Lifestyles│Singapore March 11, 2015
COMPANY NOTE
Straco Corporation STCO SP / STRA.SI
Market Cap
Avg Daily Turnover
Free Float
US$482.5m
US$0.06m
18.1%
S$669.3m
S$0.08m
847.5 m shares
Current
S$0.79
Target
S$1.01
Prev. Target
S$0.78
Up/Downside
28.0% Conviction|
Time to re-enter
Notes from the Field
————————————————————————————————————————
Jessalynn CHEN T (65) 6210 8672 E
[email protected] Company Visit Channel Check
Expert Opinion Customer Views
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Contents SINGAPORE FLYER NOT AS BAD AS FEARED............... 5 CHINA AQUARIUMS – SLOWER GROWTH BUT HIGHER ASP ...................................................................................... 7 FINANCIALS ........................................................................ 8 VALUATION AND RECOMMENDATION .......................... 11
Straco’s share price has taken a beating since it announced its acquisition of the Singapore Flyer, given the market’s expectations that the acquisition would be dilutive to earnings. However, with the Flyer turning in a profit in 4Q, we believe the biggest overhang on the stock has been removed. We also expect Straco to raise ticket prices at the Shanghai Ocean Aquarium (SOA) in FY15 as the revision cycle kicks in. Straco is trading at 12x CY16 P/E, which we deem an attractive entry point. We raise our FY15-17 EPS by 8-14% to factor in positive profits from the Flyer and the ticket price hike at SOA. Our DCF-based target price rises to S$1.01 (11% WACC), which implies 15x CY16 P/E, still below its recent peak of 17x in Aug 14. We upgrade from Hold to Add, with stronger earnings growth as the key catalyst.
Underestimated Singapore Flyer profits previously We previously built in mild EPS dilution from the Flyer in FY15-16 and expected positive contributions only in FY17. However, Straco’s 4Q14 results revealed that the Flyer contributed S$1.4m in PBT in Dec alone. Since Straco took ownership of the Flyer, it has improved the asset’s yield by: 1) lowering discounts given to tour groups, 2) channelling more walk-in visitors, and 3) streamlining costs (e.g. switching to an in-house marketing team). We now expect the Flyer to contribute S$7m in net profit annually in FY15-16, based on flat visitor arrival growth (1.4m visitors). These estimates have not factored in
Price Close
150.0
0.700
136.0
0.600
122.0
0.500
108.0
0.400 3 2 2 1 1
94.0
Vol m
164.0
0.800
Jun-14
Sep-14
Dec-14
Source: Bloomberg
52-week share price range 0.79 0.84
0.51
1.01 Current
Target
potential upside from redevelopment of the retail terminal and ticket sales from new indoor attractions that Straco plans to introduce at the Flyer.
Potential ticket price hike at Shanghai Ocean Aquarium We believe the time is ripe for a ticket price hike at SOA. The last revision was in Nov 2011, when the standard ticket price was raised from Rmb135 to Rmb160. Straco typically raises ticket prices every 2-3 years, which means we are likely to see a revision this year. Our estimates have factored in a 15% ticket price hike in 4Q15. However, we toned down expectations of visitor arrival growth at its aquariums from 9% to 4% given new crowd control measures put in place by the government, which may affect visits during “super peak” periods.
Beaten-down valuations Straco is trading at 12x CY16 P/E, a significant discount to the 16-29x its peers trade at and its recent peak of 17x in Aug 14. We view this as an attractive entry point ahead of stronger earnings in FY15 when contributions from the Flyer start to flow through.
Financial Summary
Relative to FSSTI (RHS)
0.900
Mar-14
|
Revenue (S$m) Operating EBITDA (S$m) Net Profit (S$m) Normalised EPS (S$) Normalised EPS Growth FD Normalised P/E (x) DPS (S$) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) ROE % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)
Dec-13A 72.8 48.63 34.10 0.040 74.4% 19.62 0.020 2.53% 11.53 48.22 (65.9%) 4.14 23.4%
