Thursday, March 31, 2011

Ocean Int’l

Ocean Int’l: Major Gold Assets Corporation, its 50.1% sh/h owned by its chairman Zhang Aihua, has made an exit offer of 2 cts/sh for all the shares it does not own. The offer values Ocean at $4.7m.
Ocean has been placed under SGX's watch-list since March 4, 2009. The co has received a notification letter from the regulator that it will be delisted from the mainboard...

Share trading will continue until 5 pm, Mar 31, 2011 afterwhich it will remain suspended until the completion of the cash exit offer. The exit offer will not be conditional on a minimum number of acceptances being received.

Otto Marine

Otto Marine: To sell two units of 8k bhp AHTS at total US$43.4m (S$54.8m). The two vessels are under construction and will be completed by end of the yr. After delivery, co will charter and deploy the vessels for 7 yrs. In effect, co will build and leaseback the vessels. FY2010 rev for co was $579.9m…

Order book for shipbuilding division was US$131m as of FY2010 end yr. Otto now trades at 6.3x current P/E vs hist avg at 8.2x. Other peers ASL Marine trades at 7.4x and Jaya at 5.5x current P/E


Cosco: Contrary to mkt’s bullish view, CLSA maintains underperform on Cosco with $2.20 TP. Note that although Sevan’s LOI for US$1.1b in rigs cements Cosco’s status as its yard of choice, but Cosco’s almost exclusive reliance on it for semi-sub contracts raises questions on the sustainability of future orders. House sees limited upside potential to short term order wins, given weak bulk shipping outlook and as capacity at Qidong offshore yard reaches its limit…..

House raises order wins by 20%, but lower offshore margins reflecting a turnkey bias, resulting in a 3-5% upgrade to FY11-13 Net Profit. Add that stock appears fairly priced at 16x FY11/12 P/E, in line with the 3yr mean. House is negative on the Chinese shipbuilding space as the cycle is past its interim peak, but prefer Cosco over YZJ on a relative basis due to its offshore exposure and fewer governance.

Ramba Energy

Ramba Energy: CIMB has Technical Sell Call. Note that the stock has rebounded to its 61.8%FR levels and a possible turn could take place here. It could also push on a tad more to fill up the $0.58-0.625 gap before turning down. House is on a lookout for a reversal in this stock. Its MACD and RSI show a potential bearish divergence signal, calling for bulls to be cautious…..

Recommend traders should only go short if prices fall below $0.495. Aggressive traders may choose to short on strength, preferably near the $0.60-0.625 levels. Once you are in the market, keep a stop above $0.64. A break below $0.495 would mean that prices could be heading towards $0.45 as well as retest its 200-day SMA at $0.40.

Oil Services

Oil Services: UOB has Oil Services Strategy Report. Note that valuation gap has widened. Ytd, the small-cap oil services stocks have underperformed (-7% on mkt-cap weighted basis) the offshore heavy engineering stocks (+7%) and the STI ( 3%). Rig builders Keppel Corp and Sembcorp Marine have each appreciated 8% on strong rig order wins…..

Add that the FY11F P/E and P/B differential between the offshore heavy engineering and oil services segments has widened to 6.5x and 2x respectively.
House believes the offshore O&G mkt is headed for a multi-yr boom and small-cap oil services stocks will eventually play catch-up. Sector-wide recovery depends on recovery in OSV charter rates, without which stocks can only outperform on Co. specific growth drivers…..

House use a bottom-up approach while waiting for sector recovery. Top stock picks remain Ezion Holdings (TP: $0.90) and Ezra (TP: $2.10) on their respective Co. specific growth drivers. Note that OSV shipyards still in a challenging situation. Apart from STX OSV(NOT RATED) which is a high-spec vessel builder, the OSV shipyards as a whole face the toughest challenges, but house is neutral on these stocks as their low P/B valuations have significantly discounted their difficult conditions.
ting SP, SIA, SATS, CDLHT, AirAsia and ComfortDelGro.


Biosensors: DBS upgrades to Buy from Hold with TP$1.35 up from prev $1.13 on expected Japanese approval in BioMatrix. House observes that historically stents take an avg of 3 yrs for CE to approval in Japan and BioMatrix obtained its CE mark in 2008...

Apart from Japan, progress in other areas through mkt share gains and penetration with new product launches are growing well. Other positives include exploration in India and M&A opportunities.


Infinio: Reverse take-over of Ephraim for $381.8m and co proposes 10 to 1 consolidation before to meet listing requirements. The consideration will be paid by new issue of 1.9b consolidated shares which will result in 93.1% of the enlarged share capital being held by the vendors...

Ephraim is in the business of nipah palm cultivation and converting the sap of the tree to sugar and ethanol. Ephraim made a loss of $168.6k but has a NAV of $254.5m as of yr end FY2010


Property: Office rents continued to trend upwards in 1Q2011 with prime rents avging $8.60 psf per month over $8.30 in 4Q2010 an increase of 3.6%qoq. Growth in secondary areas at fringe of CBD rose faster at 9.6%qoq to $6.85 psf per month…

Rents are expected to trend upward over nxt 3 to 4 yrs with low likelihood of spikes or sharp corrections with estimates of 10-12% rental growth. However, they are likely to moderate in the later half of the year due to 1.7m sq ft of new space being completed by end 2011. An estimated 8m sq ft of office space is targeted for completion from 2011 to 2015 of which 75% is Grade A space.


Property: Office rents continued to trend upwards in 1Q2011 with prime rents avging $8.60 psf per month over $8.30 in 4Q2010 an increase of 3.6%qoq. Growth in secondary areas at fringe of CBD rose faster at 9.6%qoq to $6.85 psf per month…

Rents are expected to trend upward over nxt 3 to 4 yrs with low likelihood of spikes or sharp corrections with estimates of 10-12% rental growth. However, they are likely to moderate in the later half of the year due to 1.7m sq ft of new space being completed by end 2011. An estimated 8m sq ft of office space is targeted for completion from 2011 to 2015 of which 75% is Grade A space.

City Dev

City Dev: Partnership between City Dev, Hong Leong Hldgs and Japan’s Mitsui Fudosan has submitted the top bid for a 99 yr private condo site nxt to Bartley MRT. Its bid at $413.3m at $620.61 psf was 0.8% higher than the next highest by Keppel Land out of 8 bidders. This compares with a site near Potong Pasir MRT which went for $607 psf last June, now launched at $1,250 psf on avg...

The plan is to build 700 units if awarded, targeted at young families, professionals and upgraders. Co now trades at 1.7x P/B, compared to KepLand at 1.5x and Capitaland at 1.0x. UBS maintains Neutral with TP$11.05 noting that co has won 2 bids in 2 wks and this acq will add 4% accretion to RNAV...

House maintains a cautious view on residential sector in line with 29 Mar MS property which notes record high prices since 1Q2008 but declining volumes.

Ascendas REIT

Ascendas REIT: Co. requested for trading Halt, and also announced proposed acquisition for properties at Neuros & Immunos for $125.6m. Located at Biopolis, one-north Buona Vista, Neuros & Immunos are a 7-storey business park building with land area of 8,051 sqm, with GFA and net lettable area of 36,931 sqm and 28,345 sqm respectively. Properties are currently 100% occupied…..

Proposed Acquisition will funded using the capital structure of 40% debt and 60% equity, and Manager has elected to receive its base fee as 80% in cash and 20% in units, the annualised pro forma financial effect on A-REIT’s DPU, using FY10 as illustration would be 0.03c…..

Separately, grp also announced that in tandem with the economic recovery, grp’s properties have achieved a $307.6m revaluation gain, over its book value as at FY10, representing an appreciation of approximately 6.3%. Post revaluation, the NAV and aggregate leverage based on 31Dec10 balance sheet will be $1.77/unit and 32.6% respectively.


SembMarine: signs long-term alliance contract with Canada's Teekay Marine Services. The long-term maintenance and refit alliance contract will see all Spore-docked Teekay vessels (estimated 6-8 vessels/ yr) go to Sembawang Shipyard for repairs, refurbishment and upgrading. Such contracts are not new to SMM, which has other Evergreen Favored Customer Contracts as well, but this latest order still represents another feather in its cap.

Rig builders

Rig builders: Recent demand in the O&M sector has largely been shallow-water focused with the bulk of orders for jackup rigs. But demand for deepwater units could come next, extending the recent order momentum for rig builders. This comes on the back of recent approvals in the Gulf of Mexico (GOM) for the resumption of work by Noble, BHP, ExxonMobil, and ATP. Shell most recently became the first to obtain approval for a plan to drill new wells…

Meanwhile news flow on other fronts has been positive as well. Rig players such as Pacific Drilling, Sevan Marine, Seadrill, Petrobras are looking to, or have raised funds to invest in more drilling units. In particular Maersk, Seadrill have given strong indication that they are planning to expand their deepwater fleet. In addition, Petrobras sees oil prices rising, and has revised its 5-yr investment plan to include as much as US$10b spending on its new deepwater fields…

All this bodes well for the offshore sector, which Deutsche remains bullish on. Says that unlike the last boom in 2005-08, where there was substantial Norwegian speculation, the bulk of new orders this time are coming from established drillers, indicating a more sustainable trend. Sees Keppel Corp and SMM having a potential addressable market for jackups worth US$10-20b, and for semi-subs worth US$8-17b over the medium term. Reiterates Buy on Keppel (TP $14.20), SMM (TP $7)…

We highlight Cosco as a beneficiary too, as the company shifts gears to its offshore marine business from its bulk carrier building business. Recall the co recently announced 2 pending rigbuilding deals worth a combined US$1.2b, and is in the midst of developing 2 types of semi-sub offshore vessels to diversify its range of vessels.

SG Market

SG Market: Spore shares are likely to consolidate its gains after strong 5.4% run-up in past 8 days & yday’s window dressing & portfolio rebalancing amid AUD/JPY currency movements. The STI is also facing a double top resistance at around the 3110 level with support tipped at 3032. A-Reit request for trading halt following $126m acqn of Spore Science Park & announcing $308m revaluation gain on its portfolio.

Oil-related plays will continue to be supported by positive newsflow on the offshore rig market.

Wednesday, March 30, 2011


O&M: Speculation that Saudi Arabia’s reserves may be more limited than previously thought is prompting more drilling. According to Baker Hughes, the oil kingdom is increasing the number of its drilling rigs by 28% to 118 by the end of this year. This could be a reflection that Saudi Arabia is getting uncomfortable with its own spare capacity in light of the Libyan shortfall. Saudi Arabia joins other Mid-East nations, including Kuwait & Iraq, that are adding to their rig counts. Abu Dhabi is planning to add 16 rigs, both onshore & offshore. Rising demand for drilling equipment & oilfield services is likely to improve pricing leverage for oil svcs cos.

Higher oil prices has also prompted Petrobras to revise up its 5-yr capex program & spend up to US$10b to explore & develop deepwater fields it bought from the govt last yr. Petrobras had earlier based its US$224b investment plan for 2010-2014 on an average oil price of US$80/bbl but now believes that the price floor for oil has increased & the trend is for rising prices. This is a boom time for E&P players.

Tech Stocks

Tech Stocks: UOB has sector report focusing on effects of Jap. Note that according to DRAMeXchange, Hitachi Chemical and Mitsubishi Gas Chemical produce more than 80% of Bismaleimide Triazine (BT) resin and both Co’s were affected by Jap earthquake. BT resin is used for producing laminates/substrates that packages semiconductor chips in mobile devices….

Mitsubishi Gas Chemical’s plant located at Nishishirakawa-gun within Fukushima prefecture will start partial production in early Apr at one qtr of pre-earthquake levels, focusing on semiconductor package substrate for mobile devices. For Hitachi Chemical, supply of electricity, gas and water has resumed for production sites at Ibaraki prefecture and Chiba prefecture.…..

Note that Semiconductor players could use either BT-based or epoxy-based laminates to package semiconductor chips. According to DRAMeXchange, another mitigating factor is that BT resin can also be purchased from Taiwan-based Formosa Plastics….

House maintains Overweight on Sector, with top picks as Hi-P (TP, $1.64) and Venture (TP $11.8 . Add that disruptions to the supply of components are usually short-term phenomenon. While house do not rule out further deterioration in the nuclear crisis in Japan, suppliers located outside the afflicted Fukushima Prefecture will have to resume normal operations. Nevertheless, the situation needs to be closely monitored.


Z-Obee: CIMB has Technical Buy Call. Note that Z-Obee may have found a short term bottom at $0.17. Yesterday long white candle on strong vol suggests that there is still room on the upside for the stock, at least in the short term. Note that prices also closed above its 50-day MA yesterday, which is a positive for the bulls. MACD and RSI are rising sharply although its MACD is still below the zero line. The strong vol helps support the positive call….

Recommend aggressive traders may opt to buy now with a stop place below yesterday’s low of $0.20. Other investors should wait for a pullback before getting in. A breakout above the downtrend resistance at $0.26 could send prices shooting towards $0.31-0.325 next. The 200-day SMA at $0.345 may also attract prices in the days ahead.

Guangzhao Ind Forest Biotech

Guangzhao Ind Forest Biotech: plans to move into biofertiliser production in China. Enters into a non-binding MOU with its controlling sh/h - exec director Song Xuemeng and exec chairman Su Min - to acquire from them a 49% stake in Asia Technology Investments (ATIL). Guangzhao wld be approaching the other sh/h of ATIL to acquire the remaining 51% stake…

Company says its "revolutionary" fertiliser does not lead to food contamination as there are no chemicals in its contents, and also promotes the pdtn of higher quality crops and superior yield. Current annual biofertiliser pdtn capacity is ~100k tons, but existing facilities can be upgraded to triple production capacity to 300k tons…

Stock trades at 26.7x P/E.
Technically, stock may have bottomed out at $0.045 in mid March. Since then stock volume and price have been rising positively. Stock currently hovering around initial resistance level of $0.08.


Hospitality: DBSV has hospitality report. Note that Travel patterns could change in coming mths. In aftermath of earthquake that hit Jap and fears of radiation leak, believe that affected Japs may delay travelling overseas while potential inbound travelers could look to divert plans from Jap to other countries in coming mths. Believe SG could benefit from anticipated change in travel patterns in the near term, offsetting any potential weakness from Jap….

House sees similarities between SG and Jap inbound tourists profiles. Believe that visitors from China and Korea - two of Jap’s top inbound visitor source markets are ‘low hanging fruits’ for SG to tap. Add that Robust tourists numbers in Jan11 bodes well towards attaining STB’s goal of 12-13m visitors for 2011. Continue to see strong growth from top markets like China (+33% YoY) Indonesia (+20% YoY), Malaysia (+16% YoY) and continuing to break new ground from likes of HK (+51% YoY)...

Believe hoteliers continue to have pricing power and expect them to optimize rates through dynamic pricing strategies, translating to strong operating results in coming qtrs. House top pick are CDL HT (Buy, TP $2.30), Ascott REIT Buy, TP $1.38, UOL (Buy, TP $5.31), and Genting SP (Buy, TP $2.70).


UOB: DMG recommends Buy with $22.00 TP. Bank remains as House top pick. Note that bank raising Lower Tier 2 Capital, and UOB will issue S$1b of 3.45% subordinated notes, which qualify as Lower Tier 2 capital, raising its proforma Dec 10 total CAR of 19.8% by 0.9 ppt. Continue to recommend Buy on UOB given management’s more aggressive stance on loan growth….

Add that bank continues to trade at a low FY11 P/B of 1.4x, a discount to its historical average of 1.6x, and also lower than its peer OCBC’s 1.5x, backed by its more aggressive loan growth stance


OCBC: Nomura maintains Buy with $11.80 TP. Note that bank has all the right trends. Reaffirm recommendation of OCBC as a core holding, underpinned by its continued diversification from the growth- and margin-challenged $ loan space, and given increasingly tangible synergies between its wealth management and commercial bank platforms….

With management execution and balance-sheet trends strong, think OCBC has the sector’s best premium-generating growth-quality balance. Add that capacity to extract rev and cost synergies from an expanding wealth management platform, and maintain lowest-in-sector NPL ratio, loan-loss provisioning may be underestimated.

SC Global

SC Global: IIFL reduce TP to $1.40, but maintains Buy Rating. Optimistic on long-term growth prospects of SG as a financial hub and believes the rise in office demand of late has not been reflected in the residential demand. Whilst near-term risk of govt measures is present, house believes it is in govt’s interest to keep property prices steadily rising in long-run. Note that high-end segment is the only segment that has not reached its previous peak.


Property: Govt has put three 99 yr leasehold residential sites, a possible yield of 1500 homes, up for tender. Predictions of developer demand were mixed due to the less attractive locations compared to prev tenders earlier…

One site in Pasir Ris is some distance from the MRT, expected to attract a top bid of $336-430 psf per plot ratio (ppr) after an adjacent plot went for $335 psf. The other sites are next to Sembawang Shopping Centre which is expected to go for $340-410psf ppr and in Sengkang for $320-450 psf ppr.

SimLian: Put in top bid of $128.1m or $170.0 psf ppr for an AMK 60 yr leasehold industrial site. Demand was strong with 13 developers in the running and Sim Lian’s bid was 1.9% above the nxt highest bidder. The site has a 752.2 sqft max gfa and is within walking distance to Yio Chu Kang MRT...

There have been no plans for the site yet but co may dev strata-titled units depending on mkt conditions. Co trades at current P/E of 3.4x vs hist avg of 4.3x


Combinewill: KDR listing approved by KRX and co is in process of finalising the structure of the offering. Co will also consolidate 10 shares to 1 new share and trade in board lots of 100 new consolidated shares with effect on 4 Apr, 9am on SGX.


SpiceI2I: Proposal for rights issue and acquisition of Affinity Grp has been approved with 88% voting in favour. Minority shareholders have been displeased due to another rights issue so soon after the previous one ended in Aug…

Other points of contention were 1) the heavily disc issue price at 5.5c compared to the last traded 11.5c, 2)the acq price of US$175m for Affinity Grp (net book value at US$29.5m) and 3) what the excess funds raised would be used for…

Co is expected to proceed with more acquisitions in the future to realize its “Circle of Champions” vision. Current P/E is at 20.5x but counter has fallen 47.8% after declaration of the acq and rights issue.

BW Offshore

BW Offshore: The Oslo-listed firm, world’s 2nd largest FPSO Operators, said it will push its dual listing on SGX from 1H11 to 2H11. At a presentation to investors in SG, BW Offshore officials said Co. was not in a hurry to raise cash and may wait out the volatile market conditions. Add that Co. will, however, go ahead with due diligence for the dual listing. Note that Co. aims to to create two equal markets in its dual listing, with good liquidity.


Aviation: International carriers (eg SIA) could continue to see weak momentum, after IATA announced that growth in air traffic slowed last mth, as political unrest in MENA and Jap’s Earthquake slowed air travel. Demenad increased 6% vs 8.4% MOM, while turmoil cut international traffic by about 1%. 1Q11 saw load factors shrinking to an average of 73%, down 2.2 ppt, placing further pressure on already low profit margins (1.45)….

Seperately, Qantas announced it will reduce intl and domestic flying capacity, retire aircraft and cut mgmt positions in response to natural disasters and higher jet fuel prices. Add that carrier needs to act decisively to combat rising fuel costs and natural disasters, just like during the global financial crisis, to ensure ongoing sustainability of business. (Could spell a clouded outlook for SIA)....

In Separate news, Tiger Air could continue to face strong competition, as Air Asia announced plans for a 50-50 JV with online travel agency Expedia, to expand the number of flights, hotels and holiday packages available in Asia. While Air Asia is also currently waiting for the rights to fly into Osaka, one of 10 Jap destinations it has its eyes on.

Indofood Agri

Indofood Agri: Indo newspapers say Company to offer 20% of SIMP to public, with listing on the Indo Stock Exchange tentatively scheduled for May/Jun ’11. Underwriters are Mandiri, Kim Eng and Deutsche. Once SGX has given its approval, the Company will release a circular to sh/h on the proposed spin off. At least 70% of sh/h support is needed.
Recall, SIMP holds essentially all of IndoAgri’s operations, and is 90% owned by the latter…

A separate listing of SIMP may entail a holding-company discount being attached to IndoAgri. Also, the lack of rationale for the proposed listing by IndoAgri mgt raises uncertainty amongst investors. This may explain the recent underperformance of IndoAgri (-25% since peak in early Jan ’11) vs Golden Agri (-17%).
CLSA yday upgraded FY11 avg CPO price estimate to RM 3400/ton. Reiterates Buy with $2.85 TP.

SG Market

SG Market: Spore shares may get a slight lift from US gains though market sentiment is expected to remain cautious with sideways trading the order of the day as the worst may not be over for Japan’s radiation fallout. Hence, any upside may be capped by some selling into strength as long as crude prices stay elevated. Support for the STI seen at 50-day MA at 3028 while immediate resistance is tipped at 3092.

O&M stocks like KepCorp (potential orderflow), Sembcorp Marine (orders, dividend payput) & Cosco (orders) remain in play.

Tuesday, March 29, 2011

Palm oil

Palm oil: Spore palm planters attracting limited interest amid uncertainty over the outlook for CPO prices, on which their earnings are highly leveraged.
Regular top-active Golden Agri off 0.7% at $0.68 in tiny volume of 14 m shares vs its 50-day average of 100 m...

Macquarie remains Neutral on the sector, with stocks currently factoring in CPO price of RM 3150/ton. Current 3-month forward price is RM 3236/ton. Sees higher pdtn pressuring prices in the coming months, though a tight soy complex and rising crude oil prices should provide support...

CLSA says Golden Agri is one of the most leveraged plays on CPO price, with every 10% increase in prices raising its earnings by 27%; says valuations are now attractive after share price corrected 16% ytd, likely on the back of profit taking and Indonesia-specific inflation stoked fears. GGR trades on 11.5X forward P/E, a 20% discount to the sector and 25% discount to Msian peers. Has a Buy call and $0.85 target.


Armarda: Heavily dilutive acquisition with option to become a RTO. Co is to acquire 45% of China Satellite Mobile (CSM) from several individuals for $76.3m (HK$469.1m). Consideration will be paid by issuing 920m shares at $0.075 per share (disc of 16.7% to last traded) and payment of HK$25m in cash. CSM will provide satellite telecom products and services…

Acq may add to co’s core business but the dilution of 920m shares is effectively 45.2% of enlarged share capital. Attributable net tangible assets of acquisition is approx $69.0m which is lower compared with payment of $76.3m…

In addition co will also have a call option to purchase the remaining 55% shareholding. Should the option be exercised, the purchase price for the remaining 55% will be S$104.9m (HK$645.1m) which will satisfied by issuing 1.3b shares, an additional HK$25m in cash and HK$30m in loan notes. The option will last till 30 days after CSM is able to sell 10k units of satellite phones…

If a further 1.3b shares are issued vendors will have majority over the co and effectively the acq becomes a RTO although co has not expressed desire to sell off existing business.

China Minzhong

China Minzhong: JPM overweights with TP$2.00 up from $1.70. Co deserves valuation premium due to
1) continuous focus on high margin vegetable products,
2) rapid expansion of cultivation base and processing capacity and
3) an integrated business model…

Co is a beneficiary of food inflation, as it is structurally difficult to implement price controls on vegetables without compromising farmers’ income, unlike other food items. Other positives are as strong execution, good growth profile and clear corporate disclosure.


