Compiled by Lynette Tan
BREADTALK | NEUTRAL (UPGRADED)
TARGET PRICE: $0.81
FEB 21 CLOSE: $0.87
RHB Research Institute, Feb 21
Q4 2018 results were above expectations, due to a write-back of the bonus provision in previous quarters for the bakery segment, lower-than-expected corporate costs and margin improvements in the food atrium segment.
The bakery segment continued to underperform, with losses incurred in China.
This was mitigated by stronger earnings in Singapore and other franchise income.
Meanwhile, the food atrium segment surprised us with wider margins, despite the already-low vacancy rates.
According to BreadTalk, the active management of its stallholders in the food atriums over the last two years resulted in higher revenue for the stalls - as such, higher variable rental payments were collected.
The restaurant segment's numbers are in line. Note that the strong performance at existing restaurants was offset by one-off opening costs of about $1 million to $1.5 million for Din Tai Fung in Britain.
Group chief executive Henry Chu is leading efforts to turn around the bakery business.
While there is still potential for earnings to improve, this may take a couple more quarters to realise. In addition, BreadTalk announced yesterday that it had acquired the remaining 50 per cent stake in BreadTalk Thailand from Minor International. We understand the bakery business in Thailand is in the red, and this may take time to turn around.
The group also aims to open another Din Tai Fung outlet in Britain in Q3 2019, which should help to improve economies of scale in Britain over the medium term.
We raise our forecasts by 12 per cent to 14 per cent for FY 2019-2021 on stronger food atrium margins and lower interest costs.
SEMBCORP MARINE | BUY
TARGET PRICE: $2.40
FEB 21 CLOSE: $1.70
DBS Equity Research, Feb 21
Despite the rebound in oil prices and higher capital expenditure guidance by oil majors, Sembcorp Marine's (SMM) share price has yet to reflect the brighter outlook ahead.
SMM is turning the corner with operational improvements and more upbeat order win prospects.
We believe SMM's strong order pipeline would translate into $3 billion or more in new orders this year, which may potentially include:
1) a Gravifloat (SMM's proprietary technology) modularised liquefied natural gas exporting terminal for Poly-GCL at about $1 billion;
2) two large compressed gas liquid carriers for SeaOne Caribbean valued at $800 million in total; and
3) Rosebank's floating production storage and offloading contract that could be worth up to US$2 billion (S$2.7 billion).
In addition to contract win catalyst, we believe any re-emergence of yard consolidation speculation could also buoy SMM's share price.
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