Sunday, October 27, 2013

3rd Quarter Stock Picks: In House Selections (Shares Investment)

25 OCTOBER 2013
3rd Quarter Stock Picks: In House Selections
By Choo Hao Xiang and Louis Kent Lee

We present to you Shares Investment‘s stock picks for the fourth quarter of 2013.

CapitaRetail China Trust: Capitalising On Maturing Portfolio (*new)

Performance
Despite talks about slowing growth, China is definitely the place to be doing business in. After all, it is the fastest growing economy worldwide. The latest gross domestic product data added to evidence that China can hold its ground. The main argument lies with the nation being the most populous and where rapid urbanisation is taking place. These two factors will underpin the country’s retail sales, which as seen in the chart below is in a strong uptrend.


Total Retail Sales In China


Total Retail Sales In China
Source: FactSet Research Systems Inc.
And it seems CapitaRetail China Trust (CRCT) is tracking this uptrend closely. Reflective of this, financial performance is looking up while operational metrics are healthy. The trust is now reaping the fruits of its asset enhancement initiatives (AEI) and renewal of tenant mix carried out over the years to improve its competitive edge. In the share price aspect, the decline since the start of the year presents an attractive entry point for the counter which is currently trading at a 5.1 percent discount to its net asset value. Not forgetting too, expectations that the Chinese yuan, in which CRCT’s income is denominated in, will continue appreciating is another plus factor.


Source: CapitaRetail China Trust’s Reports, 9M13 Figures Exclude CapitaMall Minzhongleyuan

Sponsor Network
CRCT exercised its right of first refusal to acquire Grand Canyon Mall from its sponsor, CapitaMalls Asia (CMA). Located in Fengtai District, Beijing, the mall is in a region that is set to benefit from a Rmb130 billion investment programme that will help to boost retail growth prospects there. The trust sees huge potential in this acquisition which serves an established population catchment. This projection stemmed from opportunistic upgrades in the form of rental income, floor layout and tenancy mix.

AEIs
According to the trust, the AEIs at CapitaMall Minzhongleyuan will set “the foundation for strong future growth”. Leasing activities have commenced with the trust securing commitments and advanced negotiations that account for nearly 60 percent of the total net lettable area. A target of 35 percent rise in average rental rate was also set by CRCT. The trust updated that, excluding anchor tenants, it has surpassed the target rent by 15.8 percent. With the effects of these two catalytic events projected to kick in as soon as FY14, investors may be greeted with a pleasant surprise down the road.

Eu Yan Sang: Festive Seasons Could Be Good Revenue Catalysts

Performance
Comparing the initiation price where we first introduced Eu Yan Sang (EYS) into our picks on 28 June 2013, with the price it closed at on 30 September, ($0.76 versus $0.725), EYS is down some 4.6 percent thus far. Although under the same comparison, EYS has underperformed the Straits Times Index (STI) for this quarter, where the STI saw just a marginal gain of 0.6 percent, it is noteworthy that this quarter has been extremely volatile.

FY13 Results
Financial performance wise, EYS reported its FY13 results with a 13 percent rise in revenue to $326.9 million, a gross profit increase of 12 percent to $165.6 million, and with a net profit increase of some 11 percent to $18.1 million. Pressure continues to ensue in operating expenses as revenue increases. That said, it is noteworthy that the gross profit margin (GPM) was still maintained at above 50 percent, reflecting management’s ability to keep a lid on its costs and charging a premium to its customers.

Operating Expenses


Operating Expenses
Source: Eu Yan Sang’s Reports
Australia Operations
Previously, we expressed positivity on EYS’s Australia’s revenue segment as it has consistently showed quarter-on-quarter sales growth. Factoring its FY13 results, EYS would have clocked five consecutive quarters of sales growth from this geographic segment. Revenue contribution growth from Australia is just closely behind that of Hong Kong, the largest revenue contributor based on geographic region for 4Q12. And on a year-on-year basis, revenue contribution from Australia has clearly leapfrogged through the roof, stemming our positivity on this geographical segment.



Source: Eu Yan Sang’s Reports
Seasonal Sales
As the year-end is coming soon, so are the festive seasons packed along with it. In the festive season pipeline for this year alone, we are seeing two major festivals such as Christmas and New Year, and for 2014, Chinese New Year. EYS is in a very good position to benefit from this season as sales are usually at the peak during these festive seasons. The revenue for the past five years during the March quarter has been consistently rising, with a compounded annual growth rate (CAGR) of 8.3 percent, and we are hopeful that revenue contribution for March 2014 is very likely to show another increase. Net operating cash flow was also consistently more than net income, which highlights that the cash conversion ability of the company during this quarter is encouragingly high, probably due to the fast rate of its products flying off its shelves. We are holding on to our reigns tight on this one and will want to position ourselves and ride the seasonal wave comfortably.



Source: Eu Yan Sang’s Reports
Swiber Holdings: Strong Cash Chest, Good Order Book Standing

Performance
As at 30 September 2013, Swiber has negated some of its gains we saw in the previous quarters, in line with the volatility seen in the STI for this quarter. From the closing price of $0.715 we saw on 28 June 2013, Swiber’s price closed at $0.65, representing some 10 percent loss in share price. Nevertheless, comparing it to our initiate price at $0.61 on 31 December 2012, this still shows a 6.6 percent gain till date. Technical readings on its chart is showing encouraging signs with plausible momentum aiming for $0.688 in the medium short term.

1H13 Results
Revenue was up 30.1 percent for 1H13 to US$551.8 million, with a gross profit increase of 22.4 percent to some US$87 million. Earnings were however weighed down heavily by higher operating expenses, admin expenses and finance expenses. As mentioned in the previous review (http://www.sharesinv.com/articles/2013/07/26/2013-stock-picks-second-quarter-review/), revenue contribution is already seen from Latin America. This quarter however, also saw significant increase in revenue contribution from South East Asia.

Higher Expenses


Higher Expenses
Source: Swiber’s Report
Sizable Cash Chest
As a t 30 September 2013, the cash and bank balances position of Swiber reflected some US$256 million, a 97.5 percent increase from that of US$129.4 million seen in 1H12. The strong cash position gives Swiber a competitive advantage to do synergistic acquisitions, joint ventures, and further market penetration in its desired geographic region. This essentially also highlights a very good foundation to position itself for huge contract wins and sustaining a large scale project till delivery.

