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The views & opinions expressed are the dealers' own and they do not represent the views of UOBKH. The content is written in their personal capacity and is in no way related or associated to UOBKH. Please read disclaimer page here.

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Tuesday, August 23, 2016

China Aviation Oil (CAO SP) | TAKE-PROFIT now!

S'pore-Event-Driven-pick | China Aviation Oil (CAO SP SP) Px/Tgt SGD1.45/1.90

Theme:                1.        Take-Profit-as-no-more-immediate-catalyst
                2.        Buy-back-near-sgd1.20
               
1.        UOBKH has been having CAO SP as a screaming BUY from S$0.99 & its S$1.40 now.

2.        Its time to TAKE-PROFIT as there are no more catalysts ahead until early 2017 as follows:

        a.        Aug 24/25:        Roadshow in HK (but share price underperforming from its recent sgd1.56 high)
        b.        Early 2017:        Possible utilisation of its USD220m cash for M&A (likely to take a stake in a European airport & do a similiar ops as Shanghai Pudong)

3.        From now till then, there is no more upside catalysts.

Any expression of trading idea found on this website is for sharing only and does not constitute an invitation to trade or investment advice. Please read disclaimer page here.

Thursday, August 04, 2016

Innovalues (IP SP) | Anticipation of a takeover still strong despite share price tumble

S'pore-Event-Driven-pick | IP SP: Px/Tgt: SGD0.93/1.06

My View:

1. We had called a BUY on 29 Mar @ 89cts & IP SP has outperformed close to +10% despite gyrations between 90cts & sgd1.10. I am looking at target sgd1.20 because:

        a. Recent share price fall from sgd1.10 to sgd0.85 was rumoured to be a margin call (likely temporary blip down) 

        b. Rumour of a takeover at higher prices is still strong (this is despite investors getting bored with this theme as takeover rumour is already 5-months old since Mar 16) 

        c. Appointment of an independent financial adviser points to a potential M&A
  
2. Buy Catalysts:

        a. Strong cash generation and low capex requirements 

        b. Net cash rise up from S$0.08 per share in 2015 to almost S$0.20 per share in 2018 

        c. Free cash yield is estimated at 7.5% and 8.7% for 2016 and 2017.

3. UOBKH Research has a BUY with a DCF-based target price of S$1.06 but trade cautiously. Innovalues remains as our key mid-cap pick given its earnings growth as well as strong financial position, but we would trade cautiously after its recent share price strength. On our estimates, the stock offers a resilient dividend yield of 3.7% and 4.4% for 2016 and 2017 respectively.

4. Event:

In the event of an M&A, we think the stock could trade up to S$1.20, which is based on the renewed mandatory conditional cash offer for IPE Group of HK$1.70 in early-Mar 16.

UOB Kay Hian Research issued a report dated 8/4/16 on Innovalues. Please contact us for the full research analyst report.

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Thursday, July 21, 2016

Asia Plantation | Prefer S'pore-listed First Resource (FR SP) /Bumitama (BAL SP) /Golden Agri (GGR SP) as share price at Sep 15 low now

My view:

Asia-Plantation-picks | Theme: Selective-BUYs-on-S'pore-listed-Plantations

S'pore

1.        First Resource (FR SP) Px/Tgt SGD1.57/2.20
2.        Bumitama (BAL SP) Px/Tgt SGD0.74/1.30
3.        Golden Agri (GGR SP) Px/Tgt SGD0.35/0.44
4.        Indo Agri (IFAR SP) Px/Tgt SGD0.47/0.60
5.        Wilmar (WIL SP) Px/Tgt SGD3.16/3.05

Indo (Consensus)

1.        Sampoerna Agro (SGRO IJ) Px/Tgt IDR2,020/2,300
2.        Astra Agro (AALI SP) Px/Tgt IDR15,500/18,000
3.        London Sumatra (LSIP IJ) Px/Tgt IDR1,480/1,680
4.        Eagle High Plantation (BWPT IJ) Px/Tgt IDR230/275

Malaysia

1.        KL Kepong (KLK MK) Px/Tgt MYR23.10/26.30
2.        Genting Plantations (GENP MK) Px/Tgt MYR10.70/10.25
3.        Felda Global (FGV MK MK) Px/Tgt MYR1.80/na
4.        Sarawak Oil Palm (SOP MK) Px/Tgt MYR3.65/4.06
5.        Sime Darby (SIME MK) Px/Tgt MYR7.65/7.65
6.        IOI Corp (IOI MK) Px/Tgt MYR4.30/3.60
7.        IJM Plantation (IJMP MK) Px/Tgt MYR3.33/2.65
8.        TH Plantation (THP MK) Px/Tgt MYR1.09/0.92