Dec-14A 92.3 57.06 37.69 0.044 9.9% 17.72 0.020 2.53% 11.53 NA (9.8%) 3.59 21.7%
Dec-15F 129.6 80.41 49.82 0.059 32.2% 13.44 0.025 3.16% 7.71 11.97 (25.9%) 3.05 24.5% 14.0% 1.13
Dec-16F 141.7 90.42 57.08 0.067 14.6% 11.73 0.025 3.16% 6.51 12.54 (34.7%) 2.62 24.1% 14.2% 1.12
Dec-17F 149.6 95.86 61.59 0.073 7.9% 10.87 0.028 3.48% 5.62 9.23 (46.9%) 2.27 22.4% 8.0%
SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Straco Corporation│Singapore March 11, 2015
PEER COMPARISON
Research Coverage Bloomberg Code STCO SP
Straco Corporation
Market SG
Recommendation ADD
Rolling P/BV (x)
Price 0.79
Target Price 1.01
Upside 28.0%
12-month Forward Rolling FD P/E (x)
4.50
18.0
4.00
16.0
3.50
14.0
3.00
12.0
2.50
10.0
2.00
8.0
1.50
6.0
1.00
4.0
0.50
2.0
0.00 Jan-11
Mkt Cap US$m 482
Jan-12
Jan-13
Jan-14
0.0 Jan-11
Jan-15
Jan-12
Jan-13
Straco Corporation
Jan-14
Jan-15
Straco Corporation
Peer Aggregate: P/BV vs ROE
Peer Aggregate: 12-mth Fwd FD P/E vs FD EPS Growth
4.50
30.0%
18.0
120%
4.00
26.7%
16.0
104%
3.50
23.3%
14.0
89%
3.00
20.0%
12.0
73%
2.50
16.7%
10.0
58%
2.00
13.3%
8.0
42%
1.50
10.0%
6.0
27%
1.00
6.7%
4.0
11%
0.50
3.3%
2.0
-4%
0.00 Jan-11
0.0%
0.0 Jan-11
Jan-12
Jan-13
Rolling P/BV (x) (lhs)
Jan-14
Jan-15
Jan-16
ROE (See Footnote) (rhs)
-20%
Jan-12
Jan-13
Jan-14
12-mth Fwd FD P/E (x) (See Footnote) (lhs)
Jan-15
Jan-16
FD EPS Growth (See Footnote) (rhs)
Valuation
Straco Corporation
FD P/E (x) (See Footnote) Dec-14 Dec-15 Dec-16 17.72 13.44 11.73
Dec-14 3.59
P/BV (x) Dec-15 3.05
Dec-16 2.62
Dec-14 11.53
EV/EBITDA (x) Dec-15 7.71
Dec-16 6.51
Dec-16 24.1%
Dividend Yield Dec-14 Dec-15 2.53% 3.16%
Dec-16 3.16%
Growth and Returns
Straco Corporation
FD EPS Growth (See Footnote) Dec-14 Dec-15 Dec-16 10.7% 31.8% 14.6%
ROE (See Footnote) Dec-14 Dec-15 21.7% 24.5%
SOURCE: CIMB, COMPANY REPORTS Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends. NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companies respectively.
2
Straco Corporation│Singapore March 11, 2015
BY THE NUMBERS
Share price info Share px perf. (%)
1M
3M
Relative
7.4
5.1
Absolute
6.0
7.5
Major shareholders
12M 46.3 54.9 % held
Straco Holding Pte Ltd
37.4
China Poly Group Corporation
22.5
Straco (HK) Limited
17.1
P/BV vs ROE
12-mth Fwd FD Normalised P/E vs FD
4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Rolling P/BV (x) (lhs)
30.0% 26.7% 23.3% 20.0% 16.7% 13.3% 10.0% 6.7% 3.3% 0.0%
Normalised EPS Growth 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
100% 87% 73% 60% 47% 33% 20% 7% -7% -20%
12-mth Fwd Rolling FD Normalised P/E (x) (lhs)
ROE (See Footnote) (rhs)
Diluted Normalised EPS Growth (rhs)
Profit & Loss We expect topline growth to be driven by maiden full-year contributions from the Singapore Flyer, which was acquired on 28 Nov 2014.
(S$m) Total Net Revenues Gross Profit Operating EBITDA Depreciation And Amortisation Operating EBIT Financial Income/(Expense) Pretax Income/(Loss) from Assoc. Non-Operating Income/(Expense) Profit Before Tax (pre-EI) Exceptional Items Pre-tax Profit Taxation Exceptional Income - post-tax Profit After Tax Minority Interests Preferred Dividends FX Gain/(Loss) - post tax Other Adjustments - post-tax Preference Dividends (Australia) Net Profit Normalised Net Profit Fully Diluted Normalised Profit
Dec-13A 72.8 72.8 48.6 (3.9) 44.7 3.2 0.0 2.3 50.3
Dec-14A 92.3 92.3 57.1 (4.5) 52.5 3.2 0.0 2.0 57.6
Dec-15F 129.6 129.6 80.4 (11.4) 69.1 2.1 0.0 1.3 72.4
Dec-16F 141.7 141.7 90.4 (11.8) 78.6 3.2 0.0 1.4 83.2
Dec-17F 149.6 149.6 95.9 (11.8) 84.1 4.5 0.0 1.5 90.1
50.3 (14.9)
57.6 (18.4)
72.4 (20.5)
83.2 (23.8)
90.1 (25.9)
35.4 (1.3)
39.3 (1.6)
51.9 (2.1)
59.5 (2.4)
64.2 (2.6)
34.1 35.4 34.1
37.7 39.3 37.7
49.8 51.9 49.8
57.1 59.5 57.1
61.6 64.2 61.6
Cash Flow
Strong operational cash flow generation builds a cash pile for asset enhancement initiatives (AEIs) at its existing assets and for new acquisitions.
(S$m) EBITDA Cash Flow from Invt. & Assoc. Change In Working Capital (Incr)/Decr in Total Provisions Other Non-Cash (Income)/Expense Other Operating Cashflow Net Interest (Paid)/Received Tax Paid Cashflow From Operations Capex Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Proceeds From Issue Of Shares Shares Repurchased Dividends Paid Preferred Dividends Other Financing Cashflow Cash Flow From Financing Total Cash Generated Free Cashflow To Equity Free Cashflow To Firm
Dec-13A 48.6
Dec-14A 57.1
Dec-15F 80.4
Dec-16F 90.4
Dec-17F 95.9
1.3
(3.1)
1.8
0.6
0.4
(3.3) (2.3) 3.2 (14.3) 33.3 (1.4)
(3.3) 1.7 3.2 (20.7) 34.9 (1.2)
(4.0) 0.0 2.1 (20.5) 59.7 (7.8)
(5.1) 0.0 3.2 (23.8) 65.3 (17.0)
(6.4) 0.0 4.5 (25.9) 68.4 (2.2)
(18.0) (19.5)
(111.8) (113.1)
4.0 (3.8)
5.1 (11.9)
6.4 4.1
0.4 (0.1) (11.8)
0.8 (0.6) (18.2)
0.0 0.0 (16.9)
0.0 0.0 (21.5)
0.0 0.0 (21.5)
2.1 (9.5) 4.4 13.9 13.9
96.2 78.3 0.1 (78.2) (78.0)
0.0 (16.9) 39.0 56.0 57.8
0.0 (21.5) 31.9 53.4 55.3
0.0 (21.5) 51.1 72.6 74.4
SOURCE: CIMB RESEARCH, COMPANY
3
Straco Corporation│Singapore March 11, 2015
BY THE NUMBERS
Balance Sheet
Bank borrowings to finance the Singapore Flyer acquisition.
(S$m) Total Cash And Equivalents Total Debtors Inventories Total Other Current Assets Total Current Assets Fixed Assets Total Investments Intangible Assets Total Other Non-Current Assets Total Non-current Assets Short-term Debt Current Portion of Long-Term Debt Total Creditors Other Current Liabilities Total Current Liabilities Total Long-term Debt Hybrid Debt - Debt Component Total Other Non-Current Liabilities Total Non-current Liabilities Total Provisions Total Liabilities Shareholders' Equity Minority Interests Total Equity
Dec-13A 108.1 4.1 1.0 21.7 134.8 47.1 0.0 1.4 0.0 48.5 0.0
Dec-14A 112.5 3.9 2.8 1.4 120.6 139.6 49.9 4.6 0.0 194.1 19.5
Dec-15F 152.8 5.5 3.9 1.4 163.6 136.1 49.9 4.6 0.0 190.6 19.5
Dec-16F 186.1 6.0 4.3 1.4 197.8 141.3 49.9 4.6 0.0 195.8 19.5
Dec-17F 238.6 6.3 4.5 1.4 250.9 131.8 49.9 4.6 0.0 186.3 19.5
10.2 7.0 17.2 0.0
11.1 2.7 33.2 73.9
15.6 2.7 37.7 73.9
17.0 2.7 39.1 73.9
18.0 2.7 40.1 73.9
0.2 0.2 1.9 19.3 160.9 3.1 164.0
0.2 74.1 13.1 120.3 186.6 7.7 194.4
0.2 74.1 13.1 124.8 219.5 9.8 229.3
0.2 74.1 13.1 126.3 255.1 12.2 267.3
0.2 74.1 13.1 127.2 295.2 14.8 309.9
Dec-13A 32.0% 57.4% 66.8% 0.13 0.19 22,342 29.6% 49.4% 17.30 N/A N/A 91.9% 31.7%
Dec-14A 26.7% 17.3% 61.8% 0.02 0.22 322 31.9% 45.0% 15.87 N/A N/A 75.1% 23.9%
Dec-15F 40.3% 40.9% 62.1% 0.07 0.26 37 28.4% 42.5% 13.25 N/A N/A 41.4% 22.9%
Dec-16F 9.3% 12.4% 63.8% 0.11 0.30 42 28.6% 37.1% 14.85 N/A N/A 49.0% 23.6%
Dec-17F 5.6% 6.0% 64.1% 0.17 0.35 44 28.8% 37.8% 15.06 N/A N/A 50.6% 22.9%
Dec-13A 0.0% 32.7% 23.3% 14.9% 13.0% 22.9% 1 1 N/A
Dec-14A 0.0% 20.0% 27.9% 4.9% 24.9% 28.6% 1 1 N/A
Dec-15F 3.8% 5.0% 29.3% 0.0% 2.5% 29.3% 1 1 N/A
Dec-16F 10.8% 7.5% 31.5% 0.0% 2.5% 30.0% 1 1 N/A
Dec-17F 0.0% 5.0% 33.1% 0.0% 2.5% 30.8% 1 1 N/A
Key Ratios Revenue Growth Operating EBITDA Growth Operating EBITDA Margin Net Cash Per Share (S$) BVPS (S$) Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) ROCE (%)
Key Drivers
We expect Straco to raise ticket prices at SOA by 15% in 4Q15.
