Brokers' take
Singtel | BUY
Feb 3 close: S$4.07
Target price: S$4.39
UOB Kay Hian Research, Feb 3
BENEFITS from the strength of the Indian rupee, Thai baht and Philippine peso were negated by the weakness of the Australian dollar. The Singapore dollar is expected to weaken after the Monetary Authority of Singapore reduced the slope of its policy band. . . Singtel provides a hedge against regulatory uncertainties in Singapore due to its diversified exposure to overseas markets, such as Australia, Indonesia, India, Thailand and the Philippines. It derived 68.6 per cent of its group Ebitda and 69.9 per cent of its group pre-tax profit from outside of Singapore in FY14. . . Singtel has hiked its dividend payout ratio twice to the current 60-75 per cent. Its dividend yield is almost one standard deviation above the long-term mean and is exceptionally attractive. The positive impact from the appreciation of the Indian rupee, Thai baht and Philippine peso was largely negated by negative impact from depreciation of the Australian dollar. We have reduced our earnings forecast for FY15 by 0.5 per cent and for FY16 by 1.5 per cent due to recent fluctuation in forex rates. . . We believe Singtel deserves to trade at a premium due to its diversified earnings base and geographical footprint.
Micro-Mechanics | NOT RATED
Feb 3 close: S$0.69
Target price: NA
UOB Kay Hian Research, Feb 3
BUOYED by strong demand, Micro-Mechanics has seen a 20 per cent year-on-year jump in H1 FY15 sales as volume growth more than offset the increased price and delivery pressures from customers. Going forward, the Semiconductor Industry Association has forecast the global semiconductor market to continue growing at about 3 per cent per annum to US$355 billion by 2016. . . As a result of its strong cash flow and robust balance sheet, Micro-Mechanics has been paying out dividends of S$0.03 per share for the last five financial years, translating to an attractive dividend yield of 4.5 per cent. Despite only an FY10-14 revenue compound annual growth rate (CAGR) of 1.7 per cent, Micro-Mechanics saw an FY10-14 net profit of CAGR of 12.5 per cent due to an expansion in profit margin. During this period, Micro-Mechanics continued to maintain a very strong balance sheet while maintaining a steady dividend payout of S$0.03 per share underpinned by its strong cash flow generation. While we continue to like the company for its strong fundamentals, we note that its six-month average trading volume is only 0.039 million shares per day.
Compiled by Chan Yi Wen
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.
