Brokers' Call

WILMAR INTERNATIONAL

Broker: DBS Group Research

Call: Hold

Target price: S$3.39

China's decelerating economic growth means that Wilmar is focused on expanding margins within its product portfolio. Over the long term, Wilmar is expected to gradually extend penetration of well-established brands through its vast existing distribution networks in Asia's growing markets.

Core earnings in the third quarter of this year of US$384.9 million (S$545.1 million) were better than the projected US$258 million to US$291 million range. This brought the group's core nine-month earnings to US$387.1 million.

Wilmar's Tropical Oils segment's pre-tax contribution in the fourth quarter of this year should likewise sequentially improve on the back of both higher average selling price and volume. Given delayed harvesting in the third quarter, sugar seasonal pre-tax peak is expected to spill over into the fourth quarter.

Notwithstanding continued biodiesel allocation in Indonesia, expansion of India presence (through Adani-Wilmar's proposed joint venture with Ruchi) and gradual penetration of well-established brands - including that of Goodman Fielder - in China, Wilmar's earnings are expected to expand at an approximately compound annual growth rate of 11 per cent.

COMFORTDELGRO

Broker: DBS Group Research

Call: Buy

Target price: S$3.09

ComfortDelGro's net profit in the third quarter of this year grew 2.5 per cent year on year to S$87.3 million, even though revenue slipped by 3.1 per cent to S$1.02 billion. This was slightly below expectations of approximately 6 per cent growth, due to the larger than expected translational effect.

The group's earnings before income tax margins improved by 22 basis points to 12.5 per cent in the third quarter, arising largely from lower energy and fuel costs and materials and consumables .

While the third quarter recorded only 2.5 per cent net profit growth, the nine-month earnings increased 5.2 per cent year on year to S$246 million. The fourth quarter is expected to register stronger growth on the back of the weakening Singdollar against the Australian dollar and the British pound in recent days.

That said, the forecast is trimmed by 2 per cent, 4 per cent and 5 per cent for financial years 2016, 2017 and 2018 respectively.

Despite the weak global outlook, ComfortDelGro is expected to post dividend per share growth with its lower capex requirements.

BREADTALK

Broker: OCBC Investment Research

Call: Hold

Target price: S$1.07

Following a query by Singapore Exchange on share price movements last week, BreadTalk Group announced that it has entered into an agreement with Fairy Rise Development, the franchise owner of Din Tai Fung brand of restaurants, for the franchise right to operate Din Tai Fung restaurants in the United Kingdom.

The structure of the joint venture company that would be formed for this development will be announced in due course when terms are finalised.

The first Din Tai Fung restaurant is expected to open in London next year. Din Tai Fung has been a key growth driver for BreadTalk Group, and the group has experience in operating the brand for the past 13 years in Singapore and Thailand.

A version of this article appeared in the print edition of The Straits Times on November 21, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe