Brokers' take

China Everbright Water | Buy

June 9 close: S$1.025

Target price: S$1.32

Deutsche Bank, June 9

We initiate coverage of China Everbright Water (CEW) with a Buy. CEW is well positioned to become one of the leading water companies in China, supported by its SOE (state-owned enterprise) background, low funding cost and synergy with its parent CEI. We expect CEW to accelerate expansion after completion of the reverse takeover of HanKore as a separately listed vehicle in December 2014. It offers the highest earnings growth and therefore deserves a higher valuation multiple than peers.

CEW has underperformed peers by 25 percentage points year-to-date. Its valuation multiple appears high for 2015 due to the temporary impact of the reverse takeover, but it looks attractive in 2017 considering its strongest growth rate. We think the market expectation is relatively conservative, as CEW is still building up its track record. There is significant potential for it to beat expectations.

Listing in Hong Kong in the future looks to be a realistic possibility, which would help improve the liquidity and re-rating of the stock.

M1 | Buy

June 9 close: S$3.40

Target price: S$3.60

DBS Group Research, June 9

SMRT will not bid for fourth telco licence with OMGTel, leaving MyRepublic as a possible strong contender for the fourth telco licence. The development is a relief for the three existing telcos as MyRepublic plans to spend capex of only US$250-300 million and targets 10-12 per cent market share in the long term. This compares to a possible S$500 million to S$1 billion by OMGTel.

With OMGTel out of the picture, we model a 10 per cent adverse impact on M1's revenue in 2022 (14 per cent earlier in 2020), 4 per cent adverse impact on StarHub's revenue (6 per cent earlier) and one per cent adverse impact on Singtel's revenue. We upgrade M1 to "buy" with revised target of S$3.60 (previously S$3.65) implying 8 per cent upside potential and 6 per cent yield.

IPS Securex Holdings | Buy

June 9 close: S$0.77

Target price: S$1.01

RHB, June 9

IPS has received an earlier-than-expected US$4 million purchase order, which will be directly accretive to FY15 net profit after tax, but growth will be limited by one-off costs from its co-manufacturing partnership.

This purchase order is a vote of confidence for PepperBall products. As the master distributor of PepperBall in Asia-Pacific, IPS is poised to receive an earnings boost from this game-changing product.

Compiled by Melissa Tan

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Brokers who wish to send in their reports can e-mail us at btnews@sph.com.sg