Thursday, June 30, 2011


Progen: A new investor, private co Golden Wang Holdings is acquiring 54.4m shares approx 20% of share cap of Progen for $12.2m from the exec chairman, MD and founder of the co, Mr Lee. The founder Mr Lee will continue to hold a 9.7% stake in Progen. Golden Wang has diverse businesses involving mechanical and engineering, real estate dev and supply of building hardware...

Progen is an invt holding co dealing in air conditioning systems, cooling equipment as well as leasing of factory and office space. Progen is up 21.4% today on back of news trading at current P/E of approx 6.0x, and has most recently posted a FY10 net profit of $3.9m.


Ezra: 47% owned Olso-listed EOC has been awarded a contract worth up to US$20m from a "French oil major" to provide accommodation and support services for an offshore maintenance project in Africa for up to 24 mths (initial term of 8 mths + 4mth extension + 12mth extension)...

EOC expects vessel to add to earnings from start of 4QFYAug11. The co is also expecting a boost in earnings for 2HFY11 with another vessel scheduled to commence ops in 4Q from Vietnam's Chim Sao Field, and says its other vessels would also all be utilised "substantially" during the period...

CIMB highlights the OSV mkt has bottomed out after being in the doldrums for close to 2 yrs. Says since early 2011, global OSV operators have been noting a steady increase in new contracts and utilisation although day rates still stagnant. With rigs leading the cycle, support vessels are likely to be next.
Recent Street ratings at Buy/ Hold with TP btwn $1.45-2.20.

ST Engg

ST Engg: subsidiaries are involved in the GKC.
i)ST Electronics and China’s Suntek Tech will jointly invest in an R&D Centre and implementation platform for the Network Integration, Cloud Computing and Integrated operations Centre within GKC. ST Electronics will provide system integration...
ii) ST Kinetics and strategic partners (Hitachi, Bakai electric, Xuji Group, Xianmen Jinlong) will establish a HQ for their Electric Vehicles cluster, and R&D Centre, testing centre and other related services within GKC. ST Kinetics will take charge of Eletric Vehicles systems integration...

Deutsche yday reiterated Buy with $3.95 TP. Says, at 14.6x fwd P/E, group is trading close to its crisis low valuations of 16.1x average P/E over 2008/09, despite stronger fundamentals. Says the recent share price weakness has created an attractive buying opportunity, considering the group’s strong cash- generating abilities, experienced mgt and healthy dividends.

Rubber / GMG

Rubber: DBSV has comprehensive sector report. Note that Natural rubber asset prices are driven up on scarcity and recommends to take positions in upstream and processors. Add that Motorisation, rising hygiene standards in emerging markets, mining, logistics, travel are driving demand but supply response is slow due to conversions to oil palm, long gestation period and erratic weather….

House top picks are KL Kepong, Goodpack and Hartalega. Also like JA Wattie and Sri Trang. Believe huge gap between rubber (US$46b annual value) and palm oil (US$56b annual value) listed counters reveals tendency for more M&A activities going forward. Recommend investors position themselves in upstream planters and processors as scarce value of rubber assets are driven higher up the value chain.

GMG: DBSV Initiate Coverage with Hold Rating and $0.22 TP. Note that GMG’s acquisition of Teck Bee Hang) has the potential to boost GMG’s profit level, and GMG could achieve significant earnings accretion if the grp can return TBH back to profitability with comparable margins to industry peers…..

Add that GMG’s Sinochem parentage should provide grp with financial backing to acquire smaller players strapped by significant working capital requirements. House view that stock is fairly valued at current level, as it has priced in favourable view of both NR prices and processing margins. Any potential upside should come from a turnaround in TBH, with 1Q11 results having shown promising development.


Scintronix: To lift trading halt. Proposed 1-for-1 rights issue of 356.8m new shares at issue price of $0.025 for each rights share. Net new funds of approx $8.6m are to be used for general working capital purposes including a $5.7m repayment of a shareholder's loan and business expansion opportunities.

BH Global

BH Global: Secured a $15m electrical and fabrication contract with a major Indonesia oil co. The expected start and delivery date is 3Q11 and progressively by 1Q12 respectively. BH Global now trades at approx 9.1x current P/E

Viking Marine & United Envirotech

Viking Marine & United Envirotech: After news of Tembusu paring down stake of Artivision, Viking has also pared down its stake in United Envirotech down from 11.2% to 4.5%. It sold 32m shares through married deals and in the open mkt at an avg price of $0.33 per share…

Proceeds of $9.7m will be used for repayment of loans and co views its holdings in United Envirotech as non-core and also for investment purposes. Viking trades at current P/E of 5.6x and United Envirotech at 9.1x. Viking’s share price has fallen sharply after it announced a lawsuit against one of its associates for $2.2m


Yamada: Annouced that it has entered into agreements with Villagers’ Committees in Zhangping City to lease shiitake mushroom cultivation bases measuring approximately 842 mu for a period of 17 yrs and will be used btwn 25 Sept and 25 Apr each year starting from 25 Sept 2011. Deal bring’s Co’s total shiitake mushroom cultivations to 5,134 Mu from 4,292 mu, ahead of grps schedule to double cultivation output by 2012…..

Expansion of mushroom cultivation bases is expected to contribute positively to EPS of Co. but is not expected to have any material impact on NTA for FY11. We note that valuations appear compelling, with grp trading at 2x FY11E P/E vs peers simple average of 8.1x.


SIA: Announced that it is leasing an additional 15 A330-300 aircraft from Airbus, which will be powered by Rolls-Royce Trent 700 engines. Fleet will join 19 A330-300s already in service and will be delivered btwn 2013 and 2015, which will operate on routes within Asia, Aus and Middle East……

With these new aircraft on lease rather than purchased, SIA continues to have a optimum mix between leased and owned aircraft for capital mgt, despite still having more than $5b in cash even after upcoming $1.20 special div (book closure 4 Aug), which opens possibility of more generous dividends in coming yrs….

We note that while order reinforces confidence on its long-term prospects, SIA may be in for a bumpy ride in the short term due to higher fuel costs and moderating yields. We note that street has a mix of Buy and Hold Calls on counter with a mean Tp of $14.91.

Keppel Corp

Keppel Corp: Announced that it has secured shipbuilding contracts worth $140m in Brazil. The first contract entails building 6 tugboats for SMIT Rebras, while 2nd contract involves constructing a PSV for Guanabara Navegacao. This is the first PSV constructed under business model to build OSVs in anticipation of demand in Brazil, and such vessels will be offered for charter or sale upon completion…..

Contract places Kep’s Orderbook at an estimated whooping US$7.4b, with order wins YTD at US$5.76b, underpinning earnings till 2014. While above contracts are not expected to have any material impact on NTA and EPS for grp in FY11, we note that it could mark a start of future avenue, for grp to compete or gain market share in the Brazilian OSV mkts. Other notable SGX listed yards competing in the same mkt would include STX OSV……

We note that majority of street remains bullish on grp’s prospects, with a mean TP of $13.04. At current price, valuations appear relatively compelling, with grp trading at 11.1x FY12E P/E vs historical average of 14x.


CWT: To lift trading halt at 9am on positive news. Co has acquired a 73.8% stake in MRI Trading, a Swiss based co marketing copper, zinc and other metals for smelting and processing customers internationally, essentially a metals trader. The consideration of US$94.0m will be paid with initial payment of US$60.8m upfront and remainder over 3 yrs…

MRI Trading has generated consistently over US$2.0b in rev and US$20m net profit. Its NAV is approx US$82.4m as of 30th June. The acquisition is approx over 6.4x P/E compared to CWT’s trailing P/E of 26.4x (stripping out sale proceeds of $147.6m in 2Q10) which is earnings accretive and still offers a strategic improvement to the logistics co in terms of vertical integration and network.

Delisted Counters

Delisted wef today:
Japan Land

Broker ratings

Broker ratings:
Mewah: Credit Suisse initiates at Outperform with TP $1.19
Yangzijiang: JPM initiates at Overweight with TP $1.80
ST Engg: Deutsche reiterates Buy with TP $3.95, says stock trading at near crisis lows.
Rubber: DBSV initiates on sector. Recommends Goodpack (Buy, TP $2.25), GMG (Hold $0.22), Sri Trang (Unrated, TP $1.37).

SG Market

SG Market: Spore shares are expected to open higher after Wall Street rose Wed amid optimism over the Greek debt situation. With the lifting of the cloud, the STI could reclaim the 3100 level & perhaps test the 3120 resistance. CWT will be in focus after agreeing to buy 73.8% of the capital of commodity marketing company MRI Trading for $94m. SGX may also see interest after targeting Aug 1 to start continuous trading, ending the 90-minute lunch break.

Wednesday, June 29, 2011


Ausgroup: awarded a A$12m project by Chevron, for local fabrication to the Gorgon Project. The contract scope incl the fabrication, supply, testing, inspection, storage and delivery of adjustable pipe support structures weighing >900 mt. Ausgroup will utilize its fabrication facilities in Kwinana, south of Perth, with completion due in 2012.
Ausgroup’s order book now stands at A$282m, vs A$454m revenue for 9MFYJun11.
Stock trades at 12x FY11E P/E (CIMB est)...

CIMB last had a Neutral rating with TP $0.52, and recently ceased coverage on the company

Keppel Telecom

Keppel Telecom: Following DBSV initiation last week, CIMB initiates coverage on at Outperform with a$1.57 TP. Note that recent data-centre visit and discussions with mgt have strengthened conviction in KPTT's clear strategic direction for its data-centre and logistics operations. House add that KPTT's share price has risen 5.7% in the last two wks, however, stress that the stock is still undervalued, trading below industry's and its historical forward average….

Add that excluding contributions from M1, the stock trades at a mere 4.7X CY12 EPS; SOP valuation suggests a value of $1.57, offering 21% upside from current valuations. Expect re-rating catalysts from major acquisitions and contract wins.

ST Engineering

ST Engineering: UOBKH upgrades to Buy from Hold and maintains its $3.28 target. Says the stock's underperformance vs the STI is unwarranted. Says the market could be concerned that the defence budget could be reduced or about a potential damages payout for a purported breach of contract with Louis Dreyfus...

But notes Singapore's defence budget has grown at a 4.5% CAGR over the past 6 years and chances of a material decline are low. Adds, STE intends to dispute the breach of contract claim and has stated that its liability will be limited to 10% of the contract value, or $17.9m while the group has also indicated there will be no impact to NTA and EPS for 2011, "implying it will not be making a provision."...

Adds, at just 0.75X orderbook STE is trading at the lowest P/B level since 1Q09, while current 17.2X 2011F P/E is below the 10-year average of 18.7X. Shares rise 0.7% to $2.90.


Chasen: Has won contracts for $4.7m for 2 relocation proj. The first relocation proj amts to $3.1m which is for turnkey relocation services from various global locations to Johor, Msia. This project for a global IT player will start in mid-Jul 2011 and expected to be completed by mid-Sept 2011...

The 2nd relocation proj is worth $1.6m was awarded by MNC electronic contract manufacturer to relocate from various global locations to Shenzhen, China. Co is a logistic provider with trailing P/E of approx 8.1x


Novo: Co to inject $5.7m more into 95% owned subsi Novowell ETP and contribute a shareholder loan not exceeding US$2.5m. Novowell ETP now has US$13.0m in funding and is engaged in the manufacturing of electrolytic tin plates (ETP) and marketing of such products in China and overseas…

Novowell ETP will undertake a dev project at Taizhou, Jiangsu province, relating to production of 60,000 tons ETP per annum in Phase 1A which will cost up to US$41.7m so further funding shld be expected. Co is a small cap with $67.4m mkt cap and has trailing P/E of approx 13.9x


Serial: New application for TDRs for up to 90m new shares (approx 9.9% of enlarged share cap), supersedes prev application for 84m shares. Proposed TDR issue is subject to approval. Serial now trades at trailing 6.9x P/E and peer UMS at 6.3x P/E

Hiap Seng

Hiap Seng: awarded a contract worth ~$19m for the provision of structural steel erection, piping and painting works by Shell Eastern Petroleum. Work is to start in Mar 2012 and be completed by 2013.
Hiap Seng’s latest order book stands at $214m, and compares with its FYMar11 revenue of $188m.
Stock currently trades at 15.4X P/E.


SIA: confirmed that it had lodged an application with the Australian Competition and Consumer Commission (ACCC) for its recently announced alliance with Virgin Australia. The application was submitted 20 Jun. SIA and Virgin Australia will provide access to each other's networks, coordinate schedules and pricing, engage in joint mktg & distribution, and offer reciprocal frequent flyer benefits and lounge access…

The deal does not cover all of SIA and SilkAir's extensive global network, nor all of Virgin Australia's domestic and intl destinations. Significantly, SIA does not get a "backdoor entry" into the Australia-US trans-Pacific route via Virgin Australia's existing service and any routes where Virgin has codeshare coverage with Etihad Airways…

Virgin Australia also does not automatically get SIA's lucrative European routes like Spore-London.
SIA current trades at 15.6X P/E. Recommendations in June are mixed with TP $12.35 - 17.00.


StarHub: announced that it will hike its monthly pay TV packages by $2 (before GST) wef 1 Aug ’11, citing rising content costs. This will be its first since FY07, when it raised basic subscriptions by $4 and doubled its sports package fee from $8 to $15, with the addition of costly EPL content. Starhub has since added added 15 channels to its basic tier plan. An entry-level cable TV plan is currently priced at $25.68 (incl GST)...

Cable TV accounts for <20% of StarHub’s total revenues.
Citi estimates this would lift pay TV ARPU levels by ~4%, and in turn increase group earnings by 0.4-0.8% for FY11-13, assuming no subscriber migration on account of content exclusivity. Raises TP marginally to $2.69 from $2.68, and keeps Hold rating. Notes compared to domestic peers, StarHub offers the most expensive valuation and weakest fwd earnings CAGR...

CIMB maintains Underperform with TP $2.42.
Deutsche however maintains at Buy with TP $3, likes the preferred telco for its attractive and sustainable 7% div yield.

Straits Asia

Straits Asia: IIFL reiterates Buy with TP $3.50. Note that grp remains leveraged to capture potential seaborne coal price strength and believe that rising Chinese coal imports and potential supply disruption due to heavy rains in Australia could push coal price above f/cast of US$120/t. Upgraded infrastructure capacity and receipt of final mining permit for Northern Leases should enable SAR to raise coal output 15% annually to 15.9mt in FY13…..

At 8.6x, SAR continues to trade below its historical one-year forward EV/EBITDA of 10.5x.

HPH Trust

HPH Trust: UBS maintains Buy with TP US$1.10. Note that recent vol trend weak, but looking for peak season shipping routes in Jul which should help lift the vol. Long-term vol to grow 6-7%, plus ASP improvement each year as they move HKD-denominated tariff towards Rmb. A strong SGD may discourage SG investor to hold the stock as the company pays out in USD. Mgt also confirmed that they will think of coming to HK mkt if business trust is allowed in HK.

SG Conglomerates

SG Conglomerates: Deutsche note that fundamentals still intact; with conglomerates trading near historical PER and P/B averages and strong prospects. News flow within the sector remains positive, and expect healthy long-term prospects for the key SG yards. Investments should continue despite recent oil price volatility….

Add that KEP and SMM well positioned with newbuild order momentum likely to continue strongly. Remain O/w on the O&M sector and believe KEP and SMM are well positioned to benefit from increased industry spending and any upgrade and/or replacement opportunities for offshore assets. House has KEP $13.60, SMM $7.00 and SCI $7.00 TP.


Sarin: Kim Eng maintains Buy and increases TP to $1.16 from $0.91. Note that house has been overly conservative and Sarin is deserving of a higher valuation. Hike PER multiple from 14x to 16x on revised FY11F earnings. Add that Arjav Diamonds is conducting India's first online auction with Galaxy system and BHP had previously adopted same system and was able to achieve higher premiums for its diamonds. The longer term implication is that De Beers may follow suit....

Success of the Galaxy system has led to flowover effects resulting in increasing demand for other Sarin products. Anticipate more manufacturers to switch to Sarin products when their product renewal cycle is due.


Industrial: A 60 yr leasehold industrial site at Woodlands drew a top bid of $84.24m or $152/psf ppr. Site has a max gfa of 554,231.1 sqft. Top bid was higher than analysts expectations of within $60-100/psf and also 2x higher than the $75/psf ppr winning bid for a nearby site sold in Apr10. Analysts note that this is a sign that funds are being diverted to the industrial ppty sector from the residential property mkt, which has been the target of numerous measures implemented by the govt….

Industrial players include Mapletree Industrial Trust, Cambridge Industrial Trust and Ascendas REIT.


Property: The monthly NUS Sg Residential Price Index, which tracks prices of completed projects, has shown that prices of non-landed private homes went up 2.5% in May up from 1.1% in Apr and 0.2% in Mar. This was primarily in the central region (districts 1-4 and 9-11) which went up 3.5%...

Prices in the non-central region is approx 1.7%. Resale prices of private condos also grew faster in 2Q by approx 3.3%qoq for districts 9, 10, 11 and 3.9%qoq in the suburban areas. HDB has cautioned potential buyers to bear in mind the supply in the pipeline of 68.9k priv residential units as of 1Q and 4.2k EC units.

Property: DBS issues sector report highlighting that property stock prices have fallen by 12% YTD and appear to have factored in risk of falling residential prices, policy risk and weaker macro environment. Sector’s disc is now 32% to RNAV. Key themes of exposure to office and high-end residential plays are touted…

Office rentals and values are still rising and high end developers have an opportunity to launch projects due to anticipated dip in new completions and monetize RNAVs...

Top picks for office theme include KepLand (Buy TP$4.69) and Singland (Buy TP$8.26). For high-end residential theme, Wing Tai (Buy TP$1.94) and Ho Bee (Buy TP$1.76) are preferred.

Office: Rentals in SG registered a high single-digit growth in 2Q11 despite falling occupancy rates. Average mthly gross rents of Grade A office saw a 6% qoq growth in 2Q. Despite latest increase, Grade A office rents remain about 37.4% below the peak of $14.22 psf/month seen in 3Q08. Occupancy rates for Grade A office space, meanwhile, fell to 93.5% in 2Q vs 94.2% in 1Q. Drop in occupancy rates due to a rise in supply of space from the completion of new office developments…..

Looking ahead, Colliers expects some speed bumps, where mkt optimism could be tempered by downside risks from unresolved debt crisis in EU, a slowdown in China's economic growth, uncertainty of the US economic recovery and possible withdrawal effects of the ending QE 2. However tip rents to generally remain on an uptrend ….

CS remains optimistic on the supply-demand outlook particularly for Grade A offices, where current rents are still 50% cheaper than HK’s, with room for growth. Of the REITs, like CCT, KREIT, and of the developers, prefer OUE and CDL.


Banks: MAS yday announced tougher capital rules for Spore banks, raising them to a higher level than those rolled out for Basel III, but the regulator noted that the local lenders were well-positioned to meet the new requirements.
Spore has set its capital adequacy requirements (CAR) 2 % points above what is required by Basel III...

i) Spore-incorporated banks to meet a min Common Equity Tier 1 (CET1) CAR of 6.5%.
ii) Tier 1 CAR will be increased to 8% from 6%.
iii) Total CAR will remain unchanged at 10%.
These compare with the Basel III min requirements of 4.5%, 6% and 8% for CET1 CAR, Tier 1 CAR and total CAR.
In line with Basel III, MAS also will introduce a 2.5% capital-conservation buffer beyond the capital-adequacy ratio, to be phased in btwn 2016 - 2019...

OCBC, UOB, DBS and Citi Spore fall under the new rules. MAS wants them to meet the Basel III norms by 2013 (2yrs earlier than Basel III guidelines), and meet the higher MAS min requirements by 2015.
The lenders are already believed to meet the new Basel III standards, as they are among the strongest banks in the world, according to Bloomberg. OCBC, DBS and UOB were ranked 1st, 5th and 6th rptvly...

DBS says it won’t not need to raise fresh capital to meet the new requirements.
OCBC CEO David Conner said: "We expect to be able to meet the MAS revised CAR requirements comfortably without having to raise any additional equity, undertake any rights issue, cut any dividends, or change our strategic plans." At end Mar, OCBC says its est CET1, Tier 1 and Total CAR are 10.8%, 14.1% and 16.9% rptvly.

SG Market

SG Market: Spore shares are likely to track Wall Street, which posted their biggest gain in more than 2 mths. On the technical front, the STI is in no man’s land at 3050 & needs a heavy volume breakout, otherwise we could see its 200-day MA flip down for the 1st time since the 2008 crash. However, with decreasing volumes in recent sessions, a bullish breakout seems remote. Analysts tip resistance at 3080; support at 3000.

Banks are likely in focus after the MAS introduced tougher raised capital adequacy rules than the Basel III req.

Tuesday, June 28, 2011

* PSL * (TP: 0.45 - 0.50)

PSL: To shed some light on new investors RES and priv indiv Awaludin. RES is owned in equal stakes by 4 priv indiv
a. Tan Ong Huat, executive director, See Hup Seng Limited;
b. Liew Ham Chow, ex-director and founder of Jackspeed Corporation Limited;
c. Lim Bok Hoo, ex-managing director of Heng Heng group; and
d. Goh Yew Gee, non-executive director of Wee Hur Holdings Ltd

Awaludin is an Indonesian businessman involved in the ferry, palm oil business and birds’ nest trading businesses in Indonesia. He is a director in PT Lestari Indoma Bahari, Dumai, Indonesia. He has, through his contacts, access to coal mining projects in Indonesia. He is keen to introduce opportunities to acquire coal mining businesses to the co and is looking to acquire a stake in the co through his put and call option.

China XLX Fertiliser

China XLX Fertiliser: CIMB upgrades to Neutral from underperform on the view negatives are priced in, noting the stock's 43% fall since Jan 7, when the house downgraded it. Says XLX has been maintaining above-industry margins, while coal-cost pressure and production declines due to power cuts should be over for now. Notes margins and earnings in the next two quarters should be marginally better…

Keeps unchanged its earnings estimates and target price of $0.39, at 7X 2012 P/E and a 50% discount to peers. Expects near-term catalysts from improving urea ASP and stabilizing margins for key product segments, although longer term, remains wary of costlier coal input and fund-raising needs from aggressive expansion. Adds it may be a positive now that dilutive equity-raising to fund this huge capex would not be considered, given current share-price weakness. Shares are +4.3% at $0.36.

Tiger Air

Tiger Air: more open mkt sales by significant shareholder, The Capital Group, over last wk. Sold 440k shares, bringing stake down to 7.97% from 8.09%.
Stock still flirting with all time low of $1.17, with technical indicators staying in oversold territory for almost a month now.


YangziJiang: CIMB maintains O/p and $2.05 TP. Note that Yangzijiang has acquired a 54.5% equity interest in Runzhou Heavy and its subsidiary Jiangsu New Yangzi Gas, with a total investment at US$6.5m, equivalent to 54.5% of RHICO’s registered paid in capital of US$12m. Investment expected to reduce grp’s dependency on steel structure, paint surface preparation of steel and coating related business and reduce business costs and secure long term stable supply of gas.

SG Reits / ARA

SG Reits: Credit Suisse has sector report. Note that S-REITs emerge with stronger balance sheets post subprime crisis and SIBOR likely to stay low till mid-2012. S-REITs are unlikely to face refinancing issues if the Euro crisis worsens and could also stretched their debt expiry profile to avoid lumpy refinancing…..

House continue to like the office (CCT, KREIT), hospitality (CDLHT) and retail (CMT, MCT) REITs for their attractive yields (5.5-6.5%), double-digit DPU growth and exposure to strong SGD.

ARA Asset: IIFL reiterate Add with TP $1.90. Note that the investment period of ARA’s Asia Dragon Fund I (ADF I) will end in 2012 and ARA could look at divesting the fund’s assets from 2013. If all assets under ADF I are divested in 2013, that ARA could gain incremental revenue of $65m, which would boost 2013 profit estimate by 47%.....

Add that ARA’s private funds have recently made mall acquisitions in Msia and believe this could lead to the listing of a retail REIT in Malaysia with a potential AuM of YR1.0b-1.5b ($400m- 600m). Expect AuM to reach $20b by FY12 (without the listing of any new REIT). Medium-term growth catalysts are raising US$1.1b of committed capital for ADF II; and acquisitions and impending asset revaluations by existing REITs.


O&M: Nomura has sector report. Expect SG yards to continue delivering on their strong orderbooks, with both KEP and SMM naming ceremonies for ultra high spec jack-up rigs over the weekend marking important milestone completions. With the high chartered out rate of the new rigs and the increased preference for new high spec jack-up types, believe the offshore jack-up rig replacement cycle remains intact……

House Reiterate BUY rating on KepCorp and SembMarine. KEP trades at FY11/12/13F PE of 14x, 13x and 12x, vs historical P/E band of 7x and 22x with a div yield at 4%, while SMM trades at FY11/12/13F PE of 16x, 15x and 14x, vs historical trading band of 8x and 28x, with a divi yield at 3%.


Freight-Links: FY11 results. Net profit $16.3m, +17.6% yoy. Revenue $154.1m, +22.5% yoy. This is on the back of higher business volume, including contribution from its mgmt fees business, as well as other exceptional gains. Excluding exceptional gains, net profit would have been $13m.

Rental expense +59% due to an upward revision in JTC rental rates and the lack of a 15% rebate available in 2010. Forex loss almost doubled due to the weakening USD.
The company is now in a net cash position from a 12.6% net gearing ratio in the previous year as long-term borrowings decreased from $48.7m to $9.1m. This also decreased finance costs by 90%...

Co expects its 51% stake in Sabana Investment Partners to continue contributing positively. The co is redeveloping a warehouse property in Gul Circle into a 3-storey ramp-up warehouse.
The company proposes a first and final dividend of 0.4cts, implying a 6.67% yield at its last close at $0.06.
Stock currently trades at 8.3X P/E. There are no analyst recommendations.


DMX: together with parent KDDI (52% interest), will enter the cloud computing market in China, offering sales mgt and other smartphone-based services to corporate customers starting in July...

KDDI and DMX will jointly set up a development base and build systems
compatible with the Chinese language. The sales management service, called the D-Smart platform, will start next month. Smartphones equipped with bar code readers will be provided to retail stores so that their headquarters can monitor sales and inventory data at each location over the Internet...

The service will start at ~Rmb 1,000 a month. KDDI made the price affordable to SMEs, and to reduce their high initial invmts in hardware or software. This will allow the Group to generate recurring income...

Stock may see interest given it is poised to be one of the first movers in the potentially high growth cloud computing industry in China. Smartphones account for 17% of cellular phones in China, up from 7% in 2008, with the proportion expected to continue growing. But bcs systems using smartphones have not caught on among businesses there, KDDI has determined that its offerings will be competitive. The enterprise mobile apps mkt in China is est to reach US$4.1b by 2014...

NRA, Madison Williams have Overweight/ Accumulate ratings with $0.42 / $0.49 TP rptvly. The company counts Venture Corp as its other 2nd major sh/h with 12% stake.
Stock trades at 18.4x P/E, 0.9x P/B.
Stock +6% at $0.345, amongst the top actives.


Capitaland: M+S (60% owned by Khazanah, 40% Temasek) has appointed Capitaland to oversee and develop the Ophir-Rochor site. The total GFA for the site is approx 160k sqm and consists of 2 land parcels. Temasek also owns 40.9% of Capitaland currently…

The other 4 land parcels in Marina South will be undertaken by Mapletree Investments. The total cost of both Marina South and Ophir-Rochor projects is expected to cost $11b and planning and design works on the sites began in 1Q this year...

Capitaland now trades at 0.9x fwd P/B and Citi maintained a Buy call with TP$3.53 on cheap valuations yday.


GLP: Signed a partnership framework agreement with Unicharm a Japan-based leading manufacturer. The agreement outlines a partnership in developing logistic facilities for manufacturing bases of Unicharm in China and will initiate with a Build-to-Suit project to develop Unicharm's largest manufacturing and distribution facility in Tianjin Xiqing Economic Dev Area (XEDA),North China…

This is the 3rd project that GLP has dev in Tianjin XEDA which will have total GFA of 53k sqm. This follows the strategic partnership with Vancl last wk and may signal GLP’s strategy to find suitable partners and lessees before developing logistic facilities. Co now trades at fwd P/B of 1.1x


SIA: Announced that its pilots’ union are in a dispute over how much the pilots should get in their annual service increment. The airline has frozen service increments for some of its pilots since as early as 2009. SIA spokesman said it was inappropriate to discuss the matter.


Artivision: Could see some negative interest, after annoucing yesterday that Tembusu Growth Fund has ceased to be a substantial shareholder. The fund's stake in the company dropped from 11.22% to 4.97% following open-market sales last Fri.


NOL: Reported continued sluggish operating performance for 4 wks from 7May – 3Jun 11 (Period 5). For the four wks, container shipping vol increased 7% yoy but was down 1.2% vs period 4 while average revenue per FEU fell 8% yoy and down 0.02% vs period 4. Increase in vol due to higher vol carried on the Intra-Asia and Asia-Europe trade lanes while decline in average revenue per FEU was due to lower rates in the Asia-EU trade lane…..

YTD, container shipping vol has increased 9% while average revenue per FEU fell by 1% yoy. We note that despite weak operating performance, grp has in recent days announced orders for 10, 14,000 TEU ships with Hyundai, which will be the largest vessels in its fleet. At current price, valuation appears compelling with grp trading at 0.94x P/B vs historical average of 1.2x. Street has very mixed views on stock, with a mean TP of $1.81.


STX OSV: JP Morgan initiate with O/w call and $2.00 TP, citing leader amongst the crowd. Tip grp as likely beneficiary of next leg of offshore capex and as one of the major global high-end designers and developers of OSVs, used in the offshore oil and gas E&P and oil services industries…..

Add that grp best positioned to benefit from return of potential OSV capex cycle; STX OSV’s Brazil yard provides long term upside option and tip Operating Margins to surprise on the upside in FY11E / 12E. Grp trades at compelling valuations with a steep discount to its Spore peers (trades at 6.9x FY11E PE vs Spore yards at 14-16x).

SG Market

SG Market: Spore shares could take some bullish leads from Wall Street on increased optimism over Greek debt situation but the outcome of vote on austerity measures this week remains uncertain. Still, stocks should enjoy some short term lift from end Jun window dressing by funds as well as bargain hunting of certain blue chip and STI component stocks after being heavily sold down recently. DMX may enjoy 1st mover advantage with its plans to launch a cloud computing service in China.

Container shipper NOL could come under pressure after latest operating data that show further declines in freight rates & volumes. STI tipped to trade within its 3000-3080 range.

Monday, June 27, 2011


PSL: Controlling shareholder Mr Lee Cheng Peck and his brother (Mr Lee Tian Lye) have entered into a sale and purchase agr to dispose of 60m shares at $0.27 each to RES Holdings, a Sg priv co, approx 19.4% of total share capital. Mr Lee has also entered into a separate agr with a priv individual, Awaludin in which Mr Lee will have an option to sell and Awaludin, an option to buy 76.0m shares at $0.30, approx 24.6% of total share capital, subject to certain conditions...

