Friday, December 30, 2011

Fortune Reit

Fortune Reit: Daiwa upgrades to Buy from Outperform, raises TP to HK$5.37 from HK$5.15; says Fortune's deal to buy two retail properties (Belvedere Garden in Tsuen Wan and Provident Centre in North Point) is "attractive and yield-accretive;" it thinks the current passing rent of these two properties, at HK$16-19/sq ft, is low, vs Fortune's portfolio average of HK$31.8/sq ft. "This means that there should be considerable room for improvement in their achieved rents through asset enhancement initiatives (AEIs) and tenant repositioning." Adds, this deal is the Fortune's first major move after its rights issue in 2009, which "we see as an exercise to boost its equity and asset base significantly to embark on acquisitions."
The counter is up 0.3% at HK$3.78


Sakari: the stock looks to be in a medium to longer term downtrend, with all 3 moving averages pointing down. See support at $1.75, but it is a pivot level and a break below that would be negative for the stock.
Although stochastics are oversold, RSI and MACD are only just below neutral, implying room for further downside.
Nevertheless, given the volatility in this counter, prefer to adopt a sell-into-strength approach. Resistance is at $2.


PCRT: Shenyang Summit has signed 5 lease agreements (50% owned by trustee-mgr of PCRT) for a total lease area of 57.0k sqm of Shenyang Longemont Shopping Mall for $18.8m. Shenyang Summit has the intention of operating a theme park, an ice skating rink, a supermkt and F&B outlets. The leases will expire in June-end 2014 and 2015

Tiong Woon

Tiong Woon: Proposing a 1-right-for-4-shares rights issue at $0.11 per rights share. A total of 92.9m rights shares will be issued. The price is an approx discount of 48.8% to closing price of $0.215. Net proceeds of $10m will be raised with est expenses of $0.2m. The funds raised will be for the general working capital and capital expenditure requirement. The crane operator trades at 11.0x P/B currently. Peer Tat Hong trades at approx 18.5x


Yoma: Stock has been surging, as Myanmar optimism generates interest. Fund managers note that YOMA Strategic Holdings is a unique and possibly undervalued proxy to recent optimism about Myanmar, and is one of the easiest ways to gain exposure to Myanmar.

In a filing yesterday, Yoma said it did not know of any information that could affect its share price. but noted that it has been receiving queries about its business in Myanmar following recent political and economic reforms in that country.

Recall that Yoma took in all of its $13.2m of revenue for 1H11 from its activities in Myanmar. The company is involved in at least four residential and one golf course projects in the country. Expectations of greater institutional participation may also have been raised after Yoma in Nov hired former banker Andrew Jonathan Rickards as chief executive, which analysts tip that he's probably going to do some marketing and attract more investment.

Spore market

Spore market: STI could open higher after some positive U.S. data lifted Wall Street Thursday, while regional markets are opening in positive territory.
Positive musings on yday’s Italy bond and bill auctions may also lift sentiment. While the bond sales fell short of target, the EUR 9b of bills were sold at 3.251%, about half the rate of the previous sale last month.

However, any hefty moves are unlikely on the last trading day of 2011 and the market is likely to remain very quiet. Thursday, the STI closed up 0.2% at 2672.78 and as it stands the index is down 16.2% for the year.

Looking ahead, DMG says it expects market weakness to remain in 1H12 "due to the persistent Eurozone debt problems, but a recovery could bring the STI to 3022 on a 12-month horizon." Its target works out to 1.31X P/B, lower than the 15-year historical average of 1.65X, "a level we feel is justified given the global uncertainties." The house recommends staying defensive; it says land transport stocks offer stable earnings, telecommunication have limited downside and it is bullish on the hospitality space.

Keppel may be in focus after it gets new orders worth $150m, taking total 2011 jobs to a record $10b.

Spore market

Spore market: STI could open higher after some positive U.S. data lifted Wall Street Thursday, while regional markets are opening in positive territory.
Positive musings on yday’s Italy bond and bill auctions may also lift sentiment. While the bond sales fell short of target, the EUR 9b of bills were sold at 3.251%, about half the rate of the previous sale last month.

However, any hefty moves are unlikely on the last trading day of 2011 and the market is likely to remain very quiet. Thursday, the STI closed up 0.2% at 2672.78 and as it stands the index is down 16.2% for the year.

Looking ahead, DMG says it expects market weakness to remain in 1H12 "due to the persistent Eurozone debt problems, but a recovery could bring the STI to 3022 on a 12-month horizon." Its target works out to 1.31X P/B, lower than the 15-year historical average of 1.65X, "a level we feel is justified given the global uncertainties." The house recommends staying defensive; it says land transport stocks offer stable earnings, telecommunication have limited downside and it is bullish on the hospitality space.

Keppel may be in focus after it gets new orders worth $150m, taking total 2011 jobs to a record $10b.

Thursday, December 29, 2011


Hafary: Has sold all its freehold Aljunied units at a collective consideration of $65.3m. Co has sold 59 units on the development of 29.1k sq ft. The initial plan was to develop a 6-storey building on the plot to serve as co’s headquarters and showroom. The gain on disposal is approx $22.4m which will be recognized upon completion of construction and sale (est before 2013). Co has current mkt cap of approx $50.6m with P/B of 1.8x. Gain is significant compared to co’s mkt cap.

Fortune REIT

Fortune REIT: Announced that it will buy two commercial properties, namely the Belvedere Garden Property and the Provident Centre Property in Hong Kong for HK$1.9b (US$244.4m).
The Total Consideration is payable on completion, and will be financed by first drawing down on the term loan facility under the new facility, with the revolving credit facility of the existing facility and internally generated funds being used to finance the remainder.

Financial effects of the acquisition are as follow:
1) Using FY10 fin statements, after the acqisiton, DPU will improve to 25.63 HK cents from 24.35 HK cents, while NAV will decrease slightly to HK$6.14 from HK$6.18, upon issue of 5.3m new units issued as acquisition fees.
2) Gearing will increase to 28.3% from 21%

Overall, the acquisition appears to be a fair/good deal, , slightly below the appraised value of Independent valuers from Knight Frank and Savills.

Spore market

Spore market: anemic trading volume likely to continue in this final week of trading. The Spore market is likely to open down this morning, following weak markets in the US overnight and in regional markets this morning. Kospi is down 0.4%, Nikkei is down 0.8% at 8.04am.
Still see the STI being rangebound in the near term, btwn 2650 – 2700.

Corporate news flow is light today.
* Wilmar: establishes a $5 b Guaranteed Medium-Term Note Program.
* Genting HK: subsidiary Star Cruises says it plans to spend US$25m to refurbish the SuperStar Virgo
* Fortune Reit: agreed to buy two properties for HK$1.9b.

Wednesday, December 28, 2011

SMB United

SMB United: Still halted. Osaki Electric to make voluntary conditional offer at $0.40 per share. This is a 9.6% premium over last done and 25% higher than an earlier offer at $0.32 by Boer Power. Osaki has expressed the intention to privatise the co and delist it. Osaki has currently 37.1% of SMB United compared to Boer with 20.6%. As of last results, co had NTA of approx $0.29 per share


IEV: +1.0% at $0.495 with 25m shares traded, today's most active stock, after the recently-listed company says it's started a second turnkey decommissioning project for an oil and gas operator in Malaysia. UOBKH note that the contract is valued at MY12m and is scheduled to complete 1H12 and expects the project to generate net margin of 10.0% and account for 3.5% of its 2012 profit forecast, which it raises 4.0% to $13.9m.

Says orderbook stands at MY280m including this project. Add that in the coming years, expect hundreds of fixed platforms in Asia will be due for decommissioning, or disposal, as they approach their 25-yr design life.In view, IEV is well poised to benefit from an imminent wave of decommissioning projects given its strong track record and experience in the field having completed over 15 projects as a subcontractor. The house reiterates its Buy call with a target price of $0.63, which it nudges up from $0.59.

China Minzhong

China Minzhong: Xie Xuren, the nation’s finance minister, said China will waive VAT on wholesale and retail vegetables in 2012.
According to an article posted on the Ministry of Finance’s website,
- Business taxes on the service industry will be changed to a VAT system under a trial program
- The nation will also remove “unreasonable” and “illegal” fees on companies next year
- China will “suitably” increase the subsidies for agriculture and raise farmers’ income
- China to increase fiscal subsidies for basic healthcare insurance in rural and urban areas to Rmb 240 in 2012, up from Rmb 200 in this year
- China to increase incomes in rural and urban areas, particularly for lower and middle income groups

Technically, the stock has bounced of its record low of $0.665 and the indicators have just reversed out of oversold levels. In the near term, momentum may carry share price to the $0.835 resistance. Nevertheless, the stock currently remains in a longer term downward trend. Cut loss of stock breaches the $0.665 support.

SembCorp & Hyflux

SembCorp & Hyflux: Both co are reportedly in the running amongst other bidders for Oman’s latest US$350-400m Ghubrah desalination project. There are a total of 16 co which are competing to construct and operate the project. Water from the project is urgently needed in Oman and will be developed in 2 phases, phase 1 which will provide 30m gallons and is due to be completed by May 2013 and phase 2 for 12m gallons which will be completed by Apr 2014.

Sembcorp has prev experience in the region with the Fujairah project and is developing the US$1b Salalah project (partnered with Hyflux) as well. Hyflux is apparently bidding on its own for this time after building a prev desalination plant in Sg and is in the process of doing it.


M1: Trading Central has Technical Buy Call. Note that the upside prevails as long as $2.41 is support. Note however that the downside breakout of $2.41 would call for $2.35 and $2.32.
Add that the RSI is above its neutrality area at 50. The MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at $2.43 and $2.45).
Resistance at $2.61, $2.58, $2.54 and $2.47.

Fibrechem Tech

Fibrechem Tech: Still suspended. After 3 yrs of investigations by nTan, an unauthorized share transfer and $130m in missing cash. The discrepancies found led nTan to conclude it was over an extended period of time and questioned published financial statements over the yrs. Given the irregularities, nTan noted it would be reasonable to conclude that senior mgmt including the CEO and CFO were aware.

The co was suspended in Feb 2009 after auditors could not finalise its trade receivables and cash balances.

Hotel Properties

Hotel Properties: Subsi acquires 30% stake in a 77-room holiday resort Bilila Lodge in Tanzania for US$16.5m. Seller ASB Dev will hold the remaining 70% stake and both parties intent to jointly operate Bilila Lodge and to collaborate in future to own hotels in the Greater Indian Ocean and Africa geo area. As of 30 Nov, the NTA of the acq assets was approx US$40m. The price paid was approx 37.5% above proportional NTA (30% of US$40m). Hotel Properties' major sh/h and MD owns part of the subsidiary used for the acquisition. Co trades at current P/E of 5.3x. Peer Fragrance trades at approx 8.9x


Midas: Awarded 3 contracts worth Rmb142.2m. The 1st contract was for EUR7.2m for 371 train cars for the Sao Paulo project in Brazil which will be delivered progressively from 2012 to 2015. The 2nd contract was awarded by JV co Nanjing SR Puzhen Rail Transport Co for 144 train cars for Shanghai Metro Line 13. The 3rd contract was by CSR Zhuzhou Electric Locomotive Co for 150 train cars for Zhengzhou Metro Line 1. The two PRC metro contracts are expected to be completed by 2012 and to contribute positively in FY2011 and 2012. Midas currently trades at a P/E of 8.8x


Yingli: Announced that it has secured a land plot located along the Chongqing financial street in China for Rmb50.35m ($10.3m), excluding resettlement cost. The site measures 5,452 sq m and is situated beside the group's existing Wu Yi Road land bank. The two plots will be jointly developed as an integrated Grade A office and retail mall project, Chongqing Financial Street project.


Cosco: 51% owned subsidiary, COSCO (Dalian) Shipyard has secured a contract to convert one large crude carrier (LCC) to an FPSO for a Japanese ship-owner. The FPSO will have capacity of crude oil processing of 28.6k cubic m/day of liquid, gas processing & compression of 8m cubic m/day and a storage capacity of 1.6m bbl of oil and is designed to operate for 20 yrs without dry-docking. The FPSO will be deployed in the Cernambi – Sul Field, offshore Brazil. No contract value was disclosed.

Spore market

Spore market: muted trading likely to continue in this final trading wk of the year, as participants stay on the sidelines amidst the festivities.
The Nikkei is up 0.1%, while the Kospi is down 0.8% at 8.26am this morning.
With little direction coming from the US overnight and in the region, expect Spore shares to trade in a tight range with a slight negative bias. In the near term, see resistance at 2700, and support at 2650.

Corporate news flow remains thin.

* Cosco: secures contract to convert a large crude carrier to an FPSO

* Midas: announces 3 contracts worth a combined Rmb 142.2m

* Hyflux: injects 2 China water-treatment plants into its Galaxy NewSpringworth JV for US$41.2m.

* Hotel Properties: acquires 30% stake in a 77-room holiday resort Bilila Lodge in Tanzania for US$16.5m.

* Yingli: secures a land plot in Chongqing financial street for Rmb 50.4m.

* IEV: 30% associate commences RM12m project to provide turnkey project mgmt of a vent platform and associated pipelines.

* Pteris: secures a Rmb 16.6m contract from FedEx China to design and build a new parcel sortation system in Beijing Gateway at Beijing Capital Int’l Airport.

Tuesday, December 27, 2011

CapitaMall Trust

CapitaMall Trust: Morgan Stanley removes Ascendas REIT and replaces it with CMT in house Top SG focus list. Believes CMT’s defensive retail mall asset class will fare relatively well in a low economic growth environment. Retail malls, especially those located in the suburbs, have been more resilient through downturns, supported by domestic demand for necessities even through a recession.

Also believes that while CMT is a defensive stock, it should outperform peers on earnings growth. Meanwhile, the soft manufacturing trends and office outlook are likely to weigh on rents for A-REIT’s industrial properties and business parks even though the global macro risk exposure may be offset by long leases and value add from enhancement development work.

Tiger Airways

Tiger Airways: +4.9% at $0.65 in strong vol after the Straits Times reported, citing CEO Chin Yau Seng, the carrier expects its Australian operations to return to normal by mid-2012 and that it's making progress on Indonesian and Philippine ventures.

The report mirrors comments made by Chin in an interview with Dow Jones last week in which he also said Indonesia's Mandala Airlines, 33%-owned by Tiger, would resume flying in 1H12. Orderbook quotes suggest the stock is capped at its current level, also the intraday high; its month-to-date high of $0.68 may act as near-term resistance.


NOL: Trading central has a Technical Buy Call. Note that the upside prevails as long as $1.08 is support. Note that the RSI is above 50. The MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (standing respectively at $1.12 and $1.1).
Resistances are at $1.37, $1.32, $1.27 and $1.15. Support at $1.08 & $1.00.


Wilmar: may be in focus today after a series of corporate updates.
i) to acquire the remaining 1.61% stake in Wilmar China (WCL) from Kuok Group entities for HK$1.93 b (~US$250m). Recall that the Kuok Group entities had in Sep ‘09 acquired the same stake in WCL for the same consideration in anticipation of the WCL Hong Kong IPO. JPM notes the current transaction is meant to streamline Wilmar’s ownership structure in WCL since the IPO is no longer proceeding. Given the interested party transaction, believes the price tag may not be relevant nor indicative of WCL’s current intrinsic value, but says this suggests that a near-term spin-off of WCL would be unlikely.

ii) Wilmar also separately announced that it has, together with its JV partners – Kerry Properties (40%) and Shangri-La Asia (25%), decided to terminate their acquisition of the Laobian Project sites in Yingkou City, Liaoning Province, China and recover the deposits paid. The JV Co will still proceed with the Bayuquan District project in the same city.
JPM notes the terminated Laobian project is the bigger of the two property investments, max total invmt of ~US$1.1b (~US$396m by Wilmar). This compares with the Bayuquan project which has 3 sites for residential, commercial and hotel use and has a total gross site area of 200k sm with max total invmt of ~US$386m (~US$134m by Wilmar). Believes the move may be driven by risk management amidst weaker markets, which may lead mgt to refocus on its core agri-commodities business.

iii) According to an article by China Knowledge recently, Wilmar will invest US$208m to start a sugar and grain processing project in Dongguan, Guangdong Province. The project is designed to have an annual output capacity of 1m tons with products including wheat gluten, sugar substitutes and sugar syrup, which is expected to generate Rmb3.5b in operating revenue annually. It also reported that Wilmar will spend US$148m to build a 300 mu production base for fine chemicals in Dongguan. The base is estimated to have an annual output value of Rmb2.03 b.

iv) in an interview with Reuters, consumer pdt maker PZ Cussons updates on its partnership with Wilmar in Nigeria. Cussons expects a US$56m palm oil refinery JV to be operational by 3Q12, as part of its JV co with Wilmar to invest US$612m in Nigeria over the next 5-7 yrs to develop oil pallm plantations that will feed the refinery and reduce import bills. Cussons expects consumer spending in Nigeria to expand after reforms to the banking sector; adds sales grew 20% in the first quarter for the co, which has operated in Nigeria for more than 100 yrs.

Spore market

Spore market: likely to see muted trading in this final week of the year.
Not expecting big moves today, given lack of direction as the Hong Kong market remains closed.
Markets in the rest of the region are mixed, with the Kospi up 0.2%, while the Nikkei is down 0.3% at 8.20am.

Technically, Autochartist notes that the STI may rise. Says, after forming a closing price reversal pattern last week, the STI's chart pattern suggests a bottoming formation which often leads to a two to three week rally. Adds, the index may also be trying to form a secondary higher bottom compared with Oct 5's 2522 bottom, with a follow-through rally through last week's 2678 high key. But notes, the only way the index's main trend will turn upward will be after a breakout over 2793, the last swing top.

Stocks to highlight:

* Wilmar: announces related party purchase of remaining 1.6% in Wilmar China for HK$1.9b. Separately, the co, together with its JV partners, has agreed to terminate a land-use-rights agreement in Yingkou City, Liaoning Province; recall its entry into the property sector around a yr ago weighed its shares.

* STX OSV: signed a contract worth ~NOK 200m to build a forage carrier for Eidsvaag AS.

* SGX: to add 15 new ADRs to its int’l quotation board on Dec 29.

* Noble: Moody’s says it sees no ratings impact for the co from its agreement to sell stake in Gloucester Coal.

* China Minzhong: announces the official opening ceremony of its New Industrial Park in Putian City, Fujian Province. The facility has a processing capacity of ~3x Minzhong’s current processing capacity. The facility is expected to achieve full utilization within the next 3 yrs.

* Ultro Technologies: proposes acquiring LCCE for $100m.

* Pollux Properties: exercised option to purchase a Spore property for $25m.

Friday, December 23, 2011


Olam: Plans to acquire 75.2% interest in Macao Commodities Trading (MCT) which includes shareholdings in Solimar Food Ingredients (SFI) for €15m (approximately US$20m). The sale comes with the option to acquire the remaining 24.8% interest in 5 yrs time. MCT is a leading supplier of cocoa, coconut, fruits, fats and dairy products to downstream industries in the Iberian region (Spain). Solimar is a JV btwn MCT and Olam dealing with cocoa as well. Olam currently trades at 10.8x P/E. Noble is at 11.8x

Ying Li

Ying Li: Has announced the soft opening of its Yingli IFC mall in Chongqing. The mall has obtained occupancy of over 80% and features brands such as Gianfranco Ferre, Braun Buffel, Toni & Guy, Nike, Adidas, OSIM. Note that this has been a major dev of Ying Li with co stating in prev results that until development of IFC is completed, rev and operating profits were expected to be muted. With the launch, Ying Li will likely see rev figures improving. Co currently trades at 1.1x P/B.


SATS: Could see positive sentiment after it announced it has won its bid as the operators of the S$500m International Cruise Terminal (ICT). The bid was made in conjunction with its Spanish cruise terminal partner Creuers Del Port de Barcelona.

The SATS-Creuers consortium is a 60-40 joint venture, and the grp will operate the ICT on a 10yr lease, which could be renewed for another five yrs. The ICT will finish construction by this yr, and is expected to start operations in 2Q12.

Overall, stock remains supported by an attractive dividend yield of 5-6%, which is supported by healthy cashflow. On back of this, Nomura reaffirm Buy, TP $3.16 and expect a positive stock reaction.


KepCorp: Could see positive sentiment after announcing that it has secured a Semi-Sub Rig worth approximately US$809m from Sete Brasil. The rig is scheduled for delivery in 4Q15, and is primarily intended to support the exploration for Brazil’s offshore reserves, whereby Petrobras has long-term plans for $224 b in capital expenditure from 2011 to 2015.

The US$809m contract value is significantly higher than previous semisubs of around US$600m. However, the price probably reflects its enhanced capability, higher technical and safety requirements in the wake of the Gulf of Mexico spill, and potentially higher construction costs in Brazil.

We note that contract brings Keppel’s YTD orderwins to $9.8b, or US$7.5b and brings grp’s Orderbook to approximately $9.5b. Contract announcement highly positive for Keppel’s share price, given the dearth of new orders in recent mths and we do not rule out that it could potentially spur the beginning of renewed interests in semi-subs going into 2012.

Given that KepCorp’s Orderbook is standing at an all-time high, we note that its yards could be nearing full capacity and 2012 could possibly see SembMarine gaining momentum in orderwins if KepCorp turns down potential orders in wake of overcapacity.
On another note, based on our observation, KepCorp is the Top SGX Stock Pick among different brokerages for FY12, with 8 houses picking the stock as one of their Top Buys for 2012.


Noble: To lift trading halt at 8.30am.Gloucester has entered into a merger deal with Yancoal Australia. The merged co will be owned 23% by Gloucester Sh/h and 77% by Yanzhou . Noble, which owns 64.5% of Gloucestor, has stated that it would vote in favour of the proposal. Noble had also earlier stated it would retain a cornerstone stake and maintain marketing & trading rights over the coal output from the new entity. Noble’s stake in the combined entity will be 14.8% if fully converted with additional A$420m in cash consideration.

Gloucestor sh/h will receive a total of A$700m cash or A$3.20 per share (A$0.56 special dividend + A$2.64 capital return) in addition to a 1-for-1 share conversion into the new merged entity.

For the 1-for-1 share conversion, Gloucestor sh/h will have the option to
1) elect to receive all shares in the new co
2) obtain a combination of shares in the co and rights shares

The rights share will function like a capped put option, paying sh/h the difference of (A$6.96-strike) and 3-mth-VWAP 18 mths after the acquisition subject to a cap of A$3.00.

The deal is subject to approval by ASX and sh/h of both companies which is likely to go through.

Noble, on 27 Feb 2009, had increased its 21% stake in Gloucestor to 88% through offering A$7.00 per share then.


Noble: To lift trading halt at 8.30am.Gloucester has entered into a merger deal with Yancoal Australia. The merged co will be owned 23% by Gloucester Sh/h and 77% by Yanzhou . Noble, which owns 64.5% of Gloucestor, has stated that it would vote in favour of the proposal. Noble had also earlier stated it would retain a cornerstone stake and maintain marketing & trading rights over the coal output from the new entity. Noble’s stake in the combined entity will be 14.8% if fully converted with additional A$420m in cash consideration.

Gloucestor sh/h will receive a total of A$700m cash or A$3.20 per share (A$0.56 special dividend + A$2.64 capital return) in addition to a 1-for-1 share conversion into the new merged entity.

For the 1-for-1 share conversion, Gloucestor sh/h will have the option to
1) elect to receive all shares in the new co
2) obtain a combination of shares in the co and rights shares

The rights share will function like a capped put option, paying sh/h the difference of (A$6.96-strike) and 3-mth-VWAP 18 mths after the acquisition subject to a cap of A$3.00.

The deal is subject to approval by ASX and sh/h of both companies which is likely to go through.

Noble, on 27 Feb 2009, had increased its 21% stake in Gloucestor to 88% through offering A$7.00 per share then.

SG Market

SG Market: Spore shares may bring some cheer ahead of the X’mas holidays, in line with gains in regional markets and Wall Street's gains on better-than-expected US economic data. Technical analysis tips another quiet trading day, with the STI tucked in its narrow 2650-2680 range.

Noble Group is likely to rise on trade resumption after accepting a A$2.2b reverse takeover by Yanzhou Coal for its 64.5%-owned Australian subsidiary Gloucester Coal, which soared 22% on opening. KepCorp may also see gains after bagging a US$809m contract from Sete Brasil although sentiment may be bit dampened by the cancellation of bidding process for 21 rigs by Petrobras.

Thursday, December 22, 2011


Dynamac: - 3.5% at $0.41 after rising 7.5% Wednesday on winning a provisional $115m of orders for nine topside modules and pipe racks and one turret. AM Fraser note that while a significant win, it's not yet time to pop the champagne. Caution investors against over-exuberance like the last few times and getting swept up in a stock-price run unsupported by fundamentals.

Estimate the modules and pipe-rack orders at a combined $50m, making them small modules for Dyna-Mac. AmFraser views the stock as fairly valued after falling from astronomical peaks around $0.70 post-IPO, now trading at 3.0X P/B and 14.5X P/E vs industry averages of 2.9X and 15.1X respectively. But it's turned slightly more positive given high oil price and record global E&P spending. Keep a Hold call, raising its fair value to $0.44 from $0.38, after rolling over to FY12 forecasts. Orderbook quotes show buy orders clustered around the current level, indicating the stock may not fall further.

Silverlake Axis

Silverlake Axis: DBS has an unrated note on co. Silverlake Axis is a market leader in banking software with biggest customer base in Asia, thus it is not exposed to the multiple challenges of the European and US banks. Large order wins in FY11A is expected to keep the company busy for the next 3 yrs. The stock is defensive, with significant recurring revenue (40%+ of group revenue) and over 4% dividend yield.


SMRT: UBS maintain Neutral and reduces to TP $1.70 from $1.85.
Govt-commissioned Committee of Inquiry to examine SMRT breakdowns assume SMRT would incur a $2-3m fine due to the breakdowns. Expect a permanent increase in repair and maintenance expenses, due to more frequent and intensive checks on its 24 year old NSEW trunk line.

Over FY02-11, SMRT’s average maintenance expenses amounted to 9.2% of revenue from trains, buses and taxis. If it rises to 10%, it implies an annual FY13-15E EBIT impact of ~S$6.0-9.4m. cut FY12/13/14/15E EPS by 2.7%/3.5%/4.3%/9.4% respectively. Believe SMRT’s financial ability to maintain its absolute level of DPS is high, despite rising cost.


Ezion: IIFL maintains Buy. Note that lifted by liftboats, grp has doubled its Net Profit every year since its listing in 2007. Likely to register stable earnings growth (consensus estimate of 28% CAGR over FY11-13) with 20%+ ROE, as nearly all its liftboats are under long-term contracts and 70% of the logistical and support services fleet is also under longtime charter. Valuation appears reasonable at 5.1x FY12 PE.

Nam Cheong

Nam Cheong: Secured a sale contract worth RM84m (approx $34.3m) for one unit of 300 men Accommodation Work Barge. This is a new order secured from CNN Capital (L) Bhd and is being built at one of the Group’s subcontracted yards in China. The 100 meter-long AWB will have the capacity to accommodate 300 men and be equipped with an 8-point mooring system and a 68-tonne crane.The AWB is scheduled for delivery in the second quarter of 2012 and will be deployed to serve the top side maintenance, hook up and commissioning of an existing oil platform within the Malay basin in the shallow water region. This boosts YTD contract wins to $309m, above the $206m last yr. Nam Cheong trades at 9M annualized P/E of 7.1x

Wee Hur

Wee Hur: Won the tender for a 99-yr land parcel located at Punggol for $206.2m. This is co’s first successful tender of land for residential property dev. The land parcel is abt 18k sq m and comes with a maximum GFA of 54.1k sqm, which can yield between 550 and 600 condo units. Cost is approx $354.4 psf The Group intends to launch this property dev in 2H2012. It is located adjacent to Punggol Town’s transport hub comprising Punggol MRT & LRT stations and bus interchange, also surrounded by other amenities such as schools and a future shopping mall. Wee Hur trades at approx 7x current P/E. Peers Lian Beng currently trade at approx 3.1x and Lum Chang at 6.6x.


STE: Announced that it has entered into an agreement with Pratt & Whitney to invest in a 50.1% stake in EcoServices, for a purchase consideration of US$33.3m, where Pratt & Whitney will retain the remaining 49.9% stake. Under this agreement, EcoServices will provide EcoPower® Engine Wash services to customers around the world.

The investment is not expected to have any material impact on NTA and EPS of STE for FY11, but is in line with the ST Engineering’s plan to develop engine total support capability, to address customer and mkt demands.


Noble: According to Australian Financial Review reports which cited unindentified sources closed to Noble, Noble is willing to sell most of its 64.5% stake to Yanzhou Coal, reducing odds of competing bids.

Source added that Noble is said to consider retaining cornerstone stake and wants marketing & trading rights over coal output from new entity, while Analysts say shareholders may get cash and shares in Australian unit Yancoal, with Yanzhou to control 60%-70% of the new co.

Noble could remain suspended until the close of trading on 22nd Dec, after Gloucester Coal request that ASX extend the Co’s suspension till 22nd Dec, in connection with a potential merger proposal with YanZhou Coal.


CWT: Announced that it is open to buying MF Global assets in SG, to boost its foray into financial services. While this is not a new area that they're going into, financial services represents only a small fraction of CWT's business, and Kim Eng do not expect any acquisition to be material at the moment.

CWT began its foray into financial services in Nov10 with the formation of Straits Financial to begin clearing futures and derivatives trades for clients in US, with plans to expand those activities into Asia, and Straits Financial has been actively growing its footprint.

We note that Straits Financial has already taken advantage of the collapse of MF Global, whereby Co. has hired eight former MF Global employees in the US since its collapse. While such a deal does provide an interesting outlook for CWT, we note of certain questions which investors will be pondering upon in light of the latest deal:

1) Will CWT be taking on more risky/speculative trading activities going forward? (Recall Noble’s 3Q11 loss)
2) Will CWT be able to adequately compensate their commodities traders as opposed to the major Banks/Commodity houses?
3) In an industry where financing and size plays a very important factor in maximizing margins, CWT’s much smaller size/balance sheet could place it in a detrimental position (in terms of DD and SS flows) when competing against much larger peers?

SG Market

SG Market: Spore shares are likely to slip, tracking losses in regional markets and directionless Wall Street. Immediate support seen at 2640 area, with the next major support at around 2600, while upside resistance is at 2680.

Oil-related plays such as SembMarine and Ezra are likely to get support after oil prices jumped on Wed. Retail and office REITs, such as CapitaMall Trust and K-Reit may face pressure after the BT reported retail rents are likely to stay flat and office landlords are sweetening deals. Noble Is said to have given nod to Gloucester-Yanzhou deal, while CWT may acquire MF Global’s Spore unit after hiring a number of staff.

Wednesday, December 21, 2011

Keppel Corp

Keppel Corp: Kenai Offshore Ventures (KOV), A 50/50 JV between Australian explorer Buccaneer Energy and Ezion Holdings has enlisted Keppel Fels to carry out repair and modification work to its recently acquired jack-up rig Endeavour. No financial detail on the contract size was given.

Endeavour is currently in dry dock undergoing the 1st stage of the work, which will be completed in the next 10 days. The 2nd stage will commence in Jan and will involve upgrades to the accommodation quarters, blasting and painting of surfaces, winterising, and refurbishing of tanks and piping systems. The rig is expected to arrive in Alaska’s Cook Inlet by Apr/May next year.


OSIM: The steady and frequent share buy-backs are likely supporting the price especially since volumes are also relatively low, the buybacks make up a higher % of daily volume. Counter is currently trading at resistance lvl of $1.10 and looks set to trade higher with indicators still positive. See nxt resistance at $1.20 lvl. Support at $1.05.


IEV: Follow Up. +10.3% at S$0.43, extending Tue's 2.6% gain after it announced late Mon it received a supply and installation contract from a major oil and gas operator with a MYR262m combined value. UOB KayHian says the contract increases IEV's orderbook more than eightfold. House increase FY12 net profit forecast 40.3% to account for larger-than-expected contract wins, forecasting a MYR18.8m contribution from the contract, or 57.5% of its revised estimate.

Note that IEV plans to move up the value chain by bidding for higher value projects, while expecting it to benefit from increased offshore capex. IEV is set to become one of the regional pioneers in rig re-use services, providing a quick and low cost option for producers to commercialize marginal oil fields. House expect these developments to ramp-up in the region.
Overall maintains a Buy call, raising its target to $0.59 from $0.51 and tip a successful break above $0.43 may indicate further upside toward $0.47, with immediate support at $0.37.

SMB United

SMB United +10.9% to $0.355 in relatively high volume, after disclosing that a 3rd party has expressed interest in acquiring the company, which may top the current takeover bid by Profit Sea Holdings, which is wholly owned by Boer Power (1685.HK). The SIC has ruled that the unnamed 3rd party must announce its intentions no later than Jan 10.

Meantime, SMB's board had advised investors to reject Profit Sea's takeover bid on the basis that the $0.32/share offer failed to reflect the financial position and growth profile of the company and undervalued the stock. The deadline for acceptance of the Profit Sea bid has been extended to Jan 20. As of 19 Dec, Profit Sea had obtained acceptances for 20.6% of SMB's outstanding shares. SMB's directors collectively hold approximately 24.4% of the shares. The NAV of the stock stands at $0.303 as of Sep 11.

HPH Trust

HPH Trust: DBS maintains Buy but lowers to TP$0.85 from US$0.95. Throughput at Yantian is currently up 0.3% yoy. House est 2.3% growth for US GDP and 0% for Eurozone in 2012, hence volumes in HK and Yantian are expected to show modest growth and not decline in 2012. With strong operating profit margins and cash flows, HPH Trust is expected to payout 6 US cents in div nxt yr which is not lower than 2011. At current prospective yield of 10%, house believes co is undervalued.


Yamada: Has purchase non-matured eucalyptus plantations and forestry land use rights from 4 villagers' committees and several individuals in Zhangping City for Rmb131.7m ($27.1m). The property has remaining tenures from 32 to 43 years and a total land area of 20,936 mu. The eucalyptus plantations are expected to mature for harvesting from 2014.
The above transaction is not expected to have a material impact on grp’s EPS and NTA for grp’s FY12 June financial performance.


GMG: Details for JV investment in Ivory Coast co ITCA announced on 15 Dec. Acquired assets are independently valued at US$6.8m. Co is paying US$2.8m for 60% of the assets which is a 31.4% disc. GMG will also provide expertise in mgmt, procurement and mkting. GMG is currently trading at 8.4x and is at a YTD low partly due to dilution from a rights issue just completed this month.

Positive divergences spotted which may indicate a short bounce, MACD also moving into positive territory and ADX is starting to peak. Despite a possible bounce, LT technicals are still negative with lower lows made even after the rights issue.


Dyna-Mac: Secured orders of $115m has signed LOIs with leading operators of FPSO vessels, including Modec, Bumi Armada Berhad and SBM Offshore, for the fabrication of nine topside modules, nine piperacks and one turret. The projects are expected to be completed progressively by the end of 2013. Co has boosted its order book to a value of $190m as at to date. Co’s FY2011 Jun-end rev was at $167.9m.


NOL: Announced that it has joined 5 other lines to form one of the most extensive vessel networks in the world, the G6 Alliance, which will operate in the busiest Far East-EU trade lanes when it begins in Apr 2012. The G6 will have 90 ships employed in 9 services and will call at >40 major Asian, EU and Mediterranean ports.

Members include Hyundai Merchant Marine, Mitsui OSK Lines, Hapag-Lloyd AG, Nippon Yusen Kaisha and Orient Overseas Container Line. Analysts highlight the G6 Alliance, and others before it, will help freight rates recover in 2012.
We note that such a move also could enable the respective mkts to gain mkt share, in an industry where size matters and we do not rule out the possibility of more consolidations and alliances going forward.

Macquarie believes the 6 operators can now better compete with Maersk and MSC/CMA CGM on the Asia-Europe trade lane. However, don’t see a material improvement in rates for the near term, and until there are signs of more fundamental changes through increased lay-ups, scrapping, order cancellation or better end-market demand. Expect the shares to be range-bound. Month-to-date high of $1.18 may act as a near-term cap.

SG Market

SG Market: Spore shares are set to rise with Santa in the house, judging by US and European markets' rally last night with no bad news from Europe and US housing starts giving some grounds for optimism. But investors are unlikely to pay too much attention in the last few days of Dec given the thin trades that can accentuate volatility. The STI faces strong resistance at 2679, while 2600 provides a key support.

NOL may rise after its container shipping unit APL joined 5 other shipping lines to create one of the largest vessel networks in the Far East-to-Europe trade lane. SingTel may also be in focus after it announced the commercial launch of its 4G service. Offshore player Dynamac also won $115m contracts with leading FPSO vessel operators Modec, Bumi Armada and SBM Offshore.

Tuesday, December 20, 2011


GLP: DBS issues note maintaining Buy but increases TP to $2.31 from $2.29 on JV acquisition of Japanese assets. House is of view this demonstrates GLP’s ability to find high quality JV partners as well as both increase its presence in Japan and build its income source. Price acquired was 7.5% below independent valuation. Its attributable GFA is est to expand to 9.7m sqm valued at US$10.8b with 70% of value in Japan. GLP’s longer-term strategy is to lower exposure in Japan by either spinning off its assets to a J-Reit or sell and recycle capital into China.

This new acquisition is expected to boost FY13F earnings by 13%with potential for organic growth and redev opportunities. GLP’s see through gearing is expect to rise from 23% to 25%. House increases TP based on revaluations (parity to RNAV).


Goldtron: Substantial sh/h Prospect China has reduced its stake from 5.67% to 1.15% in a married deal, selling 260m shares.

IEV Hldgs

IEV Hldgs: 30% associate IEV Msia has been awarded a RM262m ($107.8) contract from a major oil and gas operator in South East Asia. The project included the design and production of a wellhead platform and installing a pipeline and host tie-in to existing offshore production facilities. The project will be executed in a strategic alliance partnership with a USA engrg co. Co expects project to commence in Dec 2011 and to be completed by end 2012. IEV trades at current 7.4x P/E with current mkt cap of 64.5m

Tiong Seng

Tiong Seng: Announced that it has secured a residential contract worth $151m. Under the contract, Tiong Seng will develop a 17,700 sqm site with GFA of 53,100 sqm and will comprise a total of 622 homes. This is Co’s second contract win in a span of three wks (Previous contract at $189.5m)

Ytd Co’s contract wins amount to about $632m and includes developments such as Waterway Terraces I and II and The Glyndebourne. Latest win brings grp’s orderbook to approximately 1.3b vs 9M11 Rev of $272.7m, underpinning earnings visibility for the next 3-4 yrs.

Parkson Retail

Parkson Retail: IIFL recommends Reduce with $1.05 primarily due to rich valuations. Note that grp has entered Indonesia market in June 2011 with the acquisition of PT Tozy Sentosa.

After this acquisition, the Indonesian business is estimated to account for 11% of sales and 8% of NP in the current year. The acquisition is a game changer and will provide PRA a beachhead in Indo’s rapidly growing market. Indo’s US$2.8b department store market is expected to register 10.7% CAGR over 2011-15.

SembCorp Marine

SembCorp Marine: Announced it has won a US$140m contract from Equinox Offshore to convert a ropax vessel to an Accommodation and Repair Vessel. Vessel is expected to arrive in the shipyard in Jan12 for the conversion and modification works, which is scheduled for completion in 4Q12. We note that latest wins brings Ytd Order wins of S$3.9b, while orderbook now stands at approx.S$5.75b.

On another note, grp has marked an important milestone in its growth and expansion strategy with the ground breaking of Estaleiro Jurong Aracruz, the Group’s first overseas Integrated New Yard Facility in Brazil. The construction and develop incorporated new Brazilian shipyard is in-line with grp’s strategy to further strengthen its foothold in Brazil.

DMG maintains Buy, and increase TP to $5.25 from $5.16. Note that more orders; 4Q11 order win more than S$1.1b. Add that grp has strong revenue visibility for FY12 as 79% of revenue forecast is backed by existing order book and recurring ship repair work.

Nomura similarly reiterate Buy, TP $4.50, Ordering activity still going strong. Believe the current order along with the US$292mn contract from Prosafe last wk is indicative of the strength in demand for deepwater exploration, production and accommodation units.


GLP: Announced that it has entered into a 50:50 JV with China Investment Corp, to acquire 15 modern logistics facilities in Japan from LaSalle Investment Mgt for US$1.6b. Entity will see equity injection by each party at US$272.9m, which GLP will fund via internal resources. Remainder funded by bank borrowings of US$1.04b, at a 1.5% interest rate for 5 yrs. GLP will be asset manager of acquired properties.

The 15 properties have GFA of 770,989 sqm with more than 90% located in Tokyo and Osaka. Occupancy of the properties is 98.3% with a WALE expiry of 5.6 yrs. After acquisition, GLP’s Jap portfolio will grow 30% to 3.6m sqm, 40% larger than the 2nd largest competitor (Prologis).

Assuming transaction was completed on 1Apr10, acquisition would have lifted FY11 Net Profit by US$38m, while equity portion of transaction represents less than one yr of GLP’s operating cash flow created by its Jap operations. GLP’s current Leverage Ratio stands at 23%, with a cash balance of US$1.7b suggesting ease of funding the transaction.

We note that acquisition is GLP’s first collaboration with CIC and not only prevents GLP from overstretching its balance sheet, but also represents future collaborations with CIC within China. Mgt has further cited that as GLP continues to grow its fund management platform in Jap, it will look towards the monetization of its assets.

Note however that analysts are not seeing the acquisition as a big positive, just a marginal one, given pricing is fair, but all agree that the partnership with CIC is positive. Orderbook quotes suggest it may open around $1.65; the psychological $1.70 mark may offer resistance.


Noble: 64.46% owned Gloucester Coal has been approached by Yancoal Australia (a unit of China’s Yanzhou Coal Mining) to form a merger which will result in a combined value up to A$8.0b. The acquisition price is purported to be approx A$2.0b, a 43% premium to Gloucester’s mkt cap. Gloucester last traded at A$7.03 with total mkt cap of A$1.4b and has fallen 43.1% YTD. As of now no official details or pricing has been revealed.

Yancoal Australia is required to float at least 30% of its Australian assets by 2012 after acquiring Felix Resources in 2009 and was considering a reverse take over to fulfill the requirements. Yancoal Australia is currently privately held. Its parent, Yanzhou Coal Mining is listed in HK.

Gloucester has issued a statement to ASX requesting a trading halt until 22 Dec, Thursday in relation to a possible control transaction with no other official details. Noble’s shareholders had earlier in Apr voted against a merger bid by Macarthur Coal. The avg premium paid globally for coal assets this yr is 19%

SG Market

SG Market: Spore shares Singapore's STI are likely to drift on light volume with most investors closing their books as the year-end holidays approach. Nothing has changed in Europe where the worry remains. Concerns are compounded by uncertainty in the Korean peninsula.

With technical indicators entering the oversold territory, the STI may see a shallow bounce near the 2600 support towards the 2640-2650 resistance zone.

On the corporate front, SembMarine landing a US$140m contract is mildly positive, taking its total orders secured this year to some $3.9b. GLP is likely to get support after announcing a JV with China sovereign wealth fund CIC to buy 15 Japanese properties for about US$1.6b. Banks may fall, tracking losses in US counterparts.

Noble may see some interest on reports that China's Yanzhou Coal is in preliminary discussions with its 64.5% owned Australian unit, Gloucester Coal to create a US$8b coal giant by merging their Australian assets. Trading in Gloucester Coal is halted till 22 Dec.

Monday, December 19, 2011


AIMS REIT: See support at the $0.90 lvl. Indicators are bearish, with no sign of reversal yet with Stochastics trading in oversold region and RSI close to the 30 lvl. Trend looks to continue with 2010 lows at $0.91.

Co has a 10.8% indicative yield, trading at current P/B of 0.7x with a WALE (weighted avg lease expiry) of 2.8 yrs and occupancy of 98.8%. Majority of leases are due in FY2013.


AusGrp: Has acquired Sg-based priv co Subsea Pressure Controls for $5.0m and additional $3.8m earnings based consideration over the nxt few yrs, bringing the purchase price to $8.8m. Subsea Pressure Controls was formed in 2009 to provide manufacture, repair and rental services to the oil and gas industry across Asia. Ausgrp is currently trading at 7.3x P/E.


Centillion: Proposing a 1 for 1 rights cum warrants issue to raise $25.4m. It will issue up to 8.5b rights share at 0.1c each with 1 warrant attached to each rights share at 0.2c per warrant share. A total max of $25.4m will be raised and 60% of proceeds will be used for expanding the business with remainding 40% for general working capital. Approval for this issue will be sought through a EGM for shareholders.

Co’s shares last traded price was at $0.002 or 0.2c. Co’s currently has 8.3b shares outstanding. Note that, Centillion has posted losses for 3 consecutive yrs.


Olam: Likely to outperform the broad market after announcing early Monday the completion of the acquisition of the entire equity of the Progida Group for about US$38m. The acquisition includes an ingredients processing facility in the Giresun region of Turkey with a total capacity of 40,000 metric tons of kernel per annum and two leased cracking units in the Ordu region, a key hazelnut growing region in Turkey.


DBS: Begins tapping US$ commercial paper mkt through set up of US$5b facility to diversify its non-SGD funding sources. The facility which is a first for DBS to tap the USD short-term commercial paper mkt, helps to diversify its non-SGD funding sources.

The US commercial paper programme allows DBS to further diversify its funding sources into the US market and modify the tenors of its liability base for liquidity mgt. View is likely positive, as Asian banks such as DBS steps up their trade financing business which is denominated in USD as traditional players like EU banks who are facing capital constraints, retreat from the mkt.

As a gauge, DBS' group loan-to-deposit ratio is 62% so it swaps surplus SGD deposits for foreign currencies when needed, vs its US dollar loan-to-deposit ratio was 171%. DBS already has a longer tenor US$15b program and a US$5b euro program. The program has been rated A-1+ by S&P, P-1 by Moody's and F1+ by Fitch. We do not rule out a move by local banks (OCBC and UOB) to follow such a move soon.


Hi-P: Caution, note that major client RIM plunged 12% in US Trading after announcing that the BlackBerry 10 smart phones will be delayed till the later part of 2012. Analysts see a high risk that this is too late to turn around RIM's position. RIM has been counting on the new QNX operating system to make up ground lost to Apple iPhone and iPad and the slew of devices that use Google Inc's Android software.


SMRT: Likely to see negative sentiments following its series of train disruptions the last few days. Note however that overall fines and costs are likely to be negligible, as under the Rapid Transit Systems Act, the LTA can fine rail operators up to $1m if service disruptions are found negligent. Refunds to passengers and the cost of the ‘broken window’ will be min compared to SMRT's earnings.

Although at this point of time, LTA also has to take into consideration public sentiment at the moment, and whether SMRT will need to make a massive overhaul. Even as SMRT tallies up the total cost, economists believe that the emotional and social costs borne by the passengers affected are bound to be hefty.

Friday, December 16, 2011


Hyflux: CIMB Technicals notes the trend is down as prices are still stuck within its downtrend channel. All three moving averages are still easing and with prices sitting at its new 52-week low; expects lower prices ahead.
Sees mixed signals here on its indicators as its MACD is still showing a potential for a triple bullish divergence but its RSI does not show any bullish divergence. However, with both indicators in sell mode, expects weaker prices ahead.
Continues to look for support levels around $1.00 and $0.97 to be tested soon. As there is a potential for a triple bullish divergence on its MACD, would stay alert for a reversal pattern.
The confirmation that the trend has changed would come from a breakout above $1.22.
Following resistance is at $1.31 (50-day SMA) and $1.47.


Sakari: Credit Suisse maintains at Neutral, but slashes TP to $2.30 from $3, valuing the stock at 12x P/E assuming benchmark coal price of US$115/t, and 9x P/E assuming benchmark price of US$128/t. Says base case is the latter, with forecasts FY12e at 10% below consensus. Cut FY12e EPS forecast for Sakari by 12%, with 5% cut in Jembayan sales volume and higher strip ratio assumptions for Sebuku. Says forecast in FY11e is unaffected by the collapse of the bridge and lower JBY sales, which are offset by higher SBK volume. Expects further downgrades in consensus forecast but sees strong yield as cushion.

HPH Trust

HPH Trust: Citi looks at Nov operating data at HPHT’s ports.
Notes, with throughput volumes at COSCO-HIT down 17% YoY in Nov, volumes at HIT likely also declined sharply (COSCO-HIT has comprised 19% of total HIT volumes YTD). Assuming a 17% YoY decline at HIT in Nov (which would be the largest YoY decline since Oct ‘09), estimates throughput at the port is now tracking up just 3% YTD.
Notes also, Nov throughput volumes at Yantian declined nearly 4% YoY and remain flattish YTD. Meanwhile, COSCO Pacific’s volumes in Bohai Rim and the Yangtze River Delta, improved 9% and 8% YoY in Nov, respectively.
Says, with roughly 20% of Chinese exports destined for Europe (and another 18% to the US), end-market demand is likely to remain under pressure heading into 2012. Maintains tepid volume growth forecasts for FY12/13 of ~4% as we expect global growth to remain weak and cautions HPHT may continue to cede share to other regional ports.
The house keeps at sell with TP US$0.55.


SMRT: opens down 1.1% at $1.79, compared with the STI's modest 0.4% bounce. An analyst with a local brokerage cites a "knee-jerk reaction" after severe disruptions on its North-South MRT line Thursday evening. The disruption came on the heels of Wednesday's Circle Line disruption. The analyst notes the Land Transport Authority has got quite serious about the problems; SMRT may face punitive actions, such as fines. In addition, SMRT faces a public-relations headache after the company sent text messages to its taxi drivers, alerting them of the disruption and calling it an "income opportunity," even as some customers' ire over recently increased taxi fares has yet to die down; the Straits Times reported that an SMRT spokesman, when contacted about the message, said "we are sorry for the oversight. Our staff were using a template message, and we have since corrected it." The stock's November low of $1.76 may act as a support.


Singtel: Divested its entire 40% stake of 10m shares in priv coTeletech Park to Ascendas Land for approx $15m. Co will book a gain of $4m on the book value of the shares that were $11m. Price was taken after considering Telepark had a NTA value of $26m and adjustedfor the value of invt property but may be subject to a post-completion adj if audited NTA differs. Singtel is now trading at 13.0x P/E with yield of 5.1%, compared to Starhub at P/E of 16.4x with yield of 6.9%


UOL: will buy a residential property in eastern Singapore for $172m and redevelop the land for housing uses.
Its wholly owned unit Flamegold has exercised an option to purchase the St. Patrick's Garden property, located on a 137.6k sf freehold land site. UOL said the acquisition will allow it to replenish its residential development land bank, and intends to finance it with internal resources and bank borrowings.
UOL closed up 4.8% yday, vs the STI’s 1.4% decline.


SIA: Nov operating data shows further weakness.
Pax traffic fell 3% y/y in Nov vs 1% y/y growth in Oct and 2% growth y/y ytd. On
a m/m basis (adj. for the shorter month in Nov), traffic fell 1%, weaker than normal seasonality. SIA’s Nov daily pax traffic tended to be 2% higher m/m on avg in the past 22 years.

Passenger load factor (PLF) fell 4ppts y/y, 2ppts m/m to 75%. This was slightly higher than SIA’s avg Nov PLF of 74% in the past 22 years. PLFs fell in all route regions with the largest decline on American routes, down 6ppts y/y to 73%, followed by 4ppt declines on N & SE Asian and W Asia/African routes to 79% and 70%.

SilkAir’s pax traffic rose 8% y/y, 13% m/m. PLF fell 3ppts y/y but rose 5ppts m/m to 79%. PLF on N & SE Asian routes was 79% (-3ppts y/y, +3ppts m/m). PLF on W Asian routes fell 1ppt y/y but rose 11ppts m/m to 80%.

Cargo traffic rose 1% y/y in Nov, better than its 2% decline in the past few months, raising ytd growth to 2%. On m/m basis, traffic rose 1% but was weaker than normal seasonality. In the past 22 years, Nov daily cargo traffic tended to be 4% higher m/m. Cargo traffic grew 6ppts less than cargo volume carried (+7% y/y) which suggests regional trade was stronger than long-haul.

Cargo load factor (CLF) fell 1ppt y/y, 2ppts m/m to 64%, lower than its Nov avg of 69% in the past 22 years. CLFs fell the most on W Asian/African and European routes, down 3ppts y/y to 61% and 72%, followed by 2ppts y/y decline on N & SE Asian routes to 58%.

Separately, IATA notes “it is probable there has been (some) substitution from premium travel to economy as businesses cut costs. This changing seat class mix will undermine yields. Moreover, stagnant int'l trade and declining business confidence points to further weakness in business travel. Given that jet fuel prices have not fallen from 3Q11 levels, this implies 4Q11 will be more challenging for airline profitability than 3Q”.
SIA, which has substantial exposure to corporate travel, is likely to be affected.

SG Market

SG Market: Spore share get a little bounce with some relief coming from the better-than-expected Wall Street performance overnight and in line with modest gains for regional markets but gains are likely to be capped. Resistance for STI still seen at around 2670 with support at 2600.

Singapore Airlines may not react too strongly to news its Nov passenger load factor slipped to 75.2% from 78.9% a year earlier with pax traffic growth down 2.6%. SMRT may fall in a knee-jerk reaction after severe disruptions on its North-South MRT line on Thurs evening after Wed's Circle Line disruptions. Oil-related shares, such as Noble and SembMarine may also face continued pressure after oil futures ended Thurs at 6-week lows.

Thursday, December 15, 2011

HL Asia

HL Asia: CIMB upgrades to Neutral from Underperform as its valuations are near global financial crisis troughs after its recent retreat. "But pending evidence of mgt's success in turning around the group, it is difficult to envisage further upgrades." CIMB cuts its target to $1.60 from $1.66 after trimming its FY11 estimate on further losses at fridge-making unit Xinfei and after applying a bigger valuation discount to engine-making unit Yuchai. It notes new mgt rolled out a slew of initiatives to return Xinfei to profitability; "we are heartened but do not think there will be a quick fix. Xinfei's deteriorating competitive position, higher unit costs and the expiry of rural subsidies in three key Chinese cities (40% of sales) compound the uphill task." CIMB expects Yuchai's diesel engine sales to remain sluggish in FY12; it notes the unit contributes about half of HLA's earnings, but views it as unlikely to offset Xinfei's losses. The stock is down 1.3% at $1.50.

CNMC Goldmine

CNMC Goldmine: the Catalist-listed gold miner is flat at $0.46, outperforming the STI's 1.5% decline as well as much sharper falls in regional gold stocks, as the company reported that net losses narrowed in 3Q. For the third-quarter, CNMC reported a US$136,439 net loss, compared with a US$522,808 net loss a year earlier; it reported a net loss on foreign exchange of US$183,813 for the quarter. The company didn't immediately respond to an inquiry on whether the loss was realized or due to mark-to-market accounting. The stock remains above its Oct. 28 IPO price of $0.40 a share, but well off its opening day high of $0.67. The stock may may face pressure, with spot gold trading at US$1,566.70 a troy ounce, down $9.80 from its previous close after falling 3% Wednesday amid a commodities selloff.


Telcos: More competition coming in the way for the local telcos after Australian telecom operator Telstra Corp received new operating licenses in Spore and Japan, allowing it to own infrastructure facilities and provide services to customers in both countries. Financial details were not disclosed.

In Spore, Telstra will open and operate voice and data networks locally that will allow the company to build the local backbone required for new cable submarine capacity to Spore.

