Brokers' take

Genting Singapore

Hold

Maybank-Kim Eng Research | Feb 19

Close: S$0.72

Target price: S$0.78

FOURTH-QUARTER 2015 results were within our expectations. While the final dividend per share of 1.5 Singapore cents was 50 per cent higher than our estimate, the dividend yield remains lukewarm at 2.1 per cent.

VIP volume share eased two percentage points quarter-on-quarter to 38 per cent as Genting extended less credit to VIPs. That said, Q4 2015 provision for doubtful debts was 51 per cent lower quarter-on-quarter to S$45.3 million. Furthermore, Q4 2015 trade and other receivables of S$894.9 million were 26 per cent lower year-on-year and flattish quarter-on-quarter.

Genting also stated that it has disposed substantially all of its portfolio investments that generated exceptional losses in the past. But we note that there is still S$207.3 million of available-for-sale financial assets on its balance sheet as at end-2015. More importantly, the high margin mass market remains resilient.

Wilmar International

Buy

DBS Group Research | Feb 19

Close: S$3.16

Target price: S$3.70

CORE fourth-quarter 2015 earnings of US$350 million were ahead of our US$210 million forecast; in line with consensus. This brought core FY15 net profit to US$1.2 billion. A final DPS of S$0.055 was declared, bringing total payout to 36 per cent.

Oilseeds and grains merchandising and processing pretax contribution was better than expected due to strong soyabean crushing and consumer products businesses. Associates' contributions had sequentially more than tripled from the previous quarter on strong contributions from investment in India and a joint venture in Ukraine.

However, these were offset by the softer-than-expected tropical oils segment, due to lower palm oil prices, weak demand and lower downstream margins. We understand the spike in CPO (crude palm oil) and palm kernel prices had not been followed through in end-product prices, but this should be offset by higher contribution from biodiesel in Q1 2016.

CWT Ltd

Hold

CIMB Research | Feb 18

Feb 19 close: S$1.84

Target price: S$1.92

CWT had a strong finish to the year, with fourth quarter 2015 core net profit of S$28.7 million up 97 per cent year-on-year. This was driven by better performance in the commodity marketing and financial services segments, which more than offset the fall in logistics and engineering contributions.

While gross profit was in line with our estimate, the 22 per cent beat to our net profit forecast was led by lower finance expenses and lower taxes, partially offset by higher administrative expenses. CWT declared a second interim dividend per share (DPS) of six Singapore cents, bringing total DPS for the year to nine Singapore cents. This implies a dividend payout ratio of 50 per cent, up from 17-21 per cent in prior years.

Management's rationale for the higher payout was to return excess cash to investors in a year in which the company did not expand aggressively. We view this as a signal that management is more confident of a buyout scenario. CWT's dividend yield is now 5 per cent, which we view as attractive while waiting for a potential buyout.

We expect underlying earnings growth to be unexciting and flattish in the near term amid the commodities rout (commodity logistics), lower freight rates (freight logistics), lack of new capacity (contract logistics), and lower demand for naphtha (commodity marketing). The positives are higher dividends, completion of the mega logistics hub which we expect to contribute meaningfully in FY18, and a possible buyout. We maintain our Hold call but would turn more positive with the start of a formal buyout process.

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.

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