Singapore Strategy - RHB Invest 2016-03-08: Top 16 recovery plays stock picks (Part 3 of 3)

Singapore Strategy - RHB Invest 2016-03-08: Top 16 recovery plays stock picks (Part 3 of 3) OXLEY HOLDINGS LIMITED 5UX.SI  HO BEE LAND LIMITED H13.SI  CHINA AVIATION OIL(S) CORP LTD G92.SI  SINGAPORE SHIPPING CORP LTD S19.SI  IPS SECUREX HOLDINGS LIMITED 42N.SI  ISOTEAM LTD 5WF.SI 

Top 16 recovery plays stock picks (Part 3 of 3)

  • OXLEY HOLDINGS LIMITED (5UX.SI)
  • HO BEE LAND LIMITED (H13.SI)
  • CHINA AVIATION OIL(S) CORP LTD (G92.SI)
  • SINGAPORE SHIPPING CORP LTD (S19.SI)
  • IPS SECUREX HOLDINGS LIMITED (42N.SI)
  • ISOTEAM LTD. (5WF.SI)


Oxley (OHL SP, BUY, TP: SGD0.91) 

  • Oxley has executed its project pipeline well and pre-sold SGD3.2bn worth of properties across its Singapore and overseas projects that would be booked over the next 2-3 years. 
  • High-yielding mixed development projects such as KAP/KAP Residences, NEWest, Midtown Residences and Oxley Tower are on track for completion in the next 12-18 months, while in London, the group would start to handover units at Royal Wharf from mid-2016 onwards. 
  • We expect the group to gross over SGD500m in profits over FY16-17. It has also build up a sizable overseas portfolio that is likely to drive the next wave of NAV growth, with planned launches in London, Cambodia, Ireland, Malaysia and Myanmar in upcoming months. 
  • Oxley is one of our Top Picks in the property sector. Maintain Buy and SGD0.91 TP based on 20% discount to RNAV. 

Ho Bee Land (BUY, TP: SGD2.60) 

  • Ho Bee Land (Ho Bee) has bolted on another two London properties in the past month, bolstering its London portfolio to five properties. The latest purchase brings the group’s total investment in London to ~£500m in the last two years. 
  • Ho Bee’s investment property portfolio, valued at SGD2.6bn, would generate a solid stream of rental income amounting to over S$130m pa. The group continues to retain exposure to the Sentosa enclave via its three projects, Turquoise, Seascape and Cape Royale. Most of its units there are leased out as management awaits a turn in the residential cycle. Its overseas residential projects in Australia and China are likely to provide additional profit streams when completed in 1-2 years’ time. 
  • We like the stock for its earnings visibility and management’s track record in generating NAV/share growth. Our S$2.60 TP is premised on a 35% discount to our RNAV of $4.01. 
  • Catalysts include faster-than-expected monetisation of its Sentosa assets and a potential securitisation of its investment properties. 
  • Risk to TP: Protracted downturn affecting the capital values of its Sentosa properties. 

China Aviation Oil (CAO SP, BUY, TP: SGD1.28) 

  • China Aviation Oil is Asia-Pacific’s largest physical jet fuel trader and the sole supplier of imported jet fuel for China’s civil aviation industry. This means it effectively has a monopoly on supplying jet fuel for all outbound international flights in China, making it an excellent proxy to the country’s global aviation traffic boom. 
  • Our view that China Aviation Oil would continue to fly high unperturbed by the oil price fluctuation is vindicated by its organic growth from both domestic and overseas businesses. 
  • Key catalysts: The company also looks to accelerate its growth through synergistic M&As, funded by its robust FCF and net cash hoard. 
  • Conviction BUY with a DCFE-based SGD1.28 TP (9.5% CoE, 0% TG), implying 11.8x FY16 P/E. 
  • Risks to TP include slower-than-expected jet fuel demand growth and a delay in M&A acquisition. 

Singapore Shipping Corp (SSCL SP, BUY, TP: SGD0.67) 

  • Singapore Shipping Corp (SSC) is a rare gem that offers both safety and growth in the highly-cyclical shipping sector. Operating in the highly oligopolistic pure car truck carrier (PCTC) sector, SSC carved a profitable niche by: 
    1. securing a decade-long profit visibility through its long term charters to blue chip clients, and 
    2. enjoying quality growth with its fleet expansion plans. 
  • Key catalysts include: 
    1. implementation of the TPP agreement which boost vehicle seaborne trade, and 
    2. acquisition of new vessels that comes with similarly attractive contract terms. 
  • We have a conviction BUY recommendation with a DCF-derived SGD0.67 TP (WACC: 10%, TG: 0%, 127% upside), implying 11.7x FY17F P/E. 
  • Risk to TP includes the severely deteriorating macro environment which would cause its Japanese customers to default. 

IPS Securex (IPSS SP, BUY, TP: SGD0.40) 

  • We expect majority of IPS Securex’s (IPS) earnings to blast off in 2H16 mainly due to recognition from the partial orders drawn down from the Letter of Intent (LOIs) consisting of the USD55m Pepperball and USD64m Hyperspike, which would come mostly in 2H16 because of seasonality. 1H16 topline and NPAT grew by 20.5% and 10% respectively, in line with our estimates. 
  • With the political unrest among certain countries coupled with more terrorist activities, we expect Governments to continue to spend more to improve its homeland security systems and equipment. 
  • Key catalysts: more Pepperball/Hyperspike contracts and a replacement cycle for cargo/baggage scanners. 
  • Risk to TP: Execution risk. 

ISOTeam (ISO SP, BUY, TP: SGD0.82) 

  • We expect ISOTeam to continue delivering a strong NPAT growth and secure more government and private projects. Management continues to expect to benefit from the general increase in public sector upgrades. 
  • Going forward, we also expect ISOTeam to extend its services into other untapped sectors, including public sector projects such as education institutions and army camps, and non-public sector like industrial projects. 
  • With a positive outlook, we maintain BUY with an unchanged DCF-backed TP of SGD0.82.




Ong Kian Lin RHB Invest | Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2016-03-08
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.91 Same 0.91
BUY Maintain BUY 2.60 Same 2.60
BUY Maintain BUY 1.28 Same 1.28
BUY Maintain BUY 0.67 Same 0.67
BUY Maintain BUY 0.40 Same 0.40
BUY Maintain BUY 0.82 Same 0.82


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