Broker's take

Compiled by Cai Haoxiang

ROXY-PACIFIC HOLDINGS | BUY (UPGRADE)

DEC 7 CLOSE: $0.53

TARGET PRICE: $0.60

OCBC Investment Research, Dec 7

Roxy-Pacific announced that it will acquire for A$33 million (S$33.7 million) a six-storey commercial and retail building in Melbourne's Central Business District.

We understand that it is in a mixed-use zone and Roxy intends to redevelop the property to a mixed-use development comprising hotel and retail units.

In Singapore, we see Roxy to be well-positioned to benefit from a turnaround in the domestic property market.

The group has a landbank that can potentially generate over 400 homes in seven sites, including Dunearn Court that was recently acquired for S$36.3 million through a collective sale.

Our valuation model is updated with these latest acquisitions and firmer residential sales and average selling price assumptions, and our fair value estimate increases to $0.60 from $0.52 previously.

Upgrade from "hold" to "buy".

KIMLY | BUY

DEC 7 CLOSE: $0.36

TARGET PRICE: $0.45

UOB Kay Hian Research, Dec 7

Since its listing in March, Kimly has pulled back nearly 30 per cent from its year-to-date peak.

The stock is now trading at 18 times FY2018 forecast earnings (13.8 times ex-cash earnings), a 13.5 per cent discount to consumer peers' despite strong 2018 forecast free cash flow yield of 5.8 per cent (peers: 4.7 per cent).

We continue to like Kimly for its strong cash generation capabilities, clean balance sheet as well as earnings resilience.

Kimly recorded a strong cash balance of $83.7 million ($0.07/share) in FY2017 v $29.4 million in FY2016 ($0.03/share).

While we note that near-term growth may be relatively muted, its strong war chest provides opportunities for the group to grow its business.

Kimly has already started to partner food-delivery companies UberEats, Deliveroo and Foodpanda, which we understand revenue from delivery alone could contribute around $60,000 a month.

The expansion of the central kitchen remains on track.

We view the expansion and development of the central kitchen positively as Kimly would be able to increase efficiency through performing more processes and reducing manpower reliance.

Based on our new estimates, we project a three-year (FY2018-20) earnings compound annual growth rate of 6.3 per cent.

Our target price of $0.45 implies 22.8 times FY2018 forecast earnings and 18.6 times ex-cash earnings.

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