ASP (% chg, main prod./serv.) Unit sales grth (%, main prod./serv.) Util. rate (%, main prod./serv.) ASP (% chg, 2ndary prod./serv.) Unit sales grth (%,2ndary prod/serv) Util. rate (%, 2ndary prod/serv) Outlets #/POS (main prod./serv.) Outlets #/POS (2ndary prod./serv.) A&P As % Of Sales
SOURCE: CIMB RESEARCH, COMPANY
4
Straco Corporation│Singapore March 11, 2015
Time to re-enter SINGAPORE FLYER NOT AS BAD AS FEARED Positive profit contributions Straco acquired the Singapore Flyer on 28 Nov 14, which meant that 4Q14 featured one month of earnings contributions from the Flyer. During the period, the Flyer contributed S$3.70m in revenue (including ticket sales, rental income and F&B). Profit before tax came in at a loss of S$0.60m, but this was due to one-off expenses amounting to S$1.98m which included stamp duty, legal fees and professional fees relating to the acquisition. Excluding one-off expenses, the Flyer would have contributed an estimated S$1.38m in pretax profit. This is above our initial expectations that the Flyer would be mildly dilutive to earnings (2-3% dilution) in FY15-16 and only turn profitable in FY17 when visitor arrivals pick up. We now forecast that the Flyer would contribute S$7m to net profit annually in FY15-16, based on 1.4m visitor arrivals (flat yoy) (Figure 12). Figure 1: Maiden contributions from the Singapore Flyer/Giant Observation Wheel (GOW) which was acquired on 28 Nov ’14
SOURCES: CIMB, STRACO
Channel checks at the Flyer During our recent visit to the Flyer on a weekday i.e. an off-peak period, we were pleasantly surprised to see a healthy crowd at the F&B outlets, especially the Singapore Food Trail at #01-09/10/11/12. However, the number of visitors to the Giant Observation Wheel (GOW) itself could be better – there was only a short queue at the ticketing booth for walk-in visitors, while we saw 1-2 persons in each capsule of the GOW. Figure 2: Crowd at Singapore Food Trail during weekday lunch (#01-09/10/11/12)
Figure 3: Short line at the ticketing booth during off-peak hours
SOURCES: CIMB
SOURCES: CIMB
Figure 4: A capsule takes off from the terminal
SOURCES: CIMB
The 1.4m visitor arrivals recorded in 2014 implies an average of five persons per capsule per revolution per day. Our checks on the ground suggest an 5
Straco Corporation│Singapore March 11, 2015
average of 1-3 persons per capsule per revolution on weekdays including peak period from 6-8pm, while this figure increases to 12-15 during weekends. The breakeven point of 0.8m-0.9m visitors implies three persons per capsule per revolution per day – a level that we believe is easily obtainable given the stronger visitor arrivals on weekends and public holidays. Key statistics on the Giant Observation Wheel: 28 capsules 28 persons per capsule 28 revolutions per capsule per day o 3o min per revolution o operates 14 hours a day from 8.30am – 10.30pm Peak period occurs during weekends (20 min waiting time) Weekday peak period occurs from 6-8pm (10 min waiting time)
Improving yield at the Flyer One of Straco’s key considerations for acquisitions is that the target asset’s operating model must be one that it is familiar with, i.e. revenue is primarily from ticket sales and operating costs are largely fixed. This will allow it to apply its expertise from running its two ocean aquariums in China to reap operational efficiencies. Based on its experience, we believe Straco is able to improve the yield at the Flyer by 1) increasing the ratio of walk-ins vs. tour groups, 2) lowering the discounts offered to tour agencies, 3) using an in-house sales and marketing team vs. outsourcing to an external agency, and 4) optimising the cost structure. We believe these factors are the key reasons why Straco can turnaround the Flyer though the asset was previously placed in receivership after its prior owner failed to turn a profit. Figure 5: Comparison of the Singapore Flyer, Shanghai Ocean Aquarium and Underwater World Xiamen Singapore Flyer
Shanghai Ocean Aquarium (SOA)
Underwater World Xiamen (UWX)
Visitors per year
1.4 million
2.0 million
1.7 million
Capacity utilization
19%
27%
29%
Ticket price
S$ 33
RMB 160
RMB 90
Location
Singapore
Shanghai
Xiamen
Year opened
2008
2002
1995
Visitor profile
50% walk-ins, 50% tour groups
80% walk-ins, 20% tour groups
50% walk-ins, 50% tour groups
SOURCES: CIMB, COMPANY REPORTS
Plans to revamp the Flyer Redeveloping the retail terminal. Straco plans to spend S$20m-30m over the next 2-3 years to redevelop the retail terminal at the Singapore Flyer. Based on our channel checks, current occupancy is sub-par at about 70%, while rents are below S$10/psf. Though the GFA of the 3-storey building is currently maximised, Straco plans to apply for a higher plot ratio in order to increase the lettable area from the current c.60,000 sq ft. When completed, Straco can recognise higher rental income from the larger NLA, which we have yet to factor in to our forecasts pending further details on the redevelopment plan. Rental income currently accounts for 12% (S$4m) of our revenue forecast from the Flyer.
6
Straco Corporation│Singapore March 11, 2015
Figure 6: Duck & Hippo Tours (#01-06)
Figure 7: Gelatissimo (#01-14)
SOURCES: CIMB
Figure 8: Flight Experience (#02-06)
SOURCES: CIMB
SOURCES: CIMB
New indoor attractions. Given its expertise in indoor attractions from running its two aquariums in China, Straco also plans to open 1-2 indoor attractions at the Flyer as part of the redevelopment. One of the reasons for lacklustre visitor arrivals the Flyer (19% capacity utilisation) is that it is a standalone attraction in the area, which means that few visitors would make a dedicated trip to the Flyer unless they are first-time visitors or there is a special event at the Flyer. As a result, about 50% of its visitors arrive by tour groups (and pay a discounted ticket price) while the other half are walk-in visitors (full ticket price). To change this, Straco plans to introduce new attractions at the Flyer to make it a one-stop tourist destination. Assuming half of the Flyer’s 1.4m visitors visit the new indoor attractions at S$10 per ticket, this would bring in an additional S$7m in revenue per annum (20% upside to our revenue forecast). Our current forecasts have not factored in potential upside from the introduction of new attractions.
Beneficiary of SEA Games and SG50 The 2015 SEA Games will be held in Singapore during 5-16 Jun 2015. We believe that this event will draw visitors to the Singapore Flyer, given that it is one of Singapore’s key attractions. Most of the designated hotels for the event are located around Marina Bay and the Singapore River, placing the Flyer in a prime location. Separately, the SG50 celebrations will also be held close to the Marina Bay area, which may encourage more local visitors to the Flyer. We believe that these two events have the potential to boost visitor arrivals at the Flyer from the c.1.4m in 2014. Our forecasts have factored in flat visitor arrival growth in 2015, leaving room for upside to our earnings estimates.
CHINA AQUARIUMS – SLOWER GROWTH BUT HIGHER ASP Potential ticket price revision at SOA in 2015 Straco typically revises ticket prices at Shanghai Ocean Aquarium every 2-3 years. With the last ticket price hike in Nov 2011, we believe the time is ripe for another round of price revisions in 2015. During the past two rounds, Straco raised standard ticket prices by Rmb15 (+13%) and Rmb25 (+19%) per ticket respectively. Based on these figures, we have factored in a 15% ticket price hike at SOA from Rmb160 to Rmb185. However, we believe it may take some time for government approvals to come through, hence we expect the rate hike to only take effect in 4Q15. Figure 9: Ticket price revision history at Shanghai Ocean Aquarium Previous ticket price (RMB)
New ticket price (RMB)
Increase in ticket price (RMB)
% Increase
2009-10
120
135
15
13%
2011-12
135
160
25
Year
Average
19% 16%
2015-16F
160
185
25
15% SOURCE: CIMB, STRACO
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Straco Corporation│Singapore March 11, 2015
Expect slower visitor arrival growth at SOA and UWX We toned down our expectations of total visitor arrival growth at Shanghai Ocean Aquarium and Underwater World Xiamen (UWX) from 9% yoy to 4% yoy. In light of the stampede during the New Years’ countdown at the Bund in Shanghai which killed 36 people, the Chinese government has implemented crowd control measures to prevent overcrowding in public places, especially during peak periods such as public holidays (Golden Week) or school holidays. This will cap total visitation to SOA and UWX during the “super peak” period where they are already operating at maximum capacity of 20,000 and 16,000 daily visitors respectively. The “super peak” period typically occurs during <10% of the year on holidays such as the Chinese New Year Golden Week (1Q), Labour Day holiday (2Q) and National Day Golden Week (4Q). Figure 11: Quarterly visitor arrivals at SOA and UWX {‘000)
Figure 10: Annual visitor arrivals at SOA and UWX ('000) 30.0%
1,800
4,000
25.0%
1,600
Title: Source:
3,500
20.0%
1,400
Please fill in the values above to have them entered in your re
4,500
3,000
35% 30%
25%
1,200
15.0%
2,500
1,000
20%
800
15%
10.0%
2,000 5.0%
1,500 1,000
0.0%
500
-5.0%
0
600
5%
200
-10.0%
Total visitor arrivals ('000)
10%
400
0
Yoy growth
0%
Total visitor arrivals ('000)
SOURCES: CIMB, STRACO
Yoy growth
SOURCES: CIMB, STRACO
Despite the restrictive measures, we believe SOA and UWX should still see single digit visitor arrival growth in 2015, given that its overall capacity utilisation rate was only 28% in 2014. Both SOA and UWX continue to be beneficiaries of the growing demand for domestic tourism in China, which is spurred by government incentives for domestic travel to drive consumption. The government has also introduced incentives for domestic travel during off-peak periods, which should reduce the seasonality effect and drive visitation during off-peak periods at SOA and UWX.
