Compiled by Andrea Soh, The Business Times
SINGAPORE AIRLINES | HOLD
TARGET PRICE: $10.36
FEB 9 CLOSE: $9.94
OCBC Investment Research, Feb 9
Singapore Airlines' 3QFY17 revenue declined 2.5 per cent yoy to $3.84 billion on lower passenger flown revenue as passenger yields declined across all SIA portfolio airlines. SIA Cargo's 3QFY17 was exceptional as it achieved $53 million in operating profit - its best third quarter in nine years. While SIA recorded a $79 million write-down over its Tigerair brand and trademark, we strip out this one-off and coupled with a 17.6 per cent y-o-y fall in 3QFY17 fuel expenses, 3QFY17 core PATMI grew 20.3 per cent to $256.2 million.
For 9MFY17, core PATMI grew 20 per cent yoy to $378.5 million, and formed 85.3 per cent of our FY17 forecast, as fuel costs fell 22.8 per cent mainly driven by lower hedging losses.
In our view, the weak yield environment will persist on overcapacity amid the tepid global economic outlook. However, SIA has also taken the chance to hedge Brent out to 2022, locking in cheaper fuel in a seemingly recovering oil price environment.
Consequently, as we raise our forecasts on the better-than-expected results, our FV increases from $10.22 to $10.36.
SINGTEL | NEUTRAL
TARGET PRICE: $4
FEB 9 CLOSE: $3.88
RHB Research, Feb 9
9MFY17 core earnings made up 74 per cent/75 per cent of RHB/consensus estimates - broadly in line. 4QFY17 core earnings were up 4.2 per cent yoy (+3.6 per cent YTD) on lower financing cost and stronger associate contributions. The 4QFY17 core Ebitda was stable yoy (-1 per cent qoq), supported by cost rationalisation initiatives, notwithstanding the topline pressure (-2 per cent yoy) from stronger competition affecting Optus.
On a constant currency basis (AUD gained 3 per cent qoq against the SGD), group revenue would have dipped 4 per cent yoy.
Stock remains our preferred exposure to SG telcos, being the least susceptible to the threat posed by the potential fourth entrant (TPG). Key earnings risks are: stronger than expected competition in the Singapore/Australian mobile businesses, forex volatility and higher than expected losses from adjacent businesses.
PERENNIAL REAL ESTATE HOLDINGS | ADD
TARGET PRICE: $1.08
FEB 9 CLOSE: $0.80
CIMB Research, Feb 8
PREH's FY16 net profit was impacted by impairments and revaluation losses in China and Singapore. It had lower rental from Singapore due to lower occupancy with the start of AEI. In China, earnings growth to be loaded in 2H with the anticipated commencement of eldercare home business, likely in 3Q17.
Perennial International Health and Medical Hub is now 60 per cent pre-leased, expected to start from 3Q17.
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