SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.
Broker: Maybank Kim Eng
Singapore Post, a 25.8 per cent-owned associate of SingTel, has announced an investment by Alibaba Group. After the deal, Alibaba will own 10.35 per cent of SingPost.
Alibaba, one of the world's most successful e-commerce companies, runs a highly-popular Taobao online marketplace. Its B2B platform is reported to power 80 per cent of online commerce in China, and its Alipay e-payments system processed US$519 billion in online payments in 2013, nearly three times the US$180 billion cleared by PayPal. On the other hand, SingPost has built a successful e-commerce logistics platform mainly in Southeast Asia.
The two companies have signed a memorandum of understanding to discuss a partnership that will allow Alibaba's customers and merchants to have access to SingPost's international logistics capabilities, infrastructure and delivery networks.
SingPost accounts for $0.05 (or 1 per cent) of our sum-of-the-parts value of $4.35 for SingTel. Alibaba's entry could raise the valuation of SingPost over time. In the medium term, we believe the market will shrug off the fact that the placement price of $1.42 is lower than the pre-trading halt price of $1.55.
Every 35 cents gain in SingPost's share price will add one cent to our target price for SingTel. Maintain Buy at $4.35 target price.
2. Courts Asia
Malaysia has recovered from credit woes two quarters ago. With the opening of two Big Box stores, the outlook is turning brighter.
As credit sales recover, Malaysia profits are now 49 per cent of group profit, from 31 per cent in FY2013. Singapore, though, is struggling as retail sales slow in the aftermath of the total debt servicing ratio (TDSR) framework.
Courts's FY2014 net profit of $28.3 million was within our expectations but below consensus of $30.4 million.
We upgrade to Add from Hold, with our target price rolled forward to $0.69. Potential catalysts stem from earnings growth from Malaysia and Indonesia.
3. United Envirotech
United Envirotech posted a disappointing end to FY2014. Revenue of $202.3 million, up 9.3 per cent, was about 3.8 per cent above our forecast; the boost came mainly from the increase in treatment business from $40.6 million to $62.6 million.
However, net profit fell 31.9 per cent to $20.1 million, and only met 58.2 per cent of our FY2014 estimate. According to management, the main drag came from higher finance costs from its bond of $100 million and additional bank borrowings; the weaker yuan against the US dollar also resulted in a forex loss of $1.4 million versus a gain of $2.1 million in FY13.
United Envirotech declared a final dividend of 0.3 cent versus 0.5 cent a year ago. While management has maintained a pretty positive outlook for FY2015, we place our Buy rating and $1.36 fair value under review, pending further discussion with management.