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Brokers' take

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KIMLY LIMITED | BUY (MAINTAINED)

TARGET PRICE: $0.46

JULY 3 CLOSE: $0.37

RHB Research, July 3

Kimly has acquired Asian Story Corp (ASC) for $16 million in cash. ASC's Asian Story brand portfolio comprises nine different drinks.

This brand has a 7.7 per cent market share and is ranked 31st largest in the domestic Asian drinks market.

We understand that it will also be distributing Pepsi and coconut water in the near term. With more beverages in its arsenal, especially Pepsi, this could further boost ASC's profitability.

In addition, Kimly could actually replace its current canned drink choices with the beverages ASC distributes, which is likely to further boost the latter's bottom line.

This in turn should benefit Kimly, as it owns 100 per cent of ASC.

Management is keen to expand Asian Story to other countries. This brand is currently distributed by Pokka Corp in Singapore, Malaysia and Brunei, and is in the midst of working with a foreign partner to distribute the beverages in Thailand.

Despite the amortisation of intangibles for this acquisition likely increasing by $2 million per year for the first 30 months, the longer-term growth, profit accretion and cash flow to Kimly will be quite positive, in our view.


YANGZIJIANG SHIPBUILDING | BUY

TARGET PRICE: $1.82

JULY 3 CLOSE: $0.89

DBS Group Research, July 3

Yangzijiang's share price is set to stage a rebound, after falling 50 per cent year-to-date (YTD), due to overblown concerns on forex and steel cost as well as the trade war.

Recent strengthening of the US dollar will benefit Yangzijiang with every 10 fen leading to 300 million yuan writeback.

There is a window of opportunity to buy the quality shipyard at a rock bottom valuation of 0.6 times price to book value (P/BV), which is at around 30 per cent discount to global peers' average P/BV of 0.9 times, notwithstanding its attractive 5 per cent yield and higher ROE of 8-9 per cent vs peers' 4-5 per cent.

Yangzijiang also has a solid balance sheet, sitting on net cash of 76 Singapore cents per share (including financial assets), representing around 52 per cent of net tangible assets as opposed to shipyard peers that are mostly heavily indebted.

Core shipbuilding revenue is backed by its healthy order backlog of US$4.5 billion (around two times revenue coverage) as at end-March 2018. Better returns from the investment segment provide a cushion to its recurring income stream.

It is the largest and most cost-efficient private shipbuilder in China.

Yangzijiang is well positioned to ride sector consolidation and shipbuilding recovery.

Its strategy to move up into the LNG/LPG vessel segment with a Japanese partner strengthens the longer-term prospects of the company.

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.

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