SingTel -1.3% to $3.11, StarHub flat at $2.89, M1 -1.6% to $2.42


CNMC: Co posted rev of US$2.0m tenfold yoy compared to 220k last year Sep-end. Net loss of US$84.3m, an improvement compared to last yr’s net loss of US$603.7k. This is co’s first reported results since recent IPO.


Equation: Co's 67.3% owned subsi DiSa Digital Safety GmbH has signed two agreements with ALDI GmBH Co & KG and Radio City KG, franchisee of Medi Max to launch DiSa's Anti-Theft System in the German mkt. No amt was mentioned but ALDI GmBH has over 4k stores in Germany and 1.1k stores in US and Medi-Max over 110 outlets in Germany. DiSa is in stages of finalising technical details for the installation of DiSa's systems in ADLI stores. DiSa GmbH currently acts as the technology, service and marketing centre for the Equation group in Europe and deals mainly in anti-theft systems. However Equation has posted net losses for 3 consecutive yrs.

Sing Holdings

Sing Holdings: To acquire all strata lots from 2-8 Robin Robin Rd at $52.0m. Purchase is subject to approval by authorities and co obtaining a qualifying certificate. The acquired property together with 1,3,10-12 Robin Rd will have a total GFA of 12.6k sqm including a 10% balcony area. The total purchase price for all the site will be $176.3m. The parcel will allow more flexibility in design and layout. Co expects to fund this through internal funds and borrowings. Co is trading at approx 0.74x P/B.


Biosensors: CS reassumes coverage on Biosensors with Outperform and TP$2.00 up from $0.80 (in May 2010). House is of view adoption of proprietary BioMatrix drug-eluting stents (DES) places Biosensors on a rapid growth curve in emerging mkts, with significant upside supported by
(1) strong licensing revenue growth from the Japan market after the May launch (fig below),
(2) faster market share expansion in emerging markets such as China, and
(3) new product launches

Value is under-recognised as it is not only a leading cardiac DES player with value in its proprietary technology including polymer, coating, drug, stent, catheter to delivery system, which are core fundamental technology transferable to penetrate intl medtech mkts (other non-DES types in fig below). Also with Weigao as its largest shareholder diversification into other medtech products shld accelerate.

China-listed peers trade at 16.7x 2012E EPS and PEG of 0.9, approx 20% growth CAGR but Biosensors is trading below 10.5x FY12E EPS. With PEG of 0.3 implying 32% growth. House values co at 15.5x FY12E EPS and PEG of 0.5x


Biosensors: CS reassumes coverage on Biosensors with Outperform and TP$2.00 up from $0.80 (in May 2010). House is of view adoption of proprietary BioMatrix drug-eluting stents (DES) places Biosensors on a rapid growth curve in emerging mkts, with significant upside supported by
(1) strong licensing revenue growth from the Japan market after the May launch (fig below),
(2) faster market share expansion in emerging markets such as China, and
(3) new product launches

Value is under-recognised as it is not only a leading cardiac DES player with value in its proprietary technology including polymer, coating, drug, stent, catheter to delivery system, which are core fundamental technology transferable to penetrate intl medtech mkts (other non-DES types in fig below). Also with Weigao as its largest shareholder diversification into other medtech products shld accelerate.

China-listed peers trade at 16.7x 2012E EPS and PEG of 0.9, approx 20% growth CAGR but Biosensors is trading below 10.5x FY12E EPS. With PEG of 0.3 implying 32% growth. House values co at 15.5x FY12E EPS and PEG of 0.5x


GMG: announces two new JVs to expand natural rubber processing capacity in the Ivory Coast.
i) JV with Mr. Joseph Desire Biley (JDB) to develop a 30k mt natural rubber processing factory in Aboisso. The initial sh/h proportion will be 75/25 split btwn GMG and JDB. It is intended that JDB will subscribe for further shares in the JV for each of the first 3 consecutive anniversaries such that the sh/h proportion becomes 60/40.
ii) to subscribe in new shares worth US$2.8m, for a 60% stake in Ivoirienne de Traitement de Caoutchouc (ITCA), which was established to undertake the operation of a 20k mt natural rubber processing factory in Dabou. Fonds Interprofessionel de Solidarite Hevea (FISH) will own the remaining 40%.
The investments will be funded from internal resources.
Earlier this wk, GMG’s subsidiary struck a US$410m deal with Cameroon’s govt to develop 45.2k ha of palm oil and rubber plantations.
Post rights, GMG has fallen by <20% since going XR.
The stock trades at 8.9x P/E, 1.4x P/B.


SMM: may outperform relative to KEP today, after announcing a contract worth US$291.6m to build an accomodation semi-sub rig for Prosafe. The vessel will be delivered in 2Q14. The contract comes with options for two more units.

The semi-sub has a capacity for 450 persons and will be equipped with DP3 systems, to work in harsh environments alongside various fixed and floating platforms. Such rigs are used to provide additional living quarters for offshore personnel, primarily during hook-up and commissioning in the development phase, as well as for maintenance and upgrading during the production phase.

This contract brings YTD orderwins for SMM to $3.7b, compared to KEP’s $8.4b as at end 3Q. SMM appears to have followed KEP’s footsteps with regards to customer payment terms, ie. 20% initial deposit and 80% payment on delivery. This may have helped SMM secure a new customer in Prosafe.

The stock trades at 10.3x P/E.
DMG reiterates Buy with TP $5.16.

Rig builders

Rig builders: Spore O&M names likely to see weakness today, after Chevron and Transocean declined 2.9% and 3.9% last night in US trading.
Brazilian prosecutors urged a federal court to halt operations of Chevron and Transocean in Brazil, and pay 20b reais (US$10.7b) in damages after an oil spill last mth.
Chevron, the 2nd largest US crude producer after Exxon Mobil, is being audited by Brazil’s petroleum regulator for the oil leak at the Frade project off the coast of Rio de Janeiro last mth.
Transocean, the operator of the rig at Chevron’s Frade project, “continues to cooperate with the authorities.”
Both SMM and KEP count Transocean amongst their customers.

SG Market

SG Market: Spore stocks are likely to drop, tracking early declines in regional markets as well as falls in US and European bourses but trading is not likely to be active as fund managers and investors are generally on holidays. Support for the STI at Nov 25 low of 2643 is likely to give way, with the next key level distant at Oct 5 2522 low.

SembMarine is likely to be in focus after bagging a US$292m contract from rig operator Prosafe. Sing Holdings may find support after acquiring a 4th site on Robin Roa

Wednesday, December 14, 2011

Sky One Holdings

Sky One Holdings: CIMB Technicals notes, the rally that started in Nov is starting to weaken. The candles have been small in size for the past three weeks.
Also sees a bearish divergence signals on both its MACD and RSI, which suggests that the upward momentum is waning. The sell signals on both indicators also call for weaker prices in the near term.
Says, the stock is a sell now and only a rally above $0.111 on strong volume would delay the correction. Prices could pullback towards $0.075-0.09 range to consolidate the Oct–Nov run.


LionGold: CIMB Technicals notes, prices have inchinghigher from Declast year until now. It appears to be forminga large rounded top pattern. Prices are now holding just above its 200-day SMA.The MACD and RSI have been sporting bearish divergences and both are looking negative. A break below its 200-day SMA would likely signal that prices are ready to headlower from here.
Says, one can choose to sell on strength with a stop placed above $0.895. Or, one can also go short ifthe $0.83 support level gives way. A break below $0.83 would likely indicate that prices areheaded towards $0.76 and probably even $0.68 next.


Sakari: released a statement regarding the KKN Bridge collapse confirming that the Mahakam River has been re-opened on a limited basis for coal barges and other river traffic to pass through the area of the collapsed bridge. Coal barging is currently allowed during a 5 hour period each day with safety remaining a concern for the authorities and shippers. The authorities are closely monitoring the passage of all vessels such that each unit requires specific permission to traverse the area, which restricts the number of barges that are able to pass each day. CIMB maintains Outperform with TP $2.71.

Genting SP

Genting SP: S&P expects growth rates in Macau and Spore to moderate in the next 12 mths, but still move at a healthy clip. Base-case forecast for Macau gaming mkt is 10-15% yoy growth in gross gaming revenue in 2012, and Spore net gaming revenue to 5-10% yoy. Spore's net gaming revenues is expected to hit US$5.0b, +42% yoy this yr. Highlights several factors including regulatory uncertainty and projected slower growth in Spore's economy cld put a damper on local gaming growth. However, if Spore's Casino Regulatory Authority were to approve junket operating licenses next yr, gaming growth rates wld likely be higher than currently projected.

Otto Marine

Otto Marine: has chartered 2 Anchor Handling Tugs (AHT) units, that were completed at its Batam yard. One will be employed initially on an int’l towage work before being mobilized to Australia to support various civil and offshore construction works. The other is being mobilized and expected to depart before end of the yr to deliver a barge to Bass Strait before being deployed to New Zealand to support towage operations.
Both vessels are operated by Otto’s 55% owned subsidiary, Go Marine.
This news follows Otto’s Monday announcement of a sale of another AHT to its 50/50 JV Otto Limin Marine. The vessel will be deployed very soon in India.
The stock trades at 5.8x P/E, 0.6x P/B.

Berlian Laju (BLT)

Berlian Laju (BLT): may be pressured after Fitch downgrades its Long Term Foreign and Local Currency Issuer Default Ratings to ‘CCC’ from ‘B-‘.
The rating on BLT's US$400m senior unsecured notes due 2014, issued by BLT Finance B.V. and guaranteed by BLT, have also been downgraded to 'CC' from 'CCC' based on a recovery rating of 'RR5'.
Given that the 'CCC' rating is driven by primarily by refinancing risks, no outlook has been assigned.

The downgrades reflect BLT's heightened liquidity risk as it has yet to secure refinancing for the IDR 1,153b (US$127.4m) domestic bonds that are maturing in May and Jul 2012. While the company had US$105.7m of unencumbered cash and US$88.9m as debt-oriented mutual fund investments at end-Sep 2011, Fitch notes that it is required to maintain a min cash balance of US$75m to comply with bank loan covenants. The agency estimates that these balances and projected operating cash flows are inadequate to repay the bonds falling due in 2012, especially in light of committed capex. Limited unencumbered asset balance of US$9m as at end-Sep 2011, makes refinancing a difficult proposition.

Even if BLT is able to refinance the 2012 notes, it faces looming debt maturities in 2013 and 2014. The co's US$125m convertible bond has a put option exercisable in Feb 2013 and is currently out-of-the-money. US$400m notes fall due in May 2014. In addition, BLT has US$297.2m of debt – mostly secured - that needs to be refinanced between 2012 and 2014.

Fitch notes that the outlook for BLT's key business of chemical tankers is stable and that the co has the advantage of being an early entrant in the profitable Indonesian cabotage business. The agency expects BLT's cash flow from operations to improve over the medium term given its significant presence in the chemical tanker and Indonesian cabotage businesses, though rising fuel costs may temper that.


UOB KH: To acquire Msian broker Innosabah Securities Bhd (ISB) from Kretam holdings. Consideration for the purchase shall be the sum of ISB's adjusted NAV as at 31 Dec 11 plus a RM15m ($6.2m) premium. ISB's end'10 NAV RM40.6m, with total sum at approx RM55.6m ($22.9m). ISB has over 30 dealer's representatives and 60 staff, and principal activities are dealing in securities listed on authorised stock exchanges, securities underwriting and custodian services. This is part of co’s regionalization strategy by establishing its presence in the stockbroking industry of Msia.

Sound Global

Sound Global: Won the bid for a municipal wastewater treatment project in Anshan City, Liaoning with capacity of 30k tons per day. The BOT project have a total investment amt of Rmb94m and concession of 30 yrs. This is the 3rd project co has won this quarter with the other two also in Anshan City. Sound Global trades at approx 8.8x fwd P/E


Hyflux: Co has reportedly awarded a US$300-400m to Siemens for the building of a 411-megawatt power plant. This plant will be used to provide power to Tuaspring, the 2nd desalination plant in Sg costing approx $890m. Construction on Tuaspring is to start during yr end but may be deferred due to the late award of the power plant contract and is now touted to be operational in 2014. The 411-MW plant will have extra capacity even after supplying Tuaspring and Singspring, with excess power to be sold for Singapore’s usage. Currently, Hyflux trades at fwd P/E of 14.3x.

SG Market

SG Market: Spore shares are expected to continue its downward path following the weak lead from Wall Street as hopes for a QE3 diminish following a disappointing Fed statement. With a dearth of corporate news flow, the STI is likely to pull back and find support at the 2640 level with overhead resistance at 2720.

Hyflux will face some selling pressure after Nomura downgrades the stock to Neutral and cut its price target to $1 on poor 3Q earnings and lack of new EPC orders. Fitch also downgraded Berlian Laju Tanker debt ratings to 'CCC' from 'B-', citing heightened liquidity risk as it has yet to secure refinancing for the Rp1,153b (US$27.4m) domestic bonds that are maturing in May and Jul 2012.

Tuesday, December 13, 2011


NOL: Barclays notes that operating results for the 4 weeks ended Nov 18 were generally in-line with expectations. But volumes were particularly weak, with the 7% mom decline the 2nd worst in a decade after Nov 08's 9% plunge, while average freight rates were steady mom, but down 14% yoy. Revenue is down 3.1% ytd but in-line with the current 2011 forecast. The house keeps an U/W rating, with an
unchanged price target of $1.06, based on 0.7X FY12.

Its preferred sector picks are the ports, as they benefit from consistent volume growth without the direct impact of the Asia-Europe freight price war. It rates China Merchants Holdings (0144.HK), Cosco Pacific (1199.HK) and Hutchison Port as O/W. Among container shippers, it prefers CSCL (2866.HK) on lower leverage and cheaper valuation at 0.6X P/B.

Europe crisis road map

Europe crisis road map: known worry list

Tuesday: First meeting of new Spanish parliament after election. Spanish, Greek and Belgian T-bill auctions. German ZEW economic sentiment indicator for December.

Wednesday: Italian bond auction. ECB 7-day dollar tender. EU industrial production data for October.

Thursday: Spanish bond auction. Euro-zone-wide manufacturing and services sector PMI data for December.

Monday, Dec. 19: EUR 1.22 billion of Greek debt falls due. ECB's weekly bond-purchase data. French T-Bill auction.

Tuesday, Dec. 20: Spanish and Greek T-bill auctions. Announcement by ECB of 13-month long-term refinancing operation. German December Ifo business climate index.

Wednesday, Dec. 21: Portuguese T-bill auction. Swearing in of Mariano Rajoy as Spanish prime minister and disclosure of new cabinet expected around this time. ECB 7-day dollar tender.

Thursday, Dec. 22: EUR980 million of Greek debt falls due.

Friday, Dec. 23: Potential first cabinet meeting of new Spanish government and approval of first economic measures, possibly including an emergency budget decree ahead of a formal 2012 budget.

Wednesday, Dec. 28: Italian T-bill, zero-coupon bond auction.

Thursday, Dec. 29: EUR5.23 billion of Greek debt falls due. Italian bond auction.

Friday, Dec. 30: EUR715 million of Greek debt falls due. First meeting of new Spanish PM's cabinet and first batch of emergency austerity measures expected.

Monday, Jan. 2: Euro zone December manufacturing PMI.

Wednesday, Jan. 4: Euro zone December services PMI.

Thursday, Jan. 12: ECB interest rate statement and press conference. Spain auctions new 3-year bond.

Monday, Jan. 23: Euro zone January flash PMI.

Wednesday, Jan. 25: Preliminary data on Spain's government annual budget deficit expected around this time. German January Ifo business climate index.

Tuesday, Jan. 31: Ireland's troika of lenders releases its latest quarterly review of the country's bailout. Greece aims to conclude talks detailing new EUR 130b loan deal, debt exchange program with private sector creditors by this date.

China XLX

China XLX: CIMB upgrades to O/p from Trading Buy with $0.43 TP. House note that China XLX has climbed 15% since house upgrade three mths ago. Do not think the party is over, given a sustained recovery anchored in CY12-13. The entry of a new strategic institutional investor should add to financial flexibility.
While earnings are unchanged, TP has been lifted as house roll over to a lower 5.5x CY13 P/E (from 7x, still at 50% disc. to larger peers and reflecting the compression in peers’ valuations).


Olam: Citi maintains Buy with $3.10 TP. House note of Co’s Key Takeaways from US NDR. House note that discussion points with investors in the US revolved around three key points – 1) Olam’s exposure to Europe and its contingency plans there; 2) cash flow generation from 2014 onwards and thus avoidance of further equity raising till 2016; and 3) its ability to execute on its aggressive acquisition pipeline.

First Resources

First Resources: Announced good Nov11 production Figures. CPO produced at 45,033 tons, +19.4% yoy while Palm Kernel produced at 10,445 tons, +18% yoy. Result brings 9M11 CPO production to 410,186 tons, +20.3% yoy and Palm Kernel at 94,104 tons, +21.5% yoy. High CPO extraction and PL Extraction rate was further maintained, at 23.6% and 5.4%, both flat yoy.

We note that Street has a Unanimous Buy Call on counter with 14 Buy Calls and a mean TP of $1.79, while the stock has generally been quite resilient in wake of the current climate, on back of strong production growth, high FFB and CPO extraction rates and on anticipation that CPO could trend higher by 1H12 (Dorab Mistry forecast at Rm 4,000/ton)

Otto Marine

Otto Marine: Announced that it has sold a 40meters AHTS to its JV Co. Otto Limin Marine. The AHTS has been completed at Otto Marine’s yard in Batam and is about to leave the yard for its maiden job and will be deployed in India. The vessel will be operated by Grp’s strategic partner, Limin Marine, and this is the first time that any vessel under Otto Marine’s strategic partnerships is to be deployed in India.

We however caution investor’s on the counter, as outlook for grp’s OSV shipbuilding segment remains challenging, on back of excess supply of general specs OSV’s in the mkt, and on back of fierce completion from regional yards. Orderbook of $81.3m vs 9M11 rev of $206.3m suggest earnings visibility of only 2 qtrs.


GMG: Sud Cameroun Hevea S.A., 80% owned by GMG, has struck a US$410m deal with Cameroon's govt to develop 45.2k ha of palm oil and rubber plantations, officials said yday.
The plantations in Cameroon's South region should become fully operational within four years, with production aimed at the export market.

"The private sector in general, and the agricultural sector in particular, must play a leading role in our country's quest to become an emerging economy by 2035," Economy Minister Emmanuel Djoumessi Nganou told a press conference to announce the deal.
Rubber and palm oil are already significant export crops from Cameroon, central Africa's largest economy. Annual production of the two crops is currently estimated at 60k tonnes and 175k tonnes, respectively.

GMG has fallen 22% since going XR on 23 Nov, and now trades at 9.1x P/E, 1.4x P/B.


SIA: and Virgin Australia today announced the first two milestones of their recently approved alliance: new int’l and domestic routes to Darwin and the launch of frequent flyer programme co-operation.
SIA’ regional unit, SilkAir, will begin a 4x-weekly service btwn Spore and Darwin from 26 Mar 2012, and Virgin Australia will complement these services with a daily service between Sydney and Darwin from 2 Apr 2012.
The two airlines also confirmed that from 20 Dec this year, they would commence reciprocal frequent flyer recognition, enabling KrisFlyer members to earn and redeem frequent flyer points on Virgin Australia's entire network and Velocity members to earn and redeem frequent flyer points on SIA-operated flights. Reciprocal lounge access is also available for eligible customers.
The two airlines expect to commence codesharing on each other's services from early 2012.
One can’t help but notice that Tiger Air, an associate of SIA, is noticeably absent from a partnership with SIA in Australia. Yday, Tiger Air continued to report unexciting Nov operating data, with passenger volume and load factor down 13% and 8 ppt yoy respectively.

HK Land

HK Land: the biggest landlord in HK’s Central district, said yday that it would spend HK$560m to knock down commercial building The Forum to build a 7-flr office tower in its place.

Raymond Chow, executive director of commercial property, said HK Land had yet to see any weakening of rents in its portfolio of 4.4m sf of office space in Central.
Chow also said the vacancy rate for the co's office space, at 2.2% at the end of Oct, from 2.5% in Jun, had not increased since then.
That flies in the face of reports from brokers, who say Central is bearing the brunt of a drop in rents as invmt banks and large MNCs cut headcounts. Savills last week forecast a 5% drop in Central Grade A office rents in 4Q, although that would still leave them up 8% for the year. The brokerage predicted a 10% drop in Central rents next year.

The redevelopment of The Forum, which currently houses restaurants and shops, will mark HK Land's first new office building in Central since 2006, when it unveiled York House.
HK Land will start work this month to demolish The Forum, with the new building due for completion at the end of 2013. It will have 5 floors of office space, with a total of 48.5k sf - an increase of 15% over the current building.
Govt restrictions on gfa precluded building a bigger tower.

Chow agreed with a forecast that int’l investors should likely steer clear of investments in HK property next year. He said office space appeared to by fully priced. Central Grade A office values rose 21% this year, after climbing 31% in 2010. "There's no capital upside," Chow said.


SMRT: is revising fares for its taxi operations to mitigate rising operating costs and inflation.
The move comes a week after rival transport firm ComfortDelgro, Spore's largest taxi operator, announced revisions to its taxi charges that resulted in higher fares for many passengers.
Among the major changes, SMRT will raise flag fares for most cab services by btwn 20 and 70 cents, increase distance-based charges and extend peak hours, when surcharges apply.
SMRT, Spore's third-largest taxi operator, with ~3,000 cabs, will implement the revisions on Dec 20.
ComfortDelgro, which operates ~15,700 taxis, put its fare revisions into effect Monday. They include raising flag fares and extending peak hours.


NOL: warns that shipping firms are operating in an unsustainable economic environment with prospects unlikely to improve much in 2012 due to high fuel prices, low freight rates and slowing demand.
Highlights the container freight mkt has been struggling with an overcapacity of ships and may be forced to consolidate further.
APL, its container shipping unit, has 32 container vessels due to be delivered by 2013 and commented "we have a huge challenge ahead of us in terms of deploying those assets in a difficult mkt".

Separately, NOL reports operating data for Period 11 (22 Oct – 18 Nov).
Avg revenue per FEU fell to US$2401/FEU, -14% yoy due to lower rates in major trade lanes, was flat mom.
Volume at 224,200 FEU +2% yoy, but weekly volumes -7% from Period 10, reflecting slowing volumes on both the Intra-Asia and long haul Asia-Europe / US trades.

