$1.08 OVERWEIGHT (Morgan Stanley Research)
$1.04 BUY (Nomura Research)
$1.02 ADD (CGS-CIMB Research)
$1.00 OVERWEIGHT (JPMorgan Research)
95 cents UPGRADE NEUTRAL (RHB Group Research)
90 cents HOLD (UOB Kay Hian Research)
90 cents NEUTRAL (Credit Suisse Research)
80 cents DOWNGRADE REDUCE (Phillip Securities Research)
A recovery seems to be in full swing for Thai Beverage.
Year-to-date, the Mainboard-listed Thailand-based beverage producer has romped to total returns of 50.0%, outperforming the total returns YTD of 28.8% for the FTSE Straits Times Consumer Goods Index. Yet, there seems to be still more room for its share price to climb.
Over the past month, six analysts covering the counter have revised their price targets upwards, while only one has moderated the price target downwards. And market watchers believe ThaiBev’s full-year results for FY2019 — while slightly below consensus expectations — could extend “happy hour” for Thailand’s largest spirits, beer and non-alcoholic beverages producer.
The group on Nov 22 announced full-year earnings of THB23.27 billion ($1.05 billion) for FY2019 ended September, 30% higher than a year ago, as revenue grew 16% to THB267.36 billion. The higher revenue was led by an 8.6% an increase in sales of its spirits business to THB115.0 million and a 26.6% rise in sales in its beer business to THB119.6 million. Sales for its non-alcoholic beverages and food businesses also rose 7.5% and 17.3%, respectively.
“Thailand’s alcohol demand showed strong improvement in 4QFY2019 due to government stimulus measures. We expect this consumption momentum to follow through in 1QFY2020,” says RHB Group Research analyst Juliana Cai in a Nov 25 report.
The way DBS Group Research lead analyst Andy Sim sees it, the latest set of results works to reaffirm the brokerage’s positive view of ThaiBev. “We continue to remain positive on the counter and expect its regionalisation strategy to aid earnings growth and re-rate the stock price,” Sim says in a Nov 24 report.
ThaiBev’s growth ahead appears to be two-pronged, according to Sim. On the domestic front, operations seem to be on the cusp of recovery after the weak consumption in 2017 and 2018. Meanwhile, the group’s acquisition of Saigon Alcohol Beer and Beverages Corp (Sabeco) in Vietnam seems to be bearing fruit with the robust growth seen in its recent 3QCY2019 results. Grand Royal Whisky in Myanmar, too, continues to post robust volume growth.
“We like that ThaiBev’s domestic business has stabilised and view improvements at Sabeco as the next medium-term earnings growth driver,” says CGS-CIMB Research analyst Cezzane See in a Nov 23 note.
“Sabeco unveiled that it has kick-started its new product packaging and expects sales growth to continue to see a gradual improvement,” she adds. “While Sabeco maintains its earnings growth target of 7% in CY2019, we believe it can exceed this, given the 22% y-o-y growth in 9MCY2019.”
Liang Court Redevelopment
CapitaLand
Price targets:
$4.15 OUTPERFORM (Macquarie Research)
$4.30 OVERWEIGHT (JPMorgan Research)
$4.20 OVERWEIGHT (Morgan Stanley Research)
$4.10 OUTPERFORM (Credit Suisse Research)
$4.12 NEUTRAL (Goldman Sachs Research)
$3.80 HOLD (UOB Kay Hian Research)
$4.20 BUY (RHB Group Research)
$4.15 ADD (CGS-CIMB Research)
CDL Hospitality Trusts
Price targets:
$1.78 BUY (RHB Group Research)
$1.50 UNDERWEIGHT (JP Morgan Research)
$1.80 BUY (DBS Group Research)
$2.05 BUY (UOB Kay Hian Research)
$1.54 NEUTRAL (Credit Suisse Research)
$1.83 ADD (CGS-CIMB Research)
$1.80 BUY (Maybank Kim Eng Research)
$1.74 OUTPERFORM (Daiwa Securities Research)
$1.71 UPGRADE BUY (HSBC Global Research)
City Developments
Price targets:
$11.90 OUTPERFORM (Macquarie Research)
$11.35 OVERWEIGHT (JPMorgan Research)
$11.00 BUY (DBS Group Research)
$11.60 OUTPERFORM (Credit Suisse Research)
$12.00 BUY (Jefferies Research)
$13.00 BUY (Goldman Sachs Research)
$10.50 NEUTRAL (RHB Group Research)
$12.00 BUY (UOB Kay Hian Research)
$12.09 ADD (CGS-CIMB Research)
Ascott Residence Trust
Price targets:
$1.45 OVERWEIGHT (JPMorgan Research)
$1.45 BUY (DBS Group Research)
$1.38 HOLD (Daiwa Securities Research)
$1.36 ACCUMULATE (Phillip Securities Research)
$1.66 BUY (UOB Kay Hian Research)
$1.34 HOLD (CGS-CIMB Research)
As property heavyweights CapitaLand, City Developments (CDL), CDL Hospitality Trusts (CDLHT) and Ascott Residence Trust (Ascott REIT) band together in a bid to redevelop the Liang Court site into an integrated development, market watchers believe that all four developers are poised to gain attractive returns.
