Friday, July 30, 2010

GMG Global

GMG Global reported 2Q net profit of $9.5m vs $6.3m in 1Q10 & recersing $3.8m loss in 2Q09. Revenue doubled to $80.7m but was down from $82.8m in 1Q. In 2Q, rubber sold amounted to 19,069 tons (+4% yoy but -10% qoq) & prices averaged $4,233/ton (+102% yoy, +8.5% qoq). Group highlighted it is on track to increasing tonnage output by double digits and remain positive on the fundamentals of the business and longer-term prospects for natural rubber.

Rubber prices have been firming up on concerns of low stockpiles and demand from US and Europe remains firm although the balance of forward long term contracts entered by its tyre maker customers may pose some challenges for the group in the 2H. GMG is the only pure natural rubber co listed in Spore and has supplied processed rubber and latex to big tyre makers such as Goodyear and Bridgestone.


DBS posts un unexpected 2Q10 loss of $300m after taking a $1.02bn goodwill charge on its HK business. Excluding this one-ff item, core earnings grew 30% to $718m, above consensus estimate of $572m. The core out-performance was due to faster loans growth, trading gains, cost discipline and decline in specific provisions.

Operating trends strengthened as DBS expanded its loan market share and customer-driven non-interest income. Loans grew 9% but was offset by a decline in NIM by 9bps to 1.84%. Non-interest income rose by 16% on the back of a 5% increase in fee income and 21% increase in trading income. Operating costs was well contained with expense ratio at 39.5%.

NPL ratio decreased from 2.8% to 2.3%. Allowance coverage exceeded 100% as additional general allowances were taken and asset quality continues to improve. Book value fell to $10.88 from $11.20 in 1Q. The bank declared an interim DPS of 14¢/share, same as the previous period.


KepCorp formed a 75/25 JV with Seafox Group to build and own a US$220m wind turbine installation vessel with a carrying capacity of 12 turbines & capable of operating in water depths of up to 65m in the North Sea. The harsh environment multi-purpose self elevating vessel is scheduled for delivery in 2Q012. Seafox has the option of acquiring Keppel’s stake in the JV co.

This vessel is larger than the US$130m jack-up vessel contract that Cosco recently clinched, which is designed to carry 8-12 turbines at water depths of up to 45m. While the majority of existing offshore wind farms are located in water depths less than 45m, those coming online are expected to move further offshore and into harsher environments such as the North Sea, where wind speeds are higher, more constant and thereby requiring more robust solutions.

There is also an increasing trend towards larger wind turbines which are heavier. KepCorp will have a competitive edge as it virtually has a monopoly of building harsh environment jack up platforms for the North Sea area.

There is a growing market potential for servicing the emerging offshore wind energy sector, esp in deeper waters. The UK expects to install some 8,000 offshore wind turbines in the next decade, of which some 2,700 turbines would be required at water depths greater than 45m. The new gen KFELS MPSEP vessel is among the first on order worldwide that is capable of fulfilling this water-depth requirement and will give KepCorp a good headstart in this new business segment.


Semicon/UMS: TSMC, the world's largest chip maker, released 2Q10 result better than the forecast. TSMC said strong wafer shipments from growing customer demand for electronic gadgets lifted its 2Q net profit to a record and raised its capital expenditure target for this year to a record US$5.9b from its previous target of US$4.8b (previous consensus: US$5.2-5.3b). The Mgmt also revised upwards growth expectations of 30% this year for the global semicon industry, from a previous forecast of 22%


SATS: Net profit rose 10% YoY to $44.3m though if 1Q10 results are adjusted for $6.1m in Jobs Credit aid that did not recur in the latest quarter, actual YoY growth would have been 29%. Aviation-related non-food business grew 10% YoY, in line with the number of passengers handled (+14%), flights handled (+7%) and cargo tonnage (+13%). The food business also did well. Inflight catering revenue rose 8% YoY, reversing its decline of the past six quarters, while non-aviation revenue grew 9%.

According to mgtm, Coolport has started operations on 17 June but we do not expect start-up costs in the short term as existing customers such as SIA, Qantas and BA are being cut over to the new facility. In fact, SATS was optimistic that the new capabilities of the perishables handling centre will attract new customers within the next 12 mhs. KE maintains its BUY recommendation on SATS with a higher TP of $3.48. Catalysts include new customers for CoolPort, M&A and potentially higher div.


OKP announced a record 2Q10 net profit of S$4.3m (up by 18% yoy) on the back of $39.8m (up 25% yoy). The main growth driver came from its Construction segment (+42% yoy) which saw a higher percentage of revenue being recognised from a few large construction projects that were underway in the 1H10. This segment accounts for 84% to the total revenue while the rest was made up by the Maintenance segment with 16%.

Subsequently, it also saw an improvement in its GPM from 15.6% to 16.8% in the 1H 2010 mainly because some key construction projects were able to command better GPM. The group has a strong balance sheet with net cash position of S$85.0m (or 31.0 cents per share). This works to about 65% of the Group’s market cap. Mgtm has declared an interim dividend of 1.0 cent per share, representing a payout ratio of 34%.

To date, the Group’s order book stands at S$312.0m based on secured civil engineering and construction contracts, with some projects lasting up to 2013. The stock currently trades at 7.7x FY10 and 6.3x FY11 PER.


Noble: trading halt. Separately, Noble’s founder Richard Elman will handover Executive Chairmanship to Tobias Brown, who has rejoined the firm after previously resigning from his former role as non-executive Chairman . Richard Elman will remain with the firm as Chairman Emeritus.

MCL Land

MCL Land: record 1H10 net profit of US$169.2m as expected, mainly driven by Waterfall Gardens at Farrer Road. MCL Land is on track for a bumper year, to be boosted by sales of the 50-unit D’Pavilion when it is completed in 2H10. FY11/12 earnings have also been locked-in, as the fully-sold The Peak@Balmeg and Parvis at Holland Hill TOP in the respective years...

MCL Land had previously written-down US$134m against a number of its unlaunched properties. Market prices have since rebounded. Assuming all projects are launched and full write backs are made, we est NAV/sh would increase by 20% to $3.02.
We expect MCL to match last year’s div of 12.5 cts/sh, translating to an attractive 6.7% yield. KE maintains BUY with a target price of $2.76, pegged at a 25% discount to RNAV of $3.68/share.

Thursday, July 29, 2010

CapitaRetail China Trust

CapitaRetail China Trust: the street is mostly neutral or underweight this counter, mainly on valuation grounds. While recent results were ok, growth prospects appear lackluster as trust sponsor is unlikely to inject any assets this year, and third party acquisitions still remain challenging. Near term, organic growth is expected to be tepid, driven by only two key assets, Wangjing Mall and Xizhimen Mall on the back of their rental reversions.


CWT: KE has a Buy call with $1.25 target, pegged to 18x core FY10 PE. We think that CWT is currently undervalued. Taking into account the Cache Reit transactions, we estimate CWT’s BVPS at $1.01, and net cash/sh of $0.51, vs last traded at $0.915. On the back of its huge cash war chest, catalysts include prospect of special dividend payout, and announcement of earnings-accretive M&A.

Mapletree Logistics

Mapletree Logistics bought another 3 properties in Japan for $200m, its largest acqn ytd. The group has been on the acqn drive since Dec 09 & purchased 9 assets in Japan, S’pore & Vietnam worth a total of $429m. The latest deal comprises 3 distribution centres with auxiliary office space located in key logistics hubs in the Kanto region and come with an initial yield of 7.3% and fixed lease over 8-10 years. DPU accretion is expected to be higher by 0.3¢.

It will be debt funded, raising gearing from 38.8% to 43.6%, indicating that further acqn growth would require some equity raising. With its regional footprint, diversified portfolio & aggressive expansion, MLT is trading at an attractive FY11 yield of 7.2% and 1.0x P/B.


Equation: hires Philip Securities as agent for placement of up to 10m new shares at issue price at S4.5cts/sh, ~18% discount to last close at S5.5cts. Net proceeds of $445k to be used for working capital and to fund business growth and possible investment opportunities. Dilution to current share base is small at 0.5%. Shares halted this morning pending another announcement.

Genting Singapore

Genting Singapore: may rise on hopes for stronger-than-expected performance by Resorts World Sentosa following rival Las Vegas Sands' return to profitability in 2Q10 on contributions from Marina Bay Sands. LVS' earnings at US$41.8m vs US$175.9m loss a year earlier. This is a strong start as MBS is not near full ramp-up. LVS' results follow recent data from Singapore Tourism Board showing tourist arrivals to city state +27% yoy in June to 950k. CLSA rates as Outperform with $1.30 target.


Breaktalk: to expand footprint into Thailand by bringing in the Din Tai Fung franchise. Its 70% owned subsidiary, Taster Food, will invest in a 49/51 JV with certain Thai partners to operate this franchise in Thailand. This investment will be financed using internal resources, and is not expected to have material impact on EPS or NTA on the compay.


OCBC: 1Q10 GEH contributed $146m (22%) of OCBC’s group profit of $676m. Hence, the 59% drop in GEH’s 2Q earnings could impair OCBC’s 2Q profit by ~13%. Further, OCBC also booked $232m of trading gains from treasury ops and investment securities in 1Q, which is unlikely to be repeated given the more difficult market conditions in 2Q, Citigroup is forecasting OCBC to post a 2Q profit (results due Aug 2) of $558m (down 17.5% qoq) largely on an expected fall in other income.

OCBC closed at $9.10, just shy of its post-financial crisis high of $9.20.

Great Eastern

Great Eastern reported weak 2Q10 net earnings of $74.4m (-24% yoy, -59% qoq) due to lower profits from insurance ops, which slumped 51% qoq to $75m. Company attribute fall to poor investment performance arising from concerns relating to eurozone debt, as bond and equity prices around the world fell sharply. Profit from investments -68% qoq due to a loss on sale of investments & changes in fair value. New sales rose 23% qoq to $166m, boosted by sale of ILP premium products in M'sia.

Fees & other income +9% qoq to $18.4m due to the growth in AUM by Lion Global Investors, which rose to $27.8b. 2Q NAV stood at $7.90 vs ROE of 8.4%. Despite traditionally better 2H, group cautioned that its future performance may be affected by interest rate changes & volatility in the financial markets arising from eurozone debt issues & possible economic challenges in US, Europe & China. Citigroup has downgraded the stock to from a buy to sell with TP of $15.50 based on 1.2x P/Embedded value.


CAPITAMALLS Asia: According to CEO, Lim Beng Chee, CMA has a potential war chest of some $2.5-3 bn for developing and buying malls, and it will be targeting its firepower at Singapore, China and Malaysia. Currently, the group is sitting on around $1 bn of cash, which includes proceeds from the listing of CapitaMalls Malaysia Trust (CMMT) and the sale of Clarke Quay to CapitaMall Trust. With that, the group can borrow another $1.5-2 bn for investments.

With that, the group can borrow another $1.5-2 bn for investments. CMA is eyeing state land for mall developments, and it is particularly keen on areas where it already has a presence. These would include the Jurong district, where IMM and the upcoming JCube are. Another plot of interest is the one at Stamford Road/North Bridge Road, where Capitol Theatre is. Raffles City Singapore, which CMA has a stake in, is right next to the station. Besides S'pore, China remains a key growth mkt for CMA.

The Chinese government is trying to boost domestic consumption for economic growth and CMA can benefit from that trend. In Malaysia, CMA is also looking to acquire or develop malls. It is setting up a RM1 billion (S$428 million) fund for this. The stock is now trading below its IPO offering price of $2.12 after its spectacular debut last year.


Yangzijiang: another step closer to completing its TDR listing. Becomes the first S-chip to receive approvals from all relevant Taiwanese authorities (TSE, Taiwan Central Bank, Securities and Financial Bureau, FSC, Executive Yuan) for listing of up to 100m new shares and 20m vendor shares. Other S-chips also jumping onto the bandwagon, with Dukang Distillers (formerly Trump Dragon) being the latest company to propose a TDR listing as well.


Broadway: 2Q10 profit jumps 34.9% yoy on revenue of S$141m up marginally 1.7% yoy. Gross margin improves from 13.3% to 16.6%. Adjusted for non-operational and unrealized mark-to-market forex charge of S$2.9m, its profit records a 65% yoy increase. It proposes interim dividend of S$0.02(1H09: S$0.01). However, Broadway feels lukewarm HDD demand in 2Q with 11.4% yoy decrease. HDD still contributes 70% of revenue, so this segment drags total revenue down 6.2% qoq and earnings down 17% qoq…

Although the Mgmt declares HDD is in line with seasonal weakness and non-HDD sectors like semicon and foam plastic offset the impact, HDD may have yet to hit the bottom of the most-recent sector sales cycle. Broadway still heavily depends on HDD, compared with Armstrong (30% rev from HDD), whose result is on Aug 12, so headwinds would weigh more on Broadway in 2H. Seagate and WD’s 2Q revenue declined 12% and 9% qoq, respectively, anticipating single-digit qoq in 3Q that disappointed investors.

Fraser Commercial Trust

Fraser Commercial Trust: 3QJun10 results. Gross revenue +29% yoy to $29.2m, due to full qtr contributions from Alexandra Technopark. Total distributable income +123% yoy, driven by stronger AUD, and lower finance costs as company pared down debt. DPU +39% to 0.25cts, translates to annualized 6.7% yield. Portfolio occupancy rate was up 0.7% pts qoq to 93.1%, with portfolio wt avg lease term of 4.1yrs...

Mgt positive on outlook, on the back of more leasing enquiries, better take-up rate in both SG and Perth, and improved rental rates. Assets in the pipeline available for acquisition from its sponsor include Alexandra Point (198k sqft), and Valley Point (222k sqft). Stock last traded at $0.15 vs NAV/sh of $0.26.

Kruez Hldgs

Kruez Hldgs: to debut on SGX this morning. IPO priced at $0.27/sh, translates to 6.9x FY09 PE. Comprises 80m new shares, of which retail/insti split is 6 / 94. Was oversubscribed by 5.7x. Two-thirds of $19m proceeds to be used for acquisitions of remotely operated vehicles (ROV) and diving systems, remaining one-third to be used for working cap. Kruez, a spin-off from Swiber, is a subsea solutions provider that carries out inspection, repair, maintenance work for offshore oil & gas production and pipeline facilities. It counts Swiber and Allseas Marine Contractors as it main customers. Current orderbook valued at US$133m, to stretch over the next 5 yrs.


Singpost: 1Q11 net profit rose just 3% to $40.6m, in line with our house’s expectation. We note that its operating expenses (+19%) outpaced revenue (+13.5%) as labour, traffic and finance costs jumped sharply following the consolidation of Quantium Solutions, the cessation of Jobs Credit aid, the onset of higher international terminal dues and additional interest charges from a $200m FRN issued last year. The usual quarterly dividend of 1.25 cents was announced.

SingPost has recently geared up its balance sheet for M&A via a 10-year $200m fixed rate note. Pending deployment, we understand that 19% of the funds have been parked in ELNs and this could introduce volatility to its P&L in future. On the positive note, the rise in international postal terminal dues may not be as negative as originally expected. Management originally guided for an adverse impact of 5% on net profit but they are now indicating it could be less.

KE maintains HOLD on SingPost with a higher TP of $1.25 (based on 15x FY11 EPS). We believe the share price will continue to be supported by its stable dividend yield of 5.5%.


OCBC may be closely watched on concerns 2Q10 earnings may disappoint as 87% owned Great Eastern reports 23.8% on-year fall in 2Q10 net profit to $74.4m due to poor investment returns; OCBC closed +0.8% at $9.10, GE down 0.6% at $16.70.

Lian Beng

Lian Beng reported FY10 net profit grew by 41.3% yoy to $24.04m while revenue was up 12% to $345.71m. The better earnings were driven by a broad-based performance across its construction, property development and ready-mixed concrete divisions. Notably, GPM was higher at 13% compared to 12% previously. Due to the repayment of some of its loans, net gearing also decreased sharply to 0.17, compared to 0.67 in FY09. As at end-May 2010, cash and cash equivalents increased nearly 3x to to $70.8m.

In view of its strong cashflow, Lian Beng is declaring a first & final cash dividend of 0.4 cent per share, and a special dividend of 0.4 cent per share. This represents a dividend payout ratio of 17% or yield of 2.7%. YTD, Lian Beng was awarded 5 building contracts worth about $530m for the construction of private residential developments.

The addition of these contracts, coupled with the $88m condominium contract at Spottiswoode Park Road secured at the beginning of FY11 brings its total order book to $846m. The stock currently trades at 6.5x FY10 PER.

Wednesday, July 28, 2010

Sembcorp Industries

Resistance 2: $4.60
Resistance 1: $4.43
Support 1: $4.05
Support 2: $3.85

This counter is trading within a narrow range. For upside, it needs to break above the channel resistance to confirm a stronger movement with the next test of resistance near $4.60.

ST Engineering

Key levels
Resistance 2: $3.50
Resistance 1: $3.33
Support 1: $3.19
Support 2: $3.10

ST Engineering is set to continue its bullish trend with the candlesticks moving within the ascending channel and prices above the key moving averages. The counter needs to accelerate above $3.33 resistance level for further upside.

Keppel Corp

Resistance 2: $10.16
Resistance 1: $9.35
Support 1: $9.00
Support 2: $8.65

Keppel Corp continues its uptrend and candlesticks are moving within the ascending channel. Prices are reading above the 100‐ and 200‐day moving averages.


Informatics: Singapore Informatics Computer Institute (SICI) was featured favorably in an article in a Sri Lankan newspaper, over the week end. It discusses how the end of the 30yr war in Sri Lanka could spur growth for local education providers, and how SICI, as one of the most reputable private education providers in Sri Lanka could benefit from the rising demand.


Unifiber has received a letter of demand from its Chinese vendor for the repayment of a US$23m debt relating to its wood chip mill. The group has repaid US$1m in Jul and is negotiating for a restructuring of the debt with the Chinese party. Meantime, it has obtained a US$5m loan from a potential investor, Falcon Capital to part-pay the debt. The company has lifted its trading halt this morning.


OCBC says it will hold on to its stake in F&N and has no plans to divest its long term investment. OCBC owns a direct 3.3% stake while controlling another 10.57% via 85% owned Great Eastern. Going by its past acqns in Lion Nathan & San Miguel, market watchers suggest that Kirin could be eyeing at least 20% stake vs the current 14.7% it acquired from Temasek, in order to gain strategic control.

We do not believe Kirin’s long term interests lie in F&N’s large property exposure, which may lead to an eventual breakup of F&N’s brewery (to Kirin?) and property (retained by OCBC) businesses.

Tiger Air

Tiger Air: the Singapore Air Traffic Rights Committee recently reallocated more Singapore-Jakarta flights to Tiger Airways from rival Jetstar. As a result, Tiger Airways doubled the number of flights to Jakarta as of last week. Tiger now gets twice as many non-stop services at 14 a week, while Jetstar's flights are reduced to 17 from 24. We view this as a positive affirmation of Tiger's competitive advantage. Jetstar says it is in talks to appeal against the decision and the results are expected in two weeks, while Tiger has declined to comment on the issue.

CDLH Trust

CDLH Trust: posted strong 2Q10 results. Gross revenue +52% to $30.7m, as the sustained growth in tourist arrivals drove up demand for hotel space. Average occupancy was 88.5%, vs a mere 75.4% one yr ago. Avg daily rate +23.6% yoy to $220. RevPAR +45.4% yoy to $195. DPU +39% to 2.87cts, translating to 5.9% annualized yield. Mgt positive on outlook, expects further phased introduction of more attractions at the integrated resorts, and major events such as F1 Singapore, to spur hotel demand...

Recent fund raising via a $200m private placement and $1bn Multicurrency MTN, have resulted in a stronger balance sheet, and give CDLH the flexibility to pursue more acquisitions in future.

Ho Bee

Ho Bee has emerged as the top bidder for a Buona Vista commercial site putting in $411m or $342 psf GFA. This was 7% above the other bid by Mapletree at $384m. With a max 1.2m sf GFA, the office cum retail development will be targeted at research institutes at One-North business park. Breakeven cost is around $950 psf, implying a yield of 4-4.5% based on the current rentals of $4.50-5.00.

This acqn is a departure from Ho Bee’s past focus on high end residential projects and could signal the difficulties of replenishing its landbank. Completion of projection is likely to take 3 years, which will mean the group will avoid the large supply of office space coming onstream till 2013. Prefer Keppel Land, CapitaLand and CCT for the office recovery play.

Mermaid Maritime

Mermaid Maritime announced that its majority owned subsidiary MTR‐1 Ltd. has secured a letter of award from a client operating in the Middle East for accommodation barge support services utilizing the ‘MTR‐1’. Under the deal, it is expected to commence mobilization to the Middle East in early August 2010 and expected to be engaged for a minimum of 160 days, including mobilization and demobilization time. MTR‐1 Ltd. is expected to generate approx US$3.2m in revenue from this contract.

Mgtm sees this as a positive move and believe that there is potential for additional accommodation barge support work for the MTR‐1’ in the Middle East beyond this first contract.


BIOSENSORS reported sales in 1Q11 rose by 39% to US$33m mainly due to a 53% jump in sales of drug-eluting stents, which represents increased traction of its BioMatrix system in existing markets as well as continued expansion through regulatory approvals in new geographic areas such as France, Korea. Notably, overall GPM for product revenues came to 73%, up from 69% last year although operating expenses increased by about US$3m to US$17.5m due to higher sales and marketing expenses.

However, net profit of US$3.24m for the 1Q was down 23% YoY as a result of a one-off charge of US$5.97m related to the closure of its US operations. Otherwise, profit before exceptionals totalled US$11.5m, up from US$4.8m last year. Mgtm believes that this reorganization will produce annual cost savings between US$4.0m to US$6.0m starting in FY12. The Co has maintained its FY11 revenue guidance of US$135-145mn set earlier this year despite the weak Euro. Nomura has a BUY rating and TP of $1.20.

Genting S’pore

Genting S’pore will be releasing its 2Q results on 12 Aug. DB is forecasting 2Q revenues of $754m (+64% qoq) and Ebitda of $314m (+151% qoq). Resorts World Sentosa will a/c for 85% or $643m of total revenues, up from 1Q’s $335m reaped over 46 days of operations vs 91 days in 2Q. Gross daily gaming is expected to decline 10% from $8.5m in 1Q to $7.7m due to the opening of Marina Bay Sands in late Apr but Ebitada margin is projected to improve to 41% from 27% in 1Q.

The 2Q forecast would bring 1H10 Ebitda to $439m, which would suggest upside risk to street estimate of $787m for full year 2010. DB has a TP of $1.45 for the stock, believing that current share price under-estimates S’pore gaming market potential.

Monday, July 26, 2010

Parkway (Breaking News)

Khazanah to launch $3.95 general offer for Parkway

Ascendas India Trust (follow up)

Ascendas India Trust (follow up): off 3.1% at 2-week low of S$0.955 as lower June-quarter payout weighs. JPMorgan has Overweight call with $1.10 target. Notes occupancy level healthy at 97% vs 63%-92% for markets where REITs' properties are located. Says an improving office outlook to keep performance stable. Expects reit to seek more acquisitions, build more properties to drive growth, with capacity to take on up to S$350 million more in debt before reaching gearing limit.


Suntec: JPMorgan upgrades to Neutral from Underweight, increases target to $1.40 from $1.25 after raising FY10-13 DPU est by 8%-14%. Sees less pressure for 2011 rental renewals, as Suntec's portfolio is more exposed toward smaller tenants in the resources, shipping and legal services sectors, and not in the traditional grade-A space where significant new supply is expected to come on stream.

Singapore Airlines

Singapore Airlines is projected to swing to a 1QFY11 net profit of $236m after incurring $307m net loss same period last year, as global economic recovery boosts leisure, business travel and increased cargo movement. Both passenger (+8.8%) and cargo (+12.1%) traffic saw strong demand and tight capacity in 1QFY11. Results due after market close. Stock last +0.1% at $14.80.

*Genting Singapore*

Genting Singapore: Goldman Sachs upgrades to Neutral from Sell, to reflect increased optimism over gaming sector. Raises target price to S$1.15 from S$0.79. Says company proving to be stronger competition than Marina Bay Sands, with Resorts World Sentosa still retaining 60% market share, backed by its strong product appeal, strong local infrastructure and a loyalty customer program.

Notes RWS' very strong casino profitability has surprised on the upside, boosted by higher-margin slot revenues, and low VIP cash rebates.

Ascendas India Trust

Ascendas India Trust: 1QJun11 results. Net property income up marginally by 3% to $18.9m, due to more new leases signed. However, distributable income was down 19% yoy, due to loss on forward FX contracts vs gains last yr. DPU also down 19% to S1.66cts giving annualized yield of 6.7%...

Portfolio occupancy remained high at 97%. Mgt expects improvement in 2H10, driven by an enlarged portfolio income base, as1.2m sqft of new space from Park Square (a retail mall in Bangalore) and Zenith (an IT Multi-tenanted Building in Chennai), comes on stream. Stock last traded at $0.995 vs NAV/unit of $0.85.

Raffles Medical

Raffles Medical: 2Q10 results. Revenue +9% to $58.6m, due to better performance across all divisions. Net profit to sh/h +20% to $10.6m, on the back of higher margins due to improved operating efficiencies and scale effects arising from higher patient load factors. Mgt positive on outlook, expects recovery of Asian economies to underpin demand for healthcare services.

Of note is Raffles first foray into the Chinese market via Raffles Medical Shanghai, which manages a medical centre catering to expats and locals. Initial reception has been positive, and Raffles could step up its expansion efforts in China once it acquires more experience. Also, following approval by URA, Raffles is planning to expand its hospital at North Bridge Road to 410k sqft, from the current 308k sqft, which would drive the next stage of growth

Est development costs, including the development premium, would be approx S$80-100m, with construction period est to be about 18 months. Capex to be funded from internal resources.

ASCOTT Residence Trust (ART)

ASCOTT Residence Trust (ART) recorded 2Q10 DPU of 1.87 cts which came slightly below street’s estimate. YTD DPU accounts for about 45% of our house’s full year estimate mainly due to a weaker 1Q. In particular, ART’s S’pore portfolio did not fully capture the recovery in REVPAU as a result of the phased refurbishment exercise. Excluding apartment units that were closed, occupancy rate was 90% compared to 70% for the S’pore portfolio.

The units have been re-launched since July and higher REVPAU (+15% yoy) should be achieved in 2H10. Vietnam - the largest income contributor also disappointed due to lower renewal rates. However, we believe the differing recovery pace in different markets shd continue to underpin ART’s income stability. In the near-term, an acquisition is widely expected, with targets possibly being a portfolio of assets in Vietnam, India, China, and S’pore from its sponsor likely to be funded by a debt and equity combo. KE has a Buy rating with TP of $1.35. Share price is likely to be supported by forward yield of 6.9%.

Fraser Centrepoint Trust

Fraser Centrepoint Trust: 3QJun10 net property income +46% yoy, aided by new contributions from Northpoint 2 and YewTee Point, and strong recovery in Northpoint post completion of AEI. DPU +7% yoy to 2.07cts, translates to 6% annualized yield, not including the $1.6m accumulated over 9M10 retained for distribution in 4Q10. Occupancy remained strong at 99% on positive rental renewals; expiring leases were renewed at 9% higher…

Catalysts include recently commenced $72m enhancement of Causeway Point to be completed over next 30mths. Mgt expects property’s NPI to increase 22% to $51.5m, and deliver 13% ROI, and guides for minimal impact on DPU as AEI to be done in phases thereby reducing occupancy loss. Bedok Point (NLA 81k sq ft, TOP 2H10), and Changi City Point (NLA 207k sq ft; TOP 2H11), currently owned by FCT’s sponsor, are next on the acquisition pipeline. Stock trades at $1.39 vs $1.24 NAV/unit.


CAPITARETAIL China Trust (CRCT) posted net property income of $19.8m for the 2Q FY10, up 1.9% YoY, even though gross revenue fell 2.8% to $29.6m. Mgtm has attributed the lower growth in S’pore-dollar terms to the stronger Sing dollar against the Chinese yuan. In local currency terms, net property income actually grew 8.8% YoY to RMB97.2m while gross revenue grew 3.7% to RMB145.1m, mainly on higher revenue from Beijing's Xizhimen Mall and Saihan Mall in Inner Mongolia.

2Q distributable income rose 7.3% to $12.9m, implying DPU of 2.07 cents. This translates into annualised yield of about 6.6%. Going forward, CRCT remains positive on the Beijing and Shanghai retail markets. June retail sales of consumer goods in China excluding automobiles grew 18.3% YoY to RMB1,233.0 bn. Total retail sales in China also grew 18.2% YoY in the 1H10 to RMB7,266.9 bn. Rent renewals remain positive given the resilient domestic consumption.

Mapletree Logistics Trust

Mapletree Logistics Trust reported amount distributable increased by 8% YoY to $30.9m despite gross revenue staying relatively flat at $52m (due to a repositioning exercise as the trust converted three from single-user to multi-tenanted buildings). We note that the improved results were largely driven by reduction in borrowing costs notwithstanding larger portfolio size. DPU rose 1.4% to 1.5 cents, which translate into annualised yield of about 6.8%.

Also, recent acquisitions have yet to boost results. Recall that MapletreeLog bought five properties since Dec last year but of these, three were completed only in Q2. The trust expects the full benefit from these assets to make an impact from Q3. Mgtm is also upbeat about its prospects as it continues to build its pipeline of acquisitions. The trust still has a comfortable balance sheet with gearing ratio of 38.8% as at end-June 2010.

SIA Engineering

SIA Engineering: Our house maintains Buy; ups target to $5.00 from $4.52, after raising FY11 forecast by 8%, and valuation to 20x PE from 18x PE. 1Q FYMar11 results were above expectations. Sales growth +18% yoy to $288m, led by the maintenance & component overhaul business and fleet management by airlines following the recent rebound in the aviation sectors. Contributions from associates & JVs, a laggard part of SIE’s business, have also begun to catch up, rising 10% YoY, resulting in net profit + 57% YoY to $70.8m. Mgt sanguine on outlook, expects recovery of aviation industry, growth in traffic at Changi and increased utilization of aircraft by customers to further boost its MRO business.

Friday, July 23, 2010

China Hongxing & China Sports

Today, Xtep Intl's Vice President Ye Qi made an bullish comment on the co, saying that it aims to reap more than RMB 5 bn in sales revenue this year. He also added that the mainland's sportswear market value is estimated to swell around 20% in the next three to five years. In addition, he believes that Nike Inc's strategy of cutting prices in Chinese second- and third-tier cities will have a little impact on Xtep International's market share

This could bring some relief to other domestic players such as China Hongxing and China Sports


Ezion has requested for trading halt this morning. Our covering analyst suspect that the co is thinking of raising funds through a placement of new shares, in order to fund their newly established marine base ventures in Australia as well as for other ventures. If so, the dilution may be justified, as Ezion needs cash to fund its aggressive expansion plans.

King Wan

King Wan: secures 4 contracts worth ~$10.8m for Mechanical and Electrical (M&E) engineering. Work scope of projects include electrical installation, air-conditioning and mechanical ventilation systems installation, as well as fire hose reel, dry riser, plumbing and sanitary systems installation for private condos and HDB flats. Projects to be completed by 2013. King Wan’s order book stands at $142m, more than 2x FYMar10 revenue of $70.5m. Stock trades at 5x historical PE.


Tee Int’l: Record FYJun10 results. Revenue +56% to $151m, net earnings +73% yoy to $11.4m, driven by maiden contribution from the sale of completed development properties (mainly The Thomson Duplex which TOP in Apr) and healthy pace of completion for large scale construction projects such as Marina Bay Sands, Esplanade MRT and Pandan Garden projects. To pay final and special div of 2.2cts (6% yield) vs 1.2cts last yr…

Outstanding order book for engineering segment stands at $198m (projects include MBS, Asia Square Tower One, Orchard MRT). Group also has $49m in contracted sales for development properties which will be booked progressively over next FY. SG residential projects under development include Cantiz@Rambai, Dunsfold Drive, Killiney & Wood (JV with Heeton Hldgs and KSH Hldgs), Cairnhill Circle (JV with TG Dev), while projects in Thailand are the Chewathai Ratchprarop and The Surawong in Bangkok.

Ascott Residence Trust

Ascott Residence Trust: 2Q10 results. Marginal improvement overall. Revenue +3% to $44.4m, driven by revenue per available unit (REVPAU) growth of 5% yoy to S$125/day, as demand increased in both Singapore and China, thanks to strong economic growth in both countries. Ascott’s Shanghai serviced residences also benefitted from the World Expo 2010. DPU +4% to 1.87cts, translates to annualized yield of 6%...

2H10 expected to be higher, as two newly renovated properties in Singapore begin contributing to rental income. Stock trades at $1.24, a 10% discount to NAV/unit of $1.38.

United Envirotech

United Envirotech announced that its subsidiary in China, NOVO Envirotech has secured a RMB 30m contract to supply Membrane Bio-reactor MBR system for the Phase II of MBR wastewater treatment plant at Taixing Chemical Industrial Park located at Jiangsu Province. We understand there is a pick up in the demand for MBR application for industrial park wastewater treatment to replace the conventional biological treatment processes due to proven efficiency and effectiveness of the MBR processes.

According to mtm, the project will commence immediately and is expected to complete within FY2011. It is expected to contribute positively to the group's revenue for FY 2011. The stock is trading at 8x FY11 and 6.1x FY12 P/E (Mar YE). United Env is currently seeking for TDR listing. The proposed issue size will constitute approx 10% of the existing issued share capital.

Keppel Corp

Keppel Corp 2Q10 core net earnings of $347m (+9% yoy; +8% qoq) were in line with market expectations. Higher O&M EBIT margins (~20%) and increased profit contributions from the property division (+101% YoY) underpinned the strong results. In view of the improved performance, the group raised its interim DPS to 16¢ from 15¢ in 1H09.

Year to date new order wins reached $1.9bn, of which 90% was secured in the 1Q. This takes its current orderbook to $5bn, down from $5.8bn in 1Q. While the fallout out GOM oil spill has caused near-term uncertainties, the longer term prospects remain intact as above US$70 oil price and stricter safety regulations and survey compliances are conducive for E&P investment. New rigs may be required to replace the aging deepwater fleet that does not meet safety standards.

We are also optimistic on Keppel’s chances to clinch part of Petrobras’ 28-rig tender award, which is expected to be out in the coming weeks. We expect the 2H to be slower on the O&M side as margins normalize, partially offset by healthy launch schedule from Keppel Land. We maintain our TP of $11.07 on the stock with share price underpinned by Petrobras’ potentail orders and a pick-up in O&M activity.

CapitaRetail China Trust

CapitaRetail China Trust: 2Q10 results. Net property income +1.9% yoy to S$19.8m; would have been higher if not for appreciation of SGD vs RMB. Most malls saw good growth, in particular Xizhimen Mall (+23.6% yoy), and Saihan Mall which performed well after the completion of asset enhancement works. DPU is S2.07 cts, (+6.7% yoy), translating to annualised distribution yield of 6.6%...

Mgt expects Reit to continue to benefit from the Chinese government’s stimulus measures to boost domestic consumption (IMF forecasts 10.5% growth in 2010) and maintain stable and sustainable economic growth. Stock last traded at $1.25, vs NAV/unit of $1.13.

Suntec Reit

Suntec Reit: 2Q10 results. Marginal yoy decrease in gross revenue and distributable income, due to lower avg passing rents from Park Mall and One Raffles Quay. However overall office and retail occupancy continued their steady improvement to 97.6% and 98.7% respectively, due to AEI completions, rising visitor arrivals and opening of the Promenade and esplanade MRT stations which improved connectivity into Suntec City

DPU fell 15% yoy to 2.528cts, bcs of deferred payment to manager, but still translates to decent 7.1% annualized yield. Mgt is positive on the demand outlook, noting an uptrend in expansion demand from existing tenants as well as new tenants from a diverse range of industries. Gearing also remains conservative at 33.6% with no major refinancing due till 2012. Stock last traded at $1.43, 18% discount to its NAV/unit of $1.76. Deutsche maintains Buy, upgrades its target to $1.52 to $1.48.


PEC said that it has secured contracts from ExxonMobil for amendments to two existing contracts for the provision of maintenance services. Pursuant to such amendments both contracts has been extended for a five year period until 2Q 2015.Whilst the actual value of the maintenance works under the two contracts will depend on the amount and scope of work to be carried out.

As at end-Mar 2010, the Group's order book for on-going and new project works was approximately S$300m which excludes any revenue from the above Rotterdam project secured by our 50/50 joint venture. The stock currently trades at an undemanding 5x FY10 and 6.3x FY11 PER, based on Bloomberg estimates.


Cosco has won a turn-key EPC contract worth >US$500m with customer Dalian Deepwater Development to build a DP3 deepwater drillship. This vessel will measure 291m by 50m, is harsh-environment capable and can operate at ultradeep water depths up to 10,000ft, with drilling depths exceeding 30,000 ft.While there has been previous concerns on Cosco's capability in executing such a high-spec build, we take comfort in that the complex design responsibility rests entirely with the client.

On the back of this win, KE is raising its FY11 forecast by 11% to S$267.2m, and FY12 by 5% to S$285.9m. We estimate Cosco’s current orderbook at around US$7bn, with over US$1.5bn secured YTD. Separately, Cosco has also finalized 2 more bulker newbuild contracts as part of the US$440m order win announced last month. Kim Eng is upgrading Cosco to a BUY with a new TP of $2.10, based on P/B valuations of 4.2x.

Thursday, July 22, 2010


NOL: ordered 10 new 8400-TEU container ships worth US$975m to be delivered in 2013-14, and signed letter of intent for two 10700-TEU vessels worth US$225m, to meet its future growth needs and to replace vessels with charter agreements that will expire over next few yrs. Vessels to be constructed by S Korea’s Daewoo Shipbuilding & Marine Engg. This significant capex comes on the back of NOL’s recent strong operating performance, driven by demand recovery along the major Asia-Europe and Asia-US trade routes.

Keppel Corp

Keppel Corp has secured 2 contracts worth $170m for the conversion of a FPSO vessel and the repair of a semi-submersible drilling rig from repeat customers. Ytd, the group has won $1.9bn of new order, of which almost 90% was clinched in 1Q, suggesting that the group may be behind the $3-4bn consensus order assumption for this year.

The 1st contract is for the conversion of the VLCC into an FPSO facility is for Single Buoy Moorings and will be by 1Q12 while the 2nd rig repair contract awarded by Queiroz Galvão Óleo e Gás is due to be ready by Oct 10. Both these vessels will be deployed in Brazilian waters.

These contracts underscore Keppel’s close ties with Brazilian operators and continue to solidify its position as a potential beneficiary on the high capex required to develop Brazil’s massive offshore fields. It is currently in the running for both Phases 1 & 2 of Petrobras 28-rig tender, which is yet to be awarded. We maintain our Buy recommendation on KepCorp with target price of $11.07. The company will be releasing its 2Q10 earnings this evening.


Wilmar is acquiring 91.38% of Natural Oleochemicals (Natoleo) from Kulim for RM450m. Based in Johor, Natoleo is one of the world’s largest oleochemical producer with a combined annual capacity of 501k MT. Using crude palm kernel oil & palm stearin feedstock, Natoleo makes products such as glycerine, soap noodles, fatty acids, and esters which are used in detergents, home care, cosmetics & toiletries, plastics, pulp & paper, pharmaceuticals, food additives, paints & coatings, etc

Natoleo is a strategic fit to Wilmar’s existing network of oleochemical prodn bases in China & Indonesia. & entrenches the group as Asia’s dominant oleochemicals company with a market share of 35% of Asian fatty acid production capacity (5% global share). NatOleo incurred a net loss of RM23m in FY09 but has turned around in 1Q10 with a net profit of RM16m. Annualisng the 1Q results will put the acqn cost at a reasonable 8x FY10 P/E and P/B of 1.5x. This is also below replacement cost of ~RM500-600m. Funding for this purchase will be from internal sources & bank borrowings. As at Mar 10, Wilmar’s net gearing stood at 41.9% with US$5.85bn cash.

While the impact on earnings is marginal, Wilmar seems to be in aggressive acquisition mode to leverage on its business model to capitalise on growth in markets such as China & India. This purchase comes hot on the heels of its US$1.5bn acquisition of Sucrogen. We maintain our Buy recommendation on Wilmar with a target price of $7.20.

CapitaMall Trust

CapitaMall Trust: reports 2Q10 results. DPU +7.5% yoy to 2.29cts, translates to 4.6% annualized yield. Driven by higher rental rates for new, strong rental reversions and renewed leases and lower operating expenses. Portfolio occupancy remains strong at 99.5%. Mgt sanguine on outlook, sees improving economic conditions, rising consumer confidence and growing tourist arrivals continuing to spur retail growth in 2H10…

Future growth to be driven by asset enhancement initiatives (AEI) and new properties. Returns on AEI at Raffles city and JCube (formerly Jurong Entertainment Centre) could surprise on the upside, due to higher projected rental revenue and lower construction costs vs earlier expectations. The acquisition of Clark Quay, completed 1 Jul 10, should also contribute positively to rental income from 2H10. Atrium@Orchard is the next AEI target, with upgrade to start in 1Q11 and complete by 3Q12.

Renewable Energy Asia

Renewable Energy Asia announced that it has signed a MOU with Jiangsu Maritime Engineering Services Co. to acquire its wholly-owned subsidiary, Nantong Huaishuo Investment Co, which in turn has the right to subscribe up to 49% of the total share capital in Datang Baotou Asia Electricity Co. The purpose of the MOU is to allow the REA to conduct the necessary due diligence work in assessing the feasibility of its potential investment in Nantong Huaishuo Investment Co., Ltd and henceforth, determine the price for the Acquisition. Datang Baotou currently has wind farm development projects in Huaishuo town within the city of Baotou. To date, Datang Baotou has received regulatory approvals for the development of a wind farm with a capacity of 49.5 MW and a total projected investment value of about RMB490m. In the near term, REA Group expects to derive its operating income from EPC projects while long-term recurring income should come from its wind farm development and electricity generation business.

PACIFIC Shipping Trust (PST):

PACIFIC Shipping Trust (PST): While Distributable Income in the 2Q10 dipped marginally by 2% to US$6.52m, PST has pared its DPU by 20% YoY to 0.793 US cents (translating into payout ratio of about 70% compared to 90% a year ago) as it wanted to retain more cash to acquire new vessels. The DPU of 0.793 US cents represents a tax-free annualised yield of 10.9%. PST plans to acquire two new 180,000 DWT capesize bulk carriers, which cost US$61.6m each and are scheduled to be delivered in Sept 2011, with a 10-year charter with Jiangsu Shagang Group Co. The 10-year charter will add about US$194m to PST's contracted revenue, which will hit close to US$500m over the next 10 years. Notably, PST's current fleet portfolio only comprises 12 container vessels, hence these new acquisitions will enable PST to diversify into a new asset class and enlarge its base of charterers.

PST’s balance sheet remains healthy as all vessels have been financed on a long-term basis and that its loans do not have loan-to-value ratios on the vessels and top-up provisions.

Wednesday, July 21, 2010

Indofood Agri

Indofood Agri: Goldman trims target price to $2.90 from $3.15 after rolling fwd valuation to FY11, cutting FY10-11 earnings est by 6-8% to assume lower crude palm oil and sugar prices on back of reduced commodity prices. Still, keeps Buy call, picks stock as favorite in sector on valuation grounds, high organic growth potential. Tips production volume CAGR of 12% over FY09-12, highest in industry, to be supported by its large land bank, which includes 61k ha of immature CPO plantations expected to mature over next 2-3yrs.


Changi Airport Grp has shortlisted 4 companies to submit bids for Changi’s 3rd ground handling license - AirAsia, Jetstar, Aircraft Service Int'l & SIA Engrg. CAG has also extended the tenure of the license to 10 yrs from 5 yrs. Tender will close on 17 Sep and the new operator is expected to commence business in 1Q11.

We expect any new entrant to face difficulties in securing market share from the incumbents given the long term tenure of existing contracts (at least 3 yrs) and lack of economies of scale. Previous entrant Swissport also tried but failed to muscle into this space and eventually closed it business in 2009 after 4 yrs of losses.

As the lowest cost operator, SATS is well positioned to defend its market share from the threat of new entrants and any impact is likely to be minimal and can be offset by its new venture into the technical ramp business. The group is poised to benefit from the strong upturn in regional air traffic. Stock is trading at 15x FY10 P/E backed by an attractive yield of 5.8%.

ST Eng

ST Eng: Its unit, ST Aerospace will partner Guangdong Airport Mgt Corp (GAMC) to set up a commercial aircraft heavy maintenance facility in Guangzhou, China. ST Aerospace will own a 49% stake, and GAMC the remaining 51%. They will both invest US$99m in the entity, ST Aerospace (Guangzhou) Aviation Services, which will be operated and managed by ST Aerospace. The JV, however, is pending approval by the Chinese govt, has already been endorsed by the Civil Aviation Administration of China.

The facility will have 2 hangars located at Guangzhou Baiyun In'tl Airport - each able to accommodate two widebody aircraft simultaneously. Construction is expected to take about 2yrs, after which the facility will provide maintenance and modification services for Boeing and Airbus aircraft. The JV brings the no. of ST Aerospace's China establishments to four. Its three other JVs in China are an aircraft maintenance, repair and overhaul (MRO) company in Shanghai; an engin
and an import-export facility in Guangzhou. The stock currently trades at 20x FY10 and 18.5 FY11 PER but share price is supported by div yield of almost 5%. Kim Eng has a HOLD rating with TP of $3.15.


CCT: reports 2Q10 results. Net property income flat, but distributable income +16% yoy to $55.7m, on the back of lower property operating expenses and lower interest cost as CCT pared down borrowings. Qtrly DPU is 1.97cts, +15.2% adjusted for rights issue in FY09, translating to 5.9% annualized yield

Of note was the slight recovery in office market rents in 2Q10, following six quarters of decline. Committed occupancy rate increased to 95.6% from 95.1% qoq. NPI should decline going forward, following recent asset sales in Starhub Centre and Robinson Point, although completion of AEI at Raffles City in 2H10 could offset the impact some what. So far, take-up has been positive, with 86% of the new AEI space committed. Stock last traded at $1.33, vs reported NAV/unit of $1.36.


Midas: clinches two contracts worth RMB 130m, awarded by JV co. NPRT to supply aluminium alloy extrusion profiles for a total of 480 train cars, underscoring the strategic importance of NPRT to Midas. NPRT is 32.5% owned by Midas, and is one of the only four rolling stock companies licensed to tender for national metro train manufacturing projects in the PRC.

First contract worth RMB 58m, is for the Pearl River Delta Inter-City Train Project, while the second project worth RMB 72m is for the Hangzhou Metro Line 1 Project. Delivery of the extrusion profiles is expected to take place from 2010-12. Since Jun ’09, Midas has secured contracts with total value over RMB 1.5bn. Stock trades at 17.8x consensus FY10E PE. KE has a Buy call with $1.22 target.

Keppel Land

2Q10 net profit +20% yoy & +8% qoq to $70m in line with expectations, with improvements across all segments. This brings 1H earnings to $135m, ~45% of consensus estimates. Property trading (+14% qoq) was the main driver accounting for almost 80% of earnings underpinned by strong sales in China while property investment & fund mgmt also saw increased contributions. Overseas sales accounted for 41% of net earnings. Contributions from associates, which incl Reflections, Carribean & Marina Bay Suites was flat qoq.

The group sold 40 units at MBS & 745 units at Reflections in 2Q10. Despite cooling measures, 1,183 units (745 in Chengdu, 311 in Wuxi and 43 in Tianjin) were sold in China. MBFC is 80% leased with Phase 1 100% pre-committed and phase II 55% while OFC is now 63% pre-committed.

Going forward, Kepland plans to launch its 630-unit Lakeside project by end-10. Remaining units of MBS & Reflections will be released in 2H. Another 3092 units will be launched in China (incl 1,680 units at Tianjin Eco City & 260 units at 8 Park Ave in Shanghai) & 1180 units in Vietnam.

Tuesday, July 20, 2010


SATS: Deutsche rates Buy with $3.20 target. Thinks company well positioned to defend its market share and margins from the threat of a new entrant, once Changi Airport awards third ground-handling licence. Notes it would be difficult for a new entrant to operate, given the customer stickiness (contracts last at least three years) and lack of economies of scale. Second stage of 2-phase tender closes Sep 17, with AirAsia, Aircraft Service Int’l, Jetstar, Sia Engg as shortlisted candidates

Winner expected to start operation under 10yr license in 1H11.


Tee: provides electrical engineering services mainly for the construction, infrastructure and redevelopment sectors in Thailand, Singapore and Malaysia. Has since moved upstream to provide project mgt services for both residential and commercial developments. As part of expansion, recently raised $1.3m from a warrants issue to support associate’s ~S$6.6m purchase of 6312 sqm land at Ramkhamhaeng Road in Bangkok, slated for mid-end residential development…

Stock trades at 1.6x PB, 5.6x PE. SIAS has Buy call with $0.51 target.

SembCorp Industries

SembCorp Industries: Phillip Sec initiates with Buy with $5.10 target. Believes that company can achieve stable growth in revenue, net profit for at least next 3 years. Expects company to pay dividends of S$0.15 per ordinary share in FY2010E, FY2011E and FY2012E, supported by robust operating cash flows from its businesses.

Genting SP

Genting SP: CLSA lifts target to $1.30 from $1.20, based on 13X EV/EBITDA. Expects FY11 EBITDA growth of 39%, underpinned by robust tourist arrivals to Singapore. Still, downgrades to Outperform from Buy on limited upside to new target from current levels. Says 2Q10 results, due August 12, will offer reliable indication of Singapore’s gaming potential, will also reinforce co’s "excellent" mgt credentials - mgt has apparently read the landscape much better than the market had expected.


Ezion: following last week’s announcement, to lease another land site (36ha) in Northern Territory of Australia for the development of a second marine supply base to support the offshore oil and gas industry in the vicinity. Similar to the first marine base in NW Australia, Ezion is adopting the model of rolling out basic engineering and developmental work for the second base expected to be completed in 12months, after which it is expected to be able to provide its basic load out and lay down services to its customers. The resulting cashflow will then fund further capex. The project is not expected to have a material impact on earnings for FY1010. We are still positive on Ezion, and expect further newsflow to be a positive catalyst on the stock price. Maintain Buy, TP S$0.99.


KREIT: posted 2Q10 net property income (NPI) +49% yoy to S$18.4m and distributable income +26% to $22m, on new contributions from purchase of 50% stake in 275 George Street in Brisbane early 2010, and additional 29% interest in S'pore Prudential Tower. However, DPU fell 38% to 1.64c (~5.4% annualized yield) as the unit base expanded due to $620m rights issue in Nov'09. Mgt believes that the SG office mkt is likely to have "passed the trough" and has seen occupancy rise to 97.9% vs 96% QoQ…

Separately, co announced that it has acquired an 18 storey office and retail space at 77 King Street in Sydney for A$120m (S$145m). Annual rents are ~A$570psm (lower end of mkt rates), but come with NPI guarantee of up to A$4m for 6yrs, on top of fixed annual rental escalations. KREIT will fund the purchase with equity from its rights issue and debt. Its aggregate leverage at end-Jun'10 was 15.2%, and is expected to rise to 20.4% on completion of the deal.


VIKING O&M announced yesterday the purchase of controlling stakes in 2 companies for a total of $29.8m:
1) it is buying 100% of Promoter Hydraulics, a specialist in winches, power packs and marine decking equipment, for $22.3m in cash and shares (1st tranche of $10m cash upon completion and a 2nd tranche of $8m cash plus $4.3m in new Viking shares by Jan 2011).
2) Second acquisition is a 55% stake in Marine Accomm.

The private co is said to be S'pore's largest turnkey project integrator of accommodation and fit-out units for the offshore and marine industry. The cost of this deal is $7.5m. Viking has also entered a put-and-call option agreement which, if exercised, will result in the acquisition of the remaining 45% of the shares in Marine Accomm within specific periods during the next 2 yrs. Viking's two acquisitions will be funded from internal and/or external sources.

According to mgtm, the aim of the acquisitions is to bolster its offerings and to provide opportunities for growth through cross-selling. The acquisitions will also expand Viking's value chain and client base, putting the group in a stronger position to compete through savings from economies of scale, greater operational efficiency and better utilisation of resources. The stock is currently trading at 11x forward PER.


NOL: Strong improvement in Jun performance may lift share price to head back above $2.00 resistance. The liner shipped 29% more volume to 221,900 boxes. Average revenue was 32% higher at US$2,892 per FEU as freight rates improved in major trade lanes, esp Transpacific, intra-Asia routes. Compared to May, average revenue +4.5%, while volume +4.4%. For 1H10, its shipping volumes grew 39% yoy while average revenue per FEU is up 11%.

Morgan Stanley highlights that given its strong proactive mgmt team & healthy balance sheet, NOL is well- positioned to ride out the volatile demand conditions & capitalize on low ship values to replace expiring chartered-in ships with lower-cost owned vessels; has Overweight call with $2.35 target.

Yangzijiang (YZJ)

announced that it has won 10 shipbuilding contracts worth US$234.16m in the 2Q10, which are scheduled for delivery before July 2012. The awards lifted YZJ's outstanding order book to 124 vessels (bulk carriers a/c for 82 of the 124 vessels on order while the rest are containerships) worth about US$5.2 bn as at June 30. Despite the slump in dry bulk freight rates, bulk carrier demand YTD has been relatively robust, in line with what other players such as Cosco & JES are seeing.
the risk is low and US economic numbers to be released in the coming weeks will show the way.

We understand the order book of YZJ's newly acquired shipyard - Jiangsu Yangzi Changbo Shipbuilding Co (JYCS) - is not included in the figures. As at June 30, JYCS's order book stood at US$338m, with 20 vessels, slated for delivery between the 2H10 and 1H12. Separately, YZJ said yesterday it has obtained approval from the Taiwan Stock Exchange (TSE) and Taiwan Central Bank (TCB) for its TDR listing. The TDR shares comprise up to 100m new shares and up to 20m vendor shares.

Monday, July 19, 2010


F&N: 57% owned Msian listed subsidiary, F&N Berhad concludes divestment of Malaya Glass Products for US$258m. F&N Bhd to record gain to RM350m, or RM0.98/sh. Hints that cash reserve of over RM1bn plus another RM1bn of borrowing capacity to be used for future acquisitions over next 12-24 months, or could be returned to sh/h if no investment opportunities are found.

BH Global

BH Global: terminated an Engineering and Installation contract with Twins Engineering & Hardware, announced in Dec ‘09. Recall contract is expected to be worth more than $20m (approx 20% of FY09 revenue), although company says that it does not expect material impact on NTA and EPS for FY10…

Company also reported lackluster 2Q10 results. Revenue -10%, mainly due to decline in sales from Supply Chain Management segment, as lagged effect of financial crisis resulted in slower orders, project delays, and a more cautious approach to sales on concerns over slower payment from clients. Gross margins fell to 32% from 36% yoy, due to change in product mix. NPAT to sh/h fell 32% yoy to $2.7m. The group continues to maintain a cautious outlook for the foreseeable future.


Juken’s turnover and profit before tax in 1HFY10 are expected to exceed S$31.0m and S$3.3m respectively, compared to S$18.6m and S$0.29m, respectively, in 1HFY09. The significant improvement in performance is mainly due to:
1) First-time contributions from stepper motors and car clock businesses acquired from Microcomponents and Zhuhai SMH Watchmaking in Mar 2010. Based on 3 mths of contribution, the Group expects this new division to record PBT of approx S$0.6m on turnover of S$5.0m for 1H10
2) The other key driver is the automotive segment. The strong growth in the PRC automotive sector and recovery in sections of the US and European automotive sectors since the 2H09 have continued in 1HFY10, resulting in better utilization rates and improved margin. Overall, turnover for the division, including the stepper motor business, is expected to grow >90% to approx S$13.0m in 1HFY10 compared to S$6.7m in 1HFY09.The Group is expected to announce its 1HFY10 results on or before 14 Aug.


Smartflex: To debut at 9am this morning. IPO approx 4.2x oversubscribed, with proceeds to be used mainly for acquiring machinery to upgrade process capabilities. Smartflex is a provider of integrated circuit (IC) module assembly and testing services for contact and dual interface smart cards, mainly used in the telecom, banking and financial services, Pay TV and transportation industries.


Olam: to make conditional cash offer for all shares in NZ Farming Systems Uruguay that it does not own, at NZ$0.55/sh (vs NZ$0.41 last traded). Olam currently has 18.5% stake in the company. Offer will go through if Olam receives min 50.1% acceptance. NZFSU’s second largest sh/h, PGG Wrightson which holds 11.5% stake, has already agreed to accept the offer.

Full acceptance of the offer would cost Olam NZ$110m, to be funded by mix of internal funds and borrowings. NZFSU is mainly involved in dairy production in Uruguay, using NZ farming practices.


Oceanus: collaboration agreement with Australia’s Lobster Harvest Ltd, to develop commercial lobster pdtn operations in the PRC. Oceanus to invest A$1m for 6.5% stake in Lobster Harvest (with option to acquire more shares), plus additional A$2m in two 50/50 JVs for adaptive research and pilot commercial trial pdtn. In exchange, Lobster Harvest will contribute A$1m, license its slipper lobster hatchery technology to the JVs, and grant Oceanus the first right of refusal to its Spiny Tropical Rock Lobster technology currently under development.
If lobster production trials are successful, this could open up a new area of growth for Oceanus, to complement its existing business in abalone farming. Oceanus trades at 8x historical PE.

United Engineers

United Engineers: takes on $372m loan from consortium of 5 banks, to finance development of a retail, hotel and office project that links 277 Orchard Rd (former Specialists Centre/ Hotel Phoenix) to 218 Orchard Rd (former Orchard Emerald), via a glass overhead bridge and underground pass with retail shops. Development to have total expected GFA of nearly 60k sqm, comprising ~500 rooms, 23.5k sqm of retail space and 3.5k sqm of office space.

CapitaCommercial Trust

CapitaCommercial Trust (CCT) will sell Starhub Centre - located behind Centrepoint SC - for S$380m (S$1,140psf GFA) to Frasers Centrepoint. FC will redevelop the building into a high-end mixed residential & retail project. Sale price of S$380m is within market expectations and will net surplus of S$109m to CCT or implicitly S 3.9c/share. We view the sale positively as CCT will not dilute its focus in office sector by not participating in the redevelopment.

CCT will either use the net proceeds of cS$375m to repay debt (current gearing at 39%) or fund acquisitions. CCT implied FY10E DPU yield at Friday's closing price is 5.7%, which compares with KREIT's 5.9%.


A-REIT reported a 10.9% growth in gross revenue contributed by the larger portfolio base from a year ago. However, net property income increased by a smaller extent of 8.2% due to higher operating expenses as well as the cessation of land rent rebates granted by the govt in 2009. Occupancy rate for the portfolio has remained stable at 95.6%, higher than mkt avg while rental reversion on lease renewal continued to be positive for the Business & Science Parks and Hi-Tech industrial properties.

The Trust has an average term of debt maturity of 3.5 years and a well balanced debt maturity profile such that only about 39.7% of its total debts outstanding are due for refinancing over the next three years until 2013. As at 30 June 2010, A-REIT’s aggregate leverage was 34.1% with a weighted average cost of funding of 3.93%. All of A-REIT’s floating interest rate exposure is fixed for the next 2.9 years.

A-REIT is currently developing a partial built-to-suit business park facility in Changi Business Park for Citibank N.A. Upon completion expected in 4Q FY2010/11, Citibank N.A. will lease at least 50% of the building for a period of 6 years with annual rental escalation and option to renew for two further terms of 3 years each. For the balance of FY2010/11, about 11.8% of A-REIT’s revenue is due for renewal. Based on last closing price of $2.0, A-REIT still offers decent yield of about 6.9%.


ComfortDelgro is bidding to enter the Australian taxi market via a A$38.8m acquisition of Swan Taxis, the largest taxi operator in Perth, Australia. Priced at 13x earnings vs Comfort’s 14-15x, the deal is expected to be earnings-accretive. If successful, we would expect the acquisition to improve Comfort’s FY11-12 earnings by 1.5-2% and KE's fair value from $1.87 to $1.90. The deal is likely to take 3 mths to complete, subject to approval by the Australian Competition and Consumer Commission.

Friday, July 16, 2010

Keppel Corp / SembMarine (ALRT):

Keppel Corp / SembMarine (ALRT): We expect Keppel to outperform relative to SMM over the near and intermediate term. The ratio of Keppel/ SMM market cap is now at 1.7x, the lowest in over a decade (even after accounting for K-Green Trust distribution-in-specie), and we anticipate a mean reversion towards 2x, translating to a relative return of >15%. Keppel was last traded at $8.76; SMM at $3.92. We highlight the following:

a) Headwinds in the O&M industry arising from the Gulf of Mexico oil spill are likely to impact SMM more significantly, given its pure-play status. Meanwhile Keppel’s diversified portfolio in property and other investments are seeing improving prospects, and should provide additional uplift to the bottom line.

b) Both Keppel and SMM will be involed in Phase 1 of the Petrobras rig tender, however only Keppel is in the running for Phase 2, given its partnerships with 3 out of 4 of the remaining bidders. Winning this round of tenders could result in a significant rerating for Keppel given the potential size of the contract. SMM on the other hand, did not participate in the bidding for Phase 2.

c)By subtracting the market value of Keppel’s listed investments from its market capitalization, we estimate a stub valuation of 11.0x PE for Keppel’ O&M division, which is nearly on par with SMM’s 11.1x PE. We argue that the former should trade at a premium instead, given its larger scale and better positioning in Brazil where more potential orders are expected to come from.

Singapore Post

Singapore Post: UBS raises target to $1.27 from $1.15, maintains Buy. Expects company's revenue to be strong in coming quarters due to booming domestic economy, as historically SingPost's revenue has correlated strongly with GDP growth, albeit with a three to six month lag. Notes much stronger-than-expected 2Q GDP data released earlier this week.

Indofood Agri

On the daily chart, it appears that Indofood Agri is trading within the ascending channel and today it breakup above the 100-day EMA suggesting momentum is gaining strength. Resistance at $2.35 ; Support at $2.01 (200-day EMA)

Tat Hong

Tat Hong: proposed to acquire all the remaining 30% shares of thinly traded ASX-listed Tutt Bryant Group (TBG) that it does not already own, at an offer price of A$0.92/sh (46% premium to the last close price of A$0.63). Dividend payable of A$0.02/sh will also accrue to the current TBG shareholders. The acquisition will cost Tat Hong up to A$39m in total. Transaction expected to be earnings accretive; company estimates EPS +3.9% to S7.48cts, NTA/sh +4.7% to S$0.817. vs S$0.935 last traded.


M1 reported in-line 2Q10 net profit of $40.8m (+10% yoy), bringing 1H earnings to $80.1m, up 1.5% yoy. Interim dividend was raised slightly to 6.3¢/share but market may be disappointed with no mention of a much touted special dividend. 2Q revenues grew 17% to $223m driven by 161% surge in handset sales. M1 added 53k subscribers to 1.85m, faster than 1Q10’s net-add of 38k. Postpaid ARPU was flat qoq while prepaid ARPU fell slightly on lower int’l traffic due to tariff reductions. Mobile broadband continued to gain traction. The voice revenue erosion was offset by higher data usage.

Operating expenses fell 17% qoq as handset costs eased and M1 continued to migrate traffic to its own backhaul network, thereby reducing leased circuit costs. Coupled with lower acqn costs, service EBITDA margin recovered to 43.7% from 42.4% in 1Q10.

M1 remains the best positioned to benefit from the NGNBN launch in Oct/Nov. With net debt/EBITDA at just 0.9x, mgmt remained open to gear up the balance sheet to a comfortable level of 1.5x, hence a capital mgmt remains a possibility in future quarters. We maintain our forecasts and BUY call with TP of $2.62.

Thursday, July 15, 2010

SIA Engineering

Resistance 2: $4.50
Resistance 1: $4.36
Support 1: $3.73
Support 2: $3.47

SIA Engineering is moving in an uptrend and prices are well above the key moving averages since October last year. Stochastic and RSI are reading at overbought level.


Resistance 2: $3.00
Resistance 1: $2.90
Support 1: $2.65
Support 2: $2.55

Price action of SATS resembles that of SIA. Prices are above the moving averages. A bearish divergence signal formed on Stochastic suggests the possibility of a pullback. RSI is reading above the neutral level.


Resistance 2: $15.95
Resistance 1: $15.50
Support 1: $14.65
Support 2: $14.05

SIA is trading range‐bound within the ascending channel and immediate resistance near $15.15 will be tested. If prices fail to break up, price level at $14.65 (100‐day EMA) will be the support.Prices are currently trading above the key moving
averages. Stochastic is reading at the overbought level.

Keppel Land

Keppel Land: DMG upgrades KepLand to Buy from Neutral, lifts target price to $4.60 from $3.86 to reflect improved valuations for developer's S’pore office properties. Expects company to continue to benefit from progressive take-up of new offices, with rising demand for its Marina Bay Financial Centre, Ocean Financial Centre supporting share price. Notes office leasing momentum has been picking up since 4Q09 as companies plan for expansion.

KepLand’s township projects in China should still generate strong sales despite Beijing's measures to cool property market, as buyers tend to be non-speculative genuine home-occupiers.


Mobile One (M1): is the first among the three local telcos to announce that it will offer dedicated price plans for Apple's iPad with Wi-Fi and 3G in the coming wks. The tablet is expected to be officially available in S'pore by this mth. All 3 telcos also announced last mth that they would be launching Apple's new iPhone 4 here soon. The 3 telcos are already selling micro SIM cards with mobile-broadband plans, which are required for both the iPad and the iPhone 4.

FJ Benjamin

FJ Benjamin: KE maintains Buy. Raises target to $0.66 from $0.45, based on earnings upgrades. FJB is a strong recovery play, and could surpass pre-crisis earnings by tapping into the retail boom in Asia. In particular, mgt is upbeat on its 4 new boutiques in Marina Bay Sands which it secured at attractive rental rates, and is well positioned to capitalize on the spike in tourist arrivals. Positive catalyst could come from possible higher dividends...

We also view FJB as an attractive M&A candidate, given its superior retail network, sizeable brand portfolio and strong balance sheet.

Asia Power

To dispose entire 51% interest in subsidiary, Heilongjiang Asiapower Xinbao Heating & Power Co. for RMB204.4m (~S$42m). Priced at 33% premium to independent valuation done at end 2009, and 2.2x PB. Asia Power to realize net gain of ~RMB97m (after transaction costs and capital gain tax). Based on FY09 figures, NTA/sh to increase by 20% to S$0.30, while EPS to drop by 86% to S$0.23cts, vs last traded at $0.15…

Xinbao owns and operates a coal-fired combined heat and power plant in Heilongjiang province, with total installed capacity of 225 MW. Reasons for divestment include Group’s new focus on environmental-friendly and renewable energy power generation plants (especially hydro), unwillingness to commit more capital for capex at the power plant and poor expected future returns. Proceeds to be used for investment in renewable energy projects and working capital. Trading halt to be lifted at 9am.


Midas: announced a letter of intent (LOI) with Bombardier Sifang for downstream fabrication work, involving the provision of welding and machining services for train carbody components, for 475 “CRH1” high speed train cars. No contract value has been disclosed. While scope of work could be different, a previous fabrication contract for 1,280 train cars was about RMB50m.

Before contract can be signed, Midas has to ensure that its facilities, eqpt and personnel fulfil Bombardier’s requirements. The customer’s vote of confidence in Midas’ new downstream services is a positive, given management’s plans for this segment to be another significant revenue driver in the future. KE has a Buy call with $1.22 target.

Wednesday, July 14, 2010

Tiger Airways

Tiger Airways: DMG starts at Buy with $2.45 target price, based on industry avg P/E of 18.3X. Expects strong earnings growth on aggressive capacity expansion backed by high passenger traffic growth in Asia Pacific region. Says budget carrier has one of lowest cost structures among peers, allowing it to price fares aggressively. Tips earnings growth of 151% in FY11, 48% in FY12

Notes airline plans to expand fleet to 68 planes from 19 by end-2015, set up third base in Asia Pacific (outside Singapore, Australia) by March next year. Likes Tiger’s impressive track record of achieving profitability for its airlines within three years.

Genting SP

Citigroup lifts target to $0.99 from $0.65 after substantially increasing FY10-12 EBITDA estto assume higher market share in Singapore's gaming sector. Notes cannibalization has waned to 10%-12% from over 25% in first few wks of Marina Bay Sands' opening. Tips 55%-60% market share for Genting, which has achieved first-mover loyalty to the M'sian mass market despite MBS' superior mass product. Still, keeps Sell call on valuation grounds, noting stock trades at 14.9X 2011 EV/EBITDA.

Raffles Education

Raffles Education holding at $0.315 after Friday's breakout above $0.30 for 1st time in more than 2 weeks. Immediate resistance at $0.35 100-day MA. Recent interest supported partly by purchases by CEO Chew Hua Seng & spouse in open market. Still, stock down 22.2% ytd on lingering concerns over dwindling student enrolment in China, lack of near-term catalysts as contributions from new colleges not expected until several years later.

OCBC Research maintains Hold call with $0.33 target, opines that while the worst may be over, the short-term outlook remains muted as enrolment numbers still need to show a sustainable increase.

Style Merchants (STY):

Style Merchants (STY): formerly known as Netelusion, company has since been renamed to STY, following recent acquisition of 55% stake in Retail Resources Management (RRM)in Jun ’10. RRM has been in the women's fashion retail business in China since late 2007, with main label 'The Carnaby'; plans to open 50 more fashion retail outlets in cities of various tiers in mainland China over the next year, vs current 19

Expansion will be funded through STY's recent 'over-subscribed’ US$7m rights issue. The target market is middle-class women in their 20s to early 30s. The Carnaby has a 3-yr agreement with Stephanie Sun, who will be the brand’s guest designer and model.


Resistance: 1.68/70
A symmetrical triangle chart pattern formed on Cosco suggesting a breakout.

Sky China Petroleum

Sky China Petroleum: to sell 100% stake in Song Yuan Tian Xi Harbor Oil Exploration Co (“Tianxi”) for RMB 27m (~S$5.5m). Tianxi is engaged in the business of crude oil extraction. Sale was undertaken as part of Group’s efforts to shift its business model from oil extraction to the provision of full oil field services. Group also sees greater operating and earnings risks at Tianxi, in view of tightening environmental policies in the PRC Group to record gain of $1.6m from sale, with proceeds to be used for general working capital. No material impact to recurring EPS and NTA expected.

Asia Environment Hldgs

Asia Environment Hldgs: issues PROFIT WARNING for 2Q10 net earnings as it expects figures to be lower yoy. Nevertheless, it expects to remain overall profitable for 1H10. The decrease in profitability for 2Q10 was attributed to the decreasing profitability and margins of its projects and a rise in interest cost arising from higher borrowings. DBSV has a Fully Valued rating on the company, with $0.15 target.

City Dev

City Dev: to sell 287 strata-titled units (283 retail + 4 office) in 99-yr leasehold Chinatown Point for $250m, to a consortium of investors led by Perennial Real Estate group. Transaction price reflects S$1,403 psf based on total strata area of 178,187 sqft. Transaction in line with City Dev’s strategy to unlock asset value, as it does not own all of the strata-titled units in Chinatown Point Upon completion of sale, there are plans to reposition the mall and enhance its ambience, and to have NTUC FairPrice as a supermarket anchor tenant.


Ezion: to develop a marine supply base at a 15 ha site in NW Australia, to support the offshore industry in the area, which includes the Gorgon and Barrow Island projects. Tight supply of such bases ensures that Ezion is well positioned to secure more marine supply contracts, especially from Chevron. Ezion expects to invest A$37m in total over two phases, which will be financed internally. While we do not expect any significant contribution from the base until FY13, we expect it to be extremely profitable henceforth, with estimated annual turnover of around A$50m and margins of 50%. We continue to hold an extremely positive view on Ezion's prospects for more projects in offshore NW Australia, following its involvement in its initial supply contract for Gorgon. Maintain Buy with $0.99 target.

SG Economy (Breaking News):

S’pore economy grew a blistering 19.3% yoy in the 2Q, its highest on record, as manufacturing output surged 45.5% driven by robust expansion of the biomedical and electronics clusters. GDP rose a revised 16.9% yoy in the 1Q. Given the better-than-expected GDP data, MTI has upgraded its 2010 growth forecast to 13-15% from 7-9% previously. This puts S’pore on track to be the fastest growing economy in the world in 2010, surpassing even that of China.

Supporting the growth trend, S’pore June non-oil exports grew 28.7%, faster that the 26.1% consensus estimate largely due to 29.8% jump pharmaceutical exports. Growth seen in all sectors. Exports to the US were unchanged after rising 28.9% in May. Shipments to the EU rose 75.1% yoy following a 5.7% rise in the previous month while exports to China grew 38.5% after gaining 63.3% in May. Electronics exports grew 43.9% on year, while non-electronic shipments rose 21.0%.

S’pore shares are likely to get a boost from another firm session on Wall Street and S’pore’s spectacular 2Q GDP growth of 19.3% and upgraded 2010 growth forecast of 13-15%. The bullish GDP numbers have not been fully factored by investors as earlier poll has tipped 2Q GDP to expand by 16.5%. Blue chips considered proxies to S’ore's economy expected to outperform - banks, SPH, City Dev, KepCorp, Sembcorp, Venture.

Tuesday, July 13, 2010


SingTel: DBSV raises target slightly, to $3.45 from $3.40, based on 12.2x FY11 PE (vs historical avg of 13.4x). Maintains Buy call. Cites stabilizing competitive environment in India a positive for SingTel, which has been steadily increasing its stake in Bharti from 30.4% to 32% over the past 12 months.


Cosco: 51% owned subsidiary, Cosco Shipyard secured a US$130m contract with an European shipowner to build a vessel specially designed for installation of offshore wind turbines. The jack up vessel will be able to carry up to 8-10 turbines at a time to operate at water depths of up to 45m. Delivery to take place in 2H12.

Sound Global

Sound Global: framework agreement (equivalent to MOU) to undertake a BOT project in Luohe City, Henan Province, to build a wastewater treatment plant with expected capacity of up to 40k ton/day, and a recycled water supply plant with capacity of up to 50k tons/day. Potential size of contract could be approx RMB 50m based on similar past contracts.


Mermaid: to dispose of investment in Allied Marine & Eqpt Sdn Bhd (AME) via sale of 25% associate, WCI, for RM76m (~US$23m), resulting in net gain of ~US$12m. Transaction is scheduled for completion in mid-Sep 2010, and is expected to boost EPS from S$0.04 to $0.06, and NTA/sh from S$0.78 to S$0.80, based on FYSep09 figures. AME is a Petronas licensed provider of subsea engineering svcs to the offshore O&G industry.

Thomson Medical

Thomson Medical: positive 3Q10 results. Revenue +25% to $21.8m, on higher obstetric cases and deliveries, inpatient admissions from referrals and increased patient load. Gross margin expanded from 42.7% to 44.7%, boosting NPAT to $4.9m (+43.5% yoy). While market share continued to increase, Group plans to further expand distribution channels to attract more patients, incl foreigners, and widen network of satellite clinics

Thomson is also making inroads into Vietnam. A new consultancy and hospital mgt project is slated to open by Oct 2010, with plans to commence on a second project once a suitable site is found. Stock trades at 14x PE, vs Parkway at 35x and Raffles Medical at 24x.


SPH: reported strong 3Q10 results. Revenue +27% yoy at $415m, driven by final Sky@eleven contributions and a surge in advertising revenues (+28% yoy, the fastest growth in nearly 5 yrs). Core operating performance was in line with expectations. Margins were up as lower paper costs offset increase in staff cost, resulting in net profit +30% to $165m, the highest since 3Q06. Deutsche maintains Buy with $4.60 target.


Ezra: strong 3Q10 results. Revenue +82% yoy to US$109m, gross profit +50% yoy to US$33m, and net income +37% yoy to US$26m. Revenue growth came largely from the Marine Svcs Division, which benefitted from an increase in procurement and eqpt supply and engineering activities in Vietnam. Ezra’s Offshore Support Services Division now has a fleet of 33 vessels (fully deployed) and expects to its first MFSV and a deepwater subsea construction vessel to join its fleet shortly.

Management also anticipates better prospects for its Deepwater Subsea Services Division, which is expected to secure more projects in future. Deutsche maintains Buy with $2.80 target. Says Ezra could benefit over the long term from potential enhanced safety and environmental regulations post the US GOM oil spill, via its fleet of high-spec subsea vessels.

Tiger Airways

Tiger Airways: strong operating performance for June. Tiger flew 5.3m passengers in the 12mths ending Jun ‘10 (+52% yoy), with 12mth load factor at 85% (vs 80% last yr). Tiger expects to increase its Singapore fleet from 10 to 14 aircraft by end 2010, driven by the recovery in Asia Pacific air travel and growing visitor arrivals to Singapore. We view this positively, as the fleet expansion should continue to drive Tiger's rapid top line growth, with increased scale significantly improving Tiger's future margins and profitability.

Monday, July 12, 2010

Raffles Education (RLS SP, $0.325)

The chairman and his wife recently bought about 4.5m RLS shares from the open market at about 28.5 cts/share. The company, too, has been actively buying back shares. The stock surged about 14% over the past two trading days. But the counter is still trading in a downtrend with prices within the descending channel. Immediate resistance at $0.345. Support at $0.28.

SG Economy

Singapore likely to report 2Q GDP growth of 16.5% yoy vs 15.5% in 1Q on strong growth in manufacturing output, boosted by highly volatile pharmaceutical sector. This will be the highest quarterly GDP growth on record.


JPMorgan does not foresee 2Q10 results of S-REITs to spring any surprises except that consensus DPU estimates for several property trusts, such as Ascendas REIT, CDL Hospitality Trusts may be revised lower. Expects overall 2Q10 results to be in line with street estimates, with guidance on rental reversion, asset enhancement initiatives, potential acquisitions being key issues to watch. Notes market has not fully accounted for impact of withdrawal of govt rebates and higher operating cost

on Ascendas REIT. Adds consensus estimates too bullish for CDL HTrust's FY10 DPU forecast as bulk of hotel REIT's fixed leases will be fully renewed only by Sep. Cambridge Industrial Trust will be first to kick off 2Q results due Jul 15.


Citigroup downgrades NOL to Sell from Buy on concerns that earnings may head downhill after the 3Q peak season on weaker US retail sales and accelerating newbuild deliveries over next 2 years. While NOL looks set to become profitable this year on strong volume surge and rising freight rates, expect operating environment to turn challenging by 4Q10 and FY11-12E outlook may be unexciting, Valuations do not justify premium, at 1.4x FY11E PB set against a paltry 2% ROE.

Target price of $1.70 (from $2.00) based on 20-year historical mean PB of 1.1x.

Silverlake Axis

Silverlake Axis: announced a structured share sale agreement btwn Goh Peng Ooi (chairman and major sh/h with 85.6% stake), and HNA Group involving 242m shares (or 11.6% interest). Shares to be transferred to an escrow account in 3 batches over 3 yrs. Div to be accrued to HNA while shares are in escrow, and Goh to receive the lower of $0.16/sh or market price at end of three yrs. This translates to an effective share sale at ~50% discount to last traded price $0.335…

We see $0.16 as a floor for Silverlake share price, with possible upside risk, given HNA would want to maximize the value of its significant shareholdings. This could potentially lead to more orders from HNA, following Silverlake’s announcement of $70m cloud computing contracts from HNA in Feb ‘10. HNA is a multi-industry enterprise group, with total assets of ~RMB160bn and a Fortune 500 Enterprise of China.


KepLand will be releasing its 1H10 results on 20 Jul. Residential sales are expected to continue to underpin 2Q10 earnings. The group sold about 40 more units at the 221-unit Marina Bay Suites in Apr/May at ASP of about $2,600 psf. Sales of its overseas projects remain brisk, particularly in China where it sold more than 900 homes from 2 township projects, namely The Botanica in Chengdu and Central Park City in Wuxi in Apr/May. Initial launch of 900 units at Tianjin Eco-city is expected in 2H10

Positive catalyst includes the potential divestment of MBFC Ph1 to K-Reit while pre-leasing activities continue to gather pace at the MBFC Ph2 and Ocean Financial Centre. We have a buy Call with target price of $4.71.

Friday, July 9, 2010

SembCorp Industries

The offer for Cascal shares closed yesterday, with SCI receiving 92.3% acceptances. Total consideration is US$192m based on US$6.75/sh. SCI will proceed with delisting of Cascal shares, and make a subsequent offer for remaining shares at the same price. If SCI manages to get above 95% interest, it would effect squeeze-out proceedings and take Cascal private. This transaction is expected to be accretive to SCI's earnings starting from the second year of acquisition.


Yangzijiang: expectations of more contract wins boosts share price above $1.40 for first time since April. Sentiment in shipbuilding sector underpinned by slew of new orders secured by peers such as Cosco, JES International in past weeks. Transactions in the sale and purchase market have doubled in June on a m-o-m basis, despite dry bulk freight rates having dropped substantially over the last month. OCBC has Buy call with $1.60 target.


KepCorp +17¢ to $8.77, extending recent gains after sinking to 5-month low of $8.30 earlier this week, as investors continue to buy on dips. Slow pace of order flows, broad market weakness behind stock's decline to current levels from 52-week high of $10.52 set in Apr. Keppel secured only $50m worth of O&M orders in 2Q10. Nomura, which has Buy call with $11.00 target, expects fortunes to turn when Petrobras unveils outcome of its 28-rig tender, likely by year-end with its Brazilian yard securing a good share of new contracts given that quite a number of the tender bids are linked to its yard and its strong track record with Petrobras.

United Envirotech

United Envirotech: DMG starts at Buy with $0.53 target. Cites positive macro outlook for China's water industry, prospects of sharp earnings growth in next 2 yrs, attractive valuations as key invmt merits. Says China-focused wastewater treatment firm has strong track record in using its membrane technology in chemical, petrochemical, industrial park sectors, and should be able to continue securing tariff increases from various municipal govts. Stock trades at 8.5X P/E vs 12.4X for SG peers.

China New Town Development

China New Town Development: Appointed Standard Chartered Bank as the sponsor for its proposed HK listing, and submitted the application to the Stock Exchange of HK relating to the proposed dual-listing by way of introduction. Mgt believes that the HK Listing will enhance the Company's profile, thus enabling it to gain access and exposure to a wider range of private and institutional investors. This could potentially increase the liquidity and valuation of the stock.

BH Global

Announced that it has submitted an application to the TSE and the Taiwan Central Bank to offer up to 60m new shares for the listing of TDR. This represents an increase in 14% in total number of shares out. However, the Proposed TDR Issue is still subject to approval by the Taiwan Financial Supervisory Commission, Executive Yuan, Securities and Futures Bureau. We understand that application will be made after the grant of approvals by the TSE and the Taiwan Central Bank.


SGX: signed a MOU with China’s Suzhou Industrial Park (SIP) to promote the listing of companies from SIP and other parts of its province on SGX. SIP will provide guidance to potential listing aspirants, and facilitate regulatory processes and approvals from relevant Chinese authorities when necessary, paving the way for closer collaboration between the govt of Jiangsu and SGX to meet the business funding needs of companies in the province. Jiangsu province has a total of 21 companies listed on SGX, including shipbldg firms like JES Intl (JES) and Yangzijiang (YZJ).
Separately, SGX announced that its mutual offset arrangement with the Chicago Mercentile Exchange (CME) will not cover Nifty futures - allowing round-the-clock trading of the contracts where investors can offset Nifty futures positions on one exchange to the other.


SMRT: plans to open Orchard Xchange by end-2010, with NLA of ~1500 sqm. This will bring the total number of SMRT Xchanges across Singapore to 8. The tender process has started and the group expects good take-up. SMRT intends to open more such spaces at upcoming stations on the Circle Line once it is complete, providing another avenue for growth

Separately, due to the ongoing restructuring at its business, Nakheel PJSC has exercised its right of early termination for the operation and maintenance of Palm Monorail development in Dubai by SMRT. This will take effect on 5 Aug 2010, but is not expected to have material impact on SMRT’s NTA and EPS for the current financial year.

Noble Group

Gloucester Coal is preparing to sell A$500m in new shares to acquire assets from its largest shareholder Noble Group, according to the Australian Financial Review. Gloucester may buy stakes in the Middlemount and Monto projects. Meantime, Noble has increased its stake Gloucester to 92.5% and the 2 parties are in discussions on alternative plans for Gloucester, which has prompted Noble to extend its takeover offer for the remaining shares of Gloucester till 4 Aug.

We believe Noble’s intention is to consolidate all its coal assets under Gloucester.


Z-Obee wholly-owned subsidiary Zeus has inked a second co-op agreement with Shenzhen Jinzunzhe Technology (SJTL) to provide a minimum of 200k units of 3G netbooks as end products to SJTL over a 2-yr period. SJTL will in turn sell the 3G netbooks to a PRC Telecom operator. The previous agreement relates to Zeus’ provision of CDMA mobile handsets to SJTL While no contract values were announced, the agreements underscore Z-Obee’s ability to expand further into the high-tech products segment (netbooks, computer chips and other IT communication devices and terminals).


Kim Eng maintains BUY recommendation with TP of $1.22. Despite mkt jittery over the delays on some of the proposed HK dual-listings, we believe the concerns are unfounded. Based on our recent conversation with mgtm, we understand that the status of the dual-listing plan remains unchanged though it will also have to take into account the overall market condition, given the size of the proposed offering (300m new shares).

The recent share price pull-back has created a more attractive valuation gap with its peers, (17X current year PER versus 22X average for HK peers). This should facilitate better demand for the offering. Operationally, capacity expansion is on track, with a 3rd extrusion line already producing and a 4th one undergoing final tweaks. Mgt also shared that activities at its JV, Nanjing Puzhen Rail Transport has been visibly ramped up, which should improve associate contribution going forward.

Thursday, July 8, 2010


Transcu has requested the suspension of trading in the shares of the Company pending further announcements. Notably, the Company has entered into discussions with an underwriter to underwrite a rights issue and/or placement to fund its on-going research and development expenditure and other business operating costs, and to address its current liquidity situation. As a precaution, the Board has requested suspension of trading of its shares pending finalization of the terms of the underwriting.

Genting SP

Genting SP: BOA-ML raises target to $1.40 from $1.22 after increasing EBITDA estimates (FY10 +13%, FY11 +12%). Expects Genting to gain market share from slot clubs in Singapore, given its strong product offering - electronic table games, progressive jackpots and a higher payout ratio. Says recent decision to sell money-losing UK operations positive as it enables Genting to focus on Resorts World, boost balance sheet for next leg of growth, and possibly venture into developed markets by 2012.

Baker Tech

Resistance 2: $0.475
Resistance 1: $0.44
Support 1: $0.385
Support 2: $0.35

Baker Tech appears to be trading within the ascending channel over the past two months. Prices are above the moving averages with Stochastic crossed above the oversold level and 14‐day RSI maintaining near the equilibrium line.


Resistance 2: $0.195
Resistance 1: $0.18
Support 1: $0.165
Support 2: $0.145

No clear directions at this moment as the prices are trading range‐bound between $0.165 and $0.18. Current trend is conflicting with 100‐ and 200‐day EMA converging together. A breakout on either side would suggest a clearer direction.


R : 1.35
S: 1.20

CapitaComm is moving in a uptrend and is trading within the rising channel.
Prices are well above the moving averages.

HTL Int’l

HTL Int’l: CIMB cuts target price to $0.73 from $1.10, based on 6X FY11 P/E vs 8X previously, to reflect FX risks given sofa maker's exposure to EUR. Also lowers FY10-11 earnings estimates by 7%-19% to assume lower sales in Europe, higher production costs. Notes HTL derives more than 65% of sales from Europe, but exposure to EUR lower at about 20%-25% as most European customers billed in USD.

But CIMB keeps Outperform call, as HTL is better positioned this year to face challenging market conditions having strengthened its presence in major markets during the recent tough times. Also likes HTL’s inventory management capability.

Wilmar Int’l

Wilmar Int’l: Sugar prices jumped to an 11-week high on speculation that demand will increase in Indonesia and China. Pent-up demand and weather issues are providing support to the price. India is unlikely to export any supplies soon to the global market because of low domestic inventories. Wilmar, is acquiring Australia’s biggest sugar refiner, believes demand in Asia exceeds annual supply by 30% and needs to import from major producing countries such as Aust.

According to USDA, Asia imported 16.5m MT of sugar in 2009 and is projected to jump to 19.9m MT this year, which should benefit Wilmar given its market leadership in Asia. The group aims to widen its product portfolio to offer a full range of staple products. It has a 200k ha concession in Papau, Indon to cultivate large scale sugar plantations. Expect stock to cover runaway gap at $6.18. DB has a buy on the stock with $6.75 target.

Sound Global

Sound Global: Citi downgrades to Sell from Buy, despite lifting target to $0.70 from $0.60. Says current share price fairly valued after run-up in past months on HK dual listing plan, which was recently postponed. While plan could be revived by end 2010, "prospect for success will be low" unless company prepared to compromise on valuation or unless market sentiment improves significantly. Adds consensus guidance of 33% earnings growth for 2010 looks high, as China's economic slowdown could delay local govt tendering of environmental services projects.

JES Holdings

JES Holdings: announced several new contract wins. To deliver two 23,000 dwt bulk carriers to Shanghai Baosteel in 1H12, one 82,000 dwt bulk carrier to Ermeland Shipping by end 2011, and three 95,000 dwt bulk carriers to Liberian companies by 1Q12. Contract values not disclosed, but we est. a ball park total contract value of US$180m, based on latest Handysize and Panamax newbuild prices. No analyst coverage on JES, which trades at 0.6x PB. PE not meaningful as was loss-making in FY09 and 1Q10.


Its wholly-owned serviced residence business unit, The Ascott Ltd, has secured contracts to manage two more serviced residence properties in Xi’an and Shenzhen, scheduled to open in 2012, 2013 respectively. This follows Ascott’s recent expansion into Chengdu in April. To date, its Citadines Xi’an Central and Somerset Garden City, Shenzhen have achieved strong occupancy of >80%.

Going forward, mgtm expects China to remain an important mkt for the group. Besides growing in cities such as Beijing and Shanghai, it has been expanding rapidly in other cities like Xi’an and Shenzhen where there is high demand for serviced residences. With these latest contracts, Ascott’s China portfolio will increase to more than 5,500 apartment units in 29 properties across 13 cities.


SingTel: Competition in Australia's mobile phone market likely to intensify as a higher number of customers roll off their contracts and new gen mobile handsets prompt replacements. This could prove an opportunity for Telstra given its lower penetration of smartphones and iPhone subscribers but SingTel's Optus faces the challenge of protecting its market share. Margin pressures likely to continue as market moves to handset replacement cycle.