Money Talk: ComfortDelGro, Dyna-Mac, Frasers Centrepoint

Comfort DelGro building along Braddell Road. ComfortDelGro's Q1 net profit rose 9.7 per cent year-on-year to $63.3 million on $950.8 million in revenue. -- ST FILE PHOTO: ABDUL AZIZ HUSSIN
Comfort DelGro building along Braddell Road. ComfortDelGro's Q1 net profit rose 9.7 per cent year-on-year to $63.3 million on $950.8 million in revenue. -- ST FILE PHOTO: ABDUL AZIZ HUSSIN

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. ComfortDelGro

Broker: OSK-DMG

ComfortDelGro's Q1 net profit rose 9.7 per cent year-on-year to $63.3 million on $950.8 million in revenue.

Its British business continues to shine, which saw its revenue and earnings before interest and tax jump 51.7 per cent to $222.2 million and 90.3 per cent to $19.6 million respectively. This was largely on the contribution from Metroline West along with synergies achieved in cost savings.

Notably, management guided that the Government was likely to announce favourable changes in the upcoming Parliament meeting on May 16. The changes would likely be linked to bus operations rather than for the rail refinancing framework.

As such, we continue to prefer ComfortDelGro over SMRT Corp, given the former's large exposure to the bus business. Maintain Buy with a higher target price of $2.48, from $2.22 previously.

2. Dyna-Mac Holdings

Broker: OCBC

Dyna-Mac reported a strong 31.3 per cent year-on-year surge in its Q1 revenue to $78.9 million, and this made up 29.3 per cent of our FY2014 forecast.

However, net profit grew by a smaller magnitude of 6.5 per cent to $7.1 million, in line with our expectations (23.7 per cent of our full-year estimate). This was due largely to a weaker gross margin and a 43.3 per cent jump in administrative expenses to $8.3 million. Hence, net profit margin came in at 9.1 per cent, versus 11.2 per cent in Q1 last year.

Dyna-Mac also announced that it has secured new fabrication orders for two repeat customers worth a provisional sum of $50 million. Fabrication of these orders is expected to commence in Q2. Including this latest contract win, Dyna-Mac's net order book now stands at $342 million. The group continues to receive active tender enquires from both its long-term and new clients.

Maintain Buy and $0.47 fair value estimate on Dyna-Mac.

3. Frasers Centrepoint (FCL)

Broker: CIMB

FCL has announced its acquisition of Sofitel Sydney Wentworth and proposed the listing of a hospitality trust, Frasers Hospitality Trust (FHT). FHT will own an initial 12 assets: six serviced apartments from FCL plus six hotels from parent company TCC.

We see this move as a strategic one, to consolidate FCL's and TCC's hospitality assets and increase rooms under management. With TCC's over 40 hotels, FHT can be the biggest hospitality Reit in the future. This should not only give FCL a ready platform for future divestments but enlarge its asset-management business.

FCL remains attractive for its valuations and strong fundamentals. We expect its FHT listing to speed up its capital recycling and boost its rooms under management.

We maintain our Add rating with a higher target price of $2.07 (from $2.06 previously) after raising our forecasts.