F&N: Nomura reiterates Buy, TP$7.60 from $7.24, citing good cost mgmt and attractive valuation at 1.2x P/B. Soft drinks and breweries see strong momentum, dairies hit by higher raw materials and Sg property offers good visibility for earnings. Group rationalisation continues, possible catalysts for re-rating include
1) divestment of Times Publishing;
2) Kirin accumulating more shares


SATS: OCBC Sec keeps at Buy but cuts target to $2.87 from $3.31 as stock has declined 9% since 3Q11 results, weighed by concerns over food price inflation & threat of a 3rd ground handler. House believes these risks have been adequately priced in with the stock trading close to its 52-wk low…

Reckons investors have overlooked SATS investment merits, which include positive earnings growth (driven .by aviation demand recovery, Spore's robust tourism landscape & healthy 5.5% dividend yield….

While there are near term risks from higher operating costs & stiffening competition, SATS' pass-through cost structures should alleviate food inflation concerns in the medium term. Also, threat of a 3rd ground handler may not be as daunting if the new license pertains to a specific segment of services.

Golden Agri

Golden Agri: CLSA rates Buy, TP$0.85 due to growth and expected FY11 CPO price at RM3,400/ton. Cites leverage to CPO prices with every 10% increase will raise earnings by 27%, making GGR one of the most leveraged plays to CPO prices. 30k ha of annual new plantings and a strong downstream franchise will ensure medium to long term growth.
Co has attractive valuations, trading on 11.5x fwd P/E, a 20% discount to the sector and 25% disc to Msian peers.

Genting SP

Genting SP: Nomura maintains Reduce, TP$1.59 from $1.01. Earnings unlikely to surprise going forward, share price trapped in a narrow trading range.Raising TP to reflect the higher average EV/EBITDA multiple of its regional peers and earnings upgrade. Growing regulatory risk and diminishing growth rate could drive a de-rating of the stock.

Koh Bros

Koh Bros: Announced a new contract win worth $63.2m from Phileap Pte Ltd, for the construction of Lincoln Suites, a condo project off Newton Road. With this new contract win, the co’s orderbook now stands at approx $388m. Work on the site commenced on 11 Mar and will take approx 27 mths.


Hyflux: Signed an Memorandum of Understanding with Mizuho to explore financing structures for water projects and for Hyflux to tap into Mizuho's customer network for business partners. Separately, Mizuho will provide US$26.0m to partially finance the construction cost for the Hyflux Innovation Centre due for completion in 2012.


Swissco: Has ordered 3 OSVs for $27m which will be built in Guangzhou, China, and are expected to be delivered to the Group by the end of 2012. These OSVs are expected to be deployed in the Middle East supporting the O&G sector. Co owns a fleet of 38 OSVs and expects 5 more in 2011 and with this order, another 3 in 2012. Co notes that even though charter rates have not fully recovered from 2008's crisis, co is positioning itself for recovery.

Friday, March 25, 2011

Q&M Dental

Q&M Dental: CIMB maintains Buy with TP$0.83. Co now has 40 dental clinics and 2 centres up from 37 clinics and 1 centre in 09 and is undervalued with mkt not pricing in franchise and overseas expansion plans. Co also has intentions to separately list Chinese dental operations…

House notes that FY10 rev was up 29% yoy and net profit improving despite business expansion costs, together with an 80% div payout ratio makes it attractive. Co is valued at 17x CY12 P/E cheaper than peers and positives include its strong recurring earnings and potential intl expansions.

Oceanus Grp

Oceanus Grp: Up 8.2% at $0.265, in strong vol of 6.8m shares, with no newsflow from the world's largest land-based abalone producer, which also runs a chain of abalone-based restaurants, since it announced a change of CFO on 16th Mar. An analyst from a foreign house tip that rise most probably has nothing to do with any fundamental changes. Add that previously the selldown was slightly overdone, and what we have now is a healthy technical rebound….

Oceanus fell 33% from 21st Feb when it posted a profit warning for the 4Q and FY10, to a low of $0.190 on 17th Mar; since then it has put together six straight sessions of gains including today. The analyst add that the strong showing has nothing to do with the Japanese situation at all, amid worries over radiation contamination to Japanese food exports. Orderbook quotes suggest $0.270 resistance.

SG Property

SG Property: JP Morgan Upgrade sector to Overweight from Underweight. Quote sector as a ‘Safe haven at reasonable prices’. Note that attractive valuations for large cap developers CaptiaLand and City Dev, trading at 30% discount to RNAV, similar to that for small cap players AllGreen, GuoccoLand and Wingtai…..

Expect potential capital management catalysts. Upgrade City Dev to O/W from Neutral and Allgreen to Neutral from U/W. Downgrade Wheelock to U/W from O/W. House also like S-REITs for strong div yields and stable growth prospects, but recommends exposure to large cap developers such as CapitaLand and City Dev on a 12mth view.


Construction: DBSV has a Comprehensive construction sector report. Note that Construction demand forecast for 2011 revised up, and Civil engineering works will be main driver in 2011 while private residential demand will slow down. Note that rising raw material prices and higherwages/ levies will be the key risks, but can be managed…

House Top picks are Tiong Seng ($0.31 TP), Yongnam ($0.37 TP) and Pan United ($0.62 TP); downgrade OKP ($0.63 TP) to HOLD on lower growth expectations; avoid Tat Hong ($0.83 TP)

SG Banks

SG Banks: CIMB maintains OverWeight on SG Banks, with unchanged TP and stock ratings. House believe wealth-management services will prove an important differentiator for SG banks in the years ahead. Benefits are manifold:
1) business provides banks with strong pool of sticky deposits;
2) fees could grow in a less-capital-intensive manner;
3) SG banks can expand business beyond constraints of geography; and
4) in the Asian context, Asian banks can become stickier with key clients….

DBS remains House top pick as it is most sensitive to an eventual interest-rate rise and for its efforts to build up its Treasury & Markets, and private-banking businesses.

Yang Zi Jiang

Yang Zi Jiang: CLSA Upgrades to UnderPerform from Sell with $1.95 TP, citing potential capacity as concerns. Highlight that grp’s plans to triple yard capacity in next 5-7yrs carry significant risk of over-capacity, even after factoring in its coup of 22 10,000 TEU containership orders from Seaspan (to be finalized soon). Add that current bulk and container outlook, even post Japan quake, are not supportive of a surge in new orders. House remains cautious on grp given current headwinds.


Wilmar: IIFL reiterate Buy with $6.63 TP. Note that grp is trading at an attractive price and it is time to look past FY10 to a 41% earnings rebound in FY11. House add that Grp’s core strengths, top-quality assets base and unrivalled brand equity are as strong as ever and remains a top pick as a long-term Asian consumer play. Co. also has ample liquidity and low financial risks, and has no needs to raise (dilutive) equity capital.


Venture: Citi maintains Buy, after Key takeaways from Client Conference Call. Note that minimal near-term impact to grp following Jap earthquake, and expect Inventory levels to remain high, with Logistics and power in Jap more of an issue rather than plant destruction. Expectations for FY11 remains unchanged and house continue to like grp for its strong net cash position $239m as at FY10 and strong div yield of 6%....

Similarly, UOBKayHian maintains its Buy Call on grp with $11.88 TP, citing that grp provides a defensive play on a recovery in the tech sector due to its high-value high-mix business model, consistently positive free cash flow, cash-rich balance sheet and attractive dividend yield. Ex-cash FY12F P/E of 8.8x looks undemanding against 2012F EPS growth of 14.8%.

ST Eng

ST Eng: Marine unit has received 2nd notice of termination from Louis Dreyfus Armateurs (LDA) to reiterate termination and demand refund of $129.0m plus interest...

ST Marine has in turn issued a letter to LDA stating that its contract termination is a breach and that ST Marine is terminating the contract on the basis of LDA's breach.

xxx Anwell xxx

Anwell: Auditors highlight risk of bankruptcy, drawing attention to co's financial statements, which had incurred a HK$434.4m loss or S$70.2m loss for FY10. Highlights as at end'10, grp's current liabilities exceeded its current assets by HK$402.3m, and may result in difficulty in continuing operations.


GentingHK: Results slightly below expectations despite turnaround. Reported net profit of US$67.9m from loss of US$21.5m in 2009 on improvements from Star Cruises, NCL and full yr contributions from Resorts World Manila. Occupancy from Star Cruises was lower from 91% to 83% on deployment of Star Pisces in Feb…

…There may be a delay in the IPO of Norwegian Cruise Line from 2011 to 2012 due to higher oil prices and mkt conditions. Go will continue expanding facilities in Resorts World Manila in the yr ahead...

Macq reiterates Outperform with TP US$0.56 highlighting disc to Macau peers. UOBKH dowgrades to sell with TP at US$0.37 from US$0.40 prev. Our in-house maintains Buy at US$0.54


F&N: Annouced that its service residence unit, Frasers Hospitality has launched its 4th property, the 72-unit Fraser Residence Orchard, bringing No. of service apts under mgt close to 6k, a step closer to its target of 10,600 by 2012. This yr, unit will open 12 new properties in China, India, Qatar, Turkey, Hungary, with 13 properties tipped for next yr. Altogether, 4600 service apts will be added by 2012. Frasers Hospitality's properties globally has more than 80% occupancy rate.


SPH: Annouced that its 60% owned Clementi Mall is fully leased ahead of project completion, with half of its tenants opening for business today and remaining tenants following soon. Devt has 190k sqft of retail space. NTUC Income Insurance and NTUC FairPrice holds 20% stake each in the mall. We note that majority of street has a Neutral call on grp with a mean TP of $4.33. At current price, grp trades at 15.3x FY11E P/E vs historical average of 14x, suggesting that grp is fairly valued.


SATS: Deutsche maintains Buy with $3.80 TP. Note that house met mgt and got an update on the business and Jap exposure. Mgt commented that flight suspensions are starting to emerge, yet, JAL which accounts for TFK (SATS newly acquired Jap inflight caterer) is operating flights as per normal. Given unpredictable situation, mgt did not provide any specific assessment of potential impact on TFK, but gave guidance for TFK to be earnings neutral to SATS over FY11/FY12….

House note that grp’s share price has fallen 9% over past 3 mths vs STI 3% and is trading at 13.6x Forward P/E, a discount to its 3yr peak P/E of 17.8x. Add that while there may be near-term challenges for its Jap operatons, grp’s long-term growth story still remains in tact. Based on house estimates, TFK only accts for 20c/share or 6% of SATS SOTP.


NOL: Deutsche maintains Sell with $1.66 TP. Note that house recently met with mgt, who note that rate pressures continue, esp on the Asia-EU Trade, despite load factors that are close to 100% as vol picks up post Chinese New Yr. At current Spot Asia-EU Rates, grp thinks that the whole industry is losing money. NOL is still looking to place orders for new build vessels because they think it will lower their cost base and help them replace charter-ins when they expire….

With the rise in fuel prices and falling rates, house tips 1Q11 results to be depressed, and expect transpacific negotiations to be challenging for the liners. House TP is 24$ below consensus.

SG Market

SG Market: Spore shares may rise, taking strength from positive session on Wall Street & higher regional bourses. Market appears to be tired of all the bad news & risk appetite appears to be returning with the STI filling the 3010-3020 gap & breaking past its 50-day moving average at 3035. A push to close the next downward gap at 3060-3070 would pave the way for a test at the Mar high of 3113 Support is now shifted to 3025, followed by 3010 & 3000.

3 S-chips biting the dust - China Gaoxian now asks for trading susp; auditors flags Anwell’s ability to continue as a going concern & Scorpio East requests for a trading halt. Tech stocks EDMI & SMB United also announced trading halts. Others stocks in focus include Moody’s highlight that industrial S-Reits' expansion into China poses risk & ST Engrg receiving termination notice & damages from Louis Dreyfus for botched ship building job.

