COMFORTDELGRO | BUY
APRIL 20 CLOSE: $2.65
TARGET PRICE: $2.94
DBS GROUP RESEARCH, APRIL 20
SBS Transit (SBST), a subsidiary of ComfortDelGro (CD), was awarded the third bus package with a $480.3 million contract by the Land Transport Authority on April 19.
There are a total of 26 bus services within the Seletar Bus Package, of which two will be new services. Of the remaining 24, SBST is currently operating 13 services, while SMRT runs the other 11 services.
We maintain our "buy" recommendation on CD given its ability to deliver steady and consistent growth.
While the market scepticism over its taxi operations could linger for a while, we believe it stands out as a stronger party among the taxi operators to weather the headwinds.
Furthermore, the implementation of tighter regulations on private hire cars from July 1 should help to level the playing field.
KEPPEL REIT | BUY
APRIL 20 CLOSE: $1.055
TARGET PRICE: $1.18
MAYBANK KIM ENG RESEARCH, APRIL 20
DPU (distribution per unit) for Q1 17 was a slight miss. Nonetheless, our forecasts remain largely unchanged as we believe management can mitigate any income weakness through capital distributions.
Keppel Reit's portfolio experienced a negative rental reversion of 1 per cent in the quarter.
This is a significant improvement from the negative reversion of 9 per cent for FY 2016 and we view this as a sign of rents bottoming.
This, along with a slower pace of rent decline in the market, reinforces our view of a bottoming office market.
While we continue to forecast falling DPUs, Keppel Reit's undemanding valuation of 0.7x P/BV (price/book value) and 6 per cent yield more than compensate for this.
We continue to see strong stock support from elevated office prices in the physical market.
CHINA AVIATION OIL | ADD
APRIL 20 CLOSE: $1.65
TARGET PRICE: $2.28
CIMB RESEARCH, APRIL 19
Q1 17 net profit of US$25.3 million (S$35.3 miilion) was within expectations, accounting for 25.6 per cent of our full-year estimate (US$98.8 million).
Year-on-year, higher contribution from associate Shanghai Pudong International Airport Aviation Fuel Supply Company drove the overall share of associate and JV (joint venture) contribution up by 5.1 per cent.
We like China Aviation Oil's imported (bonded) jet fuel supply monopoly, which makes it a proxy for China's growing outbound travel.
The company is expanding its international footprint, gaining access to the world's busiest airports such as Los Angeles International Airport and Hong Kong International Airport.
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