Brokers' take

Singapore Airlines | Hold

Close: S$12.04

Target price: S$12.60

UOB Kay Hian, March 18

SIA's February pax traffic (RPK) continued to fall as load factors declined despite a cut in pax capacity. This suggests that certain routes still faced excess capacity, especially in the Americas and Europe, where the company will redeploy capacity to better match demand. However, SilkAir's passenger carriage in February grew 14 per cent compared to a 12 per cent increase in capacity, with load factor increasing marginally as passenger carriage growth almost matched capacity injection.

SIA may buy a 20 per cent stake in full-service carrier Jeju Air. Although not confirmed, media reports state that SIA will buy a stake in Jeju Air in an IPO scheduled in Q4 2015. Over-the-counter valuation places Jeju's market capitalisation at US$610 million. Maintain HOLD. We think the stock could trade towards its long-term mean of 0.9x, which suggests a potential upside target of S$12.60. Given the hedges for FY2016, among other things, we think that may be moderately disappointed by its next set of earnings. Suggested entry at S$11.70.

XMH Holdings | Buy

Close: S$0.21

Target price: S$0.30

RHB Research, March 18

XMH's Q3 FY2015 (April) profit after tax and minority interests dipped 3 per cent year-on-year to S$2.7 million. Maintain BUY with a lower S$0.30 target price (from S$0.42) based on 10x FY2016F price earnings, implying a 30 per cent upside. Revenue fell 30 per cent year-on-year due to lower sales in the distribution and after-sales business segments. Q3 FY2015 gross margins improved to 32 per cent (+2 percentage points quarter-on-quarter, +5 percentage points year-on-year). We believe the worst is over for XMH and expect a continuing recovery in the Indonesian business, with strong contributions from Mech-Power Generator and Z-Power group.

Genting Singapore | Buy

Close: S$0.905

Target price: S$1.08

Maybank Kim Eng Research, March 18

We leave our below-consensus earnings alone. Since Genting reported its worst-ever results on Feb 24, 2015, its share price has slid 12 per cent. It now trades at multi-year lows of seven times forward enterprise value/earnings before interest, tax, depreciation and amortisation and 1.4 times 12-month forward price/book value. In fact, its stock is at a discount to Genting Malaysia (GENM MK, BUY, target price RM4.60) (S$1.7)and even American-centric casino operators. Downside should be limited, in our view. Its FY2014 weakness was due to a low VIP win rate and record-high doubtful debts. The first should normalise over time while the second can be managed, in our view. Investors should also not discount Genting Hotel Jurong and its new chief operating officer who could help Resorts World Sentosa expand its noncredit-dependent, higher-margin mass market. Maintain target price of S$1.08, implying 9x FY2015E enterprise value/earnings before interest, tax, depreciation and amortisation. Upgrade from HOLD to BUY with catalysts expected from success in its mass-market initiatives.

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.