On Nov 21, it was announced that the site — comprising Liang Court mall, Novotel Singapore Clarke Quay (NCQ) hotel, and serviced residence Somerset Liang Court Singapore — would be turned into an integrated development.
DBS Group Research analyst Derek Tan believes the redevelopment will be a “fourway win” for the companies involved. “The rejuvenation of the Liang Court precinct will complement and create synergies as both developers [CapitaLand and CDL] already own surrounding properties [in] the vicinity,” Tan says in a Nov 22 report.
According to Tan, the developers stand to gain higher returns through a “precious land bank” in the heart of the city. He describes the estimated cost of $1,000 psf and an all-in cost of some $1,400 psf as “attrac-tive and unattainable”, especially when compared with prices at recent government land sales for sites within the city.
“The estimated end value of $2.9 billion for the completed redevelopment represents an attractive return of close to 30% for the project,” says Tan.
Meanwhile, Tan notes that Ascott REIT’s partial sale of its stake in Somerset Liang Court to the consortium is poised to pay off in the longer term.
“The use of proceeds towards the redevelopment of a refreshed serviced residence product with a hotel licence is positive as it empowers the REIT with more operational flexibility to capture a broader clientele,” says Tan. “Upon completion, the expected upside in valuation and cash flows will underpin Ascott REIT’s longer-term growth profile.”
At the same time, CDLHT’s entry into an agreement with the CapitaLand-CDL joint venture to purchase the new hotel when completed in 2025 could well work in CDLHT’s favour, Tan says.
“The forward purchase price will be the lower of $475 million, or 110% of development costs. This protects CDLHT against any potential cost overruns from the entire integrated development,” he adds.
Jumbo Group
Price targets:
47 cents BUY (DBS Group Research)
47 cents ADD (CGS-CIMB Research)
Analysts are maintaining a ravenous appetite for restaurant chain operator Jumbo Group, despite the company facing continued headwinds such as operating cost pressures and heightened competition.
The group saw its FY2019 revenue coming in flat at $153.6 million, a marginal 0.1% lower than a year ago.
Despite the lack of revenue growth, the group managed to record a 5.9% increase in its FY2019 earnings to $11.7 million, as gross profit rose 1.4% to $97.9 million on the back of a higher profit margin.
“We expect Jumbo’s Singapore operations to be its main earnings driver in FY2020, post the closure of lower-margin stores and the opening of higher-end higher-footfall outlets,” says CGS-CIMB Research analyst Ong Khang Chuen in a Nov 26 report.
He sees Jumbo’s Singapore stores recording 2% same-store sales growth in FY2020, helped by continued tourist arrival growth. Additionally, the group’s Jumbo Seafood outlets that opened in Ion Orchard and Jewel Changi in FY2019 saw a strong ramp-up in sales, which Ong believes should contribute positively to its FY2020 bottom line.
Meanwhile, DBS Group Research is also positive on the counter. “We continue to like Jumbo for its regional expansion story, steady earnings growth, decent yield of 3.% to 3.8%, strong cash flow generation, and strong balance sheet,” says lead analyst Alfie Yeo in a flash note on Nov 27.
Aviation services sector
SIA Engineering Co
Price targets:
$3.00 BUY (Maybank Kim Eng Research)
$3.30 BUY (DBS Group Research)
$3.13 UPGRADE BUY (UOB Kay Hian Research)
$3.30 ADD (CGS-CIMB Research)
$2.74 HOLD (Daiwa Securities Research)
SATS
Price targets:
$6.10 BUY (Maybank Kim Eng Research)
$5.36 ACCUMULATE (Phillip Securities Research)
$5.09 HOLD (DBS Group Research)
$5.30 BUY (UOB Kay Hian Research)
$4.10 UNDERPERFORM (Credit Suisse Research)
Singapore Technologies Engineering
Price targets:
$4.64 BUY (DBS Group Research)
$4.55 BUY (RHB Group Research)
$4.50 BUY (Maybank Kim Eng Research)
$4.32 BUY (UOB Kay Hian Research)
The Singapore aviation services sector is poised to continue to soar, analysts say, as a pick-up in the number of international conferences and trade shows in 2020 is expected to fuel the sector’s continued outperformance.
To be sure, the sector has survived a turbulent year so far in 2019, marked by weak visitor arrivals in the first half of the year, as well as shrinking air cargo volume and unrest in Hong Kong.
Despite the turbulence, ST Engineering (STE), SATS and SIA Engineering (SIAEC) recorded y-o-y revenue growth for 3QFY2019, at 27.2%, 9.8% and 1.3% respectively.
