Compiled by Melissa Tan, The Business Times
STRAITS TRADING COMPANY | BUY
TARGET PRICE: $2.73
APRIL 10 CLOSE: $2.34
OCBC INVESTMENT RESEARCH, APRIL 10
We initiated coverage on Straits Trading Company Limited (STC) - we used a sum-of-the-parts methodology and conservatively applied a 15 per cent discount to its RNAV of $3.21 to derive our fair value estimate.
We believe STC's core competitive strength lies in the group's sharp ability to allocate capital while leveraging synergies across a wide-reaching ecosystem of real estate partners.
As a result, it has developed a solid track record in creating value for shareholders while providing a stable dividend yield, notwithstanding its involvement in seemingly disparate sectors - that is, real estate and resources - and participation across various real estate investment vehicles.
We see the privatisation of ARA Asset Management to be positive for STC. Once completed, STC will swop its 20.1 per cent stake in ARA for a 20.95 per cent stake in a company that indirectly owns ARA.
Based on the current offer price, STC will also unlock $48.2 million in cash, which can be redeployed.
STC will also retain exposure to ARA's unique value proposition - note that STC will be the only Singapore Exchange-listed entity that is a significant proxy to ARA after its potential privatisation.
THAI BEVERAGE | BUY
TARGET PRICE: $1.10
APRIL 10 CLOSE: $0.935
RHB, APRIL 10
We initiated coverage on Thai Beverage - we expect to see an upturn for ThaiBev now that the 100-day mourning period is over, and following the Songkran festival, we expect alcohol consumption to normalise.
Plus, the group is likely to use the new Excise Tax Act amendment as an opportunity to raise prices, thereby seeing a margin uplift in its alcohol segments.
The rebranding exercise for Chang Beer in 2015 raised its market share to 40 per cent from 28 per cent in just one year.
While the bulk of the market share gain was realised last year, we believe this segment will continue to be a key growth driver.
The EBIT margin of its beers segment stands at 7 per cent, which is far below its peer average of 18 per cent.
Since this segment contributes about 32 per cent to its revenue, it would be accretive to the group if it could raise margins substantially.
The pending asset swap of Frasers Centrepoint with Fraser and Neave (F&N) may result in greater cross-selling between ThaiBev and F&N.
That will allow ThaiBev to leverage the F&N product range and distribution network here and in Malaysia.
President and chief executive officer Thapana Sirivadhanabhakdi has expressed an interest in acquiring Vietnam's state-owned Saigon Beer Alcohol Beverage Corporation as well as raising F&N's stake in Vinamilk.
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.