Compiled by Lynette Khoo, The Business Times
SEMBCORP MARINE | BUY
OCT 9 CLOSE: $1.815
TARGET PRICE: $1.98
OCBC Investment Research, Oct 9
Sembcorp Marine announced on Friday that PPL Shipyard has signed agreements for the sale of nine Pacific Class 400 jackup drilling rigs to Borr Drilling for about US$1.3 billion (about S$1.77 billion or US$144 million a rig) plus a market-based fee calculated based on an uplift in value of the rigs sold.
Borr will take delivery of the nine rigs progressively over a 14-month period from Q4 2017 to Q1 2019 and will make an upfront down payment of US$500 million; the balance US$800 million will be paid at any time within five years from the respective delivery dates of the rigs.
The nine rigs include all six rigs from contracts PPL had earlier terminated with its original customers, and three rigs presently under various stages of construction completion.
We maintain BUY with $1.98 fair value estimate.
AMARA HOLDINGS | BUY
OCT 9 CLOSE: $0.56
TARGET PRICE: $0.88
RHB Research Institute, Oct 9
For the first eight months of this year (8M 2017), Amara Holdings guided for an 89 per cent average occupancy rate (AOR) for Amara Singapore - higher than 88 per cent for the same period last year (8M 2016). However, average room rate (ARR) for the first eight months of this year was $188, 2 per cent lower year-on- year.
For Amara's other Singapore hotel, Amara Sanctuary, 8M 2017 AOR stood at 73 per cent. This was sharply higher than 8M 2016's 60 per cent. ARR was also higher year-on-year.
According to an article in The Business Times, only 266 new hotel rooms are expected to be added next year (2017: 3,174). The lower supply could help raise 2018 ARR amid mid-single-digit 2018 visitor arrival growth.
Management aims to start operating Amara Signature Shanghai in Q4 2017.
The development, which comprises a 343-room hotel, retail centre and office building, could boost revenue.
The group's balance sheet reflects only the cost of the hotels. There are several significant valuation upsides for Amara Singapore, Amara Sanctuary Resort Sentosa, and Amara Signature Shanghai.
Factoring in the unrealised valuation upsides, Amara has a revalued net asset value (RNAV) of $1.36 per cent share, giving a price to RNAV of 0.39 times. Next year's net profit could be driven by the hotel in Shanghai.
Our revised 2017 net profit of $10.1 million is flat versus 2016's adjusted $10 million, this is after stripping off last year's one-time joint-venture gain of $28 million. Next year's net profit is expected to expand by 35 per cent, with stronger Singapore ARR and a full 12-month contribution from Amara Signature Shanghai.
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.