Thursday, September 30, 2010


UOL: RBS maintains buy raising TP to $5.70 from $5.20 to factor in higher ASP for developer’s Spottiswoode project in SG, accretion from its China land acquisition and higher market valuations for stakes in UIC. Expect recent CNY2.06b JV purchase in Shanghai to be profitable with residential project potentially fetching Rmb50,000/sqm. Notes that recent SG property measures bodes well for grp as it has not acquired any sites so far this yr, but contemplating active participation in Govt tender

Property cooling measures in China

Summary of new property cooling measures in China:
1. Limiting property purchase as a temporary measure in response to soaring prices and
limited supply. The Beijing municipal government introduced this rule early May 2010.

2. Stop mortgages for the purchase of a third or subsequent home and mortgages to nonlocal
residents who cannot provide more than one year of tax returns or proof of social
security payments.

3. Lift the down payment to 30% or over. Full implementation of 50% down payment and
10% interest rate premium for the purchase of a second home. No consumer lending
can be used for property purchase.

4. Adjusted the preferential treatment related to property transaction on deed tax and
personal income tax.

5. Increase housing and land supply, particularly on small-to-medium units and social

6. Strengthen the monitoring of market irregularities, such as land hoarding, change of land use and delay of construction commencement by property developers. Developers
with misconduct records are not allowed to buy land nor raise funds in both equity and capital market.

Counters tt could be affected by the new measures include Capitaland, Keppel Land, Guoco Land & Yanlord.

#Property: Shares of Spore developers with China exposure mostly down but decline in line with broad market pullback, not accompanied by heavy volume, suggesting investors not overly concerned about impact of China’s latest tightening measures. View backed by gains in shares of China-listed developers although HK developers with China ops are down.

The initiatives are not unexpected as several cities have already introduced part of the measures, including limiting purchases, increasing mortgage ceiling & banning mortgages to 3rd home buyers. However, this will continue to add pressure to market sentiment, which will impact property prices in China.


F&N: Hospitality unit expands into Japan with opening of a 114-unit project in Japan, called Fraser Residence Nankai Osaka (FRNO). This is one of 12 new properties this year under both the Fraser brand and its second brand Modena. F&N now has 35 properties in total across 21 cities. It plans to double its individual residences to 10,600 units by 2012 +0.3% at $6.40, just shy of new all-time high of $6.43 created earlier. Momentum has been strong, with prices rising 19% since the recent low 6-wks ago. Nevertheless, we note that prices are approaching the top end of Street targets (Deutsche, Nomura have $6.55 TP), while indicators are looking very overbought. Near term support at $6.00 (20-day MA).


Ezion: UOBKH maintains buy with TP of $0.90. Notes grp has made meaningful inroads in Aus, recently announcing 2 new marine supply bases and another A$70m logistics services contract….

While Gorgon gas project contracts has come in slower than expected, expects high potential for positive revisions to consensus forecasts once it materializes. For now earnings growth to be largely structural, stemming from expansion of liftboat fleet in Australia, which has yet to reach critical mass. Current share price implies a 8X FY11E PE, which appears compelling, given 2 yr core EPS CAGR of 38.4%.

Seperately, OCBC has buy rating for grp with TP of 0.79

Mapletree Industrial Trust (MIT) IPO

Mapletree Industrial Trust (MIT) IPO: expected to raise gross proceeds of up to $1.19 billion. Price in offer range of $0.88-$0.93 per unit. MIT will Issue 594.91m units, subject to over-allotment option of another 91.75m units, with annualized yield of between 7.6-8% for FY10/11 & 8-8.5% for FY11/12, comparing favourably to Ascendas Reit’s DPU yield of 6.1-6.3% & Cambridge’s yield of 8.9%.....

IPO is priced at between 1.02x and 1.08x book value, broadly in line with S-Reit sector average of 0.97X PB, and industrial average of 1.06X PB. 6 cornerstone investors have agreed to subscribe for the shares, namely AIA, Prudential Asset Management (Singapore), Henderson Global Investors, Columbia Wanger Asset Management, US investment firm DE Shaw, and Dutch pension fund APG…..

MIT's IPO portfolio will comprise 70 properties located across Singapore with an aggregate net lettable area (NLA) of about 1.1 million sq m and a gross floor area of 1.5 million sq m. These assets include six light industrial buildings from Mapletree Singapore Industrial Trust (MSIT), a private trust that MIT is acquiring for $183.3 million on the listing date…..

IPO seen as recapitalization exercise for MIT, which has $977.8m of debt on balance sheet maturing in Jul 2012. Proceeds & a new debt facility of $837 million will be used to pay down existing debt & pay for the acquisition of MSIT and related costs…..

Analysts notes that the domestic focus of MIT could works in its favour, given strong outlook of Singapore's industrial property market and its attractive yields. Pricing of offer expected to be on Oct 11. The public offer opens on Oct 13 and closes on Oct 18. Trading of the units is expected to commence on Oct 21.


K-Reit: Macquarie upgrades to Outperform from Neutral, lifts target price to $1.38 from $1.05 after raising FY12-15 DPU estimates by 7-16% to reflect higher rental assumptions from 2012. Favours K-REIT for its exposure to the improving office outlook. Notes 85% of its portfolio comprises Spore office assets. Adds pace of office rent recovery stronger than expected, with prime Grade A rents reaching $9psf/month as at 3Q10 after bottoming in 1Q10 at $8psf/month amid active pre-leasing activity.

Tips Marina Bay Financial Centre, 33%-owned by parent Keppel Land as potential acqn target. Possible share placement in store but unlikely to be at significant discount to NAV of $1.45. However, current DPU yield of 4.7% does appear to be on the low end.

Fuxing China

Fuxing China: DMG maintains buy with TP of $0.255 based on 6X PE ex-cash. Note that investors’ response was generally positive after recent road show hosted by them, citing that grp has several catalysts for potential re-rating….

Expects strategies of grp to propel them to dbl market share within nxt 5 years, to become the no.1 PRC zipper maker, with grp currently holding a 4% market share. Capacity is full at most lines, with order book visibility till Nov 10, with grp aiming to increase capex by FY11 to increase current 2400 tons of output/yr for production of ‘Super durable zippers’ where grp has just successfully acquired a patent…..

Notes that grp has current net cash position of RMB630m, translating to $0.16/share, and dividend yields of 4-5% over nxt 2 yrs should provide key share price support.


Rotary: CIMB downgrades from outperform to neutral, reducing TP to $0.95 from $1.17, based on 8.5X CY12 PE. Notes tt grp has not secured any significant orders for FY10, way off their expectations of $250m for FY10….

With order-win disappointments and no clear re-rating catalysts in near term, CIMB has reduced earnings estimates for FY11-12 by 14-23% respectively. Notes tt grp still has outstanding orders (order book at 926.1m) which could provide earnings visibility till FY12, however valuations appear rich at 9X CY11 PE and believes that positives have mostly been priced in.


GuocoLand: 50/50 JV with parent, Guoco Group to acquire and develop land parcel in Changfeng , Shanghai. Land purchase price is RMB 3bn (~S$600m at Rmb 24,812 psm per plot). Group not new to property development in China, as currently undertaking an integrated development named Guoson Centre, also in the Changfeng district.
Interestingly UOL announced yesterday a land acquisition in the same district as well, with similar transaction price of Rmb24k/sqm gfa...

Given that the property developments would be completed in a few years time, both developers may not be as significantly affected by the recent PRC property policy changes. Expect both developers’ China expansion to be positive for longer term growth prospects.

Beng Kuang Marine

Beng Kuang Marine: Trading halt to be lifted at 9 am. Co. announced that is has entered into a non-binding term sheet for proposed acquisition & subscription of shares in BannerLexxon Offshore (BLO) Pte Ltd….

Proposed investment will see Co. hold an aggregate of 60% of enlarged issue share capital in BLO. Total outlay of investment is 10.3m, but will be subjected to approval by the board and shareholders in an AGM.

ST Engineering

ST Engineering: Kim Eng maintains hold with TP of $3.15, citing that share price appears fully valued at current 21X FY10 PE. With USD/SGD pair down 6% over last 3 mths, reaching an all time low of $1.317 yesterday, earnings could come under pressure. As majority of STE’s commercial contracts are in USD, management has guided that every one cent decline in USD/SGD, would translate to a decline of $1.3m in earnings….

Further notes tt ongoing concerns for the US recovery and a lack of new orders suggest tt ST Aerospace will need a longer time to get back to speed. Grp currently has an orderbook of $11.3b, expected to last for at least 3 yrs, but faces risks of a gradual dwindling of its orderbook for the above reasons.

China property

China property: govt continues to fine-tune tightening measures. New policy changes include, i) increase down payment for first time home buyers to 30% from 20%, ii) raise down payment for second property purchases to 50% from 40%, iii) banks nationwide ordered to halt lending for third and subsequent home purchases, iv) introduction of trial property tax nationwide. To begin first with cities like Shanghai, Shenzhen, Beijing, Chongqing…

Such an intensive launch of policies reflects the government's resolve to address high property prices, a major concern for most Chinese families. Street notes near term negative reaction likely; Deutsche expects China property stocks to fall by ~10%.
Yanlord, Yingli, Debao, China New Town Dev amongst the Chinese developers listed here. CapitaLand, Keppel Land among the Singapore developers with sizeable exposure to the sector.

Genting SP

Genting SP: commencement of junket operations to be next catalyst for stock re-rating. Applications from junket operators are currently being reviewed by the regulatory authorities, with market expecting some junkets to be licensed by early next year. Street estimates place the size of Spore’s gaming market at btwn US$5.7-6.5bn, and reckon junket operations could boost the market by btwn US$0.3-1.5bn in just the first year of rollout alone….

In comparison, Macau’s gaming mkt, which includes an established junket segment, is expected to grow to US$16bn in 2011. Majority of Street still bullish on longer term prospects for GENS; hence near term pullback may provide opportunities for entry. UOBK last week noted $1.73 as a possible level to accumulate.

SG Market

SG Market: Spore shares are likely to hold their positions on final day of the Sep despite Wall Street's modest pullback with prices propped up by last-minute window dressing as 3Q10 winds down. Extension of property tightening measures in China may hurt sentiment on developers with China exposure. Immediate resistance for STI remains at 3,146 (higher end of breakdown gap formed in Jun 200 with support at 3,069.

There could be some buying activity in the blue chips given the traditional window dressing ahead of a new quarter. In the broader market, interest could centre round dual-listing plays. Sound Global debuts in HK today by way of introduction; Midas in final stages of HK listing; Novo Group just received in-principle SGX approval to dual-list in HK; China New Town proposing dual listing in HK via introduction.

On the stock ratings front, Macquarie upgraded the following to OP from Neutral & raised target prices - Suntec (TP: $1.68 from $1.20), K-Reit (TP: $1.38 from $1.05), CCT (TP: $1.66 from $1.42) & downgraded Genting to Neutral from OP & cut its TP to $1.75 from $2.10, citing lower long term projections.

Wednesday, September 29, 2010

C&O Pharm

C&O Pharm: UOBK HK initiates on the China Healthcare sector with Overweight. Says macro drivers imply too good to ignore, as long term industry growth to be driven by i) ageing population, ii) rising disposable income, iii) increasing drug demand, iv) strong govt support. Notes govt support and continued reforms likely to be near term catalysts, underpinned by govt plans to spend RMB850bn by 2011 to expand basic medical insurance coverage, which should trigger increased demand for healthcare as affordability and accessibility is improved. Further implementation of policies such as the Essential Drug System, centralized tendering, drug price regulation and new Good Manufacturing Practices should also trigger consolidation and phase out smaller, inefficient players…

Tips China Shineway (2877 HK, TP HK$34.60 ), Guangzhou Pharma (874 HK) as Buys.
In Singapore, C&O Pharm is the only PRC drug manufacturer that offers exposure to this sector. Stock trades at 10.3x FY10E PE, less than half that of its HK listed peers. Street rates as Buy with targets ranging $0.62-0.69.


SIA: UOBK maintains Buy with $18.20 target. Notes SIA currently has the lowest valuation among airlines under coverage. Views positively that Singapore has signed or expanded air services agreements (ASA) with 9 countries ytd, with Mauritius being the latest addition. Tips SIA to commence flights to Mauritius in due course, given country’s status as a premium holiday destination...

Expects such as move to be yield accretive, given Air Mauritius’ S14.1cts pax yield on the Mauritius route, vs SIA’s 1QFY11 pax yield of S11.4cts.


Beyonics: FYJul10 net profit jumped 67% yoy to $6.9m, as higher gross margin arising from improved product mix and better cost control more than made up for the marginal dip in revenue. Revenue from the precision engineering services (PES) division grew 15% to $151m mainly due to improved conditions in the hard disk drive and automotive industries, while revenue from the mainstay electronics manufacturing services (EMS) division dropped 3% to $1.4bn mainly due to selling price erosion…

First and final dividend of $0.005/sh translates to ~2% yield. Mgt however, is cautious on outlook. Expects the business environment to continue to be challenging and highly competitive, on the back of increasing cost of materials, currency fluctuations and expected increase in labour costs. Stock trades at 0.4x PB, 18.8x PE, reflective of its low return on equity.

Frasers Centrepoint Trust

Frasers Centrepoint Trust: OCBC Research downgrades to Hold from Buy after recent run-up. Still likes FCT but valuations are looking less compelling. Keeps target price at $1.49. Recommends investors keen on exposure to Spore's retail market can consider Starhill Global, which it rates at Buy with $0.65 target. FCT offers DPU yield of 5.4% vs 6.7% for Starhill Global.

Sound Global

Sound Global: Dealings in Shares on HKSE expected to commence on 30 Sept by way of introduction. Co. preparing for 3 transfer batches of SG listed shares (one batch prior to introduction & 2 batches after the introduction set to be completed by 5th Oct), representing an aggregate of 231,116,500 shares or 17.9% of the shares in issue…..

Co. trades at 15.9X FY10E PE. We note the following valuations for listed peers on HKSE. Beijing Enterprises (392HK) at 22.61X FY10 PE, China Everbright (257HK) International at 25.1X FY10 PE & Tianjin Capital (1065HK) at 12.2X FY10 PE


Armstrong is likely to open lower as maker of rubber components used in electronic products reveals takeover talks between major shareholder & 3rd party have been called off without any outcome. Stock up as much as 31% since beginning of Jun, when Armstrong said unnamed 3rd party had approached its controlling shareholder to consider making possible offer. But with no conclusion, players who bought in anticipation of corporate activity may be prompted to cut holdings.

However, any downside may be mitigated by buying from investors hopeful on company's longer-term outlook, backed by magm's guidance last month for better 2H10 performance vs 2H09. 1H10 net profit soared to $14.2m vs $3.8m year earlier on improved performances by its automotive, consumer electronics businesses. Stock was trading between $0.335-0.40 before takeover news surfaced in early Jun. Support tipped at $0.41.


Bio-Treat: revises proposed 3-for-5 rights issue to 1-for-1 rights issue. To reduce costs, the rights will not be underwritten. Rights issue price however, remains unchanged at $0.04, a 58% discount to last close at $0.095. Company expects to receive gross proceeds of $40m, instead of $24m previously, with 80% of proceeds to be used to redeem outstanding Marked Down Bonds, and remainder to be used for working capital.

BW Offshore

BW Offshore: Norway-listed marine oil storage and production vessel operator is planning to dual list its shares in Singapore. Formerly known as Bergesen Worldwide Offshore, the company is one of the largest FPSO operators globally, and is a client of SembMarine and Keppel Corp. While no time frame has been given, the addition of BW Offshore would add to the depth of offshore & marine sector on the Singapore bourse, and may spur interest in the sector.


Yongnam: secures $27.5m contract for the MRT Downtown Line 2. Contract is part of the C921 contract package, one of several packages for DTL2, and comprises the Rochor, Little India stations. Yongnam will support main contractor, Ssangyong Engg & Construction in the supply, lease and installation of sheet piles, solider piles and king posts for both stations. Work to be completed by Sep 2015...

Expect Yongnam’s MRT-related order book to gain momentum, as MRT continues its line extension and awards more contracts. Yongnam’s total value of projects from DTL2 stands at $52.5m, while total order book is an est $488m. This compares with FY09 revenue of $347m. Stock trades at consensus 6.5x FY10E PE. CIMB has a Buy rating with $0.39 target.

Tuesday, September 28, 2010


Hi-P: +1.5% at $0.99. DBS reiterates Buy with $1.26 target. Notes that Hi-P is not involved in Research in Motion’s (RIM) new tablet, Playbook, but that is no loss to Hi-P. Believes Hi-P’s bet on the iPad likely to pay off because

i) iPad targets the broader consumer market whereas Playbook has a narrower corporate audience,…

ii) iPad is gaining netbook market share at amazing speed, and will likely retain its pole position in the tablet sales. Tips Apple to become Hi-P’s biggest customer by next year, overtaking RIM which currently contributes 30% of Hi-P’s sales.


MIdas: 10 mins to lifting of trading halt at 4pm. We expect stock to gap down on the weak pricing of its HK listing, which translates to $0.925 equivalent amid negative sentiment on the HK market (HSI now down >200 pts). Near term support lies at 50-day MA at $0.94.


SembMarine: +0.8% at $3.93, likely on small order wins announced over lunch. Secured 2x FPSO contracts worth $75m, namely i) award by BW Offshore, one of the world’s leading FPSO contractors involving major conversion work like repairs and life extension of a 97k dwt tanker into a Floating Production Unit. Expected re-delivery in 4Q11, ii) upgrading of an FPSO from Dutch Bluewater Energy Services, expected to be re-delivered by 2Q11.

ASL Marine, Koon Hldgs

ASL Marine, Koon Hldgs: proposed sale of water-front property and 21 tugboats and barges by Koon Hldgs to ASL Marine. Sale price of property is $7.5m vs $1.8m book value, while sale price of vessel is $7.1m vs $6.2m book value…

Deal is positive for Koon, which will recognize total $6.6m gain from the sale. This compares with Koon’s current mkt cap of $41.4m. Divestment would allow Koon to focus on its core business of construction, and reduce operating costs. Koon has also proposed a 1-for-1 bonus share issue. Stock +13.5% at $0.505 after lunch…

Deal also positive for ASL Marine as it is in line with company strategy to expand fleet and capacity, but impact is small relative to the company’s size.


Noble: Daiwa raises target price to $2.21 from $2.00 to factor in recent rise in shares of its peers. Does not expect strong 3Q10 net profit growth due to the challenging market conditions for soybean crushing in China, international dry-bulk shipping & spot iron-ore trade but sees good prospects from its energy-trading division from 4Q10. Notes Noble expanding energy trading team to cover various asset classes & stepping into lucrative market vacuum previously run by investment banks.

China Animal Healthcare

China Animal Healthcare: -1.5% at $0.33 in light trade, pausing for breather after last week's 8% gain, 20% rally since start of Sep. Recent run-up driven partly by hopes for better valuations as animal-vaccine maker seeks dual-listing in HK. Stock may have room to head higher if company successful in China govt tender exercise next month for supply of hand, foot and mouth disease vaccine….

CIMB keeps Buy, raises target to $0.52. Sees accumulation in the market, does not rule out possibility of other institutional names taking up stakes, following private equity group Blackstone US$50m investment in company in July.


Commodities: Sugar climbed to a 7-month high on supply concerns that drought in Brazil will affect crop output while wet weather in Australia has disrupted crushing & shipping & cane yields in India may be reduced by flooding. Harvests by Thai & US producers are also being delayed by wet weather. Separately, cotton also surged 65% to 15-year highs on mounting concerns that demand will outstrip supply as demand in China topped domestic prodn by 3.6m tons, widening the supply deficit.

On the coffee front, Indonesia's coffee exports for yr ending Sep 10 are est to be 10% lower yoy as prodn has been impacted by heavy rains & delayed harvests & prodn next year is expected to be little changed. A decline in Indon prodn, coupled with the possibility of another round of stock-piling by Vietnam, Asia's largest coffee grower will likely provide further support to coffee prices. Sweet news for both Olam (cotton, coffee) & Noble (sugar).

First Resources

First Resources: Phillip Securities initiates coverage at Buy with $1.33 target. Cites co. as one of purest upstream planters in industry, with the youngest average age amg it’s palm oil trees vs peers. Expect CPO production to increase & yields to improve over nxt few yrs, as bulk of grp’s palm trees approach maturity age. Grp currently trades at 12.7X FY10 EPE vs bigger peers of IndoAgr & GoldenAgr at 16.6X & 13.7X FY10 EPE....

On a separate note, CPO 3-mth futures closed at 16-mth high., with Cargo surveyor SGS reporting CPO exports +15% MoM for the period of 1-25 Sep.

Industrial Reits/GLP

Industrial Reits/GLP: Spore industrial Reits such as Cache Logistics, Mapletree Logistics, Ascendas Reit, Cambridge Industrial may face downside pressure as the mega IPO of GIC’s industrial logistics arm, Global Logistic Properties (GLP) could drain liquidity from these stocks or prompt a re-weighting of some portfolios. GLP is offering 1.17bn shares at $1.78-1.96 each, with another 589m shares to be sold to cornerstone investors, raising net proceeds of $3.1-3.4bn.

IPO ends Oct 14, with trading expected Oct 18. Temasek-linked Mapletree Industrial Trust also plans to launch its IPO on Sep 30 (listing Oct 21) to raise $800m, which could further depress existing industrial plays. With 2 similar IPOs lined up back to back, industrial Reits would be competing for attention as investors may switch their funds to these 2 much bigger regional industrial property plays.

Otto Marine

Otto Marine: DMG downgrades to Neutral from Buy, lowers target price to $0.39 from $0.46 after cutting FY10-12 earnings forecasts by 2-13% to reflect order cancellation, fewer contract assumptions. Notes Norwegian customer Mosvold Supply's intention to cancel order for vessel being built by Otto plus the highly leveraged position of Mosvold Supply has made it difficult for it to take delivery. Adds Otto has not secured any new shipbuilding contract so far this year.

But downside risk limited at $0.35 with much of the negative news already factored in price.


DMX: CEO highlights co. offering Chinese cable operators software needed to migrate from analogue to digital, aims to gain 18% of the est US$2.5b software and hardware slice of the digital media TV cable mkt by 2015. Expects subscribers signing up with cable TV operators, who do business with DMX to increase 7x from 4m to 30m within nxt 5 yrs and revenue to rise by +20% from US$190.4m last yr….

We note that stock is not cheap, trading at est FY10 P/E of 35x. Valuation is more reasonable on P/B basis at 1x

Further note that DMX ADRs has seen minmial interests to date since their debut last wk


Genting: Merrill Lynch remains confident on SG’s gaming market, projecting mkt size to reach S$7-8b by FY11. Continue to like GentingSP, with top of range EBITDA estimated earnings of $1.7B for FY10 and PT of $2.20 based on SOTP valuations, representing 12x FY11E EV/EBITDA...

However cites GenSP recent 83% run away and recommend investors switch to Genting Berhad, which is currently trading at 36% discount to its RNAV, with TP of M$12.50.


SMRT: Kim Eng maintains sell with PT of $1.71. Expect Circle Line losses to continue weighing on grp profits for nxt 1-3yrs, highlighting population density per station will be less than 35,000, vs NEL’s station population density of 52,600 taking at least 3 yrs to break even…

Further notes that Capex for FY10 likely to remain 50% higher vs FY09, on back of spending on commercial property operations, purchase of new COEs for taxis & trains. At current valuations of 21X FY10E PE, stock appears pricy, and recommends switching to Comfort Delgro, currently trading at 14X FY10E PE.


SGX: Russian firms are increasingly looking eastward to Singapore and Hong Kong, to tap on the abundance of liquidity in Asian capital markets. Market watchers are aware of about 6 Russian firms seeking to list on the SGX, and expect a couple to materialize within the next 12 months. Listings would likely come from firms in the resources, maritime and offshore, and consumer-related sectors...

With an overwhelming number of SGX's 302 foreign companies from China, the diversification and additional revenue stream from Russia would be positive for SGX.
Stock received several ratings upgrades recently, following news that it would offer ADR trading of the largest Chinese companies on its platform during Asian hours, raising expectations of a strong surge in trading volumes. The majority of Street rates as Buy, with targets ranging $8.94-10.00.


Noble: likely to be in play, as it continues its rapid pace of M&A expansion in the energy, agri space to meet rising demand from China and India. Backed by CIC, China’s sovereign wealth fund, which owns a 15% stake, we see opportunities for Noble to successfully develop its China business going forward...

Mgt plans to expand into supplies of nuclear fuel to meet rising demand from China and India, following recent acquisition of 5.1% stake in USEC Inc, a US provider of enriched uranium with 50% global mkt share. About half the world's nuclear reactors under construction at present are in China, comprising 25 reactors with a total capacity of 28GW. The govt has also approved the construction of 34 other reactors, which will have a combined capacity of 37GW…

NOBLE : newspaper reported they are interested to exapnd their nuclear energy business. Noble is also seeking to expand its grain and oilseed business to take advantage of rising global food demand, which has driven up prices for wheat, corn and soybeans as much as 62% since June 1. Sees sunflower seed opportunities in the Black Sea region, the world’s biggest sunflower seed grower, and intends to acquire origination, logistics, industrial assets…

Daiwa upgrades target to $2.21 from $2. OCBC however remains less convinced. Downgrades to Hold from buy, maintains $1.97 target. Says strong set of 3Q10 earnings is required to justify further share price outperformance. Thinks issues that plagued commodity supplier's 2Q10 results, such as shift in revenue mix to lower-margin oil & gas business not likely to vanish overnight.

Monday, September 27, 2010

SembCorp Marine

SembCorp Marine: Good mix of views from the Street, with wide range of targets from $2.80-4.75. Current weakness in SMM likely due to delays in the anticipated award of the Petrobras contracts (now slated for Nov). The longer this drags, the more bargaining power Petrobras will have, given that the order backlogs of the Singapore yards are running thin...

Longer term however, SMM, Keppel still remain well-placed for the tenders given their long standing relationship with Petrobras.

China New Town

China New Town: technicals, penny-stock focus. Strong recent price run-up accompanied by heavy volume. Broke out of $0.165 long term resistance. Although indicators looking overbought, momentum may see stock test $0.20 next. But watch for a pullback below $0.15, which would be a negative indication that momentum may have reversed.

Genting Spore

Genting Spore: DB lifts target price to $2.60 from $1.93, based on 14X EV/EBITDA, after raising core FY10-12 earnings forecasts by 34-42%; noting street expectations are still reasonable & seeing further upside should junkets be allowed to operate. Expects junkets to be licensed in Spore by early 2011; highlighting that ~20 junkets have applied for a license with the Casino Regulatory Authority. Keeps Buy call but expects limited upside in near term after recent strong run-up.

CDL Hospitality

CDL Hospitality: CIMB maintains outperform, increase TP to $2.30 from $2.04 using DDM, on larger-than-anticipated acquisitions and room rate growth in upcoming 3Q10 results….

Cite recent record high visitor arrivals, as an indication to a long-term uptrend for hotel DD in SG. Expect possible acquisitions in near term and factor in $300m worth of acquisition for 2010-11, lower cost of debt and lower payouts. Note that although grp is trading at premium vs peers, P/B has yet to reach peak of divergence during its last peek in 2007.


Olam: soft commodities supply chain manager and processor may see trading interest on continued M&A activity in food-related plays. Bright Food, Shanghai’s biggest food and dairy company, is in exclusive talks to buy United Biscuits, the maker of Jaffa Cake and McVitie’s cookies, in a transaction that may be valued at £2bn. This comes on the back of Olam’s proposed collaboration with Louis Dreyfus commodities unit, which may lead to a possible merger.


Olam: soft commodities supply chain manager and processor may see trading interest on continued M&A activity in food-related plays. Bright Food, Shanghai’s biggest food and dairy company, is in exclusive talks to buy United Biscuits, the maker of Jaffa Cake and McVitie’s cookies, in a transaction that may be valued at £2bn. This comes on the back of Olam’s proposed collaboration with Louis Dreyfus commodities unit, which may lead to a possible merger.


Dairy: Following China’s urge to improve safety of milk products, analysts tipping a wave of consolidation in the industry, as Chinese milk product makers must meet revised industry standard by end Oct 10….

Separately, Bright Dairy & Food, Shanghai’s biggest food & dairy co. has won regulatory approval frm NZ authorities to acquire 51% stake in Synlait Milk, and is reportedly in discussion over possible purchase of UK’s United Biscuit, stirring momentum for further M&A plays in the Food industry.…

Notable Dairy plays listed on SGX would be China Dairy, who recently issued profit warning, expecting to register net loss for 3Q 10 & FY10, citing rising prices of key raw materials & depressing margins following intense competition in China’s milk industry.

Falcon Energy

Falcon Energy: Proposes renounceable non-underwritten rights issue of warrants at of $0.10, on basis of 1 warrant for every 5 shares. Each warrant carries right to subscribe for 1 share at ex price of $0.40 and period for 3 yrs. Grp expected to raise $16.1m if all shareholders subscribe to warrants, & $65.1m should warrants be subsequently converted...

Proceeds will be used to strengthen grp’s B/S, provide additional financial flexibility and expand capital structure. Exercise aims to further attract and encourage shareholders to increase equity participation.


CoscoCorp: Kim Eng maintains buy with TP of $2.10 based on 4.2X Growth P/B. Expects earning base to increase on back of improvements in execution & recovery in margins. Cite strong orderbook of US$5.5B, expected to generate earnings of $500m over nxt 30 mths. Further catalysts include group’s growing expansion into the offshore sector, notably in drilling and FPSO conversions….

Buy call follows a string of upgrades on group last wk, with DBS & Citi having buy calls & TP of $2.35 & $2.30 respectively.


Biosensors: reports positive development in new test product, BioFreedom, a polymer-free drug-eluting stent. Company preparing the way for longer term product development and expansion. Near term, market likely to be focused on performance of newly listed peer, Microport (853 HK). Microport closed 36% above its HK$6.10 IPO price on its first day of trading. Microport trades at 28.6x FY10E PE, vs Biosensors 22.5x FYMar11E PE.


Z-Obee: equity invmt and strategic partner, Yoho King is seeking an IPO on Bursa Msia. May see trading interest if valuation of Yoho King improves upon listing. Recall Z-Obee bought a 14.7% stake in Yoho King in May 2010 for US$10.9m (14% of NAV, 6% of mkt cap), in which Yoho King has undertaken not transfer or list its shares at a price per share less than that purchased by Z-Obee…

Yoho King is engaged in the distributorship and trading of electronic components, R&D and sale of solution packages and electronic devices.

China XLX Fertiliser

China XLX Fertiliser: intends to invest ~RMB3bn to construct a new 4th production plant to expand production capacity for urea to over 2m tons per yr. Facility expected to yield additional cost savings, reinforce company's position as one of country's largest fertiliser producers when completed in 2013…

The 4th plant will be located at Xinxiang City, Henan Province, alongside its 3 other existing pdtn plants, but will use sand coal as raw material instead of anthracite coal currently being used. Sand coal is apparently cheaper and more energy efficient compared to anthracite coal. Stock trades at 13x consensus fwd PE. Street rates at Buy, with targets ranging $0.66-0.73.

SG Market

SG Market: Spore shares expected to start final week of Sep on firm note following Wall Street's rally last Fri. If ytd high of 3116 gives way, next resistance for STI expected at 3146, which represents the top end of breakdown gap formed in Jun 0 . Index closed +0.3% at 3093 on Fri, +4.8% so far this month. The bias for the rest of the week could be on the upside due to end-of-quarter window dressing.

Friday, September 24, 2010


Cosco: Credit Suisse maintains Sell with $1.20 target. Observes that one-third of board has resigned within a month. Notes that while changes may not be a reflection of underlying mgt issues, move may not lead to a strategic review in the near term either. Unlike DBS, Citi, CS remains unconvinced that margins have turned around. Touts Cosco, at 21.9x FY11E PE, 3.2x PB, as the most expensive shipbuilding stock globally.


SGX: CIMB upgrades from neutral to outperform with target of $9.75 based on DDM. Raise EPS by 8-13% mostly on ADR initiative. Highlight that recent initiatives to increase range of products & participants will improve trading velocity of exchange…DBSV also upgraded stock to buy with TP of $9.60 2 days ago.

On separate note, Exchange announced it is enhancing SBL services to bring additional benefits for investors & SGX CDP a/c holders. Highlights that enhanced services means >80% or >600 stocks listed both on main board & Catalist are eligible for lending or borrowing via CDP, enabling retail depositors to gain a return on their stockhldgs and access to institutional borrowers with access to large pool of stocks, thus improving overall liquidity.


Shipyards: JES, Yangzijiang, Cosco, Jaya all up btwn 1-3% in morning session, and among top actives, following glowing sector report by DBS. Says the shipbuilding sector has passed the worst underpinned by positive signals from i) sustainable and stable orderflow; ii) recovery in vessel prices; iii) firmer freight rates. Expects sector to be re-rated as it continues its recovery into 2011.

Genting Singapore

Genting Singapore: continues to slide for a fourth day, -1.4% in morning session at $2.04. UOBK maintains Hold with $1.85 target. Says GENS is priced to perfection, with downside risk outweighing. Recommends to take profit now, tips re-entry at $1.73. Notes that 3Q10 may disappoint, as gaming EBITDA could ease by over 30% qoq, due to fall in betting intensity in both VIP and mass market, as well as normalizing of luck factor (from 2Q10 exceptionally high 3.5% to 2.85%). Sees increasing competition from Marina Bay Sands, which is finally getting its act together, and gaining gaming momentum on all fronts.


DBS: Deutsche remains buy call with $17.20 target. Cites that grp’s plan to spend $250M to boost Treasury & Markets business over next 5 years will have minimal impact on immediate P&L given that annualized investment is less than 2% of 2010E costs….

However sees exponential growth and opportunities in China and India’s currency market with further development and liberalization of economies but warns of high competition.

Marco Polo

Marco Polo: Kim Eng initiates coverage with Buy target of $0.62 based of 9X FY11E PE. Expect grp to be potential beneficiary of Indonesia’s need for electricity as Indo continues building coal-fired power plants, leading to strong long-term demand for tugs and barges which ferries coal from mines in Kalimantan to power plants….

Cites Grp’s sales and lease back strategy to get around Indonesia’s cabotage rule, will enable grp to reduce gearing and improve cashflows. Further catalysts include the recent competition of 2 dry-docks in 09 which will provide enhanced recurring income

SG Market

SG Market: Renewed concerns over global recovery & a weak performance in US may weigh on SG shares in early trade. Cue expected to come from other Asian bourses as markets in Hong Kong, Japan, South Korea reopen after recent public holidays...

Support for STI at 3043 Aug peak, with ytd high of 3116 expected to cap any upside. STI closed down 0.4% at 3083 yesterday. Market watchers view recent pullback as healthy, following STI’s 4.5% rise this month. Note risk of market running ahead of expectations if share prices continue going up ahead of 3Q earnings results beginning next mth...

Stocks to watch:
#Commodities plays, such as Olam, Noble, Wilmar, on talks of possible business collaboration including a merger, btwn Olam and Louis Dreyfus Commodities.

#DBS: to invest $250m to upgrade its Treasury & Markets unit, with particular focus on China and India expansion.

#OCBC: to merge its two Indonesian bank units, into one single entity to achieve revenue, cost and operational synergies.

#Residential property: Recent data suggest recent property measure starting to take effect. Buyers, developers becoming more cautious, as transaction prices, volumes begin to come off. May erode near term sentiment.
Deutsche has the following ratings - City Dev as Sell with $10.44 target, Allgreen as Hold with $1.11 target, Wing Tai as Hold with $1.73 target.

#Office property: Street currently favors Office over Residential developers. Office leasing data also showing good momentum. Deutsche has Buy ratings on CapitaLand, Keppel Land, with $4.84, $4.74 targets respectively.

#Marco Polo: Kim Eng initiates at Buy, with $0.62 target. Charterer of tugboats and barges to benefit from the rising demand for coal transshipment within Indonesia to meet domestic electricity needs, as well as assess to the Indonesian cabotage trade.

#Biosensors: peer Microport to debut on SEHK today. SWS Research sees 20-40% further upside in Microport. If Microport runs, Biosensors may follow.

#DMX: may lose shine, as ADR debut on the US OTC last night received a flat welcome. Virtually no trades done.

#China Taisan, Sound Global: updates to TDR, HK dual listing.

Thursday, September 23, 2010


Eratat: SIAS initiates Buy on the fashion footwear and apparel maker, with $0.32 target. Expects Eratat’s margins to recover, following company’s strategic shift away from sportswear, toward higher-value casual fashion wear, which appeals more to the Chinese consumer. Likes company’s ability to reach out to the mass market via its extensive network in the fast-growing second and third tier cities, and leverage to the China domestic growth story Says Eratat undeservingly trading below peer valuation multiples, and should play catch up given new growth opportunities arising from its repositioning exercise.


DBS: +1% at $13.96; Co. will invest $250M to grow Treasury & Markets (T&M) business in Asia over next 5 yrs, to fuel expansion & become a leading Asian currency & Fixed Income house….

Aims to ramp up T&M capabilities in key Asia growth markets, esp in China, where the internationalization of the RMB will enable Group to leverage and focus on building a strong RMB business spanning FX, Bonds, Structured products and hedging solutions….

Group aims to derive more than 55% of T&M rev outside SG vs current 35%, with current non-interest income comprising of 38% of group’s recent 1Q10 Rev. DBS trades at current 1.25X P/B vs UOB 1.38X & OCBC 1.44X.


Adventus: +27% at $0.07. Trading halt lifted at 2pm.
Follow up on proposed acquisition of coal mine at Boatman’s Creek in New Zealand. Purchase price fixed at US$8.6m, to be funded via internal resources. Mining concession will expire Jun 2033. Deal is subject to certain conditions, including confirmation of minimum recoverable reserves of at least 8m tons. Mgt intends to develop the Concession Area to produce up to at least 200,000 tpa initially.


Fragrance: +2% at $0.6, on above avg volume, but off earlier high of $0.72. Operator of budget hotels likely boosted by reports that hotels are running at near full capacity in the midst of the F1 season, as well as the proposed 1-for-1 bonus share issue…

Today’s long white candle suggests stock has broken out of the long term downtrend. Price has pierced through multiple resistance levels (including the 200MA and 2-year high). Indicators look supportive of a continuation in momentum. A close above $0.68 may pave the way for a subsequent move towards $0.80.

Hiap Seng

Hiap Seng: +17% at $0.76 on strong volume. DBS reiterates Buy with $0.94 target. Says huge PE discount of 28-50% to peers is unwarranted, given i) steady earnings delivery over past one year, ii) expected net cash of 15cts by end FY10, iii) sustainable dividend payout of at least 4.5cts/yr, translating to ~7% yield, one of the highest among industrial players…

Expects Hiap Seng to play catch up with closest peer, PEC, which has seen strong run up since mid-August. Notes current orderbook stands at $166m, while order momentum should pick up, underpinned by demand from the Middle East for gas compressor packages.


Singtel: CIMB maintains underperform with SOTP target of $3.09. Notes that group faces earnings pressure in Singapore, India and Australia. Estimates that earnings contribution from group’s recent ambition to become leader in cloud computing will not be significant. Instead favors M1, believing it to be the largest beneficiary for the Next Generation Nationwide Broadband Network…

Technically, stochastics pointing to overbought region, with prices testing upper range on Bollinger bands. Near tearm support at 3.07 (20 day MA)

SembCorp Marine

SembCorp Marine: Settles dispute with Societe Generale over FX transactions made in 2007. According to agreement, SocGen will pay SembMar US$40m, resulting in a write back of transaction and will be reflected in SembMar’s 3Q Income Statement….

DMG retains ‘sell rating’ on stock, but raises target price to $3.73 from $3.70, raising FY10 net profit by 7% to reflect settlement writeback. Expect slowdown in orderbook replenishment in past 18mths to lead to lower earnings, further citing rich valuations at 17X FY11E PE. Peer KepCorp trades at 14X FY11E PE

ParkwayLife Reit

ParkwayLife Reit: large volume almost entirely due to the married trade of 56m shares done at $1.56 at 9.01am. Sale likely by TPG, which has been tipped to be selling out the same number of shares. Sale price is at the lower end of initial pricing guidance of S$1.56-$1.62 each. Deal size is equivalent to 9.3% of share base. TPG had been expected to sell its stake after Khazanah took control of Parkway. Goldman Sachs is the sole bookrunner.


Oakwell: Trading halt lifted at 9am this morning. Proposed placement of 71.6m new shares to Jeffrey Hing at $0.085/share (same as last close), raising $6.1m. Proceeds will be used for working capital. Basing on FY09 figures, deal results in marginal improvement in NAV/Share to 7.61cts and a slight dilution in EPS to 0.66cts. Company is principally engaged in engineering, trading and contracting services.


Mapletree: Deutsche maintains Buy, with $0.94 target. Notes latest acquisitions of AW Center in Singapore, and letter of intents for 1 Japan, 3 Singapore properties come with attractive net property yields at >8%. Combined with the latest round of equity raising, impact to valuations is neutral <-1% to FY10-12E DPU. But notes enhanced balance sheet capacity (gearing to decline from 46% to 38%), should allow debt-funding of additional $470m in acquisitions which sould provide upside to valuations. Valuations attractive at 1x PB, 7.1% FY10E yield.

SG Market

SG Market: Spore shares may pull back given Wall Street’s overnight retreat and lack of leads from Asia, with HK, Japan and Korea markets closed for holidays. STI support at 3043 with upside capped at yesterday’s new ytd 3116 intraday peak. Expect small cap stocks to continue drawing interests, with key focus on Technics O&G after securing $35m contract in Vietnam and Biosensors after announcing findings endorsing efficient of its stent system…

Developers may see weakness, after acknowledging yesterday that the recent property measures have injected uncertainty into the market and will dampen private home prices slightly.
Hotel operators may see interest as hotels located around the F1 track running at near full capacity even after an increase in supply of rooms. The Marina Mandarin, owned by OUE, among properties reporting higher bookings. CDLH Trust, which owns several hotels in the city, also a favorite amongst the Street...

On stock ratings, Mapletree maintained at Buy by with $0.94 target by Deutsche, raised to Buy from hold by OCBC
SATS maintained at Buy with $3.20 target by Deutsche
Hersing Corp started At Buy with $0.355 target By Phillip
Eratat started at Buy with $0.32 target by SIAS

Wednesday, September 22, 2010

Mapletree Logistics Trust

Mapletree Logistics Trust: Off 2.8% at $0.855 as investors offload on DPU dilution concerns, after Reit’s $304.8m fund raising exercise to finance acquisitions. CIMB maintains Outperfom but reduces target to $0.96 from $1.01 to reflect dilution. Expect equity raising to shave 3-6% off 2010-2012 DPU estimates and gearing to drop to 38% from 46%. Near term support at recent Sept low of $0.83.


UMS on the trot after breaking out of ascending triangle at $0.435. Prospects for this stock is closely tied to key customer Applied Materials, which is the world's largest semiconductor equipment maker, which contributes >50% of UMS revenue The sales performance of AMAT typically leads UMS by one quarter. For 3Q10, AMAT achieved a 122% yoy and 10% qoq jump in revenue, and is guiding for a 85% revenue growth this FY, which should underpin sales at UMS in the coming quarters.


Memstar: unchg today, but up nearly 30% over past one week to $0.09, on strong volume. 60% JV to undertake 4 Transfer-Operate-Transfer wastewater treatment projects with combined capacity of up to 200k cubic m/day in China. The projects are located in Hebei, Henan and Fujian provinces, with concessionary agreements of btwn 20-30 yrs. Total project value est to be RMB225m. Project to be financed via mix of internal resources and debt, and is expected to be completed by end 2010…

Earnings appear to have recovered in FYJun10, with company posting record net profit of RMB24m. But at 47x PE, market likely pricing in very strong growth expectations for maker and distributor of membrane products.

Raffled Edu

Raffled Edu: Co. announced that it has incorporated a subsidiary, ‘Raffles Design Institute’ in the Philipines with an initial investment of $0.5m, which will engage in activities relating to provision of private higher education, notably in Fashion Design, Fashion Marketing & Management, Visual communication and Interior Design….

News not expected to have any material impact on group’s Eps or Nta for FY11. Technically, stocks near term resistance at $0.31 followed by $0.34, with support at $0.29


Midas: CIMB downgrade to neutral from outperform, reduces target to $1.10 from $1.14. Notes that recent run up has priced in the positives of its HK dual listing and raises dilution concerns over the offer of 220m new shares, capped at a maximum offer price of S$1.05…

Expects group’s utilization rate to increase from 70-80% for FY11-12 which will increase gross margins, but after factoring in new estimates as well as dilution from new shares, reduces FY10-12 EPS estimates by 3-5%. Target price still based on 15X CY11 PE, in line with peers.

Sunvic Chemical

Sunvic Chemical: Mgt expects 3Q10 profit to be similar to RMB100m in 2Q, appears on track to achieving full year profit target of at least RMB300m this year vs RMB4m in FY09, when sales were hurt by the global economic downturn. Expects new cracker plant that produces propylene, a key ingredient for making acrylic acids, to lead to further cost savings of at least RMB100m pa when fully operational in 2011…

Hopeful for acrylic acid ASPs to maintain at ~RMB15k/ton, underpinned by anticipated 15-20% pa growth in demand for acrylic acid in China over next 3 yrs. Guides for additional US$400m in revenue (~1.5x of FY09 revenue) next year from the sale of the petrochemical products to distributors in China. At forecast P/E of 4.2x, valuations appear compelling. Phillps has a Buy rating with $0.60 price target.


Hi-P gaps up 15.4% to $1.01 on opening, its highest level since Jul 07. Contract manufacturer's revised guidance for higher FY10 revenue, profit sitting well with investors with volume strongest in 6 weeks. Better outlook based on improved productivity, cost controls. Record earnings look within reach because key customers growth potential is currently suppressed by the lack of part supplies while global demand is still very strong.

DBS Vickers keeps Buy call but lifts target to $1.26 from $0.94 after increasing FY10-11 earnings estimates by 10-11%. Hi-P counts Blackberry maker Research In Motion & Apple as its key customers. Group reported 2Q10 net profit of $12.4m vs $14.2m loss in 1Q10. RIM’s positive 3Q guidance issued last week bodes well for Hi-P in coming quarters. Resistance will be at $1.07 high set in Jul 07.

Rubber/GMG Global

Rubber/GMG Global: Global rubber consumption will climb 9.4% this year to 10.3m tons, the fastest increase since 2004. Demand will exceed output by 60k tons, from a surplus of 237k tons last year. World auto sales will increase 8% to 68.5m units this year & 7.2% to 73.4m units in 2011. China accounts for 27% of the global NR output with projected annual demand growth of 10% over the next 10 years.

Rubber prices reached a record US$4.11/kg on Apr 15 & closed at US$3.50 on Sep 20, +22% this year but is projected to hit US$4.20 in Mar 11. GMG’s stock price is strongly correlated to rubber prices

Stamford Tyres

Stamford Tyres (STC): Sumitomo Rubber Industries (SRI), Japan’s 2nd largest tyre manufacturer and maker of Falken brand of tyres that Stamford distributes, will be taking a 1.8% stake in STC, via a private placement. New shares will be issued at $0.35, marking a 22% premium to previous close of $0.285. Proceeds from share sale will be used to finance STC’s expansion in South Africa, where mgt targets to double or triple sales over the next 3 yrs…

SRI may consider owning a larger chunk of STC in future. News is positive and represents a vote of confidence in STC.
At $0.35, Stamford Tyre is valued at 8.4X PE. Interest may also spillover to peer YHI, which trades at 7.7x FY10E PE, and GMG, a rubber plantation and processor, which trades at 23.8x annualized 2Q10 PE.

Mapletree Logistics Trust

Mapletree Logistics Trust (MLT): similar to the recent equity fund raising by Ascott Residence Trust, MLT will raise $305m via, i) private placement of 207m units at $0.825 each, and ii) 2-for-25 preferential offering at $0.815 each. New issues are priced at 6-7% discount to last closing price at $0.88, and resulting share dilution is ~21%, but mgt guides for deal to still be mildly DPU accretive (+1.2%)...

Proceeds will be used to finance 9 previously announced and proposed acquisitions in Vietnam, Singapore, Japan and S Korea with combined value of $440m. Gearing is expected to drop to 38% from current 46%, allowing MLT to continue pursuing debt-funded acquisition growth.

Separately, MLT will acquire AW Centre, a 4-storey single user bonded warehouse at Tuas, for $18.3m in a sale-and-leaseback transaction. While small, deal is yield accretive, with initial net property yield of 8%, vs existing Singapore portfolio of 6.5%. Contract also provides for escalations of 1.5% pa. Deutsche has a Buy rating with $0.95 target.


Cosco: Citi reverses call, upgrades to Buy from sell, raises target to $2.30 from $1.40. Ups earning est by 23-26% for 2011-12E, on improving outlook for shipbuilding after recent period of large losses. Likes Cosco’s major transition towards offshore, given increasing complexity of rig and FPSO works handled, and penetration into windmill vessels. Believes Cosco’s margins have likely bottomed, whereas Street still underestimating Cosco’s ability to deliver on margins...

Catalyst to come from new orders, with Cosco tipped to win 1 deepwater rig and 2 additional FPSOs from Sevan Marine in the near term.

Tuesday, September 21, 2010

Sim Lian

Sim Lian: BNP lifts target price to $0.80 from $0.72, based on 20% discount to RNAV, after increasing FY11-12 earnings estimates by 11-28% to factor in potential property launches arising from developer's recent site acqs. Sim Lian recently won the govt land tender for Hougang Ave 7 site with a highest bid of $160m or $340 psf of GFA. The site can accommodate 400-450 condos. Group also has financial capacity to buy up to 2 more sites. But still keeps Hold call on view stock is fairly valued.

NOL (follow up)

NOL (follow up): Macquarie’s outperform target of $2.50 based on 1.2X P/B. Note changes factor in stronger than expected recovery in container shipping freight rates and further highlights NOL’s ability to maintain solid volume growth, supported by strong relationships with strategic customers, resulting in less reliance on spot rates….

Technically, stock appears to be moving to the Apex of a Symmetrical Triangle Formation, which could lead to a breakout in other direction.


JES: DBSV initiates Buy with $0.46 target. Cites JES as most undervalued shipyard in the region, trading below book and underperforming peers by at least 55%.Expects JES to play catch up on back of better operating environment and expected increase in orderbook. Further catalysts include the commencement of a new yard in 2H10 which should be earnings accretive and potential chance of being privatized.

United Envirotech (UE)

United Envirotech (UE): +2% at $0.505. DMG maintains Buy; raises target to $0.66 from $0.53. Upgrades earnings by 25% for FY11, on the back of strong project flows. Notes that UE’s recent of RMB200m contract to develop the environmental infrastructure in Neijiang city is the largest thus far, bringing latest EPC orderbook to ~S$140m. Expects UE’s track record and continued strong demand for wastewater treatment facilities in China to underpin further order book growth, est S$160m for FY11.

O&G services

O&G services: UOBK rates sector as Overweight, says time is ripe for re-rating as majority of sector picks lagging both long term mean valuations and performance of the broader market. Catalyst to come from expectation of fleet expansion from the delivery of assets and newbuild programmes, and further contract awards to offshore contractors, culminating in earnings growth in FY11F. Top picks are Swiber (Target: $1.54 ), Ezion (Target: $0.90 ). Also maintains Buy on Ezra (Target 2.10 ).


Tritech: Share price could see some weakness, after co. proposed a placement of 22M shares at $0.27, representing a 19.9% discount to current prices. Shares will represent 8.5% of the enlarged issued share captal after placement and will be used for working capital and business expansions into non-water related business...

Technically, stochastics pointing to overbought territory. See near term support at $0.31 (50 day MA)

Anwell Tech

Anwell Tech: +7.1% at $0.60. Received deposit from a leading solar module developer to deliver at least 180MW of solar modules over the next 3 years. Est contract revenue of >US$300m compares with annualized 1H10 revenue of US$132, providing significant order book visibility for firm. The first shipment is scheduled for delivery in Oct'10. Anwell has current capacity of 40-50 MW and will increase this to 120-150 MW by 1H11...

Technically, stock has just broken out of $0.60 resistance. Indicators suggest positive momentum in near term. Support at $0.585 (200MA).


SGX latest move to launch clearing services next month for OTC trades on financial derivatives, is part of a plan to broaden its range of financial offerings & will give it 1st mover advantage in Asia. SGX will start clearing US & SGD interest rate swaps but plans to expand to other foreign currency options & futures. Spore is a big market for both these products, trading more than US$75bn/day (vs HK: US$19bn, Australia: US$41bn) in OTC interest rate derivatives and US$250bn/day on the OTC forex market. The centralized clearing of these OTC trades will reduce counterparty risks posed to the financial system & provides a long term growth opportunity for SGX. News comes just days after SGX announced plan to introduce trading of ADRs in Spore of 19 major Asian companies from Oct 22 in bid to boost market activity Credit Suisse, which has Outperform call with $9.40 target. DB also has Buy with $9.50 target.

The stock has broken clear of 1-year downtrend with resistance now tipped at $9.60.

RH Petrogas

RH Petrogas: halt lifted at 9am this morning. Increases stakes in two oil producing PSCs in West Papua, Indonesia through acquisition of PearlOil’s interests for US$36.7m. This follows recent acquisition of Lundin’s interests in the same PSCs. RHP now owns 60% of Basin PSC and 33.2% of Island PSC. Acquisition will add 2600 bpd net to RHP, raising total pdtn to 4700 bpd. Proved and probable (2P) oil reserves attributable to RHP will rise from 8.1m to 14.3m.

Stock trades at 2.1x PB, has been posting losses for past two quarters since restructuring.


Midas: HK Public offer of its dual listing will commence on 21 Sep till 27 Sep. New shares expected to represent 18.6% of Midas’ enlarged capital, with Maximum Price of HK$6.10 (S$1.05). 90/10 split btwn international placing and the HK Offer. KE maintains Buy with $1.20 target but notes that near term, stock trading at similar valuations to HK peers (Midas’ 19x FY11E PE vs peer avg 19.6x FY11E PE).

Hu An Cable

Hu An Cable: to invest in new RMB 338m plant in Yixing city, Jiangsu province. On completion in 2011, annual cable pdtn capacity will almost double to 5760km from 3000km (utilization currently at 75%). The new capacity includes 600km of ultra-high voltage power cables (UHPC), which Hu An is not yet able to produce, allowing co. to expand its product offering. Given the higher value-added product, and fewer than 10 suppliers in China, UHPC offers the highest avg pdt gross margins at 25%...

Industry outlook appears positive, with the State Grid Corporation of China to invest est RMB270bn over next 5 yrs to build 3 ultrahigh voltage power transmission networks in northern, eastern and central China, vs only RMB20bn spent over past 5 yrs.

Other catalyst includes Hu An’s TDR listing, for which it seems close to completion, having received the required approvals from relevant authorities in Taiwan and Singapore. Stock still under researched. Currently trades at 7.4x fwd PE.


Noble: halt to be lifted at 9am this morning. To buy US-based energy retailer Sempra Energy Solutions, which markets retail power, energy and electricity in 16 states, for US$317m plus assumption of US$265m in debt. Acquisition will allow Noble to gain access to >6m barrels of storage capacity and broaden its refined product distribution, trading and mktg network in the US…

Acquisition is in line with Noble’s strategy to quickly build its energy business in the US, and follows recent acquisitions of Northville Product Services, a storage facility and distribution platform, and 5% stake in USEC, a uranium enrichment company. Move is positive, as deal should contribute to earnings quickly (~US$85m net profit or $0.02 EPS), with little impact to balance sheet. Valuation seems reasonable at 4.2X historical EV/EBITDA or 3X PER...

Morgan Stanley, KE maintain Buy with $1.89, $2.01 targets.

SG Market

SG Market: Spore shares likely to extend recent gains on Wall Street's rally overnight, paving way for STI to test 3100 for first time since Jun 08. But gains may capped as investors await FOMC policy statement on the health of the US economy later Tues. STI +4.4% since beg Sep; small caps & S-chips again will hog limelight esp consumption plays that will benefit higher disposable income of Chinese consumer such as China Minzhong & the sports apparel stocks.

Noble Group may gain when it resume trading as US$317m acqn of US electricity retail business of RBS-Sempra Commodities is synergistic to its natural gas, power & energy businesses. SGX may get boost from move to start clearing svcs next month for OTC trades on financial derivatives becoming 1st Asian bourse to offer such initiative. Biosensors is likely to continue drawing interest ahead of stent rival Microport’s (853 HK) impending listing in HK, which could lead to a rerating of the stock.

On the stock ratings front, Daiwa issued a S-Reit report upgrading Asecndas (OP from UP; TP: $2.50 from $1.5 & CapitaRetail China (Hold from UP; TP: $1.24 from $1.11) & downgrading FCT (Hold from UP). Keeps Ascott & Mapletree Logistics as Buys. BNP raises Sim Lian’s TP to $0.80 from $0.76 following recent win at Hougang land tender.

Monday, September 20, 2010

Technics Oil & Gas

Technics Oil & Gas: SIAS initiates Buy with $1.20 target. Likes Technic’s capability in finishing fast-track projects, which command a premium, and translate to higher margins for Group. Expects Technics to at least maintain its orderbook at peak $125m levels, as countries in the region, particularly Thailand, invest more in developing energy resources. Says current valuations are compelling, at 7.3X FY10F PE vs industry average of 14.2X...

Catalyst to come from higher dividends and successful listing of TDRs.

Genting SP

Genting SP: UBS downgrades to Neutral from most preferred, with $2.20 target. Despite being positive on GENS' fundamentals, first mover advantage and ability to better understand local clients to secure a larger than expected market share, notes valuations are no longer attractive following recent share price rally. Expects regulatory risks for GENS to rise, following recent government measures to ensure that future promotional efforts should be confined only to tourists.

DMX Technology

DMX Technology: Extending Friday’s rally, +15% at 11mth high of $0.495, with continued expectations that the listing of its ADRs from Sep 23 will generate greater investor interests. Market watchers hopeful that ADRs could potentially draw an even larger investor base compared to TDRs. Friday’s strong earnings report by US tech companies likely provided further catalyst for DMX's strong rally.
B0bbyLu : Each ADR represents 40 DMX shares. No new shares will be issued.
Technically, RSI appears overbought, but strong momentum may continue, with ADR performance to set tone for mother shares in near term. Immediate resistance at 52-wk high of $0.545.

Indofood Agri

Indofood Agri +1.3% to $2.29 after losing streak over last 3 sessions. IndoAgri has underperformed since beg Sep, down 1.7% vs Golden Agri +3.6%, Wilmar +1.9%. UBS has Buy call with $2.81 target, likes IndoAgri for offering the best exposure to CPO price because of its vertical integration in Indonesia & significant reinvestment to build up its supply chain. Also notes high ratio of immature to mature area, high proportion of trees in yield improving 4-6 years age band gives Indofood one of strongest growth prodn profiles in sector. Expects CPO prices to be range-bound in Sep-Nov due to bumper soybean harvest but bullish on CPO price over next 3-4 years due to structural supply problems in M’sia (running out of land for oil palm expansion) & Indonesia (slower rate of land expansion). Immediate resistance at 20 & 50-day MAs at $2.32; support at $2.22. Golden Agri +1.7% at S$0.59, Wilmar off 0.6% at $6.34.


Banks: Citigroup views banks are likely to be range-bound in 2H10 with DBS the top pick. Despite record 1H10 profits, sees banks underperforming as earnings headwinds mount & growth expectations moderate into 2011. Slower 2H GDP growth, margin pressure (interest rates to stay low) & rising costs (higher funding costs from regional markets & duration mismatch) offset fee recovery & cycle-low provisions.

The current surge in mortgage growth could slow sharply in 2011E as property measures take hold. Sells: UOB ($17.80 target,1.45x 2010 P/B), OCBC ($8.40 target, 1.51x P/B). Hold DBS ($14.40 target, 1.23x P/B) for its lower relative valuation & stronger 2Q earnings momentum vs peers.

Offshore & Marine

Offshore & Marine: Cimb keeps Neutral rating on O&M, citing that latest update by ODS-Petrodata suggests that new stringent regulations in the wake of the Deepwater Horizon accident will make drilling in Gulf of Mexico unattractive over the next 2 years. It argues that while Spore yards are capable of building high-spec rigs certified for GOM operations, the more immediate catalyst still rests with Petrobras mega rig award, which have now been postponed till after the Nov presidential elections in Brazil. Given the several rounds of delay, the final award may even be pushed into 2011. The lack of order flow could result in Spore yards trading in tight ranges in the interim although industry sources reveal that Atwood Oceanics has approached SembMarine & Korean yards for quotes for a drillship. SembMarine is currently building 2 deepwater semi-subs for Atwood for delivery in 2011/12.

Cimb is maintaining Neutral call on SembMarine with TP of $4.20 & Outperform for KepCorp with TP of $10.70.

Market Strategy

Market Strategy: DBSV expects STI uptrend to continue till end Sep, possibly surpassing the 3100 objective level. Tips 3160 as resistance level, before dangers of a correction.
Expects interest to remain in Small Mid Caps (SMC), as laggard proxies to Blue Chips. Top SMC picks are Longcheer, CSE Global and PEC on grounds of attractive valuations and possible re-rating catalysts. Also favours Ezion and Boustead on expectations of strong earnings growth potential for FY11….

Likes infrastructure and construction sector. Thinks accelerated building of HDBs and major projects will boost activity. Tips Pan United, Tat Hong and Tiong Seng as key benificaries…

Continues to favor Asian consumption and domestic consumer services plays that could leverage on success of 2 IRs. Favors UOL, SIA, Sats and Genting Singapore, which offer more than 10% upside to target prices.


Transcu: penny-stock focus. Becomes exclusive distributor for the Nano-Emulsion Fuel System (NEFS), via its 60/40 JV with Nanomizer, an affiliate wholly-owned by Transcu CEO. Transcu will introduce NEFS into the Chinese market, and has signed a distributorship agreement worth US$0.5m with Shanghai Timeast, to market NEFS and related pdts to "certain pre-determined companies including a major Chinese oil company", for a period of 3 years…

NEFS improves efficiency in combustion systems by up to 20%, and is used in marine vessels, and potentially cars and power plants. Such technology is targeted at companies such as CNOOC, Sinopec, Universal Shipping...

Further catalyst to come from NEFS getting approval from Japanese authorities to be installed on ~200 ships. Each system costs btwn US$1-2m with est distribution fee of btwn 5-10%, and could contribute US$10-14m to earnings. This compares with net loss of US$29m in FYMar10. Mgt believes there are another 5000 new ships which will also want to install NEFS...

Separately, Transcu has received an option to buy up to 10% of Nanomizer shares. This may allow Transcu to have greater participation in the NEFS venture, and offers upside risk given CEO’s plans to list Nanomizer in future.

ST Engineering

ST Engineering: OCBC upgrades to Buy, lifts target to $3.66 from $3.28, based on 21x FY11E PE. Tips company as beneficiary of the recovery in global aviation maintenance, repair and overhaul (MRO), evidenced by the recent surge in passenger aircraft orders at recent airshows and clinching of new contracts in past months...

Technically, stock has been range bound since Nov ’09, btwn $3 - 3.37. Indicators starting to appear overbought at current levels, but watch for a bullish break out above $3.37 as that could drive stock to move rapidly toward next resistance at $3.60.


Yangzijiang: According to latest DB company visit note, YZJ’s TDR listing has helped it raise its profile in Taiwan esp among key shipping lines. YZJ is currently discussing with a Taiwanese shipyard for potential outsource work for 8,000 TEU containerships which, if it materializes will enable it to scale up its capabilities & add a new vessel line to its portfolio. It will be building a new Rmb500m dock to cater to 8000 TEU vessels & the facility will be ready by end 2011.

The group is still seeing strength in the containership market & is hopeful of more orders. While gross margins of 15% is still healthy, co estimates that every 5% appreciation in Rmb will lead to a 2% erosion in margins. TDRs have been trading at a 10-15% premium to its mother share price in Spore since listing on Sep 7. Stock is currently trading at 12.5x FY10 P/E. Support is at $1.67.


SingTel: Thailand halts auction for 3G mobile phone licenses, dashing hopes for a growth story in Thai telco companies after delays of several years already. Share prices of the top three Thai telcos slumped Friday. This includes Advanced Info Services (AIS), which fell 8.2%; AIS is 19% owned by SingTel and contributes ~4.5% to SingTel’s market cap.


Noble: trading halt. There is market talk that RBS and Sempra Energy may sell their JV’s N American electricity retail business to Noble, with sale price in the low hundreds of millions of dollars. If so, this appears to be in line with Noble’s recent focus on expanding its energy business segment.


Midas: HK dual listing update. Maximum Offer Price to be HK$6.10 (~S$1.05), with final pricing determined on or about 28 Sep. Given that “Offer Price will not be at a discount of >10% to current price in Singapore”, this places a near term share pricing ceiling of $1.16 on the stock. Shares expected to start trading 6 Oct...

KE maintains Buy with $1.20 target, but notes stock now trading at similar valuation to HK peers (Midas’ 19x FY11E PE vs peer avg 19.6x FY11E PE), accounting of 20.5% dilution arising from new share issue.

SG Market

SG Market: Wall Street's Fri gains may give traders some confidence to continue push Spore shares higher on opening, paving way for STI to test lower end of the 3085-3146 breakdown gap set in Jun 08. Technical indicators suggest that the uptrend is still intact with both RSI, MACD indicators trending up steadily although market is hovering in overbought territory.

Small caps may continue to outperform blue chips while Genting Spore may still draw interest. Biosensors also likely to remain in focus ahead of the HK IPO of China stent rival Microport on Sep 24. Both Nomura & DBSV have a $1.20 target on the stock. Nomura also highlights that conditions are ripe for another wave of M&A in Asia-Pac ex-Japan & cities Biosensors & M1 as potential acqn targets.

On stock ratings, Citigroup has issued an Asian banking report listing OCBC & UOB as top sells. ST Engrg has been upgraded to a Buy by OCBCS with a higher target price of $3.66 vs $3.28 prev while YZJ has been downgraded to a Hold but target price raised to $1.90 from $1.76.

Friday, September 17, 2010

Market Strategy

Market Strategy: According to DMG, STI +6% so far this year but upside would have been greater if not for dismal performance by key stocks like banks, developers, rig builders, telcos. Notes index's ytd gains driven mainly by 5 stocks - Genting Spore, Jardine Strategic, Jardine Matheson, Jardine C&C, HK Land. Excluding these 5 mainly HK-based names would leave the STI with barely 1% gain.

Expects STI to trend down in 2H given net interest margin squeeze on banks, fallout from recent housing-market curbs, depleting orderbooks of rig builders. Suggests defensive strategy with top picks being ComfortDelgro, SCI & M1.

Triple witching

Triple witching refers to the final hour of the trading session on the 3rd Fri of every Mar, Jun, Sep & Dec in US & European markets, which will see the expiration of stock index futures, stock index options & stock options. The simultaneous expirations generally increase the trading volume of options, futures & the underlying stocks as investors rush to close out their positions, which may lead to sharp volatility in the prices of related securities


Hi-P rated buy by DBS with $0.94 price target. RIM 2Q results beat expectations on continued strong demand for Blackberry devices & 3Q guidance is also well above consensus driven by the rollout of Blackberry Torch in Aug. RIM accounts for 30-35% of Hi-P sales, and together with Apple forms the 2 biggest customers of Hi-P.

Strong revenue outlook from clients could see increasing demand for Hi-P’s products & services, namely in precision tooling & plastic molding of handsets & electronic accessories. The co is trading at FY10 P/E of 14.8X. Stock has pulled back to $0.87 level after hitting a year high of $0.92 but uptrend is largely intact as long as $0.865 support prevails.

Tiger Air

Tiger Air: Philippine Stock Exchange has approved the IPO of Cebu Pacific (CEB), Asia’s third largest low cost carrier. Tentative listing date is 25 Oct, with int’l roadshow and bookbuilding to be held 27 Sep. CEB to offer 187m shares at no more than P$150/sh, with overallotment option of up to 28m shares. This may lift trading interest in peer, Tiger Air in the near term.

Genting Spore

Genting Spore flat at $2.03, pausing for breather after setting record $2.06 high in early trade on continued gaming play over Resorts World Sentosa. Despite recent rally, OSK, which has Buy call with $2.65 target, believes the stock could still head higher, backed by stronger-than-expected margins & gaming volume growth as market is underestimating RWS sustainable EBITDA run rates.

The duopoly market environment & low gaming tax rates would enable the group to boost margins from future operating leverage gains. Sentiment could also be buoyed going into quarter end as the F1 entourage and VVIPs jets in for the event followed by China's Golden Week holidays, which is expected to bring in the Chinese tourist hordes as Philippines' woes could be S'pore boon.


SingTel: Credit Suisse maintains Outperform. Raises sum-of-parts target to $3.84 from $3.76, to reflect upgrade in valuations of associate, Bharti. Upgrades Bharti’s FY12, 13E EPS by 11%, on the back of higher growth and margin forecasts, in view of recent subscriber adds which surpassed expectations, firm ARPU, and turnaround in margins evidenced in previous two qtrly results.


SMRT: Cimb downgrades to Underperform from Neutral, cuts target price to $1.95 from $2.31 after lowering FY12-13 earnings estimates by 3-4% to factor in higher capex assumptions. Remains wary of losses on the Circle Line with the opening of more stations in 2011 & margin pressure from rising fuel & electricity costs. Hints that Circle Line may take 4 years to break even vs 3 years for North-East Line, run by rival SBS Transit.

Notes North-East Line ridership supported by large population catchment, giving it edge over Circle Line. Technicals are deteriorating with ADX, Stockastics, MACD & RSI all exhibiting negative signals. Stock about to penetrate 50-day MA with next support at $2.00 level.

SunVic Chemical

SunVic Chemical is eyeing record net profit of at least Rmb300m this year vs Rmb4m in 2009 when sales were hurt by the global economic downturn. The growth is underpinned by firm demand & higher selling prices for its chemicals, which are used for making various industrial & consumer products from adhesives to diapers.

Outside of China, there is not much new prodn capacity coming onstream. Margins have rebounded as the ASP of acrylic acids surged 44% to Rmb13k per ton in 2Q10 from Rmb9k in 1Q & is still rising due to increased demand from its downstream customers. To mitigate against risk of higher raw material costs.

SunVic is building a cracker plant to produce propylene, a key ingredient for making acrylic acids, which will lead to annual cost savings of at least Rmb100m when fully operational in 2011. The company is also planning two additional plants to increase prodn of acrylic acids, with the 1st expected to be completed in 2012. Both projects are expected to cost about Rmb900m, part of which will be funded via a cash call.

Earnings in 1H10 jumped >6x to Rmb156m, exceeding the average annual profit of Rmb100m between 2006 & 2008. Based on the profit estimate of Rmb300m for FY10, the forecast P/E of 4x appears compelling. The company has also recently cancelled 50m treasury shares which it bought back from the open market, reducing its share base & enhancing EPS. Phillps has a Buy on the stock with $0.60 price target.


Starhub: Macquarie keeps OP call but lifts TP to $2.97 from $2.62 after increasing FY11/12 earnings estimates by 5%l. Expects investors to be positively surprised over next 24 months with increased contributions from corporate data business on back of Spore's new high-speed national broadband network, better dividend outlook due to lower capex; also notes pay-TV business holding up well.

Estimates new broadband network to boost its market share in corporate data space by 4% in FY11 from 15% currently. Overall profit margins should improve in absence of EPL content costs. Stock still offers attractive yield of 8% based on 20¢ DPS. Support lies at 20-day MA at $2.43.

Market Outlook

Market Outlook: DB cites slowing GDP & earnings growth & tightening policies in 2H are likely to overhang the Spore market near term. Notes while 1H GDP growth beat expectations, 3Q10 performance likely to decline as inventory re-stocking reverses. Expects 2H earnings growth momentum to slow to ~13% vs +0% in 1H10. EPS growth in FY11 also not aggressive at 10%, limiting upside potential. But tourism will continue to outperform.

Prefers defensive stance as STI nearing its 12-month target of 3200, implying 14x FY11 P/E. Top picks - F&N & SCI for M&A potential, SGX for its ADR platform, Keppel Land for recovering office sector, SATS for yield & rising traffic. Also favours Starhub & Suntec for yield play. Top sells - City Dev & SMRT. Also dropping YZJ & Genting Spore as stocks have outperformed.


Venture: KE maintains Buy with $11.30 target, based on 17x FY10E PE. Expects Printing & Imaging sales to stabilize in 2H10 following completion of adjustments in the non-ODM segment, while its Networking & Comms and Test & Measurement divisions should see sustained momentum underpinned by bookings by key T&M customer Agilent…

Says also Venture’s Retail Store Solutions sales has turned around and likely to accelerate, in view of the upcoming upgrade cycle for point-of-sales solutions that typically lasts 4-5yrs. Believes component shortages not worsenfurther, and likely under control now.

Keppel Land

Keppel Land: acquires additional 66ha of a waterfront site in Zhongshan, Guangdong Province. This will be KLand’s first waterfront residential cum marina development in China, covering total area of 86ha. Project will be carried out by its 80% owned JV. First phase of dev est to cost RMB 1.1bn, and construction will start at year end. First units to be launched in early 2012. When fully completed, entire development will house 2k villas with private berths, condo units and svc apts.

United Envirotech

United Envirotech: secures RMB 200m contract to build a 50k cubic m/day wastewater treatment plant at Neijiang Xi Industrial Park in Nanjing. Will also form JV with Neijiang authorities to acquire an existing 50k cubic m/day municipal wastewater treatment plant under a BOT arrangement and undertake EPC works to double capacity. Construction to commence immediately and expected to be completed by Sep ’11...

News is positive, given larger size of contract (vs FYMar11 rev of RMB 331m), and boost to recurring income. But gains may be limited, as stock price has already moved ahead following the almost 20% rise in stock price over the past wk, and is just shy of Street targets of $0.52-0.53. Technically, also see resistance at $0.545, vs support at $0.45.

Thursday, September 16, 2010

Tourism/Genting Spore

Tourism/Genting Spore: According to media reports, all China tours to the Philippines in Sep & over the National Day holiday, a week-long vacation that starts on Oct 1, have been cancelled due to a travel advisory. In fact, more than 1,000 tour groups from HK & the mainland have canceled trips to the Philippines after a deadly bus hijacking in Manila on Aug 23. The Chinese are also giving Thailand a miss, given the political uncertainty & bombing incidents in the kingdom.

It will be no surprise if some of these Chinese tour groups are being diverted to Spore instead. From what we know, Genting Spore’s Resorts World Sentosa is apparently preparing for big crowds during the China’s Golden Week in Oct. This will dovetail the F1 night race in Sep, which is expected to draw even more tourists than last year. It is no wonder that Genting Spore is showing no signs of letup despite being extremely overbought given the positive sentiment generated by these 2 events.

Thomson Medical

Thomson Medical: StanChart starts at Outperform with $1.10 target, based on 19X 2011 P/E. Highlights group's leadership in Singapore's obstetrics and gynaecology, where Singaporeans most willing to spend money. While Thomson's 180-bed hospital has been running at nearly full capacity for years, and group continues to increase hospital revenue through operating efficiencies and shortening average admission days. Expect long-term growth to be supported by expansion into Vietnam, where it has contracts to provide consultancy services.


SingTel: Morgan Stanley upgrades to Overweight from Equalweight, lifts target price to $3.60 from $3.30. Highlights telco is benefiting from rapid smartphone adoption in the wireless data market for Spore & Australia. Stock is currently trading at 8% discount to NAV with Spore/Aust stub valuation trading at historically low implied 2011 EV/EBITDA of 5.8x. Adds, concerns over competition in Aust & the threat of Spore’s high-speed broadband network largely priced in.


SIA may falter as latest operating data showed softer growth in Aug; passenger load factor at 78.1% vs 82.4% in Jul with number of passengers carried down 6.6%. Cargo load factor also lower at 62.5% vs 64.0%, bringing last month's overall load factor to 68.1% vs 70.8% in Jul. Aug is seasonally weaker than Jul, which falls within Spore school holidays but SIA's passenger traffic month-on-month drop was worse than the typical 1-3% decline seen over 2004-2007.

Still, Credit Suisse maintains Outperform call with $18.50 target. Technical exhibiting some short term weakness with support tipped at 20-day moving average of $15.65.


Banks: sees more headwinds as SIBOR drops to lowest level in 23 years at 0.52%, further restricting banks’ ability to charge on new loans. This spells more trouble for Singapore banks, which are already expected to see slower loan growth after the govt’s recent measures to cool the property market, and face greater pressure on net interest margins as Msian banks Maybank and CIMB step up competition in the local market….

A number of houses such as Citi, GS recently downgraded the sector in early Sep. Whilst DBS is most preferred for its cheaper valuations vs peers, and less impact from the property measures, we note that DBS suffers the most from weak SIBOR rates as it is the largest net lender in the interbank market...

Street gives wide range of recommendations for banks. Recent target prices as follows:
DBS: $13.40 - 19.44
OCBC: $8.40 - 11.80
UOB: $17.80 - 22.80


Biosensors: received CE Mark approval for both the 33mm and 36mm lengths of its BioMatrix Flex drug-eluting stent (DES) system, allowing company to further expand its DES product range from the 8-28mm lengths currently available. This should bolster Biosensors market penetration, as an est 15% of all DES usage involves long lengths. Nomura has a Buy rating with $1.20 target…

Technically, stock is in a longer term uptrend. Support at $0.80 (at 200MA), resistance at $0.90, which if broken could see stock moving toward $1.

SG Market

SG Market: Singapore shares may open higher given positive cue from Wall Street overnight, but intraday pullback cannot be ruled out given that technical indicators are overbought. Near term resistance for STI at 3085-3146 gap with previous 2010 high of 3043 acting as support. Among blue chips, SingTel may outperform following upgrade by Morgan Stanley to OW with TP raised to $3.60 from $3.30.

Citigroup reiterated Buy call on Genting Spore, upping its TP for the 2nd time in a month to $2.45 from $1.55. BNP initiated coverage of HK Land with a Reduce rating & TP of US$5.42.

Wednesday, September 15, 2010

CDLH Trust

CDLH Trust: BOA-ML lifts target to $2.30 from $2.20, after rolling over valuation, increasing FY10-12 DPU estimates by avg 5.0%. Expects occupancy rates for CDLH's Singapore hotels to remain high till at least next year, given rising tourist-arrivals, lower-than-expected supply of hotel rooms. Expects positive momentum to continue; notes both Singapore casino-resorts have performed better-than-expected, with new tourist attractions coming on stream from 2011, including Int’l Cruise Terminal and Asia's first River Safari, expected to draw even more visitors.

CDLH: at current price of $2.05, Reit gives a historical yield of 5.5%

STI Mid-day summary

Mid-day summary: Singapore stocks generally still firm. Fair bit of momentum in market, with small caps, S-chips continuing to lead gains. Blue chips being sidelined, with developers underperforming after fresh official data released during midday break showed developers sold fewer homes in Aug, at 1248 vs 1549 in Jul. Market breadth at 2.4 gainers for every decliner. If ytd high of 3068 gives way, next resistance for STI expected at lower end of 3085-3146 breakdown gap formed in Jun ‘08.


Olam: alert. Bullish breakout above $3, at new 52-wk high. If momentum continues, stock could test next resistance at $3.20 in near term. Nevertheless indicators looking very overbought; a better option may be to buy on dips particular when the next pullback occurs. $2.80 offers strong support.
We note that the Capital Group of companies has recently been buying aggressively from the open market, and their cumulative stake has crossed the 5% mark as of lunch time today.

Straits Asia

Straits Asia: Nomura starts at Buy with $2.80 target. Says strong coal prices, pick-up in coal volumes should lead to earnings upturn, possible stock re-rating for Indonesia-based miner; expects Straits Asia's coal sales volumes to almost double over the next five years, driven by production increases at Jembayan mines and a strong ramp-up at Northern leases…

Notes SAR generates strong operating cashflow that can be used to fund acquisitions. Says even if there is no acquisition, dividend yield still attractive at est 5.8% for FY11, 8.3% for FY12, based on 60% dividend payout ratio.


Yangzijiang: BOA-ML yesterday restarted at Buy with $2.26 target, based on 14X FY11 P/E. Says China-based shipbuilder deserves re-rating given its sustained above-average profit margins, 3-year orderbook visibility, potential to close in on TDR price, which trades at premium to mother shares; believes the market has underestimated the sustainability of YZJ’s profit margins in FY10-12, despite its improving productivity, and the revenue recognition of existing orders that are largely secured at higher prices in 2007-08. Says company could have RMB9.6bn (S$1.9 bn) in funds for acquisitions in FY11, with potential targets being established yards equipped for new business like offshore marine engineering, or new yards located near to YZJ’s existing facilities.

Renewable Energy

Renewable Energy Asia: partners the local govt of Jiuquan, Gansu Province, to develop renewable energy facilities in the city. These include i) a wind farm of up to 1200 MW planned capacity in two phases over a 10-yr period,
ii) a 100MW photovoltaic power generation demonstration facility with solar cell component pdtn plant,
iii) hydropower and biomass power gen facilities with planned capacities of 500MW and 36MW respectively,…
iv) pdtn facilities to produce wheel hubs, nacelle casings, foundations, wind turbine towers and connecting flanges to cater for up to 2000 sets of wind turbines with capacities of 1.5MW to 5MW annually. Contracts in total appear sizeable though actual value not disclosed.

Stock trades at 16.3x fwd PE. Mainly covered by local house, which rate as Buy, with targets ranging $0.36-0.50.


Midas: HK dual listing update. One step closer towards completion, as it has issued the web proof information pack (WPIP), essentially a preliminary prospectus. But reduces size of dual-listing to 220m new shares (300m previously), with up to 33m (40m previously) additional shares as over-allotment option, which would result in maximum total dilution of up to 26%.
Street still positive on counter, with targets ranging btwn $1.14 - 1.29.

Tiger Air

Tiger Air: Aug operating performance. Load factors up as expected to 86% vs 81% yoy. No. of passengers carried +18% yoy, but -15% mom, to 442k. Growth numbers generally disappointing compared to recent months and to same period last yr, although mgt explains that Aug is traditionally a quieter travel month, and Aug last year benefited from the first full mth of contribution from new major Australian flight routes…

Seat capacity dropped 13% mom, likely due to combination of flight cancellations, as well as scheduled aircraft maintenance checks, which effectively meant an aircraft was removed from the normal flying programme. Data unlikely to inspire, and suggests 2QFYMar11 could disappoint, if pgr numbers don’t pick up in Sep…

While near term stock performance could be muted, catalyst would come from Tiger’s increase in fleet size over 2HFYMar11, as it takes delivery of 9 new aircraft and returns 2 older aircraft. This suggests Tiger’s FY11 results likely to be heavily back-end loaded.

Street is divided on Tiger’s prospects, offers wide target price range of btwn $1.52 - 2.40.

SG Market

SG Market: Spore shares may be off to sluggish start after mixed Wall Street session. Having reached a new year high of 3068 yday, the STI may now attempt to close out the 3085-3146 breakdown gap formed in Jun 2008; break of 3038 will be nagtive for the market with near term support at 3000 psychological level. After the scintillating rally over the past 2 weeks, we expect both Genting Spore & Genting HK to take a breather.

Ascott Residence REIT may come under slight pressure as the pricing of its huge placement came in at the lower end of indicative range. SGX is likely to receive a boost from the impending ADR launch of 19 top Chinese companies next month with DB raising TP to $9.50 from $8.90. On the stock ratings front, Nomura initiated a Buy on Straits Asia with TP of $2.80, Phillips initiated Buy on Sunvic with TP of $0.60.

Tuesday, September 14, 2010

Kreuz Holdings (follow up)

Kreuz Holdings (follow up): +11.1% at $0.45 in active trade, likely drawing strength from current interest in parent Swiber Holdings, last +3.9% at $1.06. As latter tipped by analysts to clinch new contracts in near term, sentiment likely rubbing off on sub-sea services provider, Kreuz as it counts parent as main customer. Kreuz one of better performers among new Singapore listings this year, +50% to date from $0.27 IPO price, despite thin newsflow on company.

United Envirotech

United Envirotech: alert. Technical breakout after piercing through $0.45 resistance. If symmetry in chart pattern continues, $0.535 resistance could be tested next.

OCBC maintained Buy with $0.52 target last week, following news that company clinched a RMB30m EPC contract to build a wastewater recycling facility in Hegang City, Heilongjiang Province. Order book now stands at ~S$66m, vs FYMar10 revenue of S$69m. Catalyst to come from successful TDR listing.


FreightLinks: good 1QFYApr11 results. Revenue +19.5% to $36.6m, as main segments in freight forwarding, warehousing, and chemical storage saw improvements in volume and rates. Net profit to sh/h +359% to $2.4m, as associates swung to profit due to absence of impairment. Mgt remains “cautiously optimistic”; reiterates ongoing plan to reit certain properties to its 51% owned, Sabana Invmt Partners, which could be a catalyst in unlocking shareholder value if successful. Stock trades at 7.4x PE.


Biosensors: Awaiting trading debut of Microport Scientific's (853 HK) IPO on 24 Sep, which could reignite interest in the stock. Microport is China's market leader in drug-eluting stents (DES) with an est 30% market share. At an indicative IPO range of HK$4.60-6.10/share, Microport is valued at 20-27x FY10 PE vs Biosensors 20x FY11. If Shandong Weigao (1066 HK) current valuation of 38x FY11 PE is any guide, the pricing of Microport's IPO will be at the higher end the range.

Biosensors owns 50% of JW Medical Systems (JWMS), the last remaining private stent maker in China with a significant 20-25% market share. JWMS is a JV between Biosensors & Shandong Weigao. Good support at $0.835 with 1st resistance at $0.90 followed by $1.10 vs Nomura’s $1.20 price target.


Yangzijiang: BOA-ML restarts at Buy with $2.26 target, based on 14X FY11 P/E. Says China-based shipbuilder deserves re-rating given its sustained above-average profit margins, 3-year orderbook visibility, potential to close in on TDR price, which trades at premium to mother shares; believes the market has underestimated the sustainability of YZJ’s profit margins in FY10-12, despite its improving productivity, and the revenue recognition of existing orders that are largely secured at higher prices in 2007-08. Says company could have RMB9.6bn (S$1.9 bn) in funds for acquisitions in FY11, with potential targets being established yards equipped for new business like offshore marine engineering, or new yards located near to YZJ’s existing facilities.


Trek: +3.2% at $0.49, bucking broader market trend, and continuing its near vertical ascent. Trek’s growth story centers on its partnership with Toshiba, and new product, the FluCard. The FluCard is a micro processor that can be a substitute for SD cards in smart devices, allowing smart devices to ‘talk’ to one another, transfer data and share information wirelessly…

Trek may gain big if the FluCard emerges to be as successful as its previous product, the Thumbdrive. The difference now is that Trek has Toshiba to help protect its IP interests from competitors. Trek will receive licensing fees for the cards, which will be priced at US$50 apiece initially, though prices are likely to slide to around US$30…

With the partnership, Trek now gains access to the 45% of the US$1.3bn SD card market which Toshiba controls. Industry insiders estimate a potential revenue of US$200m a year for Trek by 2013, with at least 20% going straight to its bottom line. This compares with the US$6m Trek earned at its peak in FY07.
DMG only house to cover, with $0.55 target.


Swiber: +2.9% at $1.05 in active trade. CIMB rates as Outperform with $1.42 target. Notes company bidding for an array of projects related to Saudi Aramco’s latest gas development project, worth a total of US$5bn. Says Swiber could announce several new contracts in 4Q10, and value of new contracts over next 12mths could be more than the US$400m clinched annually over 2007-08. Swiber’s orderbook stands at US$915m.


SGX will be launching ADRs of 19 major Asian companies on its new GlobalQuote board from 22 Oct. Many of these ADRs are not listed on their Asian home exchanges & SGX ADRs will enable investors to trade these companies on Asian time. The 19 ADRs are fully fungible with US-listed ADRs. Bank of NY Mellon will act as the depositary bank for SGX’s new ADR programme.

The 19 SGX ADRs are: Baidu,, Home Inns & Hotel, Mindary Medical,, Shanda Interactive, Suntech Power, Trina Solar, Aluminium Corp of China, China Eastern Airlines, China Mobile, China Southern Air, China Telecom, China Unicom, Huaneng Power, Petrochina, Sinopec, Yanzhou Coal. These are all A-list China stocks with strong insti following & will definitely give a lift to the S-chips here as well as improve the trading volumes on SGX.

Golden Agri

Golden Agri: Greenpeace has launched a campaign to discourage potential investors from financing a US1.6b oil palm deal between the Liberian govt & Golden Agri, contending that the Sinar Mas palm oil arm is destroying Indonesia's forest & carbon-rich peatlands. Greenpeace has also sent a letter to SGX & MAS alleging that the company misrepresented the findings of an environmental impact audit.

MNCs such as Burger King, Unilever, Kraft & Nestle have cancelled contracts with Sinar Mas & global financial institutions such as HSBC are disinvesting in them. Last month, Golden Agri's Golden VerOleum (GVL) announced a partnership with Liberia for the cultivation of palm oil & mill processing on a 220k ha concession. Apart from Golden Agri, GVL is expected to receive funding from other investors. Stock remains unchanged today despite upgrade by OSK to trading buy with $0.68 TP.