Brokers’ take

Compiled by Leila Lai

KOUFU GROUP

BUY (UNCHANGED)

MARCH 27 CLOSE: $0.765

TARGET PRICE: $0.95

UOB KayHian Research, Mar 27

Outlet openings are tracking expectations.

In 2M19, Koufu Group has opened two food court outlets and secured seven locations for R&B Tea/Supertea.

This year, Koufu expects to bring the total number of food court outlets to 53, coffee shops to 16, R&B Tea/Supertea outlets to 30 and Elemen restaurants to five.

Management had shared that the run-up to an initial public offering (IPO) had divided management's attention between running the core business and ensuring regulatory requirements of the IPO are met.

Subsequent to listing, management is giving the core business their undivided attention and is confident of unleashing the full potential of its outlets.

This year, Koufu is also planning to open one foodcourt in Macau University and another in Nova City.

Koufu does not expect NTUC Enterprise's acquisition of Kopitiam to have an adverse impact on the industry landscape.

Koufu is on a steady path of growth as management completes the enhancement initiatives of Rasapura Masters and has a pipeline of six new foodcourts this year.

In addition, we expect a steady roll-out of Koufu's R&B Tea and Supertea, which are highly popular with the younger crowd.

We think net profit could grow at double-digit levels from this year onwards.

Koufu owns two central kitchens at 18 and 20 Woodlands Terrace.

We estimate the sale of these properties could bring in $10 million and unlock gains of up to $8 million, which should bump up dividends. We maintain our earnings estimates.

Maintain "buy" and price/earnings-based target price of 95 cents, pegged to a 10 per cent discount to peers' average.

CHINA AVIATION OIL

BUY (UPGRADED)

MARCH 27 CLOSE: $1.30

TARGET PRICE: $1.60

RHB Research, Mar 27

Upgrade to "buy" from "neutral", with new $1.60 target price from $1.50.

China Aviation Oil (CAO) should benefit from signs of strong recovery in global passenger traffic growth in China.

This, in addition to resolution of capacity constraints at Shanghai Pudong International Airport once the new satellite terminal building is operational in H2 2019, should provide scope for upside surprise to our jet fuel supply volume growth assumptions over 2019-2021.

We believe its ex-cash 4.6 times 2019F price/earnings remains compelling.

The revival in international passenger traffic growth is supported by the rise in jet fuel imports into China, which grew 9 per cent year-on-year last year versus 6 per cent year-on-year in 2017.

CAO will be a key beneficiary of this trend as it is the sole importer of jet fuel into China that is consumed by all of the country's outbound international flights.

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