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“Uniquity”Idea
Discovery Undervalued•Sound financial metrics (eg strong balance sheet)•Underappreciated by the market (eg low valuation multiples) •Margin of safety (eg discounts to intrinsic value)
Upcoming Catalyst•Incoming catalysts that will wake up the market, unlocking value (eg strong profits growth, profit turnaround, dividends hike)
The Uniquity Approach
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Upstanding Management•Capable management team•Good corporate governance•Corporate access
Unique•Niche business model •Strong competitive moat •Special situation
Source: Google Images
The Uniquity Approach
• Bottom-up approach and visit as many small & mid cap companies as possible
• Channel checks with competitors, suppliers and customers
0.39BUY0.3174KTG SPKatrina Group4
1.02BUY1.015250CITN SPCityneon3
Ranking Company Name Ticker Market Cap (S$m)
Current Share Price (S$) Rating Target Price
(S$)
1 China Aviation Oil CAO SP 1,300 1.51 BUY 1.85
2 Nera Telecommunications NERT SP 255 0.705 BUY 0.835
Our Stock Picks
Source: Bloomberg, UOB Kay Hian
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Did you know…?
Only one in twenty-five Chinese citizens have a passport.
China is expected to overtake the United States as the world’s largest passenger market (defined by traffic to, from and within) by 2029.
In 2034 China will account for some 1.19 billion passengers, 758 million more than 2014 with an average annual growth rate of 5.2%.
Source: Bloomberg, Google Images, IATA
Monopolistic Fuel Distribution
Source: CAO, UOB Kay Hian
Exclusive refueller - SPIA
Source: BAFS, CAO
Oil storage facilities
Into-plane refuelling operations at Shanghai Pudong International Airport
China Aviation Oil Singapore Corp(CAO SP/BUY/Target: S$1.85/Market Cap: S$1,300m*)
Proxy To China’s Global Aviation Traffic Boom
Rare monopoly on China’s jet fuel imports is growing source of recurring income (cost-plus business model) (18.3% of profits).
Second solid recurring income is from immensely profitable SPIA refueller (50% of profits).
Catalysts: Shanghai Disneyland, China’s push on general aviation.
Five-year plan to double profits with organic growth and M&As (US$230m net cash war chest).
TP based on 14.4x 2017F PE, a 20% discount to peers’ average of 18x PE
Data as at 20 July 16
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(lcy)CHINA AVIATION OIL SINGAPORE
China Aviation Oil Singapore/FSSTI Index
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For Dividend Investors
Source: NeraTel, UOB Kayhian
NeraTel’s Business
S$88m
Expected Gains S$71.5m
Valued at P/E 31.3x
2015 Profit Generated S$2.8m (21% of total)
Estimated Special Dividend 16 SG cents
Estimated Total Dividend for 2016 19 SG cents
Dividend Yield for 2016 27%
Payment Solutions
NeraTel provide end-to-end electronic payment solutions for brick and mortar, internet and mobile commerce to the Banking, Financial Services and Retail industries.
Remaining Business
2015 Profit Generated S$10.6m(79% of total)
Expected Growth 10%
Dividend 4 SG cents a year
Dividend Yield 5.8%
NeraTel provide wireless infrastructure networks, end-to-end solutions and services in the wireless space. NeraTel also provide high-performance IP Network Infrastructure to enable Service Providers to deploy differentiated cost effective services and new revenue streams, it address various market sectors such as Service Providers, ISPs, Broadcasters, Enterprises, Government Organisations.
Source: NeraTel, UOB Kayhian
Nera Telecommunications (NERT SP/BUY/Target: S$0.835/Market Cap: S$261m*)
Get Paid While Waiting
Hefty 2016 dividend of around S$0.19/share likely.
Record-high order backlog for the remaining business.
Growth to continue as CSP capex grows.
S$0.04/share dividends sustainable going forward.
Maintained BUY with S$0.835 TP based on SOTP, valuing remaining business at historical PE of 14.6x.
