Investors’ Corner (City Developments, Singapore Press Holdings, HRNetGroup, Venture Corporation)

City Developments
Price – $12.99
Target – $15.30

According to flash estimates, Urban Redevelopment Authority’s overall private residential price index rose 0.7% in 4Q17 with prices increasing across all three sub-segments. We believe that the Singapore residential sector is in the early stages of sustained upturn, and expect home prices to rally 3% – 8% in 2018 supported by a recovery in housing rents, a neutral legislative stance from the authorities as well as a buoyant en-bloc market. As a major proxy to the domestic housing market, City Developments sits on sizeable domestic land-bank and stood to benefit from the stronger home sales with their launch pipeline ahead comprising New Futura and the 861-unit condominium project at Tampines Ave 10. In view of the stronger market conditions, we lower our discount to RNAV to 10% and raised fair value estimate to $15.30. Maintain BUY. OCBC Investment (15 Jan)

Singapore Press Holdings
Price – $2.63
Target – $2.42

Singapore Press Holdings (SPH) reported 1Q18 net profit of $60.4m despite a 13.9% decline in media revenue due to lower advertising and circulation revenues. Nonetheless, core net profit after excluding staff restructuring charge, gain from disposal of investment and dilution of interest in an associate (from IPO listing) fell 12%. Print revenue continues to be weak but the decline slowed backed by the pick-up in retail adspend, and is likely to be supported by higher advertising of new property launches in coming quarters. However, this bottom-line improvement might be dampened by rising newsprint costs leading to narrowing operating margin. The media business continues to be valued with negative terminal growth of 1% and we reckon SPH’s share price will continue to slip until evidence of positive developments manifests. Maintain SELL. UOB-Kay Hian (15 Jan)

HRNetGroup
Price – $0.83
Target – $1.14

After Indonesia, HRNetGroup entered into a binding term sheet to set up a JV with REForce in China which would quicken the group’s expansion in new and existing cities in China. REForce specialises in middle to senior level recruitment for multinational and domestic organisations across various industries, which is in line with HRNetGroup’s business model. With a net cash hoard of $280m coupled with $15m – $20m of free cash flow per year and low capital expenditure requirements, HRNetGroup is well positioned to grow inorganically through acquisitions. To this extent, several non-disclosure agreements have already being signed. Performance in 4Q17 is expected to be better on stronger growth in flexible staffing in Singapore. Together with more accretive acquisitions and focus on new markets which HRNetGroup has yet to penetrate, we maintained a positive outlook ahead. Maintain BUY. RHB Research (12 Jan)

Venture Corporation
Price – $21.45
Target – $27.50

We estimated a 39% jump in Venture Corporation’s (Venture) FY17E revenue, which is not just a fluke but that the Street has underestimated the group’s forward revenue and margins. Further growth may be sustained by larger orders from certain customers’ expanded budgets, Venture’s ramp-up of new products with high R&D content as well as new customers and projects to provide a medium-term pipeline. Analysis of Venture’s revenue and customers suggests that the latter have wider margins and larger sales since 2015. In particular, Broadcom opened a global warehouse in Batu Kawan in 2017 to facilitate the export of US$16b of products and plans to invest US$1b over the next 10 years on its local supply chain. Meanwhile, Venture has been strengthening its capabilities in radio frequency, optics and biology and its recent upgrade of net margin guidance signals a business mix tilting towards higher-margin products. Lastly, Venture has also won new contracts for smokeless cigarette devices and smart toothbrushes contributing to its revenue growth. Initiate BUY. Maybank Kim Eng (10 Jan)