As the earnings season comes to a close, here are 3 stocks that are touted to show positive progress in their businesses, evident from their latest results.
- OUE Hospitality Trust
OUE Hospitality Trust has performed well holistically with rising revenue per available room for the hotels as well as seeing a rise in occupancy rate for its retail mall. Income support has been used up in the third quarter of 2017 which saw low distribution per unit which fell by 3.1 percent year on year.
Strong performance is expected to continue as the supply of hotels room introduced will be limited while higher tourist arrivals will help to spur performance. Furthermore, with the positive economic backdrop, higher corporate demand for venues to hold MICE events is helpful for the trust as well.
As the worry of rising interest rates may be detrimental for trusts, OUEHT has already refinanced all of its debt at the start of the year which was a timely move. The earliest maturity of the loan is set to be December 2020, providing protection against an increase in interest rate for the near future.
In 1Q18, RevPAR increased by 6.9 percent at Mandarin Orchard Singapore, and Crowne Plaza Changi Airport also rose by 9.1 percent year on year, primarily driven by higher room rates as well as higher occupancy rate.
OUEHT may also be moving towards the acquisition of Oakwood Premier OUE Singapore as occupancy rates increase. Future acquisitions may trigger the need to issue new equity issuance as the trust is currently nearing the gearing level of 40 percent.
RHB has a Buy call on the stock with a target price of $0.95.
- Hong Leong Finance
Hong Leong Finance (HLF) has once again reported a great quarter with net profit rising by an impressive 57 percent year on year due to higher interest and non-interest income, and as well as lower interest cost.
The strong growth of interest income come from higher interest earned on loans and lower financing cost. Furthermore, the firm saw an increase in fee and commission income earned brought by selected lending products.
Economic growth in Singapore is expected to be steady, and HLF should see rising loan demand and boding well for its loan book growth which is expected to hit five to six percent per annum for the next two years, according to DBS.
Due to enlarged loan portfolio, the company has also stepped up its loss allowance in tandem, widely viewed as a sound move. That said, overall non-performing loan levels are still low, and the company’s asset quality remains healthy.
Overall, DBS is forecasting a dividend of 13 cents in this year which represents about 5 percent dividend yield. DBS has a Buy call on the stock with a target price of $3.20.
CapitaLand is also looking at a great second half ahead with the recovery in Singapore’s residential property market. Its performance for the first quarter was down 19 percent primarily because of the absence of a one-off gain from the sale of the Nassim. CapitaLand also divested 20 malls in China as well as a property in Vietnam.
Overall, stripping off the effect of one-off items, core operating profit still rose 25 percent due to higher development profits earned in Singapore. Further, there were new sources of recurring rental income from the malls and offices opened in China, Japan as well as Germany.
On the backdrop of healthy economic outlook, strong recovery in Singapore’s residential property will support rising transaction volumes as well as sales value and hence should benefit CapitaLand.
Notwithstanding that, occupancy rates in the Central Business District also climbed to 93.8 percent by the end of last year. Rental for Grade-A offices increased by 3.3 percent quarter on quarter, benefiting the group’s office properties.
CapitaLand is also focusing on the Chinese market with five of the thirteen malls expected to be open this year. On the residential side, the Chinese government’s cooling measures on Tier-1 and Tier-2 cities are expected to result in limited growth in residential prices which can weigh on the group’s bottom line.
Overall, UOB Kay Hian has a Buy call on the stock with a target price of $4.30.