Brokers' Call: Singapore Post

SINGAPORE POST | HOLD

Target price: $1.15

Nov 15 close:$1.28

Deutsche Bank Research, Nov 14

Management announced four key themes from a strategic review, three of which seemed like a rehash of the previous strategy.

We had hoped for a more aggressive focus on growing its top line and possible disposal of loss-making TradeGlobal.

Its differentiating theme on striving to be the leading e-commerce logistics player in Singapore seems too late as large corporations (Keppel Corp's Urban Fox and Amazon) have already set up their fulfilment operations.

Singapore's importance to Alibaba is slipping as Malaysia Airports and Cainiao have recently formed a regional e-commerce and logistics hub joint venture in Malaysia.

Management also appears to lack bench strength as its logistics and e-commerce divisions do not have permanent heads. A quick turnaround is unlikely and numerous negative risks remain.

But valuations are fair, hence we maintain a "hold" recommendation.


FIRST RESOURCES | NEUTRAL

Target price: $2.13

Nov 14 close: $1.93

RHB Research, Nov 14

As expected, First Resources' third-quarter 2017 earnings shrank quarter-on-quarter, falling 57 per cent mainly due to lower product prices. Nevertheless, lower unit costs helped to buffer earnings, on the back of a still strong FFB (fresh fruit bunches) output growth of 19 per cent (versus our forecast of 17.4 per cent and management's guidance of 15 per cent) in the nine-month period.

Despite the strong year-to-date output, we maintain our FFB growth forecast as we expect growth to continue moderating in the fourth quarter. We raise our earnings forecast for FY17-FY19 by 7 per cent to 9 per cent to impute lower unit costs. Our forecasts are now 6 per cent to 19 per cent above consensus. Our target price is lifted to $2.13 from $2 based on an unchanged 2018 forecast target of 13 times price earnings in line with historical averages.


WILMAR INTERNATIONAL | HOLD

Fair value: S$3.51 (eased from S$3.66)

Nov 14 close: S$3.19

OCBC Research, Nov 14

Results were within expectations. Wilmar reported a 0.4 per cent year-on-year rise in revenue to US$11.1 billion (S$15 billion) in the third quarter of this year, supported by increased sales from oilseeds and grains. Net profit fell 5.7 per cent year-on-year to US$370 million while core net profit decreased 15.9 per cent to US$323.7 million in the third quarter. Nine-month revenue and net profit accounted for 74 per cent and 70 per cent of our full year estimates, respectively.

The good performance in oilseeds and grains and strong contributions from associates were offset by weaker results in the tropical oils and sugar businesses. Performance of the other major business segments is expected to be "satisfactory".

We tweak our estimates and roll over our valuations to FY18 earnings, and our fair value eases from S$3.66 to S$3.51.


PACC OFFSHORE SERVICES | BUY

Target price: $0.41

Nov 14 close: $0.325

DBS Group Research, Nov 14

Third-quarter earnings came in below expectations, given the combination of start-up costs for the POSH Arcadia, higher-than-anticipated operating expenditure for other idle accommodation vessels, and late commencement of contracts of some of the offshore support vessels (OSV) on long-term contracts in the Middle East. OSV day rates declined slightly during the quarter, though going forward, we see limited downside to rates as the offshore industry recovers.

In the near term, we see a stronger fourth quarter as the POSH Arcadia gets a full quarter of utilisation, and more of the Middle East OSVs are deployed.

We continue to see POSH as a name to ride the gradual offshore service sector upturn; its share price has historically been strongly correlated with oil prices, which are rising again. Further, POSH has no bonds outstanding and remains a privatisation candidate with Kuok (Singapore) Ltd as the majority shareholder (81.89 per cent ownership).


YANLORD LAND GROUP | BUY

Target price: $2.25

Nov 15 close: $1.67

DBS Group Research, Nov 15

The company's nine-month result for FY2017 was in line with expectations.

Management has guided down 2017 pre-sales target, but has a better sales outlook for 2018 with pre-sales expected to increase to 30 billion yuan (S$6.1 billion).

This will be supported by land-bank replenishment at low cost.

Yanlord bought one project in Shanghai, one in Wuhan, and projects in Hangzhou this year.

Yanlord is trading at 5.4 times FY18 price earnings and 0.6 times price-to-book value (versus historical average of 9.3 times price earnings and 1.1 times price-to-book value).

Yanlord's earnings visibility for FY17 is high with 27 billion yuan unrecognised sales outstanding, of which 45 per cent will be booked in the fourth quarter of this year. This matches our full-year revenue estimates. We maintain our target price of $2.25 based on 7.1 times FY18 price earnings and our "buy" call.

A version of this article appeared in the print edition of The Straits Times on November 20, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe