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OCBC Reports February 2013

 
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PostPosted: Fri Feb 01, 2013 8:44 am    Post subject: OCBC Reports February 2013 Reply with quote

KEY IDEA

OSIM International: Ends FY12 on a high
OSIM International (OSIM) reported a strong set of 4Q12 results which were within our expectations. For FY12, revenue and PATMI of S$601.7m (+8.7%) and S$86.9m (+25.9%) formed 99.7% and 100.9% of our projections, respectively. A positive surprise in the form of a special dividend of 1 S cent/share was declared, on top of a final dividend of 1 S cent/share. This brings total FY12 DPS to 6 S cents, or a yield of 3.3%. Looking ahead, OSIM’s focus would remain on driving product innovation and improving productivity. We raise our FY13 EPS forecast by 2.2% on higher margin assumptions, which in turn bumps up our fair value estimate from S$2.14 to S$2.19, still pegged to 16.4x FY13F EPS. Maintain BUY. (Wong Teck Ching Andy)

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Global Premium Hotels: Asset value play, raise FV to S$0.33
Global Premium Hotels (GPH) performed in line with our expectations in 4Q12. 4Q12 revenue increased by 6.8% YoY to S$15.2m. EBIT margin fell 1.4 ppt YoY to 50.7%, partially due to increase in staff costs in relation to the general wage increases and additional staff required for Fragrance Riverside. As part of comprehensive income in 4Q12, revaluation of the land and hotel buildings led to a gain of S$83.7m, equivalent to 10.1% of 30 Sep 2012's PPE. The revaluation gain contributed to a dramatic 25% QoQ climb in NAV per share to 38.98 S cents. Lowering our capitalisation rates, which were previously too conservative, especially given that the majority of GPH's properties are freehold, we raise our FV from S$0.29 to S$0.33 (using a 10% discount to RNAV) and maintain a BUY on GPH. GPH is trading at an undemanding P/B of 0.69x. (Sarah Ong)

Yoma Strategic Holdings: Most positives priced in – Downgrade to SELL
Yoma Strategic Holdings (Yoma) reported 3QFY13 PATMI of S$3.7m, increasing by S$2.3m YoY mostly due to higher sales of residences and land development rights. This brings 9MFY13 PATMI to S$1.9m, which is mostly in line with our expectations but below consensus estimates. Topline for the quarter came in at S$13.0m, up 32.1% YoY, again driven by stronger property sales. At current price levels, while we acknowledge that the company holds meaningful franchise value as a leading developer in Myanmar, we see most positives to be already priced in, even under our most optimistic assumptions. We downgrade our rating on the company to a SELL based on a 12-month fair value estimate of S$0.71 (20% premium to RNAV), but caution that the anticipated 1-for-4 rights issue ahead would likely be supportive of the share price over the nearer term. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Mon Feb 04, 2013 9:08 am    Post subject: Reply with quote

KEY IDEA

Triyards Holdings Ltd: Undemanding valuations; initiate with BUY

Summary: With two yards in Vietnam and a fabrication facility in the US, Triyards Holdings Ltd (Triyards) is an engineering and fabrication solutions provider focused on the offshore oil and gas industry. Unlike many shipyards, the group has a strategic focus on the construction of self-elevating units (liftboats), having established a significant track record. Originating from Ezra Holdings which holds a 67% stake currently, Triyards may be able to be involved in some of the projects that Ezra undertakes and tap into Ezra’s clientele base. Trading at 6.7x FY13F EPS and 5.7x FY14F EPS, Triyards’s valuations are undemanding. Based on 8x FY13/14F earnings, we derive a fair value estimate of S$1.07. Initiate with BUY. (Low Pei Han)

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CapitaRetail China Trust: Additional AEI for Minzhongleyuan

Summary: CRCT's 4Q12 results were generally in line with our expectations. Gross revenue climbed by 3.9% YoY to S$37.9m and net property income rose 6.0% YoY to S$24.2m. The portfolio was valued at RMB7.6b, up 4.7% from Jun 2012. The AEI at MZLY is being fast-tracked, with temporary closure of the mall from Jul 2013 and completion by 2Q14 as opposed to end 2014 as initially planned. Estimated capital expenditure has been increased from RMB74m to RMB103m and expected return on AEI investment falls from 10.8% to 10.1%. Increasing our longer-term growth rate assumptions, which were conservative previously, our fair value increase from S$1.56 to S$1.72 but we maintain our HOLD rating on CRCT on valuation grounds. (Sarah Ong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Tue Feb 05, 2013 9:34 am    Post subject: Reply with quote

KEY IDEA

Astro Malaysia: Proxy to Malaysia’s rising income/spending
Astro Malaysia Holdings Berhad (Astro), the largest Pay TV operator in Malaysia (with a 99% market share in 2011), looks well-positioned to capitalise on the potential growth of the Malaysian economy and a young population demography that is open to the adoption of new technologies. And because of its steady stream of cash receipts, we believe that Astro could be seen as a dividend play. Given its stable cashflow, we believe that using a DCF (discounted cashflow) model to value the company would be appropriate. Based on our assumptions, we derive a fair value of MYR2.98. And coupled with a stable dividend yield of 3.5%, we expect Astro to generate a total return of 10.3% over the next one year; hence, we initiate coverage on the stock with a BUY rating. (Carey Wong)

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Starhill Global REIT: Asset sale a positive move
Starhill Global REIT (SGREIT) announced that it had divested its entire interest in the Roppongi Primo Building in Tokyo, Japan for JPY700.0m (~S$9.5m). We welcome the move because 1) the divestment is likely to lead to an improvement in both occupancy and yield, 2) it may mean that its Japan properties are starting to gain investor interest, and 3) it is expected to reduce its gearing level by 30bps to 30.0% since the net proceeds would be used to repay its JPY loans. Going forward, we remain positive that SGREIT will continue to turn in firm performance, supported by strong contribution from its Singapore portfolio and incremental income from its recently acquired Plaza Arcade property in Perth. We also believe that upcoming refinancing activities and rental valuation for the Toshin master lease may provide a further catalyst for its DPU growth if favourable interest rates and rental terms are secured. We now factor in the divestment in our forecasts. Our fair value, however, remains unchanged at S$0.95. Maintain BUY on SGREIT. (Kevin Tan)

Valuetronics Holdings: 3QFY13 core earnings below expectations
Valuetronics Holdings Limited (VHL) reported its 3QFY13 results this morning. Revenue from continuing operations fell 16.3% YoY to HK$508.1m, or 10.5% below our forecast. Profit from continuing operations dipped 41.8% YoY to HK$25.6m. Adjusting for exceptional items, we estimate core PATMI of HK$23.9m, a 17.9% YoY decline, and this fell short of our projection by 16.2%. VHL continued to incur operating losses (HK$1.1m) from its Licensing division, but this was a significant reduction from 2QFY13 (HK$31.2m) which includes HK$28.0m worth of one-off termination expenditure and impairment charges given its decision to cease operations of the division. We expect VHL’s outlook to remain challenging, as margin pressure from rising labour costs and slower growth from its largest customer are likely to weigh at least in the near term. We will provide more details after a teleconference call with management. We maintain our HOLDrating but our S$0.20 fair value estimate is currently under review. (Wong Teck Ching Andy)

United Envirotech: Very strong 9M13 showing
United Envirotech Ltd (UEL) put in a strong set of 9MFY13 results, with net profit jumping 145.7% to S$22.5m, meeting 95% of our full-year forecast, after revenue surged 108.9% to S$138.2m, also 95% of our FY13 estimate. 3QFY13 revenue was up 159.4% at S$32.2m, while net profit was up 350.2% at S$8.5m. According to management, the strong showing came from higher engineering and treatment revenue over the period. Going forward, UEL says it will continue to expand its recurring income by investing in more water treatment projects in China. Funding should also not be an issue given that KKR will be injecting another US$40m into the company following the recent share placement. We will be speaking with management for more insights. We are keeping our BUY rating and will review our S$0.67 fair value after our discussion with management. (Carey Wong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Wed Feb 06, 2013 9:08 am    Post subject: Reply with quote

KEY IDEA

SIA Engineering: 9MFY13 slightly below expectations
SIA Engineering Company's (SIAEC) 9MFY13F results were slightly below our expectations. Revenue increased by 1.1% to S$863.2m, chiefly due to an increase in materials and line maintenance revenue. Operating profit thus stayed roughly flat (+0.1% YoY) at S$97.2m. Share of profits from associated and JV companies increased by 0.3% to S$118.8m, representing a contribution of 51.5% of the group's pre-tax profits. PATMI was up 0.7% YoY to S$204.2m. This formed 72.6% of our previous FY13F estimate of S$281.4m, which we now reduce to S$274.0m. Still using a P/E peg of 17.1x and our basic EPS forecast of 25.6 S cents for 4QFY13F-3QFY14F, we reduce our fair value estimate from S$4.48 to S$4.38 and maintain our HOLD rating on SIAEC. (Sarah Ong)


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Valuetronics Holdings: Another challenging quarter
Valuetronics Holdings Limited’s (VHL) 3QFY13 results were below our expectations. Revenue from continuing operations fell 16.3% YoY to HK$508.1m, or 10.5% below our forecast. Estimated core PATMI declined 17.9% to HK$23.9m and fell short of our projection by 16.2%. This was driven by a slowdown in demand from some of its customers, while ASP pressures also exacerbated the challenging operating conditions. On a positive note, VHL ended the Dec-quarter with a healthy net cash balance of HK$234.7m, which would act as a buffer in light of the still uncertain macroeconomic environment. We pare our FY13 and FY14 revenue forecasts by 5.0% and 4.3%, and our core PATMI projections by 9.3% and 7.4%, respectively. We also roll forward our valuations to 4x FY14F EPS, and our fair value estimate is lowered from S$0.20 to S$0.19. Maintain HOLD. (Wong Teck Ching Andy)

Far East Hospitality Trust: Results in line for 1 Aug 2012-31 Dec 2012
Far East Hospitality Trust (FEHT) reported its first results since listing for the financial period 1 Aug 2012-31 Dec 2012 that were generally in line with our expectations (the actual results are from 27 Aug to 31 Dec 2012 since FEHT was listed on 27 Aug 2012). While gross revenue, at S$42.2m, was 0.7% lower than the pro-rated forecast in the prospectus, net property income of S$38.8m was 0.2% higher than the forecast as a result of lower operating expenses. Active management of finance costs and other trust expenses helped to lift its income available for distribution 4.5% above its forecast to S$33.6m. We maintain our HOLDrating on FEHT and put our fair value of S$1.02 under review. We will be meeting management shortly. (Sarah Ong)

Karin Technology: 1HFY13 core PATMI within expectations
Karin Technology’s (Karin) 1HFY13 revenue exceeded our expectations but core PATMI was in line due to lower-than-expected gross margin. Revenue surged 39.7% YoY to HK$2,123.3m and formed 54.4% of our FY13 forecast. Reported PATMI jumped 47.5% YoY to HK$33.7m. However, after adjusting for exceptional items, we estimate that core PATMI came in at HK$26.8m (+5.1% YoY) and constituted 50.1% of our full-year projection. Karin’s robust topline growth was driven largely by its Consumer Electronics Products segment, which reported a 56.7% increase in sales, although this also resulted in margin compression given the high volume, low margin nature of the business. Karin declared an interim dividend of 7.2 HK cents/share, higher than the 7 HK cents/share in 1HFY12 (3.5 HK cents of interim and special DPS each). Karin also returned to a net cash position of HK$69.4m in 1HFY13 (2HFY12: net debt of HK$31.7m), aided by strong free-cashflows generated of HK$99.7m. We will provide more updates after speaking with management. We maintain our HOLD rating on Karin but our S$0.25 fair value estimate is under review. (Wong Teck Ching Andy)

Yangzijiang Shipbuilding: Ups stake in Xinfu yard
Yangzijiang Shipbuilding (YZJ) announced last evening that it has acquired an additional 20% interest in Jiangsu Yangzi Xinfu Shipbuilding for US$18m (~RMB 112.1m). Following this, YZJ will hold an 80% interest in the Xinfu yard, which has a huge production area of about 166ha (YZJ’s old yard: 20ha, new yard: 201ha, Changbo yard: 29ha) and is therefore ideal for building large vessels. As mentioned by management previously, the group has plans to build VLCCs, large containerships (e.g. 10,000 TEU) and other vessels in this yard. Meanwhile, YZJ has also acquired the remaining balance of 40% interest in Shanghai Henggao Ships Design Co for RMB6m. The latter is engaged in the detail and production design for merchant ships. These acquisitions are still relatively small in comparison to the group’s cash position – YZJ had net cash and held-to-maturity assets of RMB2.6b as at Sep 2012. Maintain HOLD with S$0.95 fair value estimate on YZJ. (Low Pei Han)

DBS: Slightly below expectations 4Q
DBS posted 4Q12 net earnings of S$760m this morning (excluding divestment gains of S$450m), and this is slightly below market expectations of S$788m (based on Bloomberg poll). For the full year, net earnings came in at S$3,360m (+17.4% excluding divestments or S$3,809m including divestment gains). The board has declared a final dividend of 28 cents, bringing full year payout to 56 cents per share (same as 2011), and the shares will be quoted ex-dividend on 13 May 2013. Loans grew 8% from end 2011 or 4% from 3Q12 to S$210.5b. Net Interest Margin continued to ease off, down from 1.73% in 4Q11 and 1.67% in 3Q12 to 1.62% in 4Q12. For the year, double-digit declines in Stockbroking and Investment Banking due to weak equity markets were compensated for by double-digit gains for Wealth Management and Cards. We will provide more updates after the results briefing. Do note that our previous call on the stock was a BUY with a fair value estimate of S$15.94. We will review our estimates after the briefing. (Carmen Lee)

City Developments Limited: Top bid at GLS tender for Commonwealth Ave site

Yesterday evening, City Developments (CDL) was part of a consortium that put in the top bid of S$562.8m at a GLS tender for a residential site at Commonwealth Ave. We understand that CDL would have a 30% stake in this project. The tender attracted three bidders in total, and CDL’s bid was 2.4% above that of the second highest bidder. The site has a land area of 12.1k sqm and a maximum GFA of 59.2k sqm, and is across the street from the Queenstown MRT station – an attractive location. We estimate breakeven and selling ASPs of S$1.35k psf and S$1.6k psf, respectively, for the 99-year condominium project with ~700 units and expect this transaction to accrete 4 S-cents to CDL’s RNAV. Recent transactions over the last twelve months at Alexis, the last private condominium (freehold) launched in that area, were at ASPs of S$1.65k psf. Maintain HOLD on CDL with our fair value estimate of S$13.01 (15% discount to RNAV) under review. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Thu Feb 07, 2013 9:28 am    Post subject: Reply with quote

KEY IDEA

ASL Marine: Can afford to be selective of new orders
ASL Marine (ASL) reported a 7.3% YoY rise in revenue to S$83.0m and a 39.8% increase in net profit to S$10.6m in 2QFY13, such that results were in line with our expectations. Gross profit margin increased from 17.3% in 2QFY12 to 23.4% in 2QFY13 due to better margins in all three core business segments. Given ASL’s busy yards and healthy order book (S$528m as at 31 Dec 2012), we understand that the group will aim to start securing orders only after Jun this year. Since our last report on 3 Dec 2012, the stock has done well, with its share price appreciating by 13.8% vs the STI’s 6.7% gain over the same period. Despite this, we still see upside potential. We roll forward our valuation to blended FY13/14F earnings, still based on an unchanged PER of 10x. As such, our fair value estimate rises from S$0.82 to S$0.86. Maintain BUY. (Low Pei Han)

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Goodpack Limited: Promising prospects
Goodpack's 2Q13 revenue increased by 6.4% YoY to US$46.4m following continued growth from its Synthetic Rubber (SR) segment. Operating profit rose by a corresponding 15.4% to US$16.2m - despite operating expenses rising by 7.1% YoY to US$31.8m - and PATMI gained 4.0% YoY to US$11.1m. We raise our FY13 and FY14 outlook on sustained improvements within the SR space as tyre demand holds up and new SR plants open in Singapore. Aided by two recent key contract wins, Goodpack stands in good stead to benefit once production from these SR plants ramp up in the middle of CY2013. As a result, we upgrade Goodpack to BUY and our fair value estimate increases to S$1.95 from S$1.85 previously. (Lim Siyi)

CapitaMalls Asia: Good round-off to FY12
CapitaMalls Asia (CMA) reported 4Q12 PATMI of S$184.8m - decreasing 10% YoY mostly due to lower fair value gains from its properties in China and Singapore. This brings FY12 PATMI to S$546.0m, up 19.7%. Excluding revaluation gains and portfolio gains, FY12 PATMI adjusts to a core figure of S$175.7m, which we judge to be mostly in-line and only 3.2% below our FY12 forecast of S$181.5m. We continue to view CMA favorably and see its share price likely benefitting from dual tailwinds ahead: 1) increasing operational traction, as a larger component of CMA’s portfolio becomes operational, and 2) relatively firm retail outlooks in China and Singapore. Maintain BUY with an unchanged fair value estimate of S$2.55. (Eli Lee)

