Compiled by Navin Sregantan
FRENCKEN GROUP | BUY (INITIATE)
MAY 9 CLOSE: $0.615
TARGET PRICE: $0.82
RHB Research Institute, May 9
Frencken provides global integrated technology solutions to world-class multinational corporations (MNCs) across five different business segments.
For FY2019, we expect industrial automation to be the main growth driver, with orders from a key customer setting up a new factory.
Management expects to post robust year-on-year (yoy) growth in Q1 due to the same reason - we expect these growth factors to continue to drive sales in Q1 and Q3, which should be very positive for the company.
Management is also bullish on the outlook of its analytical and medical units, and expects yoy growth at these segments in Q1. We are projecting yoy growth in FY2019 at these two units as well, driven by new customers and new projects.
We believe Frencken's technology, which has been making rapid advancements in recent years, will provide more solutions to its customers and support future projects in terms of margins and profitability.
Frencken is undervalued and will likely continue to rerate upwards as earnings growth continues to pick up in the subsequent quarters.
HONGKONG LAND | BUY (MAINTAINED)
MAY 9 CLOSE: US$6.96
TARGET PRICE: US$8.02
DBS Equity Research, May 9
Office leasing demand from Chinese enterprises in Central, Hong Kong has softened since the second half of 2018.
This resulted in a slowdown in leasing enquires.
The vacancy of Hongkong Land's Central office portfolio inched up to 2.1 per cent in March 2019 from Dec 2018's 1.4 per cent but this should fall in the coming months as tenants take up committed space.
Despite slightly higher vacancy and waning demand, office rental reversion remained positive.
Tight new supply in Central in the years ahead should help support office rents there.
Due to fewer sales launches, contracted sales revenue in China fell 36 per cent to US$193 million but is anticipated to rise in the second half of 2019.
In Singapore, pre-sales at Margaret Ville and Parc Esta were satisfactory. Tulip Garden is expected to be launched for pre-sale in second half of this year. Year-to-date, shares of Hongkong Land have risen 10 per cent, underperforming other landlords by 9 percentage points. Meanwhile, the stock is trading at 47 per cent discount to our appraised current net asset value, against its 10-year average of 35 per cent. Valuation is attractive even allowing for softening office demand in Central.
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.
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