FINANCIALS 32% yoy earnings growth in FY15 We expect Straco to see earnings growth of 32% yoy in 2015, driven by: 1) maiden full-year contributions from the Singapore Flyer and 2) 15% ticket price revision at SOA in 4Q15. Singapore Flyer. We expect the Flyer to contribute S$35m in revenue in FY15, of which 88% is from ticket sales and the remaining 12% from rental income. We estimate that the Flyer will contribute S$7m in net profit, implying a 21% net margin (vs. 45% from aquariums). We have built in the following assumptions into our model:
Average ticket price of S$26 (Adult: S$33, Child: S$21, Senior: S$24) 50% of visitors comprise tour groups, who receive a 30% discount on ticket prices Total of 1.4m visitors in 2015 Retail rent of S$8/psf Net lettable area of 60,000 sq ft 70% occupancy at the retail terminal Interest rate of 2.5% on S$75.6m of borrowing (60% of S$126m acquisition cost financed through debt)
8
Straco Corporation│Singapore March 11, 2015
Shanghai Ocean Aquarium. Based on historical trends in ticket price revisions, we have factored in a 15% price hike at SOA in 4Q15 from Rmb160 to Rmb185. Given that the bulk of the aquarium’s operating expenses are fixed, the amount of the ticket price hike should flow through to the bottomline. Figure 12: Breakdown of income statement contributions between the Singapore Flyer and China Aquariums in FY15 Group
Amounts in S$'000 Revenue
Aquariums
129,574
Other income
Flyer
Assumptions Visitor arrival growth - SOA: 5%, UWX: 2.5%, LLC: 2%.15% ticket price revision at SOA in 4Q15
94,602
Assumptions
34,972
5,274
5,274
(60,511)
(36,547)
(23,964)
Operating expenses
(43,018)
(22,708)
(20,310)
Administrative expenses
(17,492)
(13,838)
(3,654)
Expenses
Finance costs
(1,890)
Profit before income tax
Interest and other income
(1,890)
63,329
Tax expense
(20,549)
(18,999)
Profit after tax
51,898
44,331
Minority interest Net profit
-
-
72,447
S$26 avg ticket price, 50% walk-in, 50% tour group (30% discount), 1.4m visitors/annum. 60,000 sq ft of lettable space, S$8/psf, 70% occupancy
Implies 67% PBT margin
9,118
30% tax rate
(1,550)
Based on breakeven at 0.9m visitors
Borrowing cost for the Flyer acquisition Implies 26% PBT margin 17% tax rate
7,568
(2,076)
(1,773)
49,822
42,557
(303) Implies 45% net profit margin
7,265
Implies 21% net profit margin SOURCE: CIMB, STRACO
Sensitivity analysis Based on our sensitivity analysis, we estimate that for every additional 200,000 visitors to the Flyer in FY15 (on top of our base case of 1.4m visitors), PATMI will increase by 7% from our estimate of S$49.8m. Historically, the Flyer has seen 1.0m-1.3m international visitor arrivals per year (8-10% of total visitor arrivals to Singapore) in addition to local visitors. The Singapore Tourism Board forecasts that international visitor arrivals to Singapore will remain relatively flat at 15.1m-15.5m in 2015 (2014: 15.1m), hence our forecast that total number of visitors to the Flyer will remain flat at 1.4m in 2015. However, there is potential upside to our estimates from the 2015 SEA Games and SG50 celebrations this year, which may boost both foreign and local visitation. Figure 13: Sensitivity of PATMI to visitor arrivals at the Flyer
Figure 14: International visitor arrivals at the Flyer m 1.4
12%
1.2
10%
No. of visitors to Flyer ('000)
Increase from current ('000)
% of tourist arrivals in Singapore
1,000
(400)
6.6%
0.2
-14%
1.0
1,200
(200)
8.0%
3.7
-7%
0.8
1,400
0
9.3%
7.3
0%
1,600
200
10.6%
10.8
7%
1,800
400
11.9%
14.3
14%
2,000
600
13.3%
17.8
21%
Contribution to PATMI (S$m)
Impact on FY15F PATMI
8% 6%
0.6 4%
0.4
2%
0.2 -
0%
2009
2010
International visitor arrivals at the Flyer
SOURCES: CIMB, STRACO, SINGAPORE TOURISM BOARD
15%
180,000
No. of visitors
% of visitor arrivals at the Flyer
13%
% 35
16%
10%
120,000
7%
100,000
7% 6%
80,000
4%
60,000
4%
4%
10%
25
8%
20
6%
3%
40,000
Please fill in the values above to have them entered in your rep
15 10 5
0%
GERMANY
SOUTH KOREA
UK
USA
PHILIPPINES
JAPAN
AUSTRALIA
INDONESIA
INDIA
CHINA
-
Title: Source:
4% 2%
20,000
% of total visitor arrivals to Singapore
30
12%
140,000
2013
Figure 16: The Singapore Flyer ranked as the fourth most visited paid attraction in Singapore in 2013
14%
160,000
2012
SOURCES: CIMB, SINGAPORE TOURISM BOARD
Figure 15: Top 10 visitors to the Singapore Flyer by country in 2013 200,000
2011
0 MBS/RWS
SOURCES: CIMB, SINGAPORE TOURISM BOARD
Sentosa
Gardens Singapore by the Bay Flyer
Night Safari
Singapore Zoo
National Orchid Gardens
Jurong Bird Park
SOURCES: CIMB, SINGAPORE TOURISM BOARD
9
Straco Corporation│Singapore March 11, 2015
