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Broker's take

This article is more than 12 months old

Compiled by Navin Sregantan

DAIRY FARM INTERNATIONAL | BUY (UPGRADED)

MARCH 20 CLOSE: US$7.74
TARGET PRICE: US$8.25

RHB Research Institute, March 20

It has been challenging for Dairy Farm's supermarket /hypermarket division over the past four years.

Share price saw a sell-down after the group made major write-downs and provisions to this division in Q4 FY2018. In the year up to March 19, the share price plunged 19 per cent, under-performing The Straits Times Index considerably.

We believe the share price is at its trough, and long-term investors may look to accumulate the stock at its low.

In the last two years, Dairy Farm has changed 80 per cent of its management team. With fresh sets of eyes, the new team recognised the legacy issues within the food business and took a one-off US$453 million business restructuring charge on the division.

While there is no fast turnaround for its supermarket /hypermarket division, we note that work is in progress to right-size the business as well as improve prices, offerings and presentation.

We believe near-term growth could still be driven by higher contributions from its health & beauty division and strong associates, while home furnishings is likely to see higher revenue offset by pre-opening costs for new stores.

NETLINK NBN TRUST | BUY (MAINTAINED)

MARCH 20 CLOSE: $0.795
FAIR VALUE: $0.90

OCBC Investment Research, March 20

There were a number of topics from the recent Committee of Supply (COS) debate in Parliament that, in our opinion, serve to reiterate the longer-term growth opportunities for NetLink NBN Trust.

On the topic of 5G, the eventual nationwide rollout would conceivably require more fibre backhaul connections, arising from an increased number of base stations.

Separately, Singtel has said that it views its SingPost and NetLink NBN Trust stakes as non-core, and would explore divesting if a good opportunity arises.

However, Singtel management did note that the US$525 million outlay as part of its participation in Bharti Airtel's rights issuance should be funded through a mixture of existing cash and debt, so there is no immediate push to divest off any non-core assets.

A divestment of NetLink NBN Trust could put pressure on the share price, but we would take it as an opportunity to accumulate, barring any other extraneous factors.

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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