Data as at 20 July 16
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NERA TELECOMMUNICATIONS LTD
Nera Telecommunications Ltd/FSSTI Index
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Volume (m)
The Marvel Success
Avengers: Age of Ultron (2015)Worldwide Gross: US$1.4b
Transformers: Age of Extinction (2014)Worldwide Gross: US$1.1b
The Avengers (2012)Worldwide Gross: US$1.5b
Transformers: Dark of the Moon (2011)Worldwide Gross: US$1.1b
Source: Google Images, Box Office Mojo
The Disney Success
Source: Yahoo Finance
The Avengers S.T.A.T.I.O.NThe Avengers S.T.A.T.I.O.N. Las Vegas
Different Rooms To Learn More About Avengers Lore
Source: Victory Hill Exhibitions, UOB Kay Hian
The CityNeon Success?
Sets
Customer
Rented outFixed royalty portion: minimum guarantee (MG) upfront fee to use set. Anywhere from S$1-3m.
Customer bears cost of setting up the set at the location
Assembled Set
Variable royalty portion:20% of total ticket sales, merchandise sales net of MG
Sets are insured by customer for US$7m each
Other expenses10% of royalties go to Marvel
Licensing Fee: Depends on length of contract.
Outside of Las Vegas (Low execution risk)
Las Vegas (Full execution risk)
Sets
Assembled Set
Permanent fixtures at Treasure IslandSet up cost borne by Cityneon
Revenue streams:- Ticket sales- Merchandise- Ticket service charge - Naming rights to building
Other expenses-10% of royalties go to Marvel-Rental paid for building-Labor
Source: Cityneon, UOB Kay Hian
Cityneon Holdings (CITN SP/BUY/Target: S$1.02/Market Cap: S$216m*)
Data as at 20 July 16
Immersing In Marvel’s Victory
Explosive EPS 3-yr CAGR growth forecasted at 180%.
Sustainable growth momentum supported by Marvel and Transformers movie sequels all the way to 2020.
Scalable: Potential new Intellectual Property rights with other franchises provide exciting growth opportunities. (e.g. DC Comics, Star Wars)
SOTP-based TP of S$1.02, implying FY17F PE of 14.9x which is a 42% premium to peers’ average (10.5x).
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CITYNEON HOLDINGS LTDCityneon Holdings Ltd/FSSTI Index
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A Buffet Of Brands – Katrina Group
Source: Katrina Group
Peer Group
Source: Yahoo Finance
31.54.014.217.0-54.40.315SGDKTG SPKatrina Group
17.6 2.7 19.4 22.4 29.4 Average
19.5 2.5 18.3 21.3 25.7 527 97.75THBOISHI TBOishi Group Pcl
10.6 1.6 17.8 22.6 40.9 232 1.105SGDBREAD SPBreadtalk Group Ltd
15.3 3.6 21.7 23.8 25.6 1,368 52.25THBM TBMk Restaurants Group Pcl
14.7 3.3 14.5 15.8 16.2 216 1.94MYROTB MKOldtown Bhd
27.5 2.0 21.3 24.6 38.7 306 0.64SGDJUMBO SPJumbo Group Ltd
18.3 3.1 22.5 26.3 29.1 1,967 26.15HKD341 HKCafe De Coral Holdings Ltd
Peer Comp
20162016201720162015(US$m)1-Aug-16Curr
ROE (%)Yield (%)PE (x)Mkt CapPrice @TradingTickerCompany
Katrina Group (KTG SP/BUY/Target: S$0.39/Market Cap: S$73m*)
Data as at 20 July 16
A Buffet Of Brands
34 restaurants, 9 brands cater to a variety of different palates. Clustering of different brands allow for better terms with landlords.
Halal certification for 4 our of 9 brands allows catering to the growing Muslim population. Halalcertification for restaurants provides a barrier to entry as Muis conducts audits and requires an in-house Halal team
Strong cash flow generation. Free cash flow for FY13-15 was S$2.1m to S$3.9m with minimal debt. Aiming to open 4 outlets per annum.
Online and regional expansion to spur growth.
PE-based target price of S$0.39 based on a 10% discount to peers average PE ratio.
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0.40(%)(lcy) KATRINA GROUP LTD Katrina Group Ltd/FSSTI Index
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