His wife and his brother will also appoint UOB Kay Hian to place out 30.0m shares (9.7% of total share cap). After these transactions, Mr Lee will cease to be a controlling shareholder of PSL. The family’s stake is reported as approx 54% on Bloomberg and the total stake sold is 53.7% which effectively means the family has divested all of their holdings in PSL…

PSL last done was $0.285 after rising from $0.20 on 7 June and trades at trailing P/E 19.6x. Announcement also follows decision to invest into a coal mining business in Indonesia which could imply a possible change of business in the future.


PSL: Controlling shareholder Mr Lee Cheng Peck and his brother (Mr Lee Tian Lye) have entered into a sale and purchase agr to dispose of 60m shares at $0.27 each to RES Holdings, a Sg priv co, approx 19.4% of total share capital. Mr Lee has also entered into a separate agr with a priv individual, Awaludin in which Mr Lee will have an option to sell and Awaludin, an option to buy 76.0m shares at $0.30, approx 24.6% of total share capital, subject to certain conditions...

His wife and his brother will also appoint UOB Kay Hian to place out 30.0m shares (9.7% of total share cap). After these transactions, Mr Lee will cease to be a controlling shareholder of PSL. The family’s stake is reported as approx 54% on Bloomberg and the total stake sold is 53.7% which effectively means the family has divested all of their holdings in PSL…

PSL last done was $0.285 after rising from $0.20 on 7 June and trades at trailing P/E 19.6x. Announcement also follows decision to invest into a coal mining business in Indonesia which could imply a possible change of business in the future.


SIA: Goldman Sachs downgrades to Neutral from Buy & cuts target price to $14.20 from $16.10. Expects traffic growth to remain lacklustre as SIA continues to lose market share to low cost carriers which are winning business thanks to LCC's aggressive pricing strategies. Highlights SIA screens favorably on valuations & has historically traded at a 33% discount to its peers since 2001 but this discount will likely continue barring initiatives allowing SIA to gain access to high growth markets.

House sees better relative upside in other airlines, namely China Eastern Airlines (670 HK). Notes that the stock has declined 4.3% vs the STI's 6% rise in past 12 mths; attributing SIA's underperformance mainly to market share loss at its Singapore hub to LCCs.

Mapletree Industrial Trust (MIT)

Mapletree Industrial Trust (MIT): Deutsche initiates at Buy with TP $1.30 based on DDM. Likes the Reit bcs of:
- strong organic growth profile, the highest among industrial REITs
- potential further gains from AEIs and selective developments
- high chance in acquiring the JTC portfolio in the upcoming tender.

Estimates 5.5% CAGR for DPU from FY11-14E to be amongst the highest for its peers, on upward rental reversions due to combination of expiry of rental caps at end of Jun ‘11 and short lease expiry profile (WALE of 2.6yrs). Says, along with high retention rates of 85.9% and declining pool of lower cost alternatives, this should allow MIT to close the rental gap with the market and to do so quickly...

Adds, MIT has low concentration risk as only 20.5% of its gross revenue is contributed by its Top 10 tenants. Notes high correlation between GDP growth and demand for industrial space, hence supporting the positive outlook for the sector...

Separately, notes MIT stands a good chance in securing 1 of 2 tranches of JTC’s flatted factories currently being divested. The 2 tranches are valued at $600-650m in total, and could provide ~1% accretion to FY13E DPU.
Highlights MIT’s gearing stands at 36%, and if acquisition is fully debt funded, gearing will rise to 43.5%. Expects a placement to accompany the acquisition to maintain gearing at 36-38%...

Forecasts FY11/12/13 DPU at 8.1/8.6/9.0cts which implies a yield of 6.9/7.3/7.7% respectively.
Stock currently trades at 1.23X P/NAV.
Recent new ratings by UOBKH and JPM are also positive with TP $1.35 and $1.30 respectively.

Tiger Airways

Tiger Airways: Goldman Sachs initiate at Neutral with $1.40 TP. Note that strong demand growth appears to be well discounted by the mkt, and grp trades at a valuation premium relative to their Asian peers. Flag volatile fuel prices, which may be a big swing factor for LCC’s earnings, and any demand shortfall could result in significant downside risk on LCC stocks.

Cosco Corp

Cosco Corp: CIMB has Technical Buy Call. Note that grp is still hovering in a bullish flag pattern. However, think that there is opportunity for traders to go for a quick scalp with prices trading near the support trend line. The candles have swung past its 30-day SMA last Friday, and this should entice follow through buying today…..

Technical landscape is improving with MACD stagging a golden cross, pushing its histogram bars into the positive territory. RSI too has bounced off its low. Recommend aggressive traders may start to nibble now. The next upleg should lift prices towards $2.01 and possibly even S$2.10 next. Tip support at a$1.82.

Sino Grandness

Sino Grandness: CIMB has Technical Buy Call. Note that recent pullback dragged prices towards the wedge support but the bulls have since made a comeback. The candles bounced off the $0.445 low to move above its 200-day SMA, suggesting that a temporary bottom could have been formed…..

MACD histogram bars have returned to the black, suggesting that selling climate has tapered off. RSI too has hooked upward. Recommend Investors who got in near the $0.445 low may continue to hold on to their position. Once the 30-day SMA is taken out, prices are likely to swing towards $0.505-0.51, before heading towards $0.53 next.


Lottvision: Has issued 107m new ordinary shares at $0.0135 per share (approx 10% disc to last traded) through a private placement. The 3 subscribers were introduced by business assoc of the co. The net proceeds of $1.3m will be used for business investments and working capital purposes respectively. Co is loss making and issued shares form approx 11.7% of enlarged share cap.

Asia Shipping

Asia Shipping: Goldman Sachs has sector report. Note that Demand for forward bookings good but not great and shipments should increase incrementally, add that Utilization rates should also improve 2-5 ppts during 3Q, with demand expected to grow at a slower rate. Freight rates however remain under pressure on axial routes, with terminal handling charges expected to increase 5%-10%, a bit less than initially assumed…..

Sector has no apparent constraints presently; with power, labor and boxes aplenty. Downside risks to earnings estimates due to weaker-than-expected freight rates, house believe that the mkt appears to be too pessimistic. Valuation multiples have collapsed to 0.84X EV/Fleet Value and 0.76X EV/GCI for 2011E. Reiterate Buy ratings for OOIL, NOL and Hanjin Shipping which have retraced to compelling valuations.

Asian Airlines

Asian Airlines: Morgan Stanley has sector report. Note that difficult Operating Year for the Airline Industry and prefer quality defensive airline earnings exposure for FY11, expect operating profit to fall. IATA cut global net profit outlook for the airline industry to US$4.1b from US$8.6b for this yr….

House more optimistic in earnings outlook than IATA for APAC airlines, but less bullish than market consensus, about 10-20% below consensus. Believe mkt expectations could be disappointed, particularly for the North Asian airlines. Best ideas are SIA, Qantas, Tiger and Air Asia. Recommends avoiding CAL, EVA, CPA, Air China, CSA and CEA.


Strategy: Citi has strategy report for SG. Note that SG’s earnings revision count indicator has turned negative, with hints of a weaker STI, but not pointing to a looming recession as collective net income forecast for STI is holding steady. Negative ERC is likely a normalization of earnings expectations as SG’s economy adjusts to a slower rate of growth of 7% vs 15% last yr….

Inflation is moderating, April’s CPI came in at 4.5%YoY, lower than the peak of 5.5% YoY in Jan. Expect CPI to average 4% yoy for FY11 as a stronger S$ helps dampen imported inflation but negatively impacts exporters and tourism….

Key stock picks are KepCorp as a proxy for rising demand for replacement rigs; DBS Bank as a proxy of banks that have a strong equity base and have enjoyed rising loan growth momentum; Wilmar on the turnaround of its oilseeds unit in 1Q11. Also like A-Reit and Singtel for their attractive dividend yields.


LimKimTah: 50% owned JV with Woh Hup has won a $90.4m contract to build a condo dev RV Residences in 471 River Valley Rd. The dev comprises 6 blks of 7 storeys with condo facilities. The contract period is for 30 mths and is expected to commence on 8 July 2011…

In a separate announcement, an assoc co L&W has also formed a 70% owned JV in India to undertake construction projects and consultancy services in India. Co is trading at trailing P/E of 4.9x, other peers Chip Eng Seng at 2.5x, Tiong Seng at 8.8x and Lian Beng at 4.1x


Portek: Will incur a charge of $3.3m above provision of $6.8m. This was related to difficulty of determining profit sharing arrangement with Gabon partner BJCN&M. It was decided by both parties to submit the issue for arbitration in Paris, France where the courts awarded BJCN&M $10.1m with no further claim to profits in Gabon. There is an conditional cash offer for co at $1.20 per share till 20 July 2011 by offeror ICTS Far East.

HL Asia

HL Asia: Co has signed a binding LOI for the sale of HL Karimun Granite to BVI co Hylton Invt and priv indiv Mr Joesoef for $28.0m. HL Karimun has effective ownership of 80% of a quarry on Karimun Island. A non-refundable deposit of $5.0m has been made and is pending an official sale and purchase agreement. Karimun Island itself is the main supplier of raw aggregates (80% share) of Sg’s construction sector. HL Asia now trades at 11.7x fwd P/E.


Boustead: Has filed a summons in Sg against Arab Banking Corp to restrain it from disbursing sum of US$18.8m. The purpose is to seek an interim injunction to restrain it from making payment of monies under certain bank guarantees or extending their validity to Bank of Commerce and Dev (BCD)...

Guarantees were initially provided as counter guarantees to the Adv Payment Guarantee and Performance Bond issued to BCD to Dev of Admin Centers in Libya which awarded a $300m contract for a new township…

The prev announcement on 28 Feb relating to financial exposure in Libya did not include this amt due to lack of compelling reasons then to make provisions. The High Court has granted an injunction until date of summons which co will disclose once known…

Earlier exposure was in Libya was projected at $15.5m to $39.6m initially. The new charge of US$18.8 if it materializes, is approx 4.5c per share. Co now trades at $1.02 at fwd P/E 11.4x


Strategy/Outlook: Of the 19 fund managers polled by OCBC Bank's Wealth Management, 13 do not expect the global economic and earnings recovery to gain traction in 2H11. Cite Eurozone debt woes cited as most worrying factor, besides inflation and rising oil prices…..

Lion Global add USD likely to remain 'pressurised' in 2H11 as Fed not likely to normalise policies in short term vs EU Central Bank and other central banks who will hike rates when necessary.

Golden Agri

Golden Agri: A key feature in The Edge this week. Tip that production Vols to rise further and further price weakness could be buying opportunity. Grp currently trades at only 4.1x earnings vs Indoagri at 9.5x. Goldman Sachs believes mkt is overly conservative on earnings, and ddd that better entry levels for plantation stocks in general could emerge in 3Q11 which is when CPO production is seasonally close to is peaks, and prices may then be at their lowest.


Z-obee: A key feature in The Edge this wk. Co aims to revamp business model and eye higher margin jobs. Recently moving into in-flight entertainment devices for Chinese domestic carriers. Co also working with a network systems integrator in China to come up with system for local authorities to track movtn of food inventories, and will continue to ride the trend for smartphones to serve both vertical and consumer mkts…..

At current price, valuation appears compelling, with grp trading at 7.3x FY11E P/E vs simple peers average of 17x and historical earnings of 13x.


Property: Look at shoe-box units with caution according to minister Khaw Boon Wan. Analysts add that investors paying a high psf price for a shoe-box unit only make sense if unit can command a high psf rent, but right now, suspect that they can't get those kinds of high rentals, but no way to be sure as most of these units are not on the mkt yet. e.g of Shoe box units developers include Oxley Holdings…..

Separately, Citi has property report. House holds negative outlook for sector and Downgrades Keppel Land to Sell from Hold with $3.58 TP, downgrade Wing Tai to Hold from Buy with $1.59 TP and Downgrade City Dev to Hold from Buy, with $11.20 TP. CMA is house top pick among developers with $2.06 TP, although house continues to favor REITS over developers.

Keppel Corp

Keppel Corp: expects to deliver its 3rd state-of-the-art oil rig to major US customer, Rowan Companies on time and within budget. The KepFELS N-class rig is built to operate in harsh weather conditions in water depths of 400-500 ft, about 40% deeper than traditional units in benign waters and 15% deeper than existing jack-up rigs built to operate in harsh environments...

Stock has pulled back 11% from its peak in late Apr, but remains one of the better STI performers ytd (+33%), on the back of strong order momentum, amidst demand for rigs.
The majority of the Street has Buy ratings with recent TP ranging btwn $13.30-14.60.

SG Market

SG Market: Spore shares may reverse its 2-day uptrend after Wall Street declined last Fri amid European jitters over possible downgrade of Italian banks & upcoming vote on Greek austerity measures. Friday, the benchmark STI closed +0.7% at 3066.85, gaining 2.0% last week. The market is expected to remain sluggish as investors are still wary with so many adverse news weighing although some glimmer of hope on China’s inflation & lower crude prices nay forestall any aggressive sell-offs.

Watch out for news from logistics firm CWT after it requests a trading halt pending an announcement. Thinly traded construction firm Lee Kim Tah may see increased activity after winning a $90m condominium construction project. Analysts expect the STI to trade within a 3000-3080 range near term.

Friday, June 24, 2011


Healthway: Msia newspaper reports that a unit of Healthway has bought a piece of land near the Petronas Twin Towers in KL for ~RM 80m. The buyer is said to have paid an est RM1600 psf for the site, measuring a little over 50k sf, located just behind The Pearl Condo and btwn Suria KLCC and Pavilion. The land, which has potential for development, was reported to have an asking price of RM1800 psf last year...

This may be an indication that Healthway, which operates a network of private medical centres and clinics in Spore and China, may be looking to expand more aggressively into Msia.
No official announcement from the co as yet.
Stock is unchanged at 9 cts.


Mencast: UOB Kay Hian initiates coverage with Buy Call and $0.59 TP. Like Mencast for its balanced strategy of diversifying into new engines for growth while strengthening its core competencies through synergistic acquisitions. House estimate a two-year EPS CAGR of 19.3% (2010-12F), driven by new rev streams, capacity expansion and valueaccretive acquisitions….

Technically price action appears to be on a long term uptrend, consolidating on weak trading vol. Support and resistance are at $0.42 and $0.47 respectively.

Ying Li

Ying Li: Chongqing’s housing tax has helped curbed sales and prices since its introdn in Jan 10 with the avg price of taxable housing falling 10% to Rmb13,140 psm. High-end housing accounted for 7.8% of all commercial housing sales during the period, down 3.1 ppt from a yr earlier. Ying Li is the only Spore-listed developer which is 100% exposed to Chongqing although most of its property portfolio is in prime commercial projects.

The stock is currently locked in a long consolidation band betw $0.32-0.45 & trades at 1.6x P/B. 4 out of 5 houses rates the stock a Buy with a avg TP of $0.61.


Elec&Eltek: in connection with its proposed listing on the HKEx by way of introduction, the listing committee has convened a hearing yday to consider their application. If approval is granted, listing is still subject to fulfillment of various conditions. The deadline for the 1st batch transfer of shares was on the 20 Jun...

The 2nd and 3rd transfers have a deadline of 29 Jun and 11 Jul respectively and will not be transferred by the proposed first day of the dual listing. There has been no indicative timetable given. Its parent co Kingboard Chemical is also traded in HK.
Stock currently trades at 8.5X P/E.

Hu An Cable

Hu An Cable: CIMB has Technical Buy Call. Note that Prices seem to be stuck within its consolidation triangle. It is now finding some support near its SMAs. Both its indicators are still in negative mode, suggesting that prices could remain range bound for the time being. Since, the triangle pattern is at its tail-end, think the downside from here is likely limited…..

Recommend that stock is still a buy now with a stop placed below the $0.25 low. Prices are more likely to test the triangle resistance at $0.32 and a breakout above $0.32 would be bullish for the stock, targeting $0.355 or higher in the longer term.


Midas: CIMB has technical Buy Call. Note that grp has fallen from the $0.835 high and appears to be losing steam after prices rebounded off the lower end of its long term downtrend channel. Prices broke out of its bullish wedge pattern and are now sitting just above the wedge resistance turned support levels…

MACD has reconfirmed its golden crossover and both its MACD and RSI are showing bullish divergence signals on both the daily and intra-day charts. House think that this is a good level to get in long for a short term trade. Place a stop below $0.60, the recent low. Look for a rebound towards $0.695, its 200-day SMA and possibly even retest the $0.735 levels again.

Capita Commercial Trust & Capita Mall Trust

Capita Commercial Trust & Capita Mall Trust: IIFL note that small benefit from refinancing.
Raffles City (60% owned by CCT and 40% owned by CT) has refinanced debt of $964m at ttractive fixed I/R of 3.07% (vs earlier 4.2%). Revised DPU estimates upwards for both CCT and CMT by 0.3-2.8% as the lower interest rate has marginal accretion of 1c to valuation for both...

Continue to remain cautious on office and positive on retail. Maintain REDUCE on CCT, TP $1.56 from $1.55 and BUY on CT, TP $2.42 from $2.41.

SG Property

SG Property: Tender for the West Coast Link site attracted 12 bidders with
Far East emerging the top bidder at $176m ($461 psf GFA) narrowing beating Centurion RE by 1.1%...

Deutsche note that not surprised that the top bid came in below market expectations of $560‐580psf, given the rising supply backdrop and developers' cautiousness from potential measures. Add that less ebullient competition for land and a more stable pricing environment should be positive for margins. Top picks amongst the developers are Keppel Land and CapitaLand.


SG O&M: Citi has sector report. Cite that we are nowhere near Cycle-End and worthwhile to remain Opportunistic. Maintain Buy on KepCorp and note that sector Outlook intact, think that recent sell-off has raised attractiveness of KEP’s risk-reward profile and provided for an appealing buying opportunity. Concerns of oversupply may be premature as several data points suggest mid-way through a potentially more pronounced rig-building cycle…

In near term, day rates and charter duration will be two key datapoints to look out for as they will determine outlook beyond 2011. Ytd, KEP’s and SMM’s order wins have collectively exceeded orders secured during early stages of last cycle. Continue to like KEP for its better earnings visibility and more attractive valuations (KEP O&M: 12x P/E vs SMM: 15x P/E)….

However, near-term caution arising from oversupply concerns and worries over Greece’s debt woes may result in a moderated order win momentum; and place outstanding jackup options (worth $1.9b/$2.5b for SMM/KEP) at greater risk of lapsing.


EDMI: Update on exit offer. Offeror, SMB has received acceptances for 12.1% of total outstanding issued shares. In addition SMB itself owned or controlled approx 58% previously, now a total of 70.1%.

Raffles Education

Raffles Education: to sell 50% of its wholly owns subsidiary, Value Vantage, to Mr Ding Fu Ru, for $46m.
The purchaser is an industrialist and real estate developer with extensive experiences in the PRC.
Value Vantage provides education and training services, and has invested in various education projects in the PRC, and subsidiaries that provide consultancy and mgt services for education projects...

Lacking clarity on the exact nature of assets sold, we can only hypothesize that this transaction may pave the way for Raffles Edu to fulfill its previously stated property development aspirations in China.
Sale completion is targeted by 28 Jul ’11...

Raffles Edu will book a gain of $23.7m from the sale. Sale proceeds to be used for working capital and to reduce bank loans.
Based on FYJun10 numbers, NTA (post 3-into-1 share consolidation) will rise from 37.65cts to 42.2cts, and EPS will increase from 6.03cts to 8.46cts.
Street has wide range of ratings for the stock, with recent TP btwn $0.45-0.90.
Stock closed at $0.46 yday, but touched a new multi-year low intraday at $0.445.

Metax Engineering

Metax Engineering: Has entered into a legally binding MOU with PT Jimbaran Hijau to design and build water and wastewater treatment plants for the Bali International Park. The Developer has been decreed by the President of Indo to develop the BIP, which consists of 250 ha of land located at Jimbaran, Bali. Co. will make a further announcement upon the execution of a definitive agreement in relation to the said JV Co. We note that details are still currently lacking for project.

Think Environmental

Think Environmental: Could see some interests, after annoucing it is Investing US$16m for 51% stake in firm that owns gold exploration and mining licences in Mongolia. Called the Tsagaan Jalga Project, 11,400 oz of gold resources from area had previously been classified as commercial. Some 60,000 oz has also been potential reserves. ThinkEnv will start trial mining as a lead up to full production in July …

ThinkEnv add that resources found so far are located in areas that account for 1% of the total concession area. Small-scale gold production is currently taking place at the Tsagaan Jalga Project, it added. Latest acquisition means that to date, grp has secured 16 exploring and mining concessions. Technically see resistance at $0.835 followed by $0.855.

Mapletree Logistics Trust

Mapletree Logistics Trust: Deputy CEO, Dr Michael james de Jong-Douglas resigns. No reason given.


CapitaLand: Arthur Land will take over from Olivier Lim as the Group CFO from mid-Sep. Olivier Lim, who was Group CFO for 6yrs, will assume the position of Head of Strategic Corporate Devt (incl M&A). This could provide him with more operational experience required for the Group’s future leadership succession.
Arthur Lang has been with Morgan Stanley’s invmt banking division since 1996 and is the current Co-Head of IB in SE Asia at MS...

The transition is expected to be smooth, and unlikely to affect CapL’s fundamentals.
Nomura maintains Buy with TP $4.17, does not foresee any significant change in the way CapL manages its capital, at least in the near term...

CS maintains Outperform, but cuts TP to $3.82 from $4.33, revises down CapL’s RNAV to $4.77 from $4.81, due to lower CCT TP of $1.70 after its Market Street carpark redevelopment plans, lower Australand share price, and continued headwinds for its China assets (37% of total assets ex-cash)...

But notes CapL has underperformed even the purer China developers over the past 1-12mths, and is trading at 0.9x P/NTA and 0.6x RNAV, which is overly-pessimistic for its residential business (booked at cost), given most of its listed entities trade close to or above book values and its fee income business is not included in NTA.


GLP: Co has entered into a strategic partnership with Vancl, China's largest online apparel retailer to collaborate on logistic facilities. Co also signed an agreement with Vancl's subsi V+ for 37.8k sqm in GLP Park Songjiang. Vancl as of end May 2011 is GLP's 2nd largest tenant by leased area with total of 141.3 sqm in Beijing, Shanghai and Chengdu. Vancl has US$304m in retail sales for 2010...

GLP trades at 23.2x fwd P/E and has 6 out of 7 analysts rating a Buy on the stock. Counter was adversely affected by the Japan earthquake falling to lows in March but appears to be facing another dip in the near-term. Support at $1.92

SG Market

SG Market: Spore shares are likely to open with an upward bias after Wall Street bounced off its lows on Thurs on hopes that Greece has received approval for its austerity plan. US markets gained momentum to recover from a much weaker early session, which seems to suggest that things may look a bit better for Asia. However, sentiment is still nervous & tentative despite technical conditions remaining oversold & near-term downtrend has not been negated.

Overhead resistance is tipped at around 3080 with downside support at 3000. Corporate news is thin; overnight slump in oil prices may weigh on offshore names, though fuel-thirsty airlines & shipping stocks could benefit.

Thursday, June 23, 2011

Lum Chang

Lum Chang: is an under-appreciated and under-researched deep value play. It boasts an impressive book-to-bill ratio at 8.2x (industry average 1.6x), backed by strong customers such as the LTA, Ascendas Land and Ho Bee. Contract visibility is strong, given its $1.1b orderbook, stretching till 2015.

Valuations are attractive both at an absolute level and relative to peers. The stock trades at 0.7x P/B on 18.7% ROE; while trailing P/E at 10.6x should go under 5x (vs peers ~7x), once Lum Chang begins to run down its orderbook.
The stock provides a substantial margin of safety with net cash of $0.155/share, and potential earnings from its current orderbook that could translate to an estimated $0.164/share. Combined, both elements amount to 116% of current share price.

Investors get to enjoy a steady dividend income while waiting for a re-rating. The payout ratio is a decent 30-50%, and DPS has been rising over the years to its current yield of 7.3%.
A back-of-the-envelop calculation suggests a fair value of $0.59 by 2016, when most of its current projects are completed.

More details in


Yanlord: Company-specific factors appear strong, with co pushing new projects and phases out in 2Q2011. Both Yanlord Yangtze Riverbay in Nanjing and Yanlord Lakeview Bay in Suzhou will have new phases launched which will drive co’s rev. A smaller villa dev Suzhou Wuzhong will also be launched. Co has sizeable existing land bank in China, total of 5.1m sqm (compared to 185.1k sqm delivered in 1Q2011 where co has stellar results)…

Net debt to equity at 0.55x appears manageable. The problem is on the macro front where China has implemented tightening property measures (raising rates and curbing home-buying in Shanghai and Shenzhen where Yanlord has holdings) coupled with S-chip and US-listed co which had a slew of accounting/fraud issues. The Shanghai SE Property Index has fell off April highs and Yanlord has followed suit…

Given counter’s current weakness, downtrend looks to continue. Co now trades at 0.9x P/B but has delivered superior margins due to land acquisition costs. The advantage may not be sustainable due to higher prices for newer plots of land. See nxt support at $0.95 levels.

Otto Marine

Otto Marine: The courts have denied Otto’s application to restrain Entities from canceling the shipbuilding contract for Hull No. 7049 and/or from making calls on the related Refund Guarantees.
This follows customer Mosvold’s earlier cancellation of another shipbuilding contract for H7048, in which Otto is required to refund advance payments of US$26.7m...

The court ruling news may overshadow news that its deep-sea vessel H7047 has obtained the DNV maritime class certification.
Otto’s share price has been hit by concerns about its cash flow, poor financial performance due to vessel delivery delays, and potential order cancellations by Mosvold.
Recent Street ratings are bearish with TP ranging btwn $0.19-0.21.


Mencast: CIMB maintains Buy with TP $0.70. Note that Mencast continues its expansion strategy with the proposed acquisition of Unidive Marine Services for $14.85m. The acquisition of Unidive adds another earnings-accretive company under for the group. TP still set at S$0.70, pegged at 9x CY12.


SGX: UBS maintains Buy but reduces TP to $8.70 from $9.30, citing excessive discount. Note that current share price suggests a much lower trading vol for a prolonged period, which is excessively pessimistic. SGX is now trading at a 23% discount to the HKE’s PE vs the average 9% seen in the past 5yrs. High frequency trading in the securities starting in August could boost the velocity and in turn provide a catalyst for the stock.


Noble: IIFL downgrade to Reduce and slashes TP to $2.04 from $2.80, citing the Glencore drag. Note that Noble’s share price has been dragged down by the very weak performance of Glencore’s since the latter’s IPO in May, while Noble is at earlier stage of growth, and has much more stable earnings, than the asset-heavy Glencore…..

Believe that the market is under-pricing Glencore as a pure miner. However, the inescapable comparison with Glencore now renders original valuation of Noble untenable. Tune down target P/E to 13x (and P/B to 2.2x).

Golden Agri

Golden Agri: Deutsche maintains Buy with TP $0.83. Expect grp to deliver above-average output growth of 9% pa vs industry growth of 6% pa over 2011-13. Yield projected to grow by 3.6% pa, on back of favorable age profile of planted area and improved weather conditions. Although still positive on long-term fundamentals of CPO, expect near-term price weakness on higher global supply…..

Add that grp’s strong output growth should help cushion the impact of a softer CPO price. Raise FY11-13 earnings forecasts by 6-12%, factoring in higher sales vol. Reduce PE valuation to 15x due to a more subdued palm oil price cycle. Continue to like grp for its above-average production growth.


GLP: UBS reiterate Buy with TP $2.71. Reported in its FY11 results that 30 of its 69 Jap assets sustained damage from the earthquake (higher than expected), but a write-down of US $42m was in line with initial estimates. Remain confident on its Japan outlook after viewing the damage to its Tokyo assets and assess GLP’s Japan operations…..

Add that potential positive catalysts aplenty in H211, with 1) Demand-supply dynamics favorable as channel checks indicate post earthquake, disaster-affected Co’s and relocations have created 200K GFA in demand, while supply remains tight. 2) The company is also actively looking to pursue greenfield developments post-expiry of its non compete clause, while 3)monetisation of its Japan assets remains on the cards.


Capitaland: Nomura maintains buy but reduce TP to $4.17 from $4.41. Cite that Land banking opportunities in China surfacing are likely more productive use of capital. Raise NAV estimate from $4.41 to $4.50 but ascribe a 45% discount to grp’s development business in China to reflect the challenging near-term outlook. Recommend Buy on attractive valuation, as 2011 is likely to see well located and managed malls assert their comparative advantage.


O&M: CS maintains O/W on sector. Note that govt’s emphasis on raising productivity of SG’s manufacturing industry has been heightened post the recent GE. Expect population growth to slow to 1-2%, as the govt reduces dependence on foreign workers and tip progressive hikes in foreign worker levy to have minimal impact of around 10 bp on margins…..

In tandem, yard productivity gains may outweigh potential labour costs rise. Add that Labour cost is the key competitive strength of Spore yards, with wage cost per employee 40% that of Korean yards, offset by lower productivity in SG yards, with rev per employee being 32% of Korean yards. Believe ombination of strong order in near term and optionality of expanding into new business segments put SG yards in sweet spot. Reiterate O/p on KepCorp (TP $14.60) and SembMarine ($6.60).

Olam / CPO

Olam: UBS raises to Buy Vs Neutral with revised TP of $3.50 vs $3.20 as the agricultural commodities supplier has exhibited strong profitability over the past two qtrs, and in light of the recent 21% correction, believe share price reflects significant improvement in earnings. Expect earnings momentum to persist into 4Q11 and 2012, as emerging market urbanisation and economic growth remain strong in the face of overall inflation concerns.

CPO: CIMB has sector report. Note that the latest report card on regional planters reveals more outperformers than in the previous qtr as the output of planters with exposure to Indonesia was stronger than expected. Project better yoy 2Q11 earnings, spurred by higher ASPs and production…..

House retain CPO price and earnings forecasts for planters and is staying NEUTRAL on sector as qtrly earnings may peak in 2Q11 for some and expect CPO prices to drift lower in 2H11. Wilmar replaces Golden Agri as top pick in the region, in keeping with house view of weaker CPO prices in 2H11.


Hisaka: 20m new shares have been allotted and issued at an issue price of $0.51 each (6.25% premium over its last close of $0.48) and will be listed on SGX today. The TDRs will be listed on the Taiwan Stock Exchange tmr. The net proceeds of the TDRs of approx. $10.2m will be used to dev a new medical product, the Portable Blood Warmer System…

Note that the TDR shares comprise of 20m new shares and 40m vendor shares held by U9 Investment, a controlling sh/h of the company. Stock currently trades at 9X P/E. SIAS and NRA both have overweight on the stock with TP $0.58 and $0.55 respectively.


Anwell: Secured long-term funding arrangement of RMB500m or $95.4m from the municipal govt of Dongguan for the setting up their 2nd thin film solar panel production plant. This is on the back of securing RMB700m in funding for its first solar plant in An Yang City two days ago. Production is expected to start in 2012 and the new plant will be producing ANW's latest proprietary products…

Grp aims to achieve 1.5GW annual production capacity within 5 yrs. They claim further discussions are ongoing with the Dongguan govt for a second round of funding support. Stock currently trades at 0.51X P/B and has made a losses of HK$11.5m for 1Q11 and HK$416.9m for FY10.

Hu An

Hu An: Co has secured multiple contracts worth Rmb102.8m from Shenhua Grp Corp Ltd to supply cable for various projects relating to power and thermal generation, coal, railway and mining. Co states that it will continue to focus on power generation sector, notably wind power which co expects exponential growth in…

Shenhua Group is a state-owned diversified energy group in China and currently the largest coal supplier in the world with 27 coal-fired plants and 17 wind farms. Hu An supplies copper cables and focuses on the power industry in China, currently trades at P/E of 6.1x


HPHT: Citi maintains Sell with TP cut from US$0.80 to US$0.78. Throughput at Yantian is below expectations but sees modest downside risks as yields and transshipment mix appear stable and volume have been tracking inline with mgmt guidance…

House believes that near-term volume migration at neighbouring MTL terminal will weigh on HK ports as a whole and believe other China ports will capture a larger share over time. At 24.6x 2012e earnings HPHT is trading over twice of Cosco and China Merchants’ avg which is still rich despite being more palatable. Co expects 7.3% annualized yield in 2011 at current lvls.


SingTel: News largely expected. Singtel’s wholly-owned Optus has reached an A$800m agr with the govt to migrate its customers to the NBN. Optus’ migration will commence in 2014 and payment will be received progressively on migration. Telstra, the competitor to Optus, has also reached an $11b agr with the Aus govt to rollout the NBN. Both Telstra and Optus will gradually phase out their copper wire network…

Currently the Optus unit and Australia is the greatest contributor to co’s EBITDA, with approx 30% FY11 share of rev at $2.9b. Singtel has fwd P/E of 12.2x with div yield of 5.1% compared to Starhub at 15.3x with div yield of 7.3% and M1 at 13.4x with div yield of 5.6%.


Yangzijiang: enters into a Cooperation Framework Agreement (CFA) with China Development Bank (CDB) and Peter Dohle, where CDB agrees to provide financing to Peter Dohle for the purchase of up to US$1b worth of shipping vessels from YZJ over the next 5 yrs. This comes as China and Germany work on building closer ties...

At the same time, Peter Dohle signs LOI to order 8x 10k TEU container vessels. Recall, Seaspan recently ordered 7 units of the same vessel (plus 18 options) from YZJ at US$100m per vessel.
While the latest contracts are non-binding, news will likely be taken positively by the market, particularly after recent concerns that vessel orders may slow down due to the potential supply glut...

With this latest order, YZJ would have a net outstanding orderbook of US$6.7b, vs FY10 revenue of Rmb 12.9b (US$2b).
Last wk, IIFL initiated at Add with TP $1.63.

Tiong Seng

Tiong Seng: Announced that its subsidiary, Yuan Ching Dev has taken a 30% stake in Feature (Balmoral). Feature is a consortium comprising the Tong Eng Group, Clarus Corp and Yuan Ching, which has entered into a collective sale agreement to purchase 16 Balmoral Road, Balmoral Cond for $141m. Subject to approval, Feature will redevelop the Balmoral site. Investment was funded by internal resources and will not have any material effect on the EPS and NTA of Co. for FY11.


STX OSV: Order win momentum continues, with grp securing new contracts to build 2 vessels for Farstad Shipping worth Nok1.2b (US$218.6m). Vessels are scheduled for delivery in 2Q13. We note that contract wins brings orderbook to an approximate Nok17.7b and Ytd grp has secured Nok3.8b worth of orders (exclude contracts for 8 LPG carriers worth Nok 3b, not yet made effective) vs FY10 order intake of Nok12.5b ……

At current price, valuation appears compelling, with grp trading at 6.8x FY11E P/E vs historical average of 9.8x and SGX peers average of 7.5x. Houses generally prescribe a multiple premium on grp vs SGX OSV builders, due to grp’s strong orderbook, mkt share and expertise in the high specs OSVs industry which non of the local peers are have a commanding presence in. CIMB maintains O/p target with $1.70 TP…..

Technically, grp is sitting on its 10- and 20-day MA at $1.20, just above its 50-day MA at $1.19, which may offer support; the $1.25 recent peak will likely cap.

SG Market

SG Market: Spore shares are likely to open lower after Wall Street fell on Wed, weighed by the Fed's downbeat assessment of the US economy; regional markets also opened weaker, with Nikkei down 0.4%. With fears of a Greek default easing, the Fed's downgraded view of the U.S economy is likely to stoke fresh worries over the global recovery, esp with no indication the Fed intends to take new steps to boost growth and jobs ahead of QE2's expiry at the end of Jun.

Those worries, coupled with concerns over the effects of monetary tightening in China, are likely to weigh on the market in the near term. Analysts tip 3000 support & 3050 resistance for the STI. STX OSV may be in focus after it secured contracts worth US$218m; Singtel may also attract interest after its Optus unit agreed a A$800m deal with Australia's NBN Co. YZJ also in the news after signing pact with Peter Dohle of Germany to build 8 containerships of 10k TEU capacity each.

Wednesday, June 22, 2011

Lizhong Wheel

Lizhong Wheel: Co has entered into a JV with Italian co HT&L Fitting to invest in Changsha. Co has invested Rmb16.2m to hold 49% of the JV which will construct a plant of 30 mu and have an annual capacity of 1m set of assembled wheels per annum. The JV will also provide assembly of automobile wheels, tyres and other services…

Targeted customers include Guangzhou Fiat and other large carmakers in China. HT&L supplies to brands such as Fiat, Lamborghini, Volkswagen amongst other brand. Lizhong Wheel is the leading manufacturer of aluminium alloy wheels in China and now trades at current P/E of 8.2x.

Sim Lian

Sim Lian: Pricing for its Tampines DBSS Centrale 8 will sell for up to $778k off previously indicated $880k.Grp has priced its 3-rm flats from $389-445k; 4-rm flats from $511-592k; 5-rm flats from $685-778k The dev will have 708 units and is due for TOP by Oct 2014. Dev is near the town centre and Tampines MRT with the future Downtown Line 3 MRT to be located there as well. Co trades at approx current P/B of 1.0x


CDL: HSBC maintains Neutral but cuts TP to $10.79 from $11.64. May industry sales figures were strong at 1575 units and increases the risk of further policy action. Notes that CDL’s share price prices a fall in residential prices of 15-20% from end-2010 lvls which is unlikely unless policy tone turns severely negative...

Baseline view for prices to remain flattish despite prices being up 6% ytd in 2011. House reduces TP and RNAV on back of lower mkt price for Millenium and Copthorne listed on LSE and limited opportunity for CDL to grow its RNAV in nxt 12 mths. Co trades at 1.4x fwd P/B, Capitaland at 0.9x and UOL at 0.8x


CapitaLand: which has $10.4b of assets in China, is aiming to double its portfolio in the country in the next 5 yrs as it expects the economy to expand over the next decade. China accounts for 37% of Capitaland’s assets vs 35% for S'pore. It expects to expand in key markets with the capacity to invest a further $2b this year.

Ascott Holdings plans to increase its portfolio in China to 12k from 6.6k apartment units by 2015, while CMA, its shopping mall unit, aims to double its holdings to 100 malls from 53 within 3-5 yrs. Capitaland’s residential projects in China accounted for 12% of its global portfolio, and its separate unit will build value homes in China to tap on demand for lower-priced apartments.

They expect to start construction at its Wuhan site at the end of this year and is looking for similar sites in Guangzhou.
Stock currently trades at 0.87X P/B. Recent recommendations are largely Buy with TP$3.50 - $4.61. Stock closed at 52-wk low last Friday but rebounded slightly yday.

Spore Market

Spore Market: likely to open higher after US stocks posted sharp gains Tuesday, their 4th-straight positive session thanks to easing fears over a Greek default; news Greece's government survived a key vote of confidence is also likely to boost sentiment. Yday the benchmark STI closed up 1.3% at 3054.

The STI is tipped to head towards, and maybe retest, the 3100 level; a break above 3100 would point to a more sustainable near-term recovery. Until that happens, mkt watchers may view the recent bounce as just a technical rebound because of the heavy correction over the past 2 weeks.

The STI is up 1.6% over the last two sessions, rebounding from an 8-session, 3.6% fall. Battered down property plays, including large-cap developers such as CapitaLand, have led that rebound and may remain in focus.

Spore market outlook: general consensus among brokers is that the STI will end higher by yr end.
CIMB highlights the Spore mkt does not look expensive at 1.6x P/B and 12.8x fwd PE on 10% EPS growth.
Goldman Sachs also views Spore valuations as reasonable, albeit not low enough to counter a period of soft profit growth.

Brokers still see tourism sector as one of the preferred ones that will ride out this patch of mkt uncertainty.
Credit Suisse highlights that the pricing power for the tourism sector is likely to remain strong given robust demand, high utilisation rates and limited incremental capacity. Meanwhile, the 6% appreciation of the SGD against the Spore 'tourism-weighted' basket of currencies shows that the impact is not as significant as the headline SGD/USD appreciation of 14% suggests.

Separately, the theme of dividend surprises was also raised, with CIMB highlighting "Spore stocks that trade >4% yields, yet pay out <80% of their earnings are M1, Venture, F&N and DBS.

JPM highlights that the STI is usually well correlated with earnings growth trajectory, with key mkt inflection pts anticipating the earnings trend with a 6-12 mth lead historically. Barring an external shock of similar magnitude as the Asian financial crisis, the house believes its estimates for Spore's earnings trajectory, whilst decelerating, will continue to remain in growth mode in the next 2-3 yrs.

CIMB, Citi and Goldman have yr-end STI tgts of 3440, 3500 and 3600 respectively.

Tuesday, June 21, 2011

Noble Group

Noble Group: CLSA upgrades to Buy from Outperform, with $2.39 TP. Note that with Brazil making up around 50% of global sugar exports, Noble is now firmly placed in sugar trade's nerve-center. Hence, it is positioned to capture the trade-flows that will result from sugar demand growth as emerging markets…..

Add that Noble'' recently-completed acquisition of two Sao Paolo sugar mills has catapulted it to Brazil's top five millers with cane crushing capacity of 17.5m mt and the ability to alternate production between sugar and ethanol will allow Noble to capture higher profits when product prices are out of synch. Tip sugar mills to contribute steady-state profit after tax and minority interests of around US$115m, or 10%-14% of Noble's PATMI.

** Aims Amp Capital Industrial Reit **

Aims Amp Capital Industrial Reit (AAREIT): Msia’s Axis Reit says Reits in SE Asia are ripe for consolidation with prices rising in certain property segments. Believes there is a need to increase the size of Reits to ensure greater flexibility in trading assets. Notes, with units in a number of Reits trading at a discount to NAV, there is scope for consolidation...

