Money Talk: Keppel Land, Lian Beng, Valuetronics

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. Keppel Land

Broker: OCBC

Keppel Land is expected to begin sales this weekend at its 500-unit Highline Residences, located near Tiong Bahru MRT station. Pricing at launch is expected to be about $1,800 to $1,900 per sq ft (psf) after discounts, which is in line with our expectations.

To recap, Keppel Land purchased the 99-year leasehold government land sales site for $550.3 million ($1,163 psf of gross floor area) in April 2013. Due to site regulations and restrictions, construction costs are likely to be higher than usual and we estimate Keppel Land's breakeven average prices at about $1,700 psf, which points to a high single-digit profit margin for the group.

We continue to see value in Keppel Land shares at these levels and like the group for its diversified exposure across property segments and geographical regions, and firm balance sheet. A possible catalyst ahead could be the divestment of Marina Bay Financial Centre Tower 3, which would likely lead to a potential bumper special dividend over FY2014-FY2015.

Maintain Buy with an unchanged fair value estimate of $4.09 (30 per cent discount to RNAV).

2. Lian Beng

Broker: OSK-DMG

Lian Beng's 38 per cent-owned associate company, Millenium Land, will together with its joint-venture partner, Billion Land, dispose of 122 Middle Investment - the vehicle that holds Midlink Plaza on 122 Middle Road - for $270 million.

We expect Lian Beng to reap a FY2015F post-tax gain of $8.45 million from this sale. We lift our FY2015F earnings by 14 per cent to $69 million.

Maintain Buy based on a target price of $1.17. Lian Beng is currently trading at an undemanding value.

Its upcoming catalysts in the form of the sale of strata-titled units at Prudential Tower, profit contribution from a new asphalt pre-mix plant and a granite concession may potentially unlock value in the company.

3. Valuetronics

Broker: CIMB

Valuetronics is changing its business model by aggressively growing its higher-margin industrial and commercial electronics (ICE) segment. This segment holds exciting prospects for the company - higher demand from an increasing pool of customers.

We think that the ICE segment will experience a 20 per cent compound annual growth rate from FY2015 to FY2016, driven by new customers and increased demand for outsourcing of manufacturing and supply chain in China.

Valuetronics offers an attractive proposition for its ICE customers due to its design capability and strong balance sheet.

The higher ICE revenue contribution will be positive on gross profit as ICE margins are relatively higher than those of the consumer electronics segment, which may suffer from structural headwinds.

Possible fair values for Valuetronics could be S$0.40 or S$0.57, depending on your choice of yardstick. The S$0.40 valuation is perched on 5.8 times 2015 earnings while S$0.57 is based on a 20 per cent discount to the peer average of 10.3 times 2015 earnings.

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