In this briefing:
- Lyft IPO Preview: Maybe We’ll Just Walk?
- Receding Political Gains to the Ruling Party, Possible Threat to the Markets
- Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class
- Blue Bird (BIRD IJ) – Transport Wizzard with a Twist – On the Ground in J-Town
1. Lyft IPO Preview: Maybe We’ll Just Walk?
Lyft Inc (0812823D US) , a leading ride-sharing company, released its IPO prospectus in order to raise 3bn USD. Our key points are below
Intro to Lyft
Lyft – a comparison vs. peers
Strengths and Weaknesses
Financials
2. Receding Political Gains to the Ruling Party, Possible Threat to the Markets
Post the downing of the Indian Air Force (IAF) MIG-21 by Pakistan over its territory and the capture and subsequent return of the pilot, the narrative which was strongly in favour of Narendra Modi and the ruling Bharatiya Janata Party (BJP) rapidly spiralled downwards. Whether the Pakistan Air Force (PAF) entered Indian air space to deliberately attack Indian targets and was driven back, or it was a lure to ambush the IAF aircraft over Pakistani airspace, is not yet clear, but the stark acknowledgement that the IAF MIG-21 had been downed and the pilot captured, and a video of his capture and interrogation broadcasted on social media, were setbacks to the Indian government and its military. Although the Indian government claimed that a PAF F-16 was brought down (although some Indian defense commentators are stating that this is evidence of the downed PAF F-16), Pakistan is denying any loss of its aircraft.
If the market was banking on a decisive Modi victory in the 2019 national elections in the immediate aftermath of the IAF strike on Bagalkot that has been dissipated with the capture and return of the IAF pilot. Unless another such event arises (or is generated), the outcome of the national elections in India will be determined by political alliances and the socio-economic conditions of the electorate; national security concerns may play a secondary role
3. Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class
Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, we examine Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign work force policy.
The number of Work Permit holders in the construction, marine, processing and manufacturing industries has declined in the last three years and we see the government being content to keep the foreign workers quota unchanged for these sectors in Budget 2019. In spite of the continued decline in the foreign workers population amidst a soft patch in those industries, Centurion Corp (CENT SP), a major PBWA operator in Singapore, has identified a huge gap between demand and supply, where demand outstrips supply by 120,000 to 150,000 beds. This shortfall of supply represents a whopping 54% to 67% of existing bed capacity for PBWA. There is no new supply expected in 2019 and we observed that government policies continue to encourage the shift of foreign workers from public housing, on-site dormitories and other non-purpose built accommodation to PBWA.
However, capacity growth for PBWA is limited by land scarcity, high construction cost as well as stricter regulatory standards which increase the operators’ running costs.
Based on Centurion’s results for the financial year ended 2018 (FY2018), its portfolio of four workers accommodation in Singapore is enjoying a healthy average occupancy rate of 96%. Pre-tax profit margin improved from 60% in FY2017 to 62% in FY2018. In light of the heavy regulation in Singapore’s PBWA, the company is expecting stronger growth to come instead from its PBWA business in our neighbouring country, Malaysia. There are about 1.7 million registered legal foreign workers in Malaysia. Half of this number is from manufacturing. The Malaysian government is said to be drafting new laws requiring employers to provide adequate housing for foreign workers. Centurion’s PBWA capacity in Malaysia is forecast to grow 28% in 2019 and a further 20% in 2020 to reach 36,400 beds, while its capacity in Singapore is forecast to remain constant at 26,100 over the next two years. That said, the strong profit margin of its PBWA business in Singapore could still be sustainable due to the demand and supply imbalance and high entry barriers.
Centurion, the only listed operator (dual listing in Singapore and Hong Kong Centurion Corp (6090 HK) ), is believed to be one of the largest operators in Singapore’s S$720-million1 dollar PBWA industry based on its 10.8% share of industry revenue and 11.7% share of total bed capacity. Investing in Centurion is a cheaper option to profit from running a PBWA compared to being an operator. Besides its core business in PBWA, Centurion operates a growing portfolio of student accommodation in the United States, United Kingdom, Australia, Singapore and South Korea.
4. Blue Bird (BIRD IJ) – Transport Wizzard with a Twist – On the Ground in J-Town
A visit in Jakarta to the Blue Bird (BIRD IJ) office was well-timed as the company is close to the conclusion of two corporate actions, as well as an interesting extension to its relationship with Go-Jek Indonesia (1379371D IJ).
Both acquisitions are synergistic with its existing business and represent long-term opportunities rather than an immediate significant boost to earnings.
The company’s underlying fundamentals continue to improve with fleet utilisation up versus last year in 4Q18, as was the average revenue per taxi.
The company continues to see the benefits of its tie-up with Go-Jek, which will soon morph into something even more significant.
Blue Bird (BIRD IJ) remains an interesting way to play the rising levels of affluence amongst the rising middle classes in Indonesia. the company is close to completing two corporate actions including a new venture into the car auction business with Mitsubishi UFJ and the acquisition of an intercity bus company. It is also close to signing an extension and expansion of its relationship with Go-Jek, which will help to cement its position in the online ride-hailing space. Underlying fundamentals continue to improve both in terms of fleet utilisation and average revenue per taxi. According to Capital IQ consensus, the company trades on 14.9x FY19E PER and 13.7x FY20E PER, with forecast EPS growth of +16.2% and +8.9% for FY19E and FY20E respectively. The near-term completion of two corporate actions and an extension of its agreement with Go-Jek Indonesia (1379371D IJ) should provide positive catalysts for the share price coupled with improving ridership, average revenue per taxi, and fleet utilisation.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
