Brokers' Call: Yoma Strategic Holdings

Yoma Strategic Holdings | Buy

Target price: 58 cents

June 1 close: 41.5 cents

Broker: DBS Group Research

Despite some disappointment on Myanmar's economic growth, we believe Yoma remains the best proxy of a potential economic turnaround in Myanmar with the new government in place.

With its diversified portfolio in property, consumer and automotive sectors, Yoma is well placed to tap into the growth.

Potential catalysts include recovery in Myanmar's property market and its non-real estate businesses turning profitable.

Yoma's FY2018 net profit fell 26 per cent year on year to $27 million, largely due to lower profit contribution from its real estate business, and lower fair value gains, mitigated by a $28 million gain from the sale of its tourism business and currency translation gains of $10 million versus $3 million loss in FY2017.

The non-real estate business recorded strong revenue growth of 33 per cent year on year. Yoma has entered new business ventures - franchisor of Little Sheep Hot Pot and a joint-venture with Pernod Ricard on whisky.

We remain positive on the group's prospects and see it as a beneficiary of an improved economic outlook with the new Myanmar government.


SATS | Hold

Fair value: S$5.50

June 1 close: $5.25

Broker: OCBC Investment Research

SATS' FY2018 revenue fell 0.3 per cent to $1.72 billion, mainly attributable to a 2.7 per cent decline in Food Solutions segment due to weaker TFK Corp's performance, mitigated by a 2.9 per cent growth in the Gateway Services segment driven by stronger cargo tonnage and more flights handled.

Stripping out one-off items, FY2018 core profit after tax and minority interests (Patmi) missed our expectations as it grew 0.8 per cent to $236.1 million, but only formed 94.6 per cent of our forecast. Working with a high operating leverage, gaining scale is crucial and SATS' strategy ahead is to build up its network and connectivity with a focus in Asia. Beyond these, a potential catalyst would be the potential partnership with Turkish Airlines to provide inflight catering services at Istanbul New Airport.


ComfortDelGro|Hold

Target price: $2.37

June 1 close: $2.50

Broker: CGS CIMB

ComfortDelGro said it was parting ways with Lion City Rental (LCR), given that Uber's exit renders the tie-up less attractive. To recap, in December 2017, as part of ComfortDelGro's tie-up with Uber, it announced the planned acquisition of a 51 per cent stake in the operator of Uber's LCR for S$642 million.

The management reiterated that it still intends to enter the private-hire vehicle space as it foresees increasing convergence of private-hire vehicles and taxis in the personalised mobility market.

Indonesian ride-hailing firm Go-Jek recently confirmed it plans to enter the Singapore market in the coming months and invest US$500 million (S$669 million) in international expansion that includes Vietnam, Thailand and the Philippines. Go-Jek also said it will take the approach of giving technological support to its chosen partner countries and leave the local founding teams to run the firms that Go-Jek will help set up.

Recent local news reports quoted unnamed sources as saying that ComfortDelGro and Go-Jek are in talks for a tie-up.

In our view, Go-Jek's passive management style could appear to be attractive to ComfortDelGro. However, the reports remain unsubstantiated.

We maintain our forecasts as we had not incorporated any earnings from the proposed tie-up with LCR.

While the taxi business headwinds have moderated, we still see a lack of meaningful growth catalysts for ComfortDelGro.

A version of this article appeared in the print edition of The Straits Times on June 04, 2018, with the headline 'Brokers' Call'. Print Edition | Subscribe