OCBC Investment Research downgraded Breadtalk Group Ltd to 'sell' from 'hold' and cut its target price to S$0.49 from S$0.51, as it expects higher labour costs and rental rates to hurt the bakery and food firm's earnings.
Breadtalk shares were down 1.67 percent at S$0.59 by 0340 GMT. They have gained 10.2 percent since the start of the year, compared to the FTSE ST Consumer Services Index's 0.1 percent.
Breadtalk posted a 6 percent rise in its third-quarter net profit at S$3.9 million from a year ago, despite a 21.5 percent rise in revenue at S$116.7 million.
OCBC lowered its 2013 operating and net profit estimates for Breadtalk to S$17.6 million and S$10.3 million respectively, as regulatory changes for labour have resulted in difficulties in hiring service staff and have had a bigger-than-expected impact.
Breadtalk's gross profit margin fell to its lowest of 52.3 percent, compared with an average of mid 54 percent, OCBC highlighted, adding that "a turning point has potentially emerged given the ultimate limitations on cost savings centralized sourcing and bulk purchasing can bring."
OCBC advised investors to take profits in Breadtalk at current levels as its valuations are rich given likelihood of depressed margins and the absence of a large dividend payout.
1146 (0346 GMT) (Reporting by Charmian Kok in Singapore; Editing by Gopakumar Warrier; firstname.lastname@example.org)
9:13 STOCKS NEWS SINGAPORE-CIMB cuts Biosensors target price
CIMB Research cut its target price for medical device maker Biosensors International Group Ltd to S$1.79 from S$1.82 and kept its 'outperform' rating, citing risks of weaker licensing income from Japan and potential price cuts in other countries.
Biosensors shares were down 1.3 percent at S$1.125, and have plunged 21 percent since the start of the year, compared with the 26 percent rise in the FTSE ST Mid Cap Index.
Biosensors said on Wednesday its second-quarter net profit rose 22.7 percent to $28.2 million from a year earlier, helped by higher product revenue.
The brokerage cut its earnings estimates for Biosensors for 2013, but noted that its product profitability remains strong and valuations are at an attractive low level.
CIMB said Terumo Corp, which licenses Biosensors' drug-eluting stent technology for a royalty fee, has stated that it will be fighting to claw back market share lost, which should offer respite to Biosensors' licensing revenue.
Biosensors maintained its expectations that 2013 revenue will grow at 20-30 percent, as a royalty agreement negotiated with Terumo should offset competition and any mandatory price cut, CIMB said.
0904 (0104 GMT)