Viz Branz Limited: Continued margin improvement
Ongoing competitive pressures in Myanmar caused Viz Branz (VB) to report a 5.6% YoY decline in 1H13 revenue to S$86.1m. However, favourable raw material costs and a reduction in administrative expenses saw operating profit and PATMI rise by 6.7% YoY to S$13.6m and 4.0% YoY to S$10.1m respectively. VB’s management also declared an interim dividend of 1 S cents, which was similar to last year’s interim payout. With the performance coming in within our expectations, our 2H13 forecasts remains unchanged, and we retain our fair value estimate of S$0.74. While the lack of progress on a GO will disappoint investors, we reiterate our view that a deal is likely to materialize. Maintain BUY. (Lim Siyi)

Karin Technology: Leveraging on smartphones for growth
Karin Technology’s (Karin) 1HFY13 revenue surged 39.7% YoY to HK$2,123.3m, exceeding our expectations (54.4% of our FY13 forecast). However, estimated core PATMI of HK$26.8m (+5.1% YoY) was in line due to lower-than-expected gross margin, forming 50.1% of our full-year projection. Karin’s strong revenue growth was driven largely by its Consumer Electronics Products and Components Distribution segments, which have significant exposure to the growing smartphone market. An interim dividend of 7.2 HK cents/share was declared. Our forecasted FY13F dividend yield stands at an attractive 7.7%. We retain our core PATMI projections, but raise our PE multiple peg from 6x to 7x in light of the improved market sentiment and Karin’s stronger financial position. We also roll forward our valuations to blended FY13/14F EPS and our fair value estimate increases from S$0.25 to S$0.295, partially offset by a lower HKD-SGD assumption. Maintain HOLD.(Wong Teck Ching Andy)

PEC Ltd: Ceasing coverage
PEC Ltd reported another quarter of lackluster result with 2Q13 PATMI falling 15% YoY to S$2.6m despite revenue increasing by 11% to S$144m. Gross margin declined to 14% (2Q12: 20%) due to competitive pricing and cost pressures in both the project work and maintenance sectors. Other operating expenses also jumped 55% YoY to S$12.4m from cost increases associated with higher headcount (i.e. accommodation, transport expenses, etc). Besides the tight labour market, PEC’s earnings growth is also limited by slower pace of petrochemical investments due to a change in EDB’s energy policy. Meanwhile, we note that its share price has risen by almost 11% since our last report. We now see limited upside ahead and think that its earnings are likely to remain sluggish. Therefore, we CEASE COVERAGEon the stock due to the lack of medium-term price drivers and muted earnings outlook. (Chia Jiunyang)

Midas Holdings: JV clinches CNY710m metro contract
Midas Holdings (Midas) announced last evening that its 32.5%-owned JV company Nanjing SR Puzhen Rail Transport (NPRT) has clinched a metro contract worth CNY710m. This encompasses the supply of 24 train sets, or 104 train cars for the Ningtian Intercity Line Phase 1 project. Delivery is scheduled to take place only from 2014 to 2015, but this could lead to potential contract wins for Midas as it is a supplier of NPRT. We note that this is NPRT’s second announced contract order of the year. Total contract wins amount to ~CNY1.05b for NPRT YTD. While NPRT has been a drag on Midas’ earnings in FY12, we believe that its fortune would likely reverse from FY13 given its order book schedule on hand. Midas’ share price is likely to react positively as a result of this announcement. Maintain BUY and S$0.60 fair value estimate, pegged to 1.2x FY13F P/B. (Wong Teck Ching Andy)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Fri Feb 08, 2013 9:28 am    Post subject: Reply with quote

KEY IDEA

KSH Holdings: Another quarter of strong growth

KSH reported 3Q FY13 PATMI of S$8.1m, which surged 179% YoY mostly due to contributions from its property development segment as the group recognized earnings from The Boutiq, Cityscape@Farrer Park and Rezi 26. 9M FY13 earnings now cumulate to S$22.3m, up 108.3% YoY and forming 73% of our FY13 forecast. The group has sold a significant portion of launched projects, and we expect progress billings from already sold projects to underpin earnings growth ahead. Maintain BUY with an increased fair value estimate of S$0.62, versus S$0.50 previously, as we lower the RNAV discount for its property segment from 50% to 40% to reflect a lower risk profile given a larger percentage of projects sold, and raise our PE multiple for its construction segment from 3.0x to 4.0x - a level closer in line with that of its peers. (Eli Lee)


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Biosensors International Group: Revenue guidance lowered
Biosensors International Group (BIG) reported a disappointing set of 3QFY13 results which missed our below-consensus estimates. Revenue fell 4.0% YoY to US$81.3m, dragged down by weak licensing and royalties revenue (-37.8% YoY), and was 11.2% below our forecast. Core PATMI declined 9.2% YoY to US$24.3m, falling short of our forecast by 20.3%. BIG also lowered its revenue growth guidance for FY13 from 20-30% to 15-20% due to weaker-than-expected licensing and royalty revenue from Japan. However, product revenue growth is expected to remain robust. We pare our FCFE-based fair value estimate from S$1.69 to S$1.63 as we incorporate lower core PATMI projections and BIG’s recent fixed notes issuance in our model. We believe that proceeds for the latter would be used for earnings accretive acquisitions. Maintain BUY. (Wong Teck Ching Andy)

Olam Int’l: 1HFY13 results slightly ahead
Olam International (Olam) reported 1HFY13 results which were slightly ahead of our forecast. Revenue grew 24.3% to S$9589.5m, meeting 48.1% of our FY13 projection; while estimated core net profit came in around S$147.6m, also meeting around 48.4% of our FY13 estimate. However, its net gearing increased from 1.95x in 1HFY12 to 2.21x in 1HFY13. Management meanwhile is in the process of recalibrating its operations after the Muddy Waters’ incident. While we see the recalibration exercise as positive, we do not intend to make any changes to our forecasts just yet. But we are pushing our 10x valuation from FY13F EPS to blended FY13F/FY14F EPS and our fair value improves from S$1.44 to S$1.50. Maintain HOLDfor now. (Carey Wong)

Singapore Airlines: Premature optimism
Singapore Airlines’s (SIA) 3Q13 results came in below our expectations with operating profit declining 20.4% YoY to S$131.0m. Although revenue held up well during the seasonal travel peak, it came at expense of declining passenger yields (YoY basis) following increased promotional activity, which offset some savings from favourable fuel prices during the quarter. Only with gains from non-operating segments did the Group post a 5.4% YoY improvement in PATMI to S$142.5m. The operating environment remains challenging for SIA with competition heating up and jet fuel prices inching upwards. Coupled with the lack of any near-term catalysts, we temper our optimistic outlook and lower our FY13/14 forecasts accordingly. Given the short run-up in its share price, we maintain HOLDat an unchanged fair value estimate of S$10.85. (Lim Siyi)

StarHub Ltd: FY12 results in-line; HOLD

StarHub Ltd posted FY12 results that were mostly in line, where revenue rose 4.7% to S$2421.6m, or just 0.8% above our figure, while net profit jumped 13.9% to S$359.3m, and 2.5% above our estimate. Full-year dividend came in at S$0.20 as guided. For FY13, StarHub expects to see single-digit revenue growth, with EBITDA margin on service revenue likely to be about 31% (versus 32.3% in FY12). StarHub says it also intends to maintain its annual cash dividend of S$0.20/share, or S$0.05 per quarter. However, it raised its capex guidance to ~13% of operating revenue (versus 11% in FY12), which includes the payment of the leasehold land and the construction of its cable TV network transmission centre. Separately, StarHub announced that CEO Neil Montefiore will retire by end of Feb; COO Tan Tong Hai will step up to replace him in Mar. Biggest change to our model would be the increased capex guidance, otherwise, we are keeping our FY13 revenue and earnings largely unchanged. However, as we are pushing out DCF valuation to FY13 to FY16, our fair value improves from S$3.75 to S$4.00. But given the limited upside from here, we keep our HOLDrating. (Carey Wong)

Lippo Malls Indonesia Retail Trust: 4Q12 results in line
LMIRT posted 4Q12 gross rental income of S$33.0m, up 35% YoY. The increase was primarily due to the contributions from Pluit Village and Plaza Medan Fair (acquired in 4Q11) and marginal contributions from the six acquisitions made in 4Q12. Total revenue fell 11% to S$33.0m (equivalent to gross rental income in 4Q12). This is because of the absence of the service charge and utilities recovery following the outsourcing of the operational services to a third party operating company with effect from 1 May 2012. Net property income margin was at 93.4%, down 3.2 ppt QoQ. 4Q12 results were generally in line with our expectations; DPU of 0.74 S cents formed 97% of our estimate. We will speak further with management regarding these results and, in the meantime, put our FV of S$0.52 and Buy rating UNDER REVIEW. (Sarah Ong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Wed Feb 13, 2013 8:52 am    Post subject: Reply with quote

