Boustead Singapore (April 11: BUY; S$1.33)
Boustead added about S$150 million worth of new contracts to its orderbook. This excludes two other design-build-and-lease projects, which we estimate would add about S$2 million to its annual recurring income once completed. However, we are adjusting our order win assumptions for the Real-estate Division to S$200 million per year (from S$250 million) as the average contract size appears to be smaller. We are also removing the revenue from the Libyan project from our forecasts, which we had assumed at S$80 million per year through FY2013 initially. Our revenue forecast for FY Mar12-13 is thus lower by 22 per cent but net profit forecast is less affected as we had assumed zero profit. We believe Boustead may take a write-down of its Libyan project in FY2011 so that it can start on a clean slate for FY2012, and also to be conservative. We adjust our RNAV (revalued net asset value) valuation for its Real-estate Division by writing down S$40 million and also roll forward our valuation multiple on FY2012-2014 average earnings for the other business divisions. – Kim Eng Research
CapitaLand Limited (April 11: BUY; S$4.10)
Last week, we visited two CapitaLand (CAPL) residential projects in China – the Paragon (Shanghai) and the Beaufort (Beijing). We believe 116 units at the Paragon (T1-2) would be launched in May 11 at RMB100–150,000 per square metre, in line with prices around the area. At the Beaufort, 220 units (T2) were launched in December 2010 and there are only 30-40 unsold units left at RMB40-43,000 per sqm. Our visits confirm the picture of slowing volume but stable prices in these two cities. Given CAPL’s current share price, we reiterate our view that Chinese residential worries on CAPL are likely overwrought. First, Chinese residential exposure only takes up around 12 per cent of CAPL’s total book assets. In addition, we believe major projects, such as the Paragon, are well thought-out and likely resilient in a weak market. We update our assumptions and maintain BUY at a revised fair value of S$4.10. – OCBC Investment Research
Pan Pacific Hotels Group (Not Rated)
PPHG recently completed the acquisition of the 276-room Hilton Melbourne Airport Hotel (HMAH) for A$108.9 million, making it its fourth hotel in Australia. PPHG intends to rebrand it as a PARKROYAL hotel. Last year, the group focussed on strengthening its brand franchise via organic growth of management contracts. This allowed it to take advantage of the strong economic recovery in the Asia Pacific and its EBITDA in FY2010 increased by 15 per cent YoY to S$97 million. With the acquisition of HMAH, PPHG now owns 14 hotels and manages 15 others, with a total of 8,972 rooms. In the confirmed pipeline will be another two hotels to be owned and five other hotels for management, for a total of 2,036 rooms. PPHG has a presence in Asia, Oceania and Northern America. The group is also working on the Plaza, a mixed development located on Beach Road comprising Furniture Mall, the 90-unit PARKROYAL Serviced Suites, the 343-room PARKROYAL on Beach Road Hotel, and The Plaza, which consists mainly of shops and offices. Work is already underway to redevelop the Furniture Mall into a 183-unit serviced suite. We reckon there could be a possibility of redeveloping or refurbishing The Plaza’s office space to make it more competitive. – Kim Eng Research
Viz Branz (April 11: HOLD; S$0.30)
Viz Branz produces more than 40 beverage products under its seven flagship brands like Gold Roast and Café 21 to be sold across geographical regions like China, Southeast Asia and Indochina. We forecast fairly stable revenue growth for Viz Branz of about 2.5-3.5 per cent for the next two years due to the relative affordability of Viz Branz’s products in its core markets, and the demand stability arising from its non-cyclical nature. Due to the sheer size of its consumer market, China will remain the largest contributor to revenue for Viz Branz going forward. We believe that rising costs will have minimal impact on Viz Branz’s margins due to its proven track record of mitigating previous price increases, and we like its targeted branding strategies, which have netted it market leaderships in Indochina. We initiate coverage on Viz Branz with a HOLD rating and a fair value estimate of S$0.30. – OCBC Investment Research
Wee Hur Holdings (Not Rated)
With over 30 years of history, WHur is a key player in the construction industry in Singapore. The group has been involved in numerous building projects across various industries and has completed about S$500 million worth of projects since listing in 2008. WHur presently has an unbilled orderbook of about S$300 million lasting until 2013, which will underpin its near-term earnings. In an effort to broaden its revenue stream, the group recently included property development as one of its core businesses. The property division made its maiden earnings contribution in 2010 from its two projects Villas@Gilstead (residential) and Harvest@Woodlands (industrial). For 2011, we estimate net profit to increase by 74 per cent to S$36.2 million on the back of stronger property earnings with contribution mainly from the Harvest@Woodlands project. Key construction projects which were in their early stages of work in 2010 are also expected to start contributing meaningfully. Meanwhile, the mid-term outlook looks positive with the continued growth in Singapore’s economy and sustained roll-out of public sector projects. – Standard & Poor’s