Further catalysts in FY16-17 FY16 earnings to be driven by SOA. We expect growth in FY16 to be underpinned by: 1) the full-year impact of the anticipated ticket price hike at SOA, and 2) stronger visitor arrival growth of 7.5% yoy (vs. 5.0% in FY16) at SOA with the expected opening of Shanghai Disneyland in 1Q16. If history is a reliable guide, Straco’s aquariums saw strong visitor arrival growth of 27% yoy in 2010 (vs. 1.4% in 2009) due to the World Expo being held in Shanghai; we expect the opening of Shanghai Disneyland to have a similar positive impact on visitation at SOA. Furthermore, Shanghai Disneyland is likely to draw both local and international visitation year-round, which will improve capacity utilisation at SOA during the off-peak period. AEIs at Flyer to be completed in FY17. We expect the redevelopment of the retail terminal at the Flyer to be completed in FY17, which should drive up visitor arrivals from current levels. As such, we have built in a 5% visitor arrival growth rate at the Flyer in FY17-18 (vs. flat yoy growth in FY15-16). Our estimates have not yet factored in potential upside from: 1) higher rental income due to the increased NLA, and 2) ticket sales from new indoor attractions introduced at the Flyer. Figure 17: Breakdown of our revenue forecast for the Flyer and visitor arrival growth S$m 45
Figure 18: Expectations of visitor arrival growth at SOA, UWX and the Singapore Flyer Title: Source:
8.0%
6.0%
40
7.0%
5.0% 35
Please fill in the values above to have them entered in your rep
6.0%
30
4.0%
5.0%
25 3.0%
4.0%
20 15
3.0%
2.0%
2.0%
10 1.0%
1.0%
5 0
0.0% FY15F Ticket revenue
FY16F
FY17F Rental income
0.0%
FY18F
FY15F
Visitor growth rate (yoy)
Singapore Flyer
SOURCES: CIMB, STRACO
FY16F Shanghai Ocean Aquarium
FY17F
FY18F
Underwater World Xiamen
SOURCES: CIMB, STRACO
Cash pile to pursue AEIs and future acquisitions Straco continues to generate strong operating cashflows of S$30m-40m per year, which allows it to accumulate cash to pursue asset enhancement initiatives (AEIs) at its existing properties and for future acquisitions. In addition, Straco ended FY14 with S$19m in net cash, which leaves ample room to gear up for expansion. We expect Straco to spend S$20m-30m in capex to redevelop the retail space at the Singapore Flyer in FY15-17. Straco also has the option to expand the capacity at SOA and UWX when the need arises. At SOA, Straco can redevelop its carpark space and office block adjacent to the existing aquarium, while for UWX, Straco has plans to expand capacity by adding a basement level. These will require at least another S$20m-30m in capex.
10
Straco Corporation│Singapore March 11, 2015
Figure 19: Operating cashflow
Figure 20: Cash and equivalents and total debt S$m 150
S$'000 80,000 70,000
Title: Source:
100
Please fill in the values above to have them entered in your rep
60,000 50
50,000 40,000
0 30,000 (50)
20,000 10,000
(100) 2007
0 2007
2008
2009
2010
2011
2012
2013
2008
2009
2014 2015F 2016F 2017F
2010
2011
Cash and equivalents
SOURCES: CIMB, STRACO
2012
2013
2014
Debt
SOURCES: CIMB, STRACO
Straco also remains open to M&A opportunities, though acquisitions will be limited to assets in Asia that run on a similar operating model (i.e. revenue from ticket sales and primarily fixed operating costs). They are unlikely to consider investments in theme parks as the upfront investment cost is too high while margins are considerably lower, hence the higher risk.
Committed to higher dividends In 2014, Straco increased its ordinary DPS to 2 Scts, from 1.25 Scts previously. We believe that this signals management’s commitment to paying a higher level of dividends and their confidence in achieving a higher level of earnings going forward. As such, we have raised our DPS forecasts, which are based on a c.40% dividend payout ratio. There may be scope to pay out additional special dividends if earnings come in above expectations. Figure 21: Dividends per share – actual and forecasted
Figure 22: Earnings per share and dividend payout ratio
Scts
Scts
3.5
8.0
3.0
7.0 6.0
2.5
Title: Source:
60% 55%
Please fill in the values above to have them entered in your rep 50%
5.0
45%
4.0
40%
3.0
35%
2.0
30%
0.5
1.0
25%
0.0
0.0
20%
2.0 1.5 1.0
Ordinary DPS
EPS (LHS)
Special DPS
SOURCES: CIMB, STRACO
Dividend payout ratio (RHS)
SOURCES: CIMB, STRACO
VALUATION AND RECOMMENDATION Beaten-down valuations Straco is trading at 12x CY16 P/E, significantly below the 16-29x its peers trade at and the 23x it listed at in 2004. Valuations have been beaten down since Straco announced that it was acquiring a 90% stake in the Singapore Flyer on 28 Aug 14. This was an acquisition that the market did not view positively given the previous negative newsflow associated with the Flyer and concerns that the acquisition may be dilutive to EPS in the near term. However, we believe that valuations have room to re-rate from here as the Flyer has proven to be profitable, which removes the biggest overhang on the stock. Our DCF-based 11
Straco Corporation│Singapore March 11, 2015
target price of S$1.01 (11% WACC) implies 15x CY16 P/E, still below its recent peak of 17x in Aug 14. We ascribe a slightly lower valuation to the stock given that the Flyer is a lower-margin business than Straco’s aquariums in China and could mildly dilute overall group margins. Figure 23: Peers Comparison Bloomberg Ticker
Company Straco Corporation SeaWorld Entertainment Inc Walt Disney Co/The Six Flags Entertainment Corp Cedar Fair LP Emei Shan Tourism Co
STCO SP SEAS US DIS US SIX US FUN US 000888 CH
Recom.
