Compiled by Lee Meixian
KSH HOLDINGS | BUY
TARGET PRICE: S$1.04
JUNE 7 CLOSE: S$0.66
UOB Kay Hian, June 7
KSH's Q4 FY18 results came in above expectations with full-year profit exceeding our forecast by 19.1 per cent.
Despite the fall in revenue, construction margins expanded. Singapore's outlook generally looks positive, so performance at the upcoming launches should be a catalyst.
Moving ahead, all eyes will be on the sales of the Riverfront Residences (formerly Rio Casa) and Park Colonial (formerly Woodleigh Lane) by end of this month. A solid sales showing will translate into continued earnings performance.
Also, the Gaobeidian project should see progress by September although selling prices are lower.
While there have been delays in the sales launch of KSH's Gaobeidian project, it looks as though they should receive the necessary government approval and be ready in September.
However, as the Chinese government demands that property prices stay low at around the Xiong An area, management now expects to launch the initial phase at only 10,000 yuan (S$2,100) per sqm (previously 12,000 yuan per sqm).
HUTCHISON PORT HOLDINGS TRUST | BUY
FAIR VALUE: US$0.375
JUNE 7 CLOSE: US$0.305
OCBC Investment Research, June 7
After we reiterated our "buy" call on HPHT on June 1, the stock has been up 10.9 per cent in less than a week and up 7 per cent on Wednesday alone.
Yet, HPH Trust is still down 26.5 per cent year-to-date mainly due to the National Development and Reform Commission's announcement of a 30 per cent cut in the "list price" for Shenzhen ports, US-China trade tensions and most recently, the removal from the MSCI Singapore Index, which has prompted selling by index and institutional funds.
Based on what has been announced so far, we see little impact operationally for the first two factors and no change in fundamentals following the third.
First, for NDRC, we estimate that HPH Trust's Yantian port is already charging below the new list price and believe Q1 2018 results indicate that these fears have indeed been overblown.
Second, with regard to the US-China trade war, the list of goods targeted in the proposed US tariffs on US$50 billion of Chinese goods make up less than 2 per cent of HPH Trust's throughput.
Furthermore, we believe it would be unrealistic to assume that this throughput related to these goods would cease completely as a result of tariffs.
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