Brokers' Call

Sats' investments in technology and productivity over the past 18 months are expected to yield results.
Sats' investments in technology and productivity over the past 18 months are expected to yield results.PHOTO: ST FILE

YOMA STRATEGIC HOLDINGS

Broker: DBS Group Research

Call: Buy

Target price: 80 cents

Yoma's fourth-quarter results for 2017 were ahead of expectations. Revenue and gross profit rose by 18 per cent and 61 per cent respectively to $53. 8 million and $21.6 million. Profit after tax and minority interest rose by over 100 per cent to $24.1 million.

Positivity remains in the non-real estate business, which increased by 31 per cent year on year while real estate business increased by 10 per cent. Non-real estate businesses contributed approximately 40 per cent of revenues for the quarter. Automotive, consumer franchise and heavy equipment were the main drivers.

A strong rebound was seen in operating performance as most of its underlying businesses are doing well. The fourth-quarter gross profit covers the group's overheads of approximately $14.3 million, implying that operating performance has achieved a sustainable level.

For the quarter, despite stripping out the fair-value gains, Yoma is still expected to record a core operating profit.


SATS

Broker: Maybank Kim Eng

Call: Hold

Target price: $4.90

The main reasons for a core- profit miss for Sats in the fourth quarter of 2017 were softer food solutions revenue, which grew 0.7 per cent year on year, and higher staff cost, which grew 2.2 per cent.

However, investments in technology and productivity over the past 18 months are expected to yield results that should see staff-related costs grow at a slower pace compared with revenues. The revenue outlook for financial years 2018 and 2019 is unchanged and the upward profit forecast revisions are largely to do with revisiting cost-structure assumptions.

Various developments in the quarter suggest declining execution risk in new investments and a focus on tackling problem entities in the network. Sats' management stated that the first commercial kitchen in China for Sats Yihai Kerry had started operations as scheduled in March and take-up from the initial three customers was encouraging.

Brahim's in-flight catering in Malaysia had turned the corner to post a profit. Also, the entry of Hong Kong Airlines as a shareholder in Asia Airfreight Terminal would address the problem of a lack of base-load cargo volumes for the entity.

Profit forecasts for financial years 2018 and 2019 are revised by 5.5 per cent and 8.3 per cent, respectively.


mm2 ASIA

Broker: CIMB

Call: Hold

Target price: 65 cents

mm2 reported core profit after tax and minority interest of $18.8 million for the financial year 2017, led mainly by robust growth in core production and contribution from newly acquired event- management firm UnUsUal, as they accounted for 81.7 per cent of the overall top line.

UnUsUal reported a strong set of results, with 15 months' sales of $33.9 million and better gross margins of 35 per cent, which generated a core net profit of $7.3 million.

For core movie/TV production, progress in North Asia is seen, as the region represented 56 per cent of mm2's 2017 production revenue, up from 36 per cent in 2016. Its upcoming partnerships with Rhizophora Ventures/Pinewood Iskandar Malaysia and Turner on co-production projects bode well for the company as it has not only gained access to alternative content distribution channels and a world-class filming facility at Pinewood Iskandar Malaysia Studios, but could also benefit from potential cost savings and funding.

A version of this article appeared in the print edition of The Straits Times on May 29, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe