Brokers’ take
Compiled by Navin Sregantan
KOUFU GROUP | HOLD (DOWNGRADED)
MAY 7 CLOSE: $0.765
TARGET PRICE: $0.80
DBS Equity Research, May 7
Koufu's first quarter revenue increased 4.9 per cent year-on-year to $57.8 million and core earnings increased by 17 per cent year-on-year to $7.2 million. Both were in line with our estimates.
Our earnings forecasts remain unchanged as Koufu stays on track to meet our estimates, supported by Marina Bay Sands foodcourt's full 12 months of operation this year.
We are now neutral on Koufu as valuation has re-rated and the stock is no longer at a discount to peers.
However, fundamentals remain sound, with strong cashflow generation capability, defensive earnings, net cash balance sheet, and strong return on average equity.
Key earnings risks include failure to renew leases, inability to secure new outlets, departure of key tenants and food stalls, customers downtrading to hawker centres and coffee shops, and competition from foodcourts that offer more attractive propositions to customers.
NETLINK NBN TRUST | BUY (MAINTAINED)
MAY 7 CLOSE: $0.825
TARGET PRICE: $0.92
UOB Kay Hian, May 7
We expect NetLink NBN Trust to meet our FY2019 net profit forecast of $73 million and distribution per unit (DPU) may exceed initial public offering projections by 5 per cent at an annualised DPU of 4.88 cents.
This translates to attractive net dividend yields of 5.8 per cent and 6 per cent for FY2019-2020 respectively.
Key earnings drivers include StarHub's fibre migration plan and expansion of network coverage into new housing estates.
NetLink is expanding its network coverage to new housing estates at Sengkang, Punggol and Tengah.
It will support telcos to serve new end-users for non-residential and non-building access point fibre connections.
We continue to like the company for defensive earnings (high barriers of entry), stable cash flow (90 per cent of earnings are recurring in nature) and it being a potential beneficiary of TPG's mobile coverage plan.
Moreover, competition or churn among retail service providers (RSPs) does not affect the number of fibre connections provided by Netlink.
It is also not affected when a fibre broadband subscriber switches from one RSP to another.
In fact, overall demand for NetLink's fibre connections could increase if competition reduces the prices charged by RSPs.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.
The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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