19 May 2017

SIA Eng, Food Empire, Comfort Delgro and ShengSiong

Morning all,

Please watch for Comfort Delgro (to buy around 2.30 to 2.40 range), ShengSiong (price stable after XD) and property counter (CityDev)

Telecomm counters should be facing headwinds and price is expected to drift lower over the months due to rising costs and increasing competitions.

Avoid Noble, unless you are just wanting to trade.

 my 2 cents

- Oil prices up 2% after deal to extend supply cut

- Wall Street rises as oil price jump boosts energy shares http://www.straitstimes.com/business/wall-street-rises-as-oil-price-jump-boosts-energy-shares?xtor=CS3-18

- Chinese economy loses steam due to debt-risk clampdown http://www.straitstimes.com/business/economy/chinese-economy-loses-steam-due-to-debt-risk-clampdown?xtor=CS3-18

- Thailand's GDP expands 3.3% in Q1, fuelled by agriculture http://www.straitstimes.com/business/thailands-gdp-expands-33-in-q1-fuelled-by-agriculture

- Traders shake off worries over global events http://www.straitstimes.com/business/companies-markets/traders-shake-off-worries-over-global-events?xtor=CS3-18

- New private home sales stay robust http://www.straitstimes.com/business/new-private-home-sales-stay-robust?xtor=CS3-18

- Croesus last close $1, 52wk high/low $1.02/$0.783 - Croesus available DPU for Q3 up 15.2%

- Golden Energy last close $0.425, 52wk high/low $0.71/$0.395 - Company sees Q1 revenue boosted by coal mining division http://www.businesstimes.com.sg/companies-markets/golden-energy-sees-q1-revenue-boosted-by-coal-mining-division

- Golden Agri last close $0.375, 52wk high/low $0.45/$0.325 - Revenue up, but Golden-Agri's Q1 profit falls by 60% http://www.straitstimes.com/business/companies-markets/revenue-up-but-golden-agris-q1-profit-falls-by-60

- MM2 last close $0.53, 52wk high/low $0.55/$0.27 - mm2 ties up with Turner Asia Pacific to produce five films http://www.businesstimes.com.sg/companies-markets/mm2-ties-up-with-turner-asia-pacific-to-produce-five-films

- Noble $0.59, 52wk high/low $2.80/$0.57 - Noble Group routed again as analysts look at worst-case outcomes http://www.straitstimes.com/business/noble-group-routed-again-as-analysts-look-at-worst-case-outcomes?xtor=CS3-18; Noble Group saviour Brough is turnaround specialist http://www.businesstimes.com.sg/companies-markets/noble-group-saviour-brough-is-turnaround-specialist?xtor=CS3-25

- Olam last close $1.99, 52wk high/low $2.17/$1.59 - Earnings in food sector boost Olam's Q1 results http://www.straitstimes.com/business/earnings-in-food-sector-boost-olams-q1-results?xtor=CS3-18

- Sinarmas Land last close $0.45, 52wk high/low $0.54/$0.415 - Boost for Sinarmas Land profit from Indonesian recovery http://www.straitstimes.com/business/boost-for-sinarmas-land-profit-from-indonesian-recovery?xtor=CS3-18

- Starhill Global Reit last close $0.745, 52wk high/low $0.84/$0.725 - REIT divests 4th property in Tokyo http://www.businesstimes.com.sg/companies-markets/starhill-global-reit-divests-4th-property-in-tokyo

- Yanlord last close $1.81, 52wk high/low $1.99/$1.09 - 1Q 2017 profit leaps 259.1% driven by home buyer demand in China http://infopub.sgx.com/FileOpen/15-05-2017_1Q2017_PressRelease.ashx?App=Announcement&FileID=453900

- Valuemax last close $0.265, 52wk high/low $0.29/$0.22 - Company's Q1 profit surges 41.1% to S$4.9m http://www.businesstimes.com.sg/companies-markets/valuemaxs-q1-profit-surges-411-to-s49m