Thursday, March 24, 2011


Venture: UOB Kay Hian maintains Buy Call with $11.88 TP. Note that after meeting with mangement, grp tip minimal impact from Jap earthquake. Venture should not be unduly affected as it was already holding a high level of inventory prior to the earthquake as it had experienced component shortage in 2010. Overall, EMS players will have to rely more on alternative sources of components outside of Jap…..

Add that shipment to Japan not sizeable. Venture focuses on enterprise and industrial applications. Its shipment to Japan is very small given that there are no new factories in Japan. Venture’s customers are predominantly US-based MNCs. Add that grp expecting strong pipeline of new products…..

Conclude that Venture provides a defensive play on a recovery in the tech sector due to its high-value high-mix business model, consistently positive free cash flow, cash-rich balance sheet and attractive dividend yield. Grp trades at Ex-cash 2012F P/E of 8.6x which are undemanding against 2012F EPS growth of 14.8%.


Ausgrp: Private placement of total 64.3m shares approx 13.7 of enlarged share capital at $0.306 to 4 separate companies. The issue is at 10% disc to $0.34 to VWAP of 23 Mar. The purpose is to reduce borrowings and to raise funds for working capital purposes. Placement is conditional on approval from SGX.


Yanlord: China’s State Council has approved plans to start trials for tax-free shopping on Hainan from Apr 20. Tax-free shopping will be available to all foreign & domestic air travelers with the eligible purchase limit set at Rmb5,000. This will be a boon for tourism on the island & benefit developers such as Yanlord, which jointly acquired 2 adjacent land parcels in Hainan in Jan 10 for Rmb2.1b with Spore based Jing Hope Holdings.

The land, which sits on Hainan’s picturesque Hai Tang Bay, has been slated for devt of a 5-star hotel & serviced apts with a planned GFA of 155k sqm & marks Yanlord’s maiden foray into Hainan’s tourism & hospitality sector. Hainan is the China’s largest SEZ & its only province within the tropical climate belt. Fondly referred to as the “Hawaii of China”, the Chinese govt intends to position Hainan as an int’l tourist destination of choice by 2020.

Under this plan, Hai Tang Bay has been earmarked as a new focal devt area with support from the provincial & municipal govts for reputable developers to partake in its devt. The Hai Tang Bay area has attracted many int’l hotel groups such as Shangri-la, Sheraton, Sofitel, Conrad, Grand Hyatt, Fairmont, Intercontinental, who will begin devt of resorts & hotels from 2010 to 2013. Valuation is appealing with stock trading at almost 50% discount to RNAV. Immediate resistance is at $1.49 with support at $1.42.

Keppel Land

Keppel Land: Trading Central has a Technical Buy Call for Keppel Land, aiming at a short term rebound. Note that the RSI is above its neutrality area at 50, yet MACD is negative and above its signal line. The MACD must break above its zero level to call for further upside. Note that stock is trading above its 20 day MA ($4.24) but under its 50 day MA ($4.36). An alternative scenario is that a downside breakout of $4.15 would call for $3.95 and $3.84….

Tips key Resistances at $4.84, $4.72 and $4.60


Goodpack: CIMB has Technical Sell Call. Note that the stock has fallen below its uptrend channel support in mid-February. It fell in 5 waves, suggesting that the trend has changed. Add that the current run is likely only a rebound and prices are headed for a host of resistances. Its MA, Fibonacci retracement levels as well as a gap resistance are all within the S$1.94-2.10 range…..

Although its MACD has just confirmed its golden cross, think that the upside could be capped. RSI is still rising, suggesting that there is still room on the upside. Continue to expect higher prices ahead but would prefer to be on the sell side, as there are no decent positions to put one’s stop loss if one was buying. Selling on the other hand, a stop could be easily placed above the $2.10 levels. Recommend traders to sell into strength as think that prices could soon fall beneath the recent low of $1.68 in the next few mths.

First Resources

First Resources: CIMB Has technical Buy Call. Note that the stock broke out of its bullish wedge pattern recently and built a base just above it. Prices kick up yesterday, suggesting that the next leg up is taking place. Its MACD has confirmed its golden crossover and its bullish divergence signal. Its RSI is now slowly trudging higher, but is still in neutral territory….

Recommend aggressive traders should attempt to buy now with a stop placed below the recent swing low of $1.21. This short term run should take prices towards $1.36, at a minimum. It could even reach $1.41-1.46 levels.

CapitaMall Trust

CapitaMall Trust: UBS upgrades to Buy TP$2.06. Notes it has corrected -8.2% YTD vs -5.9% for SREITs, triggered by concerns on SREIT incumbents being a funding source for the upcoming IPO pipeline; and rich valuations with yields at -1 std dev. House believes funding concerns should be alleviated by deferment of potential listings…

Current correction is a good entry point for exposure to a large cap,well-managed retail portfolio, particularly in an environment of higher inflation expectations. In FY10, CMT achieved positive rental reversion of 6.5% and expect growth to continue at a similar clip. The risk of convertible bond (CB) holders exercising their put options on 2011 DPU impact is a one-off and should not distract from underlying fundamentals. Indicated yield is currently at 4.7%

Otto Marine

Otto Marine: CIMB upgrade to Netural with $0.25 TP. Note that GC Rieber has agreed to maintain the shipbuilding contract in favour of Aries AP. All terms of the shipbuilding contract remain unchanged. No impact to earnings estimates for FY11-13. Note that Otto has underperformed the FSSTI sharply. House deem that value has re-emerged.

BW Offshore IPO

BW Offshore IPO: Norway’s BW Offshore, the world’s 2nd largest FPSO owner and operator, has started the process to list in SG and will announce details of the plan next week. Firm’s dual listing plans are likely to benefit from the existing agreement between OSLO and SGX. Various sources said that the Co. has started the process for its dual listing and is expected to happen by end of this yr….

DNB Nor note that outlook for energy mkt and grp’s positions remain strong, with spending in the offshore oil explortation tipped to hit record highs this year (Estimat spending of US$500b). We note that the listing could potentially open SGX doors to future O&M listings from EU, as the number of listed EU O&M players (e.g STX OSV) on SGX increases, which could potentially improve valuations of local peers.


StarHub: Macquarie downgrades to Neutral from O/P and reduce TP to $2.72 from $2.97. Note that as a yield play, grp still offers an expected div yield of 7.5%, which is attractive to investors seeking a safe haven. However, see limited upside until evidence of lower acquisition costs and/or a sharp take-up of the NGNBN services. Div sustainable but minimum upside expected…..

Prefer M1, rate O/P with TP of $2.78 to StarHub because of a combination of its cheaper valuation and stronger balance sheet. Grp trades at a slight premium of 14.1x 2011E PER vs M1’s 13.3x. also M1 has a lower level of gearing embedded in net working capital and other liabilities.

Baltic Dry Index

Baltic Dry Index: Advanced to an 11-week high on higher rents for iron-ore carriers. The gauge rose 1.4% to 1,565 points. Hire rates for capesize ships, the biggest tracked by the index, led gains with a 5.8% climb. Pareto Securities however noted that gains could be limited, due to insufficient fresh inquiry to match vessel supply….

Meanwhile, we note that beneficiaries of a rising BDI include Mercator Lines, Courage Marine and STX P.O and Cosco, while Co’s tipped to be negatively affected by a high BDI would include CWT and Goodpack, which could see their margins depressed.


Eratat: Co has confirmed orders of up to Rmb40m following launch of Premium Summer series in Feb 2011 in addition to Rmb477m to be delivered from Jan to Jun 2011. As of 31st Dec 2010, co has 9M rev of Rmb787.6m. Based on the amts disclosed, rev is likely to be higher than revenue in 1H2010 of Rmb512.4m. Co trades at current P/E of 4.2x vs hist avg of 3.3x,. SIAS issued a Buy with TP$0.48 early March

CS Strategy

CS has Strategy Report. Note that Singapore Tourism Board (STB) is looking for record average tourist spending, projecting a record 12-13m visitor arrivals in 2011, 3-12% growth over 2010 and tip tourism receipts to jump 17-28% in 2011 to S$22-24b. Key tourism stocks that are positive would include Genting SP, SIA, SATS, CDLHT, AirAsia and ComfortDelGro.


Biosensors: Nomura reaffirms Buy with $1.50 TP. Note that peer MicroPort 4Q10 earnings reaffirms robust vol growth dynamics. Note that 2011 market guidance in-line with MicroPort's management forecasting 15-17%, with MicroPort believing that any new local entrants will not impact the market dynamics…..

House expect robust market dynamics for incumbents, backed by positive guidance provided by both MicroPort during their 4Q10 conference calls. Reaffirms positive view on the robust DES market dynamics in China for the local incumbents and reaffirm buy on BioSensors.


SIA: Richard Branson is considering a sale of his 51.0% stake in Virgin Atlantic, as well as options for the airline's 288 takeoff and landing slots at Heathrow are 3% of the total. A buyer wld be able to use the slots to add lucrative flights to US and Asian business mkts…

Heathrow slots are so valuable that Continental Airlines paid US$209m for four pairs 3 yrs ago. SIA owns a 49.0% stake which it acquired in 1994. SIA's spokesman commented "no decision has been made about an immediate divestment of our stake".


ChinaGaoxian: Co is in 3rd day of trading halt and will have to issue a statement explaining reason for halt by end of today or convert the halt to a trading suspension. BT has an article which highlights that it would be surprising if there were accounting irregularities due to 1) co only listed in Sept 2009 and 2) co has recently went through a round of scrutiny from its KDR listing. However, it still does not rule out any possibilities.


SaizenREIT ivestment of Johnan Building to a priv investor for JPY312.6m (S$4.9m). The building is located in Fukuoka and comprises 24 resi units, 6 commercial units and 21 parking units valued at $5.0m.It contributed 0.9% of annual rev in June FY2010. Proceeds will cont to be used to pay off YK Shintoku loan which is an outstanding $75.8m after this divestment…


GentingSP: Deutsche maintains Buy at TP$2.43. With recent correction co now trades at low-end of hist EV/EBITDA at 11x, and is a 30% disc to Macau peers (15-16x). Co is fundamentally sound with a positive operating environment with an expected catalyst from seasonally strong 1Q. Co derives approx 60% of VIP play from North Asia and intends to expand VIP table capacity by 33%. Junket approvals are also expected to come in in 2H2011…

House notes high amt of receivables but is not overly concerned due to nature of direct VIP business, operations still in relatively new stage and positive $1.4b operating cash flow. Of interest, parent Genting Bhd has also recently increased its stake by 0.2%.


UMS: May rise and test YTD high of $0.625 after it says it received in-principle approval from SGX for the listing and quotation of up to 110m new shares in conjunction with its proposed dual listing on Korea's KOSDAQ Market. However, further upside may be limited with the stock up around 25% since UMS announced early Oct it was seeking a listing on a foreign exchange…..

Co, says it will now seek shareholders' approval to issue 110m new shares which will underlie 11m KDRs, which would amount to around 24.24% of enlarged share capital. UMS says the move will enlarge its equity base and also raise its profile in Korea, a major semiconductor manufacturing center globally and facilitate its business expansion and possible M&A. Grp will use 80% of the net proceeds to invest in plant and equipment.


GLP: Beijing Int'l Airport will begin work on a second airport in China’s capital this yr, with ops scheduled to begin in 2016, according to its General Manager. This could position GLP, via its 53% stake in Airport City Development, for logistic expansion plans in the top tier city.


Ramba: Co. announced that its first prospect to be drilled in the ‘Lemang block’ is the Akatara prospect, targeted to ‘spud in’ in Aug11. The total budget for Akatara-1 is US$10m. An independent evaluation of prospective resources estimates at Akatara is expected to be completed in Apr this yr. According to preliminary indication, the gross mean prospective resource is estimated at 147.2m/barrels of oil…..

CEO commented that grp is very bullish on the Akatara prospect given the preliminary results and could be a game changer for Ramba, especially considering that the block has altogether 6 ready to drill prospects and 21 leads…..

Shareholders are however advised to exercise caution when trading Co’s shares, as exploration and production of oil and gas are a very risky undertaking. There is no certainty that the prospective resources estimates will be discovered, or that it will be commercially viable.

SG Market

SG Market: Spore shares may open higher tracking gains on Wall Street & firmer regional bourses. Having nosed above the 20-day MA at 3021, the STI may attempt to close the 3058-3070 gap set on 11 Mar. However, gains could be limited after the STI''s 3.0% rise over the last 3 trading sessions & lingering Mid-East concerns with oil prices surging.

Watch out for UMS Holdings after it gets the nod from SGX to list KDRs. Saizen Reit could also see some action after it says it has now managed to view all 146 of its Japan properties, which are reported to intact.

Wednesday, March 23, 2011

China Railway/Midas

China Railway/Midas: China's state auditor has disclosed that millions of dollars in funds for the construction of a high-speed railway linking Beijing & Shanghai were embezzled last year. The revelation follows last month's sacking of railways minister Liu Zhijun, who allegedly pocketed more than Rmb800m in kickbacks linked to contracts for the expansion of China's high-speed rail network while some construction companies & individuals siphoned off Rmb187m.

Other problems uncovered included improper bidding processes & the filing of fake invoices. Work on the 1,318km line costing Rmb221b started in Apr 08 & is expected to open in Jun. China has invested heavily to expand its high-speed rail network from 8,358 km as at end 2010 to 13,000 km this year.

After spending over $240m on capacity expansion over the past 3 yrs, any delays in new contract wins may not auger well for Midas & we hope the company would not be implicated in the ongoing corruption scandal.

Genting Sp

Genting Sp: Latest notification just in show that its parent Genting Overseas Holdings has bought shares on 1 Mar (11m @ $1.93 & 15 Mar (16m @ $1.90). Stock has broken above its 20-day MA at $1.94 & penetration of its $2.03 resistance would negative its recent downtrend. Momentum indicators, Stochastics turnng positive while MACD & ADX poised to trigger buy signals.


Mewah: Standard Chartered Initiate Coverage on Mewah with OutPerform rating and $1.10 TP. View the decline in Mewah’s share price from a high of $1.20/sh on 18Jan11 as misplaced and overdone. Add that grp is not a palm oil price play and asset-less earnings exposure to MENA. Estimate only 10% exposure to MENA, and capture this exposure by applying a 10% discount to theoretical valuation….

Note that grp is the #2 refiner in Malaysia (14% share), the #1 branded consumer pack entity in West Africa, and an important alternative to an industry increasingly populated by fully integrated entities. Despite operating in the palm complex, Mewah’s earnings and growth, in contrast to plantation companies, are not price dependent. Vol, structure and mix are key, with IPO funding gives it the capacity to improve on all fronts.


Olam: Following Nomura and Credit Suisse Buy Calls yesterday, Deutsche maintains Buy but raises TP to $3.60 from $3.20, citing strong growth prospects and appealing valuations, while grp’s diversification limits exposure to high-risk countries. At current price, valuations are compelling, with grp trading at 14x Forward P/E vs its historical average of 19x ….

Meanwhile, Olam CEO highlights that tackling commodity speculation is not the solution to food price spikes which are in fact the result of policy failures by govts. Add that commodity futures mkts play a huge role in price discovery, a huge role in hedging your exposure. Highlight that the biggest crisis we're going to face over the next 40, 50 yrs, is going to be food, given its links to other major devt issues such as energy, water and climate change.


MapletreeIndTrust: Citi issues note following US roadshow maintaining Buy on MIT with TP$1.25. Co’s portfolio remains under-rented due to 5% per annum rental cap on non-biz park space but has renewed 99.3% of its leases at the maximum. 2nd phase of JTC’s divestment of flatted factories in 2H11 offers acquisition opportunities for co...

House notes tenant CS will move out of The Signature in Dec 2012 and contributes 2.2% of total rental rev. MIT is to seek replacement tenants over the nxt 21 mths. Citi remains sanguine on mgmt and relatively high expected yield of 7.9% in FY2012 and 8.6% in FY2013.


Swiber: Follow up. +2.6% at $0.805 after securing various contracts worth US$27m. DMG note that YTD 2011 new orders hit US$186m, 53% of house FY11 forecast. House makes no changes to its EPS estimates and $0.85 target, and maintains its Neutral call, remaining lukewarm on stock, as believe earnings will be unexciting this yr due to poor order flow in 2H10. Mar peak of $0.830 may cap in the near term….

We note however that OCBC and CIMB maintain their Buy call on counter with $0.94 and $1.01 TP respectively.


K-REIT: Daiwa upgrades K-REIT to Hold from Sell following its unit-price correction over the past two mths. House note that REIT looks fairly valued now, relative to its new 6mth TP of $1.30, vs $1.35, with yields of 4.9%-5.6% on 2011-13 DPU forecasts. House revises down its DPU forecasts by 4.7% for 2011, 5.1% for 2012, and 2.2% for 2013 to include associate-level borrowing for ORQ, which house had not factored in following grp’s 4Q10 results….

On K-REIT's acquisition of more floors in Prudential Tower, Daiwa add that although it is marginally DPU-accretive with rental support and debt financing, the acquisition does not look like a bargain. Add that risk to its rating would be a disruption in the office sector recovery, while catalysts would be spot-rent rises above 10% for FY11


Property: DBSV has property report. Expect economic factors and improving property fundamentals to underpin retail performance. Suburban rents to trend upward and Orchard Road rents stabilizing. Prefer suburban plays. House Top picks are Fraser Commercial Trust (TP $1.73, 5.5-5.8% FY11 Yield) and CapitaMall Trust (TP $2.06, 5.4% FY11 yield)….

House prefer retail sector that are exposed to the suburban sector, as it is more resilient to
external shocks while rising local wages and increasing purchasing power would enable consumers to boost retail spending. Continue to like FCT for its defensive earnings quality given exposure to the domestic suburban retail sector, completion of AEI at Causeway Point and impending acquisition of Bedok…

Like CMT as it is the mkt leader in SG retail property space. Completion of AEI works at Raffles City will boost earnings this year, while redevelopment of JCube and The Atrium AEI, scheduled to reopen over the next two yrs should provide a continual source of earnings growth.


O&M: Nomura has O&M report. Quote that ‘it's raining rig orders’, and maintain a bullish stance in 2Q11F. Expect KepCorp and SembMarine to continue their mkt outperformance, underpinned by a more pronounced rig-building cycle upturn with the potential return in semisub order momentum….

Reaffirm Buy picks: KepCorp (top pick, undemanding valuations), SembMarine (capacity upside from PPL), Yangzijiang (technological breakthrough from potential US$2.2b order). Tip continued recovery in offshore rigs, production vessel and shipbuilding orders for SG and China shipyards to provide positive momentum over the next 6-12 mths.

SG Banks

SG Banks: IIFL has banks report. Note of step up in growth and profitability. Estimate that growth, credit quality, and profitability of Spore banks will be significantly better in the yrs ahead, vs last decade or the past 5yrs. Expect SG banks to deliver 16% NP CAGR, and ROEs will rise back to 2006-07 peak levels, when Spore banks traded at 1.6-1.8x forward P/B vs current 1.1-1.4x 2011 P/B. Maintain positive stance, with DBS & OCBC as preferred picks.

SG Reits

SG Reits: Credit Suisse has REITs report. Expect M&A to continue driving office REITs. Note of recent acqusitions, e.g Alpha Investment Partners and NTUC Income, who jointly acquire Capital Square for $2,300 psf and K-REIT has raised its stake in Pru Tower from 73.4% strata interest to 92.8%, at $125.1m and Lucrum Capital, who sold OFG to a private group for $2,520 psf. Believe M&A could continue to drive momentum for: K-REIT, CCT and Suntec.


Hyflux: Credit Suisse maintains O/P with $3.00 TP. Expect strong order momentum in Asia and Middle East concerns to fade. Note that grp has secured US$76m of contracts in China YTD, and management expects strong order momentum to continue. Co. expects ‘low teens’ project IRR for its $890m investment in the second desalination plant at Tuas. Add that exposure to MENA has been reduced and continue to see strong growth prospects for grp.

Genting SP

Genting SP: UBS Upgrade to Buy from Neutral with $2.30 TP. Note that grp is a bona fide play on wealth creation in China. Believe RWS will continue to benefit from strong VIP growth out of North Asia (esp China) Expect VIP volumes of US$18-20b/qtr at RWS in 2011. Believe the increase in credit risk profile is manageable and collections have been solid…..

Add that RWS collected more than $1bn from VIP customers in 2010. Conclude that China VIP growth, capacity expansion in 2012, a net cash position and potential for new projects together make GENS attractive stock. YTD Genting SP has underperformed Macau by 25% & STI by 7%.


Strategy: UBS has strategy report. Note that SG stocks Oversold on global growth fears and recent underperformance of Spore stocks reflects heightened fears of a global slow down, as SG itself is not particularly exposed to turmoil in MENA, high oil prices or the crisis in Jap. Recommend a strategy combining high-quality yield stocks with oversold blue chips likely presents the best opportunities……

Yield stocks key picks include Ascendas REIT, CDL HTrust, CMT and SingTel, while Oversold blue chips are: OCBC, Genting SP, Olam and KepLand which could present tactical value as respective near term business case is intact. Think SIA and CapitaLand are cheap but may lack re-rating catalysts.


CPO: Nomura has CPO report. Cite the great buying fair for food exposure, and recent correction in soft commodities and corresponding equity underperformance provide an attractive broad-based BUYing opportunity. Crude oil support and any prospects of QE3 should prevent commodity prices from going into free-fall as global inventories are at multi-yr lows…..

Continue to like planters (IFAR, Sime and LonSum), Olam, Noble, Mewah, Indian agri stocks, and think earnings will be near-term catalysts. US planting report may provide the fillip to palm oil as soy may lose the acreage battle. Note that Investor’s top picks seemed to be KLK, IFAR and London Sumatra. House also interested in niche plays like China Minzhong and GMG, as well, with broad consensus positive on rubber. Neutral on Wilmar.


CDL: JV with TID has won the top bid for a EC plot in Choa Chu Kang for $170.1m or $320.9 psf. The bid for the 99-yr plot seen as supporting the pricing for another upcoming EC project to be launched in a few mths. The tender was 7% higher than the 2nd bid by Fraser Centrepoint out of a total of 6 bidders but was not excessive compared to Esparina EC in Buangkok which went for $315psf...

Site is 530.1k sf gfa within walking dist from Choa Chu Kang MRT and can accommodate 490 units. Breakeven is est at $660psf by Deutsche implying a 13% margin based on Esparina’s ASP. Co’s current resi landbank is now 3.9m sf up 7% after the acq. Deutsche maintains Sell on cautious view to residential mkt with TP$10.67


Olam: Following Nomura and Credit Suisse Buy Calls yesterday, Deutsche maintains Buy but raises TP to $3.60 from $3.20, citing strong growth prospects and appealing valuations, while grp’s diversification limits exposure to high-risk countries. At current price, valuations are compelling, with grp trading at 14x Forward P/E vs its historical average of 19x ….

Meanwhile, Olam CEO highlights that tackling commodity speculation is not the solution to food price spikes which are in fact the result of policy failures by govts. Add that commodity futures mkts play a huge role in price discovery, a huge role in hedging your exposure. Highlight that the biggest crisis we're going to face over the next 40, 50 yrs, is going to be food, given its links to other major devt issues such as energy, water and climate change.


Swiber: Continues its recent contract wins, as it annouced that it has secured various contracts worth US$27m, for the charter of its offshore construction and support vessels. These charter contracts from leading oil majors and other oil and gas contractors include the provision of AHTS vessels, flat top barges, and construction barge…..

Grp believe that stable oil prices in the long run will motivate increased exploration and production to meet the demand for energy especially in the Asian region and emerging countries, which will keep grp’s fleet utilisation high….

We note that contract is the 3rd contract win for 2011 and brings orderbook to approx US$866m vs FY10 Rev at US$469.7m, under pinning earnings visibility till 2012/13. CIMB has Outperform Call on stock with $1.01 TP, with an order win assumption of US$200m (93% achieved) for 2011. Given recent orderwins, we could potentially see further rerating of share price from other houses. At current price, valuations appear compelling with grp trading at 8.4x FY11E P/E vs Peers Simple Average of 12.6x

SG Market

SG Market: Spore shares are likely to open flat to slightly lower after a weak session on Wall Street on thin vol, suggesting little conviction. While the STI regained the 3000 ground for the 1st time in 6 sessions, there appears little market conviction that the Mid-East crisis is over with renewed worries about the EU debt issues. Commodity & oil & gas plays will remain in focus. STI support is tipped at 2950 while resistance is at 3020

Tuesday, March 22, 2011


Yongnam: CIMB maintains Outperform with $0.40 TP. Note that with a healthy pipeline of projects for bidding and measures in place to manoeuvre cost challenges, remain upbeat on grp’s 2011 prospects. No change to our order-book assumptions, EPS estimates or TP of $0.40, still based on 8x CY12 P/E, or a 20% discount to its mid-cycle multiples….

Continue to like grp for its healthy order book of $450m as at end-Dec 10 and undemanding valuations against peers (5x CY12 P/E vs peer average of 10.6x). Stock catalysts are expected from contract wins for projects like the MRT Downtown Line and Singapore Sports Hub. Co. is gunning for $1.4bn of projects this yr.

SG Strategy

SG Strategy: Citi has comprehensive Strategy report for SG. Not that strong growth and loose monetary conditions have propelled price expectations and policy makers have started to weigh in as they grapple with inflation. House note that more downgrades than upgrades have been registered recently, which is likely a normalization of earnings expectations as SG’s economy adjusts to slower rate of growth of 5.5% in 2011 ….

Note that current valuations are attractive and economic cycle remains positive - Impact from the Japanese earthquake has dampened the STI Index, which has declined 8% YTD and now trades at 13.5x 12-mth forward P/E, below mean of 15x P/E and -1 deviation away from mean. Surveys of growth indicators remain supportive of an intact growth phase, which implies that current market weakness is an attractive entry point …..

House likes big cap stocks that are mid-to-late economic-cycle plays and key top picks are rig builder KeppelCorp as a proxy for rising demand for replacement rigs; DBS as a representative of banks here that feature a strong equity base and have diversified earnings base; and GLP and SIA on attractive valuations. Also see value in real estate developers, such as WingTai, which is near the bottom end of its trading range, similar to past crisis points.

Monday, March 21, 2011

ST Eng

ST Eng: Has received notice of termination from Louis Dreyfus Armateurs (LDA) for shipbuilding contract of a passenger ferry contracted in Jul 2007 for total price of S$179.0m. LDA alleges that there is a delay and even if tendered for delivery, there will be a deficiency of the ferry capacity. ST Eng will be req to refund milestone payments of $129.0m plus interest and the liability for damages is capped at 10% ($17.9m) of contract price...

Co has referred this case to its legal advisers. UBS issues a note maintaining Neutral with TP$3.36. House expects profit recognized to be reversed (est 5.5% of 2011 net profit) but could still sell the vessel to a 3rd party.

Singapore Post Holdings

Singapore Post Holdings: CIMB has Technical BUY Call. Note that the stock fell below its long term support trend line back in Nov. House had expected a deep correction but instead prices
moved sideways in the last 5 mths, forming a triangle pattern. Note that MACD has been swinging below and above the zero line, in line with the triangle pattern and RSI, has also moved sideways without reaching the overbought or oversold region….

House think it is a good time to switch camp to the bulls as a triangle means that the uptrend from the Mar09 low is not over. Recommend aggressive traders may choose to go long now with a stop placed below $1.13. A breakout above $1.19 would likely see prices head above the recent high of $1.25 towards $1.28- 1.30 next. Falling below $1.13 would likely mean that the stock is still in correction mode.

Golden Agri

Golden Agri: OCBC maintains Buy with $0.88 TP. Note that weaker CPO prices factored in and grp has seen its share price coming under some pressure of late, easing some 9.2% from its recent $0.705 high. Add that house have already taken the impact of softening CPO prices into assumptions, given that base CPO price assumption remains at US$950/t for FY11, vs the current price of US$1108…..

Believe that any sharp tumble in CPO prices is unlikely, given the still rising crude oil prices. Short-term market volatility notwithstanding, remain sanguine about the growing demand for CPO based products from rapidly developing countries such as China, India and Indonesia over the medium term.


Singtel: Deutsche maintains hold with $3.31 TP. Expect grp to be range bound, Note that subscriber share in Bangladesh drops to a new low. Add that view on how grp approaches and manages this non-performing asset as potentially indicative of STel's wider international strategy. Concerned that grp's future strategic options with respect to Bharti.


SPH: Deutsche maintains Buy with $4.70 TP. Note that SPH's 2Q11 ad revs likely in-line. Core P/E at 12mth low. Feb's total ad expenditure fell by 4%($5m) to $144m. Estimate SPH booked S$179m 2Q11 advertising revenues, up 8% YoY, YTD, with advertising revenue at $385m, forming 49% of house FY11 $783m estimates. Add that grp is an attractive investment opportunity given its stable and cash-generative media business and 6% div yield.

HL Asia

HL Asia: Credit Suisse maintains O/P, but reduce TP to $3.45 from $4.35. Expect demand growth to continue into FY11. Add that near term, sales outlook for Xinfei should remain challenging, as it pushes into Tier 1 and Tier 2 cities amid rising competition. Reduce FY11-12 earnings by 16-22% on less optimistic price and margin assumptions, but believe risk is on the upside, as demand rises ahead of expiry of China’s rural subsidy scheme in 2012…..

Add that grp has received a formal offer for its equity stake in the Karimun Island quarry, and could reap a gain. At current price, valuations appear compelling, trading at 9x P/E, vs other China white goods peers’ 15x, and diesel engine manufacturing peer Yuchai’s 10x.

Sino Grandness

Sino Grandness: DBSV initiates coverage with Buy Call and $0.60 TP. Tip Beverage manufacturing to drive growth over the next two yrs. Given the firm demand for its beverages in 4Q10, believe that beverage sales should turn in strong results for FY11F. Fair value of $0.60 is based on 6x FY11E P/E….

Believe rerating for the stock hinges on its ability to penetrate the China beverage market and deliver better-than-expected results. House forecast a topline growth of 44% for the beverage business, contributing 33% of the Grp’s revenue. Risk to forecast is the rate of grp’s penetration rate of its beverage business across China.


YingLi: IIFL initiate with Buy rating and $0.49 TP. Estimate rental income will grow by 6x and adjusted net profit by 18x over the next two years, better-positioned, with its niche focus on commercial property.


FinancialOne: 73.6% owned Grand Pacific (GP) has been embroiled in lawsuits in US by pursuing loans from borrowers in default. In one case, counterclaims have been filed by the Bobker Grp, accusing GP of using their Hale project to help Financial One towards its IPO in 2007. They alleged they were convinced to forego a lucrative sale of the project and instead partner GP to develop the project...

GP eventually became a lender and called on the mortgage notes it issued amounting to S$8.1m and the Hale project ran into financial distress. However, FIN appears to have won half the legal battle as the court in NY County ruled in favour of GP in its summary judgment last mth while the lawsuit at Westchester is still in process If co is delisted, it plans to list its Asian ops under wholly-owned subsi Chailease in Taiwan. The exit offer at 48.5c is a cause of unhappiness from minority sh/h due to disc from 2007 IPO price of $1.15. The sh/h will decide whether to accept the offer at an EGM on 29 Mar.


MapletreeIndTrust: Tenant Credit Suisse will leave its business park in 2012 when its leases are up. As of 28 Feb, firm occupied abt 1.1% of total NLA and adds 2.2% of total rental rev. Trust mgr will seek replacement tenants over nxt 21 mths and is looking to re-configure space to smaller units to secure higher rents. Co’s IPO was in Oct 2010 and is projecting an annualized yield of 6.8% at current price $1.02.

Elec & Eltek

Elec & Eltek: Proposed a dual primary listing on HKEX. Co has submitted an application to the SEHK and appointed Standard Chartered Securities as the sole sponsor for the proposed listing. Grp added that dual listing will widen the investor base of Co. and increase liquidity of ordinary shares in Co….

Co add that listing in HK is in line with grp's focus on PRC, for Co’s growth and long-term development. Shareholders are advised to exercise caution when trading in the Shares, as there is no certainty or assurance that the proposed Listing will materialize. Grp will announce any material updates when appropriate. At current price, grp trades at 7.4x trailing P/E vs peers average of 12.2x.

Hutchinson Port Holdings

Hutchinson Port Holdings: As at 1st April, grp would be added to the MSCI global standard indices effective, with a weighting of 2.7%, rank 11th. Credit Suisse note that grp’s stock price could peak within next two wks, and based on the projected div yield of 6.2%, Trust would rank among the highest div stocks within MSCI SG, behind just Starhub, Ascendas REIT and SPH…..

In other news, SGX highlight that it will promote the listing and intends to within the yr, facilitate quotation and trading of HPH Trust in SGD in addition to pricing in USD. Co added that Jap's impact on trust's business had been minimal. NRA Capital highlight that anything below IPO price is a buying opportunity, as grp is a good defensive stock, giving exposure to growing Asian trade, while yield is quite attractive…..

We note that Fri saw Deutsche Bank, acting as stabilization manager, buying in 70.5m shares between the price range of US$0.945 - US$0.975.

SG Market

SG Market: Spore shares like to open higher following Wall Street’s firmer close but any upside is likely to be limited as market remains events driven by ongoing worries over Japan’s nuclear plants, the consequences of military action in Libya & escalating tensions in Yemen on oil prices. Downside for STI seen at 2910 with immediate resistance at 2965 level. Thin corporate news flow with SGX in focus after reports that its ASX bid is likely to be opposed by Australia's govt.

Hutchinson Port made weak debut last Fri despite massive buying support (70m shares) by stabilization mgr, stock expected to remain under pressure.

Friday, March 18, 2011

Hutchison Port Holdings Trust IPO

Hutchison Port Holdings Trust IPO: Debut at US$1.01 at 2pm. CS maintains UnderWeight and recommends selling into MSCI inclusion. Tip IPO to be included by MSCI to its indices. Assuming foreign inclusion factor of 0.65 and based on estimated free float of 62%, HPHT's MSCI weighting would be 3.1% and rank 10th in MSCI Spore…..

Based on GLP and CMA, which were both included by MSCI immediately upon listing, announcement could be made Fri evening. GLP jumped 11% on debut and CMA rose 8%. GLP peaked on the 10th trading day (+18% over the IPO price), 1 day before being effectively included in the MSCI index. CMA peaked on 14th day (+27%) of its debut, 2 days after being included, yet both GLP and CMA returned nearly all their outperformance within 100 days post their debut…..

Note that based on GLP and CMA’s historical share price performance, HPH Trust’s stock price could peak within two wks of debut. We however like to highlight that Credit was left out in this mega IPO, which boasts a wide range of top global investment banks as Co-Lead managers and underwriters.

