Money Talk: SingTel, ComfortDelGro, Centurion

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports.

1. SingTel

Broker: CIMB

Following SingTel's conference call for its second quarter of 2015 financial year (2QFY15) results, we continue to believe its Australian business is now on a firmer footing and set for stronger growth in FY16-17. Associate earnings should continue growing as currencies stabilise.

Singapore profits will be dragged down by pressure in the enterprise business as well as wider Digital Life losses. We trim our FY15-17 EPS (earnings per share) forecasts by 1.6-2.0 per cent to take into account SingTel's revised guidance for Digital Life losses of $200 million to 250 million this year. However, we raise our target price by 10 cents to $4.25 after updating our valuation for higher target prices for Bharti, AIS and SPOST.

Maintain ADD, with target price raised to $4.25 from $4.15

2. ComfortDelGro

Broker: OCBC Investment Research

ComfortDelGro's results 3Q2014 were largely in-line with our expectations. PATMI (profit after tax and minority interests) grew 5.3 per cent year-on-year (YoY) to $80.8 million on the back of a 6.0 per cent increase in revenue to $1.04 billion. Top line growth was mainly driven by Bus (+4.9 per cent), Rail (+21.4 per cent) and Taxi (+7.9 per cent) segments. For the first nie months of 2014, ComfortDelGro's revenue and PATMI rose 9.0 per cent and 8.1 per cent YoY to $3 billion and $219.8 million, forming 75.9 per cent and 78.2 per cent of our FY14 projections, respectively.

Outlook remains relatively stable with Singapore and UK Bus segment as well as Singapore Taxi segment expected to drive revenue growth.

While we think its 3Q14 results are largely in-line with expectations, we adjust our FY14 PATMI forecast upwards by 2.2 per cent to factor in the outlook guidance from management.

Maintain BUY with fair value estimate raised to $3.03 from $2.92.

3. Centurion Corp

Broker: OSK-DMG

Strong performance shows fears were overhyped. Centurion posted strong results with 3Q14 revenue increasing 46 per cent YoY to $21 million while net profit surged 47 per cent YoY to $7.9 million, largely due to the increase in bed capacity at Toh Guan, increased occupancy rate of over 90 per cent in Malaysia as well as its maiden revenue from RMIT Village and two weeks of income from its UK student accommodation assets. Gross profit margins improved to 69 per cent from 58 per cent due to higher rental rates from both its Singapore and Malaysia dormitories.

We expect Centurion to further invest in new dormitories in Singapore as well as in Malaysia (especially in Penang) as highlighted in our previous reports.

Oversupply worries massively overhyped. While we expect a massive supply of 100,000 new beds streaming into the market in the next two years, our channel checks and market research revealed that a total of 74,000 short-term dormitory beds would be deemed as expired (or unusable) in the next three years. Hence, we believe that the additional supply is to make up for the shortfall previously encountered as well to replace the expiring beds in short-term dormitories.

Its expansion plans in Singapore and Malaysia are on track, and it expects its Woodlands unit to be operational by 3Q15 and provide the next league of growth. Due to its aggressive expansion plans, we expect it to book strong NPAT growth of 34.8 per cent in FY15 and 19.1 per cent in FY16. Overall occupancy rates in Singapore and Malaysia remain above 95 per cent and 90 per cent respectively while rental rates averaged around $285 and 100 ringgit per bed per month.

Maintain BUY, with a target price of 89 cents. We remain bullish on Centurion.

Compiled by Ann Williams