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. Sembcorp Industries
Broker: OSK-DMG
Sembcorp's Q1 net profit was in line at 23 per cent of our FY2014 forecast. The utilities segment remained steady, and we expect SembMarine to deliver stronger earnings in coming quarters.
If SembMarine delivers a margin surprise, which we feel is possible, Sembcorp will rise in tandem. SembMarine's latest results have shown some indications of margin recovery, with operating margins remaining stable even on 27 per cent lower revenue quarter-on-quarter. With higher revenue in coming quarters as more projects reach initial recognition stage, operating leverage should result in stronger margins.
Sembcorp's property division's revival could mean an additional growth driver. Sembcorp has reactivated its dormant properties division to capture more economic value from its urban development focus in Nanjing and Chengdu in China, targeting more than $100 million net profit by 2020 from FY2013's $50 million.
Upgrade to Buy with $6.00 target price.
2. Osim International
Broker: OCBC
Osim started FY2014 on a bright note, recording a 14.6 per cent and 14.7 per cent increase year-on-year in its Q1 revenue and net profit to $172.6 million and $28.8 million, respectively. This was within our expectations.
An interim dividend of one cent per share was declared, similar to a year ago. Management highlighted during the analyst briefing that the prospects for its core business remain very positive.
We expect this to be driven by its productivity gains and continued product innovation drive, such as the recent launch of its uDiva massager.
Keeping our forecasts intact, we maintain Buy and our $3.18 fair value estimate on Osim.
3. Wing Tai Holdings
Broker: CIMB
Wing Tai reported Q3 core net profit of $39 million, down 59 per cent year-on-year and 20 per cent quarter-on-quarter. This was slightly below our expectations, as weak residential sales continue to be a drag on earnings.
While mass market projects Tembusu and Foresque Residences should help to underpin its development earnings in FY2014-FY2016, its high-end projects in Singapore remain the weak spot.
Despite its cheap valuations and low gearing, we believe there are limited re-rating catalysts at the moment.
Maintain Hold, with a higher revalued net asset value-based target price of $2.00, from $1.98, as we update rent and cost estimates for its China project.