“Operating challenges for the first two were defrayed by M&A and market diversification,” says Maybank Kim Eng Research analyst Neel Sinha in a Nov 25 report. Of the three, only SATS recorded a decline in core profit after taxes and minority interests (Patmi) of 7.6%. STE and SIAEC recorded core Patmi growth of 32.9% and 17.9% respectively for 3QFY2019.
SATS’ decline was attributed to lower volume due to air cargo exposure to the Changi and Hong Kong terminals, the loss of Jet Airways, as well as one-off upfront expansion costs in Haneda, Japan and Daxing, Beijing.
Meanwhile, SIAEC’s Patmi was ahead of expectations, with transformation initiatives of improving cost efficiencies and diversifying service offerings bearing fruit. The company had also improved market share at Changi to 81.6%, and recorded a 2.7% increase in flights handled in Singapore during 2Q2019 and 3Q2019 despite flights at Changi falling 1.2% during the same period.
Over at STE, growth was driven through various M&As, efficiency improvements and portfolio rationalisation. The company saw its revenue jump 27% to $2.07 billion for 3QFY2019 — the highest y-o-y growth in over a decade.
Sinha is of the opinion that all three counters are set to rise with a number of international events being held in Singapore in 2020. This is boosted by the fact that a large number of biennial events fall on even-numbered years.
Singapore is one of the top 10 international convention centres, hosting 150 to 160 international conferences annually. About 60 to 80 of these are major sector events with over 500 delegates.
“The Singapore Airshow is the most notable amongst these,” he says. “The trade show attracts more than 60 of the 100 largest global aerospace, aviation [and] defence firms and 50,000 [plus] delegates from [over] 100 countries. The other large notable biennial conferences are the Global Smart Cities and environmental summits and the International Water Convention, all scheduled for 2020 as well.”
EC World Real Estate Investment Trust
Price targets:
84 cents INITIATE OUTPERFORM (KGI Securities Research)
84 cents BUY (Phillip Securities Research)
86 cents BUY (DBS Group Research)
82 cents BUY (RHB Group Research)
KGI Securities is initiating coverage on EC World REIT (ECW) with an “outperform” recommendation and a price target of 84 cents — representing a total upside of more than 23%, including a dividend yield forecast of 9.1% for FY2020.
“EC World REIT is the only specialised and e-commerce logistics S-REIT that provides investment access into China’s booming e-commerce industry,” says analyst Amirah Yusoff in an initiation report on Nov 25.
Amirah notes that ECW’s portfolio is “well-diversified” into three main logistics segments — port, specialised and e-commerce logistics — which lends stability to its income.
“China has quickly emerged as a global leader in e-commerce with the rise of technology. This inevitably translates into demand for e-commerce logistics assets, which represent 40% of ECW’s portfolio,” Amirah says.
“With support, too, from the Chinese government to propel the e-commerce and technology space in the coming years, we believe that ECW’s assets are well-positioned to capture the vast growth opportunities,” she adds.
Since its IPO in 2016, ECW’s assets have also enjoyed close to 100% occupancy levels, with the exception of Wuhan Meiluote, which saw its occupancy drop to 85.8% recently after JD.com vacated the property.
However, Amirah points out that the management has been in active discussion with several interested parties regarding the space, and are optimistic on filling occupancy by year-end.
At the same time, the analyst also likes ECW for its strong sponsor, Forchn Holdings Group Co — a well-established operator of port facilities in China with over 20 years of experience.
“A reasonable proportion of the multi-tenanted properties are, directly or indirectly, leased to wholly-owned subsidiaries of the sponsor,” says Amirah. “Therefore, we think that WALE (weighted average lease to expiry) and occupancy should remain relatively secure and consistent, enhancing income visibility.”
For 3QFY2019 ended September, ECW saw its gross revenue increase 7.5% y-o-y to $25.7 million, while net property income (NPI) grew 3.2% to $22.9 million. The better performance was led by contribution from Fuzhou E-Commerce, which was acquired in August 2019, and rental escalation at the other properties.
However, 3QFY2019 distribution per unit (DPU) fell 5.2% to 1.489 cents on the back of a 35.4% jump in finance costs and a $1.5 million foreign exchange loss during the quarter.
To be sure, KGI is not the only brokerage with a bullish view on ECW. In particular, DBS Group Research lead analyst Derek Tan likes ECW’s recent acquisition of the Fuzhou E-Commerce property.
“The recent acquisition of yet another property on master lease will provide further income stability and visibility,” says Tan in a Nov 11 report. “From 4Q2019, the new asset is expected to contribute close to $3.6 million to quarterly NPI and close to 1.6% accretion to DPU.
“With the acquisition of the Fuzhou E-Commerce property, ECW’s portfolio WALE has been extended to 4.3 years, and overall portfolio occupancy stands at 99.2%.”
