Tuesday, November 30, 2010


Oceanus: China has halted imports of rock lobsters from Australia because both countries do not have a trade agreement. Portside rock lobster prices have halved since the ban.
In 2008, Australia accounted 32% of frozen lobster imports and 61% of live or fresh lobster imports to HK and China…

Possible spill over impact on Oceanus, which recently bought a 6.5% stake in Lobster Harvest for A$1m. Oceanus will also invest A$2m in 2 50/50 JVs in China and Spore to conduct R&D on slipper lobster pdtn for eventual commercialization.
Technically, stock price is exhibiting a bearish breakdown after breaching the previous $0.30 support. While indicators appear oversold, downside momentum could continue till $0.265 levels.


Banks: UBS sees Spore banks continuing to underperform market & Asian peers as interest rates expected to remain low in coming months with risk of more property-market curbs adding pressure to lenders. House says banks' performance hinges largely on US interest rates, which it expects to rise only around end-3Q11. Picks OCBC for its strong loan appetite & credible wealth mgt franchise, which would lift growth & profitability.

Likes DBS on valuation grounds, market laggard with limited downside but stock is very sensitive to interest rates, unlikely to outperform in near term. Tips banks' net profits to fall 3.3% for every 25% decline in Spore housing loan growth. Rates OCBC, DBS as Buys with respective $9.80, $16.60 targets; UOB at Neutral with $20.55 target.


LippoMapletree(LMRT): Macquarie maintains Outperform at TP $0.64. Cites high occupancy rate and attractive yield as reasons. LMRT occupancy rates at 98% vs peer avg of 81% and expected to be stable at 96%. The trust DPU remains attractive at 8.6% and is expected btwn 7-8% in nxt 3 yrs...

Drivers of growth are LMRT’s plans to double asset size from S$1b to S$2 with target assets req to have occupancy rates of 70-80% and growth in Indonesia’s economy and stronger rupiah. Trades at 13.3x 2011e P/E in line with sector avg. Other retail focused REITs with 2010 yields are, Starhill 6.4%, CMT 5.1% and FCOT 6.4%.

Strategy Report

Strategy Report: Citi initiates strategy report with STI target of 3450. Ample liquidity suggests continued SGD strength, low rates & buoyant commodity prices. Expct GDP growth to hit 6% in 2011. Note that Banks have lagged, despite record earnings, while NIMs close to bottom & business lending is recovering…

Highlight that REITs remain attractive and O&M also sees new rig replacement cycle underpinned by strong demand outlook & firm oil prices. Rates DBS, KepCorp, YangZiJiang, Genting SP, AREIT, AG & M1 as conviction Buy.


NOL: Morgan Stanley tips as top container shipping pick; reiterates Overweight rating with $2.35 target. Likes NOL for its higher relative exposure to Intra-Asia and Transpacific routes, where demand will likely be underpinned by lower new-build ship deliveries, and greater potential for increased slow steaming measures. Notes freight rates likely to trough soon, with demand to pick up seasonally prior to Chinese New Year. Says current dip provides opportunities to accumulate stocks.

Suntec Reit

Suntec Reit: raised S$417.9m net proceeds from issuing 313m new units (17% of existing share base) at S$1.37/unit, to partially fund its S$1.5b purchase of one-third stake in MBFC. Issue price was at the upper end of the S$1.34-1.38 indicative range. The private placement attracted institutional investors and was 3.1x oversubscribed. Trading in the new units expected to start 9 Dec…

The remainder of the MBFC purchase will be financed through a $1,105m debt facility. Suntec’s gearing is expected to rise from 32.4% to 40.6% in 2011, giving it an acquisition headroom of approximately $542m before hitting 45% gearing (the target for most S-Reits). Suntec though may gear up to a max of 60%...

Overall the acquisition is expected to be marginally yield accretive, with mgt guiding for DPU to rise from 8.61 cts to 8.7 cts in FY11E.
UOB maintains Hold with $1.60 target.
StanChart maintains Outperform with $1.58 target.

CitySpring Infrastructure Trust

CitySpring Infrastructure Trust: Kim Eng downgrades to Sell from Hold and reduces TP to $0.52 from $0.62. Highlight that in move to avoid potential credit rating downgrade of the bonds issued, grp will set aside A$20m in an escrow account before Jan 2011…

While although move place bonds out of CreditWatch by S&P, note that a capital structure plan possibly involving an equity cash call is unavoidable, in view of the presence of other debt obligations ($142m corporate loan due in Aug 2011 and $120m City Gas loan due in 2012) Forward yield of 7.1% based on previous DPU guidance appears compelling but the risk of dilution lingers...

Reduce DPU assumption for FY12 onwards to 3c from 4.2c (pre-dilution), to factor in the removal of Basslink’s contribution.

Global Logistics Properties

Global Logistics Properties: Reported a strong set of 2Q results in-line with expectations. Rev was at US$113.3m, +13.5%YoY and flat QoQ, while Net Profit at US$85.4m, +216.6% YoY. Excluding revaluation gains (+US$11.6m), Net Profit was at US$74.2m, +98.4%YoY...

Continued strong top line rev attributed to completion and stabilization of grps development projects in China and strengthening of Yen against the USD. Growth continued to come from grp’s Chinese segment, which saw Rev surged 40% YoY to US$39m for 1H11, while Japanese portfolio rev increased 10% to 185m. Demand for facilities remained strong with Japanese facilities seeing a lease ratio of 99%, while China at 91%....

Result places 1H11 Net Profit at US$573.4m (inclusive of a revaluation gain of US$427.6 million), vs loss of US$1.8mYoY, while Rev +14.3%YoY at US$224m, placing grp on track to meet FY11 Net Profit consensus estimates of US$672m...

Going forwards, grp remains positive on outlook and will pursue development and acquisition opportunities in the region and continue to build its portfolio of modern logistics facilities in China and Japan for long-term growth….

Grp has increased its China’s warehouse space by 20% in last six mths, bringing its China portfolio to 3.5m sqm of completed gross floor area. Including land held for future development and properties under development, grp’s China portfolio stands at 6.6 million sqm. Still grp says it has less than 1% market share, which it calls a fragmented market.

We note that at current levels, grp trades at undemanding valuations of 1.3x P/B, vs CMA of 1.45xP/B and Hang Lung Properties of 1.7x, while net gearing remained low at a comfortable 25.6% with majority of debt expiring 2013 and beyond. Citi, DBSV (TP $2.76) & JP Morgan (TP $2.90) maintains Buy Call. Near term resistance at last week's of $2.29, followed by post-listing high of $2.33.

SG Market

SG Market: Spore shares likely to track weak lower Wall Street close & softer opening on major Asian bourses. Weak trading pattern expected to continue with focus on the lingering tensions in the Korean peninsula & European debt woes. No need to be aggressive at this pt in time, investors can accumulate on weakness.

GLP may be in focus after solid 2Q11 results, currently trading at 1.3x P/B, Suntec’s placement price fixed at $1.37, near top end of indicative range, should ease dilution concerns. Banks may continue to underperform Asian peers given low interest rates & risk of more property curbs. STI likely to move in narrow range today, 3118 November low tipped as firm support.

Stock rating changes:
*GLP maintained as Buys at Citigroup, JPMorgan & DBSV with respective target prices of $2.80, $2.90 & $2.76
*SembMarine TP cut to $5.17 from $5.75 at Daiwa
*SembCorp Inds TP cut to $5.12 from $5.53 at Daiwa
*Lippo-Mapletree TP raised to $0.64 from $0.55 at Macquarie

Monday, November 29, 2010


Amtek: Plans to double its capacity in Shanghai in 2 yrs, to ramp up for growth from global car makers and China will continue to make up about half of the co’s rev. Amtek’s business now involves the higher-margin mechanical assembly of accessories such as seat belts, casings for printers and CPU for computers extending from merely producing lower-margin individual parts...

It focuses on outsourced jobs from multinationals such as Sony and Philips. Offer for Amtek IPO closes today and stock trades on Wednesday, known institutional investors are Fidelity and The Capital Group.


SembMarine: -1.7% at $4.76, extending Fri's 3.8% fall, as prospect of missing out on Petrobras 28-rig contracts continues to weigh. Concerns come after outcome of Petrobras tender exercise disclosed Friday, showing SembMarine among 1 of higher bidders….

Merrill Lynch however remains hopeful. Note that the selldown in SembMarine's share price is unwarranted, as the jury is still out on the total number of rigs that Petrobras wants to build. Cite that probability of success for SembMarine reasonable as channel check shows Petrobras may award more than 28 rigs in total….

Adds, prospects for rig-building sector not just about Petrobras' orders, but a multi-year cyclical upturn that was first driven by the demand for higher-specification rigs, and then subsequently by the supply case for replacement of older rigs. 50-day moving average, last at $4.52, eyed as near-term support.

First Resources

First Resources: CIMB has Technical Buy Call. Note that stock appears to be consolidating within converging lines, forming triangular pattern. Both of its indicators are still in consolidation mode, supporting the triangle view, with RSI is also holding above the 50-pts mark…

Recommend aggressive traders to accumulate on weakness. Tips support at $1.33 levels and a breakout above $1.42 would mean that prices could climb above the S$1.49 high towards $1.55.


Telco: OCBC downgrades Singapore telecom sector to Neutral from Overweight. Note that yields still good & mobile segment expected to perform reasonably well in 2011, however highlight that ARPUs have not been rising even as more are taking up smartphone packages, while acquisition costs are rising….

As such, it looks unlikely there will be a significant recovery in EBITDA margins; but do not expect any debilitating price wars. Cite that NBN is a story for late 2011 and even 2012. However, note that there are probably very little positive catalysts going for them in 2011. Has Buy call for all the Telco’s, with TP of $3.02 for StarHub, $3.59 for Singtel and $2.70 for M1.


Z-Obee: The TDR Offer Price is NT$10.20 (equivalent to S$0.437/sh). Still in the midst of underwriting period (26 Nov - 2 Dec). Listing to commence 3 Dec, 9am.

Suntec Reit

Suntec Reit: halted. May be related to equity raising, following sh/h approval to acquire the one-third interest in MBFC for $1.5b. Recall the acquisition is expected to increase DPU from 8.61 cts to 8.7 cts for FY11E. Suntec’s Aggregate Leverage Ratio is 33% as at 3Q10, is expected to rise to 41.5% post acquisition (still within 60% max limit), assuming $428m raised from the Private Placement and $1,105m borrowings.


MapletreeLog: Acquired Liang Huat Building from Ho Lee Grp for $55m resulting in initial rental yield of 7.8%. Property consists of 6 blks of industrial warehouses and 2 ancillary blgs at Jurong area...

Agreement comes with rental income guarantee for 1) existing leases to match mkt rates in vicinity and 2) escalation of 2% for 5 yrs. Funding will come from recent equity raising on 21 Sept. DPU for 3Q was 1.54c and current yield is 7.74%.


Serial: announced that its application to list TDRs on the Taiwan Stock Exchange (TSE) has not been approved but intends to make a re-submission to the TSE.

TTJ Hldgs

TTJ Hldgs: wins contracts worth $31.5m in two petrochemical and oil and gas dev projects on Jurong Island, bringing TTJ’s order book to $145m. Co is to supply, fabricate and install structural steelworks….

Work starts next mth, with target completion dates of 2011 for Germany's Lanxess 400m euro facility, and 2012 for the $1.5b Sg LNG Terminal. Full yr rev for Jul 2010 was at $69.7m, a 50% decline from 2009’s $138.1m.


SIA Eng: Formed JV with state-owned Southern Airports Corp (SAC) for 6th overseas line maintenance at Ho Chi Minh's main Tan Son Nhat Int'l Airport. The JV, Southern Airports Maintenance (SAAM) will be 49% owned by co and 51% by SAC. One of SAC's subsi is the dominant grnd handling operator with mkt share of 50%...

This deal should be beneficial to SIA Eng esp since there is national ownership in this JV. SAAM started operating this mth, servicing a strong base load of 9 airlines, SIA and Cathay Pac amongst others.


SGX: Goldman Sachs upgrades to Buy from Neutral and raises TP to $10.37 vs $8.22, based on 25x 2011 EPS vs 22x previously. Raises 2011-2012 EPS estimates by 11%-10%. Note that recent increase in Singapore market's average daily turnover sustainable, driven by more buoyant macro environment, increased market confidence, velocity & IPOs in SG…

Add that investors too negative on proposed merger with ASX and expect combined entity to yield rev synergies, backed by ample scope for cross-platform migration of derivatives products. Highlight that if deal not approved, relief rally may result, particularly for investors that were more skeptical on synergies and concerned about dilution to SGX's underlying growth rates.

Rig Builders

Rig Builders: Final outcome is contingent on Petrobras’ decision. Petrobras has said the bids in the three categories “will be analysed by its respective commissions that will evaluate all the proposals before the release of the final result.”…

The lowest bidder in categories 1 and 2 is the EAS group, made up of Brazilian contractors Queiroz Galvao, Carmargo Correa and PJMR, plus Samsung Heavy. In cat 1 (for the construction of two rigs), Keppel Fels appears to be well-positioned to win a rig, having come in with the second lowest bid after EAS….

In cat 2, Keppel Fels’ and Jurong Shipyard’s (Sembcorp Marine) bids are behind those of EAS and Alusa/Galvao. The final outcome of the entire rig tender will depend particularly on how many seven-drillship packages Petrobras decides to purchase in category 2…..

In cat 3, rig contractors will charter rigs to Petrobras. Should Petrobras decide to award orders in category 3, Keppel appears to be well-positioned as it has been earmarked by three rig contractors - Etesco, Queiroz Galvao and Petroserv - to build six semisubmersible rigs….

RBS has Buy Call on KepCorp, raising TP to $13 from $11.30 and Deutsche has Buy call on both KepCorp and Semb Marine with TP of $12.50 and $6.30 respectively.


Mermaid: Reported FY10 results which were below expectations, with FY10 rev at Bt3.5b,
-33.3%YoY and net loss of -Bt456.5m, -161.1%YoY. For 4QFY10, grp reported rev of Bt799.4m, -34.3%YoY & -9.3%QoQ and net loss of Bt114.3m, -176.8%YoY & +57.7%QoQ. Weaker earnings were attributed to lower utilisation and rates for both grp’s subsea and drilling segments….

Utilisation for subsea assets was at 39.5% in FY10 (vs 52.6% in FY09) while rates fell approximately 21.7%YoY. Utilisation for the drilling division was at 56.4% in FY10 (vs 94.9% in FY10), as segment was negatively impacted by the extended off-charter period for the MTR-1, which faced difficulty securing employment due to its age….

UOBKH however maintains Buy Call, based on valuations grounds, noting that grp currently trades at a compelling 0.6x P/B, and has a TP of $0.70, peg to 1x FY11F P/B. Seperately, CIMB downgrades stock to underperform, and reduces TP to $0.46 from $0.52.

Asia Travel

Asia Travel: FY10 results came in below expectation with net profit at $1.6m, -70.7%YoY, despite higher revenue of $82.0m, +15.6%YoY. Dismay performance due to higher operating expenses following aggressive launches of new products and sales channels, to promote and acquire new distribution channels for the new products….

Gross margin trended lower by 3.9%pts to 27.2% while net margin decreased to 2.5% vs 8.0% in FY09. Kim Eng notes the potential for grp to scale up its business, but expect FY11 earnings to remain suppressed as grp continues its marketing activities into 1H11. Recovery in earnings likely visible only from 2H11 which could be a catalyst to re-rate the stock….

Kim Eng downgrades stock to Hold, and reduces TP to $0.47 from $0.62, after cutting previous earnings forecasts by 20-50% to account for the increased operating expenses which would continue through to 1H11.

Genting HK

Genting HK: Completed the raising of its USD denominated 7 yr floating rate term
loan and revolving credit facility of US$600m. The facility is secured against grp’s eight-vessel Asian fleet. Net proceeds from the Facility will be used to pay down existing indebtedness and
for general corporate purposes….

Grp notes that this is an opportune time to undertake such a refinancing exercise given attractive terms and pricing, as well as, to strengthen its key banking relationships within the region. Maybank, Credit Agricole,DnB NOR, RHB Bank, HSBC and OCBC were the lenders.

soy crushers

Supply chain managers: may see weakness as soy crushers have suspended output, as the PRC govt's moves to roll back agricultural price increases cuts into crushing margins…

Noble’s Nantong Laibao Grain Protein Co is suspended until Dec 28. Noble ranks among the top 10 soybean crushers in China, with est installed soybean crushing capacity of ~4m tpa, behind only Wilmar and China Agri. Analysts had been tipping recovery of China crushing margins as one of the share price catalysts…

Negative news follows Friday’s report that Noble may face problems selling gasoline after Nigeria said it would stop subsidising marketers who import gasoline from Noble, as well as the surprise departure of its star gasoline trader…

Similarly, Louis Dreyfus' Zhangjiagang crushing plant will not resume pdtn until Dec 10. This may have implications for Olam, which is supposedly considering a business collaboration with Louis Dreyfus…

No mention of Wilmar suspending soy crushing output, but as the market leader in China, it is unlikely to remain unscathed.

SG Market

SG Market: Spore shares expected to take negative cues from Wall Street decline as investors continue to fret over European debt problems. Last week's low-volume trade in narrow ranges expected to flow into this week. But there may also be some relief as there has been no major altercation on Korean Peninsula over weekend while Ireland successfully completed its rescue deal. Downside for STI tipped at 3118.

Rig builders facingsome uncertainly pending likely outcome of Petrobras 28-rig tender after pricing details released which saw both KepCorp & SembMarine submitting higher bids than Brazilian consortiums. All is not lost for the local yards as technical evaluation of the bids are still in progress but SembMarine appears to be fighting losing battle. KepCorp still stands a chance as all 3 groups that submitted bids for Package 3 (Lot B) intend to build the 2 semi-submersibles at KepFels Brazilian yard.

Noble may come under selling pressure following the suspension of its China soy crushing plants till Dec 28 as the Chinese govt’s moves to roll back agricultural prices cut into crushing margins. At the same time, Nigeria has also halted all subsidies to all oil trading activities associated with Noble due to discrepancies in its reporting of deliveries. Serial Systems may fall after its TDR bid was rejected by TSE.

Stock ratings changes
*SGX upgraded to Buy from Neutral at Goldman Sachs; TP raised to $10.37 from $8.22
*KepCorp TP raised to $13.00 from $11.30 by RBS
*Mermaid Maritime downgraded to U/P from Neutral at Cimb, TP cut to $0.46 from $0.52
*Foreland Fabritech initiated as Buy by Cimb with TP of $0.16

Friday, November 26, 2010


HISAKA: 2H10 results were strong with rev for 2H10 was 44.3m, +136.7%yoy, +17.5%qoq. Net profit, at $5.1m, a 12 fold increase yoy, +16.9%qoq. Results were due to pick-up in sales tracking the economic recovery. Full yr EPS of 5.13, trailing P/E at 8.2x. Dividend declared of 1.75c compared to 1.00c prev yr. No mention on the dev of its listing of TDRs since Oct.


SIA: longer term uptrend still looks intact, and dip may present a buying opportunity. Indicators are pointing downward hence further weakness possible in the near term. But CCI and Stochastics are oversold, which means a reversal may occur soon, for prices to test $16.50 resistance again. First support at $15.33 (200MA, today’s intraday low), then at $15.


JardineMatheson(JM): HSBC overweights co with TP at US$54.00 from US$46.00 on improved earnings outlook driven by Astra, HK Land and Dairy Farm. JM’s strong cashflow generation will allow further growth through capturing opportunities in Indonesian’s infrastructure, ASEAN retail stores and undervalued holding co stock…

JM’s 41% interest in HK Land offers exposure to HK office sector which has rebounded strongly. Astra performs as well due to stronger sales 55% YTD in cars and 32% YTD in motorcycles. At TP, co trades at 13x 2011eP/E, 1.6x P/B, vs consensus fwd P/E of 12.15 and 1.6x P/B.


SIA: positive read across from industry data. Int’l pax demand grew 10.1% yoy in Oct, while int’l freight demand was up 14.4%. Pax demand now 5% above pre-crisis levels of early 2008, while freight is 1% above. IATA notes growth returning to a more normal pattern as 2010 comes to a close. Says recovery seems to be strengthening despite uncertainties in the global economies…

Improvements in demand are being met by a cautious approach to capacity expansion, which has increased at a slower pace. Discipline within the industry bodes well for yield trends going forward…

Separately, SIA has a new reciprocal code share with Garuda for all S'pore- Denpasar, Bali flights, to commence Dec 1. SIA currently operates three flights a day on the route, while Garuda has one. This follows yday’s announcement of a code-share deal with Scandinavian Airlines, and would help boost flight frequencies.
Stock trades at 14x P/E, 1.3x P/B. The majority of Street rates as Buy with targets ranging $16.34-20.50.


MarcoPolo (MPM): 4Q Sept results in, rev at $14.7m +1.0%yoy, -33.1%qoq, net profit at $2.8m +52%yoy, -31.9%qoq. Margins were up 35.6% compared to 34.7% prev yr and 22.8% last quarter, driven by its ship repair segment. The fall in profit qoq was attributable to decrease in contributions from associated co. Recent contracts incld 6 units of barges at $8.3m and co has plans to acq 2 Australian OSVs with existing charter contracts for A$21.5 in a sale-and-leaseback.

CapitaLand (CAPL)

CapitaLand (CAPL) and Hotel Properties (HPL) unveiled d'Leedon a condo to be built on the site of the former Farrer Court. A total of 1715 units will be built, 1703 apts and 12 semi-detached houses on the 840k sq ft site. Preview sales will be to former owners of Farrer Court this wkend and the first public launch after will be for 200 units at $1,680 psf….

d'Leedon is developed by a consortium incld CAPL, HPL, a fund owned by Morgan Stanley Real Estate and Wachovia Dev Cor. TOP to be obtained in 2015. CAPL’s dev cost is est at S$3.0b, breakeven at $1350-$1450psf, at current price, margins are approx 16%-24%...

In separate news, CAPL divests its 30% stake in Meridian Atlantic (MA). MA owns 23 flrs of a building in Penang and has a net deficit of about S$3.0m. The stake was sold for RM3,000 and S$1.2m was returned to CAPL for debts owed by MA...

CAPL will recognise a $1.2m write-back in its financial statements. This is in line with CAPL's strategy of capital productivity and is not expected to impact Dec


Midas: Announced that it is currently in discussion with relevant parties to establish a new plant in Liaoyuan City, Jilin Province. The new plant is to have an aluminum alloy extrusion capacity of 30,000 tonnes per annum. (currently 50,000 for FY11F), which will be funded by HK IPO proceeds. Plan is pending approval, however there is a lack of details for now, street estimates plant could begin earnings contribution in 2012….

Technically, Stochastic looking over Sold, and beginning to Hook upwards, while RSI appears to be coming up from its neutral levels. See resistance at $0.96 (20day EMA) and support at $0.91 (Resistance turned support)

Keppel Corp

Keppel Corp: Likely to gain with orderbook momentum not letting up as company secures US$180m contract to build jack-up rig for Norway's Standard Drilling. Deal comes with options for another 2 rigs, which would bring combined contract value to US$550m if exercised. Rig due for delivery in 2H 2012...

Order in-line with sector wide pick-up in demand for high-specification rigs. Goldman Sachs note that Standard Drilling's order is even more significant for the industry as it marks the return of speculators to the cycle, recalling that speculators were a major driver for the last rig-building cycle, and Standard Drilling's order could set the pace for more. This could be another sign for a strong cycle ahead….

