Investors’ Corner (Japfa, SMRT Corp, CapitaRetail China Trust, Sheng Siong Group)
Related stocks: SGX:UD2, SGX:S53, SGX:AU8U, SGX:OV8
Japfa
Price – $0.635
Target – $0.80
Japfa’s wholly-owned subsidiary, Japfa Myanmar JV, had entered into a conditional share purchase agreement to acquire the remaining 15% of Japfa Comfeed Myanmar (JCMA) for US$5.7m, subject to approval by Myanmar Investment Commission. While we expect the acquisition’s impact on earnings to be immaterial, we believe the potential growth in the Myanmar market should continue to contribute to Japfa’s earnings growth over the long term. Based on our recent checks, broiler Day-Old-Chick (DOC) prices in Indonesia have now recovered to between IDR3,100 and IDR5,100 per chick, from less than IDR1,000 per chick in Oct/Nov-14. We continue to expect strong long-term potential in both DOC and broiler demand in Indonesia, premised on an expanding middle class and still low consumption per capita. We also believe government efforts to reduce DOC grand-parent stock import quota would have positive price implications in 2016. Reiterate BUY. DBS Vickers (2 Feb)
SMRT Corporation
Price – $1.73
Target – $1.90
SMRT Corporation continued its recovery momentum, as 3Q15 profit after tax and minority interest (PATMI) jumped 58.4% y-o-y to $22.5m on the back of a 6.8% broad-based revenue growth to $313.2m. The fare business continued to show solid growth on higher ridership and average fares as well as lower diesel costs. Non-fare business improved mainly on higher rental income. Sustained strong performance for all 3 quarters led to a 56% y-o-y increase in 9M15 PATMI to $70.2m. Outlook on SMRT remains positive due to the group’s ability to consistently manage expenses since 1Q15, management stating that electricity costs will continue to decrease, expectations of higher growth in the taxi segment and the disposal of SMRT’s bus assets to switch to the new bus contracting model that could lead to special dividend or acquisition for growth. Maintain BUY. OCBC Investment (30 Jan)
CapitaRetail China Trust
Price – $1.73
Target – $1.80
CapitaRetail China Trust posted a 12.7% y-o-y rise in 4Q14 distribution per unit (DPU) to $0.0248, bringing FY14 DPU to $0.0982 (up 8.9% y-o-y). Full-year contribution from CapitaMall Grand Canyon underpinned FY14 net property income increase of 26%. Tenant sales rose across all trade sectors, with 4Q14 y-o-y growth of 21% translating to a full-year increase of 16% (9% rise in FY13). Rent reversion for the quarter continued to be strong at 20.6%, led by CapitaMall Wangjing and CapitaMall Saihan. Occupancy fell 1.7 percentage points q-o-q to 95.9%, due to tenant mixing at CapitaMall Wuhu and the closure of Zhongshan Avenue leading to poorer accessibility to CapitaMall Minzhongleyuan that could see further downside pressure but only comprises 5% of full-year projections. Assuming optimal gearing of 35% (now 28.5%) there is ample debt headroom of Rmb1.1b for acquisitions. The stock is also proxy to the yuan appreciation. Key risks include weakness in China’s economy. Maintain OVERWEIGHT. JP Morgan (29 Jan)
Sheng Siong Group
Price – $0.71
Target – $0.84
After 2 years of no-store growth, Sheng Siong Group opened 2 stores in Dec-14 to Jan-15, hiking total store count to 35. Recent grouses about the group centred on its need to buy sites to expand, since that is expensive and morphs the business model into an asset-heavy one. We agree but also feel that such grouses will dissipate as new stores deliver earnings growth. Sheng Siong has also won the bid to run a store in a new integrated dormitory in Penjuru. Other purpose-built dormitories in the pipeline represent new store opportunities as the firm’s positioning sits well in this segment. Our last concern is whether Sheng Siong will be overly aggressive in expanding to China. Management has clarified that its plans are conservative and intends to open only 1 to 2 stores initially, and will limit its investments to US$6m. We also see prospects in new HDB townships and the possibility of taking over stores from competitors. Maintain ADD. CIMB Securities (28 Jan)
