has announced that it is acquiring Mapletree Commercial Trust II (MBC II) at a total acquisition price of $1,575.8 million (5% acquisition yield), to be funded by a mix of debt and up to 500 million new shares via private placement and issuance of preference shares. Based on proforma financials, the deal is expected to be 4% DPU and 2.2% NAV accretive. Post-acquisition, MCT’s portfolio valuation will be enlarged from $7.4 billion to $8.9 billion and raise rental income contribution from the technology segment, a growth sector, from 5.5% to 18% of MCT’s total gross rental income. Gearing is estimated to be ~34%. We raise our FY2020-2022 DPU forecasts by 1-4%, factoring in the contribution from MBC II, assuming 45%/55% debt-to-equity funding ratio. This raises our DDM-based price target to $2.38. The stock is currently trading at 4% yield versus its REIT sector average of 6%. — CGSCIMB (Sept 27)
Oversea-Chinese Banking Corp
(Oct 2: $10.77)
MAINTAIN NEUTRAL. The US Federal Reserve cut the federal funds rate (FFR) at the mid-September FOMC meeting. Going forward, more cuts are expected. Given the historical positive correlation between the US FFR and 3-month SIBOR, we expect further softness in the latter. This is negative for the NIMs of the three Singapore banks. Market talk of Oversea-Chinese Banking Corp’s (OCBC) interest in buying Bank Permata may also cap OCBC’s share price. We forecast 2019 dividend of 50 cents per share (4.6% dividend yield) – consistent with OCBC’s 1H19 interim one-tier tax-exempt dividend of 25 cents per share. Our OCBC valuation is based on 11.7% long-term ROE assumption (vs 1H19’s 11.7%) – factoring in weaker NIMs and competition from digital banks, offsetting strength from wealth management. Price target unchanged at $11.50, 7% upside, 4.6% yield, based on 1.07x 2020F P/BV. — RHB Research (Sept 26)
Sembcorp Industries
(Oct 2: $2.06)
MAINTAIN ADD. Sembcorp Industries’ (SCI) urban development in Vietnam is a direct beneficiary of the trade tensions as the country is preferred by MNCs for expansion in ASEAN. Our ground checks showed that VSIP is a highly-preferred industrial park and township master developer among international and local companies. Vietnam Singapore Industrial Park (VSIP) is 49%-owned by Vietnam state-owned enterprise Becamex IDC Corp, 49% owned by Sembcorp Development. Urban development generated $86 million net profit in FY2018 (FY2017: $83 million), with Vietnam and China contributing 90% of urban development net profit in FY2018. We think growth prospects can be sustained on the back of 504 hectares of order book (deposits paid) in urban development to be recognised over the next 2-3 years. We believe investors may have under-appreciated urban development potential given its entrenched position. Its NAV as of 1H19 stood at $873 million (50 cents per share). Price target of $2.83. — CGSCIMB (Sept 27)
Thai Beverage
(Oct 2: 88 cents)
MAINTAIN ADD. According to Thailand’s Office of Industrial Economics, the country’s domestic beer, select white liquor and mixed liquor consumption volumes remained in positive territory in August 2019, rising c.6%, 3%, and 21% y-o-y, respectively. YTD, domestic beer volumes rose 9% y-o-y; select Thai spirit volumes (white and mixed) rose 8.5% y-o-y. We estimate Thai Beverage’s (THBEV) 4QFY9/19F net profit at THB4.5 billion (-30% q-o-q as 4Q is typically seasonally weaker; +20% y-o-y). We see full-year net profit rising 16% y-o-y to THB24.4 billion, and its domestic Thai alcohol spirit and beer volume expanding 7% and 6% y-o-y, respectively, in FY2019F. Price target of $1. The stock trades at FY9/2020F P/E of 18.4x, below its 5-year average and peers. Stable domestic consumption growth is a boon. M&As in Vietnam and SABECO could unlock value. — CGSCIMB (Oct 2)
FOREIGN
Aisan Industry
(Oct 2: ¥918.0)
UPGRADE TO OUTPERFORM. We expect steady growth of the powertrain business driven by the business alliance with Denso. It is not yet clear what product lines may be transferred to Aisan as part of the tie-up. However, if Denso’s fuel pump module business (currently under consideration) was transferred to Aisan, we estimate that it could boost Aisan’s earnings by more than 30% even assuming no change in margins. We expect sluggish earnings for existing businesses in the near term, as Aisan is currently focusing on structural reforms and other initiatives targeting strategic sales growth down the road. Catalysts include greater-than-planned growth in auto production and further progress on business consolidation within the Toyota group. Risks include further profitability issues in overseas operation and a delay in business restructuring. Our ¥1,050 target price uses FY3/2021E BPS of ¥1,578 (prev. ¥1,565) and a P/B of 0.66x (0.48x). — Credit Suisse (Sept 25)
