1. Venture Corporation Limited
Outperformed seasonally weak quarter
Historically, the first quarter of every year is typically weak for Venture Corporation Limited (Venture Corp) due to the seasonal trend (Chinese New Year plant shutdown). However, Venture Corp saw a boost in revenue in 1Q17 as Venture Corp won some orders from existing customers.
The growth in revenue was largely attributed to the Test, Measurement, Medical and Life Science and Others segments. DBS notes that these segments command superior margins.
New business mix sustaining revenue and margins
Venture Corp has demonstrated consistent revenue growth (on a year-on-year basis) for the last 14 quarters without fail. Venture Corp’s business mix continues to evolve with increasing contribution from the Test, Measurement, Medical and Life Science segments.
As such, DBS opines that Venture Corp can sustain its revenue and sales margins despite declining contribution from computer peripherals and printing.
Earnings growth trajectory gaining momentum
Venture Corp’s earnings growth trajectory is gaining momentum over the last four quarters. DBS believes that Venture Corp’s efforts to grow in new niche segments has come to fruition.
Taking reference from market leaders in the attractive end markets that Venture Corp has exposure to (e.g. genome sequencing and optics), the industry has posted double-digit revenue growth guidance for the year. This is a positive sign for Venture Corp.
Venture Corporation Limited (SGX: V03) BUY, Target Price $14.30
2. CDL Hospitality Trusts
Stronger 1Q17 than consensus estimates
Despite a weak overall Singapore market, CDL Hospitality Trusts (CDL) managed to start the year strongly with 1Q17 DPU rising nine percent year-on-year.
This is contrary to what the Street had forecast. This was mainly due to the smaller drop in the Singapore revenue per available room (RevPAR), better margins for the Singapore hotels, and higher contribution from New Zealand.
Discount in share price unjustified
DBS opines that the current low share price of CDL has largely priced in the current downturn. This means that CDL offers compelling long-term value given that its Singapore portfolio currently trades at a heavily discounted implied price per key.
CDL’s implied price per key for its Singapore portfolio stands at less than ~$500,000, which is below its replacement cost of ~$700,000.
Given the quality of the portfolio and CDL’s long-term track record, DBS strongly believes that the share price discount is highly “unwarranted”.
Dividends patient investors
Moreover, with an attractive dividend yield of 6.6 percent based on a 90-percent payout ratio, it offers patient investors a good investment opportunity (with dividends to collect) ahead of the eventual upturn.
CDL Hospitality Trusts (SGX: J85) BUY, Target Price $1.70
3. OUE Hospitality Trust
Timely acquisition of Crowne Plaza Changi Airport extension
OUE Hospitality Trust (OUE) saw its gross revenue and net property income improved year-on-year largely driven by the acquisition of Crowne Plaza Changi Airport’s Extension (CPEX) and higher retail contribution.
Moving forward, the opening of Terminal Four at Changi Airport in 2H17 could bring higher demand for Crowne Plaza Changi Airport’s rooms. This could bring further upside to OUE’s revenue and net property income.
Attractive dividend yield with DPU growth
OUE Hospitality Trust has attractive FY17/18F yields of 7.0 and 7.2 percent respectively which is highly attractive for investors. DBS expects OUE to be able to continue delivering a healthy DPU growth of four percent in 2017.
OUE Hospitality Trust (SGX: SK7) BUY, Target Price $0.75