Note that based on GLP and CMA’s historical share price performance, HPH Trust’s
stock price could peak within two wks of debut. We however we like to highlight that Credit Suisse was left out in this mega IPO, which boasts a wide range of top global investment banks as Co-Lead managers and underwriters.


Yanlord: IIFL initiates at Sell with $1.18 TP. Estimate Yanlord’s selling prices will drop 20-30% in 2011-12, owing to tightening measures by the government. Property prices in tier-1 cities such as Shanghai and Shenzhen (40% exposure) and Nanjing (10% exposure) could drop 30% from current levels, which is a major cause for concern.

SG Banks

Citi has Asean banks Strategy report. Singles out OCBC as SG’s 'top gun' for next 5 yrs. Note that OCBC delivered best 5 yrs total returns, with 5 yr CAGR of 8.1%, a 3 yr CAGR of 6%, and 8.6% one-yr return, with share price rising 48% over 2005-2010 period, making it the top-performing bank in Spore…..

Add that bank was also the most defensive going into the 2008/2009 crisis and best performer coming out. Quote DBS as 'dark horse' in SG, with strong and liquid balance sheets for growth but sub-par ROA and ROE. Conclude that SG remains challenged due to low profit economics, capital ratio constraints enforced by conservative regulator, and greater need to execute on regional growth to deliver superior returns.

CLSA has Banks report. Maintain UnderWeight with UOB as top pick. Note that Siboring recovering in SG interest rates and NIM remains unlikely in 2011. SIBOR remains tied to US interest rates and there is little sign in SG or US yield curves of a rate recovery in 2011.
While bank NIMs should bottom out in 1H11, caution that recovery in NIMs remains a 2013 story. Maintain UnderWeight on SG banks, with UOB (BUY) as top pick, on relative value.


Boustead: Announced yday, co secured contract to design, build and lease to Continental Automotive a 7-storey R&D and tech centre. With a gfa of 11,250 sqm, and structural provisions for an 8th flr to support future expansion plans, project is to be completed by 1Q 2012. This follows $72m worth of contracts on Wed but will not be on co’s orderbook due to nature of lease. Orderbook stands at $262m as of Wed, 16 Mar. Co trades at P/E of 7.0x to hist avg of 7.9x.


Kepland: JV between NTUC Income and KepLand's Alpha Invtment Partners reported to be doing due diligence to purchase Capital Square. A deal cld be struck as early as next wk and mkt watchers tip the price to be in the region of sgd2300-2400/psf on net lettable area or total sgd889-927m…

Analysts expect price to be a discount to the $2400/psf that MBFC fetched due to age, location and lease remaining. CS has a total net lettable area of 386.5k sq ft comprising a 16-storey office twr, two rows of shophouses with a remaining lease of 84 yrs.KepLand now trades at P/B 1.3x close to its hist avg.

Japan Land

Japan Land: Suspended Co. loses its suit to get reprieve for unsecured creditors of its Jurong Data Centre (JDD). JDD was forced into receivership last yr after delaying paying its contractor. High Court dismissed JAL's lawsuit, challenging whether its contractor M&W is a secured creditor and if certain assets of the centre can be used to pay unsecured creditors. To date, M&W's claim against JDD is unadjudicated, and currently stands at $207m. Co. is considering whether to appeal.

SG Market

SG Market: Spore shares are likely to open higher after a positive session on Wall Street & Nikkei’s firm opening though ongoing caution amid Japan's nuclear threat could limit gains. STI index currently sits on the lower Bollinger Band, which sets it up for a nice rebound but market is now more dictated by events driven rather than fundamentals. Investor attention will be on whether there will be more worrying news from Japan. Upside resistance will lie between the 3009 to 3020 gap.

All eyes will be on mega listing of Hutchison Port Holdings Trust, which makes its debut this afternoon. Commodity-linked stocks may continue to feature after wheat, natural gas, corn, nickel, cotton, soybeans, sugar & copper rose more than 3.3% in US trading.

Wednesday, March 16, 2011

Shaking before and after Japan’s great quake

The magnitude 9.0 earthquake that rocked Japan on March 11 at 2:46 p.m. struck after a series of smaller quakes earlier in the week. Aftershocks — as many as 12 to 15 an hour — now total in the hundreds, including more than 30 of magnitude 6 or greater.

Play the timeline map below to see quakes magnitude 5 and greater before and after the strongest temblor to strike Japan in 140 years.,0,729519.htmlstory

The timeline begins two days before the great quake, when a magnitude 7.2 earthquake hit off the coast shortly before noon March 9. All times are Japan Standard. Click on any icon for more details.

— Ken Schwencke and Thomas Suh Lauder


SIA: Feb Overall Load Factor 66.9% vs 71.4%, Cargo Load Factor 61.8% Vs 65.6%, and Passenger Load Factor 75.1% Vs 79.9%, YoY.

- DMG downgrades to Neutral from Buy, with $14.00 TP from 17.20, citing discouraging load factor in the wake of the devastating earthquake in Japan and the on-going tension in the Middle East, shaving off house FY11-12 earnings forecasts by 4.8%-17.5% upon revisiting key assumptions.

- CS maintains O/P, with $18.50 TP, expect to see some demand moderation in Mar on impact from Japan earthquake. Add that stock is attractive given the high projected RoAEs, and currently trades at 1.1x forward P/B, a significant discount. from its 1.5x historical average. Its forward EV/EBITDAR of 3.9x is also at a 43% discount from its historical average.

- RBS reiterate Hold with $16.20 TP, note that Co. still waiting for brighter skies, and stock has been severely affected by external factors such as the earthquake in Japan as well as the fluctuation in fuel prices, find little near-term support for the stock or the sector


YZJ: CIMB maintains Outperform with TP$2.69. Letter of intent signed with Seaspan in shipbuilding newswires were for 22 units of 10k TEU containerships vs expected 10 units. Each vessel is est to cost US$95-98m due in 2013-14, potentially over US$2b worth...

No formal announcements by YZJ made yet possibly due to deposits not paid yet. House believes fear of sharp rise in steel prices have been priced in and sees current opportunity to buy. YZJ has secured US$147m worth of new orders YTD with orderbook at US$5.3b.


Property: Morgan Stanley believes residential price growth is capped due to anticipated further measures if property prices continue to rise, and see little reason to invest in residential focused property developers, which could see RNAV declines if residential prices decline, retain preference for office-focused developers like KepLand and OUE. O/W KepLand (TP $4.73); OUE (TP $3.34) and E/W Capitaland (TP $4.0 ; CityDev (TP $11.87); and WingTai (TP $1.84);


TigerAirways: Macquarie upgrades to Neutral from Underperform raising TP $1.45 from $1.50. Long term structural growth provides limited upside over the coming 12mths and rising jet fuel prices may exert downward pressure on the sector.However, current valuations represent a good entry point for long-term investors looking to invest in a structural growth story for the coming few yrs.

SG Strategy

SG Strategy: CIMB combines top-down views and valuations, and recommends top Buys/Sells in uncertain times like this. Recommends KepCorp ($10.60 target entry price, theme of higher oil prices), OCBC ($7.38, theme of wealth management inflows into SG) and Genting SP ($1.85, theme of benefiting from alternate travel demand flows)….

Top three stocks house would avoid and continue to SELL include SATS (theme of food inflation hurting margins), STX Pan Ocean (negative near-term as steel mills close and bulk ship oversupply kills rates) and Tiger Air (earnings most sensitive to rising crude oil prices). Maintain OVERWEIGHT on Singapore, with FSSTI bottom-up target of 3,560.

CIMB issues reporting highlighting Top Picks, Buy Keppel Corp TP$10.60, Buy OCBC $7.38, Buy Genting SP TPS1.85. House sees higher oil prices due to demand risk from shunning nuclear power and Middle East unrest…

Singapore as a disaster-free zone with no intrusive rules adds to the positivity of wealth-mgmt industry and house has heard of influx of Middle East money into the country. Sources in travel have highlighted shift from tourism in Egypt, Tunisia and Morocco to Spain and Italy. Likewise, they postulate that Sg might be a beneficiary due to disasters in region (NZ and Japan)

Indofood Agri

Indofood Agri: CIMB has Technical Buy Call. Note that prices fell below the $2.20 low to current levels and is now just points away from the $2.03 support. It is possible that it could fall a tad further towards the said support, but however think that the downside from here is likely capped, at least in the short term….

House have been bearish on stock since 6th Jan , but reckon that it is time to go the other way, at least in the short term as house see a completed 5-waves decline. Recomemnd that this short term bullish trade is only for the more aggressive traders, and aggressive traders should long now with a stop placed below $2.00. However, anything within the range of $2.06-2.13 is a good level to get in with a similar stop loss point. Rebound could potentially see prices kick up towards $2.41 and $2.46

Cache Logistics

Cache Logistics: Macquarie maintains O/P, with $1.15 TP. Note that recent acquisition is 1st acquisition since grps listing and raises FY11/12 DPU estimates by 2-4%. Add that grp still has right of First Refusal over 13 properties owned by its sponsor CWT and C&P. Further acquisitions from this pipeline, or from third parties will be a positive catalyst. FY11E yield of 8.4% is attractive.


O&M: DMG has sector Report. Remains O/W on sector, noting that Deepwater drilling permits positive, and still-high enquiries suggest more orders to come. Stock prices corrrction of 6-8% is an opportunity to accumulate. Expect record FY10 O&M profit and margin expansion and increased visibility on orderbook expansion; potential $5b jobs on offer and encouraging news on deepwater drilling paving way for new orders…..

House have Buy Calls on Sembcorp Ind (TP: $6.15), KepCorp (TP: $13.94) and SembMarine (TP: $5.95), in order of most upside potential.

Noble Grp

Noble Grp: IIFL retains Buy with $2.80 and RBS maintains Buy with $3.00 TP. Note that Co. is on its way to titan league by setting a net earning target of US$1b by 2013. Believe target will be firmly supported by assets building strategy along the supply chain nodes; oil trading volume expansion on a strong balance-sheet; and normalised operating expenses ratio…

Add that Co. benefitting from carbon credits spike and Jap’s earthquake and tsunami last Fri have brought unexpected potential benefits to Grp. Due to rising global fear for the safety of nuclear reactors, market price of carbon credits have risen sharply over the last two days. Noble is the world’s fifth largest trader in this product.


Amtek: CS maintains O/P with $1.75 TP. Note that stock edging up reaffirm positive view on Amtek’s growth outlook. Note that sales forecasts for Dell and Juniper have increased, which should support revenue growth. Expect 3Q11 revenue to decline QoQ on seasonality. See a strong ramp up in 4Q11, and hence a stronger 2H11. Add that grp trades at 7x P/E and 13% free cash flow yield, and remains a compelling play on the manufacturing outsourcing theme


Wilmar: CLSA Upgrade Wilmar from straight Sell to OutPerform, with TP at $5.80. Cite of positive implications from the expected peaking of Chinese inflation and massive insider buying, absence of any red flags at the recently concluded lianghui and Palm Oil Conference suggest that near-term macro risks are receding…..

Add that volatility from large trading operations appears priced in, given FY11/12 P/E of 14.5x (1 Std Dev below 2yr mean). House adjust consumer and palm & laurics margins reflecting a more positive outlook, and reduce conglomerate discount from 15% to 10% given greater focus on agri-businesses.

Sabana REIT

Sabana REIT: Daiwa initiates at O/P with $1.05 TP. Note that REIT is a stable portfolio with rerating potential. Portfolio stands out from other industrial-property S-REITs for its exposure to the high-value-added high-tech industrial, chemical warehouse and logistics segments. Believe DPU accretive acquisitions could be highly positive unit-price drivers….

REIT however, faces some income uncertainty after its master leases begin to expire in Nov13. See limited downside risk from negative rental reversions as long as business-park sector continues to recover.


