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What happened in markets this week, and what are analysts talking about?
Uni-Asia
• KGI; Joel Ng: Upgrade to Outperform with TP S$0.91. Valuations are attractive with bulk carrier upcycle and resilient property markets in HK and Japan. The House raises its multiples for shipping division from 0.2x to 0.5x P/B while maintaining 0.5x P/B for its HK and Japan property business. Forecast dividend of 3-3.5 S Cents on 40-48% payout ratio to give an implied dividend yield of 5%.
Koufu
• PhillipCapital; Terrence Chua: Downgrade to neutral with lower TP S$0.64: Given the slower than expected recovery in consumption, the house lower its profit forecast and reduced its TP to S$0.64 implying a PE of 18.5x FY21F. Koufu has seen a fall in footfalls for its food outlets in malls and tertiary institutions as Singapore move into Phase 2 (Heightened Alert). Construction of its integrated facility has also been delayed by COVID-19 measures to 3Q21, where the Group will be occupying 75% of total GFA and leasing out the remaining.
Boustead Projects
Boustead Projects reported a net profit of S$131.7m which was below expectations, as its design and build segment was affected by COVID-19. With the successful unlocking of its value and capital recycling, Boustead Projects has declared a special dividend of 14.5 S cents, with a total FY21 DPS of 15.4 S cents translating to a yield of 13.9%.
•CIMB; Ong Khang Chuen; Add with higher TP S$1.40: Valuations are attractive with net cash of S$0.95/share as of end of FY21, while owning a portfolio of industrial properties worth S$700m that can be potentially injected into property trusts. Raise TP to S$1.40 on 25% discount to RNAV of S$1.86 (post-special dividend payout).
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What happened in markets this week, and what are analysts talking about?
Tencent
Tencent reported 1Q results which were generally in line with estimates. Revenue +25% yoy to RMB135,303m ; Net profit +65% yoy to RMB47,767m while non IFRS net profit grew 22% yoy to RMB33,118m.
• CIMB; Mark & Chi Man: Maintain ADD with a lower TP of HK$677.1. The slowdown in online game revenue growth was somewhat expected due to the positive impact of COVID-19 in 2020 on online gaming revenue. Tencent stated that it would increase its investment in 3 strategic areas (1) Business services (SaaS products); (2) games; (3) short video. The increase in investment is expected to put pressure on near-term profitability- as such reduce net profit forecasts for FY21-23F with a lower DCF based TP of HK$677.1.
• UBS: Maintain BUY with a lower TP of HK$730. Sees Tencent as the less risky option in a sector facing regulatory and competitive headwinds. Believe the magnitude and pace of investment will be milder compared to peers who are building asset-heavy and lower margin businesses. As a result of the investments which will hit near term earnings, revise earnings down by 7% in 2021-2022 and lower PT to HK$730 (from HK$780).
• UOB: Maintain BUY with a lower TP of HK$789. Good 1Q results as online gaming revenue growth normalizing, online advertising remaining strong and Fintech and business services revenue growth accelerating to 47% on faster growth from cloud segment, consolidation of Bitauto, and healthy growth in fintech services. However, the House also reduced it TP to HK$789 (from HK832) as it lower its net profit forecasts on ongoing investments and as the company enter another period of transition.
Singapore Airlines
• UOB; K Ajith: Maintain SELL with lower TP S$4.15: Earnings were within expectations, however, the issuance of S$6.2b in mandatory convertible bonds (MCB) offers shareholders little to cheer. Temasek has given an undertaking to take up any unsubscribed portions. Including the latest MCB, SIA would have raised S$21.6b since the pandemic started. Monthly operating cash burn has declined to S$100-150m from S$250m in Feb 21. SIA plans to raise pax capacity to 32% (of pre-pandemic levels) by Jul 21. (Currently pax capacity in Apr 21 was 24% of pre-pandemic level)
• CLSA: Maintain SELL at S$4.20. The house remains cautious of SIA’s recovery outlook and lowers its passenger traffic assumption cutting its FY23F net profit forecast by 16%. Stock is trading at 1.3x forward P/B against a long-term average of 0.96x.
Jiutian
Jiutian is a manufacturer of chemicals that are used as feedstock for a variety of applications including DMF, which is used in consumer goods, pharmaceutical, agrochemical products and electronics sectors.
•KGI, Joel: Initiate Outperform with TP of S$0.145: TP is based on 7x FY2022F PE, as the House expects to record earnings in 2021, helped by favorable industry supply/demand dynamics. The Group declared its first dividend since 2008 of S$0.0035 for 1Q2021. The House forecasts a full year dividend of S$0.0063-0.0084 for FY2021-2023F based on 30% payout ratio, which will translate to a yield of 7-9%.
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What happened in markets this week, and what are analysts talking about?
iFast
To recap, iFast reported its results in April with a record net profit of S$8.8m in 1Q (2.5x from a year ago); on the back of a 51.4% rise in revenue. Assets under admin (AUA) also grew to a new record of S$16.1b. Link to results ppt
• UBS; Aakash: Initiate BUY with TP of S$10. While at first glance, iFast is expensive at 48x Forward PE, however, the House believes that near-term growth is not priced in, not to mention the potential hockey stick growth which the House believes may be possible given the scalability of the business. The House believes iFast may enjoy strong growth given (1) its recent history of rapid 20%+ AUA growth; (2) Early experiences of mature peers; (3) Structural Asian wealth management growth opportunity in SG/China; (4) Greater acceptance of online platforms and (5) Room to grow market share in 5 key markets.
Riverstone Holdings
• CIMB; Ong Khang Chuen: Maintain BUY with a lower TP of S$1.80. Continue to like Riverstone for its strong earnings prospects as it benefits from the robust glove demand in both cleanroom and healthcare sectors. Hower, the house lower TP due to a switch to DCF valuation methodology to better reflect the inflection in selling prices and earnings normalisation in coming years. The house sees dividend yield for FY21F to potentially rise to 13.2% assuming a 60% payout ratio.
• UOB; John Cheong: Maintain BUY with a higher TP of S$1.75. 1Q net profit beat the house estimate by >100% due to higher than expected ASP and net margin, as well as favorable demand-supply dynamics. The house sees Riverstone’s cleanroom gloves as standing a good chance to maintain favorable ASP beyond COVID-19 as unique selling points.
Propnex
•UOB; Adrian Loh: Maintain BUY with a higher TP of S$1.34. 1Q net profit jumped 97% to S$16.2m beating estimates. According to management, the stronger results were due to improved market sentiment, successful COVID-19 vaccine rolls out locally, and availability of ample liquidity, and attractively priced new project launches. While Management believes cooling measures are likely but it will be targeted in nature as the pace of economic recovery remains uncertain.
•CIMB; Lock Mun Yee: Maintain BUY with higher TP of S$1.19, based on 10x FY2021F PE and DCF valuation. The House raised its earnings estimates for FY21-23F by 14.9-21.9% after increasing its private resale and primary market transaction value assumptions due to a higher mix of centrally located products.
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