Money Talk: KS Energy, Croesus Retail Trust, Maxi-Cash

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. KS Energy (KSE)

Broker: OCBC

KSE reported a 44.1 per cent year-on-year rise in revenue to $59.8 million and net profit of $46.7 million in Q2 compared to $1.5 million in Q2 2013.

Earnings were boosted by a $54.4 million gain on disposal of property, plant and equipment; recall that the group had sold its rights and obligation under the jack-up rig contract (KS Orient Star 1) for US$84.88 million in June this year.

Excluding this, we estimate a recurring net profit of $3.2 million in the quarter. For FY2014, we are projecting net profit of $53.3 million and recurring net profit of $8 million. KSE is now trading at 0.64 times price to book value and we are seeing value in the stock.

Our fair value estimate is $0.58, from which we see a 25 per cent upside from current levels. The stock has been trading at a historical average of 1 times price to book value in the past three years and 0.75 times price to book value in the past year. Upgrade to Buy on valuations.

2. Croesus Retail Trust (CRT)

Broker: CIMB

We initiate coverage on CRT with an Add rating. CRT offers investors a pure play into the reflating Japan retail real estate sector through a capital-efficient platform that can provide earnings and net asset value (NAV) growth.

Potential yield-accretive acquisitions could catalyse its share price while prospects of a cap rate compression should drive NAV uplift.

Our projection for a 4.6 per cent compound annual growth rate in revenue over FY2014 (annualised) to FY2016 is premised on positive rental reversions from Mallage Shobu renewals in FY2015 as well as additional contributions from two new assets.

Our target price of $1.16 implies a fair value FY2015-2016 dividend per unit yield of 7.1 to 7.2 per cent, attractive when viewed against retail J-Reits and other retail Reits in the region.

3. Maxi-Cash Financial Services

Broker: OSK-DMG

Maxi-Cash booked an operating loss of $300,000 in Q2 despite peers seeing a turnaround. This was on higher operating costs from new underperforming outlets.

Quarterly revenue slipped 5 per cent to $28.6 million and it posted $150,000 in earnings on tax credits - way below our estimates.

With a sluggish outlook, we cut FY2014 net after-tax profit by 74 per cent to $800,000 and downgrade to Sell (from Neutral) with a target price of $0.21 (down from $0.27).

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