Price (lcl curr)
Target Price (lcl curr)
Market Cap (US$ m)
Add rated rated rated rated rated
0.79 18.51 103.1 46.59 54.49 24.24
1.01 na na na na na
482 1,652 175,208 4,335 3,042 1,020
Not Not Not Not Not
Average
Core P/E (x) CY2015 CY2016 13.4 21.9 20.6 33.2 17.7 27.4
11.7 19.2 18.2 29.0 16.0 23.7
22.4
19.6
3-year EPS CAGR (%)
P/BV (x) CY2015
Recurring ROE (%) CY2015
Dividend Yield (%) CY2015
18.0% 27.3% 1.1% 34.9% 22.8% na
3.05 2.99 3.68 10.04 29.03 3.47
24.5% 13.5% 18.8% 59.0% 166.4% 12.4%
3.2% 4.8% 1.1% 4.5% 5.6% 0.7%
20.8%
8.71
49.1%
3.3%
SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG
Figure 24: Straco forward P/E vs. forward EPS 35.0x
Figure 25: Straco current P/BV vs. core ROE 0.12
4.5x
30.0%
4.0x
0.10 3.5x
Current P/BV
25.0x
0.06
EPS
0.08 20.0x 15.0x 0.04
Please fill in the values above to have them entered in your report 25.0%
3.0x
20.0% 2.5x
#N/A
2.0x
15.0% 1.5x
10.0x
1.0x
10.0%
0.02
5.0x
Current core ROE
30.0x
Current core P/E
Title: Source:
0.5x
0.0x
-
Forward core P/E
0.0x
Forward EPS
5.0%
Current P/BV
SOURCE: CIMB
Core ROE
SOURCE: CIMB
Upgrade to Add We believe that the worst is over for Straco – our previous concerns that the Flyer acquisition would be mildly dilutive to EPS in the near term appear to be unfounded. We revise our FY15-16 EPS forecasts by 8-14% to factor in positive profit contributions from the Flyer and the 15% ticket price hike at SOA in 4Q15. We also adjust our DCF terminal growth rate to 2% (previously 1%) for brighter prospects for the Flyer, and our target price rises to S$1.01 accordingly. We view this as an attractive entry point ahead of better reported earnings in 2015 as contributions from the Flyer start to flow through.
12
Straco Corporation│Singapore March 11, 2015
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13
Straco Corporation│Singapore March 11, 2015
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Straco Corporation│Singapore March 11, 2015
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CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AIT, AMATA, ANAN, AOT, AP, ASP, BANPU, BAY, BBL, BCH, BCP, BEC, BECL, BGH, BH, BIGC, BJC, BJCHI, BLAND, BMCL, BTS, CENTEL, CK, CPALL, CPF, CPN, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, GFPT, GLOBAL, GLOW, GUNKUL, HANA, HEMRAJ, HMPRO, ICHI, IFEC, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, KTIS, LH, LOXLEY, LPN, M, MAJOR, MC, MEGA, MINT, NOK, PS, PSL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, RML, ROBINS, SAMART, SAWAD, SCB, SCC, SCCC, SF, SGP, SIM, SIRI, SPALI, SPCG, SRICHA, STA, STEC, STPI, SVI, TCAP, THAI, THCOM, THREL, TICON, TISCO, TMB, TOP, TPIPL, TTA, TTCL, TTW, TUF, UV, VGI, TRUE. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result. Score Range: Description:
90 - 100 Excellent
80 - 89 Very Good
70 - 79 Good
Below 70 or N/A
No Survey Result
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing 15
Straco Corporation│Singapore March 11, 2015
authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. CIMB Securities (USA) Inc does not make a market on the securities mentioned in the report. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2014 1586 companies under coverage for quarter ended on 31 December 2014 Rating Distribution (%)
Investment Banking clients (%)
Add
58.4%
6.0%
Hold
29.4%
4.3%
Reduce
12.2%
1.0%
Spitzer Chart for stock being researched ( 2 year data ) Straco Corporation (STCO SP) Price Close
0.78
0.78
0.96 0.79
0.76
0.61
0.60
0.82
Recommendations & Target Price
na
0.92
0.72 0.62 0.52 0.42 0.32 Add
0.22 Mar-13
Outperform
Jul-13
Hold
Neutral
Nov-13
Reduce
Underperform
Mar-14
16
Trading Buy
Jul-14
Trading sell
Nov-14
Not Rated
Straco Corporation│Singapore March 11, 2015
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014. AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good, ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL – Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good, CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good, DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE – not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good, LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good, RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC – Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good, SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good, TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good, WORK – not available.
CIMB Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months. Sector Ratings Overweight Neutral Underweight
Definition: An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings Overweight Neutral Underweight
Definition: An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected negative total returns of 10% or more over the next 3 months.
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