Brokers' Call

MM2 ASIA

Broker: DBS Group Research

Call: Buy

Target Price: $1.05

mm2 generates revenue by extracting fees from producing and distributing movies. It has a high-margin business model with an impressive growth outlook.

The firm is expected to grow at a compound annual growth rate of 46 per cent between financial years 2015 and 2018, underpinned by growth in local productions, expansion into the China market, and contribution from cinema operations and newly acquired entertainment company UnUsUal Group.

However, each production is dependent on mm2's ability to secure funding, and could be adversely affected by delays and cost overruns, which are the only risks to the company.

SINGAPORE POST

Broker: OCBC Investment Research

Call: Hold

Target Price: $1.37

Singapore Post (SingPost) reported a 32 per cent year-on-year rise in revenue to $316.2 million and a 0.6 per cent increase in net profit to $43.5 million in the third quarter of financial year 2016.

There were no significant one-off items in the quarter, even as underlying net profit rose 0.7 per cent to $43.9 million.

SingPost finished all strategic acquisitions after it financed TradeGlobal for $176 million in the quarter. Going forward, the focus will be on integrating various businesses.

The stock price was hit by questions on the group's corporate governance and the resignation of its chief executive officer. However, SingPost's core businesses should continue to churn out stable cash flows as it remains Singapore's dominant postal operator. The markets are waiting for results of the special audit by PwC and Drew & Napier.

SINGAPORE AIRLINES

Broker: OCBC Investment Research

Call: Hold

Target Price: $11.45

Singapore Airlines (SIA) reported a profit rise after tax and minority interests of 35.7 per cent year-on-year in the third quarter of financial year 2016 at $275.6 million, on the back of better operating profit as well as a gain of $53.3 million from the disposal of aircraft.

These were only partially offset by higher tax expense incurred, impairment of aircraft and weaker performance of associated companies.

Group revenue fell 3.9 per cent to $3.94 billion owing to a 4.6 per cent drop in passenger yield and a 13.5 per cent decline in cargo yield. Total expenditure reduced by 7.6 per cent to $3.65 billion largely because of lower net fuel costs.

But the strengthening of the US dollar against the Singdollar, as well as hedging losses, partially offset the fuel savings.

GLOBAL LOGISTIC PROPERTIES

Broker: CIMB

Call: Add

Target Price: $2.74

GLP's top line for the third quarter of financial year 2016 rose 11 per cent to US$198.9 million (S$280 million), thanks to higher contributions from China, development gains in Japan and higher management fee income.

GLP signed new and renewal leases with a 69 per cent customer retention rate and maintained lease ratio at 93 per cent. Leases signed in China are keeping the ratio at 88 per cent.

Demand came from retail, e-commerce, auto parts, pharma and healthcare industries, but effective rent growth was lower as incentives remain high.

In Japan, it continued to see strong demand, keeping lease ratio at 99 per cent and effective rent growth at 5.4 per cent.

With 93 per cent of its scheduled completions achieved, it is on track to deliver its objectives in 2016.

A version of this article appeared in the print edition of The Straits Times on February 08, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe