Business

Brokers' take

Compiled by Melissa Tan, The Business Times

HAW PAR CORP | BUY
TARGET PRICE: $11.40
DEC 8 CLOSE: $9.14
RHB, Dec 8

Once overshadowed by the size of its investment portfolio, Haw Par's healthcare business has grown rapidly in recent years.

The healthcare division's revenue and operating profit grew at CAGR of 14 per cent and 24 per cent over the past five years, respectively. In the first nine months of 2016, operating profits grew 16 per cent year on year to a record high of $46.6 million, while profit margins expanded from 32 per cent to 34.7 per cent. We reckon the healthcare business to be worth $1.1 billion based on a price earnings multiple of 20x.

Adding its investment portfolio of about $2 billion (primarily includes UOB, UIC and UOL shares), investment properties worth $211 million and net cash of $253 million to its healthcare business, we arrive at a fair value of $16.25 for Haw Par's stock using a sum of parts valuation. Our target price of $11.40 is based on a 30 per cent discount to fair value.

HUTCHISON PORT 
HOLDINGS TRUST | BUY
TARGET PRICE: US$0.48
DEC 8 CLOSE: US$0.42
DBS Group Research, Dec 8

Hutchison Port Holdings Trust (HPHT) offers investors an attractive 8.3 per cent prospective yield even after our DPU forecast cut, and looks oversold at the current price level. Further upside could come from a stronger-than-expected recovery in China's exports, acquisition-driven growth or privatisation by its major shareholders.

HPHT's share price is trading near historic lows, offering a prospective yield of more than 8 per cent in 2017F and at 0.6x FY16 P/BV, could be attractive as an acquisition target, given its strategic assets. Our target price is based on a discounted cash flow valuation framework (weighted average cost of capital of 7 per cent and terminal growth rate of 0 per cent). While we have cut FY17F DPU forecast to HK 27 cents, the prospective yield of 8.3 per cent is attractive after a recent price correction.

SINGAPORE HEALTHCARE | NEUTRAL
OCBC Investment Research, Dec 8

Medical tourism growth may slow down amid heightened macro uncertainties for the region. We are keeping our neutral stance on the healthcare sector given the high valuations and varying growth trajectory across the companies. We upgraded Raffles Medical Group (fair value estimate: $1.61) from Hold to Buy on Nov 24 following a dip in share price, for its steady earnings track record, strong management execution, healthy balance sheet and visibility on long term growth driven by expansion plans (hospital extension next year and Shanghai Hospital by end 2018).

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.

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