Order win brings YTD order wins to $2.9b, placing Total Net Order Book at approximately $5b, with deliveries till 2013. Kim Eng maintains Buy call with $11.70 TP, while Morgan Stanley, Deutsche and Citi all have Buy Calls with $12.25, $12.50 & $12.80 TP respectively. Technically, resistance eyed at 52-week high of $11.06.


SingTel: 32% associate Bharti Airtel, faces the prospect of a US$1b fine, according to unnamed sources. The Indian govt alleges that local telcos have underpaid for a series of 2G cellular licences issued back in 2008. Incumbents Bharti, BSNL, Vodafone were reportedly allotted more than their stipulated share of the 2G spectrum without incurring any upfront fees, costing the govt a combined US$8b in lost revenue. Amidst the fiasco, telco minister, Andimuthu Raja has resigned...

A US$1b fine would lower SingTel’s EPS by ~S$0.026; this compares with consensus estimates of $0.243 FYMar11 EPS. News likely to weigh on SingTel share price, despite upgrades by Goldman, CLSA earlier this wk.

SG Market

SG Market: Trading in Spore likely to be thin with no leads from Wall Street due to Thanksgiving holiday. Session may mirror yday's, with only 1.1b shares worth $1.2b traded. STI’s immediate resistance at 3200, support at 3118. SingTel could be weighed down by 32% owned Bharti, which is facing a US$1b fine following allegation by the Indian govt that local telcos underpaid for a series of 2G licenses issued in 2008. However, stock have fallen about 7% in the past 2 wks & is oversold, downside risk likely to be limited at $3.04.

KepCorp shares may be supported by latest US$180m rig order, options for 2 additional rigs but gains likely to be capped as technicals appear weak while Midas unveils plan for new 30k tpa aluminium alloy extrusion plant in China. Pacific Shipping Trust may rise on boost to long-term revenue as vessel owner acquires 5 bulk carriers for US$150m to be chartered to South Korea's Glovis for 8-10 yrs.

Environmental plays may also see some interest ahead of the UN Climate Change conference in Cancun next wk, which will likely see several environmental accords being signed which may benefit palm oil, waste-to-energy, water treatment players.

Latest GLS for 1H11 points towards ample housing supply, which will cap mass market prices; near term inventory not excessive but medium term supply is rising sharply. Most houses remain cautious on residential sector due to policy risks & prefer office landlords & Reits.

Stock ratings changes:
*OUE rated as Buy at Credit Suisse, TP raised to $4.20 from $3.61
*Jardine Matheson rated as O/W at HSBC, TP Raised to US$54 from US$46
*Dairy Farm downgraded to Neutral at HSBC but TP raised to US$8.50 from US$7.30
*KepCorp TP raised to $12.50 from $11.22 at OCBC Sec; Cimb raised TP to $13.00 from $11.30
*CWT TP raised to $1.72 from $1.12 at Cimb

Thursday, November 25, 2010


Ziwo: Phillips initiates at Buy with $0.47 TP pegged at 6X FY11 earnings. Tip strong growth potential for China-based supplier of raw materials used for making various lifestyle consumer products, given rising consumer spending….

Note that while grp has huge exposure to consumer market, it's able to keep sales, marketing costs low as it doesn't need to spend on creating brand awareness as Product quality and consistency are more important for suppliers of intermediary products. Add that grp built on its R&D capability to emerge as one of the bigger players amongst its peers, contributing to higher net profit margins, at above 20%


Mewah slumped as much as 13.2% yest on trading debut, one of the weakest IPO debuts this year. Poor mkt sentiment, lack of institutional interest cited as causes. Note investors prefer upstream players to downstream and Mewah‘s earnings may be volatile due to exposure to higher CPO feedstock prices…

Sentiment towards Mewah's stock may also have been affected by firm's legal issues. Mewah's controlling shareholder and chairman Cheo Tong Choon, and subsi Mewah-Oils, have been charged with allegedly using 2 false Customs docs to discharge CPO between Oct and Nov 2003. Mewah-Oils has also been charged with theft of two batches of CPO from Lushing Traders. Msian lawyers representing them are said to view these charges as having no merit.


SATS: Japan Airlines is in final talks to sell its in-flight meal subsidiary TFK Corp to SATS. Selling price may be above ¥10bn (~S$157m). TFK is Japan's top provider of in-flight meals and services over 30 domestic and international airlines. TFK recorded ~¥22bn in sales last fiscal yr…

SATS operations are mainly in Spore and the UK. A successful acquisition would allow SATS to extend its geographical footprint to the Japanese mkt, and make more efficient use of its underleveraged balance sheet…

Stock trades at 15.2x FYMar11E P/E, supported by 4.8% yield. The majority of Street rates as Buy with targets ranging $3.07-3.50, cite SATS as a key beneficiary of rising tourist arrivals to Spore. CIMB the only house to rate as Underperform with $2.35 target.


Capitaland: Its landmark Ascott Raffles Place reported to be up for sale discreetly. The price expected for the 999 yr leasehold bldg, which has 146 serviced residences, is to be US$250m. Ascott Residence Trust has the right of first refusal and any sale will come with a mgmt contract for Capitaland to cont managing the property likely for 10 yrs...

The bldg was acquired in 2006 for nearly S$110m and a further S$60m was spent sprucing it. Ascott Limited, Capitaland’s service residences arm made up 15.6% of grp’s 3Q rev.

Amtek Eng

Amtek Eng Smaller IPO than expected launches a S$299m vs expected US$250m. The IPO consists of 200m shares at S$1.30 each (180m priv placement and 20m public tranche), mkt cap of co approx $706m. A 30m over-allotment option is exercised would bump up offer to 230m for $299m…

StanChart Private Equity and Metcomp Grp will each sell 85.3m, and cut their stakes from 44% to 28.3% each, assuming no over-allotment.Other significant shareholders include the CEO and CFO. Offer was from 24 Nov till today, and expected to trade on 1 Dec. The co makes computer and printer cases and parts for LCD TVs, was taken private 3 yrs ago at $1.10 with mkt cap S$552m.

Viking Offshore

Viking Offshore: Penny stock focus.
Mgt guides for FY10 revenue to exceed $100m vs $37.6m yoy. Net profit expected to range $10.5-12m vs $1m yoy. Last closing price at $0.19 implies 8.7-9.9x FY10E P/E.
At 1H10, Viking had already recorded $35.4m revenue, $5.9m net profit.
Order book is close to $40m, and there are several deals in the offing. Profit margin is around 10-12%, roughly the expected long run avg...

Most of Viking's full-year expectations will come from heating, ventilation and air-con specialist Viking Airtech, acquired in Jan. Two subsequent purchases of marine decking stockist Promoter Hydraulics and accommodation outfitter Marine Accom, will contribute ~5mths revenue. Marshal Systems, bought for $17m in Oct will not impact FY10 financials. Viking’s value-add is being a one-stop shop for simultaneous fit-out of interiors of rigs and ships, saving shipyards 4-6wks of time…

The group plans to expand overseas and is focused on the Chinese and Vietnamese markets. Brazil and and India are also in its sights. Mgt has no plans for further acquisitions unless it is that of a specialist in explosion-proofing. Adds Viking’s stakes in TT International, United Envirotech and Nico Steel Holdings could yield at last $30m (30% of mkt cap) if monetized.

CDL Hospitality Trust

CDL Hospitality Trust: Daiwa maintains Buy with $2.30, noting that underlying trends still
positive. Highlight that management expects further upside to earnings and RevPAR for 2011 due to the relatively modest supply of new rooms of 1,223 compared with over 5,000 for 2010….

REIT will also benefit from an increase in room rates that it negotiates with its major corporate customers in 2Q-3Q10 which would kick in from Jan 2011. Management expects the mega MICE events to come through only in 2012, while next major unit-price catalyst would be a DPU-accretive acquisition announcement.

Lian Beng

Lian Beng: Annouced that its wholly-owned subsidiary, Deenn Engineering Pte Ltd, has on 9 Nov granted an option to Smart United Investments Pte Ltd to purchase the property at 7 Temasek Boulevard, #17-01 Suntec City Tower One. The sale price of the Property is $9.9m….

Estimated net gain on the Transaction is $3.3m. Based on latest audited consolidated financial statements of the Group for May FY10, NTA of the Group would have increased from 27.16c to 27.79c and EPS of group would have increased from 4.54 to 5.16c….

We note that Grp currently trades at undemanding valuations at 4.55x FY11E P/E vs peers average of 6.1x.


KepCorp: Annouced that its 20% owned jv Nakilat-Keppel O&M has launched a new 43 ha shipyard in Qatar reported to cost US$2.8b. Shipyard is being developed in six phases and KEP will operate the first 2 phases. Yard will be largely financed by Qatar, while KEP's role will be to manage and operate the yard….

CEO highlight that yard was envisioned to be ‘a best-in-class shipyard’, and the preferred partner for marine and offshore solutions in the region. The yard has already signed a 3 yr fleet servicing agreement with Shell for ship repair services, and LOIs with Idemitsu Tanker, Mitsui OSK Lines, NYK Line, Kawasaki Kisen Kaisha, Iino Kaiun Kaisha and the Marine Contracting Association for shipyard and drydocking services…

Morgan Stanley has Buy call on Grp with TP of $12.25.

Starhill Global

Starhill Global: Kim Eng initiates coverage with Buy call and TP of $0.80 based on DDM. Highlight that Starhill owns 13 prime commercial properties in stable, high-growth markets in the Asia Pacific, with retail rental making up 87% of group revenue in 3Q10, expecting DPU growth to be bolstered by medium and long-term leases that provide income stability and rental upside potential, as well as acquisition opportunities…

Note that with a clear target to double asset size and the backing of a strong and committed sponsor, Starhill is poised for a new beginning. At 0.7x FY10 P/B and 6.8% FY11F yield, the stock is deeply undervalued and offers a yield spread as high as 160bps over the yield of some of its retail peers.

SG Market

SG Market: Spore shares likely to get boost in early trade from gains in Wall Street overnight on back of positive economic data. Resistance for STI tipped at 3200. With corporate news flow thin, attention may continue to center on small caps, penny stocks as traders eye low-price plays for quick punt. Oil-related marine plays may see some interest following latest upgrade by Morgan Stanley. Genting Spore may continue to hog top actives after seeing heavy buying support from DMG yday.

Nomura cautions govt could still roll out more housing curbs as strong demand seen at recent project launches seem to suggest market shrugging off recent cooling measures. Tips UOL, Allgreen & KepLand as most defensive against policy risks. SATS may be re-rated after reports disclose that it is in talks to acquire JAL’s inflight catering unit, which will give it a beachhead in Japan.

Palm oil stocks may also get a boost as China limits purchases in vege oil auctions. With a sizable share in China’s edible oil mkt, Wilmar’s margins will be impacted by price controls but new IPO Mewah, which does not have any Chinese exposure, may benefit from the tight global supplies.

Stock ratings changes:
*KepCorp target price raised to $12.25 from $11.00 at Morgan Stanley
*SembMarine target price raised to $5.15 from $4.15 at Morgan Stanley
*Sembcorp Inds target price raised to $6.20 from $5.15 at Morgan Stanley
*Cosco Corp upgraded to O/W from U/W; target price raised to $2.40 from $1.25 at Morgan Stanley
*China Minzhong maintained as Buy but target price cut to $1.68 from $1.76 at BNP
*Ziwo initiated as Buy at Phillips with target price of $0.47

Wednesday, November 24, 2010


SIA: UBS maintains Buy and raises TP to $19.50 from $16.50 based on 1.57x P/BV. Note that share price has underperformed Asian peers, +7% Ytd vs +11%, +60% in MSCI AXJ Index, Cathay Pacific's share price, respectively. Highlight that stock trading at 10x FY12E EPS, 4x EV/EBITDA, 1.2x FY12E book value, discount to mid-cycle, peer valuations, and 5% dividend yield….

