Brokers' take

Compiled by Leila Lai BUMITAMA AGRI | BUY TARGET PRICE: $0.93 JULY 16 CLOSE: $0.65

UOB Kay Hian, July 16

Bumitama Agri (BAL) is likely to outperform peers in Q2 2018 with a net profit of 360 billion rupiah to 400 billion rupiah (S$34.1 million to S$38 million), better quarter-on-quarter and year-on-year on the back of stronger fresh fruit bunch production.

Management has been putting in efforts to improve group fresh fruit bunch yield and BAL is starting to see a better fresh fruit bunch yield recovery and has sustained its high operating expense ratio despite high third-party fruit intake.

We adjust our 2018 net profit forecast upwards by 14 per cent to factor in the higher fresh fruit bunch production growth.

Maintain "buy" with a higher target price of $0.93 (from $0.80), post earnings forecast adjustments.

We maintain "buy" as BAL's share price has been lagging behind its peers even though the company is expected to deliver net profit growth of 22 per cent year-on-year for 2018, in contrast to peers which are likely to record negative earnings growth in 2018 as fresh fruit bunch production growth is not likely to offset the decline in crude palm oil average selling prices.

KSH HOLDINGS | BUY TARGET PRICE: $0.94 JULY 16 CLOSE: $0.62

OCBC Investment Research, July 16

Following the additional buyer's stamp duty (ABSD) announcement after market closed on July 5, KSH Holdings' stock price fell 4.7 per cent from $0.645 to close at $0.615 on July 13.

KSH is currently trading -20.1 per cent year-to-date, versus the -8.6 per cent in the FSTREH and -2.5 per cent for the STI, and is currently 33.9 per cent below its peak price of $0.93 as at Oct 31, 2017's close.

While we do see the latest round of cooling measures as effective curbs to new en bloc sales in the near-term, we are still optimistic about the $8.6 billion of already successful en bloc transactions in 2017 and the additional more than $9 billion of transactions year-to-date 2018.

The group's construction order book currently stands at about $542 million, one of the highest it has been as at the end of a quarter since Q1 2014.

We believe the predictive value of the order book size is high on the revenue of the following six quarters, and expect the construction segment to turn a corner in 2018.

With the new cooling measures, we lower our margin assumptions for its property development projects and our fair value decreases from $0.98 to $0.94, with a significant upside from July 13's close.

We reiterate "buy" on KSH Holdings.

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