Compiled by Cai Haoxiang
THE TRENDLINES GROUP | OVERWEIGHT
NOV 27 CLOSE: $0.145
TARGET PRICE: $0.225
NRA Capital, Nov 27
We see opportunity for investors to accumulate Trendlines at its current share price of $0.143, a 2 per cent premium from the recent private placement price of $0.1403 to various institutional names.
Excluding the most valuable portfolio company, Trendlines has valued the remaining 44 companies at US$1.1 million (S$1.5m) each.
Our review yielded 11 high-confidence portfolio companies and derived a higher valuation of US$139m for Trendlines' portfolio or $0.225 per share.
Currently, Trendlines trades at about 0.7 times price to book and 10.3 times 2018 earnings, suggesting that the full upside of potential exits has not been priced in.
Most high-confidence portfolio companies have potential to be exited at valuations of more than US$100m, based on transactions at comparable companies.
For example, portfolio company ApiFix's peers in the orthopaedic industry were acquired at valuations of US$212m to US$410m during the last two years.
Overall, Trendlines' track record is impressive, with a success rate of more than 20 per cent.
We attribute the high success rate to Trendlines' relationships with key opinion leaders and partnerships with established players in the industry.
Looking ahead, Trendlines will sell its stake in Vensica upon successful clinical trials in 2018.
Other potential exits include ApiFix, Leviticus Cardio, and Gordian Surgical where B Braun has taken a stake.
JUMBO GROUP | HOLD
NOV 27 CLOSE: $0.565
TARGET PRICE: $0.61
DBS Group Research, Nov 27
We believe Jumbo is at an early growth stage regionally with franchise/joint venture partnerships established in Vietnam, Taiwan and Beijing this year.
We could see more franchises and new stores in Thailand, Indonesia, Hong Kong, Macau, South Korea, Xi'an, and Shenzhen.
These initiatives will likely add to cost and margin pressures in the near term. We have hence lowered our earnings forecast as we expect lower operating margins going forward.
Jumbo currently trades at 21.9 times 2018 forecast earnings. Maintain "hold" as growth expectations are priced in and outlook is dampened by higher operating costs.
Apart from operational risks, we see failure to deliver growth in China as a key risk to our earnings growth projection.
Singapore's business is stable, while the bulk of the growth is driven by China.
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