ARA US Hospitality Trust

Price – US$0.865

Target – US$1.15

Select-service hotels offer selected facilities and services but not the full range of services provided by full-service hotels, resulting in a revenue mix that is geared towards higher-margin room revenue while minimising labour cost. This means that ARA US Hospitality Trust’s (ARAHT) hotels have higher and more stable margins. Furthermore with higher occupancy of 77.1%, ARAHT achieved a higher RevPAR of US$94 in comparison to US select-service peers’ RevPAR of US$82 in 2018. All ARAHT’s 38 hotels are branded under Hyatt Place and Hyatt House, which allow the group to ride on Hyatt’s premier branding and access to Hyatt’s guest loyalty programme as well as Hyatt’s large reservations system and marketing platforms. ARAHT is looking to refurbish selected hotels in a staggered manner to achieve higher RevPAR, and seek to diversify its portfolio by expanding into the western region and acquiring other premium branded hotels such as Hilton and Marriott. Initiate BUY. UOB-Kay Hian (14 Jun)

SATS

Price – $5.09

Target – $5.40

Changi’s data revealed a 1.7% decline in the number of flights in Apr-19. However, we believe that the drop was unlikely to be structural but due to the grounding of B737 Max and suspension of Jet Airways. Meanwhile, the weaker freight volume which had fallen for six consecutive months is more of a concern as cargo made up 25% of gateway revenue. SATS expanded its EBIT margin to 13.5% in FY19 attributable to the deconsolidation of SATS BRF Food and better operating leverage from higher gateway revenue. Amidst increasing pricing pressure for catering services, cost optimisation is key. Some of the initiatives which SATS have rolled out to improve efficiency include taking full control of the economy meals, shrinking menus and reducing gateway headcount as a result of increased automated ground handling. While SATS has improved its M&A execution over the last two years, we also factored in gestation for new M&As and defer our earnings growth expectations given that M&A-related costs such as staff and business developments costs also tend to rise in tandem. Maintain ADD. CIMB Research (14 Jun)

Sheng Siong Group

Price – $1.09

Target – $0.95

Supermarket and hypermarket sales briefly recovered in Mar-19 before resuming their fall with 4M19 sales down by 1.1%. We believe that consumer sentiment will continue to be weak amid a slowing economy. Meanwhile, fast-food sales registered their 15th month of consecutive growth while other eating places their 7th. We think this reflects Singaporeans’ increasing demand for value-for-money convenient ready meals which could affect supermarket sales. Hence barring any higher-than-expected new store contributions and improved consumer sentiment, we made no changes to Sheng Siong Group’s target price in consideration of the shrinking basket values as consumers continue to tighten purse strings and where convenience seems to be an increasingly critical factor in deciding meal options. Reiterate SELL. Maybank Kim Eng (13 Jun)

Thai Beverage Public Company        

Price – $0.83

Target – $0.92

The latest statistics from Thailand’s Office of Industrial Economics indicated that domestic beer consumption rose 21% in Apr-19, a sharp turnaround from the slow demand growth in Mar-19. We believe that Thai Beverage Public Company’s (ThaiBev) numbers will grow in tandem given that it is the second-largest beer player in the market with a 40% market share. Furthermore, Thailand retail sales remained strong while farm income was also stable. The economic stimulus package, which includes state welfare cards to low-income earners and tax deductions, should help boost domestic spending. In addition, the strengthening THB in comparison to regional currencies also bode well for the group. Based on our forecast, ThaiBev is now trading at 21 times FY19F P/E which we think is undemanding. Hence, we expect the share price to perform well when results are delivered. Maintain BUY. RHB Research (13 Jun)