Brokers' Call: Thai Beverage

THAI BEVERAGE

Broker: OCBC Investment Research

Call: Hold

Target Price: 89 cents

Post its first-quarter results in 2016, Thai Beverage's share price has done well.

Looking ahead, expectation is that its beer will drive growth in the coming years while the spirits segment will see a largely stable performance given the maturity of the industry.

Two other factors that could help to expedite achieving the group's vision2020 aims would be mergers and acquisitions as well as corporate restructuring involving the entities (TCC, F&N, FCL and Thai Bev).

Positivity remains over the group's growth prospects in the years ahead, thus longer-term investors should consider accumulating at 85 cents or below.

Based on the sum of the parts valuation and rolling valuation to one year forward, fair value estimate is lifted from 83 cents to 89 cents.

However, following the share price run-up and in view of the limited upside at current levels, the stock is downgraded to hold for now.


GENTING SINGAPORE

Broker: CIMB

Call: Buy

Target Price: 89 cents

Resort World Jeju (RWJ) is a US$1.8 billion (S$2.4 billion) development built on 2.5 million sq m of land in south-west Jeju. It is a 50-50 joint venture between Genting Singapore and Landing International.

RWJ will be the first integrated resort on the South Korean island, with a 10,000 sq m foreigners-only casino, a Myths & History theme park and a 70,000 sq m retail complex. Its 1,518 residential units are expected to net US$900 million in sales, which would partially fund the rest of the development.

Jeju is only a two-hour flight from the major cities in north-east China, including Shanghai and Beijing, and it has a unique visa-free policy that allows visitors to stay for 30 days. It received 3.3 million international visitors in 2014, of which 86 per cent were Chinese.

Genting Singapore's 50 per cent stake in RWJ will add S$145 million in net profit per annum when completed (excluding residential sales). While VIP gaming volumes appear to have stabilised at RWS in the first quarter of 2016, bad debt charges are expected to stay high until the second half of 2016.


SINGAPORE POST

Broker: Maybank Kim Eng

Call: Sell

Target Price: $1.29

SingPost started its mergers and acquisitions in 2011 to evolve from a domestic mail monopoly into an international e-commerce logistics provider. Although it now provides various e-commerce logistics services in the Asia-Pacific, most of its acquisitions have not added much to synergies or earnings.

The acquired businesses are small players in their fields facing intense competition. They have diversified and bumped up SingPost revenue but not yet added much to earnings, and more investments would be needed for its customer acquisitions and scale economies.

Alibaba's second investment in SingPost is taking much longer than its first in 2014. Its long-stop date has been extended three times. SingPost attributed the delays to slow regulatory approval.

Investors' confidence in SingPost has been dented since its CEO's abrupt resignation in December 2015, followed by revelations that one of its directors had omitted the disclosure of his interest in a previous acquisition. Since then, its chairman and two directors have agreed to step down. While a new chairman has been appointed, SingPost is still searching for a new CEO.

The air may not clear in the near term.

A version of this article appeared in the print edition of The Straits Times on June 20, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe