Compiled by Navin Sregantan
| HOLD (UPGRADED)
MAY 8 CLOSE: $1.32
TARGET PRICE: $1.38
CGS-CIMB, May 7
First-quarter net profit of $800,000 was a relief as we were worried that Sunningdale may incur a loss in the first quarter.
Excluding a foreign exchange loss of $900,000, Sunningdale disclosed that its adjusted net profit was $2.1 million. For Q1, the revenue decline of 6 per cent year on year was mainly due to a 15 per cent decline in sales in the automotive segment (due to weak demand and projects reaching end-of-life).
Given the ongoing cost reduction efforts and the seasonally weak first quarter, we expect Sunningdale to report a quarter-on-quarter earnings recovery in Q2. However, net profit should still decline on a year-on-year basis.
While the demand in the automotive segment remains weak, Sunningdale continues to garner momentum in the consumer/IT and healthcare segments.
Cost pressures (wage increase and raw material costs) are also easing.
In our view, the share price decline of 13.5 per cent since our "reduce" call on March 1 has factored in the current concerns over weak FY2019 earnings outlook.
Catalysts are new order wins/ customers. However, all bets are off if the US-China trade war spirals out of control. It offers dividend yields of 6 per cent and has minimal net gearing.
| HOLD (MAINTAINED)
MAY 8 CLOSE: $0.99
FAIR VALUE: $1
OCBC Investment Research, May 8
Singapore Post saw a 2.1 per cent year-on-year fall in revenue and a $75.1 million net loss in Q4 FY2019, bringing full-year net profit to $19 million.
Excluding exceptional items such as a $100.4 million impairment of goodwill, underlying net profit in Q4 was $14.5 million, or 6.1 per cent lower year on year.
This would bring full year underlying net profit to $100.1 million, which was 5.8 per cent lower compared to FY2018.
As mentioned in our Feb 1 report, there are risks of impairments to the US businesses.
Do note that besides the impairments that have been made, the group expects to continue to account for operating losses of the US businesses until it completes an exit.
Looking ahead, capital expenditure is also expected to be incurred for the post and parcel segment to improve processes and preparing it to be future-ready.
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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