KEY IDEA
Consumer Sector: Tough 1Q for plays with EM exposure
The consumer sector has been relatively unexciting, with both consumer indices FTSE Consumer Goods (FSTCG) and FTSE Consumer Services (FSTCS) showing a muted performance against the FSSTI. As a recap, our coverage had a couple of disappointments from OSIM, Petra Foods and BreadTalk, as weaker economic sentiment from their respective key markets, China and Indonesia, took a toll on performance. We are keeping our NEUTRAL call for the consumer sector given the subdued near term outlook for our stocks’ key markets. Nonetheless, the long-term outlook for regional growth remains supportive, and 2H15 may be better for companies such as OSIM [HOLD, S$1.87]given its new flagship product launch in 2Q.
We still favour Sheng Siong Group [BUY, S$0.92] as consumer staples evidently continue to offer stability.
We also like Thai Beverage [BUY, S$0.83] for its market dominance in Thailand, while higher ASPs and effective marketing should cement its beer segment’s turnaround and maintain profitability growth. (Jodie Foo)
MORE REPORTS
Biosensors International Group: Headwinds to continue for FY16
higher ASPs and effective marketing should cement its beer segment’s turnaround and maintain profitability growth.
Biosensors International Group’s (BIG) FY15 revenue was 5% lower at US$308.4m, forming 95% of our full-year forecast. The group had faced ASP erosion, FX translation effects, and lower licensing revenue from Terumo over the financial year. A net loss position of US$224.8m was mainly due to a US$256.1m one-off goodwill write-off of its China subsidiary JWMS. Stripping exceptional items out, estimated core net profit fell 23% to US$34.9m, constituting 107% of our estimates. Amid on-going headwinds for the year ahead, the group intends to focus on top-line growth through BioFreedom, as well as expansion of its distribution business in Japan. We do not see immediate major impacts on profitability, and thus trim our FY16F revenue and net profit by 5%/11% while we also introduce our FY17 estimates. Our FV estimate of S$0.60 stays unchanged based on 20x FY16F P/E. SELL at this juncture on rich valuations. (Jodie Foo)
United Envirotech: FY15 core earnings in line
United Envirotech Ltd (UEL) reported its FY15 results, which came in mostly within our expectations. Revenue jumped 73% to S$349.0m, which exceeded our forecast by about 22%, mainly due to higher-than-expected EPC revenue. While reported NPAT jumped 195% to S$59.3m, we estimate that core earnings (excluding one-off gains and forex) came in around S$42.1m, or about 5% above our forecast. UEL declared a final dividend of S$0.005/share. Going forward, management remains upbeat about its prospects, where it expects to benefit from the stronger government policy support in the water treatment sector and greater need for membrane-based water treatment solutions for the treatment and recycling of water in China. We will have more after we speak to management at the scheduled briefing tomorrow. For now, we maintain our HOLD rating but place our S$1.70 fair value under review. (Carey Wong)
Source: http://www.ocbcresearch.com/
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