Compiled by Andrea Soh
ST ENGINEERING | BUY (INITIATE COVERAGE)
TARGET PRICE: $4.07
SEPT 6 CLOSE: $3.59
RHB Research, Sept 6
ST Engineering's exposure to the commercial and defence industries across four segments creates a defensive business model that is tough to beat.
It is the world's largest MRO service provider for aircraft and Asia's leading provider of ICT solutions. Aircraft fleet size growth, rising demand for passenger-to-freighter conversions and more spending on Smart Nation initiatives should lead to strong 2018 growth.
Supported by growth in the aerospace and electronics segments, plus land systems' recovery, the group is set to deliver 10 per cent earnings growth in 2018-2019 (2017: +2 per cent).
With rising profit and limited capex requirement, we believe ST Engineering could gradually increase the 2019 dividend/share to $0.17 (2016: $0.15).
With a dividend yield of 4 per cent, it is among the few strong dividend-paying blue-chip counters on the SGX with expectations of earnings growth.
DBS Equity Research, Sept 6
We expect August's market choppiness to continue into September for the following reasons:
(1) uncertainty over central bank's policy actions
(2) risk of escalating geopolitical tensions in the Korean peninsula
(3) a lacklustre Q2 results season.
Yield stocks should continue to find favour amid tamer Fed rate hike expectations and heightened geopolitical tensions in North Asia.
Our SReits team's picks are Keppel Reit ("Buy", TP: $1.23), Ascendas Reit ("Buy", TP: $2.85), Frasers Logistics & Industrial Trust ("Buy", $1.15), CDL HT ("Buy", TP: $1.75), Far East HT ("Buy", $0.70) and MAGIC ("Buy", TP: $1.25).
For non-SReits, we pick Breadtalk ("Buy", TP: $2.04), Hong Leong Finance ("Buy", TP: $3.20) and Frasers Centrepoint Ltd ("Buy", TP: $2.35).
CACHE LOGISTICS TRUST | HOLD (UPGRADE)
FAIR VALUE: $0.810
SEPT 6 PRICE: $0.815
OCBC Research, Sept 6
The manager of Cache Logistics Trust is undertaking an underwritten and renounceable rights issue of 162.6 million new units to raise gross proceeds of $102.7 million.
Rights units will be offered at a rights ratio of 18 rights units for every 100 existing units with a rights issue price of $0.632 per rights unit.
On a pro forma basis, FY16 DPU would decrease by 10.9 per cent from 7.725 cents to 6.882 cents.
The bulk of the proceeds are intended for the partial repayment of existing debt.
This would reduce Cache's gearing from 43.4 per cent as at June 30 to 35.5 per cent.
We are positive on the dramatic decrease in leverage.
Given the reduction in gearing, we lower our cost of equity from 9.6 per cent to 9.1 per cent and lower our interest burden accordingly.
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.