Tips SIA slower recovery attributed to its modest capacity growth and fleet reconfiguration, smaller exposure to north Asia, and competition from low cost and Gulf carriers. However, note that grp’s business model remains solid and estimate 28%YoY growth in pre-ex EPS in FY12.

Noble Grp

Noble Grp: UBS upgrades to Buy from Neutral, raises TP to $2.70 from $2.10 after tweaking assumptions in discounted cashflow valuation. Note that Fed's QE2 could lend momentum to commodity supply chain manager's earnings, which should lead to strong capital flows to emerging markets and reinforce commodity-intensive growth, thereby incentivising commodity prices and trade-volume growth….

Expect improved margins for Noble's Chinese soybean crushing business in 3Q10 to continue through 4Q10, while coal and oil prices could rise further due to winter demand from northern hemisphere.

Viking Offshore

Viking Offshore: unchg at $0.19.
Mgt guides for FY10 revenue to exceed $100m vs $37.6m yoy. Net profit expected to range $10.5-12m vs $1m yoy. Current stock price implies 8.7-9.9x FY10E P/E.
Mgt attributes the robust performance to the full recognition of newly aqcuired assets Viking Airtech, Promoter Hydraulics Distributor, Marine Accomm and Marshal Systems, following the reverse-take over of Novena Hldgs in Feb ‘10…

For 2H10, revenue guidance is ~$65m, +83% qoq, up ~3x yoy, while 2H10 net profit is expected to come in at $4.6-6.1m, vs $5.9m in 1H10. Recall 1H10 net profit exceeded mgt’s guidance of $4.5-5.0 m due to better-than-expected margins and gain on disposal of equity invmts.


Capitaland: Established JV Vietnam Joint Venture co (VJV) with Mitsubishi Estate Asia and GIC Real Estate. Capitaland will own 50% for US$100m whilst other co.s will each hold 25% for US$50m. Purpose of VJV is to invest in residential dev projects in major cities Ho Chi Minh and Hanoi…

VJV will acquire 4 of Capitaland’s invt co.s in Vietnam for $66.3m. Currently one of the invt co.s has already invested in a project in Vietnam and Capitaland will hold a 30% interest reduced from 60% before setup of VJV. Capitaland has another separate vehicle with a 70% stake in a US$40m Ho Chi Minh residential project as announced on the 23rd Oct...

Note that both KepLand and Capitaland have been investing in Vietnam as nxt location for growth


SingTel: +0.3% at $3.08. Goldman Sachs raises target price to $3.67 from $3.53 for 18% potential return, revises SingTel's EPS estimates for FY11-13 by -1.5%, +2.4%, +2.9%. Upward revision mainly driven by upgrade in SingTel’s 32% associate, Bharti Airtel to Buy, 25% lift in target price to INR430, as changes in regulatory environment in India likely to favor the market leader. Notes SingTel’s invmt in Bharti now accounts for $0.94/sh in its sum-of-parts valuation…

Says key risks include re-farming of India's 900 Mhz spectrum, creating greater competition for Bharti; also Spore’s struggling pay TV growth segment, with profitability hurt by high content cost of BPL.


Telco: CLSA says SingTel still offers most compelling risk-reward trade-off, most preferred among Spore telcos. In bull case, (ie Spore fixed-line franchise maintains, Optus keeps gaining market share, Bharti's Zain buy progresses well, Telkomsel's tower portfolio monetized), SingTel likely worth $3.76, +21% vs current price...

StarHub least preferred, in bull case only worth $2.59, -3% from current price, and hinges on StarHub making early, significant, inroads into SME, corporate segment with NGNBN.

For M1, says hard to get bullish on a stock with a limited product portfolio and the smallest balance sheet among its local peers. Nevertheless, with marginal improvement in ARPU, tips M1 to be worth $2.60, +16.5% vs current.

China Sports Int’l

China Sports Int’l: unchg at $0.11. FIFA has terminated the FIFA licensing and marketing rights previously granted to China Sports, with immediate effect. Seems like China Sport was unable to grow the new segment quickly enough, as sales of FIFA related pdts only accounted for 1% of Group sales for 9M10. News likely a dampener, as it removes a potential area of growth for the firm.
Despite lack of catalyst, stock trades at 7.5x trailing P/E, vs peer Eratat at 3.7x.

Global Logistic Properties

Global Logistic Properties: DBSV initiates at Buy with $2.76 target. Says GLP offers a compelling invmt opportunity into the logistics facilities space. Growth drivers include,
i) strong organic expansion and potential value extraction by monetizing its assets via listed vehicles,
ii) acquisitions given its low estimated gearing of 0.19x for FY11
iii) redevelopment of selected centrally located properties in Japan and China.


OCBC: will apply a network approach to grow its business in Greater China (PRC, HK and Taiwan), by helping customers network their business within these territories, where the bank has a total of 14 main and sub-branches. Mgt notes the signing of the Economic Cooperation Framework Agreement has been a catalyst for development of these markets…

While OCBC has not revealed a target for loans growth in Greater China, mgt recently mentioned that China's loan growth rates are about 30% potentially. In the corporate banking segment, OCBC's earnings from Greater China had more than doubled in the past year. Total Greater China loans, incl consumer loans ytd, grew 64% yoy to >$10b.


Strategy: UOBK sees selective opportunities following yday’s 2% selldown in the STI. Says STI’s longer term uptrend still intact; sees firm support at 3060 with scope to retest prior peak near 3310 once the index rebounds…

Recommends DBS, SIA given the alignment of technical and fundamental analysis. Says both are low risk, with support at $13.62, $15.20 respectively.
Top picks are OCBC, StarHub, M1, K-REIT, AREIT, Swiber, Ezra, ART and CDREIT.
Stocks with Buy ratings, but fell >3% yday: City Dev, Ezra, Genting SP, Olam, IndoAgri, Cosco, First Resources and Ezion.


Property: Foreigners and PRs accounted for 23% of 7,888 private home transactions in 3Q. Chinese buyers formed 20% of the grp, on par with Indonesians, up from 17% in prev 2Q. DTZ expects increased Chinese property ownerships due to curbs in China and HK such as higher i/r, larger down payments...

Tender for Tampines EC won by JV of Hoi Hup Sunway & SC Wong with top bid of $188m ($302psf GFA.) Breakeven cost est at 580-630psf implying gross margins of 10-17% based on SimLian’s strong Waterview launch at $840psf. Top bid surpasses estimates of $220-280psf…

Demand appears resilent despite measures by Sg govt, Oct CPI up 3.5% partly due to housing, analysts expect that further measures will not be as harsh as HK’s recent measures. Houses DBS, BNP highlight policy risks and expect residential prices to fall in near term.


LMA: +7% at $0.30. The co. which designs, develops, markets and distributes medical equipment, such as its LMA branded supraglottic airway mgt devices, to undertake an Off-Market Equal Access Offer (OMEAO) of up to 10% of each sh/h stake at $0.36/sh (29% premium to last close at $0.2 . The buyback offer, which is open until 29 Dec ‘10, was endorsed by sh/h at an EGM in Oct. LMA will also declare an interim div of $0.01/sh for FY10 after the close of the OMEAO…

The shares purchased will be held in treasury; may be used for its employee share schemes, to finance M&A, as placements to new investors, or be cancelled.


Midas: Deutsche initiates on the China Rail sector. Says urban rapid transit/ rail eqpt capex likely better than expected, with house estimate of Rmb2.65tr to be spent on constructing rapid-transit networks in 2011-2020 (vs consensus Rmb1.5tr). Sees fixed asset invmt in railway eqpt in China growing 25% pa over 2010-12, as the substantial increase in operational rapid-transit lines stimulates demand for eqpt such as metro/light rail cars. Top pick is CSR (1766 HK) given co’s focus on eqpt…

We see this as a positive read-through for Midas’ prospects over the longer term, as CSR counts as one of Midas’ largest customers.
Midas trades at 19.8x fwd PE. Recent Street ratings (post 3Q results) all at Buy. Target prices range $1.10-1.25.


AIMS Amp REIT: Several updates.
1) Sale of 23 Changi South Ave 2 $500k above book value, following 3 Nov announcement of option issued to Premier Land for sale of said property for $16.7m. Premier Land exercised option and paid $1.7m in total as of 15 Nov, remainder to be settled by Jan 2011...
2) Signing of 3 long term leases with tenant T-System at 23 Tai Seng Driv. 2 Leases to expire on July 2020 with option to renew, last lease is for 5 yrs, total of over 64% leased to T-System with occupancy of said property at 100%.
3) 100% occupancy also achieved at 15 Tai Seng Drive. Total occupancy for REIT now in excess of 98%...
4) New senior asset mgr prev from MIT joins AIMS REIT mgr. DPU for 1H10 is at 0.93c. Assuming closing price at $0.215, annualized yield of approx 8.7%.


TigerAirways: South East Asian Airlines (SEAIR) to become the first Tiger Airways Partner Airline in the region. SEAIR will lease 2 Airbus aircrafts and start its first jet services on 16 Dec between Clark, Philippines to Singapore. SEAIR will be using Tiger's website for distribution…

SEAIR is a Philippines leisure airline with a fleet of 4 Dornier328s and 350 employees. News is not new but likely to be positive as it is an extension of flight services in Philippines. Tiger has currently 21 Airbuses in its existing fleet incld the 2 leased and expecting 2 more aircraft in 2011/12


Ziwo: Annouced that it has reveive approval in-principal from SGX for the listing and quotation of up to 59m new shares in relation to the proposed TDR issue and also approval from the Taiwan Central Bank for the Proposed TDR Issue….

Recall that Co. had submitted an application to the Taiwan Stock Exchange for the offering and listing of TDRs, representing an aggregate of up to 89 million Shares (comprising 59m new Shares and 30 million existing Shares) on the Taiwan Stock Exchange. The said application is pending approval from the Taiwan Stock Exchange...

As the Proposed TDR Issue is subject to, among others, the approval of the relevant govt and regulatory authorities in Taiwan and the prevailing market and economic conditions, the Proposed TDR Issue may or may not proceed.


Broadway: Annouced that a fire broke out at a rented factory premises of its subsidiary. There were no casualities and no serious damage to equipments and machineries. Co. is unable to ascertain the total loss suffered, but estimate losses to be approximately S$400,000, but actual loss could be lower if facilities are covered by fire insurance and is expected to have minimal impact to grp’s overall consolidated financials for FY10.


Ezra: Deutsche downgrades to Hold from Buy, cuts TP to $1.90 from $2.80 after lowering FY11-12 earnings estimates by 35%-24% to account for vessel delays & integration of Aker Marine Contractors, which it recently proposed to buy for US$250 million….

Note that delay in delivery of several vessels will affect profitability of offshore oil & gas support Co. Add that while Aker Marine will enhance Ezra's sub-sea capability, grp may have its hands full trying to turn AMC profitable. Say that 2H11 may better time to revisit stock to get better clarity.

China MinZhong

China MinZhong: Macquarie initiates with Overweight call and $1.80 TP, citing deep value in the patch, with attractive valuations of 6.2x CY11E PE vs peers 9x leading processed veg producer in China who is gaining overseas mkt share as quality improves. Highlight that grp getting ready for big capex push in FY11 & FY12, projecting EPS to grow 20% in FY11 & 38% in FY12 on the back of rising vols.


Mewah: IPO 1.9 times subscribed. Public tranche oversubscribed 12.7 times, expected to debut at 9am today. Total offering of 251.7m shares, raising a total of $276.8m, with interest of 315.6m from private placement and 159.8m from public offer. A total of 1.5b shares are listed and its mkt cap, based on price of S$1.10, is approx $1.7b upon listing today…

Mewah may fall on debut, given subdued response and weak mkt sentiment, 1.9x subcription on the low side compared to other IPOs recently. Price is approx 15.3x of annualized earnings from 1H10. Peers such as trade at 18x-20x currently. Free float is approx 16.7% of mkt cap.

Korea skirmish

Korea skirmish: this attack is more serious than previous ones, as it is the first time N Korea has fired on to a civilian village. N Korea is likely trying to get more bargaining power by escalating tension in the peninsula before coming back to negotiations at the 6-party nuclear talks. Kim JungIl may also be seeking to consolidate the N Korean people after nominating one of his sons as successor, who is believed to lack military and political support…

Deutsche, Macquarie believe the market may have overreacted on this news, as the worst case scenario of war btwn the 2 Koreas is unlikely to play out. Both suggest accumulating on dips, as most episodes in the past showed that the mkt recovered quickly and investor sentiment was not derailed.
Spore stocks with plans for Korean Depository Receipts: Combine Will, China Gaoxian, UMS. STX PO is a Korean co. with secondary listing in Spore.

SG Market

SG Market: Selling pressure on Spore shares may persist following Wall Street selloff, tension in Korean peninsula, Fed's lowering of 2011 US economic forecast, eurozone debt issues, China's tightening measures, HK property cooling measures. After penetrating below the 50-day MA to a 4-week low of 3,126, STI may test 3080 for 1st time since Sep, which represents the lower limit of its upward trend channel with subsequent support eyed at 3069 (Sep low).

Any upside likely to be capped at 20-day MA at 3211. With many fund managers closing their books for year-end, the lower volumes would amplify market volatility. Cautious market sentiment may take toll on new listing Mewah Int’l IPO priced at $1.10/share, merely 1.9X subscribed. Stocks held by Janus Capital such as SIA (1.2%), Capitaland (5%), Raffles Edu (5.9%) may come under spotlight following revelation that US hedge fund is facing FBI investigation for insider trading.

Medical devices maker LMA Int’l may see some buying support after announcing an off-market offer to buy back 10% of its shares at $0.36 or 28.6% premium to current market price. The buyback offer will be open till 29 Dec.

On the stock ratings front:
*China Minzhong initiated as O/P at Macquarie with TP of $1.80
*StarHub TP raised to $2.25 from $1.90 by Nomura
*Ezra downgraded to Hold from Buy at DB with TP slashed to $1.90 from $2.80
*Genting Spore reiterated as Conviction Sell by Nomura with TP of $1.01

Tuesday, November 23, 2010


GentingSP has staged a breakdown below 50-day EMA.
Next support @ 1.80/84 (100-day EMA) is likely to be tested.
RSI below neutral.


Sabana REIT IPO: Grp expects to buy at least three more industrial properties in SG from sponsor Freight Links to boost portfolio. REIT will raise gross proceeds of $533.4m from its listing at $1.05 per share, and offer a distribution yield of about 8.22% for FY11 and 8.25% for FY12. Sabana Reit will rank as the world's biggest syariah-compliant Reit by asset size, holding some $850m worth of 15 industrial properties in SG…

Some 508m units will be sold through the IPO, consisting of a placement of 432m units to institutional players, and a public offering of 75.5m (50m units however reserved for directors to subscribe under public offer) shares, while Freight Links will take up another 27m units, and cornerstone investors 97.8m shares. Free float appears liquid at 76.5%, with an estimated market cap of $664m…

Most of Sabana Reit's IPO proceeds, and a drawdown of $221 million from a committed three-year commodity murabaha facility, would be used to pay the vendors for the properties. Any future acquisitions, which will be aimed at SG properties, should be funded by debt, with a long-term gearing target of about 40%....

We note that Sabana currently trades at 1.05x P/B, with a low Gearing of 29%, while its average lease age is at 3.8 yrs, comparing this to its peers, (Ascedas REIT currently 1.29xP/B, yield 6.5% and gearing at 31%), (MIT currently at 1.22xP/B, yield 7.2% and gearing at 38.1%) and (Cambridge Industrial Trust currently at 0.8x P/B, yield 9.1% and gearing at 41%)..

The public offer opened yesterday and will close tomorrow. Trading should start at 2pm on Friday.


M1: Suing former account mgr who embezzled approx $2.1m. The corporate acct mgr reportedly generated order forms for non-existent orders and then sold the falsely ordered handsets to resellers for cash. He was found out when the number of handsets and corporate subscriptions were vastly different. News is highly unlikely to impact M1’s results. 2009 rev at $216.2m.


StarHub: Citi downgrades to Sell from hold, has $2.47 target. Says while 7% div yield attractive, sustainable, valuations not appealing. Notes stock trades at premium to M1, faces greater risk due to material exposure to fixed broadband market, which will be under threat from the next-generation national broadband network…

Adds, pay-TV business (17% of group revenue) also facing increased competition from SingTel, which has already secured 31% market share within 3 yrs of operation.


KohBros: Co has submitted the top bid of $37.8m and awarded the Geylang River Makeover contract. Work on the project will be from Nov 2010 till May 2013. The project involves constructing a drain, landscaping and building other amenities. With this new contract, Koh Brothers’ current order book has increased to S$407.0m. This compares to 9M10 and 2009 full yr rev at $265.0m and $333.8m respectively.

Keppel Land

Keppel Land: Completed non deal roadshow with Deutsche. Most investors were positive on the MBFC divestment transaction with S$2,400psf pricing. Positive residential sales momentum, in both Spore and China. In particular, sales in China remain firm in township projects with 1,600 units sold in 3Q (> 3k units YTD) on track to meet 4k-unit target this year….

More than 90% of the 220 units released in Seasons Park, Tianjin Eco-City taken up in the recent launch at better-than expected RMB11,000psm. Mgmt targets to sell 5,000 units in China next year. With 3Q10 pro-forma gearing of 0.13x post-divestment, mgmt is on the lookout for acquisition opportunities and is comfortable gearing up to 0.5x…

Recently, Kep Land has proposed the issue of $500m 1.875% of convertible bonds mainly to fund future acquisitions and invested in Vietnam and China, Chendu residential dev.


Wilmar: Deutsche downgrade to Hold from buy, lowers target to $6.50 from $7.50. While positive on Wilmar's future prospects, house believes there are challenges in relation to policy risk from China's threat of price controls and high feedstock costs so crushing margins might not recover strongly in near term...

To cut FY10-11E earnings by 8-18%. Preferred exposures in the sector are the upstream plantation stocks that are more leveraged to high CPO price. Wilmar is now trading at 20.32x fwd P/E compared to plantation stocks Indofood Agri 21.53x and Golden Agri 17.76x.

Renewable Energy

Renewable Energy: DMG maintains Buy with $0.385 TP. Note that grp has entered into a Sale and Purchase Agreement with Jiangsu Maritime Engineering Services to purchase the latter’s 100% stake in NHI for RMB48m….

NHI, owns 49% stake in Datang Baotou Asia Electricity Co, which is the developer and operator of the 49.5MW capacity wind farm in Huaishuo, Inner Mongolia.

Ascendas REIT

Ascendas REIT: Decision to widen investment scope beyond SG to explore Asian acquisition opportunities not expected to move unit price much near term as work still in progress. Still, strategy could pay off in longer haul given stiff competition locally & increasingly challenging conditions for acquiring yield-accretive assets….

In bid to enlarge portfolio, industrial REIT says actively eyeing China opportunities &set up Shanghai representative office. Current business stable & earnings profile backed by long-, short-term leases accounting for weighted average lease to expiry of 5 yrs. But for property income to grow beyond current single-digit rate, acquisition-driven strategy beyond Singapore may need consideration. Resistance at current $2.18 November high and support at last week's $2.02 low.


Vallianz: Proposed 1:1 rights issue of up to 5.9m new Shares, at price of $0.05. Co. is expected to raise proceeds from a minimum to maximum subscription scenario of $11.4m to $29.3m, in which 90% will be used for vessel acquisition and remainder for working capital. Based on yesterday’s closing price of 8.5c, theoretical ex rights price would be at 6.75c….

Swiber which owns 28.9% of Vallianz has undertaken to subscribe for the new Shares up to 49.1% ownership in the min subscription scenario. Co has obtained waiver for obligatory acquistion offer for Vallianz even if ownership exceed 30% of enlarged share cap.

SG Market

SG Market: Spore shares at risk of extending recent losses after Wall Street's overnight decline triggered by concerns over federal investigation into insider trading. Since reaching almost 3-yr high of 3313 earlier this month, STI has been on almost sustained decline, closing down 0.2% at 3191 y’day. Support expected at current Nov low of 3150…

Mkt watchers opine that the strong run-up since Sep, leaves little incentive for prices to head much higher with the year coming to an end. STI +8.2% since beginning Sep.

Stock ratings:
* Mapletree Industrial Trust: Citi initiates at Buy with $1.21 target. Recall yday Goldman started at Neutral with $1.12 target.
* Gallant Venture: KE initiates at Buy with $0.75 target.
* Straits Asia Resources: Credit Suisse raises to Outperform from neutral, raises target to $3.10 from $2.20. Sees rising coal prices as catalyst.
* Osim: Macquarie raises target to $2 from $1.50
* UOL: Nomura reiterates Buy with $5.55 target. Sees land bank replenishment and potential redevelopment of aged assets as catalysts to narrow the discount to NAV.
* NOL: Citi upgrades to Hold from sell, raises target to $2.40 from $1.80 in a sector report.
*StarHub: Citi cuts to Sell from hold on valuation grounds. Raises target marginally to $2.47 from $2.45.
*Wilmar: Deutsche downgrades to Hold, lowers target to $6.50 from $7.50, due to China policy risks, higher feedstock costs. Prefers upstream plays.

Stocks to watch:
* Ascendas Reit: to widen investment scope beyond Singapore to explore acquisition opportunities in China, Msia and Japan.
* Koh Bros: awarded the Geylang River Makeover contract. With this new contract, current order book will increase to $407m.
* Sim Lian: releases more units in Waterview for sale on strong demand.
* Raffles Edu: launched the Raffles European Dual Academy and signed a collaborative agreement with Germany’s Baden-Württemberg Cooperative State University and Spain’s University Alcalá.

Monday, November 22, 2010


Rubber: futures advance for a third day in Tokyo trading, while cash price in Thailand climbed to a record THB 132.75/kg (US$4.44/ kg) today as floods devastated trees, lowering pdtn in the country’s south. The southern provinces account for 68% of the country’s total plantation area. Meanwhile worries over the debt situation in Europe have eased, improving sentiment and raising optimism over demand for rubber…

However May-delivery rubber on the Shanghai Futures Exchange declined as much as 2.7% to Rmb 33485/ ton (US$5195/ ton) on concerns over China’s measures to fight inflation. China’s natural-rubber inventories rose for an 8th consecutive wk to a 7-month high, +705 tons to 60,996 tons, based on a survey of 10 warehouses across China’s major cities.


S-REITs: CLSA favouring sector due to low interest rates, rising confidence amongst REITs managers in rental and occupancies outlook. 3Q10 Rev growth of 6% YoY supported by acquisitions and improved occupancies in line with results. Expects further acquisitions and sponsored REITs to have advantage as competition for acquisitions increases...

Notes sector’s gearing at 32% compared to hist avg of 30% can be stretched further and valuations undemanding at 0.9x book and yields at 6.8% for FY11DPU. Favours CMT, FCOT, Ascott, Ascendas, MLT, Cambridge, Suntec and K-Reit.

Renewable Energy

Renewable Energy: buys 49% stake of Inner Mongolia wind farm for Rmb 48m. The Huaishuo wind farm, which began generating electricity in Oct ‘10, has a total capacity of 49.5MW, and will allow REA to recognize income generated from its operations almost immediately. The remaining 51% is held by a subsidiary of China Datang Corp, China's largest state-owned power producer by installed capacity. The acquisition will be funded by the proceeds from REA’s recent share placement...

