KSH HOLDINGS | BUY
TARGET PRICE: $1.08
FEB 22 CLOSE: $0.75
UOB Kay Hian, Feb 22
With the recent share price drop, we believe the negatives in the construction sector are now priced in.
We see some light in the tunnel ahead. While the Gaobeidian project may perform below expectations, cheap land cost means it is still a mega profit driver for KSH over its 10-year development cycle.
Following acquisitions, KSH has a solid landbank to ride on Singapore's property upcycle.
KSH also showed execution astuteness in grabbing sites on the cheap in this en bloc wave.
Its purchase, as part of a consortium, of Serangoon Ville at $835 per square foot per plot ratio (psf ppr) is about 16 per cent lower than the $964.80 psf ppr paid for a nearby Serangoon North site.
Upgrade to "buy" and raise our SOTP target price to $1.08.
SEMBCORP MARINE | BUY
TARGET PRICE: $2.90
FEB 22 CLOSE: $2.33
DBS Group Research, Feb 22
We continue to like Sembcorp Marine (SMM) as a key proxy to the recovery in the O&G and O&M sectors, with strong order wins as key re-rating catalyst.
Though, in the near term, we reckon that sentiment might be adversely affected by the wider-than-expected losses in 4Q17; and the M&A premium, which we estimated to be about 40 Singapore cents. This could be given back if privatisation rumour is off the table.
Order wins, a critical leading indicator for earnings recovery, are set to rise in the next 12 months. We believe SMM's strong order pipeline would translate into $3 billion in new orders this year.
SINGAPORE AIRLINES | ADD
TARGET PRICE: $12.05
FEB 22 CLOSE: $11.16
CGS-CIMB, Feb 21
With up to 47 per cent of its fuel needs hedged, Singapore Airlines (SIA) may benefit if its unhedged competitors are compelled to raise ticket prices to cover the rising cost of fuel.
SIA noted that its new revenue management system, introduced from CY17F, has sophisticated algorithms to help it maximise revenue by balancing the often opposing objectives of maximising loads and yields.
The installation of premium economy seats since August 2015 is almost complete, with five more 777-300ERs to be retrofitted. These initiatives have helped slow the pace of SIA mainline's yield declines.
The introduction of non-stop A350 services to San Francisco has been a success, as the schedule connects well to Indian services.
SIA expects to take delivery of seven A350ULR planes in CY18F, with which it will launch more non-stop services to North America, including to New York and Los Angeles.
SIA does not intend to reduce its one-stop US services as it hopes to grow its trans-pacific market share.
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.