|CIMB SECURITIES||UOB KAYHIAN|
Sarine Technologies Ltd
Sell-off overdone; restoring its lost shine
■ Sarine trades at 15.9x CY18F P/E, 14% below its historical 9-year average of 19.1x.
■ Improved diamond prices in mid-stream value chain point to better sales outlook for Sarine.
■ It plans to enter the diamond grading market with the opening of two labs in 2018.
■ In Jan 2018, the company launched the Meteorite system to capture sales from the under-0.35 carat stone segment.
■ We upgrade to Add from Hold in light of a more positive business outlook. Our new TP is lower at S$1.56, based on 17.2x CY19F P/E, with a transfer of analyst coverage.
Manulife US REIT (MUST SP)
A Giant Leap For Manulife
Manulife US REIT is an up-and-coming institutional player with a US$1.3b portfolio comprising five prime freehold assets with an NLA of 3m sf, 5.9 years WALE and a healthy 96% occupancy across Northern New Jersey, Orange County, Los Angeles and Atlanta. Valuations are undemanding with yield of 6.5%, about 150bp higher than Singapore peers’ despite the latter having mostly leasehold properties. Initiate coverage with BUY and target price of US$1.12.
|OCBC SECURITIES||DBS VICKERS|
Hutchison Port Holdings Trust: Better than the headlines
Hutchison Port Holdings Trust’s (HPHT) results were within expectations, with FY17 DPU coming to 98.1% of our full-year forecast. As announced on 1 Feb 2018, the National Development and Reform Commission (NDRC) has reduced the “list price” or reference tariff rate for origin and destination foreign trade containers at Shenzhen – Yantian ports from RMB 1400/TEU to RMB 980/TEU. While we believe the recent regulatory measures has tangible implications for the industry, we see the impact on HPHT as a whole as being significantly muted than what headlines would suggest. Based on our analysis, HPHT’s unit price reaction on 2 Feb has been too severe. Note that though YICT contributes ~64% to HPHT’s top-line, it contributes less to the bottom line as a 50+% owned subsidiary of HPHT. Furthermore, we estimate that YICT’s ASP is already ~50% below the new “list price” tariff, which should allow the port operator some buffer in negotiations going forward. After rolling our estimates forward, our fair values increases from US$0.42 to US$0.43. We upgrade HPHT from Hold to BUY.
Expanding on mid-recovery outperformers
• February events - Budget 2018, results season has little room for disappointment
• STI corrects off 3600, near-term support 3450-3480
• Interest on mid-economic expansion outperformers to expand – O&G, basic materials, commodities, consumer
• SMC interest should improve - Roxy Pacific, Frasers Commercial Trust, POSH, Breadtalk, HRNetGroup
Singapore Airshow may bring some cheer Opportunity to buy on share price weakness.
Over the last 7 months, SIA Engineering (SIE)’s share price has declined c.20% from the previous peak, owing to a combination of weakerthan-expected 1HFY18 earnings, removal from the STI index since September 2017, and an alleged bulk sale of shares at a discount. We now see an opportunity to buy on weakness. SIE’s forward P/E is now around the -1SD level relative to its 5-year average. Further, with the Singapore Airshow starting this week, we expect some announcements of contracts and/or partnerships, which could be a catalyst for an upward re-rating of the shares (share price has risen by 8% on average over the last 5 Singapore Airshows on such announcements). Additionally, while revenues remained flat in 3QFY18, we saw a jump in JV earnings (primarily from SAESL, which is SIE’s RollsRoyce engine JV) which could hint at some upswing in the engine MRO cycle. Upgrade to BUY with TP of S$3.86 (20% allin return including c.4% dividend yield)
Check out our compilation of Target Prices