mm2
Broker: DBS Group Research
Call: Buy
Target price: 52.5 cents
StarHub is to acquire 9.05 per cent stake in mm2 Asia at $0.41 per placement share.
The placement price represents a discount of about 19.2 per cent to the last volume weighted average price.
The estimated net proceeds of $17.98 million will be used for general working capital purposes. The acquisition is expected to be completed in May.
A strategic investor like StarHub coming onboard is a significant endorsement for mm2. This could raise mm2's profile and pave the way for bigger opportunities ahead, both domestic and abroad.
Its a win-win situation for both mm2 and StarHub. The former can generate content for StarHub, and help to promote StarHub's localised content beyond Singapore, including in China and Malaysia, where mm2 already has a presence.
StarHub can also choose to tap on mm2's cineplex business to showcase its content, as well as gain access to top-rated concerts and artists through UnUsUaL of which mm2 owns a stake.
SMRT CORPORATION
Broker: OCBC Investment Research
Call: Hold
Target price: 1.51 cents
SMRT Corporation (SMRT) acknowledged a lapse in its safety procedure that led to the deaths of two of its staff members at Pasir Ris MRT station on March 22.
The team of 15 members was granted authorisation to access the 0.5m-wide walkway beside the railway track for maintenance-related reasons. However, the procedure to coordinate with the signal unit at the station to ensure no trains enter the affected area before the team is allowed to step onto the railway tracks did not happen.
This is the first time that a fatality involving SMRT staff had happened on the North-South and East-West lines.
Recall that SMRT was fined $1.3 million in July 2014 for two safety breaches. However, as the lapse in safety procedure resulted in the deaths of two employees, we believe the Land Transport Authority will take much more severe action against SMRT.
SUPER GROUP
Broker: DBS Group Research
Call: Hold
Target price: 97 cents
Earnings of food and beverage maker Super Group are expected to be positive but not exceptional. Growth will be supported by better sales transaction from new product launches and stable margins from low input prices. However, earnings growth projection is low at 4-6 per cent.
Earnings growth will be dampened by Asean's outlook, which will see a challenge due to a weak Malaysian ringgit, sluggish consumption in Thailand, a weakening Philippine peso and lower gross domestic product in Singapore.
On a sequential basis, top-line sales decline has exacerbated from 0 per cent year on year in the fourth quarter of 2014 to minus 8 per cent year on year in the fourth quarter of 2015.
Going forward, the success of new product launches to improve sales and earnings is also subject to the market's response and acceptance.
Surge in commodity prices will be key risks, as Super will no longer benefit from lower coffee bean prices. Poor weather could impede or derail earnings estimate for the stock.
NEPTUNE ORIENT LINES
Broker: OCBC Investment Research
Call: Hold
Target price: 1.51 cents
Based on SGX filings, CMA CGM has been slowly accumulating shares of Neptune Orient Lines (NOL) since early December, and has spent more than $160 million to acquire more than 130 million NOL shares through open market purchases.
CMA CGM owns approximately 5.21 per cent of NOL. The French container shipping company could be signalling that it is confident in meeting the pre-conditions of being granted anti-trust clearances in the United States, European Union, and China, and complete this acquisition of NOL.
About 45 per cent of NOL's fourth-quarter revenue for 2015 came from transpacific trade routes. The plunge in freight rates last year due to overcapacity is likely to dominate 2016/17.
NOL's share price of $1.265 represents a mere 2.8 per cent upside to the offer price of $1.30/share compared with a significant 20.9 per cent downside to the target price if the takeover bid falls through on failure to meet pre-conditions.
Hence, the risk-reward makes sense for investors to sell part of their holdings in the open market.