Beijing Enterprises Holdings
(Oct 2: HK$36.25)
MAINTAIN OUTPERFORM. Beijing Enterprises (BJE) stands out in our dividend-strength scorecard for HK/China utilities stocks based on their payout increase potential. Given the current low base, we expect BJE to boost its dividend payout ratio from 17% last year to 20%-30% in FY2019-2021E. Management is committed to increasing its dividend return, which was evidenced by a 25% increase in interim dividend, with 11% earnings growth in 1H19. Most of the earnings of BJE are from its associates, which generate stronger dividends than the group, and help create a strong cash position for the company. In terms of expenditure, BJE has not made major investments since acquiring Russia oil gas assets in 2016. We expect BJE's dividend per share CAGR to improve to 34% over FY2019-2021E vs EPS CAGR of 10%. Valuation looks attractive as the stock is trading at 0.6x FY19E P/B despite >10% ROE. As a result, we expect dividend yield to improve meaningfully from 4% in FY2019E to 7% in FY2021E. Price target of HK$58. — Credit Suisse (Sept 27)
China Resources Power Holdings
(Oct 2: HK$9.54)
MAINTAIN OUTPERFORM. China Resources Power (CRP) has seen share price weakness this year, largely due to the FY2018 full-year dividend missing three-year guarantees. We expect strong earnings growth for both of CRP's major businesses, coal-fired power (8% decline in coal prices) and wind farms (capacity expansion). With large capex budgeted for wind farms, we expect CRP may run into negative FCF in FY2019-2020E, followed by a large turnaround in FY2021E with less investment. On a positive note, its interim dividend was raised by 60%, the first interim dividend growth since 1H16. For FY2019, CRP maintains a target dividend payout of 40%, but we believe this could improve to 45% in FY2021E, with a downward capex trend. Our earnings and price target remain unchanged. The stock now trades on 7% FY2019E dividend yield, higher than the historical mean of 4%. Its FY2019E P/B multiple is also approaching a historical low at ~0.7x. Price target of HK$19. — Credit Suisse (Sept 27)
CLP Holdings
(Oct 2: HK$81.15)
UPGRADE TO OUTPERFORM. CLP Holdings Ltd (CLP) reported a net loss of HK$907 million in 1H19, as previously warned, due to one-off impairment loss for Australian business with retail policy change. On the positive side, 2Q19 dividend per share came in at HK$0.63 per share, a 3% y-o-y growth, same growth rate as 1Q19. CLP has maintained a positive growth in dividend since 2011. CLP has underperformed peers/the market by 7%/12% YTD, so we believe the risk-reward has turned favourable with possible upside surprise on Australian earnings on bottoming-out retail margins, as well as its improved yield appeal in the current low-interest-rate environment. We raise our FY2020-2021E EPS by ~3% mainly on higher Australian earnings, thereby lifting DCF-based price target from HK$84 to HK$95. CLP's bond-dividend yield spread now is ~200 bp, much higher than historical average of ~120 bp (2001-2018). With improved earnings outlook, we expect its annual dividend growth to accelerate to ~5%. — Credit Suisse (Sept 27)
Gamuda
(Oct 2: RM3.66)
MAINTAIN HOLD. Gamuda reported 4QFY19 core net profit of RM161 million (-9% q-o-q, -20% y-o-y) on revenue of RM1.5 billion (+45% q-o-q, +24% y-o-y). Excluding arbitration gains of RM37 million (India toll), disposal gains of RM24 million from investment property and impairment of receivables of RM38 million, FY2019 core net profit of RM645 million (-18% y-o-y) represents 107% of our estimate, attributed to progress billings at its construction segment as well a better performance from its property arm on sales recognition from overseas projects in Vietnam. The government has yet to make an official offer for its proposed toll takeover due end-October 2019. We raise our FY2020-2021 net profit forecasts by 2% and 3% following housekeeping adjustment with an unchanged orderbook replenishment target of RM2 billion and property sales of RM2.5 billion annually for FY2020-2021. We also introduce FY2022 earnings forecast. Price target of RM3.65 (from RM3.62), implies 20.3x FY20F PE. — UOB Kay Hian (Sept 30)
Indofood CBP
(Oct 2: IDR12,200)
UPGRADE TO OUTPERFORM. We estimate Indofood CBP’s (ICBP) noodles' volume growth to stabilise at 5-6% p.a. over the next few years boosted by strong growth of warmindo (restaurants specialising in selling instant noodles). As consumers look for cheap hangout options, these warmindo standout as they offer both affordable price and tasty food, which are the two key criteria for restaurant selection for a majority of Indonesians. Overall, we raise our FY2019/2020/2021E EPS by 1.0%/4.4%/6.9% as we factor in higher EBIT margin potential from its noodles segment. We raise our target P/E multiple to 29.2x (3-year peak) to derive at new price target of IDR13,500 from IDR11,740. We believe ICBP deserves to trade at a higher multiple, given structurally higher volume growth for its Noodle division. Furthermore, given the challenging macro backdrop next year, its defensive quality commands a higher valuation premium. — Credit Suisse (Sept 25)
Major Cineplex
(Oct 2: THB23.50)
MAINTAIN BUY. We expect strong 4Q19 earnings as several blockbuster movies will be screened and there is an abundance of Thai movies lined up. Hence, we project 2019 earnings to grow 4% y-o-y, driven by healthy earnings in 2Q19 and 4Q19, with 3Q19 earnings expected to be the weakest quarter of the year. We believe Major Cineplex’s 4Q19 earnings would increase significantly y-o-y and q-o-q on the back of higher admission income and wider gross margin, especially since earnings in 4Q18 were low and 3Q19 earnings would be very weak. We project 3Q19 net profit at THB137 million, down 33% y-o-y, due to lower other income and lower gross margin. 3Q19 earnings should also tumble 73% q-o-q on the back of seasonality as 2Q19 earnings would have been the peak of this year. Price target of THB30.75, pegged at 20x 2020F PE, or -0.5SD to its 5-year mean. We believe 2020 earnings outlook remains positive as the addition of more screens as well as an economic recovery would support both admission income and advertising income. — UOB Kay Hian (Oct 2)
New World Development
(Oct 2: HK$10.46)
MAINTAIN BUY. New World Development’s (NWD) revenue grew 26.5% y-o-y to HK$76,764 million, while profit attributable to shareholders fell 22.2% y-o-y to HK$18,160 million. Excluding investment properties (IP) revaluation and other fair value gains, reported core profit of HK$8,814 million implies a 10.5% y-o-y increase and represents 93%/98% of our/consensus’ FY2019 full-year forecasts. Full-year dividend of 51 HK cents per share, up 6.3% y-o-y. This represents an attractive yield of 5.1% as of the last close price. We forecast a FY2020 yield of 5.2%. We revise our 2020/2021 earnings forecasts downwards by 7% and 3% respectively, mainly to factor in a weaker renminbi and Hong Kong hotel performance. Price target of HK$13.28 based on a 45% discount to NAV of HK$24.16 per share. As of the last closing price, NWD trades at a 58% discount to NAV (around -1SD vs historical average) and at an attractive FY2020 yield of 5.2%. — UOB Kay Hian (Sept 26)
Nine Dragons Paper
(Oct 2: HK$6.54)
MAINTAIN SELL. Nine Dragons Paper’s (NDP) FY2019 core net profit came in as expected at RMB4,024 million, down 48.9% y-o-y, due to: (a) 4.5% ASP drop on weakened demand; and (b) old corrugated containers (OCC) cost hike given tightened restriction on OCC imports. Net profit per tonne slumped 52.8% y-o-y to RMB285. Revenue grew 3.5% y-o-y to RMB54.65 billion in FY2019 on an 8.5% y-o-y growth in sales volume and 4.5% y-o-y drop in product ASP. We maintain FY2020-2021 core net profit forecasts at RMB3.14 billion (-22% y-o-y) and RMB3.09 billion (-1.6% y-o-y) respectively, and introduce FY2022 net profit forecast of RMB2.28 billion (-26% y-o-y). Our FY2020-2021 core earnings estimates are 7%, 27% and 38% below consensus respectively, given our lower-than-consensus assumptions on margins. Price target of HK$4.50, based on 6x FY20F PE, or 2SD below historical mean. Going forward, we expect NDP to continue to face heavy earnings headwinds from the trade war and tightening OCC imports in the next few years. — UOB Kay Hian (Sept 26)
