Broker's Digest: UOL, APTT, Straits Trading, Yangzijiang, ART, CDLHT

Analysts from CGS-CIMB Research and OCBC Investment Research have maintained “buy” on UOL with higher target prices on the property company’s diversified portfolio, healthy balance sheet, as well as its ability to embark on redevelopment projects and asset enhancement initiatives (AEIs).

On Feb 26, UOL reported earnings of $13.1 million for the FY2020 ended December 2020, representing a 97% plunge y-o-y. Core EPS for the 2HFY2020 and FY2020 of 18.5 and 30.8 cents came in line with CGS-CIMB analyst Lock Mun Yee’s forecasts, while FY2020 core patmi, which fell 17.2% y-o-y to $259.8 million, stood above the OCBC research team’s estimates for the period. Lock has increased her target price to $7.91 from $7.60 previously as she pegs a higher target price estimate for UOB, which has a controlling stake in the company.

She has also raised her EPS estimates for the FY2021 to FY2022 by 0.182% and 0.386% respectively post-results. “Our current estimates have not factored in value creation from its asset enhancement activities,” she writes. “We continue to like UOL for its diversified business model with a high proportion of recurring income.”

On the continued buying demand for UOL’s residential projects, Lock foresees the group’s property development revenue, as well as its plans to roll out its 448-unit Canberra Drive project in 2QFY2021, to “underpin the group’s residential earnings visibility”.

For OCBC’s research team, it is positive on the group’s strong balance sheet, which could buttress its redevelopment projects.

UOL has obtained in-principle approval from the authorities to build a seven-storey building as an extension to its Odeon Towers Building. The new building will comprise office and retail space.

In addition, the group has obtained in-principle approval under the Strategic Development Initiative Scheme to redevelop its Faber House property into a 250-key hotel.

“Besides potentially higher GFA to be unlocked from both projects, UOL will also be able to benefit from a decline in development charge rates in the Hotel and Commercial categories over the past year,” it says.

Similarly, the team at OCBC has raised its fair value estimate to $8.91 from $8.48, “still pegged to a 30% discount to its RNAV estimate”. — Felicia Tan

Asia Pay Television Trust

Price target:
PhillipCapital “buy” 15 cents

‘Buy’ for 5G potential, dividend yield of 9.3%

PhillipCapital has maintained its “buy” rating for Asian Pay Television Trust (APTT) with an unchanged target price of 15 cents following its 4QFY2020 ended December 2020 results that were within expectations.

Despite a decrease in cable TV subscribers by 7,000 q-o-q, PhillipCapital analyst Paul Chew remains upbeat on APTT as average revenue per user remained stable at NT$482 ($23.13). The trust’s cable TV revenue also benefitted from the 6.1% appreciation of the Taiwan dollar in FY2020.

Chew’s rating and target price is underpinned by APTT’s growth in adjusted free cash flow for FY2020, which increased from $29 million to a record $67 million due to a significant decrease in capital expenditure by $21 million or 29%.

Based on the higher free cash flow, Chew believes the trust will sustain a DPU of 0.25 cents per quarter in FY2021 for a full-year DPU of 1 cent, which translates to a yield of 9.3%.

Chew also anticipates growth opportunities from a 5G data backhaul for mobile operators in Taiwan that will help counter shrinking cable subscribers.

“No guidance has been provided but we expect a 14,000 fall in cable-TV subscribers in FY2021 to be offset by a 15,000 increase in broadband subscribers,” he says.

Chew’s target price of 15 cents is based on EV/ebitda of 9 times, which is a 20% discount to Taiwanese peers given its “smaller scale, higher leverage and softer growth profile”. — Atiqah Mokhtar

Straits Trading
Price target:
DBS Group Research “buy” $3.90

Potential near-term relisting of ARA a ‘key’ catalyst

The potential relisting of The Straits Trading Co’s (STC) ARA Asset Management in the near term is a “key” catalyst for the company, according to DBS Group Research.

The move, which the brokerage estimates could be worth up to $6.4 billion, could benefit STC “significantly”, it says.

“We continue to believe that ARA’s possible relisting in 2021/2022 will be a key catalyst for STC,” DBS analysts Chung Wei Le and Derek Tan write in a note dated March 4, where they kept their “buy” call and $3.90 target price.

