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OCBC Reports June 2013
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PostPosted: Wed Jun 26, 2013 9:13 am    Post subject: Reply with quote

Sembcorp Industries: Not your typical utilities company

Summary: Sembcorp Industries (SCI) is a major industrial group primarily involved in the businesses of 1) utilities, 2) marine and 3) urban development. The nature of its utilities business is relatively stable, while growth is driven by asset acquisition and construction. SCI’s marine arm is also well-positioned to capitalise on demand from the offshore oil and gas industry, given its market-leading position. Finally, the urban development segment possesses growth potential with its focus on emerging markets. The long-term outlook for its businesses look bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. The group has been consistent in paying out dividends of at least S$0.15/share each year since 2009, implying a minimum dividend yield of 3.1% at current prices. Initiate with BUY and S$6.48 (based on sum-of-parts method) fair value estimate.


Tat Hong Holdings: Time to take profit

Summary: Since our last upgrade on Tat Hong Holdings (“Poised for Recovery”, 9/1/2012), the group’s crane fleet grew by ~20% (in tonnage), utilization rate by 5 ppt and rental rates by an estimated 10-15%, resulting in a 66% jump in FY13 PATMI. In our view, the easy money has already been made. Investors who have heeded our call would have made 45% return in 1.5 years and should now consider taking some profit. Looking ahead, the macro environment looks increasingly uncertain with sluggish data points coming out of China. Tat Hong’s crane fleet expansion is also expected to slow after a 79% surge in crane tonnage over the past five years. Finally, there is a possible share overhang resulting from private equity AIF Capital’s conversion of convertible preference shares to 53.3m ordinary shares. Downgrade to HOLD with lower FV estimate of S$1.31 (previously S$1.75). (Chia Jiunyang)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

- AusGroup is suing Karara Mining Limited for A$54.7m for works carried out in Western Australia.

- Baker Technology has divested its entire 20.29% stake in Discovery Offshore SA for NOK199m (S$41.9m).

- Swissco has secured contracts worth S$8.24m for three of its crew boats.

- Yongnam Holdings has secured two new specialist civil engineering subcontracts worth HK$166m (S$27m).

- Z-Obee’s FY13 net income fell 17% to US$4.26m as impairment losses from the group’s asset portfolio wiped out an increase in fair value gains.
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PostPosted: Thu Jun 27, 2013 9:15 am    Post subject: Reply with quote

Starhill Global REIT: Prospects remain bright

Summary: Starhill Global REIT (SGREIT) announced that its convertible preferred unit (CPU) holders have notified the REIT manager of their intention to exercise their rights to convert a total of 152.7m CPUs into new units on 5 Jul. With the conversion, we estimate that the distribution to CPU holders will drop from an average of S$2.4m to just S$0.3m per quarter, leaving a larger distributable amount available to unitholders. However, as the unit base is expected to increase by 10.8% upon the conversion, the net impact is likely a marginal dilution of ~1.1% to pro forma FY12 DPU, according to management. We now factor in the impending CPU conversion into our forecasts. We also update our CAPM assumptions to incorporate the continued increase in risk-free rate. As a result, our fair value eases from S$1.00 to S$0.95. Nevertheless, we continue to like SGREIT for its strong growth potential, robust fundamentals and attractive valuations. Maintain BUY. (Kevin Tan)


Hyflux: Value is starting to emerge
Summary: Hyflux Ltd recently saw a massive correction in its share price, plunging nearly 13.1% from a high of S$1.37 on 10 Jun to a low of S$1.19 on 24 Jun; it was down 6.1% on 24 Jun itself, no doubt spooked by recent reports of credit tightening in the mainland. But these worries – while valid – are overwrought. We believe that Hyflux should still have access to funds from overseas, and this should put the company on a better footing against local Chinese companies when it comes to bidding for projects. Nevertheless, as the market appears to be taking a more “risk off” approach, we now use a lower 20x peg (versus 22x previously) against our FY13F EPS, which results in our fair value easing from S$1.44 to S$1.30. However, value is starting to emerge, especially closer to its recent S$1.19 low; hence we maintain our HOLD rating on the stock. (Carey Wong)

Yoma Strategic Holdings: Telco license award possibly delayed

Summary: Yoma has requested for a trading halt last night pending the expected award of two telecommunications licenses today by the Myanmar authorities. However, latest news reports that the parliament had on Wednesday voted to delay the award until a new telecommunications law governing the industry is passed. This is due to concerns that the “industry risked being monopolized” and it is yet unclear if a proposed new rule - that only foreign companies with a local JV partners would be granted licenses – would be adopted. Given these latest updates, we believe that the license award could possibly be delayed as the decision from the parliament is purported to override that of the Telecommunications Operator Tender Evaluation and Selection Committee, which is overseeing the tender process. Maintain HOLD with a fair value estimate of S$0.87. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


- Kevin Rudd returned as Australian PM yesterday, executing a stunning party room coup on Julia Gillard with less than three months out from a general election.

