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Ascott Residence Trust (BUY; Target Price: S$1.14)

Ascott Residence Trust (ART) announced 1Q12 distributable income of S$24.2 million, mostly flat on a YoY basis versus S$24.0 million in 1Q11 and in line with our expectations. In terms of DPU (dividend per unit), 1Q12 DPU came in at 2.14 S-cents which was identical to 1Q11. Topline for the quarter was S$71.6 million, up 6 per cent mostly due to the contributions from Citadines Shinjuku Tokyo which was acquired in December 2011 and improved numbers from China, Philippines and the UK. Average REVPAR for the portfolio increased 3 per cent YoY to S$137, driven mainly by the performance of China, Philippines and the UK. We continue to see mostly firm numbers across the portfolio, and as expected, little changed on a YoY basis from France and Germany due to its master lease structures. For management contracts with minimum guaranteed income, we saw a 20 per cent YoY dip in gross profit in Spain due to higher staff costs. Gross profits for Belgium, the UK and Vietnam stayed mostly flat. We saw a mostly positive performance from assets under management contracts, with strong growth in gross profits from Australia, China, Indonesia, Japan, Philippines and Singapore. For Vietnamese assets under management contracts, however, 1Q12 gross profit dipped 15 per cent due to higher staff costs and operational expenses, and a one-off S$0.5 million charge from a change in functional currency from USD to VND.  We continue to see value in ART given a robust yield of 7.6 per cent and undemanding P/B (price to book) ratio of 0.8x which should underpin the share price and provide a reasonable margin of safety for bear case write-downs. Gearing for the REIT remains at a reasonably comfortable 41.6 per cent, with a weighted average debt to maturity of 3.1 years. – OCBC Investment Research

 

ASL Marine Holdings (BUY; Target Price: S$0.83)

We recently visited ASL Marine’s shipyard in Batam, Indonesia and discussions with management confirmed a robust operating outlook, in line with our expectations. The cheaper yard operations in Batam, as compared to Singapore, and associated synergies between the two yards enable the group to bid competitively for contracts, while still reaping decent margins. The shipbuilding division has seen impressive order inflows in recent months, driving orderbook close to pre-crisis highs and ensuring healthy yard utilisation till end-2013. While the group can still take in more orders, estimated earliest delivery dates could be end-2013/ early-2014. Steel accounts for only about 10 per cent of shipbuilding costs for the type of vessels being built by ASL and steel prices are locked in on a project-by-project basis, ensuring steady shipbuilding margins. On the ship-repair side, management indicated that current inquiry levels are better than expected, and that most ship-repair slots are fully utilised at the moment, with forward bookings stretching up to three to four months. This indicates a strong pick-up in demand for ship-repair activities, especially from the buoyant offshore market, which could potentially boost shiprepair margins. With a significantly enhanced order backlog and earnings visibility – 90 per cent of shipbuilding revenue in FY13 is secured by existing orders – and an estimated earnings rebound of over 40 per cent in FY13, we maintain our BUY call on ASL and target price of S$0.83. – DBS Vickers

 

CapitaMalls Asia (BUY; Target Price: S$1.76)

CMA reported 1Q12 PATMI (net profit) of S$66.8 million, up 36.1 per cent YoY mainly due to revaluation gains (S$30.7 million) on three Japanese malls. Excluding these gains, we judge 1Q12 results to be below consensus and our expectations, making up only 16 per cent of our FY12 forecast due to higher operating expenses and a slower-than-expected ramp-up at new malls. We believe the street has generally baked in overly optimistic assumptions for FY12, and pare our core earnings forecast to S$170.7 million from S$220.6 million. 1Q12 topline came in at S$70.9 million – 41.2 per cent higher YoY and more broadly in line with expectations. We continue to see good QoQ growth in NPI yields on cost across the Chinese portfolio, pointing at still healthy retail conditions in China. Same-mall shopper traffic is up 9.9 per cent and 1.0 per cent YoY in China and Singapore, respectively. Management execution on the pipeline remains within expectations; JCube opened in April 2012 and Star Vista would open in 3Q12. In China, CMA continues to target seven new malls opening this year. – OCBC Investment Research

 

CDL Hospitality Trusts (BUY; Target Price: S$2.04)

For 1Q12 ended March 2012, CDLHT recorded a 19 per cent YoY in gross revenue of S$38.4 million. The increase was from strong organic growth, maiden 1Q contribution of S$2.7 million from Studio M Hotel, and the receipt of a full-year’s variable income of S$1.8 million versus S$0.84 million recognised for an 8-month period in 1Q11 for Australia hotels. Net property income grew 20 per cent YoY to S$36.0 million. Total return for the period climbed 24 per cent to S$28.6 million. After deducting income retained for working capital, income available for distribution per security climbed 17 per cent YoY to a 1Q record of 2.78 S-cents, which translates into an annualised DPU yield of 6.0 per cent based on Wednesday’s close of S$1.87. The results were in-line with our forecasts. Upcoming attractions of note include Phase One (Bay South) of the 101-hectare Gardens by the Bay, the River Safari (Asia’s first river-themed wildlife park) and the Marine Life Park at Resorts World Sentosa. We believe that they will continue to enhance the experience of tourists. While the supply of new hotel rooms in Singapore is expected to grow by 3.1 per cent YoY according to Howard HTL, we believe that demand growth will outstrip supply growth. – OCBC Investment Research

 

Cordlife Group (BUY; Target Price: S$0.66)

