SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.
1. Great Eastern (GE)
GE reported Q1 net profit of $232 million (up 12 per cent year-on-year) on broad-based growth across its distribution channels in Singapore and Malaysia. During the quarter, the group wrote $226 million in weighted new sales, generating new business embedded value of $89.2 million.
The good Q1 performance follows on from a 12 per cent growth in operating profit to $560 million in 2013, and we expect GE's operating profit to grow 10-12 per cent in 2014, underpinned by the strength of the group's multi-channel distribution strategy in Singapore and stable sales of both conventional and takaful insurance products in Malaysia.
Despite a spate of M&As in Malaysia last year, including AIA's acquisition of ING-Malaysia's life insurance operation, GE continues to maintain its dominant position in Singapore and Malaysia through product innovation and a well-diversified distribution network. We continue to like GE for its dominant insurance franchise in Singapore and Malaysia and the stock is inexpensive.
Since last year, GE has began to separate out investment income from its more stable under-writing business, and with this, investors are now able to peg an appropriate multiple for the long-tailed life insurance business. We believe this has led to the recent strength in the share price. GE remains a Buy in our view with a target price of $25.30.
2. HPH Trust (HPHT)
HPHT reported Q1 net profit of HK$558.9 million, which increased 47 per cent year-on-year mostly due to a one-time HK$243.8 million gain from the divestment of a 60 per cent stake in ACT. Accounting for this impact, we estimate that Q1 net profit would have constituted 24.1 per cent of our full year forecast, which we judge to be mostly within expectations and consensus.
Q1 revenues came in at HK$2.9 billion, up 2.7 per cent. The trust also reported an uptrend for outbound cargoes to the United States and the European Union - a major factor determining total container volume handled by HPHT - and management notes that growth outlooks in the US and the Eurozone remain favorable.
We update our valuation model for the latest data-points and our fair value estimate increases marginally to US$0.68 from US$0.63 previously. Maintain Hold.
3. Raffles Medical Group (RMG)
RMG's Q1 core profit is in line with expectations. The increase in patient load from the expansion of the clinic network and more corporate contracts secured are fuelling growth.
Management gave strong insights into its philosophy of continuous revenue growth through managing volume growth, then patient charges. The medical centre at Marina Bay Financial Centre (MBFC) is expected to be operational by June 2014 and will offer a more comprehensive range of services to patients, further enhancing healthcare services revenue in the second half of this year.
The use of gearing is savvy and should strengthen its chances of succeeding given a more efficient capital structure. Dividends are not at risk while, in the longer term, the
asset-recycling theme should also emerge.
Also, with the combination of internal cash and leverage, there is room to raise dividend pay-outs. Our estimates are intact, although our target price rises to $3.89 from $3.68. Higher healthcare dollars from the expansion of domestic operations and the China angle could catalyse its stock. Maintain Add.