- Tuan Sing Holdings has entered into a sale and purchase agreement with Robinson Point (Cayman) Limited to acquire Robinson Point for S$348.9m.

- Keppel Reit has acquired a 50% stake in a freehold office building, 8 Exhibition Street in Australia, for A$160.2m (S$192.4m).

- Sin Heng Heavy Machinery announced that it plans to raise about S$18.4m through a one-for-four rights issue priced at 16 cents apiece.

- Mirach Energy is proposing to raise some S$18.1m in net proceeds from a rights issue of 152m new shares and another S$36m via a convertible loan.

- Singapore’s industrial production grew 2.1% YoY in May, above the market’s expectations of just 0.1%, driven by a 22.8% jump in pharmaceutical output.
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PostPosted: Fri Jun 28, 2013 9:20 am    Post subject: Reply with quote

Roxy-Pacific Holdings: Strong sales at key launches – Upgrade to BUY
Over 2Q13, ROXY launched three out of four land-bank sites – LIV on Sophia, WhiteHaven and Jade Residences – which are 100%, 71% and 50% sold to date, respectively. Overall, we judge these pace of sales to be fairly strong with selling prices above expectations. These successful launches are a key milestone for ROXY given their significant combined size – S$407m and S$76m in estimated total sales and net profits – relative to the group’s project portfolio. ROXY now sits on a whopping S$1,188m of unrecognized progress billings from sold units (up 38% from end FY12), which is 8.5 times total FY12 development revenues. We also note that a significant portion of ROXY’s value is diversified in its hotel segment (Grand Roxy Mercure Hotel worth S$0.47 per share) and that only 10% of ROXY’s total launched development GDV is now left unsold. Our fair value increases to S$0.74 (30% RNAV disc.) versus S$0.61 (25% discount) previously. Upgrade to BUY. (Eli Lee)


First REIT: Volatile times ahead
Concerns over the tapering off of the U.S. Federal Reserve’s quantitative easing programme have driven bond yields up and adversely impacted high-yield stocks such as First REIT (FREIT). We see risks coming from higher borrowing costs in the medium-term as ~72% of its debt is based on a floating rate structure, although short-term interest rates in Singapore are likely to stay low in the near future. We expect management to take a more prudent approach towards new acquisitions given the volatile market conditions. Maintain HOLD with a lower fair value estimate of S$1.20 (previously S$1.31) as we raise our cost of equity assumption from 7.7% to 8.3% to take into account the rising bond yields and reduced investor sentiment for interest rate sensitive stocks. (Wong Teck Ching Andy)

SingTel: Not awarded Myanmar telco licence
SingTel was not among one of the two winners awarded the 15-year telecommunications licences in Myanmar. Instead, these licences went to Norway’s Telenor and Qatar’s Ooredoo (formerly known as Qatar Telecom). While we do expect a pull-back in SingTel’s share price, it is mainly because of the 3.3% jump yesterday ahead of the announcement (as SingTel was widely touted as one of the front-runners). Otherwise, we do not expect any lasting impact as there will be other opportunities for SingTel to get involved at a later stage. In addition, some market watchers note that those awarded the maiden licences may face a lot of challenges in getting the infrastructure in place. For now, we maintain our HOLD rating and S$3.83 fair value on SingTel. (Carey Wong)

Yoma Strategic Holdings: Missed out on telco license
Yesterday evening, Myanmar authorities announced that it would award two telecommunications licenses to Norway’s Telenor and Qatar’s Ooredoo, with the France’s Telecom-Orange group as a reserve. We see some downside risk to Yoma’s share price from this news, given that Digicel was widely perceived by the market to be one of the frontrunners. That said, we believe there is still some scope for the group to stay involved in the telecommunications sector in Myanmar, which could still throw up various opportunities ahead. This is especially since Digicel has already spent several years investing in Myanmar and establishing a business presence. Given the limited color from Digicel’s press release yesterday, however, we see this to be uncertain at this juncture and likely contingent on further negotiations between the parties in the consortium. Maintain HOLD with a fair value estimate of S$0.87. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


- China Gaoxian Fibre Fabric Holdings shareholders voted yesterday in support of the company's RMB2.2b (S$444m) investment in a project to expand its polyester production capacity.

- Popular Holdings' FY13 net profit fell 25.2% to S$23.3m, from S$31.1m the previous year, as its property development and retail arms brought in less revenue.

- Marine fuel provider Chemoil Energy has secured two banking facilities totalling US$800m.

- Freight Links Express Holdings reported a 19.1% rise in FY13 net profit to S$38.36m, boosted by higher revenue from the warehousing and chemical logistics business segments.

- Companies in Singapore will move to an electronic mode of reporting financial information that replaces static paper-based formats.
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