Brokers' take

Land Transport Sector | Neutral OCBC Research, May 23

Q1 results of ComfortDelGro Corp (CDG) and SMRT Corp came in within our expectations. We believe the focus for Singapore land transport sector should still be on catalysts driven by regulatory changes. For the bus industry, we think transition to the new bus government contracting model is still likely on track to meet the H216 target. With 75 per cent market share, CDG will be key beneficiary.

For the taxi industry, playing field was levelled slightly with the introduction of new policies to regulate private hire car drivers and vehicles. Nonetheless, we still see disparity relating to applicable standards and pricing structures between traditional taxi businesses and private hire car services, and this may lead to further loosening of strict taxi standards.

With ongoing regulatory changes in Singapore's land transport sector, we maintain our "neutral" rating as we wait for better clarity. Top pick within the sector is CDG ("buy"; TP: S$3.40).

NeraTel | Trading Buy Target price: S$0.80 May 23 close: S$0.695 RHB Research, May 23

NeraTel is selling its payment solutions business to Paris-based Ingenico Group for S$88 million (31.3 times FY15 P/E) and is expected to record a disposal gain of S$71.5 million.

A significant portion of this is to be paid out to shareholders. We expect total FY16F dividends to be a substantial 21 Singapore cents per share. This includes a special one-off 17 Singapore cents/share dividend from the sale, coupled with its usual four Singapore cents share share. As a result, we lift our call to "trading buy" (from Neutral) and raise our discounted cashflow-backed TP to S$0.80 (from S$0.55, 14 per cent upside).

UOL Group | Add Target price: S$8.26 May 23 close: S$5.63 CIMB Group Research, May 20

UOL announced it has entered into a sale and purchase agreement with UBS Central London Office Value Added Fund to acquire 110 High Holborn, an office building with a small component of retail space. The property has circa 10,900sq m of NLA (117,328sf) and is located in London's midtown near Holborn underground station.

The agreed-upon consideration is £98.75 million (S$197.2 million) , translating to £842 psf. While no details have been shared by management, our understanding from media reports indicate that this could translate to a net yield in excess of 5 per cent.

This move is in line with the group's strategy to diversify outside of Singapore. With a low gearing of 0.27x, the group is well placed to tap more new opportunities. We leave our FY16-18 estimates unchanged for now, pending more information from management, and retain our "add" rating.

Compiled by Andrea Soh

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