Qualitas: To lift trading halt at 9am today. Conditional offer for Msia healthcare provider Qualitas’ shares at either $0.35 per share, a new share in the Offeror or a mix of cash and shares…

The offer is at a 20.0% premium to last traded price at $0.28 but is conditional on 50% or more of the shares being acquired. The Offerer is a invt holding co made up of a fund and two other individuals. Offeror intends to delist and privatise the co. Price is expected to narrow close to the offer price.


F&N: Issues $300m worth of bonds in two tranches. The first $150m will be launched at 2.5% due 2016 with $50m for public subscription. The remainder will be launched at 3.2% due 2018 with $50m for public subscription.

Saizen Reit

SaizenREIT: Update on properties. 3 Morioka, 3 Koriyama and 17 out of 22 Sendai appear to have only minor damages and are intact although more detailed assessments will be undertaken. Remaining 5 properties have not been viewed and represent 3.1% of co's NAV contributing 2.3% of annual rental income...

The 3 Koriyama properties are also more than 50km from the nuclear plants and are currently out of the risk zone. Saizen foresees difficulty in finding funding for a loan in default under YK Shintoku holding 40 properties which does not contribute to co’s DPU.


SIA: Release of operating results for Feb. Capacity increased 5.4%yoy but had a decline in carriage by 1.0%yoy. As a result, passenger load declined to 75.1% a fall of 4.8% points from prev yr, the lowest load since May 10. No of passengers increased to 1.27m up 0.6% over Feb 10...

All regions except East Asia faced declines in load due to decrease in lower promotional fares. Cargo capacity increased by 10.1%yoy and traffic improved by 3.6%. Cargo load fell as traffic did not match capacity increases. Declines in cargo load from all regions particularly in East Asia due to seasonal slow airfreight activities during Lunar New Year. In other news, co will refund tickets to destinations in Japan on or before 11 Mar.


Yongnam: Awarded $23.5m MRT North-South Line extension contract. Co will support main contractor Samsung in the construction. The line will be extended 1km southwards to serve upcoming dev in the Marina Bay area. As of 31 Dec 2010, orderbook stood at $450.0m. Yongnam’s current P/E is at 7.1x vs historical avg at 5.6x


KeppelCorp: Secured a contract worth US$210.0m from Japan Drilling Co (JDC) to build Super B Class rig which can drill to depths of 35k ft and operate at a depth of 425 ft. Due for delivery in 2013, rig will be JDC's first newbuild in 6 yrs and Keppel's first for JDC. Keppel had previously done repair and maintenance for two of JDC rigs…

Currently co’s orderbook stands at $4.4b including this contract and is on track for a record yr compared to 2007 where US$7.5b worth of orders were obtained. Nomura maintains Buy with TP$15.00 on positive outlook of orders. Daiwa maintains Outperform raising TP to $12.83 from prev $12.70. Co trades at fwd P/E of 14.1x compares with SembMarine at 16.7x


KepLand: Emerged as top bidder for the Sengkang Square residential tender with a bid of $286.8m ($502psf GFA).Site is located adjacent to Sengkang Town, which houses the MRT, LRT and Compass point. Bid surpassed market expectations of 350-380psf GFA, reflecting attractiveness of the site…..

Deutsche maintains Buy of grp with $5.08 TP. Estimate a small 3c/shr accretion to RNAV of $5.08. Add that acquisition helps boost its low-end residential exposure and augments its overall SG residential landbank from 52% from 1.1m to 1.7m sf GFA. Valuations attractive at a 19% discount to RNAV after pullback.


Property: URA stats showed that developers launched 1710 private homes excluding ECs in Feb (+37%MoM and +45% from Dec10), but sold 1101 private homes excluding ECs (-8.9% MoM). Ratio of units sold to units launched in Feb fell 64%, well below the 82-113% between Jan10 and Jan11. URA figures indicate that 18,400 private homes including ECs could potentially be launched by yr end…..

Figures also show stock of private homes including ECs launched but unsold has increased steadily from 3,620 units in Sept10 to 5,399 units in Feb11. Property analysts note that if trend continues it could signal oversupply is building up. Sales were underpinned by Mas Market Projects, at the expense of high-end segment, where activity remains muted…..

Deutsche maintains cautious view on residential developers, given rising downside risk, against a backdrop of escalating medium term supply and threat of further policy action if action market fails to cool. House prefer office landlords, KepLand, CCT and Suntec, citing attractive valuations after Sell Off….

RBS believe govt could introduce more measures and this puts an overhang on developers' stock prices. Neutral on sector with Hold rating on City Dev (TP $11.70) and CapitaLand (TP $3.40). Prefer office plays with Buy calls on Keppel Land (TP $5.90) and OUE (TP $4.55).


Cosco: Announced that its subsidiary, has entered into a cancellation agreement for one unit of bulk carrier vessel of 79,500 DWT, after negotiations with shipowner. Construction of the vessel has commenced for some time. Shipowner has paid compensation to Cosco as part of the agreement. Cancellation is not expected to have significant impact on NTA and EPS of the Co for FY11.…

CS maintains U/P, with $1.60 TP, noting that Order cancellation highlights continued oversupply in bulk carrier market Add that Cosco is one of the most expensive shipbuilders globally, suggest a switch to Yangzijiang (10x FY11E P/E)

Hutchison Port Holdings

Hutchison Port Holdings: Annouced that its IPO was about 3 times over-subscribed, according to a HKSE filing. The trustee allocated 36.4m additional units to the preferential offering to Hutchison shareholders. For the placement tranch, an indicative interest of 10.9b units were received for 3.8b units, while for the public offer, indicative interest of 286m was received for 185.1m units.

SG Market

SG Market: Spore shares could see a relief rebound after Wall Street finished well off its lows on Tues & with Nikkei rallying 6% this morning on the view that the situation at stricken Fukushima power plant may be stabilising. However, the situation remains very fluid & any adverse Jap headlines could cause volatility. Factional tension is also rising in the Mid-East with Saudi & GCC troops sweeping into Shiite majority but Sunni-ruled Bahrain.

STI closed down 2.8% to 2946, its lowest level since Aug 00, near a key base at around 2910-2920. For now, upside resistance tipped at 2965 & psychological 3000 level. Saizen REIT may stem some losses after it releases another update on its Japan properties. KepCorp may get a lift on news it secures a US$210m jackup contract from Japan Drilling Company, bringing total orders secured this yr to $4.4b, ahead of most forecasts.

Tuesday, March 15, 2011


ThinkEnv: 70% owned Mornington Offshore will acq another license known as the Kekoro License through an agreement with African Resource and Investment SARL (ARI). The license is owned by ARI which will be transferred to a JV owned 80% by Mornington and 20% by ARI. Further details to be made once JV is formed. The new co will undertake exploration and mining of gold under the Kekoro License which is currently being mined by est 1000 artisanal miners (villagers)…

ARI owns agreements with local communities including heads of 19 local villages which will be transferred to the new co. ThinkEnv intends to implement a fair-trade and environmentally responsible model in this site. The Kekoro site is 27km from Morilla Gold Mine the largest gold mine in Mali.

RH Petrogas

RH Petrogas: BNP Paribas Intiate at Buy with $1.20 TP. Note that Co. is most attractive E&P play in SG and Basin PSC, to deliver strong near-term cash flows. Expect significant development upside from grp’s Fuyu Block in China and further asset injection by Parent Co. should boost growth,


Goodpack: DBSV intiate coverage with Buy Rating and $2.25 TP. Note that Co. offer 21% upside in a fast growing industry boosted by global substitution of wooden boxes. Add that Co. is leveraged to economic upcycle and growing underlying demand for rubber products. Move to less capital intensive model should unlock cash for further growth.

Straits Asia Resources

Straits Asia Resources: IIFL initiate at Buy with $3.55 TP. Note that Co. is good proxy to underlying benchmark coal prices. Expect Co. to deliver 66% earnings CAGR during FY11-13, driven by, a 16% CAGR in coal production, 8% CAGR in ASP and a 700bps expansion in net margin between FY11-13 driven by strong cost control. Valuations remain demanding, with grp trading at 6.4x FY11 and 4.2x FY12 EV/EBITDA.

China MinZhong

China MinZhong: Could see positive sentiments and possible fund inflows after counter was added to the FTSE ST China Top Index. New changes will take effect when trading starts on 21 Mar 2011. Street has unaminous Buy Call on grp with a mean TP of $1.99, as grp progresses to triple its cultivation output and increase its processing vegetables in tandem, while leveraging on rising vegetable price and demand for agriculture.


Cache: Has acquired 2 properties with total gfa of approx 232k sq ft for $39.8m. The first was 6 Changi North Way for price of $30.9m and the other was for 4 Penjuru Lane in Tuas for $8.9m Both properties are expected to have a net property yield of 8.0% which is accretive to the est 7.7% yield of co...

Both acquisitions are to be fully funded by debt and will raise total leverage to 27.6%. This increases co's assets under mgmt to $783.9m. Co is still currently in first yr of operations since IPO.

Monday, March 14, 2011

Strategy by DMG

Strategy by DMG: House issues comprehensive strategy report on impact of Japan’s quake on SGX counters. Note that amongst the STI stocks under coverage, SIA’s (BUY, TP: $17.20) impact probably larger than the rest, with high flight capacity exposure (Nagoya, Osaka, Fukuoka and Narita), which could face a risk of poor load factor ….

For Tiger Airways (BUY, TP: $1.65), do not expect any negative impact from quake as currently does not operate flights to Japan. In fact with catastrophe, tourists could deferring holiday plans there and may likely be an increase in travel to other destinations which Tiger services….

Impact minimal for most other sector:
1) SG banks primarily exposed to the ASEAN and HK markets and have minimal exposure to Japan.
2) Oil & Gas: KepCorp (BUY, TP $13.94) has stake in a Japan unit involved in fabrication and supply of specialized steel parts, but earnings contribution share to Keppel is insignificant.
3) REITS: Saizen REIT likely to face greatest impact. ParkwayLife REIT, which has some exposure in Japan (33% of portfolio value), but most of properties located in regions relatively less affected by earthquake, and none are within the evacuation zones of the nuclear plants.
4) Commodites: Small impact on commodity counters. Noble (BUY, TP $2.5 and Olam (BUY, TP $3.70) have little exposure to Japan. Straits Asia Resources (NEUTRAL, TP $2.49) sells coal to Japan and coal power as an alternative to nuclear could lead to higher coal prices, a positive for SAR.
5) Telcos: Negligible impact. Singtel (NEUTRAL, TP: $3.00) has the largest proportion of mobile revenue coming from roaming at 20-25% but Japan is not a key contributor in terms of outbound roaming revenue.
6) CPO: Imapct on sector should be minimal. Japan buys about 3% of global palm oil. Still catastrophe such as this will probably put some pressure on palm oil price, which is already on the decline.
7) Construction: Minimal impact. Most raw materials not sourced from Japan. Kian Ann Engineering (a heavy equipment parts distributor) whose purchases from Japan form <5% of its total monthly parts purchases, but suppliers in Jap have factories in China, which may help to mitigate any short term disruption in supply.
8) Tourism: Japanese tourists form <5% of visitor arrivals to Resorts World. Impact to earnings is minimal as estimate that Japanese visitors contribute to less than 5% of overall visitor arrivals to RWS, and majority of the 5% Japanese visitor contribution to the resorts emanates mainly from visitors to Universal Studios rather than casino patronage
9) Agriculture: Yamada Green (BUY, TP $0.43) - financial impact minimal. YGR derived 28% of its rev from export of processed agricultural products to Japan. While share price could see near-term weakness, believe possible negative impacts, mainly from supply disruptions, could be mitigated by Japan's greater import needs for agricultural products post-crisis.