Money Talk: Sheng Siong, Singapore Airlines

Sheng Siong announced it has entered into a non-binding letter of intent (LOI) in relation to a proposed joint venture with Kunming Luchen Group (Luchen Group) to operate supermarkets in Kunming, Yunnan, China.. -- PHOTO: ST FILE
Sheng Siong announced it has entered into a non-binding letter of intent (LOI) in relation to a proposed joint venture with Kunming Luchen Group (Luchen Group) to operate supermarkets in Kunming, Yunnan, China.. -- PHOTO: ST FILE

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. Sheng Siong

Broker: OSK-DMG

Sheng Siong announced it has entered into a non-binding letter of intent (LOI) in relation to a proposed joint venture with Kunming Luchen Group (Luchen Group) to operate supermarkets in Kunming, Yunnan, China.

The JV company will have a registered capital of US$10 million as its equity base, with Sheng Siong holding 60 per cent, the Luchen Group holding 30 per cent and Mr Tan Ling San, an executive director in Sheng Siong, holding the remaining 10 per cent.

Having earlier identified overseas forays as a possible stock catalyst, we are positive on this development, as it could open up a new growth market for Sheng Siong.

Maintain Buy with a target price of $0.83.

2. Singapore Airlines (SIA)

Broker: OCBC

The recent progress on Singapore Airlines' (SIA) partnerships with TATA and Air New Zealand (Air NZ) seems hopeful, but we remain cautious on SIA's future growth.

We believe the recent approval of Air NZ-SIA alliance allows SIA to leverage on its access to Air NZ's passengers for top line growth but with plans to commence operations only in late October 2014, it is too early to tell whether the increased capacity will find the right balance between passenger load and yield.

On the TATA-SIA alliance, although India's aviation market is growing in both domestic and international flight segments, we believe growth from the alliance will be suppressed by the rule that restricts only Indian airlines from operating international flights out of India until they have accumulated five years of domestic flight operation and have a fleet size of at least 20 aircrafts.

Given the long-term nature of these partnerships, we do not expect to see significant impact in SIA's FY2015 results.

Maintain Hold with an unchanged fair value of $9.97.