Brokers' Call: CapitaLand

CapitaLand | Buy

May 2 close: $3.76

Fair value: $4.26

Broker: OCBC Investment Research, May 2

CapitaLand's Q1 2018 results were in line with our expectations. Revenue and gross profit surged 53.3 per cent and 78.9 per cent year on year to $1.4 billion and $602.9 million, respectively. This was underpinned largely by stronger contributions from development projects in Singapore and China, rental income from newly opened and acquired properties and the consolidation of CapitaLand Mall Trust, CapitaRetail China Trust and Raffles City Singapore Trust from Q3 2017.

Profit after tax and minority interest (Patmi), however, dipped 18.8 per cent year on year to $319.1 million due mainly to the absence of a $160.9 million gain from the sale of The Nassim in Q1 2017. Excluding this and other one-off items such as portfolio gains and revaluation gains and impairments, CapitaLand's adjusted operating Patmi grew 25 per cent year on year to $228.7 million, forming 24.8 per cent of our FY18 forecast.


Moya Holdings Asia | Buy

May 2 close: 9.9 cents

Target price: 15 cents

Broker: RHB, May 2

Moya reported a sterling Q1 2018, with Patmi surging 560 per cent year on year to $8.8 million, making up 31.9 per cent of our FY18 estimate. Q1 2018 revenue also spiked by 268 per cent year on year to $45.06 million, mainly due to the acquisition of Acuatico in 2017. Going forward, we do expect 2018 to be a stellar year for the company, with acquisitions and the extension of the concession in the pipeline, as well as the full accretion of Acuatico's numbers for the full year to drive earnings growth.

With the planned expansion in capacity for two of its water plants, Bekasi and Tangerang, coupled with non-revenue water (water that has been produced and is lost before it reaches the customer) reduction in the next five years, Moya is set to enjoy strong organic growth. It is now Indonesia's largest water treatment company in terms of capacity, and management aims to reach 20,000 litres per second in capacity this year, from 13,000 litres per second presently. This would also give it an advantage, especially when negotiating terms in buying out existing smaller players. With further cost savings, volume expansion, and the recovery of its non-revenue water providing strong organic growth - coupled with additional acquisitions in the pipeline to further boost net profit after tax - we think the outlook is bright for Moya.


United Overseas Bank (UOB) | Buy

May 3 close: $29.58

Target price: $33.20

Broker: DBS, May 3

UOB continues to be optimistic about FY18's outlook and has guided for high single-digit loan growth (we have assumed 8 per cent), net interest margin to continue to track higher with visibly higher rates ahead, and credit costs guided at 20 to 25 basis points, possibly at the lower end.

High capital levels ensure that higher dividends are here to stay. UOB's full-year dividend of $1 per share is here to stay. Possible upside to higher dividends would not be discounted. There might be special dividends along the way. Although scrip dividends will prevail, the shares would be issued without a discount.

UOB hinted at a likelihood of attaining 12 per cent return on equity (Q1 2017: 11 per cent) over these two years on the back of sustained net interest margin uplift (another 1 to 2 basis points each quarter ahead), further improvements in cost management and higher dividends.


Cityneon Holdings | Buy May 3 close: $1.04

Target price: $1.60

Broker: DBS, May 3

The acquisition of The Hunger Games - The Exhibition intellectual property (IP) rights comes with the right to acquire other IPs owned by Lionsgate.

With this latest deal, Cityneon is now on a stronger and firmer growth path. Together with the three existing IPs - Avengers, Transformers and Jurassic World - plus its traditional business - we continue to expect Cityneon to deliver explosive FY16-19F earnings per share compound annual growth rate of 172 per cent.

Trading at a low PE-to-growth ratio of just 0.2x forecast FY18 earnings, Cityneon is attractive to investors seeking unique ideas in the entertainment industry.

Potential catalysts are mergers and acquisitions, acquiring more IPs, expanding project pipeline, focusing on higher-margin projects for the traditional business.


OUE Hospitality Trust | Buy

May 3 close: 81 cents

Target price: 95 cents

Broker: RHB, May 3

OUEHT posted a strong all-round performance, with healthy revenue per available room growth for its hotels and a higher occupancy rate at its retail mall.

We expect this trend to continue in 2018, with the limited supply of new hotels and continued momentum in visitor demand. Corporate demand is also expected to trend higher, on the back of more Mice (meetings, incentives, conferences and exhibitions) events and a positive economic growth outlook.

With borrowing costs inching higher, OUEHT's refinancing of all its debts at the beginning of the year has proven timely.

Dividend yields are compelling, with FY18F-19F dividend yields at 6.5 per cent and 7 per cent, respectively.

A version of this article appeared in the print edition of The Straits Times on May 07, 2018, with the headline 'Brokers' Call: CapitaLand'. Print Edition | Subscribe