Investors’ Corner (800 Super Holdings, APAC Realty, Keppel Telecommunications & Transportation, Oxley Holdings)

800 Super Holdings
Price – $0.64
Target – $1.03

800 Super Holdings’ (800 Super) negative surprise of a 4Q18 loss dragged FY18 PATMI 25% lower than our estimate. Manpower cost, which is the largest cost component, came in 20% higher than expected for 4Q18. The group’s balance sheet has also weakened with debt-to-equity ratio increasing substantially to 105% while cash dropped from $25.1m to $5.6m y-o-y. Moreover, dividend and payout ratio are also lower because of capital expenditure requirements for the public waste collection (PWC) contract. Nonetheless, recall that 800 Super was awarded a sludge treatment contract by the PUB valued at $133.7m for a period of 15.5 years as well as the Pasir Ris-Bedok PWC contract size of $193.5m for a tenure of 7 years and 4 months which will start contribution in 1Q19. We believe that 800 Super’s one quarter of loss is neither reflective of future quarters nor a precursor to deterioration of future earnings, and hence maintain our positive outlook. Upgrade to BUY. Phillip Securities (3 Sep)

APAC Realty
Price – $0.58
Target – $0.77

APAC Realty (APAC) announced its foray into Hainan by entering into a JV with Hainan Zhong Zhi Sheng He Real Estate Investment Consulting (40% stake) and Bei Guo Tou (Shanghai) Equity Investment and Fund Management (20% stake). The former has been in the real estate consultancy and marketing services since 2015, was profitable last year and has about 10 – 15% of market share in project sales. While we do not expect any significant earnings contribution in the near-term in view of the muted outlook for the Hainan property market on various cooling measures, we believe that this venture is beneficial to APAC in understanding real-estate agency dynamics and paves ways for future expansions in China. Trading at 8.8 times FY18F price-to-earnings ratio, APAC is reasonably priced as compared to global peers trading at 11.7 times. Maintain BUY. RHB Research (31 Aug)

Keppel Telecommunications & Transportation
Price – $1.40
Target – $1.51

Keppel Telecommunications & Transportation’s (KTT) datacentre segment continues to be a drag in 2H18 due to elevated staff costs. As contributions from fee management income may only kick in materially from next year, earnings for 2H18 are likely to be dismal. Meanwhile, logistics segment continued to post losses on start-up costs and upfront expenses despite the good traction for UrbanFox. Breakeven is only likely earliest by late 2019. Hence, we revised our earnings estimates for 2018 down sharply by 25 – 33%, primarily attributable to datacentre earnings cuts as well as logistics seeing a widening of losses while we factor in a longer runway for its turnaround. Growth could possibly be driven by the new datacentre projects which KTT is pursuing. But until these datacentre projects materialise, share price performance is expected to be lacklustre. Downgrade to HOLD. UOB-Kay Hian (28 Aug)

Oxley Holdings
Price – $0.35
Target – $0.36

Driven by the revaluation of Chevron House, Oxley Holdings (Oxley) registered $118m of fair value gains for the year which lifted net profit by 31% for FY18. Updated AEI plans for Chevron House indicated a 14% increase in NLA from our original estimates and as such, we raised our RNAV estimate to $0.71. Although net gearing had improved by 22 basis points to 2.2 times due to the higher asset values, Oxley’s elevated gearing levels could still limit its ability to take on more projects. Oxley achieved strong pre-sales for the five Singapore residential projects launched this year, and 27% of the 4,000 units in its development pipeline have already been sold. Despite the recent policy tightening, the group intends to stick to its launch plans for this year and the year ahead. We believe that Oxley can weather the headwinds to Singapore’s residential market but expect steep valuation discount to persist. Maintain HOLD. Maybank Kim Eng (27 Aug)