DMG maintains Buy with $0.385 target, says already factored in this acquisition in previous forecasts.


SunVic: +3.2% at $0.645, recouping part of 7.4% fall since release of 3Q10 results. While net profit at CNY193.3 million vs CNY6.1 million YoY, CNY103.5 million profit in 2Q10 due to increased sales, investors have since opted to sell on strength given 82.4% rally after 2Q10 results came out. CIMB notes that stock's uptrend remains intact, with intraday pullback in recent months offset by dip-buying…..

Highlight that fundamentals support further ascent of share price. Add that 1Q & 4Q traditionally peak periods for China-based chemicals maker, hence current quarter could improve on 3Q10 performance. Orderbook quotes suggest price unlikely to challenge 52-week high of $0.70.

China Gaoxian

China Gaoxian: targets 20-30% growth in 2011 sales volume, vs single-digit growth this yr, as capacity for higher-end polyester yarn increases to 240k tpa by 1Q11, from 210k tpa currently. Earlier this yr, Gaoxian also invested Rmb 172m to ramp up its pdtn capacity for warp-knit fabric to 81k tpa from 17k tpa…

Mgt sees ASPs rising 17-24% to Rm 17-18/kg in 4Q vs Rmb 14.5/kg achieved in 9M10, due to higher raw mat’l prices and resilient demand. Catalyst includes listing of Korea Depository Receipts by early 2011, and using part of proceeds for moving upstream into pdtn of raw mat’ls to improve scale and overall gross profit margins…

Gaoxian sells most of its pdts to wholesalers in China, that in turn provide the fabrics to end-users incl sportwear firms like Nike, Li Ning, Anta. P/E trades at 3.96x vs hist avg at 2.81x. China Sky Chem Fibre trades at 12.1x compared to hist avg 33.3x.


Wilmar: -1%, extending last week's 2.7% fall, as concerns over China's recent price controls continue to weigh, further weighed by Beijing's fight vs inflation giving investors additional reason to exit following plantation grp's weaker-than-expected 3Q10 results released earlier this month…

UBS cuts TP to $7.00 vs $8.00 after lowering FY10-FY12 EPS estimates to account for earnings volatility stemming from Wilmar''s trading business, but keeps Buy call on view Co. remains structurally sound. Note that grp’s size gives it superior insight into the vegetable oils trade flow, and thus a superior trading advantage. Expects Wilmar to profit from its trading positions over longer periods of time. Tips support at $5.88 October trough.


Sabana REIT IPO: has priced its IPO at $1.05 a share, the midpoint of an indicative range, to raise $491m. The retail tranche of the IPO will close on Nov 24 and the units will begin trading on Nov 26. The manager of the Reit had forecast in a draft prospectus a distribution yield of 8.45% for 2011 and 8.48% for 2012 based on the minimum offer price of $1.00.

HL Asia

HL Asia: Phillips initiates at Hold with $3.62 TP, based on SOTP valuations, translating to 10x FY11E P/E, a 20% discount to its 5-year historical 12.5X P/E. Note that outlook for 4Q10 remains rather challenging, adviseing investors to stay on sidelines….

Outlook bleak due to additional marketing expenses in bid to boost sales at Xinfei, sales of refrigerators will be impacted by winter months, stiff competition, increased raw material costs & higher wages in China….

Add that demand for building materials will be highly dependent on weather conditions. However, on a brighter note, broker still very bullish on the prospects of China Yuchai which will benefit strongly from the strong recovery of industrial production and record automobile sales in China. Tips various JVs to start commercial production in FY11 which will contribute positively to HLA''s earnings.

Mapletree Industrial Trust

Mapletree Industrial Trust: Goldman Sachs starts at neutral with $1.12 TP. Expect SG focused REIT to deliver sector-leading organic DPU CAGR of 9.5% over FY10-12, but says catalyst already reflected in current price. Expect grp to benefit from SG's stable economic growth, with 44% of its income derived from MNC, listed firms & 56% from SMEs, which form backbone of economy. Highlight that portfolio under-rented, at average 21% below market average.


SembMarine: Deutsche maintains Buy with $6.30 target. Citi downgrades to Hold due to less attractive valuations following recent rally, but raises target to $5.60 from $4.60 on its strong execution and growing footprint.

Keppel Corp

Keppel Corp: Citi’s pref pick, says the conglo has the strongest positioning among global exploration & production (E&P) peers to capture the Petrobras' orders. Both Citi, Deutsche maintain Buy; Citi raises TP to $12.80 from $11.10, Deutsche raises TP to $12.50 from $11.45.


Shipping: AP Moeller Maersk, and 14 other shipping co.s (including NOL) agreed to seek rate increases of US$400 per 40-foot box on Asia-US west coast routes nxt yr. Asia-US shipping volumes surged in past two quarters and may rise from 6% to 9% nxt yr as the economic pick-up stokes US demand for Chinese goods. Maersk commented that costs were expected to rise for labour and associated costs. The appreciation of Asian currencies has also hit shipping lines that charge rates in USD.


Ezra: 1) To invest US$130m in 4 new platform supply vessels over nxt 2 yrs. 2) Awarded new charter contracts of US$51m for 6 vessels to be completed in avg of more than 2 yrs….

Funding details for the 4 new vessels not disclosed but co has funds of US$43.5m from existing equity placements and US$88.5m in potential debt drawdowns, a total of approx US$132.0m. Net debt to equity currently at 0.88x. Invt plan comes days after Ezra unveiled purchase of U.S. yard for customized cranes for leasing.

Palm Oil

Palm Oil: HSBC initiates strategy sector report. Highlight that structural and regulatory drivers means that 2011e demand growth for CPO will be at deacde high and bottlenecks in expanding acreage and unfavourable weather will pressure supply going forward. Expect FY11e CPO prices to rise 24%YoY which will favor upstream players….
….Broker initiates coverage, with Overweight call on Indoagri (TP $3.3 and Golden Agri ($0.90 but remains neutral on Wilmar (TP $7.01)

Friday, November 19, 2010


UOL: Goldman Sachs upgrades to Buy from neutral, raises target to $5.80 from $4.55. Says UOL offers attractive leverage to Spore (84% of Gross Asset Value) and the right blend of diversification across asset classes. Notes UOL offers relatively lower exposure to the softer Residential segment, yet earnings visibility remains strong from unbilled sales; has 69% of GAV in Commercial, Hotels, currently favored segments Sees optionality from strategic stakes in MCH, UIC, and potential value to be unlocked via asset restructuring. Notes UOL trading at 0.78X FY11E P/B, below sector average of 1.36X.

First Resources

First Resources: UOBK upgrades to Buy from hold, raises target to $1.62 from $1.40. Says co one of fastest-growing pure CPO producers in SE Asia, with over 116k ha hectares under mgt (25.1% CAGR since 1992). Expects earnings to rise on higher CPO prices (raises ASP forecasts for both 2011, 2012 to RM 2650/ton from RM2500/ton), and recovering yields. Group's fresh fruit bunch (FFB) pdtn +16.5% yoy in 3Q10 due to the estate's young tree age, is expected to continue with aggressive new planting in Kalimantan.


RafflesMed: OCBC maintains Hold at TP $2.35. Believes value as potential acquisition after ThomsonMed’s takeover and Parkway’s delisting alr priced in. Cites slower foreign patient growth than regional peers as factor but remains positive due to higher value-added services and more advanced medical treatment...

Est TP based on 24x FY11F EPS. Current P/E at 30.57x compared to historical avg of 20.74x, does look on the steep side. At current price of $2.47, it is close to the avg TP $2.46 of analysts.

Suntec Reit

Suntec Reit: OCBC maintains Buy. Notes MBFC being acquired at a fairly tight initial yield of 4%, but views this as a sound acquisition from a long-term, strategic perspective. Says Suntec to fund the total acquisition cost through debt (72%) and a private placement (28%). Revises earnings estimates to incorporate the proposed acquisition, assumed to be completed 1 Jan ‘11. New TP of $1.63, reduced only slightly from $1.64, as lower-than-expected cost of debt offsets dilutive effects of new unit issue.

Financial One

Financial One: Taiwanese Co. Financial One Corporation may delist soon, after a poor reception by investors here since its listing three years ago. Financial One said a trading suspension that has been in place since Tuesday will remain, so as to avoid any speculation in its shares….

Grp may list its wholly owned subsidiary Chailease Holding on the Taiwan Stock Exchange.

Financial One, which focuses on lending to small and medium enterprises in Taiwan - has been ignored by investors, going by its share price. Since listing, shares have mostly traded below the offer price of $1.15, with the stock last traded at $0.42.


SPH: Deutsche maintains Buy with $4.70 target. Notes strong numbers for Spore Oct adex, +4% yoy at $199m (just shy of Nov ’09 $207m LT historical high), on increases across almost all adex platforms. Biggest driver was newspaper (+8% yoy to 3yr high of $83m), and magazine (+14% to $11m ytd high)…

Sees SPH as on track to meet FY11 advertising revenue projection of $783m. Tips SPH to post solid 3-year core net profit CAGR of 8%. Says in the absence of Sky@eleven contribution, investor focus should revert back to SPH's core business of advertising revenues.


M1: Kim Eng maintains Buy with $2.63 TP, based on 15x FY10 EPS. Note that grp has made its long-awaited foray into the world of Pay TV with the launch of 1box. Expect M1 to be a beneficiary of the immense potential of the blurring of lines between TV and the Internet, particularly in the area of interactive IPTV…

Tips grp to benefit more significantly when content cross-carriage is effected, and particularly when the common featured set-top box, being developed by IDA and MDA under Project NIMS. The set-top box will replace the current multi-box system and make it easier for subscribers to switch…

Add thatCost of entry into Pay TV is expected to be low for M1, as it will have no heavy-weight content and its content will only be distributed to users upon subscription and on-demand.

Hongkong Land

Hongkong Land: Citi upgrades to Buy vs Hold, raises TP to US$9.37 vs US$5.50. Expect growth momentum for Central office rentals to continue in 2011 & 2012 due to tight office supply in core districts. Note that grp is the most leveraged play on HK Central office properties, while its NAV is the most sensitive to any change in HK office capital values…

Lifts NAV to US$10.41/share vs US$6.88/share, and roll over valuations to FY11, factoring in higher 2011 prices for HK office (+20%), retail (+10%), residential (+10%-15%). Lower cap rates for central office & retail properties, by 50-100 bps to 4.0% & raises FY10-FY12 earnings estimates by 1.0%-10%. Note that grp trades at 31% discount to NAV, close to 28% historical average discount.

SG Market

SG Market: Spore shares likely to follow the US lead after Wall Street's rally yday as specter of euro-zone debt problems recedes again. STI closed +0.1% at 3215 Thursday. Positive news flow may add to sentiment, as Spore expected to avoid the technical recession in 4Q, driven by strong financial services, integrated resorts contribution…

Citi says emerging stocks outlook now bullish after drop, with China tightening measures likely priced in. Commodities across the board also seeing rebound, with rubber, palm oil, soybean, cotton, cocoa all posting good gains. The Thomson Reuters/Jefferies CRB Index gained 2.4% in New York yday, snapping its two-day drop. Plantations, commodities counters may get lift.
Index likely to hold above 3200, may test 3240, 13-d MA.

#Stocks to watch:
Shipyards: Yangzijiang, Cosco may be in focus, as peer Rongsheng debuts on the HKEX today. Credit Suisse maintains Outperform for both stocks, citing strong execution, M&A opportunities for YZJ; likes Cosco for having the most advanced rig building capabilities among the Chinese shipyards.

DBS: good response to retail preference share public offering, 3.5x oversubscribed. Size of offering upsized to $800m from $500m.

#Olam: Business Times says recent underperformance to Wilmar, Noble not justified, given Olam’s potentially higher growth.
#Sim Lian: pre-launch of Phase 1 of Waterview at Bedok Reservoir well-received. 200 units of the 348 slated for launch have been sold at ASP of $838 psf.

#Seroja: secured a US$150m contract from PT Adaro Indonesia to transport coal to various buyers located within the Indonesia. The contract will be in force for 7 yrs and transportation will be using Indonesian-flagged vessels in line with cabotage laws.

#Stock ratings:
* HK Land: Citi upgrades to Buy from Hold, raises target to US$9.37 from US$5.50.
* SembMarine: Citi lowers to Hold from buy, but raises target to $5.60
* Keppel Corp: Citi has $12.85 target.
* SPH: Deutsche maintains Buy with $4.70 on strong Oct adex numbers.
* Genting SP: HSBC rates as new Underweight. Macquarie maintains Underperform, $1.83 target, on slower than expected growth citing regulatory risks, overhang.

Thursday, November 18, 2010


SGX: Deutsche upgrades to Buy from neutral, with TP of $10.55 vs $8.55 previously, based on DDM valuation. Note that the ASX deal could bring abt meaningful valuation uplift, and rev oppourtunies are realistics from increased market data and connectivity revenues, neither of which are viewed as particularly difficult to achieve. Rev synergies are estimtated to boost EPS accretion by 33-57%...

Add that ASX will derive just $40m FY11E rev frm cash trading, suggesting limited downside for SGX and a small rev opportunity for potential competitors. If securities trading competition drives higher capital velocity, ASX rev could increase on greater clearing and settlement volumes.

Seperately, ASX has hired David Gazard, a former adviser to Tony Abbott, Australia's parliamentary opposition leader, to lobby lawmakers in support of its takeover by SGX. He will seek to persuade lawmakers - including one who is his brother-in-law - that the US$7.9 billion bid doesn't hurt Australia's national interests

China Animal

China Animal: Kim Eng initiates coverage with Buy Call and TP of $0.48, pegged at 15x FY11F PER, a discount to its peers average of 23x. Note that while FY10 net profit may be hurt by certain one-off expenses, remain confident on grp’s longer-term growth prospects given its leading market position in animal drug manufacturing and distribution….

Highlight that the recent approval by China’s Ministry of Agriculture to commence commercial production and sale of its animal foot-and-mouth disease (FMD) vaccines should underpin its earnings growth in the medium term…

Add that grp has submitted application for the dual primary listing of its shares on HKSE by way of introduction and believe the process would not take more than four months. Which could possible see grp be listed on HKSE by yr end....

Further keen interest from institutional funds also points to good support on stock, with Investment and advisory firm Blackstone recently made a strategic investment by subscribing for US$40m in principal amount of convertible bonds at par and 20m new shares at the issue price of $0.35 per share for a consideration of S$7m and mutual fund group FMR LLC has also been buying in the open market, raising its stake to 9.2%.


GLP: JPMorgan starts at Overweight with $2.90 based on SOTP, implying 1.61X P/B MarFY11. Expects developer of logistics properties to generate sustainable 13%-15% annual core earnings, portfolio-value growth given focus on China, Japan, Asia's 2 largest logistics markets…

Note that 80% of group''s end-customer business in China exposed to domestic consumption, a high-growth segment of the economy for the medium-to-long-term. Expect grp to increase existing stock of completed logistics facilities in China by more than 3-fold as builds out pipeline of development sites, land reserves over next 4-5 years.

SG Market

SG Market: Spore shares may catch up with y’days weakness in most Asian markets on renewed concerns over euro-zone debt problems, prospect of more China tightening measures. STI down 0.8% at 3212 Tuesday, may slip below 3200 for first time in more than 2 wks, with current Nov 3150 low eyed as support. Just-released Spore 3Q10 final GDP data not expected to sway market as performance already expected when initial figures last month showed sequential 19.8% contraction vs -18.7% actual.
Moves by China to rein in inflation, such as imposing temporary price caps on “important daily necessities” and pdtn mat’l likely to weigh on commodity plays like Wilmar, fresh vegetable processors like China Minzhong.

Stock ratings:
* Global Logistic Properties: JPM starts at Overweight with $2.90 target. To be included in MSCI Spore from Dec ’10.
* Olam: Nomura upgrades to Buy from neutral, raises target to $3.90 from $3.40. Views US$1.5b Gabon investments as long term positive.
* SGX: Deutsche upgrades to Buy from hold, raises target to $10.50 from $8.55.
* China Animal Healthcare: KE initiates at Buy with $0.48 target. Recent approval by the PRC govt to commence commercial pdtn and sale of its animal foot-and-mouth disease vaccines to underpin earnings growth.
* SIA: Nomura raises target to $18.25 from $16.85. Rates as Buy.

Stocks to watch:
* Bund Center: 1-to-2 stock split to take effect today. Last traded $0.545 (prior to split).
* Offshore & Marine: Rising rig rental rates and industry consolidation spur Maersk Drilling to expand, to order 1 new rig every 6 months. Positive read through for SembMarine, Keppel Corp.
* Keppel Corp: may underperform SMM as the Philippine court rejects Keppel Cebu Shipyard's appeal. The shipyard has to pay 33m pesos (S$9.7m) in damages to its insurer, due to negligence in a fire incident resulting in the destruction of a vessel 10 yrs ago
* Ezra: to purchase a 650k sqft fabrication facility in Houston. Deal was concluded at ‘distressed prices’ and allows fabrication of customized cranes which meet the requirements of the offshore O&G, but no price or closing date disclosed
* DBS: opens branch in Ho Chi Minh City to meet the rising demand for banking services as companies expand in Vietnam. This marks the bank's next phase of growth in the country.

Tuesday, November 16, 2010


Olam: DBS maintains Buy with $3.60 target. Sees current share price weakness as an opportunity to accumulate. Notes recent US$1.5b Gabon invmts are large by Olam's standard; and represent a departure from its "bite size" investments in recent past. Says preliminary calculations show that these projects could potentially boost Olam’s value by 25%. But makes no changes to forecast yet, as financial closure for the fertiliser plant is not expected until Sep11;...

while sales of CPO and PK from oil palm plantation would not contribute meaningfully until FY16F.

Sembcorp Marine

Sembcorp Marine’s unit PPL Shipyard has signed a US$195m contract to sell a jack-up rig, already under construction, to Transocean. The rig is scheduled for delivery in the 4Q11 in 12 months. The high-spec rig is a prototype able to operate in waters 400 feet and drill to depths of 30k feet…

SMM is confident for the demand for new high-spec builds in the future. Supporting that is news that Transocean has left 4 out of 10 older models of high spec and 27 out of 55 other jack ups idle. Kim Eng has maintained a Buy with TP $5.40.


SIA’s Oct operating results out and Cathay Pac has posted a positive profit warning for the peak period in 4Q. Cathay improved business on long haul routes than regional routes and profit greater than HK$12.5b, vs HK$4.7b last yr. Generally a positive read through for SIA given similarities in ops and geo coverage. For Oct operating stats, SIA pax load factor dipped 1.5%yoy to 79.6% explained by capacity increase of 1.4% vs 0.6% decline in pax carriage…

No. of passengers carried -1.8% to 1.4m. All regions except East Asia saw declines in passenger load factor yoy. For Oct, co upped capacity via increasing frequencies to destinations including Houston (via Moscow), Manchester (via Munich), Hong Kong, Seoul and Delhi. QoQ performance increased for all measures due to seasonality. CS maintains Outperform TP 185, At fwd P/B 1.3x, EV/EBITDA of 4.7x attractive below hist avg of 1.3x of 7.2x for high projected RoAEs.

Sound Global

Sound Global: 3Q earnings -53% YoY to Rmb60m owing to higher-than-expected new listing expense of Rmb60m in HK, slower-than-expected turnover growth and weaker-than-expected gross margin….

DMG maintain Buy, increasing TP to $1.05 from $0.93, expecting strong growth ahead. Remains confident of order books’ sustainability, trimmimg earnings downwards (-7.3% in FY10 and -4.6% in FY11) to factor in the higher effective tax rates and expenses. Cash invested into BOT projects will provide recurring steams of revenue….

However Citi maintain Sell, with $0.76 TP from $0.70, cite that 3Q results disappointed, cut earnings estimates by 6-14% in 2010-12F.

Renewable Energy

Renewable Energy: Grp announced that wholly-owned subsidiary, REA China, was informed that they are the successful bidder for Tender and that REA China has till 18Nov10 to accept Tender. Management is presently considering whether to accept the Tender and will release announcement in due course….

We note that grp’s 1H11 Net Profit of Rmb11.7m vs loss-making in 1H10 & revenue +370%
YoY. DMG maintains Buy with $0.385. Note that Net Profit slightly below expectations due to slower initial progress from manufacturing unit and lower than expected gross profit margins for manufacturing and fasterner businesses.


YingLi: Kim Eng maintains Buy with $0.50 TP, pegged at 40% discount to RNAV. Note that grp posted 51%YoY jump in 3Q Net profit to RMB5.8m on back of 17.3% growth in revenue to RMB36.8m, as grp achieved higher ASP from sale of unit in Future International. Core earnings estimated to be about Rmb11.5m….

Highlight that preview of the IFC has begun and is likely to be officially launched within this yr, and a total of 20,000sqm of office space is up for sale and will be recognized as rev in FY11. Expect Ying Li to turn slightly profitable in FY10 after the booking of a fair value revaluation gain of no less than Rmb30m, while RNAV model has been adjusted to reflect the re-design of grp’s Daping project and more achievable retail yield and ASPs assumption.

SG Market

SG Market: Wall Street's flat session overnight unlikely to inspire Spore shares in early trade. Any upside may be restrained by profit-taking, especially given recent hefty gains. Expect STI support at 3200, while resistance at Friday's 3285 high…

For the rest of the week, DMG expects market to take a breather post earnings season. Notes external factors to be key drivers, with prospect of additional China tightening measures & renewed concerns over euro-zone debt problems as risks. Beyond these hiccups, SG market is poised to continue uptrend as liquidity continues to flow in.

Stocks to watch:
* SembMarine: to sell a jack-up rig to Transocean for US$195m; delivery in 4Q11.
* Property: developers may be supported after URA data shows private home sales increased 16% MoM in Oct, despite the cooling measures introduced in late Aug. Morgan Stanley prefers Allgreen, Wingtai. Deutsche prefers CapitaLand, Keppel Land.
* SIA: May get lift following rival, Cathay Pacific’s positive profit guidance and sanguine 4Q outlook. Oct operating stats show sequential improvement in pax, cargo demand due to seasonality. Yoy pax load factor, demand saw mild yoy declines, but cargo load factor, demand continued to expand.
* Tiger Air: Oct operating stats indicate MoM decline and lower than expected YoY increase in pax numbers, due to lower capacity. Load factors remained at constant. We look forward to improvement from Nov onwards as previous pilot shortage, aircraft technical issues are resolved, and delivery of new aircraft.
* STX OSV: maker of oil-rig support vessels plans to double capacity in Brazil in anticipation for more orders, as the country makes significant invmts to develop its resources.
* Marco Polo Marine: to acquire 2 offshore support vessels for A$21m. The vessels come with existing chartering contracts which expire in end Sep 2011 and end Aug 2012.
* Sound Global: DMG raises target to $1.05 from $0.93. CS maintains Outperform, $1.20 target. Citi downgrades to sell, $0.76 target.
* Tat Hong: OCBC cuts target to $0.99 from $1.10
* Ying Li: KE upgrades to Buy from hold, raises target to $0.50 from $0.46.

Monday, November 15, 2010

Keppel Land

Keppel Land: +1.9% at $4.90. Sold 80% of its 400 units released from The Lakefront Residences project over the weekend. The 99-yr development located next to the Lakeside MRT station and near Jurong Lake, comprises 629 units ranging from 484sf for a one-bedder to 3000sf for the penthouse. 65% of the development comprise 2 and 3 bedroom units. ASP avg $1020psf, within mkt expectations, and higher than the prices achieved at neighbouring Caspian project of $700-800psf…

KepLand acquired the site earlier this year at a land cost of $303m or $499psf. Based on the achieved selling price and est breakeven cost of $880-900psf, KepLand may generate a margin of 13-15% from this development.