http://www.sharesinv.com
Related stocks: SGX:UD2, SGX:S53, SGX:AU8U, SGX:OV8
Japfa
Price – $0.635
Target – $0.80
Japfa’s wholly-owned subsidiary, Japfa Myanmar JV, had entered into a conditional share purchase agreement to acquire the remaining 15% of Japfa Comfeed Myanmar (JCMA) for US$5.7m, subject to approval by Myanmar Investment Commission. While we expect the acquisition’s impact on earnings to be immaterial, we believe the potential growth in the Myanmar market should continue to contribute to Japfa’s earnings growth over the long term. Based on our recent checks, broiler Day-Old-Chick (DOC) prices in Indonesia have now recovered to between IDR3,100 and IDR5,100 per chick, from less than IDR1,000 per chick in Oct/Nov-14. We continue to expect strong long-term potential in both DOC and broiler demand in Indonesia, premised on an expanding middle class and still low consumption per capita. We also believe government efforts to reduce DOC grand-parent stock import quota would have positive price implications in 2016. Reiterate BUY. DBS Vickers (2 Feb)
SMRT Corporation
Price – $1.73
Target – $1.90
SMRT Corporation continued its recovery momentum, as 3Q15 profit after tax and minority interest (PATMI) jumped 58.4% y-o-y to $22.5m on the back of a 6.8% broad-based revenue growth to $313.2m. The fare business continued to show solid growth on higher ridership and average fares as well as lower diesel costs. Non-fare business improved mainly on higher rental income. Sustained strong performance for all 3 quarters led to a 56% y-o-y increase in 9M15 PATMI to $70.2m. Outlook on SMRT remains positive due to the group’s ability to consistently manage expenses since 1Q15, management stating that electricity costs will continue to decrease, expectations of higher growth in the taxi segment and the disposal of SMRT’s bus assets to switch to the new bus contracting model that could lead to special dividend or acquisition for growth. Maintain BUY. OCBC Investment (30 Jan)
CapitaRetail China Trust
Price – $1.73
Target – $1.80
CapitaRetail China Trust posted a 12.7% y-o-y rise in 4Q14 distribution per unit (DPU) to $0.0248, bringing FY14 DPU to $0.0982 (up 8.9% y-o-y). Full-year contribution from CapitaMall Grand Canyon underpinned FY14 net property income increase of 26%. Tenant sales rose across all trade sectors, with 4Q14 y-o-y growth of 21% translating to a full-year increase of 16% (9% rise in FY13). Rent reversion for the quarter continued to be strong at 20.6%, led by CapitaMall Wangjing and CapitaMall Saihan. Occupancy fell 1.7 percentage points q-o-q to 95.9%, due to tenant mixing at CapitaMall Wuhu and the closure of Zhongshan Avenue leading to poorer accessibility to CapitaMall Minzhongleyuan that could see further downside pressure but only comprises 5% of full-year projections. Assuming optimal gearing of 35% (now 28.5%) there is ample debt headroom of Rmb1.1b for acquisitions. The stock is also proxy to the yuan appreciation. Key risks include weakness in China’s economy. Maintain OVERWEIGHT. JP Morgan (29 Jan)
Sheng Siong Group
Price – $0.71
Target – $0.84
After 2 years of no-store growth, Sheng Siong Group opened 2 stores in Dec-14 to Jan-15, hiking total store count to 35. Recent grouses about the group centred on its need to buy sites to expand, since that is expensive and morphs the business model into an asset-heavy one. We agree but also feel that such grouses will dissipate as new stores deliver earnings growth. Sheng Siong has also won the bid to run a store in a new integrated dormitory in Penjuru. Other purpose-built dormitories in the pipeline represent new store opportunities as the firm’s positioning sits well in this segment. Our last concern is whether Sheng Siong will be overly aggressive in expanding to China. Management has clarified that its plans are conservative and intends to open only 1 to 2 stores initially, and will limit its investments to US$6m. We also see prospects in new HDB townships and the possibility of taking over stores from competitors. Maintain ADD. CIMB Securities (28 Jan)
http://www.sharesinv.com