KEY IDEA

ComfortDelGro: Comforting results but rich valuations

Summary: ComfortDelGro’s (CD) FY12 results came in within our expectations with revenue increasing 3.9% YoY to S$3.5b while operating profit rose 3.3% YoY to S$412.3m as the group managed to keep a lid on operating expenses. With PATMI rising 5.6% YoY to S$248.9m, management declared a final dividend of 3.5 S cents (FY11: 3.3 S cents), taking the total dividend declared for the year to 6.4 S cents (FY11: 6.0 S cents). Investors can now look forward to an announcement in the coming months for local fare increases, which will provide much-needed relief for domestic operations. Away from home, we expect CD’s overseas ventures to stay lucrative despite greater competitive pressures. However, while we raise our fair value to S$1.95 (from S$1.90 previously), we feel that the market has already priced in much of the upside. Therefore, we downgrade CD to HOLD on valuation grounds despite favouring the group over SMRT. (Lim Siyi)


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Lippo Malls Indonesia Retail Trust: Downgrade to HOLD

Summary: LMIRT posted 4Q12 gross rental income of S$33.0m, up 35% YoY. The increase was primarily due to the contributions from Pluit Village and Plaza Medan Fair (acquired in 4Q11) and marginal contributions from the six acquisitions made in 4Q12. Results for the quarter were generally in line with our expectations; DPU of 0.74 S cents formed 97% of our estimate. NAV per unit rose 6.3% QoQ to 56.16 S cents, giving a current P/B of 0.93x. Gearing remains healthy at 24.5%. Management indicates that the average weighted all-in cost of debt for FY13 is likely to be 5.5%-5.7%. We maintain our fair value of S$0.52. Since the current unit price is near our fair value, we downgrade LMIRT to a HOLD. We estimate a FY13F yield of 6.9%. (Sarah Ong)
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PostPosted: Thu Feb 14, 2013 8:45 am    Post subject: Reply with quote

KEY IDEA

Cache Logistics Trust: New ramp-up warehouse addition
Cache Logistics Trust (CACHE) has signed an option agreement to acquire a three-storey fully ramp-up warehouse for S$55.2m, or S$194 psf GFA. The transaction is expected to complete in Apr, subject to JTC approval. According to management, the initial NPI yield is ~8.7%, higher than CACHE’s FY12 implied portfolio yield of 7.1%. Hence, we expect the acquisition to be earnings accretive. CACHE also announced that it has received its maiden corporate family rating from Moody’s Investors Service. With this development, we believe CACHE may finance the acquisition wholly by debt, since it is now able to exceed its previous regulatory debt ceiling of 35%. We raise our fair value to S$1.34 from S$1.32 after factoring in the investment. Maintain BUY. (Kevin Tan)

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TEE International: Better outlook, but still cautious
Since our last report on TEE International (10 Jan), its share price has stayed firm, retaining most of the gains made since the start of the year, despite its disappointing 2QFY13 results. We believe that TEE’s share price has been supported by recent strong interest in Singapore construction stocks generally, boosted by the government’s latest projections for construction demand and population growth, both of which should benefit the construction sector. We raise our valuation of TEE’s main engineering business to 5.5x FY13 forecast earnings from 5x previously, to reflect the improved long-term outlook for its engineering segment. This raises our overall fair value estimate for TEE to S$0.30, from S$0.28. Given its weak 2QFY13 showing, however, we prefer to remain cautious on TEE until we see stronger contributions from its real estate business. We maintain our HOLD rating on TEE. (Conrad Tan)

SingTel: Stable 3QFY13 results
SingTel reported its 3QFY13 results this morning, with group revenue dipping 4.8% YoY to S$4597m, and while EBITDA rose 0.5% to S$1262m, net profit fell 8.3% to S$827m (mainly due to exceptional loss of S$67m). However, excluding exceptional items, underlying net profit was down 2.3% at S$874m. 9MFY13 revenue fell 2.4% to S$13702m, meeting 73% of our FY13 forecast, while net profit slipped 2.2% to S$2640m; core earnings was down 1.6% at S$2610m, or 69% of full-year estimate. SingTel has kept its guidance for FY13, and we will have more after the analyst teleconference. For now, we maintain our BUY rating but our S$3.53 fair value is under review. (Carey Wong)
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PostPosted: Fri Feb 15, 2013 8:44 am    Post subject: Reply with quote

KEY IDEA

Tat Hong Holdings: Another strong quarter

Summary: Tat Hong Holdings (Tat Hong) reported a fairly strong set of 3Q13 results with net profit attributable to shareholders surging by 37% YoY to S$17.8m. Gross margin increased slightly to 35.9% (3Q12: 34.4%) due to higher contribution from Crane Rental and Tower Rental segments which yielded higher margins compared to Distribution. Looking ahead, the crane divisions are expected to continue their strong momentums with the roll-out of infrastructure projects across the region. However, Distribution and General Equipment Rental may slow due to weaker demand in Australia. Overall, we are still positive on Tat Hong and raise our fair value estimate to S$1.75 (previously S$1.70) as we roll forward our projections to FY13/14F. Maintain BUY. (Chia Jiunyang)

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SingTel: Stable 3QFY13 results
Summary: SingTel saw its 3QFY13 group revenue dipping 4.8% YoY to S$4597m, and while EBITDA rose 0.5% to S$1262m, net profit fell 8.3% to S$827m (mainly due to exceptional loss of S$67m). However, excluding exceptional items, underlying net profit was down 2.3% at S$874m. 9MFY13 revenue fell 2.4% to S$13702m, meeting 73% of our FY13 forecast, while net profit slipped 2.2% to S$2640m; core earnings was down 1.6% at S$2610m, or 69% of full-year estimate. SingTel has kept its guidance for FY13, which we have already captured in our forecast. As such, we would not be making any changes. However, in line of the recent recovery in the price of its listed associates, our SOTP-based fair value improves from S$3.53 to S$3.68. We also maintain our BUY rating on the stock. (Carey Wong)
Starhill Global REIT: 10% rent increase for Toshin master lease

Summary: Starhill Global REIT (SGREIT) has secured a 10.0% increase in base rent for Toshin master lease at Ngee Ann City, following the completion of the rent review process yesterday. The new rate was based on the average of three market rental valuations undertaken by independent licensed valuers, in accordance with the Court of Appeal’s directions, and will be retrospectively applied for the term commencing 8 Jun 2011. Assuming the accumulated rental arrears owing as a result of the rental increase from 8 Jun 2011 to 31 Dec 2012 were paid in FY12 (after deducting expenses), management estimates an increase of 0.19 S cents (+4.3%) in its FY12 DPU. SGREIT intends to distribute substantially the net arrears received (~S$3.8m) from Toshin in 1Q13. This will be on top of the regular distributable income generated for the quarter. We expect the market to react favourably to this news. Maintain BUY on SGREIT but place our fair value of S$0.95 under review as we incorporate the rental and DPU increase in our forecasts. (Kevin Tan)

STX OSV: Three new OSCV contracts worth US$350-500m

Summary: STX OSV announced that it has secured contracts for three Offshore Subsea Construction Vessels (OSCVs). We estimate the total value to be around NOK 2b to 2.8b (or US$350-500m). The three vessels are for Solstad Offshore, Farstad Shipping and DOF Subsea Group. They will be built in Norway and scheduled for deliveries in 2014 and 2015. As the group is expected to report its 4Q12 results soon, we put off adjusting our estimates and maintain our BUY rating with S$1.52 fair value estimate. (Chia Jiunyang)
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PostPosted: Mon Feb 18, 2013 8:52 am    Post subject: Reply with quote

KEY IDEA

Singapore Residential Property: Healthy Jan sales but expect weakness ahead

Summary: URA reported that a headline total of 2,269 new private homes (including 256 EC units) were sold in Jan 2013, which was up 2% MoM and 9% YoY. Excluding EC and landed-units, 2,003 units were sold in the month - up 47% MoM and 7% YoY with a sustained above-par take-up rate at 111% (versus 144% in Dec 2012). Looking ahead, we expect Feb 2013 sales figure to fall MoM due to the traditionally quiet Chinese New Year season and a limited number of new launches. Immediate data-points ahead are the launches at Trilinq (IOI Group) near the Clementi MRT Station and Urban Vista (Fragrance Group) near the Tanah Merah MRT station. We have a NEUTRAL rating on the residential property sector and prefer diversified developers with strong balance sheets and significant exposure to the Chinese property sector. Our top picks are CapitaLand [BUY, S$4.04], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55]. (Eli Lee)

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Population White Paper favours Infrastructure Plays

