Looking out for firm-specific news is important for retail investors who are not well-diversified and have invested a significant amount of money in any one particular company.
Below are three companies highlighted by analysts with exciting news for the quarter ahead.
1. Memtech International (MTEC)
Memtech exceeded the expectations of analysts at CIMB Research with their core net profit due to “gross margin expansion, higher operational efficiency, and lower-than-expected tax rate” despite reporting lower revenue as compared to forecasted figures.
The management has attributed the low revenue to “slower progress in the Tesla production”, and “more selective take-up of consumer electronics projects” because of the tighter labour supply in China.
The segment that was bringing in much of the earnings was the automotive segment which grew by 17.3% year on year, accounting for 44% of the total sales.
This segment is likely to continue to grow with increased opportunities for China’s domestic auto manufacturers expected to drive growth for the company.
Analysts expect no major capital expenditure is needed in the near future and it should receive the proceeds from the sale of land assets in the second quarter of this year.
As such, CIMB Research thinks MTEC will pay out 40% of its net profit (with a dividend policy of paying out at least 30%). This will equate to a 4.0% dividend yield for investors.
Analysts are reiterating their “Add” call due to “robust company fundamentals and sector rally”.
Key risks that remain include order delays and cancellations which will drag down profits. The target price for MTEC increased to $1.33.
2. ComfortDelgro (Uber deal to be finalised soon)
According to analysts at Maybank Kim Eng Research (MBKE), Comfort’s earnings were within expectations despite falling by 8.0% year-on-year.
The decline was due to a reduction in earnings from the taxi segment, boosted by increase earnings from bus and rail segment which grew by 3.0%.
However, the upcoming fare cut will likely delay the turnaround in the rail segment.
A fare cut is due in the rail segment which will possibly delay the breakeven point for the new Downtown Line 3. However, ridership has already reached 430,000 and continues to grow.
According to CIMB Research, the rail operations turnaround is currently set to happen in the first quarter of 2019 instead of the second half of 2018 as guided previously.
With aggressive competition coming from the private-hire sector, a decline in Taxi earnings is expected.
The reduction in earnings is slightly mitigated by the new flat fare scheme introduced in the second quarter of 2017 though taxi bookings continued to come down by about 20% year on year.
It is still unclear as to how disruptive the new private-hire vehicles will be to Comfort’s Taxi segment, and the weakness is likely to continue for now.
The main news in the headlines is the tie-up with Uber.
Management at Comfort has stated that the potential benefits to be reaped include “exposure to private hire vehicle segment”, which will reduce the disruptiveness of private hire vehicles eroding away market share.
Also, they could “tap [on] Uber’s technology” and “share complementary strategies”. The tie-up should be finalised by the end of this month.
CIMB Research analysts have placed a “Hold” call on the stock with a discounted-cash-flow (DCF) based target price of $2.15, as the results from the Uber deal is still pending.
3. UOL Group
Currently trading at 0.8 times of price-to-net-asset-value, DBS research analysts opine that the stock is now attractively valued and have increased their target price for the stock to $10.15 with a 20% discount to their revised net asset value of $12.70.
The results from the third quarter were improved with gain from acquisition/consolidation of UIC with gain amounting to $542 million while incurring a $15 million business acquisition costs.
Stripping off these one-off gains, the third quarter profits actually fell by 13% year on year, standing at $76 million.
Analysts are positive on the performance of UOL due to its increased stake in UIC and raising the expected stock price to match its net asset value.
Analysts also expect that the firm will benefit from the recovering property market in Singapore.