Swiber: UOB maintains Buy at TP $1.40 from $1.45, results within expectations. Notes that gross profit has increased sequentially qoq and gross margin sustained above 20% for 3 quarters despite US$4.7m mtm loss on bonds and $5.2m translation loss on notes. Expects strong op performance to flow from 2011 onwards, key risk of project execution. DBS maintains Buy at TP $1.28, results slightly below exp.


SIA - Operators of the A380 may have to replace another 29 Rolls-Royce engines after an investigation into a Qantas engine failure identified problems. Singapore Airlines may have to replace up to 20 Trent 900 engines.

Impact on SIA may be limited, as Rolls Royce is responsible for the maintenance and related costs. Also, the 3 SIA planes scheduled for engine replacement would be out of service for only 1-2 days, hence impact on operations should be mitigated.


SpiceI2I: 3Q rev at $65.8m, +136.8%yoy 5.3%qoq, turning a profit of $2.7m over losses in both yoy and qoq largely due to forex gain of $3.9m. The gain arose from revaluation of rights issue and USD loan due to weak USD, excluding which, the co would have made a loss...

Gross margin actually fell qoq, from 24.7% 2Q10 to 21.1%, attributed to a shifting sales mix from voice business to handset sales. EPS of US0.17c. Note: Co has yet to remain profitable from core business, but in near-term b/s is sound and boosted by rights issue, adding US$100m to cash.


SeeHupSeng: 3Q Rev at $47.0m, +11%yoy, flat qoq, net profit $1.0m, -17%yoy, +78.4%qoq. Gross profit margins stable at 16.3% compared to 16.8% in 3Q09, 16.4% prev quarter. Decrease in net profit due to acquisition fees for balance of 49% of TAT Petroleum and business expansion. Net profit increased qoq due to a shift in rev mix (18.3% from 16.8% in 2Q10) to the higher margin corrosion prevention segment. TAT Petroleum contributes 80% of grp rev and is expected to be positive on 2010-11 earnings.


BreadTalk: 3Q10 results. Rev at $81.3m, +26.8% yoy, +14.1% qoq. Net profit at $2.8m, +4.8% yoy, +20.5% qoq. Higher costs due to misappropriation of funds in Msia unit resulting in a provision of S$622k, start-up costs of Thailand’s Din Tai Fung and lapsing of Jobs Credit Scheme. Mgmt expects raw material costs to rise.


Midas: 3Q10 NP +44% YoY to S$13.7m, revenue +35% YoY to S$49.8m, with contribution from new extrusion capacities. CS maintains Outperform, TP 1.20 from 1.10, well-leveraged into the structural growth theme for China’s railway sector and further contract wins wld support share price action. Daiwa reiterate Buy, TP 1.25, results inline with expectation. JPM initiate Overweight, TP 1.10, on the fast track for growth.

FJ Benjamin

FJ Benjamin: 1Q rev at $82.8m +23%yoy, +16.7%qoq. Net profit at $3.2m, +5.0%qoq, a 7-fold increase yoy due to a $1.8m forex gain and higher operating profit. Rev increase was on the back of higher sales in key mkts in SEA and North Asia. The IR and F1 event were drivers of higher sales as well as timepiece distribution in North Asia….

Excluding the $1.8m, net profit qoq would have fell mainly due to an increase in advertising and promotions expenses which is a positive for co’s future earnings. P/E trades at 21.2x close to avg of 22.0x.


Olam Intl (OLAM): signs 2 key deals with Gabon govt in Africa - a USD1.3bn fertiliser plant project, and a USD236m for palm plantations. Co will have an 80% stake in the fertiliser plant, with Gabon govt 20%. The JV will enjoy a 10-yr tax holiday after targeted commencement of ops 1H 2014, and 10% tax rate after. Project will be exempted from customs duty and VAT as long as ops cont. Grp expects venture's EBITDA to eventually range between USD300-350m and a ROE of >45%...

Grp will take a 70% stake in the plantations with Gabon govt 30%. Plans to develop an initial 50k ha, or 1/6 of the 300k ha landbank the govt has committed to the jv. To enjoy a 16-yr tax holiday from FY11, exemption from VAT and customs duties on imported machinery and inputs, oil-and-gas and fertilisers. Planting is expected to start in early 2012 with completion scheduled for 2016…

Earnings impact will only filter in after 2014 but incentives make projects attractive. LT positive for Olam.

Mun Siong

Mun Siong: Reported Net profit of $9.2m for 9M10. Rev at $48.2m, - 6.6%, mainly due to completion of a project which was in progress in the 3Q09 but was completed in the 2Q10. Decrease was partially offset by an increase in term maintenance contracts which were awarded in 1Q10, but started generating rev in 3Q10. 9M10 was however +40.1%YoY mainly due to lower COGS attributed to completion of a project in 2Q10...

We note that at current level, grp trades at undemanding valuations of 6.7x FY10E P/E, vs peers’ average of 8.5x.

China MinZhong

China MinZhong: Reported 1Q11 Net Profit +20%YoY to Rmb52.4m, which were in line with expectations, margins improved and cash conversion cycle improved, with Planting & leasing target on track, currently planting 7kmu of new cultivation area, while leasing 8300mu of new farmland for rmb151.5m….

Valuations are undemanding, with Grp currently trading at 6.2xE FY11P/E vs CHina Green 8.4x. JP Morgan maintains Overweight with $1.60 TP based on strong execution & attractive valuation.


F&N: FYSep10 net profit +27% to $585m. But growth slowed in 4Q10, as rev flat YoY at $1.5b, although PBIT +10% to $258m. F&B was the key driver, with 4Q10 PBIT +51%YoY, buoyed by growth from breweries in IndoChina (mainly Vietnam) and contribution from the PT Bintang acquisition…

Soft drinks posted solid gains while Dairies fell. Mgt commented that it will seek to scale up the F&B business via M&A and organic growth by increasing its food pdts and beverage portfolios….

4Q PBIT from property fell slightly due to decline in property development, and deconsolidation of FCT. Mgt expects softening demand due to recent govt measures in Spore, but thinks earnings should continue to be supported by pre-sold projects and planned FY11 launches…

Remain positive on long term trends in China, target 1000units/yr over medium term. Sees Australia’s housing shortage worsening, plans to deliver existing pipeline with construction of One Central Park, and launch of Queens Riverside Perth in FY11.
Final div of $0.12/sh, bringing full yr div to $0.17 (+26% yoy), translates to 2.6% yield...

At current levels, grp trades at undemanding valuations at 11.2x FY10 P/E and 14.53x Forward P/E, vs historical average of 16.13x.

Sound Global

Sound Global: Reported 3Q10 results, with Rev strong at the topline at Rmb570m, +8.8%YoY and +39%QoQ, Net profit however was at Rmb60.6m, -51.5%YoY and -18.7%QoQ, due largely to the one-time expense of Rmb60.3m for listing on HKSE, as well as higher administrative expenses arising from share options accounting. Without the one-off listing expenses and the share options accounting expense, Net Profit would have grown 18.3%YoY...

Grp continues to enjoy success in bidding and negotiation for BOT projects, securing more BOT projects since Jan, with flow of BOT project wins to underpin growth of recurrent income over the medium term. Going forward, grp plans to make deeper inroads into China, aiming to work with various other counties for their water needs next yr...

We note that grp balance sheet remains strong, with net cash balance of Rmb1.1b, this was strengthened by earlier successful placement of Rmb885m USD 6% convertible bond due in 2015. Result brings full 9M10 Rev to Rmb1.2b, +26.4%YoY and Net Profit at $180.7m, -17.9%YoY. At current price, grp trades at annuazlized FY10E P/E of 23.8x, and ex cash at 19.2x FY10, vs historical average of 18.2x and Hyflux’s 23.17x P/E.

Comfort Delgro

Comfort Delgro: strong set of 3Q results in line with expectations, with record revenue at $823.4m, +5.2%YoY and +4.3%QoQ, while Net Profit at $61.4m, +10.4%YoY and +5.5%QoQ. Rev growth would have been +7.9%, if not for negative translation effect of the weaker Pound, Rmb and Vietnamese Dong....

Rev growth driven mainly by Singapore bus (+10%) and rail (+13%), which benefited from surging ridership (+6% and 20% YoY, respectively) brought on by the strong economy and booming tourism scene. Taxis (+13%) had the advantage of a larger fleet, higher usage of credit transactions…

Overseas, Australia bus (+24%) continued to be the biggest outperformer due to more services in New South Wales and Victoria, and the strong A$. While the UK continued to be plaqued by the weak pound, taxi operations appeared to be starting to turn the corner with management reporting higher QoQ call volume….

Going forward, grp remains positive on outlook, but will remain vigilant and continue to focus on demand patterns of customers. Expenses will continue to be tightly controlled even as fuel and electricity pose challenges....

Result brings 9M10 Rev to $2.4b, +5.4%YoY and Net Profit to $173.9m, +5.1%YoY. At current levels, grp trades at undemanding valuations, with annualized FY10E P/E at 13.1x vs grp’s average of 15.3x and SMRT of 19x FY11E MarP/E. Kim Eng and DMG maintains buy with $1.87 & $1.85 TP respectively. Technically, $1.45 support, not breached since Jul, may hold, while resistance at $1.49 (30day MA).

SG Market

SG Market: may continue Friday's negative tone, tracking declines on Wall Street; also, with domestic earnings season all but wrapped up, investors may now take a breather, await more clues on health of global economy. Street concerned about China raising interest rates to curb growth, lending by its over-exuberant local banks. STI ends down 1.3% at 3252 Friday. 3244 support tipped, then 3220; 3300 likely medium-term cap.

* Commodities: plantation plays, supply chain operators may come under pressure today after commodities fell the most in 18 months on speculation that China will increase borrowing costs to damp inflation, eroding demand for crops, metals and energy.
* Olam: shares likely underpinned by significant Gabon invmts, comprising a JV to build a US$1.3b port-based ammonia-urea fertilizer complex and another JV for a US$236m palm plantation. Mkt watchers may view move positively, given the high project returns (>35% ROE, >24% IRR).
* Hyflux: won a contract, valued at US$100m to build a water desalination plant in Libya.
* Comfort DelGro: may be supported after posting strong 3Q results, that were within expectations. KE (Maintain Buy, TP $1.87 ), UBS (Maintain Buy, TP $1.69 ), Citi (Buy, TP $1.73 ), CS (Outperform, TP $1.90). DMG rates as Buy, raises target to $1.85 from $1.74, prefers Comfort over SMRT due to former’s cheaper valuation, greater overseas growth.
* Midas: JPM initiates at Overweight on Midas HK (TP HK$6.50 ), translates to Midas SP $1.10 target. CS also raises target to $1.20.
* FJ Benjamin: may be in focus as 1QFYJun11 net profit up 7-fold to $3.2m, boosted by record high tourist arrivals in Singapore, and positive contribution from the timepiece distribution business in China, Hong Kong and Taiwan.
* China Minzhong: 1Q11 NP +20% YoY to Rmb52.4m, in line. JPM maintains O/w, TP $1.60, on strong execution, attractive valuations.
* Sound Global: disappointing net profit at Rmb 60.6m, -51.5%YoY and -18.7%QoQ, due largely to the one-time expense of Rmb60.3m for listing on HKSE.
* HL Asia: 3Q net profit -54% yoy to $20.6m. 4Q challenging. Street maintains Buys but reduce target prices. CS (TP to $4.35 from $4.50), DMB (TP to $4.18 from $4.88 ).
* F&N: growth slowed into 4Q10 as net profit fell 23% to $144.5m. Full year net profit of $585 below consensus est of $639m.