Compiled by Lynette Tan
M1 | SELL (MAINTAINED)
JAN 30 CLOSE: $2.06
TARGET PRICE: $1.77
Maybank Kim Eng, Jan 29
M1 recorded a softer Q4 2018 that missed consensus net profit by 7 per cent but beat ours by 15 per cent.
Total revenues were driven by equipment sales as wireless service revenues were down quarter-on-quarter (q-o-q) and year-on-year (y-o-y).
Although part of equipment sales is accounted for by contract revenues, net of handset costs, subsidies increased in the quarter. Meanwhile, a significant 17 per cent q-o-q (12 per cent y-o-y) increase in staff costs from bonus provision and expansion in corporate segment hires also pressured the results.
We raise our 2019, 2020 and 2021 revenue forecasts by one per cent, 2 per cent and 2 per cent, leading to higher profits of 19 per cent, 21 per cent and 14 per cent respectively, and a higher target price.
We have assumed that M1 can maintain its 80 per cent dividend payout policy even though the balance sheet will be pressured from a $188 million license fee payment for the 700Mhz it was awarded in 2016.
There was no earnings, capex and payout guidance for 2019 as management awaits the results of the voluntary general offer.
Nonetheless, our profit forecasts and target price translate to non-compelling dividend yields at current levels. If Konnectivity gains control and implements structural changes to revenue generation and costs, this would be an upside to our base case.
CDL HOSPITALITY TRUST
| BUY (MAINTAINED)
JAN 30 CLOSE: $1.63
TARGET PRICE: $1.80
RHB Research Institute, Jan 30
Over the next three years, we expect a 4 per cent compounded annual growth rate (CAGR) distribution per unit (DPU) growth.
Revenue per available room (RevPAR) rose 5.1 per cent YoY for the first 27 days in Jan 2019, with healthy forward bookings seen for most of its hotels.
Some disruption is expected at the Orchard hotel in 1H 2019 due to upgrading works.
Despite 2019 being an odd year (even years typically have more biennial events) management noted that corporate demand (about 55 per cent of total) is expected to remain stable with a pick-up from sectors such as IT, pharma and infrastructure.
Maldives operations have bottomed out. The Dhevanafushi Maldives Luxury Resort will be rebranded and opened as Raffles Maldives Meradhoo in early Q2 2019, and is expected to command a 20-30 per cent increase in room rates.
Outlook for its Japan and European hotels (UK, Germany and Italy) remains positive, on the back of a better events calendar, despite supply growth. The Australian market is expected to remain stable on the back of largely fixed rentals. RevPAR for the Grand Millennium in Auckland is expected to taper after a strong growth over the last two years.
Gearing remains modest at 34.2 per cent, which means the company has about $300 million in debt headroom for acquisitions.
Management still sees more opportunities in the European market due to attractive yield spreads. While Singapore remains the preferred market, the recent surge in capital values has made yield-accretive acquisitions difficult.
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