Monday, September 23, 2013

PSR Coverage – Deep Value Play (Phillip)

PSR Coverage – Deep Value Play
We introduce three stocks, which forms our Deep Value Play list. We think that the market has not realized the fair value of these stocks. Current share price presents significant upside potential.

#1: Amara Holdings – Trading at > 50% disc to RNAV
Amara (Buy, TP: S$0.74) engages mainly in two business areas; Hotel (development and management) and Residential (Development and Sales).
Additionally, the company engages in F&B businesses to complement its hotel segment. Amara reported a stellar performance in 2Q13, with 2Q13 PATMI growing 51.6% y-y. We like Amara for the following reasons. 1) Trading at Deep discount to valuation, we value Amara at S$0.74, based on a conservative 40% discount to RNAV of S$1.23. 2) Normalization of recurring earnings (hotel assets) is expected to bring in approximately S$0.045/share. This is expected to come from the completed refurbishment of Amara Singapore, and completion of 100AM, the hotel’s neighboring retail mall. Amara Sanctuary is also expected to experience higher occupancy. 3) Overseas expansion to bring in higher revenue. Amara is expanding both in Shanghai (Mixed development-Hotel/Office/Retail to be completed in 2015) and Bangkok (By 1Q14). Amara recently signed an MOU, indicating their intention to potentially build and manage a Hotel in Myanmar.

#2: Boustead Singapore – Record order books for IPDB and Energy, Total Order books a record S$491m.
Boustead operates market leading infrastructure related businesses: Geospatial Technology (28% PBT), Industrial Property Design & Build (IPDB) + Property Portfolio (58%), Water & Wastewater Engineering (1%), and Energy Related Engineering (13%). We like Boustead for the following reasons. 1) Growth of recurring income through its exclusive distribution and service agreements for its Geospatial Technology business with ESRI Inc. ESRI is the global leader in GIS (geographic information systems), with 60% of global market share for governments. Operations in Malaysia, Indonesia and Australia are expected to be the main growth drivers. The exclusive relationship with Boustead implies almost no competition in those markets. 2) Strong pipeline of work, Regional market leadership in the IPDB business. Boustead is one of only three know full turnkey players in Asia. Orderbook is at a record S$274m. 3) Benefitting from the Shale energy boom, with resurgence of orders for the Energy Related Engineering business. Boustead is one of only four players in the Direct Fired Heat Processors and Waste Heat Recovery segment. Orderbook is at a record S$187m. 4) Attractive dividend yields of 5.1%-5.3% for FY14E-15E., with an average historical payout ratio of ~52%. Capex is minimal at 5% of earnings, thus cash flow can be used to reward shareholders, and in making more value accretive investments.

#3: Courts Asia – Benefit from rising credit demand
Courts (Buy, TP: S$1.14) is an electrical, IT products and furniture retailer in Singapore and Malaysia. Courts will be expanding to Indonesia by CY2014. We like Courts for the following reasons. 1) Current share price low relative to our Fair value of S$1.14. Share price has aggressively corrected recently, possibly due to disappointing sales figures. This is partly due to the lack of new launch of attractive products. However, we continue to see growth in the medium term, both from expansion of retail space, and higher sales from existing retail space. 2) Unique in-house credit facilities provide an additional source of recurring revenue. Margins are also attractive at interest rates >20%. Bad debts have also been manageable, as Courts is able to tap on its long operating experience and customer data collected in both Singapore and Malaysia. 3) Higher demand for credit facilities and goods from recent tightening of unsecured lending leading both in Singapore and Malaysia. Besides increasing sales volume, Courts is also able to be more selective, lending only to higher quality customers. 4) Expansion to Indonesia is also expected to increase revenue. While initial contributions are expected to be small, and credit cost may be higher due to lack of customer data, this provides strong growth potential.

Source/Extract/Excerpts/来源/转贴/摘录: Phillip-Research,
Publish date: 20/09/13

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