JADASON ENTERPRISES LTD | ADD (INITIATION)
JULY 3 CLOSE: $0.09
TARGET PRICE: $0.17
CIMB Research, June 30
Jadason has firmly returned to the black since Q3 2016. Key factors aiding the turnaround were right-sizing its workforce, improving productivity, higher use of automation and a large $12.9 million impairment on its production equipment in FY 2015.
Jadason is headed for a strong earnings recovery over 2017-18.
This is likely to be driven by new orders from its customers, in particular, customer A (which cannot be named due to non-disclosure agreements).
We understand that customer A has won large orders from a mobile device customer that is looking at a H2 2017 product launch. Jadason will be the sole provider of the outsourced printed circuit board (PCB) drilling required by customer A.
Short-term competition is non-existent as Jadason, whose huge asset impairment and restructuring efforts over the years position the company as not only the cheapest supplier, but also the only one that can satisfy customer A's large capacity requirements.
SINGAPORE MARKET STRATEGY
DBS Group Research, July 3
DBS' Singapore economists expect fourth quarter 2017 to show a sharper slowdown.
Manufacturing index and loans growth are peaking, while first quarter 2017's earnings saw a resumption of the earnings cut trend. We expect higher volatility as investors keep a watchful eye on the Fed's next move and currency swings.
While Straits Times Index valuations are fair at 14 times 2017 earnings, our year-end target stays at 3,350. We advocate investors rotate into:
- Defensive yield plays - ST Engineering, Sheng Siong, Keppel Reit, Mapletree Greater China Commercial Trust and Mapletree Logistics Trust; and
- Alpha picks with catalysts - Genting Singapore, Thai Beverage, Dairy Farm, BreadTalk, CapitaLand and City Developments.
DEL MONTE PACIFIC | HOLD
JULY 3 CLOSE: $0.325
TARGET PRICE: $0.32
DBS Group Research, July 3
Given the headwinds facing Del Monte Foods Inc and the planned higher investments behind innovation and current core operations, we believe it could take longer than earlier anticipated for Del Monte to show substantial contributions.
As a result, we have cut our revenue and gross profit projections, particularly for its US operations, coupled with higher operating expenditures.
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