Good morning,

  • SIA (SIA SP)'s Apr pax load factor rose 3.7ppt yoy on the back of a 4.5% rise in traffic, with strong loads on long haul routes.
  • While SIA indicated that Apr's stronger demand was helped in part by a shift in Easter holidays from March to April, load factors have improved for 5 consecutive months. Apr's load factor at 80.8% was also the highest April load factor in more than than 10 years.
  • Pax loads on long haul routes to Europe and  Americas rose by 8.7ppt, and 5.8ppt respectively, and this holds scope for higher front end loads and thus overall yields.
  • Cargo loads also rose 2.3ppt in Apr on the back of a 3% rise in cargo traffic. The improvement in long haul pax load factors and cargo load factors bodes well for FY18 profitability.
SIA will report results on 18 Apr 2017 and we expect core 4QFY17 net profit to rise 25% yoy. We will also seek management's guidance on inbound traffic from Europe, the reasons behind the strong international load factors and their impact on yields. We place our HOLD recommendation and TP of S$10.40 under review, pending 4QFY17 results.

Link to announcement:  http://infopub.sgx.com/FileOpen/opstats-apr17.ashx?App=Announcement&FileID=453722

Good morning

We maintain SELL on SIA engineering (SIE SP) but raise our TP from S$3.30 to S$3.50.

  • 4QFY17's 15% core earnings growth is not reflective of long term prospects. Instead, profits were aided by a 64% rise in associate profits due to unexpected checks on the P&W 4000 engine series on older aircraft which were made economical by low fuel prices.

  • However, the odds of this repeating are low given that fuel prices have since rebounded, and SIAEC affirmed this view by stating that the PW4000 maintenance was mature. We do not see 4Q's stronger associate profits as a sign of a cyclical recovery but have followed SIAEC’s guidance of a potential uplift in Trent engine maintenance and raised our earnings estimates.

  • Market is pricing in a cyclical recovery but we believe it is premature to form such an opinion, given a) rising cost pressures and increasing competition from MROs will impact margins, b) major overhauls for the Trent 1000 and Trent XWB are still more than 5 years away and c) earnings growth for the next 2 years will be largely dependent on the successful growth of line maintenance ventures.

  • Valuations are rich with the stock trading at 26x FY18 PE, 26% above peers. This is despite core net profit rising by just 1.8% in FY17, and we expect earnings to be largely flat going into FY18-19 even after factoring in higher revenue growth.

Link:  https://research.uobkayhian.com/content_view.jsp?id=39865&ety=cty&h=c42bd6650f37513f5375dd4e9414b359&


Food Empire Holdings (FEH SP)

BUY | Price/Tgt: S$0.655/S$0.90 | Mkt Cap: S$349.3m

2QFY17: Stable Core Market Currencies Lead To Strong Results

Food Empire’s 1Q17 results came in above our expectations as net profit to equity holders rose 58.8% on the back of strong growth in sales for most key markets. As core market currencies stabilise, we expect Food Empire’s strong pricing power to translate into stable growth for the company. With the CEO buying back shares once again, investors should follow suit. Maintain BUY with a higher PE-based target price of S$0.90 (previously S$0.78).

WHAT’s New
·        Food Empire Holdings (FEH) reported 1Q17 results with net profit to shareholders coming in at US$6.3m vs US$4.0m for 1Q16. The increase in net profit was attributable to an increase in sales in Russia, Kazakhstan and the rest of the CIS nations. Russia accounted for about 48% of sales for 1Q17 with sales growing 23% yoy from US$24.3m in 1Q16 to US$29.9m in 1Q17 due to a stronger Russian ruble (RUB). 1Q17 Sales in Kazakhstan and the rest of the CIS nations grew 141.6% yoy due to a change in business model where FEH takes more control over sales by reducing the compensation given to distributors. Vietnam sales came in much weaker than we had expected with sales falling 18% yoy from US$8.6m in 1Q16 to US$7.0m in 1Q17 due to an overstocking situation in Vietnam in Jan 17. We believe that the situation has normalised in Feb/Mar 17. Stripping out the effects of forex and other one-off items, FEH’s 1Q17 profit to equity holders was about US$4.8m vs US$1m for 1Q16.
·        Margins on the rise. Gross margin trended upwards from 32.1% in 1Q16 to 39.9% in 1Q17 due to higher operating leverage together with a more favourable foreign exchange rate.

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Gross Profit
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