Summary: After five days of intense debate, Singapore’s Parliament passed the amended White Paper on Population about a week ago. We reviewed the White Paper and emphasize the following: - (i) the government will now build infrastructure ahead of demand, (ii) planning parameters of 5.8m to 6.0 million in 2020 (and 6.5 to 6.9 million in 2030) are to be used, (iii) the housing supply will be ramped up and HDB prices will remain affordable, (iv) rail network will double by 2030 with the addition of five more lines. In our view, the most direct beneficiary is the infrastructure sector (public works providers opposed to construction-developers). We highlight several niche players such as Tat Hong Holdings (BUY; FV: S$1.75), Yongnam Holdings Limited (UNRATED), TEE International (HOLD; FV: S$0.30) and TTJ Holdings (UNRATED). (Chia Jiunyang)

ST Engineering: FY12 in line

Summary: Singapore Technologies Engineering (STE) reported FY12 results that were in line with ours and consensus expectations. For FY12, revenue rose 6% YoY to S$6.4b, profit before tax climbed 10% YoY to S$723mm and profit attributable to shareholders rose 9% to S$576m. All sectors recorded higher PBT for FY12 versus FY11. Aerospace, Electronics, Land Systems and Marine saw PBT increase by 9%, 11%, 6% and 5% YoY respectively. Aerospace’s FY12 PBT margin of 15.0% improved over FY11's 14.4%. STE expects to achieve higher revenue and PBT in FY13 versus FY12. We forecast a FY13F EPS of 19.9 S cents, and keeping a P/E peg of 20.7x, we raise our fair value from S$3.90 to S$4.12 and maintain a HOLD on STE. We estimate a FY13F dividend yield of 4.5%. (Sarah Ong)

Singapore Transport: Fare review report delayed till end-May

Summary: We are unperturbed by the Transport Minister's decision to delay the submission of the Fare Review Mechanism Committee's report to end-May because i) our projections already factor in price increases from mid-2QCY13, and ii) broad-based fare increases will still materialise. Although the reason for the delay is to facilitate further study of the impact of fare increases on low-income families and/or dependent groups (e.g. polytechnic students), wording in recent speeches and reiterations by the Transport Minister have been clear that commuters should be prepared to bear some of the cost increases especially after the fact that current fares have been kept affordable over recent years at the expense of public transport operators. Therefore, we leave our forecasts for both public transport operators - ComfortDelGro and SMRT - unchanged and maintain HOLD for both counters at S$1.95 and S$1.71 respectively. (Lim Siyi)
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PostPosted: Tue Feb 19, 2013 9:48 am    Post subject: Reply with quote

KEY IDEA

Telecom Sector: Expecting higher capex in 2013

Summary: Out of the three telcos, M1’s 4Q12 results were slightly below our forecast while the other two were mostly in line. But M1 also surprised with a special dividend of S$0.017/share on top of its final dividend of S$0.063. StarHub declared a quarterly dividend of S$0.05 as guided. Both M1 and StarHub expect to see earnings growth in 2013; but both are also guiding for higher capex targets, likely for the ongoing 4G roll-out and also more data capacity to meet growing usage trend. SingTel has kept its previous guidance, but note that its year-end is in Mar. For now, we maintain our OVERWEIGHT on the sector. But as the telcos have already done quite well YTD, further capital appreciation may be limited, although dividend yields are still relatively attractive. M1 remains our top pick. (Carey Wong)

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Starhill Global REIT: Expect extra DPU in 1Q13

Summary: Starhill Global REIT (SGREIT) announced that the rent review process relating to Toshin master lease at Ngee Ann City has been completed on last Thursday and that it has been awarded a 10.0% increase in base rent. Assuming the accumulated rental arrears owing as a result of the rental increase from 8 Jun 2011 to 31 Dec 2012 were paid in FY12 (after deducting expenses), management estimates an increase of 0.19 S cent or 4.3% in its FY12 DPU. SGREIT intends to distribute substantially the net arrears received from Toshin in 1Q13, on top of the regular distributable income generated for the quarter. We also understand that the new rate will serve as the base rent for the next lease renewal exercise in Jun. Management expects the renewal rent to be determined before the commencement of the lease period. We believe further upside in rent is still possible. However, we choose to incorporate only the new rate and distribution for now. This raises our fair value from S$0.95 to S$0.98. Maintain BUY. (Kevin Tan)

CapitaLand Limited: Involvement in Danga Bay development in Johor

Summary: It was reported in news yesterday that Capitaland Malaysia Pte Ltd, along with Temasek Holdings and Iskandar Waterfront Holdings Bhd, would buy and develop a 28.33ha man-made island at Danga Bay into a mixed integrated development, comprising high-rise residences, landed homes and retail centers. The total development cost for the project is reportedly RM4-5 billion. We note that the group has not made an announcement via SGX, and the extent of CapitaLand’s involvement in the project is still unclear. We would speak further with them regarding this development, and in the meantime, maintain our BUY rating with a fair value estimate of S$4.04. (Eli Lee)

Lian Beng Group: S$117m contract win boosts order book to S$664m

Summary: Lian Beng Group has secured a S$117m contract for the construction of Skies Miltonia, a condominium development of TG Master Pte Ltd, at the junction of Yishun Avenue 1 and Miltonia Close. The project involves the construction of eight 13-storey residential blocks with penthouse and one 3-storey residential block, totalling 420 units, as well as basement car park, swimming pool, communal facilities and shops. Construction is due to start next month and will take about 33 months to complete. The new contract strengthens the group’s order book to S$664m as at 18 Feb 2013, with projects lasting through FY2016. We are keeping Lian Beng UNDER REVIEW pending a change in analyst. (Research Team)
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PostPosted: Wed Feb 20, 2013 9:13 am    Post subject: Reply with quote

KEY IDEA

Aviation Sector: Budget trumps premium

Summary: The Jan 2013 operating statistics for Tiger Airways (TGR) and Singapore Airlines (SIA) mirrored their recent corporate result performance. TGR saw passenger load factors (PLF) improve on effective capacity management for its Singapore and Australian segments while SIA continued to see PLF falter with capacity growth outstripping passenger demand. With the environment remaining challenging – particularly in the premium carrier space – we favour TGR over SIA in the coming quarters. TGR [BUY; S$0.86] shows more promise with its turnaround story intact, and we are expecting another positive showing for 4Q13. On the other hand, SIA [HOLD; S$10.85] will likely see passenger yields remaining depressed especially with other carriers introducing fare promotions of their own. Maintain NEUTRAL on the overall aviation sector. (Lim Siyi)

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CapitaLand Limited: Overall positive on Danga Bay project

Summary: CAPL is taking a 51% stake, alongside Iskandar Waterfront Sdn Bhd (40%) and Temasek (9%), in a JV to acquire and develop a 71.4 acre freehold site in A2 Island, Danga Bay in Johor Bahru, Malaysia. This is the group’s first major Malaysian township development, which is envisioned to be a premier waterfront residential community. Total land cost for the project is RM811m (S$324m), payable over 4.5 years, and its gross development value is estimated at RM8.1b (S$3.2b). We estimate CAPL’s IRR for this project to be in the low to mid teens, and for this acquisition to accrete S$174m or S$0.04 per share to the group’s RNAV. Maintain BUY with a higher fair value estimate of S$4.29 (20% discount to RNAV), versus S$4.04 previously, as we incorporate this acquisition into our model and update for valuations of listed holdings. (Eli Lee)

Roxy-Pacific Holdings: 4Q results in line

Summary: The group announced 4Q12 PATMI of S$23.3m, up 96% YoY mostly due to S$11.2m of fair-value gains on investment properties. Excluding one-time gains, we estimate core 4Q12 PATMI of S$13.9m which cumulates to full year earnings of S$48.9m - in line with our FY12 estimates. Topline for the quarter came in at S$56.2m, also up 33% YoY as revenue recognition from property developments increased. The group reports progress billings from already sold units at a healthy S$861.7m, equivalent to 4.5 times FY12 revenue, which we expect to underpin earnings over FY13-15 ahead. A final cash dividend of 0.92 S-cent is proposed. We would speak with the company later today regarding these results and, in the meantime, maintain HOLD and will review our fair value estimate of S$0.54. (Eli Lee)
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PostPosted: Thu Feb 21, 2013 8:45 am    Post subject: Reply with quote

KEY IDEA

Venture Corp: 4Q12 results preview
Venture Corporation (VMS) is slated to release its 4Q12 results on 28 Feb after trading hours. We are projecting revenue to remain flat YoY at S$34.9m and PATMI to decline 8.1% YoY to S$633.2m. This is approximately 4.5% and 14.8% below the Bloomberg consensus estimates, respectively, due to lower operating margin assumption. However, a key highlight would be expectations for a first and final dividend of 55 S cents/share, which translates into an attractive yield of 6.5%. Looking ahead, conditions for VMS are likely to pick up gradually after the seasonally slow 1Q13, with stronger financial performance expected in 2H13 when contribution from new product launches gain traction. Maintain BUY, with an unchanged fair value estimate of S$9.22. (Wong Teck Ching Andy)

