Brokers' Call

OUE HOSPITALITY TRUST

Broker: OCBC

Call: Hold

Target Price: $0.80

Visitor arrivals from Indonesia to Singapore continue to be lacklustre. OUE Hospitality Trust has been affected by this as Indonesian tourists probably contribute around a quarter of its room nights occupied. Management has updated that there were lower room nights from its Indonesian customers in the third quarter but the decline was less than the overall industry dip.

OUE Hospitality Trust is aiming to diversify its customer profile, with encouraging numbers from India, South Korea and longer haul regions such as Europe and the United States. The average rental reversion figures - rates for new or renewed leases - at Mandarin Gallery have moderated.


QAF

Broker: OCBC

Call: Buy

Target Price: $1.27

QAF, which bakes bread under the Gardenia label as well as other pastries, recorded a 5 per cent drop in revenue in the third quarter due to foreign exchange translation effects. Net profit rose 30 per cent to $10.5 million.

Without the forex effects, the bakery segment and primary production segment, which includes pork production and food manufacturing, would have continued to see growth in sales.

However, broader economic concerns remain on the group's core markets such as Malaysia and Australia. A better product mix and efficiencies helped increase profitability for the group's bakery operations in Singapore, Malaysia, the Philippines and Australia as well as its pork production side.

Looking ahead, management expects "satisfactory" profitability for the year.


NEO GROUP

Broker: RHB

Call: Buy

Target Price: $0.82

Neo Group's second-quarter results surprised on the downside with a 95 per cent decline in net profits. While this is largely due to one-off charges relating to its acquisitions, it is important that the second-half festive season shows a strong turnaround.

Food catering revenue soared due to increased marketing and promotional efforts, which was significantly higher than the previous expectation for 20 per cent. With strong efforts in advertising and promotions, we believe revenue from this core segment will continue to grow.

Since (Japanese restaurant) Umisushi is perceived as a lower-tier brand compared to high-end restaurants, the recent cases of Group B Streptococcus bacteria have affected its stores' footfall and sales. In view of rising operating costs, we like management's conservative approach to halt the expansion of its food retail business, with no new outlets launched during the quarter.


Q&M DENTAL

Broker: Maybank KimEng

Call: Buy

Target Price: $0.97

Third-quarter results were in line with expectations. Two major acquisitions - TP Dental and Tiong Bahru Dental Clinic - completed in September, will boost earnings in the quarters ahead and we expect more deals to come.

The acquisition model has shown great success in delivering sustainable growth and is increasingly replicated across the niche medical industry.

A version of this article appeared in the print edition of The Straits Times on November 23, 2015, with the headline 'Brokers' Call'. Print Edition | Subscribe