1.        UOBKH Research maintain Asia Plantation sector to OVERWEIGHT despite:

        a.        Since our last BUY call in May 16: S'pore CPO sector -5% (Indo/Mal CPO flat or -10% down); trending down to Sep 15 low in Jul 16

        b.        Asia Plantation sector saw CPO price see-sawed:

                i.        Sep 13:                RM2,300/tonne
                ii.        Mar 14:                RM2,900/tonne
                iii.        Aug 14:                RM1,900/tonne
                iv.        Oct 14:                RM2,200/tonne
                v.        Jan 15:                RM2,300/tonne
                vi.         Jun 15:                RM2,200/tonne
                vii.         Jan 16:                RM2,400/tonne
                viii.        Mar 16:                RM2,500/tonne
                ix.        May 16:                RM2,600/tonne
                x.        Jul 16:                RM2,400/tonne
       
2.        Despite the above, looking ahead, I am of the view that this sector is likely to be re-rated upwards as our CPO assumptions has formed a strong base: 2016 at RM2500/tonne & 2017 at RM2600/tonne (vs current RM2,600/tonne), in line with our House-Overweight-Call, focusing on S'pore/Indo Plantation on the back of:

        a.        Lower inventory
        b.        Slower production at 5% vs 6% previously
        c.        Demand better-than-expected
        d.        Bio-diesel blending from current 5% to future 7.5%

3.        I am already seeing cash-flushed Investors continue nibbling on Asia Plantation sector & the picks thus far has been FR SP, BAL SP, WIL SP & GGR SP on stock-specific catalyst. I am pretty confident they will follow up with more BUYs on the other S'pore/Indo/Mal Plantation-plays. Investors BUY inflows continue (given recent share price fall) because they are expecting reversing up CPO prices because a) soybean planting down, b) stabilising oil prices at <USD45/bbl.

4.        UOBKH Research maintain regional plantation sector at OVERWEIGHT after adjusting our earnings forecasts to reflect our new CPO ASP assumptions. The current weakness in CPO prices provides an opportunity for investors to increase exposure to the sector. We are expecting CPO prices to stay firm and trend higher into 1H17. We maintain the plantation sectors in Malaysia at MARKETWEIGHT; Maintain OVERWEIGHT for S'pore & Indo. We still like companies with younger tree age and efficient management that will ensure high productivity, which translates into higher production growth. SELL IJM Plantations. BUY S'pore-listed Plantations i.e. FR, WIL, BAL, GGR.

5.        Our CPO assumptions:

        a.        2016:                RM2,500/tonne
        b.        2017:                RM2,600/tonne

6.        My BUY Strategies for the sector are: a) buy the largest plantation landbank owners (Sime Darby <myr7.00), and b) buy plantation companies with strong production growth (London Sumatra, First Resources, Bumitama and Sampoerna Agro)  c) BUY highest correlation to CPO price (GGR, BAL, FR).

7.        I am of the view that CPO price is expected to gain momentum on the upside as concern over high palm oil inventory levels subsides. Given the improving CPO price uptrend momentum, we raise our sector valuations (refer to the Valuation section). For sector exposure, we prefer:

        a.        Young and efficient upstream players: First Resources and Bumitama Agri.
        b.        Integrated players with catalysts: Wilmar for its earnings recovery and IOI Corp for the upside from the proposed demerger of its property unit.
        c.        High beta to CPO prices: Golden Agri, Indofood Agri and Sampoerna Agro.

UOB Kay Hian Research issued a report dated 21/7/16 on Regional Plantation.  Please contact us for the full research analyst report.

Any expression of trading idea found on this website is for sharing only and does not constitute an invitation to trade or investment advice. Please read disclaimer page here.

Wednesday, July 20, 2016

Innovalues (IP SP) | Anticipation of a takeover still strong despite share price tumble

My view: 

S'pore-Event-Driven-pick | IP SP: Px/Tgt: SGD0.94/1.06 

1. We had called a BUY on 29 Mar @ 89cts & IP SP has outperformed close to +10% despite gyrations between 90cts & sgd1.10. I am looking at target sgd1.20 because: 

a. Recent share price fall from sgd1.10 to sgd0.85 was rumoured to be a margin call (likely temporary blip down) 

b. Rumour of a takeover at higher prices is still strong 

c. Appointment of an independent financial adviser points to a potential M&A 

2. Buy Catalysts: 

a. Strong cash generation and low capex requirements 

b. Net cash rise up from S$0.08 per share in 2015 to almost S$0.20 per share in 2018 

c. Free cash yield is estimated at 7.5% and 8.7% for 2016 and 2017. Thanks Mans 

3. UOBKH Research has a BUY with a DCF-based target price of S$1.06 but trade cautiously. Innovalues remains as our key mid-cap pick given its earnings growth as well as strong financial position, but we would trade cautiously after its recent share price strength. On our estimates, the stock offers a resilient dividend yield of 3.7% and 4.4% for 2016 and 2017 respectively. 

