JAPFA LIMITED | REDUCE (DOWNGRADED)
MARCH 14 CLOSE: S$0.66
TARGET PRICE: S$0.63
CGS-CIMB, March 13
At current valuations, we believe the market has priced in weaker Vietnam swine profits, mainly due to the potential impact of the African swine fever (ASF) outbreak in Vietnam.
Share price could re-rate till Q3 FY2019 on sustained Indonesia poultry margins ahead of the Lebaran season and the continual day old chick (DOC) supply shortage.
However, in the longer term, potentially narrower year-on-year growth for Japfa's poultry business towards FY2020F and larger than-expected disruption in the Vietnam swine business could be risk factors.
The outbreak of ASF in the north of Vietnam is spreading at a rapid pace. We believe industrialised farmers (like Japfa) may stand a better chance but there are no guarantees they will not be affected.
While swine prices may be maintained as the supply dwindles, if there is a shift in consumption to other proteins, the demand for Japfa's swine could also decline.
Japfa said it could see higher costs due to enhanced biosecurity measures and lower swine feed sales volumes.
CAPITALAND MALL TRUST | NEUTRAL (MAINTAINED)
MARCH 14 CLOSE: S$2.37
TARGET PRICE: S$2.20
RHB Research Institute, March 14
In the year up to March 13, CapitaLand Mall Trust's (CMT's) unit price was up 6 per cent mainly on optimism over Funan Mall's opening, and the bottoming of retail rental rates.
We believe positives are fully priced in and valuations are fair. While retail rental seems to stabilising, we do not expect any strong growth in rates in the near term.
Tampines Mall could face some pressure in rental reversions in the future due to Jewel Changi Airport's opening, which could result in shopper traffic being diverted from other malls in the eastern region.
Funan Mall and its office complex (to open in June) have a committed occupancy rate of about 80 per cent, exceeding our 70 per cent estimate.
Management guided that it is still on track to achieve its yield-on-cost of 6.5 per cent for the asset.
Management also noted that Westgate is performing well after its asset enhancement, and sees room for more upside.
CMT also plans to reposition the slightly weaker performing J-Cube and Lot One shopping malls.
Gearing is comfortable at 34.2 per cent, giving the Reit ample debt headroom acquisitions with management preferring Singapore malls, but may selectively look at overseas assets, since options at home are limited.
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