Money Talk: ValueMax Group, Singapore Airlines, Overseas Education

Storefront of ValueMax's pawnshop and retail store at Boon Keng. -- PHOTO: VALUEMAX GROUP PTE LTD
Storefront of ValueMax's pawnshop and retail store at Boon Keng. -- PHOTO: VALUEMAX GROUP PTE LTD

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. ValueMax Group

Broker: OSK-DMG

Management met our clients at our Asean-Hong Kong Corporate Day on 27 June. It plans to expand its network to 20 outlets in Singapore and eight in Malaysia by end-FY2014. ValueMax is still sourcing for a location for its first high-end pawnbroking branch in Singapore, which is expected to open by the end of the year.

The company has seen a general increase in loan disbursements. This, coupled with gold prices stabilising at around US$1,300/ounce since the start of this year, could translate to a stronger net profit that ought to contribute to our projected turnaround this year.

Generally, most ValueMax clients have given positive feedback on its management and business model. However, its low liquidity is a key concern for any party interested in acquiring a sizeable stake in the firm. The stability of gold prices in the future is another key risk, as the performance of ValueMax's business could be sensitive to the fluctuations in gold prices.

Investor interest in the pawnbroking business appears to have increased since we initiated coverage on the sector. This could have raised awareness over the pawnbroking business model. Coupled with the stable gold prices thus far and a potential increase in loan disbursements, this leads us to continue believing that ValueMax could see a turnaround in FY2014. Reiterate Buy with a $0.56 target price.

2. Singapore Airlines (SIA)

Broker: OCBC

SIA has been seeking new revenue through geographical expansion as well as ancillary sources. Some will start contributing modestly in FY2015, but we think the initiatives' boost to profits in the current environment will be limited, if any at all.

The initiatives include: 1) NokScoot, a Thailand-based low cost carrier (LCC) JV with Nok Airlines, which is expected to start operating in 2H 2014, 2) a Tata-SIA JV, which reportedly is likely to start operations in September 2014, and 3) KrisFlyer Spree, an online shopping mall.

NokScoot's fate might be adversely affected by prolonged political uncertainty in Thailand and competition with close peer Thai AirAsia X, while the Tata-SIA JV might not be able to operate international flights until five years later while coping with a market where all except one is expected to be profitable.

Maintain Hold with S$9.50 fair value estimate.

3. Overseas Education

Broker: Maybank Kim Eng

Our checks reveal that the bigger international schools in Singapore still experience high demand, despite two new entrants - Dulwich and GEMS - this year.

With most of the smaller schools showing availability, we believe the new entrants could be drawing students from them and are not threatening the larger and more established schools such as Overseas Education.

The two most prominent international schools in the Iskandar region that Singapore-based parents can send their children to are Marlborough College and the upcoming Raffles American School (RAS). The all-in costs to attend Marlborough and RAS are equally if not more expensive than Singapore's international schools. The travelling time that could consume up to two hours per day is hardly appealing.

We maintain Buy on Overseas Education with a target price of $1.40.

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