Lendlease Global Commercial REIT
Price target:
UOB Kay Hian “buy” 97 cents
Beneficiary of Orchard Road rejuvenation
UOB Kay Hian has initiated a “buy” call on Lendlease Global Commercial REIT (LREIT) with a target price of 97 cents.
Analysts Jonathan Koh and Loke Peihao believe that the REIT’s largest asset — 313@Somerset — is uniquely positioned due to its youth orientation and prime location on top of Somerset MRT Station, one of the busiest in Singapore.
It will also benefit from the government’s plan to rejuvenate Orchard Road. The other key asset, Italian property Sky Complex, is located at the emerging and vibrant office area Milano Santa Giulia in Milan.
It is fully leased to broadcaster Sky Italia on a triple net basis till May 15, 2032, with a long weighted average lease expiry (WALE) of 11.6 years, thereby providing income stability.
The REIT also has access to a potential acquisition pipeline from its sponsor Lendlease Group, which has a development pipeline value of A$113 billion ($111.49 billion) and funds under management of A$36 billion.
“LREIT will increase its exposures to other gateway cities through right of first refusal (ROFR) provided by its sponsor. Lendlease Group has a strong presence in Singapore through Jem (15.1% stake), Parkway Parade (10.2% stake) and Paya Lebar Quarter (30% stake). It also has [a] long-standing presence in Australia, Asia (Singapore, Malaysia, China and Japan), Europe (Italy and the UK) and the US,” the analysts note. Koh and Loke call LREIT a “laggard” with not just an attractive yield but also a 20% discount to NAV. — Felicia Tan
Jumbo Group
Price target:
DBS Group Research “fully valued” 21 cents
RHB “sell” 19 cents
Long road to recovery
DBS analyst Alfie Yeo has recommended “fully valued” on Jumbo Group with a maintained target price of 21 cents after the restaurant operator reported a $8.2 million loss for the FY2020 on Nov 27.
He disagrees with consensus estimates that Jumbo will return to the black by earning $10.3 million in FY2021. Rather, Yeo estimates Jumbo to make $7.6 million instead given the slow recovery seen.
However, when tourists return to Singapore, Jumbo’s share price will be up for a re-rating. “Visibility for earnings recovery remains poor for now,” he adds.
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RHB analyst Juliana Cai shares Yeo’s sentiment, as she maintains her “sell” rating on the counter with a target price of 19 cents.
In addition to the lack of tourists, she expects a soft FY2021 revenue outlook due to cautious business sentiment and the lack of international travel.
On the upside, Jumbo is seeing a stronger recovery trend in China after months of positive momentum in sales and the closure of its underperforming outlet in Shanghai’s Raffles City.
These should help “narrow losses and chart a turnaround for its China operations”, Cai adds. “We understand from management that the business was still not profitable in 4QFY2020 (Phase Two of Singapore’s economic reopening). Hence, we cut our FY2021-FY2022 earnings by 81% to 45% to account for weaker-than-expected recovery,” she says. — Felicia Tan
Q&M Dental Group
Price target:
KGI Securities “outperform” 54 cents
Acquisitions positive, core business resilient KGI Securities’s analysts Joel Ng and Amirah Yusoff have initiated coverage for Q&M Dental Group with an “outperform” rating and a target price of 54 cents, due to the resilience of its “bread and butter” dental and medical services through the Covid-19 pandemic.
Although business at its clinics were somewhat affected during the “circuit breaker” period of April to June 2020, demand has quickly bounced back.
As a result, its dental and healthcare services remain its core strength and will continue to lend a greater level of stability to the business.
Even with more than 80 clinics across Singapore, Q&M is aiming for further expansion both in the Republic and in Asia, with an eye on other healthcare segments like medical technology, AI and even specialised education to provide additional value to its shareholders.
Furthermore, after the disposal of its stake in Aidite “for a sizeable profit”, Q&M also ventured into artificial intelligence (AI) medical technology in partnership with International Medical University (IMU) Malaysia in an effort to champion AI-based diagnostics and treatment.
Most notably, Ng and Amirah highlighted Q&M’s venture into medical technology firm Acumen Diagnostics in April, a move that will provide a “strong but short-term boost” to earnings within the next two years. Acumen Diagnostics has been mainly involved in the manufacture, sale and distribution of diagnostic test kits for Covid-19 in Singapore and internationally.
They expect the business to contribute “positively, and significantly” to Q&M in the short-term as combatting the virus remains an immediate priority globally. The analysts also do not expect the implementation of vaccines to impact significantly on the rate of testing, as Covid-19 testing will still be needed to ensure the efficacy of vaccines, even to confirm the absence of any virus transmission within the community.
They conclude that Q&M will continue to generate stable and resilient earnings, and foresee no material changes in or threats to its market share in the private dental space in the medium-term. — Lim Hui Jie
Thai Beverage
Price target:
PhillipCapital “buy” 86 cents
UOB Kay Hian “buy” 85 cents
Spirited performance’ inspires upgrades
Analysts at PhillipCapital and UOB Kay Hian are positive on Thai Beverage’s recent results, with earnings holding up even amid the pandemic.
On Nov 26, the regional F&B group reported full year earnings of THB22.75 billion ($1 billion), down 2% y-o-y, on the back of a 5.2% y-o-y dip in revenue to THB253.48 billion.
