Brokers' Call

IHH HEALTHCARE

Broker: DBS Group Research

Call: Hold

Target Price: $1.80

IHH's second-quarter 2015 core results were within expectations.

Top line reached RM2.1 billion (S$707 million) driven by organic growth of its hospitals, while inpatient revenue showed a strong rise in Singapore.

According to management, the growth in Singapore was largely due to local patients. It remains confident of attracting foreign patients and indicated that despite the weakening of regional currencies impacting traditional sources of patients (that is, Indonesians and Malaysians), its efforts to reach other nationalities have paid off. It now sees more complex cases of Middle Eastern patients.

Growth is expected to remain relatively robust with projected earnings of 20 to 22 per cent forecast for financial year 2015-16, driven by the continued ramp-up of new hospitals, coupled with revenue intensities and price increases.

SMRT

Broker: OCBC Investment Research Call: Buy

Target Price: $1.45

Singapore's Transport Minister announced reductions in bus and train fares by up to 1.9 per cent effective from the end of the 2015 calendar year for a one-year period to reflect the lower energy costs.

With the most recent fare hike of 2.8 per cent effective from April 15, this announcement of fare reduction within the same year was a surprise.

With transition to bus government contracting model (GCM) only effective from the second half of 2016 and bus segment making up only about 20 per cent of total revenue, the fare reduction is negative on SMRT's growth in the near term.

The outlook is positive on the transition to the new rail financing framework where SMRT is required to complete all renewals and upgrade of rail network before any transition can take place.

Both the Land Transport Authority and SMRT also have a common interest of ensuring minimal rail services disruption, which means transition could be brought forward to an earlier date.

SILVERLAKE AXIS

Broker: Maybank Kim Eng

Call: Hold

Target Price: 61 cents

The net income for the fourth quarter of the financial year 2015 of Silverlake Axis Ltd (SAL) stood at RM74.7 million - 92 per cent of estimates.

A final distribution of 1.2 Singapore cents translates to a payout of 96 per cent in 2015. Full-year revenue was flat (a 3 per cent rise year on year) with bottom line flattered by the RM19.2 million gains from its sale of stake in Global Infotech during its recent initial public offering.

Order backlog of RM200 million to RM220 million is expected to provide revenue visibility for financial year 2016.

Licensing and project service sales for financial year 2016-17 are cut from RM250 million to RM290 million to RM220 million to RM235 million owing to a lack of new contracts. As a result, the earnings per share is cut by 15 to 18 per cent. Share price is down a sharp 40 per cent in the past three months on concerns over interested-person transactions between SAL and private entities under its chairman.

EU YAN SANG



PHOTO: EU YAN SANG


Broker: RHB

Call: Sell

Target Price: 36 cents

Eu Yan Sang (EYS) reported its first full-year loss of $600,000 for the financial year 2015 ending June, below expectations.

The fourth-quarter revenue dropped 15 per cent year on year, led by the decline in Chinese tourist spending in Hong Kong as well as goods and services tax (GST) implementation in Malaysia.

This was partially offset by sales from Singapore, which were up 5 per cent year on year from the launch of new products.

For Australia, revenue grew 15 per cent year on year through reduced reliance on franchisees and increased number of company-operated stores.

However, Australia still made a loss of $4.5million for the financial year.

Travel restrictions on mainland Chinese to Hong Kong, compounded by the yuan's devaluation, may deteriorate sales in Hong Kong by 10 per cent in financial year 2016.

Poor consumer sentiment in Singapore may result in benign growth, while the GST implementation and weakening ringgit will continue to stifle demand in Malaysia.

Distribution and selling costs remain high despite lower revenue. To reduce costs, the company will rationalise its stores and focus on wholesale channels.

A version of this article appeared in the print edition of The Straits Times on August 31, 2015, with the headline 'Brokers' Call'. Print Edition | Subscribe