4. Event: 

In the event of an M&A, we think the stock could trade up to S$1.20, which is based on the renewed mandatory conditional cash offer for IPE Group of HK$1.70 in early-Mar 16. 

UOB Kay Hian Research issued a report dated 20/7/16 on Innovalues.  Please contact us for the full research analyst report.

Any expression of trading idea found on this website is for sharing only and does not constitute an invitation to trade or investment advice. Please read disclaimer page here.

Tuesday, July 19, 2016

Asia Casino | Prefer SJM (880 HK) /Sands China (1928 HK) /Genting Bhd (GENT MK)

My view: 

Asia-Casino-picks: 

Macau Casino: 

BUY: 

1. SJM (880 HK) Px/Tgt HKD4.83/6.80 
2. Sands China (1928 HK) Px/Tgt HKD28.00/30.80 

HOLD: 

1. Galaxy (27 HK) Px/Tgt HKD24.60/26.00 
2. Wynn Macau (1128 HK) Px/Tgt HKD12.20/10.70 
3. MGM China (2282 HK) Px/Tgt HKD11.06/10.20 

Asean Casino: 

BUY: 

1. Genting Bhd (GENT MK) Px/Tgt MYR8.86/10.40 
2. Genting S'pore (GENS SP) Px/Tgt SGD0.813/0.97 
3. Genting Malaysia (GENM MK) Px/Tgt MYR4.35/4.76 

HOLD: 

1. Genting HK (GENHK SP) Px/Tgt USD0.32/0.35 

Theme: BUY-10%-lower-&-4%-dividend-yield 

1. Share price has broadly gone up +20% from Sep 15 low level. Although most Fund Managers are of the view that there is likely a further +20% upside (as Macau casino sector recover from -80% fall from Jan 14 to Sep 15 from China anti-corruption measures); I am of the view, Macau Gaming stocks are good BUYs a further -10% lower once the negative sentiment against the likely fall-out from on-going anti-corruption drive & non-use of the China Union pay cards from Macau Casinos abates (and other measures against black-market transfer of Yuan out of China). 

2. I am still upbeat on Macau Casino stocks (buy -10% lower). As negative sentiment abates & stabilise, I am expecting a further +20% upside across the board as fundamentals improve & liquidity BUY flows kick-in into these HIGH BETA LARGE CAPS with good 6.0% dividend yield. 

3 I am pretty upbeat on share price outperformance ahead of the Macau Casino given that share price of SJM/Galaxy/Sands China/Wynn Macau will be chugging up well on the back of improving prospects 1) GGR -30% in 2015, +12% in 2016 (Macau), GGR -2% (Mal), GGR -2% (S'pore), 2) prefer Macau Casino (another -10% lower) over Mal/Sing/Phil Casinos. 

4. UOBKH Research maintains to MARKETWEIGHT. While the VIP market was negatively affected by tighter junket regulations which dragged down 2Q16 GGR by 15.7% yoy, the mass market reconfirmed its stabilisation with the first and slight yoy GGR uptick since 3Q14. We continue to expect industry GGR to modestly recover going into 2H16 in anticipation of 3Q16 openings (Wynn Palace on 22 August and Sands Parisian in mid-Sept). Additionally, our channel checks affirm a stronger summer holiday period after an exceptionally low GGR in June. Risk-weighted stocks that appeal are Sands China, Genting Singapore, SJM and Genting Bhd. 

5. UOBKH Research has BUYs. In terms of preference under our coverage universe: 

a. SJM is my top-pick, and a cheap proxy to Macau's gaming market growth and more importantly, it pays a decent 6% dividend. 

b. Galaxy for its long-term prospects as we foresee their earnings in next few quarters continuing to be driven by Galaxy Macau's increasing business volume and margin improvement. 

c. Sands China, as the ramp up of Sands Cotai Central (SCC) should ensure 25% EBITDA growth in 2016, driven by growth in foot traffic, rising betting volumes and margin improvement. 

d. Wynn Macau, although we have a HOLD rating as we believe the company's near-term growth would continue to be restricted by the limited growth potential on its existing property, we also think that the company will be attractive to investors who are seeking good dividend returns. 

e. GENT for its steady growth, driven by its VIP programme, and intermediate-term opportunities from the ongoing gaming liberalisation in the US. Lastly, GENT's valuation should recover post-GE as history suggests, being one of the cheapest casino stocks in our coverage universe at 7x 2015F EV/EBITDA. 

f. GENS and GENHK in Singapore. GENS is likely to be impacted by a further contraction in mass market GGR but value is emerging, and GENHK's 50%-owned Resorts World Manila will face its first formidable challenge in the integrated resort-and-casino (IRC) space.

Any expression of trading idea found on this website is for sharing only and does not constitute an invitation to trade or investment advice. Please read disclaimer page here.