Brokers' Call: Noble Group

Noble Group

Broker: DBS Group Research

Call: Hold

Target price: 23 cents

Noble Group's core loss in the fourth quarter last year was US$118 million (S$167 million), which was worse than expected.

While Noble's share price has rallied on a potential investment by Sinochem, a further re-rating beyond the current level is unjustified without details over Sinochem's potential investment and/or a material improvement in free cash-flow generation.

It is still too early to ascribe a value to the balance-sheet items which the market has been questioning for the past two years, given the risk that Sinochem may withdraw.

Questions still remain over earnings quality and cash flow.

Noble is expected to return to profitability this year as it is no longer constrained by the need to preserve liquidity.

Hongkong Land Holdings Ltd

Broker: CIMB

Call: Buy

Target price: $7.80

Hongkong Land (HKL) reported its results for the financial year 2016 with core profit of minus 6 per cent year on year to US$848 million (S$1.2 billion), missing market expectation by 5 per cent mainly due to lower property sales recognition.

HKL's rental income grew moderately at 1.3 per cent year on year due to strong office performance, partly offset by sluggish high-end retail. The average rent of HKL's Central office portfolio increased from HK$101 (S$18.40) per sq ft per month to HK$103 per sq ft per month, due to the positive rental reversion of existing tenants.

Vacancy dipped to 2.2 per cent as at Dec 16, from 3.4 per cent a year ago.

Starburst Holdings

Broker: OCBC Investment Research

Call: Hold

Target price: 30 cents

Starburst Holdings' net loss in financial year 2016 widened 605.7 per cent to $11.7 million despite a 14.8 per cent jump in revenue to $18.3 million, as project delay at Marina One drags on its earnings.

Revenue growth can be attributed to the different work phases that its projects were in, and was driven by the Marina One architectural steel project, as well as design, fabrication and installation work phases for three firearm shooting-range projects in the Middle East.

Project and production costs surged 75.9 per cent to $21.2 million, with the increase mainly due to higher fabrication and installation costs and foreseeable losses provided for the Marina One architectural steel project due to project delay.

As a result, total operating expenses increased 54.1 per cent to $29.1 million for financial year 2016.

A version of this article appeared in the print edition of The Straits Times on March 06, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe