Brokers' Call


Broker: CIMB

Call: Buy

Target price: RM6.84

IHH already has multiple ongoing expansion projects and these are causing a drag on profitability even as core operations remain strong but the company is still in an investment phase and on the lookout for value-accretive opportunities.

India can be the next likely destination for this. India is IHH's fourth home market, after Malaysia, Singapore and Turkey. This came following landmark acquisitions in 2015, which propelled IHH's India operations to approximately 1,200 beds, but revenue contribution was still small at 6 per cent.

IHH is still under-represented (especially in north India) and given that India's healthcare market is poised for growth, IHH is now laying the groundwork. India is expected to be a major growth driver in five years.

IHH also completed the divestment of its entire 10.85 per cent stake in Apollo for net cash proceeds of RM1.26 billion (S$410 million). Media reported that the stake was always somewhat a conflict of interest that prevented IHH from being more aggressive in India. Regardless, the divestment is positive and proceeds will be reinvested as part of a broader strategy in India.


Broker: SAC Advisors

Call: Buy

Target price: 37 Singapore cents

United Global Limited, the lubricant manufacturer and trader, supplies lubricant products to over 30 countries and territories, serving mainly the automotive, industrial and marine sectors.

United's normalised earnings are expected to increase 13.9 per cent year on year in financial year 2017, with half year of contribution from Pacific Lubritama Indonesia (PLI) which it acquired.

United's earnings are expected to increase by 3.9 per cent and 10.1 per cent in financial years 2018 and 2019, with the consolidation of full-year earnings from PLI and cost savings that can be realised from the consolidation.

The global lubricants industry is forecast to expand at a compound annual growth rate of 2.4 per cent, with Asia poised to be the key driver of growth. The key growth driver is expected to come from the burgeoning middle-income class in emerging markets that will continue to fuel an expansion in construction activity, and rising demand for industrial machinery and automobiles.

Key risks remain exposure to fluctuations in base oil prices and cost of raw materials.


Broker: CIMB

Call: Buy

Target price: S$2.20

The Belt and Road Forum for International Cooperation held on May 14-15 reaffirmed China's "internationalisation" goals and provided a further boost to the ongoing developments in Chinese international air routes and transport, in our view. CAO benefits as its key earnings drivers - imported jet fuel supply to China, and associate contributions from Shanghai Pudong International Airport Aviation Fuel Supply Company - are firmly intertwined with China's aviation industry.

Chinese carriers are still expanding international routes. The aggregate long-haul available-seat-km of the three largest Chinese airlines continues to grow. This is a boon for CAO as its core jet fuel supply business is driven by outbound travel. CAO's strong alliance with Chinese carriers could also make it one of the preferred jet fuel suppliers for these carriers outside China.

As at the first quarter of 2017, CAO had a net cash position of 26.1 US cents/share, which accords it the financial flexibility to consider merger and acquisition opportunities.

CAO is also committed to a 30 per cent dividend payout policy, which implies a yield of 2.7-3.28 per cent between financial years 2017 and 2019.

Correction note: This story has been edited to correct the target price of United Global.

A version of this article appeared in the print edition of The Straits Times on June 12, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe