Brokers' take

Dairy Farm > Hold DBS Group Research, July 27 July 27 close: US$9.15 Target price: US$9.35

WE believe Dairy Farm's outlook will be relatively slower on higher operating costs; more time needed to turn around the supermarket or hypermarket business; and lower contribution from Yonghui going forward.

Catalysts include faster than expected earnings turnaround from Yonghui and Dairy Farm's core business, but will depend on successful implementation of strategies by new CEO Ian McLeod.

We believe any share price upside will be driven by earnings recovery over the longer term. Upside risk on the stock is based on the firm's ability to turn in more efficient operations. However, earnings would have to improve significantly to derail our neutral bias on the stock.

Hongkong Land > Add CGS-CIMB, July 26 July 27 close: US$7.23 Target price: US$9.50

HONGKONG Land (HKL) posted a solid performance in investment properties, registering a 9 per cent y-o-y growth in rental income in H1 2018 to US$484 million. However, due to fewer property sales bookings from associates and joint ventures in China, core net profit dipped 3.1 per cent to US$455 million in the first half this year. An interim DPS of US$0.06 was declared, unchanged from last year.

The group's central office average rent rose 2 per cent in H1 2018. Retail portfolio also remained fully occupied, with retail average rent up 3 per cent.

Despite the mildly negative rental reversions in Singapore, HKL managed to maintain the average office rent at S$9.10 per sq ft per month, unchanged since H1 2017. Management expects the rental reversions to turn positive in the second half of this year.

Having secured five projects in various countries, we are of the view that HKL's diversified landbanking will drive earnings growth.

We think HKL has a stable growth outlook. It is now trading at a 47 per cent discount to NAV, which offers sufficient downside protection for investors. Key risks include faster-than-expected rate hike in the US, and slowdown in the HK or China economy.

Compiled by Rachel Mui