Cash Position


PERSPECTIVE| 25 OCTOBER 2013
3rd Quarter Stock Picks: In House Selections
By Choo Hao Xiang and Louis Kent Lee
Share
stock picks 1
We present to you Shares Investment‘s stock picks for the fourth quarter of 2013.
CapitaRetail China Trust: Capitalising On Maturing Portfolio (*new)
Performance
Despite talks about slowing growth, China is definitely the place to be doing business in. After all, it is the fastest growing economy worldwide. The latest gross domestic product data added to evidence that China can hold its ground. The main argument lies with the nation being the most populous and where rapid urbanisation is taking place. These two factors will underpin the country’s retail sales, which as seen in the chart below is in a strong uptrend.
Total Retail Sales In China
Source: FactSet Research Systems Inc.
And it seems CapitaRetail China Trust (CRCT) is tracking this uptrend closely. Reflective of this, financial performance is looking up while operational metrics are healthy. The trust is now reaping the fruits of its asset enhancement initiatives (AEI) and renewal of tenant mix carried out over the years to improve its competitive edge. In the share price aspect, the decline since the start of the year presents an attractive entry point for the counter which is currently trading at a 5.1 percent discount to its net asset value. Not forgetting too, expectations that the Chinese yuan, in which CRCT’s income is denominated in, will continue appreciating is another plus factor.
Source: CapitaRetail China Trust’s Reports, 9M13 Figures Exclude CapitaMall Minzhongleyuan
Sponsor Network
CRCT exercised its right of first refusal to acquire Grand Canyon Mall from its sponsor, CapitaMalls Asia (CMA). Located in Fengtai District, Beijing, the mall is in a region that is set to benefit from a Rmb130 billion investment programme that will help to boost retail growth prospects there. The trust sees huge potential in this acquisition which serves an established population catchment. This projection stemmed from opportunistic upgrades in the form of rental income, floor layout and tenancy mix.
AEIs
According to the trust, the AEIs at CapitaMall Minzhongleyuan will set “the foundation for strong future growth”. Leasing activities have commenced with the trust securing commitments and advanced negotiations that account for nearly 60 percent of the total net lettable area. A target of 35 percent rise in average rental rate was also set by CRCT. The trust updated that, excluding anchor tenants, it has surpassed the target rent by 15.8 percent. With the effects of these two catalytic events projected to kick in as soon as FY14, investors may be greeted with a pleasant surprise down the road.
Eu Yan Sang: Festive Seasons Could Be Good Revenue Catalysts
Performance
Comparing the initiation price where we first introduced Eu Yan Sang (EYS) into our picks on 28 June 2013, with the price it closed at on 30 September, ($0.76 versus $0.725), EYS is down some 4.6 percent thus far. Although under the same comparison, EYS has underperformed the Straits Times Index (STI) for this quarter, where the STI saw just a marginal gain of 0.6 percent, it is noteworthy that this quarter has been extremely volatile.
FY13 Results
Financial performance wise, EYS reported its FY13 results with a 13 percent rise in revenue to $326.9 million, a gross profit increase of 12 percent to $165.6 million, and with a net profit increase of some 11 percent to $18.1 million. Pressure continues to ensue in operating expenses as revenue increases. That said, it is noteworthy that the gross profit margin (GPM) was still maintained at above 50 percent, reflecting management’s ability to keep a lid on its costs and charging a premium to its customers.
Operating Expenses
Source: Eu Yan Sang’s Reports
Australia Operations
Previously, we expressed positivity on EYS’s Australia’s revenue segment as it has consistently showed quarter-on-quarter sales growth. Factoring its FY13 results, EYS would have clocked five consecutive quarters of sales growth from this geographic segment. Revenue contribution growth from Australia is just closely behind that of Hong Kong, the largest revenue contributor based on geographic region for 4Q12. And on a year-on-year basis, revenue contribution from Australia has clearly leapfrogged through the roof, stemming our positivity on this geographical segment.
Source: Eu Yan Sang’s Reports
Seasonal Sales
As the year-end is coming soon, so are the festive seasons packed along with it. In the festive season pipeline for this year alone, we are seeing two major festivals such as Christmas and New Year, and for 2014, Chinese New Year. EYS is in a very good position to benefit from this season as sales are usually at the peak during these festive seasons. The revenue for the past five years during the March quarter has been consistently rising, with a compounded annual growth rate (CAGR) of 8.3 percent, and we are hopeful that revenue contribution for March 2014 is very likely to show another increase. Net operating cash flow was also consistently more than net income, which highlights that the cash conversion ability of the company during this quarter is encouragingly high, probably due to the fast rate of its products flying off its shelves. We are holding on to our reigns tight on this one and will want to position ourselves and ride the seasonal wave comfortably.
Source: Eu Yan Sang’s Reports
Swiber Holdings: Strong Cash Chest, Good Order Book Standing
Performance
As at 30 September 2013, Swiber has negated some of its gains we saw in the previous quarters, in line with the volatility seen in the STI for this quarter. From the closing price of $0.715 we saw on 28 June 2013, Swiber’s price closed at $0.65, representing some 10 percent loss in share price. Nevertheless, comparing it to our initiate price at $0.61 on 31 December 2012, this still shows a 6.6 percent gain till date. Technical readings on its chart is showing encouraging signs with plausible momentum aiming for $0.688 in the medium short term.
1H13 Results
Revenue was up 30.1 percent for 1H13 to US$551.8 million, with a gross profit increase of 22.4 percent to some US$87 million. Earnings were however weighed down heavily by higher operating expenses, admin expenses and finance expenses. As mentioned in the previous review (http://www.sharesinv.com/articles/2013/07/26/2013-stock-picks-second-quarter-review/), revenue contribution is already seen from Latin America. This quarter however, also saw significant increase in revenue contribution from South East Asia.
Higher Expenses
Source: Swiber’s Report
Sizable Cash Chest
As a t 30 September 2013, the cash and bank balances position of Swiber reflected some US$256 million, a 97.5 percent increase from that of US$129.4 million seen in 1H12. The strong cash position gives Swiber a competitive advantage to do synergistic acquisitions, joint ventures, and further market penetration in its desired geographic region. This essentially also highlights a very good foundation to position itself for huge contract wins and sustaining a large scale project till delivery.
Cash Position
Source: Swiber’s Report
Long-Term Outlook
We continue to be positive on Swiber’s intention to go into the deepwater market. As of 14 August 2013, Swiber reported that its current order book stands at approximately US$1.2 billion. There is a possibility that this figure could rise for 2013 if new contract wins are bagged, but with less than two months to run to the end of the year, we are taking a conservative approach and not hope for that. The realisation of such contracts into the following quarters will make revenue and earnings realisation an interesting thing to watch. At the time of writing, Swiber is trading at $0.655, representing a good discount to its book value per share of US$0.844.

Revenue Breakdown


Revenue Breakdown
Source: Swiber’s Report
Warren Buffet once said, “In the business world, the rearview mirror is always clearer than the windshield.” While all seems good now, the element of uncertainty always exists for the road ahead. In order to reduce panic attacks should things go South, it is paramount for investors to stay diversified and maintain a cash reserve.

With that said, be sure to stay tuned to our next quarterly review.



Source/Extract/Excerpts/来源/转贴/摘录: http://www.sharesinv.com/
Publish date: 25/10/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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