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. Singapore property
Broker: Maybank Kim Eng
New private home sales doubled month-on-month in May 2014, with 1,470 units (excluding ECs) sold vs. 1,790 units launched, making it the best-performing month since May last year.
Demand was not broad based. The top five projects made up 78 per cent of total sales (excluding ECs). Coco Palms was the best-selling project with 590 units sold, at a median price of $1,018 per sq ft.
Despite the much improved sales, we expect sector headwinds to remain as sales at new launches taper off after the initial fervour. Our Neutral stance on the Singapore residential property market remains as developers continue to de-risk their exposure to this segment.
We reiterate our view that the cooling measures are likely to stay amid the low interest rate environment. Our top picks are CapitaLand (Buy, target price $3.85) and Keppel Land (Buy, target price $4.60) for their diversified portfolios.
2. Yangzijiang Shipbuilding
Yangzijiang announced that it has won contracts for four 260,000 deadweight-ton (dwt) Very Large Ore Carriers (VLOCs) from an Australian company to be delivered between FY2016-2017. This is the first time Yangzijiang has won orders from Australia.
We estimate the value of the vessels at US$260-280 million, bringing year-to-date order wins to about US$1.35 billion, well ahead of schedule to meet its own target of US$1.5-2.0 billion in wins this year.
Additionally, chairman Ren Yuanlin commented that Yangzijiang's "focus remains on our core shipbuilding business. Our key strategy is to redirect attention from our non-core businesses into our core shipbuilding related businesses... The group will gradually reduce our investment in non-core businesses and eventually divest [THEM]". This represents a strategic shift away from the non-core businesses back into Yangzijiang's key competencies.
While we have had no issues with its previous strategy of diversification, we opine that this strategic shift could be strongly positive for investor sentiment. We maintain our Buy recommendation with an unchanged target price of $1.55.
3. QT Vascular (QTV)
QTV's story continues to hold audiences. The M&A angle has been the hottest topic after the United States FDA's recent clearance of QTV's coronary Chocolate balloon catheters.
QTV is also developing its next-generation product pipeline to stay ahead of the competition. While euphoria surrounding the FDA clearance of the coronary Chocolate device is understandable, we think the "holy grail" in the coronary balloon space is the drug coated/eluting balloon (DEB) space.
QTV's drug coated Chocolate (DCC), its version of DEB, is in the pipeline. We suspect that the FDA 510(K) application for DCC will be made as soon as Q1 next year, meaning that QTV has a leg up in the coronary business, which is an important growth element for the group.
Our estimates and target price of $0.73 are intact. We retain our Add rating as we continue to like QTV's changing dynamics and earnings uplift surprises.