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Brokers' take

This article is more than 12 months old

Compiled by Rachel Mui

JUMBO GROUP | HOLD

TARGET PRICE: $0.44

NOV 22 CLOSE: $0.405

DBS Group Research, Nov 22

Maintain "hold" with lower target price as we believe growth prospects are largely priced in. Q4 earnings of $2.5 million (-7.3 per cent y-o-y) was below expectations, on the back of slightly lower than expected revenue of $39.7 million (+4 per cent y-o-y).

We maintain our neutral stance as we await new outlets to start contributing to growth. While we believe the long-term growth outlook from regional outlet expansion is positive, near-term margins will be affected by higher operating expenses and expansion-related costs.

We have cut FY19-20F earnings by 20-22 per cent as we have assumed that Jumbo is still in expansion mode, and will incur higher operating expenses.

Longer term, we could see more franchises and new stores in existing and new locations including Thailand, Indonesia, Hong Kong, Macau, Korea, Xi'an, and Shenzhen turning in better performance after the initial phase.

A potential catalyst includes faster than expected outlet expansion especially in China and regional franchises, provided cost structure does not deteriorate considerably.

More franchise outlets should also deliver better growth once the number of outlets attain critical mass. However, apart from operational risks, we see failure to deliver growth in China as a key risk to our projection. Singapore's business is stable, while the bulk of the growth is driven by China.

NETLINK NBN TRUST | BUY

TARGET PRICE: $0.99

NOV 22 CLOSE: $0.77

UOB Kay Hian, Nov 21

Singtel's and StarHub's decision to retire their legacy ADSL and HFC (hybrid fibre-coaxial) networks would accelerate growth in NetLink's residential fibre connection to 9 per cent in FY19 and 6.2 per cent in FY20.

StarHub has decided to migrate its customers of both residential broadband and pay-TV to an all-fibre network. It will cease provision of cable services after June 30, 2019 and retire its legacy HFC network.

Singtel has already closed its copper-based ADSL connections for broadband, TV and digital voice in H1 2018.

Management is closely monitoring developments on the roll-out of 5G networks in Singapore.

NetLink could support the four mobile operators on deployment of fibre for their 5G networks.

NetLink declared distribution per unit (DPU) of 2.44 Singapore cents for H1FY19. The distribution payment date is Nov 27.

Assuming the DPU for H2 FY19 stays the same, the annualised DPU of 4.88 Singapore cents is 5.2 per cent higher than the projected DPU provided in its IPO prospectus.

NetLink is on track to achieve the number.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.

The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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