Brokers’ take
Compiled by Navin Sregantan
DAIRY FARM INTERNATIONAL | NEUTRAL (DOWNGRADED)
MAY 30 CLOSE: US$7.64
TARGET PRICE: US$8.25
RHB Research Institute, May 30
In view of the escalating uncertainties brought forth by the ongoing US-China trade war, and that the share price has rebounded from a low of US$7.34 (S$10.13) in March this year, we think the stock is now fairly valued.
The health and beauty segment continued to deliver stellar results in Q1 across most markets but we think growth in the segment will slow down in the second half of FY2019 if consumer sentiment worsens.
Shanghai-listed hypermarket and supermarket operator Yonghui Superstores, which Dairy Farm has a 20 per cent stake in, registered tremendous growth of 38 per cent yoy in its core Patmi.
While consensus is still bullish on Yonghui's performance this year, the escalation of US-China trade tensions and the resulting depreciation of Chinese yuan could cap its contribution to Dairy Farm, when translated to the group's reporting currency (US dollars).
Dairy Farm's share price is likely to stay range-bound, as the one-off growth arising from the full-year contribution of Yonghui, maiden contribution from its Philippine-listed associate Robinsons Retail Holdings, new acquisitions from Hong Kong caterer Maxim's and reduction in operating expenditure, could mitigate downside risks in the health and beauty segment and weaker earnings in the food segment.
SEMBCORP MARINE | HOLD (MAINTAINED)
MAY 30 CLOSE: $1.43
FAIR VALUE: $1.60
OCBC Investment Research, May 30
Since our last report on May 6 and Wednesday's close, Sembcorp Marine's share price has corrected by 13.2 per cent compared to the Straits Times Index's (STI's) 6.8 per cent.
Besides the soft set of results, the price action could be due to the recent market sell-down amid increasing uncertainties which have affected sentiment, as well as the slide in crude oil prices.
The offshore industry is improving, though competition for projects remains intense.
For instance, it is understood that at least five leading offshore contractors (including Sembcorp Marine) are competing for the front-end engineering and design work linked to Posco Daewoo's third-phase development of the Shwe gas project off Myanmar.
Risks to our rating include higher than expected capex requirements and potentially a need to raise funds, risks relating to Brazil, and lower than expected new order flows.
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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