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Roxy-Pacific Holdings: 4Q results in line
The group announced 4Q12 PATMI of S$23.3m, up 96% YoY mostly due to S$11.2m of fair-value gains on investment properties. Excluding one-time gains, we estimate core 4Q12 PATMI at S$13.9m which cumulates to full year earnings of S$48.9m - in line with our FY12 estimates. A final cash dividend of 0.92 S-cents is proposed. Though we see the shares to be fairly priced currently, a re-rating could come through if management shows active and accretive capital redeployment ahead, particularly with an anticipated cash capital in excess of S$200m flowing back into the balance sheet over FY13. Maintain HOLD with an increased fair value estimate of S$0.61 (25% discount to RNAV), versus S$0.54 previously. (Eli Lee)

CapitaLand Limited: Earnings dip from lower fair value gains
CapitaLand (CAPL) announced 4Q12 PATMI of S$262.7m – down 45% YoY mostly due to lower fair value gains recognized over the quarter. Full year PATMI cumulates to S$930.3m, forming 103% of our FY12 forecast which we judge to be mostly in line. FY12 topline came in at S$3,301m which increased 9.3% YoY mainly due to higher contributions from development projects in Singapore and Australia, its retail mall businesses and a stronger fee-based income. In Singapore, 681 residential units were sold in FY12, dipping 19% from 844 units the previous year. Over 3,000 units were sold in China over FY12 – a strong pickup from ~1,500 units in FY12. Over FY12, the group committed S$4.1b of new investments, 71% of which is in Singapore and China. We could speak with management regarding these results later today and, in the meantime, maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee)

Ezion Holdings: Results in line with our expectations
Ezion Holdings (Ezion) reported a 91.8% YoY rise in revenue to US$52.3m and a 95.7% increase in net profit to US$20.5m in 4Q12, bringing full year revenue and net profit to US$158.7m and US$78.8m, respectively. FY12 revenue and net profit were in line with our expectations, accounting for 100% and 105% of our full year estimates, respectively. However, FY12 net profit was 22% higher than the street’s US$64.3m forecast. More assets will be deployed in 2013, and higher contributions are also expected from Australia with the commencement of two major LNG projects as well. Same as last year, a 0.1 S cent dividend per share has also been declared. Pending an analysts’ briefing later this morning, we maintain our BUY rating but put our fair value estimate of S$2.05 under review. (Low Pei Han)

OKP Holdings: Weak 4Q12 results, as expected
OKP Holdings’ 4Q12 results were in line with our expectations, with net profit falling 60.3% YoY to S$3.8m (taking FY12 net profit to S$12.4m, 6% above our forecast and 53.4% lower than in FY11), due mainly to a surge in costs. Revenue rose 18.4% YoY to S$27.5m in 4Q12 (taking FY12 revenue to S$104.5m, slightly below our full-year revenue forecast), but its gross profit margin narrowed to 21.9% in 4Q12 from 64.8% a year earlier. OKP declared a final cash dividend of 1.5 S cent/share, down from 2 S cents for FY11. Its construction orderbook remains strong at S$376.6m, with contracts lasting up to FY15, but its narrowing margins and feeble 4Q12 showing suggest difficulties in converting future revenue growth into profits. We place our previous Hold rating and fair value estimate of S$0.46 on the company UNDER REVIEW pending a change in analyst. (Research Team)
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PostPosted: Fri Feb 22, 2013 8:59 am    Post subject: Reply with quote

KEY IDEA

Sheng Siong Group: Time to go defensive
Sheng Siong Group’s (SSG) FY12 results met our expectations with revenue increasing 10.2% YoY To S$637.3m while prudent cost management ensured an improvement in core operating profit margin by 0.3 ppt to 6.2%. In addition, core PATMI rose 14.8% YoY to S$31.3m. Management also declared a final dividend of 1.75 S cents (versus 1.77 S cents in FY11), and committed to extend its 90% PAT payout policy for another two years. We are positive on the outlook for SSG in FY13 on the back of i) full-year contributions from the eight new stores, ii) margin stability, and iii) defensive consumer spending in the face of continued economic uncertainty. Therefore, we reverse our previously conservative assumptions and raise our fair value to S$0.69 from S$0.58 previously. Upgrade to BUY. (Lim Siyi)


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Genting Singapore: FY12 in line; HOLD with new S$1.52 FV

Genting Singapore (GS) reported FY12 revenue down 9% at S$2948.1m, or 4.6% shy of our forecast, mainly due to lower gaming business volume. Net profit came in around S$677.7m, down 34%, and was 4.4% shy of our estimate. GS declared a final dividend of S$0.01/share, unchanged from last year. Going forward, GS is also slightly more upbeat about RWS’ performance this year, citing the more positive global economic outlook. Besides the VIP segment, GS intends to focus on the mass market by targeting visitors from Malaysia and Indonesia. It adds that it is well placed to capitalize on investment opportunities in related leisure/gaming business, after raising some S$3b from perpetual securities last year; but did not give specific targets. While our DCF-based fair value improves from S$1.33 to S$1.52, we maintain our HOLD rating on valuation grounds. But an accretive acquisition could provide the catalyst of a re-rating. (Carey Wong)

CapitaLand Limited: Focused on improving ROE
CapitaLand (CAPL) announced 4Q12 PATMI of S$262.7m, falling 45% YoY mostly due to the impact of lower fair value gains. FY12 PATMI now cumulates to S$930.3m (down 12% YoY), which forms 103% of our FY12 forecast and is judged to be mostly in line with our expectations. Over 3,000 units were sold in China over FY12 – a strong pickup from ~1,500 units in FY11. In Singapore, 681 residential units were sold in FY12, dipping 19% from 844 units the previous year. We believe the strategic realignment initiative is proceeding well, with management clearly articulating their focus on improving ROE for shareholders ahead. To that end, we observe that CAPL has, over FY12, increased its leverage ratio to 45% from 31% and committed S$4.1b of new investments, mainly in key markets Singapore and China. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee)

COSCO Corp (S’pore): Headwinds remain
COSCO Corp (S’pore) reported a decent set of results that were within ours and the street’s expectations. FY12 revenue decreased 10% to S$3.7b, while PATMI fell 24% to S$106m. The declines largely reflected the general weakness in the shipbuilding environment and COSCO’s initial expansion into the offshore segment. While the group’s margins appear to have stabilized, its cash generation remains weak. Against the backdrop of an uncertain operating environment, the rising net gearing ratio is also another concern. Rolling forward to FY13F, we raise our fair value estimate to S$0.90 (on 1.5x P/B). Maintain HOLD. (Chia Jiunyang)

Hyflux: Order book hits S$2.9b
Hyflux Ltd posted FY12 revenue of S$682.4m, up 42%, and was also some 16% above our forecast, but reported net profit of S$61.0m (+15%) was around 5% below our estimate; this is likely due to higher-than-expected recognition from its TuaSpring Desalination Project (TDP), which is now substantially completed. Hyflux has declared a final dividend of S$0.025/share, versus S$0.021 last year; this brings the total dividend for the year to S$0.032, versus S$0.0277 in FY11. Going forward, Hyflux is slightly more upbeat about its prospects, citing the still-strong global demand for water infrastructure projects. Order book already stands at S$2.9b (as of end-2012); and management believes that growth in the O&M portion will provide a steady and recurring revenue stream; it further expects the O&M revenue to capture the full impact of its current portfolio by FY16. For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should it win another substantial contract. (Carey Wong)

Sembcorp Marine: Receiving enquiries for drillships
Sembcorp Marine (SMM) reported a 38.1% YoY rise in revenue to S$1.38b and a 27.0% fall in net profit to S$167.1m in 4Q12, bringing full year revenue and net profit to S$4.43b and S$538.5m, respectively. Excluding one-off items such as foreign exchange losses and disposal gains, core net profit of S$562m was in line with our expectations. Operating margin fell from 14.1% in 3Q12 to 10.8% in 4Q12, mainly due to lower margins from new design rigs, and a higher proportion of procurement in the business mix. The group is seeing healthy enquiries for semi-submersible rigs and even drillships. SMM has secured new orders worth S$900m YTD, accounting for 20.3% of our full year estimate. Net order book is also strong at S$13.6b with deliveries till 2019. Maintain BUY with S$5.84 fair value estimate, based on 16x blended FY13/14F earnings. (Low Pei Han)

KS Energy: FY12 sees net profit of S$1.3m
KS Energy (KSE) reported a 41.7% increase in revenue to S$698.1m and a net profit of S$1.3m in FY12, vs. our forecast of a full year net loss of S$1.0m. This compares to a net loss of S$78.8m in FY11. Revenue from the distribution business grew 32% to S$460.4m, accounting for 66% of total revenue. Turnover from the drilling segment rose 76%, mainly due to the sale of the KS Java Star rig to a subsidiary of KSE’s jointly controlled subsidiary, PT KS Drilling Indonesia. Overall gross profit margin fell from 22.2% to 18.6%. KSE expects more assets to be deployed over the next twelve months for its drilling business, particularly in Indonesia. Pending more details from management, we maintain our HOLDrating but place our fair value estimate of S$0.83 under review. (Low Pei Han)

Midas Holdings: Expects significant fall in FY12 revenue and PATMI
Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 4Q12 results release, saying that it expects to record a significant drop in its revenue and PATMI for FY12. This is unsurprising as its 9M12 results had already seen a 24.9% and 92.9% plunge in revenue and PATMI, respectively. We are forecasting FY12 revenue of CNY845.6m and PATMI of CNY6.8m, which translates into a decline of 21.8% and 96.4%, respectively. We had also constantly highlighted that Midas’ near term financial performance would remain lacklustre in the near term. Reasons cited for the guidance are higher operating and financial expenses and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). Midas will report its 4Q12 results on 27 Feb after trading hours, while an analyst conference call has been scheduled the day after. We will provide more updates then. For now, we have a BUY rating and S$0.60 fair value estimate on the stock. (Wong Teck Ching Andy)

Raffles Medical Group: Letter of Intent for proposed hospital development in China
Raffles Medical Group (RMG) announced this morning that it had entered into a non-binding Letter of Intent (LOI) dated 31 Jan 2013 with China Merchants Shekou Industrial Zone, to collaborate on the proposed development of an integrated international hospital in Shenzhen, China. The hospital would have more than 200 beds and is targeted to provide high-end medical services to foreigners and locals in the Pearl River Delta region. Although this LOI is subject to terms being finalised and relevant regulatory approvals, we believe that it highlights the intention of management to expand its hospital operations beyond Singapore. Recall that RMG had also submitted a hospital development tender in Hong Kong last Jul (tender results expected to be out in early 2013). Should these projects materialise, we opine that it would raise RMG’s brand profile in the region and diversify its income streams. As RMG is slated to release its 4Q12 results next Monday, 25 Feb before market open, coupled with its recent share price appreciation, we place our Hold rating and S$2.68 fair value estimate under review. (Wong Teck Ching Andy)

Wilmar: Much stronger-than-expected FY12 earnings
Wilmar International Limited (WIL) has posted a much stronger-than-expected set of FY12 results. Although reported net profit was down 21.6% at US$1255.5m, core earnings at US$1167.0m (down 23.1%) were still 14% ahead of our forecast. We note that the outperformance came mainly from a 32% jump in PBT from its Palm & Laurics division; this driven by the revised Indonesian export tax structure. WIL has declared a final dividend of S$0.03/share (versus S$0.031 last year), bringing its total dividend to S$0.05 for FY12, or 18% lower than last year. Going forward, management remains “cautiously optimistic” about its long-term prospects. We will have more after the mid-day analyst briefing. For now, we place our Buy rating and S$3.52 fair value under review. Note that the stock has jumped 18% since we upgraded it on 9 Nov 2011. (Carey Wong)

Yangzijiang Shipbuilding: Results largely in line; four more contracts ceased
Yangzijiang Shipbuilding (YZJ) reported a 32% YoY fall in revenue to RMB3.6b and a 22% drop in net profit to RMB807.7m in 4Q12, bringing full year revenue and net profit to RMB14.8b and RMB3.6b, respectively. Results were largely in line with our expectations, with both revenue and net profit 4% shy of our full year estimates. Four shipbuilding contracts were ceased in 4Q12, affecting the original delivery schedule. Hence the group only delivered 12 vessels in the quarter. The commercial shipbuilding industry is still in its down cycle and the operating environment continues to be difficult and challenging. Pending an analysts’ briefing later this morning, we maintain our HOLD rating but our fair value estimate of S$0.95 is under review. (Low Pei Han)

Singapore Economy: 2013 growth forecast remains at 1.0-3.0%
According to the Ministry of Trade and Industry (MTI), Singapore’s economy grew by 1.5% in 4Q12, better than the street’s expectations of a 1.2% growth, as well as the zero growth seen in 3Q12. On a seasonally-adjusted annualized basis, the economy expanded by 3.3% QoQ, compared to the 4.6% contraction in 3Q12. Manufacturing grew by 3.1% QoQ vs 3Q12’s 16.6% decline, largely due to a rebound in biomedical output and transport engineering. Construction contracted by 3.9% while services grew by 2.5% QoQ. All these factors brought 2012 growth to 1.3%. For 2013, the official growth forecast is maintained at 1.0-3.0%, but key risks include the fiscal cutback in the US and the Eurozone debt crisis. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Mon Feb 25, 2013 8:57 am    Post subject: Reply with quote

Key Idea
Neptune Orient Lines: Is the worse over?
We were disappointed by Neptune Orient Lines's (NOL)
4Q12 performance. Although there were YoY
improvements, NOL still registered a net loss of US$98.1m.
On a full-year basis, NOL saw revenue inch higher by 3.3%
YoY to US$9,511.6m with net losses falling to US$419.4m
from US$478.2m. This set of results force us to re-evaluate
the timing of NOL's turnaround, and we expect 1Q13 to
remain loss-making. Nonetheless, the stabilisation in overall
freight rates remain encouraging and we maintain our view
that NOL will return to full profitability by the onset of the
peak season. Coupled with NOL's manoeuvrability in terms
of capacity management, we maintain BUY on NOL with an
unchanged fair value of S$1.38.
More reports:
- Bumi Armada: Decent FY12 results
- Yangzijiang Shipbuilding: Results largely in line; four more
contracts ceased
- Wilmar: Downgrade to HOLD; positives priced in
- Raffles Medical Group: 4Q12 results within expectations
News Headlines
• US stocks rose on Friday after better-than-expected
results from H-P and a positive report on German
business confidence. The Dow climbed 0.9% to
14,000.57 (up 0.1% for the week).
• Aztech Group announced FY12 PATMI of S$230k, versus
a loss attributable to shareholders of S$25.0m a year ago
(FY11 impairment loss on vessels of S$19.4m).
• VibroPower reported FY12 PATMI of S$2.2m, up 855% on
the back of a 24% increase in revenue to S$39.1m.
• HL Global Enterprises’ net loss for FY12 attributable to
owners of the company was S$2.6m, versus a loss of
S$5.9m the prior year. It has recorded pre-tax losses for
the three most recent consecutive financial years.
• Baker Technology posted 4Q12 net profit of S$2.75m,
down 3%. Revenue had declined 50% to S$16.4m.
Key Singapore Indices
Close Chg % Chg
STI 3288.1 0.5 0.0
Catalist 176.1 1.0 0.5
Finance 837.4 -0.8 -0.1
Property 816.4 -3.2 -0.4
Electronics 552.9 -1.8 -0.3
Vol(m) 4604.9 -1494 -24.5
Val(S$m) 1691.4 22.7 1.4
World Indices
Close Chg % Chg
Dow Jones 14000.6 120.0 0.9
Nasdaq 3161.8 30.3 1.0
S&P500 1515.6 13.2 0.9
FTSE 6335.7 44.2 0.7
KLCI 1622.1 8.0 0.5
Hang Seng 22782.4 -124.2 -0.5
Nikkei 11385.9 76.8 0.7
SET 1540.1 11.4 0.7
KOSPI 2018.9 3.7 0.2
TWSE 7986.9 39.2 0.5
Market Statistics (SG)
STI 52-week range 2,699 3,319
No. of gainers 303
No. of losers 250
No. of unchanged 165
Economic Statistics
S$/US$ 1.2 0.0
Yen/US$ 94.2 0.8
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 93.1 0.3
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
25 Feb 2013
2
Neptune Orient Lines: Is the worse
over?
● 4Q12 missed our forecasts
● Turnaround still on; just delayed
● Leaner NOL to cope well
Positive end to year failed to materialise
Neptune Orient Lines's (NOL) 4Q12
performance disappointed us as our forecasts
called for another positive performance.
Although there were YoY improvements - its
revenue grew 4% YoY to US$2,498.6m and
net losses narrowed to US$98.1m from
US$320.4m - continued weakness in demand
on the Asia-Europe and Intra-Asia routes
negated the higher freight rates enjoyed by
the liner in the seasonally weaker quarter.
On a full-year basis, NOL saw revenue inch
higher by 3.3% YoY to US$9,511.6m and net
losses fell to US$419.4m from US$478.2m.
Is the worse over?
Yes and no. Management states that the
Group will likely post an improvement in
results, and our FY13 projections - assuming
no further deteriorations in volumes for FY13
- agree with this assessment. However, the
disappointment over its 4Q12 results forces
us to re-evaluate the timing of this
turnaround. In addition, while overall freight
rates according to the Shanghai
Containerized Freight Index have indicated
slight increases, bunker fuel prices have also
ticked higher. Therefore, 1Q13 will likely
remain in a marginal net loss position, and
the return to profitability for NOL will be
delayed to the onset of the peak season.
Still a turnaround; maintain BUY
Collective action by major container shipping
lines continue to be encouraging with general
rate increases across the board, and this will
help to provide a supportive base for the
liners in 2013. Nonetheless, the more
pertinent factor remains capacity
management across the industry. NOL has
charters of 27 vessels totalling 152K TEUs
expiring between 2013 and 2014 so there is
some manoeuvrability for the Group. Coupled
with the lower cost base resulting from the
conclusion of its Efficiency Leadership
Programme, we maintain BUY on NOL at an
unchanged fair value of S$1.38. (Lim Siyi)
. . . . .
Bumi Armada: Decent FY12 results
● FY12 net profit RM386m
● FPSO, OSV and T&I performed well
● Maintain HOLD
FY12 results within expectations
Bumi Armada Berhad’s revenue and net
profit increased by 7.5% and 7.3% to MYR
1.7b and MYR386m respectively for FY12 ,
driven by stronger contribution from its
FPSO, OSV and T&I (Transport and
Installation) divisions. The results were
within ours and the street’s expectations.
FY12 PATMI margin was flat at 23.3%. On a
sequential quarter basis, 4Q12 net revenue
was flat at MYR478m, while net profit
improved 15.1% QoQ to MYR110m, partly
due to a change in depreciation policy (more
below). The group also declared a final cash
dividend of 3 MYR cents for 2012 (2011: 2.5
MYR cents).
Change in depreciation policy
According to Bumi Armada, the useful lives of
selected offshore vessels (OSV) and derrick
lay barge were increased from 20 to 25 years
and 25 to 30 years to “reflect the design and
operating capabilities of these vessels”. This
resulted in a reduction in depreciation charge
for MYR 24.5m for FY12. If there had been
no change in its depreciation policy, we
estimate FY12 net profit to remain flat at
MYR366m (+1.8%), instead of the reported
MYR 386m (+7.3%).
Key divisions performed well
FY12 revenue from its FPSO business
increased to MYR716m (+17.5%), helped by
a full year contribution from its Apache FPSO
project. Earnings from the ONGC-D1 FPSO
were accounted as share of results from
jointly controlled entities. OSV revenue
improved to MYR551m (+14.3%) on
increased fleet size and higher utilization
rate. Transport & Installation (T&I) division
reported revenue of MYR388m (+60.3%),
mainly due to contribution from the new
LukOil contract. The only laggard was the Oil
Field Services (OFS) segment which had
suffered from absence of new contracts in
the past year.
OCBC Investment Research
Market Pulse
25 Feb 2013
3
Positive outlook
Looking ahead, management believes that
the long-term outlook for the offshore oil &
gas service sector remains positive and
anticipates robust capital expenditure as the
search for deepwater oil continues. However,
we feel that current valuations – at 21x PER
and 2.6x PBR – provide limited upside
potential. Maintain HOLD with unchanged
fair value estimate of MYR3.48. (Chia Jiun-
Yang)
. . . . .
Yangzijiang Shipbuilding: Results largely
in line; four more contracts ceased
●First dip in annual net income since
listing
●New orders, but also cessations
●No change in bleak industry outlook
FY12 results within expectations
Yangzijiang Shipbuilding (YZJ) reported a
32% YoY fall in revenue to RMB3.6b and a
22% drop in net profit to RMB807.7m in
4Q12, bringing full year revenue and net
profit to RMB14.8b and RMB3.6b,
respectively. Results were largely in line with
our expectations, with both revenue and net
profit 4% shy of our full year estimates. This
is also the first time that YZJ’s annual net
income dipped since its listing in 2007. Four
shipbuilding contracts were ceased in 4Q12,
affecting the original delivery schedule.
Hence the group only delivered 12 vessels in
the quarter.
Four new orders, but four contracts also
ceased
Despite stiff competition in the shipbuilding
industry, YZJ secured US$360m worth of new
orders to build four units of 10,000 TEU
containerships in Jan 2013 after Seaspan
exercised its options. We are estimating
single-digit gross profit margins for these
contracts. Management has indicated that
the group would be willing to take on orders
even if they are near break-even levels.
Increases HTM assets to RMB11.4b
YZJ increased the amount invested in heldto-
maturity assets from RMB9.78b in 3Q12 to
RMB11.38b in 4Q12. This compares with
RMB10.47b in 4Q11. Along with the increase
in investment, net provisions of RMB99m
were made in FY11, accounting for 2.8% of
FY12’s net profit. Returns on the investments
range from 10-12% for government related
customers and 12-15% for non-government
related ones.
Industry outlook remains challenging
The commercial shipbuilding industry is still
in its down cycle and the operating
environment continues to be difficult and
challenging. We still expect 2H13 to 1H14 to
be the most difficult period for the group,
based on its order book (US$3.4b as at 22
Feb 2013) and delivery schedules. Maintain
HOLD with fair value estimate of S$0.95,
based on 8x blended FY13/14F earnings.
(Low Pei Han)
. . . . .
Wilmar: Downgrade to HOLD; positives
priced in
● Outlook more upbeat
● Most positives priced in
● Downgrade to HOLD
Better-than-expected FY12 showing
Wilmar International Limited (WIL) has
posted a much stronger-than-expected set of
FY12 results. Although reported net profit
was down 21.6% at US$1255.5m, but core
earnings (down 23.1%) at US$1167.0m was
still 14% ahead of our forecast. We note that
the outperformance came mainly from 32%
jump in PBT from its Palm & Laurics division;
this driven by the revised Indonesian export
tax structure. WIL has declared a final
dividend of S$0.030/share (versus S$0.031
last year), bringing its total dividend to
S$0.05 for FY12, or 18% lower than last
year.
OCBC Investment Research
Market Pulse
25 Feb 2013
4
Outlook slightly more upbeat
Going forward, management remains
“cautiously optimistic” about its long-term
prospects. On growth drivers over the next
two years, management believes that its
fledging flour and rice business in China
would continue to put in strong double-digit
growth, and potentially be a larger market
than for cooking oil. We understand that WIL
is also looking to expand its plantation
business further in Africa and even Myanmar,
the largest country in mainland SE Asia.
Separately, WIL and Noble Group has formed
a 54:46 JV that will own 23k ha of land for
palm production in Papua, Indonesia; the JV
will also jointly explore and develop further
palm oil opportunities there.
Stabilizing but positives priced in
From the 4Q operating numbers, it does
appear that the operations are stabilizing. As
such, we bump up our valuation from 13.5x
to 15x FY13F EPS, which in turn raises our
fair value from S$3.52 to S$3.90. But we
suspect most of the positives may already be
priced in, given that the stock has rallied by
as much as 26% since we upgraded our call
on 9 Nov. But in view of the limited upside,
we downgrade our call to HOLD; would be
buyers closer to S$3.50. (Carey Wong)
. . . . .
Raffles Medical Group: 4Q12 results
within expectations
Raffles Medical Group (RMG) reported its
4Q12 results this morning which were within
our expectations. Revenue rose 14.9% YoY
and 5.5% QoQ to S$83.0m. PATMI jumped
22.7% YoY and 61.0% QoQ to S$20.2m. For
FY12, revenue of S$311.6m represented a
14.2% increase, and just 0.1% shy of our
forecast. Reported PATMI rose 12.8% to
S$56.8m. However, if we exclude the fair
value gain in investment properties
amounting to S$3.9m, we estimate that core
PATMI rose 9.7% to S$52.9m, forming
99.3% of our earnings projection. The
improved performance was attributed to
growth from its Hospital Services and
Healthcare Services divisions, which both
saw a double-digit jump in revenue (16.1%
and 11.4% respectively). The former was
driven by higher patient loads, a wider range
of medical specialties on offer and the
recruitment of more specialist consultants. A
final dividend of 3.5 S cents/share was
declared, bringing full-year DPS to 4.5 S
cents and translates into FY12 yield of 1.4%.
This is slightly higher than our 4 S
cents/share forecast. We will provide more
updates after the analyst briefing. Given the
YTD appreciation in RMG’s share price, we
place our Hold rating and S$2.68 fair value
estimate under review. (Wong Teck Ching
Andy)
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