PhillipCapital analyst Paul Chew, in his Nov 30 report, cited a recovery in spirit sales, increased beer margins and a raised final dividend as his reasons to maintain “buy” on the counter.
“ThaiBev managed to increase its earnings in FY2020, exone-offs, despite lockdowns, economic weakness and tighter regulations on alcohol consumption. To cope with these, it bludgeoned its marketing and distribution spending, which dropped 14% y-o-y or THB4 billion,” he says.
For the coming year, Chew sees revenue growth for the company’s spirit and beer segments to increase by 3% and 4% respectively.
Gross margins are seen to improve too, with sales and marketing expenses kept tight. “If it increases spending at all, it would be to respond to aggressive promotions by competitors,” he adds, who has a revised target price of 86 cents on the stock, based on a P/E of 18 times, from 82 cents earlier.
However, Chew warns that Thai Bev’s Vietnam subsidiary Sabeco will remain weak due to tight enforcement of the new drink-driving regulations in Vietnam, as well as the closure of restaurants and bars.
“Any significant pick-up will depend on the ability of its new Saigon Chill product to compete in the sub-premium category of beers, and the enforcement of regulations on alcohol consumption,” he says. For UOB Kay Hian analyst Lucas Teng, ThaiBev’s “resilient” performance was above expectations, given the pandemic. Teng lauds the company for keeping its costs down, “which look set to continue in the near term, given lower levels of on-premise activities”.
He notes that Thai Bev has been deleveraging its balance sheet using cash flows from its operations, with net gearing pared down to 1.01 times as of FY2020. The group has available credit facilities of THB40 billion to refinance its existing bonds due in March 2021, if required,” says Teng, who has “buy” call and 85 cents target price, up from 78 cents previously. — Felicia Tan
Multi-Chem
Price target:
RHB “unrated”
An undiscovered gem in Singapore’s tech scene
RHB Group Research’s Jarick Seet has called Multi-Chem — which provides IT security solutions and training — “a little known cash tech gem” in Singapore’s technology space that is trading at low valuations while giving out steady dividends. It is also seeing stronger demand for IT related products.
In an unrated note on Dec 1, he highlighted as at 1H2020, Multi-Chem’s net cash stood at $71.1 million, or 62% of its current market cap.
Management owns about 80% of the company and has shown a great track record in rewarding shareholders with dividends. Furthermore, the company enjoyed stable earnings from FY2015 to FY2019, and “is likely poised for further strong growth in FY2020.” 1H2020 Patmi surged 84% to $7.3 million, and if prorated, represents only 7.8x FY2020 P/E and a lower 3.9x ex-cash P/E.
SEE:UOBKH sees 'minimal' impact on ThaiBev from Thai political unrest
As such, he believes that this trend is set to continue with the further advancement into 5G, a rise in e-commerce and increased reliance on technology for more companies even as the pandemic subsides. Seet notes the company has also shown a willingness to pay more dividends if profitability increased with its payout ratio ranging from 40% to 75%.
With profitability expected to increase along and a brighter outlook, Seet expects the payout can be maintained and possibly raised. In addition, he said the fundamentals of the company have been improving over the years as it toned down its printed circuit board (PCB) business, while growing its IT distribution business.
Seet thinks that the re-rating of this stock will likely come when it announces its full-year results, which should justify its strong growth trend and outlook. — Lim Hui Jie
Frasers Hospitality Trust
Price target:
DBS Group Research “buy” 70 cents
'A laggard no longer’, rebound ahead
A rebound is underway for Frasers Hospitality Trust (FHT), with vaccine distribution anticipated in 2021, say DBS Group Research analysts Derek Tan and Geraldine Wong in a Nov 26 note. They are keeping their “buy” call but with a raised target price of 70 cents, up from 65 cents.
“We maintain our view that Frasers Hospitality Trust (FHT) offers compelling value at 0.7x P/NAV, which is below replacement costs. The current price which is 40% below pre-Covid-19 level remains an attractive level for investors for an overlooked stock. Prospective FY2022 yields of approximately 8.0% is attractive,” say Tan and Wong.
FHT provides investors exposure to one of the largest international hospitality portfolios by number of keys. Its geographically diversified portfolio of 15 quality assets are in prime locations across nine key cities in Asia, Australia and Europe.
Tan and Wong note that FHT is one of the more diversified S-REITs among its peers, with many opportunities to tap on the gradual reopening of the global hospitality sector.
Its exposures in the UK and Australia are starting to relax its domestic travel restrictions which bodes well for its portfolio performance in the coming quarters while its Singapore hotels should benefit from the robust demand for staycations and gradual reopening of the borders, they add.
The analysts consider FHT “a laggard no longer”, with “compelling value”, and that its price is catching up with its peers, supported by a robust approximately 30% compound annual growth rate (CAGR) in DPU over the medium-term.
“Its portfolio of Australia and European hotels (50% portfolio exposure) should start to see better prospects on the back of loosening of domestic travel restrictions while Singapore (36% exposure) sees incrementally stronger earnings come 2HFY2021,” note the analysts.
Going private may also be within means for FHT’s sponsor, Frasers Group. “Given the sponsor’s significant 62% stake in FHT and relative illiquidity vs peers, we believe that the stock remains an attractive take-over target given that it cost less than $500 million to take it private and gain control of FHT’s portfolio of approximately 4,000 room keys and landmark Singapore hotels,” they add. — Jovi Ho
