Compiled by Wong Kai Yi
ST ENGINEERING | BUY
TARGET PRICE: $3.97
NOV 13 CLOSING: $3.46
RHB Research Institute, Nov 13
We expect ST Engineering - scheduled to announce its Q3 2018 results today, to report Patmi of $140 million, up 13 per cent year-on-year.
This growth will largely be aided by the improvement in profits from Aerospace and Land Systems.
We still expect the company to see a gradual revival in earnings growth, aided by increased MRO (maintenance, repair and overhaul) activity, P2F (passenger to freighter) conversions, likely contributions from its recently-acquired MRAS (Middle River Aircraft Systems), delivery of smart city-related contracts in and outside Singapore, and defence-related contracts.
Its order book, now at a peak of $13.4 billion, offers revenue visibility of two years.
We believe the market has not yet fully priced in the potential earnings growth from the MRAS acquisition.
Without the contribution from MRAS, we expect ST Engineering to deliver a strong 16 per cent profit growth in FY19.
Its share price has outperformed the STI by 17 per cent year-to-date and is up 6.4 per cent since the announcement of the MRAS acquisition.
ST Engineering is one of our Singapore Top Picks and we maintain "buy" with a $3.97 target price, which offers a 13 per cent upside and 4.4 per cent FY2019 dividend yield.
SASSEUR REIT | BUY
TARGET PRICE: $0.90
NOV 13 CLOSING: $0.68
Maybank Kim Eng, Nov 13
Sasseur Reit (real estate investment trust) reported another strong set of earnings with DPU of 1.542 Singapore cents, 4.5 per cent ahead of its IPO projection.
Sales growth momentum was strong in Q3 2018 at between 19-91 per cent year-on-year (y-o-y), outpacing our 3-40 per cent growth forecasts for its four outlet malls; we expect this to pick up into the seasonally-strongest Q4.
Our forecasts and $0.90 target price are unchanged.
Total portfolio sales jumped 35.7 per cent y-o-y to 1.13 billion yuan (S$224.19 million) or 7.9 per cent ahead of its IPO projection.
Its NPI or rental income from embedded EMAs was $29.1 million or 0.7 per cent ahead of its forecast, while its DPU of 1.542 Singapore cents was 4.5 per cent ahead of the 1.476 Singapore cents guidance.
This is a seasonally strong quarter for sales - typically at 25 per cent of the full year according to management, with higher sales per unit and per customer of fashion items in the autumn-winter season.
We expect the momentum to pick up in Q4 to achieve 30 per cent of full-year.
Q3 2018 DPU would have met 25.7 per cent of our FY2018 estimate provided for by the EMA structure resulting in an annualised DPU yield of 8.9 per cent.
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