Brokers' call: SingPost

A typical sorting operation at SingPost, where stronger e-commerce logistics volume growth is seen as the key catalyst.
A typical sorting operation at SingPost, where stronger e-commerce logistics volume growth is seen as the key catalyst.ST PHOTO: NG SOR LUAN

SINGPOST

Broker: CIMB

Call: Add

Target price: S$1.76

SingPost has completed its joint venture agreement with Alibaba for a 34 per cent stake in SingPost's subsidiary Quantium.

Stronger e-commerce logistics volume growth is the key catalyst.

Assuming the entire proceeds from the joint venture will be put into investments, SingPost would have about S$223.9 million to invest in its e-commerce logistics network. We do not rule out further mergers and acquisitions or local partnerships.


SHENG SIONG

Broker: RHB

Call: Buy

Target price: S$1.21

Sheng Siong's defensive nature and its ability to deliver growth despite softening demand are points in its favour. Gross (profit) margin is expected to continue expanding despite tepid demand, with more bulk handling services, more sales of fresh produce and low input prices.

Dividend payout is intact. The company has committed to a 90 per cent payout ratio up to financial year 2016. Its chief financial officer has said Sheng Siong generates cash and does not have any debt. Barring any new property purchases, it should be able to maintain its dividend payout policy.

HDB has seven new units dedicated for supermarkets up for bidding in the next six months. We estimate Sheng Siong to open three to four new stores annually in the financial years 2017 and 2018.


SEMBCORP INDUSTRIES

Broker: OCBC

Call: Buy

Fair value: $3.07

Sembcorp Industries reported a 10.8 per cent year-on-year drop in revenue and a 2.9 per cent rise in gross profit for the third quarter. However, net profit fell 55.9 per cent year-on-year, dragged down by "other expenses".

Utilities did well, supported by India and China. Looking ahead, more units are expected to start up. Marine continues to be a risk for the group, but we like the long-term growth prospects of the utilities segment which has exposure to developing markets.


CAMBRIDGE INDUSTRIAL TRUST

Broker: CIMB

Call: Hold

Target price: S$0.59

Third-quarter results were dragged down by lower revenue and higher costs

There were additional property costs from more multi-tenanted properties. Lower revenue resulted from negative reversions.

Looking ahead, Cambridge Industrial Trust's operating performance is likely to reflect the challenging industrial rental market.

A version of this article appeared in the print edition of The Straits Times on October 31, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe