MEMTECH INTERNATIONAL | BUY
TARGET PRICE: $1.05
APRIL 25 CLOSE: $0.84
UOB KAY HIAN, APRIL 25
Companies operating in the precision engineering space experienced a sector re-rating over the last few months, driven by stronger H2 16 results and M&A interest.
Memtech remains one of the sector laggards.
Its earnings momentum is likely to continue this year, and investors can look forward to continued earnings momentum, increase in dividend frequency and potential dividend surprises.
M&A remains a possibility given the automotive exposure and strong cash flow.
RAFFLES MEDICAL GROUP | BUY
TARGET PRICE: $1.67
APRIL 25 CLOSE: $1.39
MAYBANK KIM ENG RESEARCH, APRIL 25
We cautioned that weaker demand here could continue due to a softer economic outlook in the region. Management highlighted that competition within the region has increased and Singapore's expensive pricing might discourage price sensitive patients from visiting.
From the financials, we noted two rare signs of revenue weaknesses: Q1 17 recorded the first year-on-year revenue decline since Q4 04, and Q4 16 recorded the first ever quarter-on-quarter decline.
On the bright side, Shanghai and Chongqing Hospitals could lift growth in the mid- to long-term.
We expect both hospitals to turn profitable in 2020, the second full year of operation.
However, we caution that start-up costs next year and initial operating losses in 2019 will drag earnings.
HUTCHISON PORT HOLDINGS TRUST | HOLD
TARGET PRICE: US$0.42
APRIL 25 CLOSE: US$0.395
DBS GROUP RESEARCH, APRIL 25
Citing an uncertain business outlook, especially for Hong Kong's transhipment business, and reiterating the plan to pare down its debt as well as rising interest rates outlook, Hutchison Port Holdings Trust's distribution per unit guidance for this year now stands at 20 to 23 Hong Kong cents, which is substantially lower than last year.
Amid the deteriorating shipping environment, the formation of new shipping alliances - such as Ocean Alliance, which is due to commence operations this month - that are increasingly focused on efficiency could put further pressure on transshipment volumes, which are purely viewed as costs to shipping lines.
Meanwhile, trade volumes in the Pearl River Delta region remain mired in a sluggish growth environment.
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