Investors’ Corner (Jumbo Group, NetLink NBN Trust, Yanlord Land Group, mm2 Asia)

Jumbo Group
Price – $0.41
Target – $0.54

Jumbo Group’s (Jumbo) net profit for 4Q18 came in stronger at $2.4m on the back of higher revenue, mainly due to expanded store count in PRC. This brought full-year net profit to $11m dragged by higher expenses from new store expansions earlier in the year. Gross margin inched up to 62.7% despite overall operating costs climbed slightly after a gestation period following the launch of 2 Jumbo Seafood PRC outlets. Growth in FY19 will be supported by the group’s planned addition of 2 new Jumbo Seafood outlets and 1 Teochew Cuisine restaurant in Singapore alongside its franchise expansion. In addition, growth plans are shifting to Singapore with Jumbo’s intention to open at least 2 more Tsui Wah outlets in Singapore over the next 12 months. In spite of this, we cut FY19-20F EPS by 7% to reflect depreciating RMB against SGD as well as weaker PRC sales growth amid a slowdown in consumption spending. Maintain ADD. CIMB Research (22 Nov)

NetLink NBN Trust
Price – $0.77
Target – $0.99

StarHub has decided to migrate its customers of both residential broadband and pay-TV to an all-fibre network, ceasing to provide cable services after 30 Jun-19 and retire its legacy hybrid fibre-coaxial (HFC) network. Meanwhile, Singtel has already closed its copper-based ADSL connections for broadband, TV and digital voice in 1H18. We estimated that Singtel’s and StarHub’s decision to retire their legacy ADSL and HFC networks would accelerate the growth of NetLink NBN Trust’s (NetLink) number of fibre connections to 9% in FY19 and 6.2% in FY20 respectively. Furthermore, there are opportunities for NetLink to support the four mobile operators on deployment of fibre for their 5G networks or support network sharing among them. With a low gearing of gross debt/EBITDA at 2.6 times, NetLink has sufficient debt headroom to finance further expansion. Maintain BUY. UOB-Kay Hian (21 Nov)

Yanlord Land Group
Price – $1.26
Target – $2.04

Yanlord Land Group (Yanlord) delivered a solid 3Q18 result with net profit increasing 61.3% underpinned by a 51.7% jump in revenue. Looking ahead, Yanlord highlighted that it had encountered some pre-sales permit delays for 2 projects in Shenzhen with a push back to early next year. As a result, management signalled a more feasible contracted sales target of Rmb27b for 2018. One of the concerns in 3Q18 was the higher net gearing ratio of 91.2% from 78.3% in 2Q18. Acknowledging that this was above its comfort zone, management indicated that it will continue to be more prudent in its land acquisition. Nonetheless, the push back in the delayed projects in Shenzhen will eventually translate into cash inflows to alleviate the situation. Taking Yanlord’s higher gearing ratio into account, we derive at a lower fair value estimate of $2.04. Maintain BUY. OCBC Investment (21 Nov)

mm2 Asia
Price – $0.35
Target – $0.57

mm2 Asia’s (mm2) 1H19 revenue makes up 41% of our estimates with growth driven by the group’s Cathay Cineleisure cinema acquisition and growth from concert and event production. 2H19 looks promising with management outlining a healthy core production pipeline inclusive of recently-announced production work for Netflix’s 2019 Asia programming. We expect more B2B deals similar to Netflix’s which could lift volume and upfront payment despite lower margin. Meantime, mm2’s concert and event production business is expected to scale up further while cinema EBITDA is higher from both revenue enhancement and cost reduction. Looking forward, mm2 continues to focus on non-box-office cinema revenue sources such as F&B and advertising to create a platform for the eventual listing of its cinema business, while targeting more TV production works for its core business. Maintain BUY. Maybank Kim Eng (19 Nov)