Brokers' take

Singapore Aviation

UOB Kay Hian, Jan 6

Strategy - buy SATS and Singapore Airlines (SIA) on weakness. SATS remains our top pick within the Singapore aviation space and we expect the stock to generate 17 per cent returns (net of dividend) for 2016. Catalysts are improved earnings from subsidiary TFK, cost savings as well as incentives from Changi Airport. We also favour SIA on expectations of lower fuel hedging losses and stable yields. SIA is expected to generate 13 per cent returns for 2016 (inclusive of dividend). We would be buyers of SIA near S$10.80. Meanwhile, SIA Engineering Company remains the top sell within the sector. While its stock price is supported by a stock buyback, we expect the stock to underperform.

SPH Reit | Hold

Jan 6 close: S$0.955

Target price:S$0.99

OCBC Investment Research, Jan 6

SPH Reit reported a steady set of Q1 FY2016 results which met our expectations. Gross revenue rose 2.9 per cent year on year to S$52.1 million, but distribution per unit was flat at 1.33 Singapore cents, as S$1.6 million of taxable income available for distribution was retained. We believe a portion of the income retained could be distributed to unitholders in subsequent quarters. Both Paragon and The Clementi Mall (TCM) achieved positive rental reversions of 3.2 per cent and 5.4 per cent, respectively, resulting in overall portfolio rental reversion of 3.2 per cent. However, this was a moderation from the 8.6 per cent attained in FY2015. SPH Reit's balance sheet remained strong, with a low gearing ratio of 25.7 per cent, similar to the previous quarter. Of its S$850 million debt facility, 84.7 per cent is on a fixed rate basis. Maintain "Hold" and S$0.99 fair value estimate as we see limited potential total returns ahead.

mm2 Asia | Buy

Jan 6 close: S$0.79

Target price: S$1.05

DBS Group Research, Jan 5

mm2 Asia is riding on growing demand and support for local production and gaining traction overseas. It has a high margins business model, with new revenue streams to strengthen competitive edge and build recurring income base. It is also spreading its wings in China, one of the world's most lucrative movie markets, to support growth. mm2 is trading at 23 times FY March 2016 forecast price earnings and 14 times FY2017 forecast price earnings, based on its enlarged share capital, compared to peers' 27 times FY2016 forecast price earnings. Taking a 30 per cent discount to peers given its much smaller size, we arrive at a target price earnings of 19 times to derive our target price of S$1.05 on FY March 2017 forecast earnings per share. The stock offers a potential upside of 36 per cent, and it trades at an attractive price/earnings to growth of 0.31 times.

Compiled by Claire Huang

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.