Brokers' Call: Frasers Centrepoint

FRASERS CENTREPOINT

Broker: CIMB

Call: Buy

Target Price: $2.04

Frasers Centrepoint's revenue declined in the third quarter by 33 per cent to $682 million. Earnings before interest and tax (Ebit) fell 47 per cent year on year to $166.8 million on lumpy China residential and smaller Singapore development profits.

In Australia, a skewed residential completion profile and reduction in commercial and industrial rental income, on asset sales and Frasers Logistics Trust (FLT) spin-off, also put a drag on performance.

Singapore residential contributed approximately $32 million of Ebit in the third quarter, coming from progressive recognition and sales of ongoing projects. Similarly, China residential Ebit came in at $9 million, and UK residential contributions improved with the completion and handover of the Riverside Quarter in the third quarter.

In Australia, FCL expects to deliver 1,810 units in the fourth quarter, so a rebound in income is expected. Development activities in Singapore and Australia may build up a pipeline for potential future monetisation. Risk is a slowdown in key markets, which would delay sales.


EZION HOLDINGS

Broker: OCBC Investment Research

Call: Hold

Target Price: 30 cents

Ezion Holdings reported a 7 per cent year on year drop in revenue to US$83.7 million (S$112.37 million) and a 31.5 per cent fall in net profit to US$19.8 million in the second quarter, such that the first half net profit accounted for 52 per cent of full year estimates.

Revenue was lower as a few service rigs underwent modification and routine class surveys, while the bottom line was boosted by a US$14.6 million gain on disposal of an asset.

From a cash flow perspective, Ezion generated operating cash flow of US$27.4 million in the quarter, bringing first half net operating cashflow to US$58.3 million.

Looking ahead, Ezion expects to generate more cash flows in the fourth quarter as about four of its units should be deployed by then.

For the third quarter, however, core operating results should be similar to the second quarter.


SINGAPORE POST

Broker: Maybank Kim Eng

Call: Sell

Target Price: $1.29

SingPost results for the first quarter of 2017 were in line with expectation, but below consensus, achieving 21 per cent of consensus forecast.

SingPost's biggest contributor, the mail segment, remains stable, where revenue and operating profit grew 1.5 per cent and 0.4 per cent year on year respectively as the decline in domestic mail was offset by international mail.

The e-commerce segment continued to record a marginal operating loss of $3.5 million, due to marketing and sales efforts in the US to scale up. The newly acquired Trade Global and Jagged Peak contributed to operating profit.

Management expects this segment to deliver better results in the peak period of November to December.

However, core earnings fell 11 per cent year on year due to a loss of rental income from the redevelopment of SPC mall, depreciation charges on the e-commerce logistics hub, and investment in commerce.

SingPost is still in transition and more investments might be needed to drive growth.

A version of this article appeared in the print edition of The Straits Times on August 15, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe