Compiled by Navin Sregantan
SATS| HOLD (MAINTAINED)
JUNE 3 CLOSE: $5.03
TARGET PRICE: $5.05
UOB Kay Hian, June 3
Sats outlined a clear growth strategy on its capital markets day to maintain its leadership position as the Asia-Pacific market leader in aviation catering and ground handling as well as to be a leading central kitchen provider in the region.
This includes plans to spend $1 billion in 3 years and raise gearing to 30 per cent and speed up digitalisation of cargo traceability and food procurement.
We agree with Sats' approach to grow its business in fast developing countries.
However, cost pressures are likely to keep margins low, even for central kitchens.
Sats, however, believes that the formation of central kitchens to supply to fast casual restaurants could be a disruptive trend, which it plans to capitalise on. We agree but we are unsure on the gestation period for the business to start contribution in a meaningful way.
Our suggested entry price is $4.70.
YOMA STRATEGIC HOLDINGS| BUY (MAINTAINED)
JUNE 3 CLOSE: $0.34
TARGET PRICE: $0.40
DBS Equity Research, June 3
Yoma posted a FY2019 net profit of US$34 million (S$47 milion), boosted by US$96 million in fair value gains.
Bottom line in FY2018 stood at US$12 million.
Core earnings before interest, tax, depreciation and amortisation, which excludes fair value gains, is estimated to have increased 14 per cent on the year mainly from real estate and Yoma Fleet, offset by losses from Yoma F&B and Yoma Motors.
The company plans to launch more affordable housing, targets 125 F&B stores by FY2023, and new capital to grow Yoma Fleet's fleet size by five times.
Despite some disappointment on Myanmar's economic growth, we believe Yoma remains the best proxy to ride on the country's potential economic turnaround with a new government in place.
With its diversified portfolio in property, consumer and automotive sectors, Yoma is well placed to tap into the growth.
Potential catalysts are a recovery in Myanmar's property market and non-real estate businesses turning profitable.
Key risks to our view are political and economic in nature.
Myanmar is still a developing country and its real estate and infrastructure sectors are in the nascent stage. As such, continued supportive government policies on foreign investments are key to improving sentiment within the real estate space.
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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