STARHUB
Broker: DBS Group Research
Call: Buy
Target Price: $4.10
StarHub core profit was 5 to 7 per cent ahead of estimates at $100 million in the second quarter of 2016. A higher-than-expected "other income" from grants for the fibre adoption and lower-than-expected depreciation and amortisation costs were the key variances.
A 25-50 per cent lower price for the additional mobile data from March 2016 should boost usage and revenue in the near term, while SIM-only plans should reduce the handset subsidy burden.
Fixed broadband business has also stabilised because of the fibre network adoption. Pay TV business may decline gradually because of more competition from the likes of Netflix.
Adding to the good news for StarHub is the low probability of a new entrant in the Singapore telecom market due to the interested player's inability to raise sufficient funds. Existing Singapore telcos have been showing their intent to defend their subscriber bases through data price cuts.
A successful entry of a new playercould capture 6 per cent revenue share and is ikely to have a 4 per cent adverse impact on StarHub's group revenue in 2022.
FAR EAST HOSPITALITY TRUST
Broker: CIMB
Call: Hold
Target Price: 65 cents
June was an awful month for the hospitality industry as room demand suddenly evaporated. The end of the SEA Games hosted by Singapore last year, and the refurbishment of public spaces at Orchard Parade also impacted the trust more than it had anticipated.
Far East Hospitality Trust achieved a second-quarter distribution per unit of 1.01 cents as trading conditions remained challenging. Hotel occupancy for the same quarter dropped 1.4 percentage points year on year and 2.7 percentage points quarter on quarter to 85. 3 per cent.
For hotels, revenue per available room (RevPar) dropped 7.5 per cent year on year in the second quarter.For serviced residences, revenue per available unit dropped 8.9 per cent year on year.
With the drop-off in oil and gas, the company is trying to re-position some of the properties to attract corporate customers from other trade sectors such as electronics and manufacturing, as well as tourists.
Barring another bad June, the second half is likely to be slightly better than the first half of 2016. September is a typically good month for serviced residences, with the F1 races going on.
BREADTALK
Broker: OCBC Investment Research
Call: Sell
Target Price: 99 cents
BreadTalk Group's revenue for the second quarter of 2016 was down 3.3 per cent year on year to $149.8 million while profit after tax and minority interest (Patmi) declined 55 per cent to $1.3 million.
Revenue in first-half 2016 was slightly down by 1 per cent to $304.3 million, meeting 48 per cent of full-year expectations, while Patmi dropped 23 per cent to $3.8 million.
The weaker bottom-line has been largely attributable to the Food Atrium business. With steady earnings growth from Bakery and Restaurant segments, while the group keeps its focus on cost management, all eyes are on the Food Atrium segment for an eventual turnaround.
At this juncture, it is preferable to stay cautious until pressure eases on the Food Atrium segment and signs appear of a consistent pick-up in overall core profitability.
