CAPITALAND LIMITED
Broker: DBS Group Research
Call: Buy
Target price: $3.60
CapitaLand Limited's strategy to focus on growing its commercial portfolio is bearing fruit, offering better earnings visibility. Coupled with opportunistic asset recycling of mature assets into its listed real estate investment trusts/funds, there is ample upside potential to our earnings estimates.
Its property portfolio has approximately 75 per cent of assets in retail malls and commercial integrated developments, including Ascott Group, which offers strong income visibility in the medium term.
The operating performance of its malls will improve as the properties reach maturity.
CapitaLand reported a robust 28.4 per cent growth in net profit to $247.5 million, on the back of stronger revenue, which was up 27.7 per cent to $1.37 billion.
A slowdown in Asian economies, especially China, could dampen demand for housing and private consumption expenditure and retail sales.
VENTURE CORPORATION
Broker: DBS Group Research
Call: Buy
Target price: $10.90
Maths works in Venture Corporation's favour as its growing segments like medical and life sciences comprise 40 per cent of the business, while shrinking segments comprise only 11 per cent.
Venture has added new customers over the last six years to its customer base, which is likely to keep its growth momentum, while a fixed dividend commitment of 50 cents and high digit earnings growth in financial year 2017 are attractive.
Venture's net profit was $47.4 million, due to strong improvement in gross margins, mainly on the back of favourable business mix. Revenue also saw steady growth, reaching $705.7 million.
As the bulk of the labour costs are sourced in Malaysia, a stronger Singdollar against the Malaysian ringgit is favourable.
Key risks involve a broad global slowdown, since Venture has exposure to the United States, European Union and Asia markets, and due to its vulnerability to business cycles.
Potential weakening of the US dollar could also dampen growth in revenues.
SINGAPORE POST
Broker: CIMB
Call: Buy
Target price: $1.76
SingPost remains in the investing phase as it builds up its infrastructure in preparation for larger volumes. Its underlying net profit fell $10.5 million to $27.1 million, led by transformational efforts, including expansion into the lower-margin e-commerce logistics business, the opening of its new eCommerce Logistics Hub and redevelopment of the SPC retail mall.
Domestic mail volumes continued to decline and revenue fell 5 per cent year on year due to business mail going digital and one-off effects from SG50, the general election and the World Stamp Exhibition. In the logistics segment, SingPost saw pricing pressure amid intensifying competition in the last three to four months, as other players drove down pricing in expectation of higher volumes towards the peak season. Interim distribution per share was cut to one cent, in line with a new dividend policy to pay out 60 per cent to 80 per cent of annual underlying net profit.
GLOBAL LOGISTIC PROPERTIES
Broker: OCBC Investment Research
Call: Buy
Target price: $2.37
GLP reported that its second-quarter profit after tax and minority interest for financial year 2017 increased 52 per cent to US$173 million (S$245 million), mainly due to increased contributions from the group's fund management platform.
Specifically, fund fees over the quarter rose 25 per cent year on year to US$47 million, comprising US$31 million of asset and property management fees and US$16 million in development fees.
On a core basis (adjusting for non-recurring items and revaluations), the group's core earnings in this second quarter were 53 per cent higher year on year at US$68 million.
In terms of the top line, GLP's revenues over the quarter also increased 13 per cent year on year to US$214 million, mostly because of the completion and stabilisation of the group's Chinese projects with higher rents, higher management fee income, and the appreciation of the Japanese yen, partially offset by the weaker yuan and rent adjustments in China due to the transition from business tax to a VAT (value-added tax) regime.