Cordlife processes stem cells extracted from umbilical cord blood at birth and stores them for future use in disease treatment. Cordlife has a 62 per cent and 28 per cent market share in Singapore and Hong Kong respectively, and currently stores more than 35,000 cord blood units in these countries. The group is also the first cord blood bank in Southeast Asia to receive the prestigious AABB accreditation. According to a market research conducted by Deloitte & Touche Financial Advisory Services (DTFAS), private cord blood banking is a relatively consolidated industry, with the top three players in many countries commanding a combined market share of over 80 per cent. DTFAS forecasts annual incremental units of cord blood storage to grow at 9 per cent and 10 per cent CAGR (2010-15) in Singapore and Hong Kong respectively, driven by increasing awareness of cord blood banking and medical developments in the field. Cordlife offers a variety of payment plans which give customers the option of choosing between an upfront payment or payments spread over the term of the contract – 21 years in Singapore and 18 years in Hong Kong. Cordlife currently has about 20,000 customers enrolled under the annual payment scheme, contributing S$5 million of stable and recurring cash flow annually. This amount is likely to grow as Cordlife expands its customer base. Cordlife will realise margin expansion from sub-leasing income and rental savings after the group relocates to Yishun A’Posh Bizhub, which is owned by the group. We forecast gross margin to increase from 69.0 per cent in FY12 to 71.0 per cent in FY14, and net margin to increase from 29.9 per cent in FY12 to 35.1 per cent in FY14. We initiate coverage on Cordlife Group (Cordlife) with a BUY recommendation and target price of S$0.66, implying a 20.0 per cent upside from the current price. We like Cordlife for its market leadership in Singapore and Hong Kong, with potential for growth through a) the ROFR to acquire assets in high growth developing markets and b) a 10 per cent stake in a Guangdong cord blood bank, which enjoys a monopoly in an underpenetrated market. – UOB KayHian

 

Sheng Siong (HOLD; Target Price: S$0.49)

Sheng Siong Group (SSG) reported a 3.9 per cent YoY increase in 1Q12 revenue to S$159.8 million while net profit rose 73.7 per cent YoY to S$16.8 million. Excluding a one-time gain of S$10.5 million from the sale of its old Marsiling warehouse and a S$1.6 million prior-year tax provision, SSG’s net profit actually fell 18.1 per cent YoY to S$7.9 million. SSG’s 1Q12 top and bottomline figures came in at 24.7 per cent and 38.2 per cent of our FY12 projections. With retail space now exceeding 2010 levels, we fully expect SSG’s revenue to continue ramping up strongly over the next three quarters. Management is also anticipating the addition of three new stores, which will add about 30,300 square feet to its overall retail space. These stores should be prepped and ready for operations by the end of 3Q12. While its FY12 revenue prospects remain strong, the biggest risk to SSG remains the level of competition amongst the big three local supermarket chains. Given the uncertainty surrounding the recovery of the general economy and resulting price-sensitive consumers, this Big 3 competition is likely to continue over the course of the year, and could potentially exert margin pressures. Despite the threat of continued competition, we expect SSG to hold firm given its strong consumer base, brand prominence and strategic store locations with minimal gross and operating profit margin fluctuations. – OCBC Investment Research

 

Singapore Airlines (HOLD; Target Price: S$11.05)

Singapore Airlines (SIA) is expected to report a weak set of 4QFY3/12 results, dragged down by ballooning fuel prices. Earnings are forecast to come in at S$75 million, representing a 56 per cent YoY decline. High jet fuel prices are not coming down anytime soon and will continue to plague global airlines in the near future. While SIA’s passenger yields seem to be steadying, cargo yields are showing a decline of about 5 per cent YoY and this could be another roadblock to profitability. Also waiting to be resolved is the segregation of routes between Tiger Airways and Scoot to minimise cannibalisation of passengers. It was recently announced that Scoot would be plying the Singapore-Bangkok route, which Tiger is currently already in. SIA’s fortunes are closely tied to the cyclical ups and downs of the economy, whether global or domestic. Given the current developments in Europe, we do not think the global economy is out of the woods yet. We think that SIA will test its historical P/BV (price to book value) trough of 0.8x, which will provide a more attractive entry point for investors looking to ride the recovery. While there is little to cheer for SIA in the near term, existing investors can take heart that its strong balance sheet and positive earnings will sustain a dividend payout of 5.7 per cent. We will turn buyers at prices below S$10.00 while keeping an eye out for signs of economic improvement in Europe. – Maybank Kim Eng Research

 

Super Group (BUY; Target Price: S$2.08)

Super will report its 1Q12 results in mid-May and we expect net profit to come in at upper end of our estimated S$14 million-S$17 million range. 1Q12 revenue is likely to expand 14 per cent YoY to S$113 million, driven by volume growth and some 6 per cent ASP hike introduced in FY11. Due to higher input coffee prices at US$1,900+/tonne, GPM (gross profit margin) could see a 2 ppt dip to 34 per cent. Post our upgrade to BUY in February, Super’s share price had returned +20 per cent driven by a strong set of 4Q11 results and recent interest in Myanmar-themed counters. Fundamentally, we like Super for its dominant market positions in its key Southeast Asia markets – Myanmar (over 30 per cent market share), Singapore (over 20 per cent), Malaysia (over 10 per cent) and Thailand (over 5 per cent). Going forward, we expect Super to continue to benefit from better margins in 2H12 on softer raw material prices. – OSK-DMG