Brokers’ take

Compiled by Leila Lai

YANGZIJIANG SHIPBUILDING (HOLDINGS) |BUY

NOV 8 CLOSE: $1.32
TARGET PRICE: $1.41

OCBC Investment Research, Nov 8

Yangzijiang Shipbuilding (YZJ) delivered a 23 per cent year-on-year rise in revenue to 5.4 billion yuan (S$1 billion) and a 10 per cent fall in net profit to 866 million yuan in Q3 2018, bringing 9M18 net profit to 2.4 billion yuan.

This is a much better than expected set of results, with 9M18 earnings accounting for 94 per cent and 90 per cent of ours and the street's full-year estimates, respectively.

Gross profit margin for shipbuilding was 20 per cent in Q3 2018, compared to 15 per cent in Q3 2017, mainly due to a stronger US dollar against the yuan, as well as reversal of 152 million yuan of provision that YZJ made previously (in anticipation of potential losses when the RMB was stronger).

Though the group made an impairment of 333 million yuan on financial products, the investment segment delivered strong earnings of 373 million yuan in Q3 2018, which was a 67 per cent year-on-year rise.

With the better-than-expected results, we have raised our earnings estimates and our fair-value estimate rises from $1.32 to $1.41. As such, we upgrade our rating to "buy".

OUE HOSPITALITY TRUST | BUY

NOV 8 CLOSE: $0.69
TARGET PRICE: $0.85

DBS Group Research, Nov 8

FY18 is a transition year for OUE Hospitality Trust (OUEHT), given the loss of income support and share price correcting on the back of slower increase in revenue per available room (RevPAR) and fears over a rights issue similar to that conducted by its sister real estate investment trust (Reit), OUE Commercial Reit.

However, we believe these issues have largely been priced in as OUEHT currently trades at 0.9 times price/book value (P/B) which is in line with -1 standard deviation (SD) of its mean P/B, and its forward yield of 7.6 per cent is also close to +1SD of its mean yield of 7.7 per cent.

Between Q4 2017 and H1 2018, the market came around to our view that OUEHT should trade at a premium to book, given its leverage to a multi-year recovery in the Singapore hospitality market given limited new supply over the next two to three years and premium prices paid for hotels by property investors.

However, the recent correction now places OUEHT at about 10 per cent discount to book. As we believe we are in the midst of a multi-year recovery, OUEHT should re-rate from the current level.

After incorporating slower RevPAR performance, we lowered our discounted cash flow-based target price to 85 cents from 90 cents.

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