Brokers' call: Super Group

SUPER GROUP

Broker: CIMB

Call: Buy

Target price : 93 cents

Beverages producer Super Group believes its three-pronged strategy of branding, product innovation and diversification will pave the way for the company's growth in the longer term.

Near-term challenges exist but the group is already starting to see its strategy bear fruit. Sales of new higher-margin products are picking up, gross margins are improving and new markets are growing. The introduction of new products injected the much needed spark, and year-on-year sales growth in the first quarter of this year at 2 per cent in constant currency terms was welcoming after consecutive quarters of decline.

Furthermore, the company is seeing a recovery in Indonesia on the back of a more stable rupiah and increased roll-out of premium products.

Net cash in the first quarter of this year stood at $115 million or about 13 per cent of market cap. The group has already invested in new plants in recent years and capital expenditure needs are now minimal.


MIDAS HOLDINGS

Broker: OCBC Investment Research

Call: Hold

Target price: 29 cents

Midas Holdings recently announced that its joint venture company, Nanjing SR Puzhen Rail Transport (NPRT), which is 32.5 per cent owned by Midas, has secured four rail-related contracts totalling 3.3 billion yuan (S$680 million).

Out of the four contracts, two are metro contracts worth a total of 2.5 billion yuan with delivery scheduled between financial years 2016 and 2019, and the other two are tramway contracts worth a total of 800 million yuan with delivery scheduled between financial years 2016 and 2017.

While the contract win is positive for Midas, the firm is still in the midst of starting up its new aluminium light alloy business.

If it takes longer than expected to ramp up its lower-margin new business, costs may continue to erode its earnings as a result.

All said, the upcoming second quarter earnings for this year will provide better clarity over its ability to execute and ramp up this new business segment.


RAFFLES MEDICAL GROUP

Broker: OCBC Investment Research

Call: Hold

Target price : $1.57

The share price of Raffles Medical Group had recently turned south to some extent.

This comes as a recent news article reported on the status of the group's Holland Village mall. While the overall process has been taking longer than expected, it is not a matter of concern for now and assumptions for this project only account for 1 to 2 per cent of revenue estimate for the financial year 2016-2017.

Separately, prospects for the healthcare sector continue to be healthy, in view of the broader industry transformation through innovation.

The group's long-term plans of expanding capacity as well as geographical presence are welcome, and the group is still a strong contender in the region.


FIRST REIT

Broker: OCBC Investment Research

Call: Hold

Target price: $1.36

First Reit recently provided a couple of updates to the market. First, it managed to obtain an extension of the Hak Guna Bangunan title from the National Land Office of Indonesia for its Siloam Hospitals Kebon Jeruk for a period of 20 years to Aug 10, 2037.

Second, First Reit also gave an update with regard to its proposed joint venture and joint acquisition with Lippo Malls Indonesia Retail Trust (LMIRT) for an integrated development comprising a hospital and a retail mall.

Both parties are still in discussions with the vendor of the Yogyakarta property to finalise the details of the joint acquisition.

The vendor is wholly owned by Lippo Karawaci, which is the sponsor of both First Reit and LMIRT. The process has taken longer than expected due to the unique structure of the acquisition as this is the first time that First Reit and LMIRT are jointly acquiring an integrated development with both hospital and retail mall assets.

A version of this article appeared in the print edition of The Straits Times on June 27, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe