Compiled by Lynette Tan
IHH HEALTHCARE | BUY
TARGET PRICE: RM6.35 ($2.09)
NOV 28 CLOSE: $1.71
DBS Group Research, Nov 28
Headline net profit fell 86 per cent for the first nine months of 2018, year-on-year (y-o-y), to RM118 million, largely impacted by higher exchange translation losses following the sharp depreciation of the Turkish lira especially in Q3 2018 and the absence of a one-off RM555 million gain from the disposal of its stake in Apollo Hospitals which was recognised in 1H 2017.
This is partially offset by foreign exchange gains (approximately RM23 million) arising from the strengthening US dollar on the group's US dollar-denominated cash balances in the first nine months of 2018.
Going forward, given that IHH can now raise its stake in Acibadem to 90 per cent following the exercise of options by founder Charimand and his wife, management can soon proceed to capitalise the existing US$250 million equivalent of subordinated loans.
Management expects to complete this by year-end, and reducing risk of Turkish lira translation losses.
IHH has also obtained control (31.1 per cent stake) in Fortis Healthcare in Nov 18. Subsequently, it has made an open offer to acquire up to 26 per cent stakes in Fortis Healthcare and Fortis Malar.
Management expects to complete the acquisition (including the offer to acquire all assets under RHT) by year-end.
Finally, Gleneagles Chengdu's opening is delayed to 2H 2019, with Gleneagles Shanghai to open in 2H 2020. Management expects to see increased pre-operating costs typically three months before opening when the hiring of doctors, nurses and staff occurs.
THAI BEVERAGE | BUY
TARGET PRICE: $0.75
NOV 28 CLOSE: $0.64
RHB Research Institute, Nov 28
Despite the ending of the mourning period following the passing of King Bhumibol Adulyadej, FIFA World Cup, and strong GDP growth, ThaiBev results consistently disappointed the market this year.
Marred by weaker rural income and rising prices - as a result of excise and elderly taxes - the group's sales volumes for spirits and beer were both down 11 per cent.
However, we believe the worst is over for ThaiBev. Improving farm income, as well as potential relief to help farmers amidst the upcoming election, should help soothe the weak consumption levels in rural areas.
We expect Thailand's domestic alcohol consumption to grow at low single-digit levels next year.
Higher earnings growth is likely to be seen outside of the kingdom at ThaiBev's Grand Royal Group subsidiary in Myanmar and with Sabeco in Vietnam. In a move to invite more foreign direct investments, Vietnam's Finance Ministry is looking to remove restrictions on foreign ownership of listed companies.
This is expected to take place by end-2019.
We believe this move is positive for ThaiBev, as its effective stake in Sabeco could potentially be raised from the current 26 per cent.
We lower our FY2019 and 2020 forecasted core profit after tax and minority interests (Patmi) 11 per cent and 13 per cent on higher selling, general and administrative (SG&A) expenses and interest expenses.
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