Morgan Stanley believes that the success of proposed rate hikes is contingent on continual capacity rationalization. Believes that despite weak spot freight rates, news flow is incrementally turning more positive, marking a gradual return to rational pricing and an eventual freight rate recovery from unsustainable cash loss levels. Near-term negative catalysts are: sharp 4Q11 losses and potential need to raise capital, but recovering freight rates and a stronger balance sheet are medium-term positives.

Credit Suisse prefers exposure to OOIL with stronger track record at lower forward P/B of 0.7x. Notes CSCL is the high beta play and also on lower P/B of 0.6x, while NOL is more exposed to the Transpacific trade which could potentially see a rate hike, and its forward P/B of 0.8x is 1 SD below its historical average.

SG Market

SG Market: It will probably be more of the same for the Spore market with corporate news flow tap running dry and the STI dancing to the tune of headlines from US and Europe. Spore shares are likely to continue its downward path with supports topped at 2644 and 2600 and upside resistance at around 2800 level.

GMG Global may be in focus after striking a US$410m deal to develop rubber and oil palm plantations in Cameroon. NOL will face selling pressure after reporting a 14% drop in revenue per FEU for Nov and warned that prospects for the shipping industry are unlikely to improve much in 2012 due to high fuel prices, low freight rates and slowing demand.

Monday, December 12, 2011


Yangzijiang: enters into JV with Qatar Invmt Corp (QIC) to set up Group Companies which consist of two entities with the proposed names, YZJ Offshore Engineering (“YOEPL”) and YZJ Offshore Engineering (China) (“YOECCL”).

YOEPL will have a paid up capital of US$110m, equally subscribed by YZJ and QIC.
YOEPL will provide mktg, procurement, front end engrg and design, mgt consultancy services for the construction, fabrication/repaid of O&G marine vessels and platforms.

YOECCL will have a paid up capital of US$250m, 40% owned by YOEPL and 60% owned by YZJ.
YOECCL will provide turnkey construction, fabrication/repaid of offshore O&G marine vessels and platforms.

Recall, QIC had purchased Baker Tech’s entire 15% stake in PPL Shipyard, which has offshore compatibilities. This partnership btwn QIC and YZJ marks the first steps by YZJ to pursue its offshore ambitions.

YZJ trades at 4.7x P/E, 1.5x P/B.


Venture: CIMB maintains Sell Call. House note that stock appears to be at its tail end of its consolidation triangle and the next move is likely to be down as a triangle is usually a continuation pattern.

The recent bullish divergence on both its MACD and RSI could be attributed to the triangle pattern and with both turning down again, a breakdown of the triangle is the more likely outcome.
Recommend Sell now with a tight stop placed above $6.69. A break below $6.30 would mean that prices are headed towards S$6.00-6.10 next. The following support is at $5.85.


STX OSV: CIMB has Technical Sell Call. House note that stock’s rebound from the $0.79 low appears to be losing momentum. It is currently faced with strong resistance with its 200-day SMA as well as its key resistance trend line standing in the way.

The MACD is about to confirm its dead cross while it’s RSI has hooked lower, back into the neutral levels. Both indicators suggest that selling pressure is rising. Coupled with the bearish island reversal pattern set on Friday, the bears could continue to dominate in the weeks ahead.

The stock is still a sell as long as the recent top of $1.26 is not breached. The gap at $1.175-1.195 is likely to keep the bears at bay as well. Prices are likely to head lower towards $1.00. Minor support around the $0.945 levels.

Ascendas REIT

Ascendas REIT: Poised to hunt for further acquisitions given its comfortable debt position according to analysts. Comments came after A-Reit completed the acquisition of two properties on Thur that analysts said should deliver a net property income (NPI) yield of 7%. Acquisitions are expected to have an additional 0.1c/unit on the distribution per unit for FY11. By estimates, the latest purchases - which are funded by debt - will push the group's aggregate leverage to about 36% from under 32%.A-Reit can borrow an additional $350-$400m to fund acquisitions before it hits the 40 per cent mark in leverage terms.


APB: Along with partner Heineken NV, grp plans to boost profitability in China by focusing on premium beer. Highlights that premium beer sells for 4x more than the regular brew in China. APB estimates China's consumption of premium beer to grow 12% annually through 2020 to 2.1b litres. We note that move could be seen as a positive move for Co, as it grows its Chinese mkt share and diversify from its reliance in Asean.


F&N: Paying $85m to acquire Queensgate Gardens and 39 QGG Mgmt. The ppty is managed and operated by Frasers Hospitality under a mgt agreement. Commercial property, which includes investment properties, reits and the hospitality division, accounted for 4% of FNN's FY11 revenue and 14% of profit before interests and taxes. Acquisition is not expected to affect F&N’s NTA and EPS for FY12.


Wilmar: Grp obtained a majority of creditor votes for its AU$120m or S$158.5m purchase of Proserpine Sugar Mill, which will see Wilmar take on Proserpine's operating costs and certain critical expenditure since 31 Oct, with Proserpine's creditors getting repaid before Christmas.

Highlights that it will hit the ground running next wk and its best to ensure the mill is ready for the start of the 2012 season. Purchase will boost Sucrogen's milling capacity by 2m tons to 17m tons and increase its raw sugar production by 10% to 2.2m tons. Wilmar had became the world's 8th largest sugar producer last yr after acquiring Sucrogen. Grp is diversifying and expanding its sugar business to meet demand in Indonesia and India and rely less on the Chinese cooking oil mkt, where it has a 50% mkt shs.

Mkt is generally still positive on tocks, with 13 Boys, 8 Holds and 5 Sells with mean TP of $5.75


BANKS: DBS, OCBC, UOB and others like Standard Chartered Bank are the major beneficiaries of European banks's retreat from trade financing, esp since private bank (PB) clients typically have a substantial portion of their wealth in USD.

Both DBS and OCBC have seen their USD loan to deposit ratio surging to 166-171% at end 3Q11 as demand for USD trade finance loans piled in. DBS highlights that ‘on the PB front, cachet as a bank that is safe, coupled with attractive deposit rates, have enabled them to see good growth momentum in new clients, with total deposits rising by 22% since end-2010.

Non-SGD deposits account for >75% of DBS's total PB deposits. Stanchart highlighted having a PB is a natural source of liquidity; in a tough environment, customers may stay in cash longer that helps bank’s funding.

Spore mkt

Spore mkt: likely to play catch up with the US and regional markets, after European leaders expanded a bailout fund and tightened anti-deficit rules, boosting investor demand for riskier assets. Nevertheless, this is but a short term solution, and UK’s decision to reject the new treaty suggests more challenges continue to lie ahead.
In the region, the KOSPI and Nikkei are up 1.2% and 1.4% at 8.14am.
Technically, near term momentum still appears negative with the key indicators currently all tipped downwards. While there might be a gap up this morning, there may be a fade into strength if the index is unable to breach the 2739 level (50day MA). With the index last closed at 2694, next support lies around the 2650 level.

In corporate news,

* Yangzijiang / Cosco: may see sentiment impacted after Daewoo Shipbuilding announced on Friday a cancellation of a 2008 order from a European client worth US$521m (2 VLCCs, 2 bulkers).

* Tiger Air: reports still weak Nov operating data, with no. of passengers carried down 13% yoy to 402k, and load factor at 78% vs 86% yoy.

* F&N: to acquire ownership of a serviced residence property in London’s affluent Kensington area for £42m.

* Armstrong: estimated the loss of profit per quarter arising from recent flooding in Thailand at $2.2m.

* Freight Links: reported 2QFY12 net profit of $7.8m from $952k a yr ago.

* Popular Holdings: reported 2Q12 net profit rose 58% to $4.05m.

* Elektromotive Group: proposed a 1-for-5 rights offer and a share consolidation

Friday, December 9, 2011

** New IPO - Keong Hong **

New IPO - Keong Hong: Homegrown construction services company, Keong Hong Holdings has launched its IPO to list on Catalist board.

It is offering 27m placement shares at 24c apiece to raise gross proceeds of $6.48m. The offer closes at noon on Dec 14, and share trading is expected to begin on Dec 16. PrimePartners Corporate Finance is the manager and sponsor, while PrimePartners Corporate Finance and Kim Eng Corporate Finance are the joint placement agents.


Noble: IIFL maintains Sell Call with TP $1.13. Note that Agri segment not so resilient, cannot blame cotton alone. Weak margin in other energy products, besides carbon credits. metals, minerals and ores (MMO) segment faces double whammy. Noble currently trades at 13.1x FY12 P/E, vs Olam and Wilmar.
Hence, Noble’s motivation for a separate listing of its agri business is difficult to justify, if the company has an equally strong business outlook for its energy and MMO segment.


DBS: Nomura maintains Buy, TP $15.80. Note that DBS sell-off on property measures exaggerated. DBS fell 3.7% yesterday (vs UOB -1.9% n OCBC -1.2%), knee-jerking banks appears overdone. YTD S$ loan growth is just 11% vs 22% for the broad loan book. YTD mortgage loan growth has been just 5.2% (mortgages make up 22% of loan book). Hence, S$ mortgages are NOT a key driver of loan growth for DBS (or any of the other SG banks).

SG banks are not extraordinarily exposed to the property sector – housing loans accounted for 17% of non-bank loans as at 3Q11, comparable to the medium-term average. More than 70% of outstanding housing loans are for owner-occupied residential properties. Further, household debt-to-assets is low at 15%, below the LT average of 18%. It appears the mortgage market can withstand the price ramifications of a drop-off in foreign interest.

Ascendas Reit

Ascendas Reit: Acquires two business parks in Singapore — Corporation Place at $99m (Jurong) and 3 CBP Vista at S$80m (Changi). New Acquisitions Likely to Add 1.7% to DPU.

CS upgrade to Neutral from U/p, TP 2.01 from 1.99, attractive yields of 7% FY3/13E, offset its less exciting longer term growth given its larger base now, having grown its assets 9-fold since. Within SREITs, still prefer retail REITs given their resilience. DB maintain Buy, TP 2.28, continue to like AREIT's well-diversified and defensive portfolio, valuations undemanding at FY12e yield of 6.8%.

Spore market

Spore market: likely to open lower, taking cue from the weak close in the US overnight, and lower open in the regional mkts (KOSPI, Nikkei down 1.8% and 1.7% at 8am).

News flow from Europe impacting sentiment, as to be expected. Investors were spooked after the ECB damped speculation that it will buy more govt bonds to stem the region’s debt crisis. This overshadowed the ECB’s cut in interest rates matching a record low of 1% ( expected) and loosening of collateral requirements for banks that need dollars. This caused the euro to fall more than 1% at one stage, to its lowest level in more than a week.

Technically, the STI chart has begun to turn negative, with the key indicators starting to hooking down. Price patterns suggest possible near term weakness as well, with the STI having cut below the 20 and 50 day MA, and the 20 day MA poised to do a negative cross over the 50day MA.
First support at 2700, followed by 2650. Resistance at 2800.

Property stocks may extend yday’s fall, after the govt announced a 5th round of cooling measures on Wednesday night. The Business Times highlighted how Sentosa properties might be hard hit, given the high level of foreigner purchases there. Ho Bee has the highest concentration of property exposure to Sentosa. SC Global, City Dev also have some Sentosa exposure.