In 2017, ARA was delisted from the Singapore Exchange and taken private by a consortium of buyers that included the company. STC effectively owns a 20.95% stake in ARA, which had a stated aim of achieving asset under management of $100 billion by 2021 before relisting its shares.

DBS points out that ARA had completed several notable developments in recent years.

They include the acquisitions of majority stakes in LOGOS Group and Venn Partners.

ARA had also increased its stake in Cromwell Property Group to 30.7% as at Dec 31, 2020. — Jeffrey Tan

Yangzijiang Shipbuilding
Price target:
CGS-CIMB “add” $1.54

Order book may reach five-year record high of US$5 bil by end-2021

CGS-CIMB Research analyst Lim Siew Khee has maintained her ‘add’ rating for Yangzijiang Shipbuilding with an unchanged target price of $1.54 after the company recently announced it had signed contracts to build 31 vessels for a total contract value of US$1.74 billion ($2.32 billion).

Lim says that the new contracts bring Yangzijiang’s orders secured year to date to a record US$3.04 billion, its highest since 2009. She currently estimates the company’s order book at US$6.1 billion and expects it to reach US$4.8 billion–US$5 billion in FY2021 ending December 2021.

While the customer for the new contracts was not disclosed, Lim notes that based on Clarksons Research, Yangzijiang’s customer Seaspan had recently placed similar containership orders worth US$900 million with an unnamed shipyard.

She also notes that Yangzijiang is gunning for sizeable contracts to reap economies of scale and preserve margins.

“To date, we estimate Yangzijiang having a few sets of 10 series feeder Panamax containerships (1,800 TEU, 4,600 TEU) and Panamax bulk carriers (82,000 dwt) to see some margin expansion ahead,” she says.

From an industry standpoint, Lim says the near term outlook remains positive, with the containership trade still experiencing support from widespread port congestion, robust demand conditions, and high containership freight rates.

She recommends the stock for its earnings visibility, strong net cash of RMB2 billion ($413.7 million) as of end-2020, as well as its track record in shipbuilding. Her unchanged target price of $1.54 remains based on its five-year average P/BV of 0.8 times. — Atiqah Mokhtar

ART, CDLHT top picks as travel bubbles, domestic markets revive sector

DBS Group Research has maintained its “overweight” rating for Singapore’s hospitality sector, with travel bubbles poised to drive international travel.

Analysts Geraldine Wong and Derek Tan are upbeat on the prospects for hospitality REITs, which they believe will see better performance in the 2HFY2021 ending December 2021 as the roll-out of vaccines globally boosts travel demand and Singapore implements new protocols for international travel.

Singapore will start the Connect@Changi business travel bubble facility this month, which the analysts believe will provide the foundation for future border opening protocols. In addition, the World Economic Forum (WEF) will be held in Singapore in August, giving Singapore’s status as a safe hub a boost and could even spark more events later in 2021.

Amid these developments, Wong and Tan anticipate local hotels to benefit from an increase in demand for rooms.

“Although the travel bubble will likely be kept within the Changi precinct at the start and for the WEF to potentially be held at Marina Bay Sands (MBS), there may be a chance for other hotel operators to be appointed as “bubble hotels” to cater to these travellers, towards the medium term,” they say.

Meanwhile, Wong and Tan anticipate that large domestic markets like the US and the UK may see a faster rebound in travel thanks to vaccination progress reaching herd immunity thresholds by the end of 2021.

To that end, the analysts believe that Singapore REITs with a diversified portfolio of assets in these markets stand to gain once domestic travel restrictions ease.

“Hotels within large domestic markets are in the early tides of recovery based on our observation where hotels are either still operationally closed or are still ascertaining a breakeven level of room demand,” they say.

“We think that the trend will only be upwards from here given the rock-bottom performance in H2FY2020. With more room inventory now opened as of end-2020, most hotels are in the “ramp-up” stage but ready to welcome guests once domestic travel restrictions are lifted,” they add.

Their top picks for the sector are Ascott Residence Trust and CDL Hospitality Trusts due to their diversified portfolio holdings with substantial exposure to large domestic travel markets. Both stocks are rated “buy” with target prices of $1.20 and $1.35 respectively. — Atiqah Mokhtar