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Brokers' Take

Golden Agri-Resources | Hold

Oct 9 close: S$0.50

Target price: S$0.48

OCBC Investment Research, Oct 9

Golden Agri-Resources (GAR) has drifted down to our previous fair value of S$0.50 (based on 13.5 times blended FY14/FY15 forecast earnings per share), after posting a worse-than-expected set of Q2 FY14 earnings. But at current levels, some of the negative news appears to be priced in.

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For one, soy prices - the main reason for the drag on CPO (crude palm oil) prices - appear to be bottoming. Secondly, plantation owners may get a modest boost from the absence of export taxes on CPO in September and October. Having said that, we still see the need to reduce our FY14 CPO price assumption to US$760/ton (FY15 to US$800/ton), down around 3-5 per cent as we see reduced risk of an impactful El Nino effect on production in 2014 (probably a bit more in 2015).

This in turn reduces our FY14 revenue and earnings estimates by around 3 per cent; it also drops our fair value to S$0.48 (still based on same 13.5 times blended EPS). But from a valuation perspective, we upgrade our call to "hold".

Mapletree Logistics Trust | Buy

Oct 9 close: S$1.17

Target price: S$1.25

DBS Vickers Research, Oct 9

Mapletree Logistics Trust had entered into sale-and-purchase agreements with its sponsor to purchase two properties: (1) Mapletree Yangshan Bonded Logistics Park (MYBLP) in Shanghai, China for 197.2 million yuan (circa S$41.1 million) and at an initial NPI (net property income) yield of 7.5 per cent, and (2) Mapletree Zhengzhou Logistics Park (MZLP) in Zhengzhou, China for 205.6 million yuan (circa S$42.8 million) at an initial NPI yield of 8 per cent. The initial yields are higher than the current portfolio yield of circa 6.75 per cent for its properties in China.

The strategic location of the two properties provides exposure to rapidly growing Chinese trade volumes. Contributions from these properties will result in a 0.2 per cent/1.3 per cent uplift to our FY15/16 forecast DPUs (distribution per unit). "Buy" maintained, target price revised marginally to S$1.25 (previously S$ 1.24).

Sino Grandness Food Industry Group | Hold

Oct 9 close: S$0.64

Target price: S$0.73

Maybank Kim Eng Research, Oct 9

Sino Grandness has announced that bondholders, holding 80.5 per cent of the principal amount of its first tranche of convertible bonds (CB) (100 million yuan in principal) issued to Sun Hung Kai Investments, intend to exercise their rights to extend the CBs' maturity date from Oct 19, 2014 to June, 30 2015.

Sino Grandness has redeemed the remaining 19.5 per cent... However, its biggest catalyst remains Garden Fresh's IPO. If this cannot be completed before July 2015, a much bigger liquidity risk will arise in nine months. This is when Sino will need to fork out 700 million yuan to redeem its CBs: 80.5 per cent of the first plus 100 per cent of the second tranche and penalties for not listing Garden Fresh.

Compiled by Kenneth Lim

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