Money Talk: Goodpack, Midas, Raffles Medical Group

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

1. Goodpack

Broker: OSK-DMG

Reuters reported on Thursday that giant private equity firms Blackstone Group and Carlyle Group are considering a bid for Goodpack but discussions are currently at a preliminary stage.

Goodpack is the global leader in the seaborne transportation of natural and synthetic rubbers, with market share of 40 per cent and 32 per cent respectively. Long-term contracts with its multinational customers and market share gains in the synthetic rubber segment will underpin earnings growth of 10-15 per cent for the group over the next few years.

Meanwhile, the company continues to gain traction with its automotive customers for the transportation of auto parts, and any large-scale contract win in this segment will provide the next leg for growth for the company. At Thursday's closing price of $2.30, the stock trades at 18.5 times forecast earnings for FY2014F. Based on its peak of 24 times price/earnings, Goodpack would be worth $3.00, by our estimates.

2. Midas

Broker: Maybank Kim Eng

Change is afoot in China's railway industry following the government's recent announcement of five railway construction projects worth 142.4 billion yuan (S$29.0 billion). Also brewing are a possible reform of China Railway Corp's (CRC) funding structure, strong order win momentum for Midas's upstream clients and better-than-expected high-speed train pricing.

All this augurs well for Midas. Recent order wins by Midas's upstream clients have been very encouraging. In the high-speed rail sector, we expect Midas to win around 1.1 billion yuan worth of contracts this year and next.

Midas's share price has retreated by 9 per cent and underperformed the market by 10.7 per cent in the past three months. The stock currently trades at an undemanding valuation, which offers a safe entry point in our view.

3. Raffles Medical Group

Broker: CIMB

Raffles Medical Group's asset-heavy approach is timely. Its pipeline of hospital expansion and development of its Holland Village medical centre needs the group to tap onto its balance sheet for cash and leverage. We believe that management is not adverse to being in a net gearing position in the next three years.

The use of gearing is a good departure from its conservative style previously and should strengthen its resolve to succeed given a more efficient capital structure.

A review of the group's dividend history also suggests that dividends will not be jeopardised.

Apart from its projects in Singapore, the group is expanding in China, which should open a pipeline for growth for many years to come. The projects will make better use of its cash and free cashflow, in our view.

Raffles Medical Group has a very good cash-generating business. Higher healthcare dollars from the expansion of Raffles Hospital and the successful development of integrated international hospitals in China with its joint venture partners should catalyse its stock and we maintain our Add rating.