Brokers' take

Wilmar International | Hold

May 11 close: S$3.20

Target price: S$3.20

Jefferies Singapore, May 11

Wilmar International reported adjusted net profit of US$263 million, up 23 per cent year on year driven by improvement in soybean crushing margins, which management expects to sustain in the second quarter this year.

However, structural over-capacity in palm refining continues to be a drag on earnings.

With sugar prices staying weak, we struggle to see how Wilmar can materially lift its return on equity from the current 7.5 per cent to 8 per cent - a pre-requisite, we believe, to valuations re-rating from here.

Wilmar unveiled a new reporting format wherein it clubbed its previous five reporting segments into three new business divisions.

We are unclear on the rationale behind this move, which we believe makes it more difficult to analyse its business performance given that peers in similar space are being pushed to increase disclosure and transparency.

Frasers Centrepoint | Add

May 11 close: S$1.83

Target price: S$2.02

CIMB Research, May 10

Frasers Centrepoint Ltd's (FCL) Q2 FY15 results were in line with our expectations.

Looking ahead, the group has S$3.9 billion in unrecognised residential billings from Singapore, China and Australia.

Northpark Residences in Singapore saw 56 per cent of the 920 units sold in H1 FY2015.

With net gearing of 84.8 per cent, FCL is likely to continue looking for opportunities to recycle capital.

We continue to like FCL for its strong recurring income base that contributed 47 per cent of the first half FY15 net profit.

Land Transport

DBS Group Research, May 11

The Land Transport Authority announced that the first bus package has been awarded to Tower Transit from the UK.

The estimated value for the five-year contract is S$556 million, and excludes adjustment for inflation, changes in wage levels and fuel costs, service variation, and incentive payment.

We do not expect any significant impact on both incumbents (SBSTransit and SMRT) as we were already expecting new players to enter the scene.

In addition, the change from the current model (where the operator undertakes fare revenue risks) to an asset-light, gross cost based contracting model will help lighten the operator's balance sheet and should also erase losses that both are currently facing.

Compiled by Jamie Lee

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.

Brokers who wish to send in their reports can email us at btnews@sph.com.sg