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Investors’ Corner (Banyan Tree Hldgs, Ezion Hldgs, Japan Foods Hldg, Japfa)

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Banyan Tree Holdings

Price – $0.58

Target – $0.76

Banyan Tree Holdings (BTH) saw a recovery in its fee-based segment revenue with hotel/fund/club management and spa/gallery operations enjoying positive growth in 4Q18 after registering close to 20% declines each a year ago. Revenue from BTH’s property sales segment also jumped 61% in 4Q18 driven by higher handover of units at Cassia Phuket, Laguna Park townhomes/villas, Laguna Village residences and Banyan Tree Grand Residences. Meanwhile, revenue from the group’s Hotel investments dipped 13% as a result of ongoing renovations at Banyan Tree Phuket and underperformance from Angsana Laguna Phuket as well as deconsolidation effect following the disposal of Seychelles assets portfolio. BTH managed to secure 28 new management contracts in 2018 which will be the main driver for the group’s fee-based income. We think long-term growth catalysts remain intact as BTH transitions to an increasingly asset-light model. Maintain ACCUMULATE. Phillip Securities (8 Mar)

Ezion Holdings

Price – $0.043

Target – $0.05

Ezion Holdings (Ezion) has called for a trading suspension because of its advanced talks with an undisclosed potential strategic investor which has commenced due diligence. A capital injection from the potential white knight would strengthen Ezion’s balance sheet and add value in view of the group’s financial constraints. While Ezion’s 4Q18 revenue rose 6% to US$29.7m, the group continued to make core losses of around US$28m excluding impairment losses, foreign exchange gains and gains from the derecognition of associate Ausgroup. As a result of impairment losses on PPE, trade receivables and loans to JV in 4Q18, Ezion turned into a net liability of US$255m as of end Dec-18. Operating cash flow was also weak due to higher working capital requirements as payments were made to suppliers in preparation for the delivery of liftboats. Given the slower-than-expected ramp-up in utilisation and revenue, we lowered our FY20 earnings forecasts by 45%. Maintain HOLD. DBS Vickers (8 Mar)

Japan Foods Holdings

Price – $0.43

Target – $0.45

The ongoing rationalisation of stores and a weak consumer discretionary spending amidst slowing economic growth has dragged Japan Foods Holdings’ (Japan Foods) revenue and earnings lower in FY19. Furthermore in the 2019 budget announcement, Finance Minister Heng Swee Keat revealed a reduction in foreign worker dependency ratio ceiling for the services sector. This will make it difficult for F&B players to grow their businesses in an already tight labour market. In Dec-18 Japan Foods announced a JV with Minor Singapore (Minor) which will allow it to bring Minor’s Thai restaurants to Japan while enabling the latter to expand Japan Foods’ brands in Thailand and China. We remained upbeat on the collaboration as Japan Foods can leverage on the strengths and experience of a strong partner to grow outside Singapore. While near-term profits are expected to remain weak, Japan Foods’ net cash balance sheet, strong cash flow generation and 5% yield should provide support to its share price. Maintain NEUTRAL. RHB Research (8 Mar)


Price – $0.71

Target – $0.98

Japfa’s management estimated the maximum financial impact of the African Swine Fever to be at 12% of the group’s 2018 core net profit, if the disease outbreak destroyed 10% of its swine fattening volume and 20% of feed volume in Vietnam. Nevertheless, we believed that the 8% share price correction over the past two days has been overdone, given that none of Japfa’s farms have been impacted so far and Japfa could benefit from higher swine prices and increased market share from the potential exit of backyard farms. Japfa’s 2018 core net profit exceeded our expectation soaring 676% on a 2017 low base. Full-year dividend jumped significantly to $0.02. We view the dividend hike and recent share buyback as strong votes of confidence and current valuation has turned more compelling at 7.7 times 2019F price-to-earnings ratio. Maintain BUY. UOB-Kay Hian (5 Mar)

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