Nevertheless, acknowledges that there are regulatory hurdles, eg. no guidelines for Reit M&A in Msia and the corporate takeover code is insufficient…

Axis Reit trades at 1.2x NAV and could potentially be seeking conciliatory consolidation of smaller industrial M-Reits such as AmFirst Reit at 0.83x P/NAV.
StanChart notes S-Reits such as AAREIT at 0.78x P/NAV could also be potential targets for Axis. House has an Outperform rating on AAREIT with TP $0.23/unit. Stock trades at 9.4% FY11E yield.

Top Global

Top Global: clinched the Braddell Park collective sale site for $85m or $665/psf ppr. The freehold 91.4k sf site is zoned for residential use with a plot ratio of 1.4 and an allowable height of up to 5 storeys...

Authorities have granted an in-principle approval for the sale of a 6.5k sf adjoining piece of state land, which wld allow Top Global to build up to a gfa of 137k sf - sufficient for a new condo project with 130 apts averaging 1000 sf. This would lower the effective land rate of the amalgamated site to $639/psf ppr...

Top Global may be better known for its participation in the Capitol site redevelopment, which involves transforming the site into an iconic 5-star hotel cum retail and residential devt. Its partners include Pua Seck Guan’s Perennial Real Estate and Kwee Liong Seen’s Chesham Properties.
Top Global also has warrants W150929

SG Strategy

SG Strategy: JP Morgan has strategy report. Note that SG mkt has factored incountry-specific earnings risks and is trading at 13.8x and 12.5x FY11E and FY12E earnings, 5-11% below the 14.5x historical average. House remains overweight on banks and property in Singapore, with underweight positions in industrials and telcos.

Container Shipping: Morgan Stanley has sector report. Note fears of 3Q11 proposed rate hikes and peak season surcharges not being implemented are exaggerated and remain positive on the 2012 industry outlook and believe that fears of recovery in the developed economies rolling over and massive new ship orders impacting 2012 supply growth are unfounded. House continues to favor NOL, CSCL and Hanjin.

SG Strategy: UOB Kay Hian has Strategy Report. Note that should history repeat itself, the potential downside to STI is 2,642-2,880 after the expiry of QE2. See further weakness as a buying opportunity for quality laggards. Add that the jury is still out on whether there could be another QE3 and current consensus thinking is that there is unlikely to be further quantitative easing but we cannot rule this out totally as this is dependent on the extent of US’ economic recovery…..

House key top picks for 2H11 include counters that offer sustainable and high div yields which are (M1, StarHub, CDLH-T), industrial REITs (A-REIT, Cache Logistics, MIT, Sabana REIT), and quality laggard stocks (SIA Engineering, ST Engine, KepLand, OCBC, Ezra). Forecast 2011 GDP growth of 5.7% yoy and 5.0% yoy for 2012.

SG Strategy: Citi has strategy report. Note that STI is -3% Quarter-to-date (QTD) and SG’s earnings revision count indicator has turned down, with negative revisions exceeding positive counts by 10%. Tip that trend should continue to be on the negative side across summer, given concerns on high energy costs and softer export data lately…..

Add that SG however is at strong support levels from a valuation standpoint and should recover into 3Q11. The STI is at 13.5x PER, near to -1 SD from mean and should be a good support level for the market. House reiterate that the US is in a mid-cycle adjustment period and the softer patch of electronics exports and NODX data from Singapore should recover (and bring stocks higher) as we move into 3Q11…..

House recommends switching into defensive names into with the addition of A-REIT and Singtel. Wilmar was added on back of a turnaround at its oilseeds division. Also likes WingTai, KepCorp (-5% QTD) and DBS (-4% QTD). Other notable stock highlights include SIA (for having held up well) and Genting SP (stock price has declined 9% QTD).


Yang ZiJiang: IIFL initiate coverage with Add Call, and $1.63 TP. Note that grp is one of the most efficient shipbuilders in China, among the pioneers to break the dominance of Korean yards in large containership building. With a huge cash position to cushion a possible down-cycle and a net outstanding order book of US$6b, expect 9% core earnings CAGR over FY11-13. House values Co on 9x FY12 P/E plus residual cash.


Ausgrp: CIMB ceases coverage on stock due to a lack of institutional interest in the stock. House last rating was Neutral with a $0.52 TP. Notwithstanding, that the acting CEO has reiterated a turnaround and positive outlook in house recent meet up with him, believe that a dual-listing could catalyze the stock and narrow the valuation gap against ASX-listed peers.


Osim: Macquarie maintains O/p with $2.06 TP. Note that the recent sell down has been driven by profit booking and misunderstanding on the use of cash from the bond issue proceeds. Stock is now trading at 12.4x 2012E P/E vs 17.9x for China consumer names. Expect earnings upgrades after the 2Q11 results, and see an opportunity forinvestors who are focused on OSIM’s core fundamentals to accumulate the shares at current levels. Believe there is deep value in the stock at current valuations (12.4

Fraser Centrepoint Trust

Fraser Centrepoint Trust: DMG maintains Buy with $1.77 TP. Note that drop in share price presents buying opportunity. Reiterate O/w on S-REITs which offer a current dividend yield of 6.9% and FCT as top pick for S-REITs , as it owns prime suburban malls that are experiencing strong positive rental reversion…..

Add that despite the asset enhancement initiatives at Causeway Point which saw occupancy fell to 69% during 1Q11, FCT’s DPU were not affected much due to contribution from its Northpoint 2 and Yew Tee Point which were acquired in Feb 2010. House believe FCT is primed for growth at cheap valuation.

Courage Marine

Courage Marine: Announced that the HK Exchange had granted an approval in-principle for its Introduction listing in HK. Co expects to post listing documents on website of SEHK at 21 Jun11, and for trading of Shares to commence at 9am on 24 Jun11. We note that currently there is a lack of info on grp’s pricing of its dual listing and Grp has previously issued profit warning in 1Q11, citing a very volatile and cyclical dry bulk shipping sector.


Anwell: Co has secured long-term govt funding of Rmb700m for subsidiary, with Rmb200m in cash and a Rmb500m guarantee for bank financing from the municipal govt in An Yang City, Henan. Co intends to use the funds to ramp up production capacity for solar manufacturing. Co is also in discussion with local govt of another city in China for funding of its 2nd solar panel production plant…

However, the solar index in US has lost 25% since its high on 18 Feb and has twice the 60-day volatility of S&P 500. Solar stocks have attracted short-selling due to bets that profits will be affected from glut of Chinese panels and shrinking demand in Europe. Anwell is still loss-making as of last quarter, with net loss of approx HK$18.6m.


ChinaNewTown: Co has entered into a fixed assets loan agreement with China Minsheng Banking Corp for Rmb600m at 7.98% (floating rate of 20% on top of BOC 5 yr rate) and co has drawn down Rmb300m from the facility. Co is currently trading at P/B of 0.6x and P/E of 4.8x with net gearing of 0.24x. Most recently, co turned a 1Q profit of $74.6m.

Tiger Air

Tiger Air: the ash cloud from the Chile volcano has returned to Australian airspace, causing Virgin to suspend all Adelaide and Mildura flights and Tiger to cancel 8 flights btwn Sydney & Melbourne, and Melbourne & Adelaide.
The latest flight cancellations adds to Tiger’s list of woes, such as aircraft technical difficulties, pilot shortages and rising fuel costs, that caused the airline to miss earnings estimates for the recent FYMar11...

Expect Tiger Australia to be a drag on the Group. The unit contributed $279m, or 45% of Group revenue last yr, but made an operating loss of $9m (widening from the $0.6m loss in the previous yr).
Stock trades at 15.7x trailing P/E, vs closest peer AirAsia at 8.5x P/E.
Recent Street ratings are Neutral/Sell with TP ranging btwn $1.30-1.60.


M1: becomes the first to introduce 4G cellular services in Spore after it launched an ultra high-speed mobile broadband service over its newly minted LTE (long-term evolution) network in selected parts of the country.
Its LTE will initially cover major areas in and around Spore's financial district, in the Marina Bay area as well as Tanjong Rhu...

Coverage will be progressively expanded and scheduled to be nationwide by 1Q12. LTE allows operators to offer blazing cellular data speeds that are >100x faster than existing 3G. SingTel and StarHub will both roll out their LTE networks later this yr...

CIMB keeps earnings forecasts, $2.63 TP, and Neutral rating. But says M1 remains as top pick in the Spore telco sector, as it has most scope for capital mgt. Notes the “soft launch” of LTE is not expected to have much impact on either revenue or costs...

Technically, M1 has been one of the better share performers amidst the recent mkt correction. Counter closed at $2.52 yday, just shy of its all-time high of $2.55 made last wk. The longer term uptrend is still intact, with the key moving averages and indicators rising positively.

Spore Market

Spore Market: shares may open a tad higher after Wall Street's gains Monday following easing worries over a possible Greek sovereign default. The benchmark STI Monday closed 0.3% higher at 3014, rebounding modestly after an 8-session, 3.6% losing streak, which had taken the index into oversold territory actual resolution to the Greece debt situation and more clarity on global growth heading into 2H11.
Sias says the uncertainty surrounding the Euro-debt crisis is spooking investors around the world; and despite months of discussions, Euro nations are still struggling to come to a consensus on the details of the Greek bailout. Notes most investors continue to sit on the sidelines awaiting for the final outcome of this crisis...

However, despite the relief from U.S. markets, trading activity is likely to remain muted as investors await an actual resolution to the Greece debt situation and more clarity on global growth heading into 2H11...

Sias says the uncertainty surrounding the Euro-debt crisis is spooking investors around the world; and despite months of discussions, Euro nations are still struggling to come to a consensus on the details of the Greek bailout. Notes most investors continue to sit on the sidelines awaiting for the final outcome of this crisis.
Support for the STI is tipped at 3000, then 2970-2980, with resistance at 3040, then 3050.
Corporate newsflow is thin.

Monday, June 20, 2011


CCM Grp: Signed an MOU with Dianjiang County to develop an eco-tourism holiday resort. Total land size is approx. 700ha and will be developed in the following 4 phases over 3-5 years. Total invt is estimated at approx. $320m. $5m is required for the first phase and will be funded through bank borrowings and from local and foreign investors…

Co is still considering various avenues to finance the remaining phases. Stock currently trades at 15.1X P/E and is involved in construction services with mkt cap of 12.9m.


NOL: DBSV maintains Hold with $1.55 TP. House expect no recovery in freight rates yet as we approach peak season and expect losses to continue in 2Q11, although note that value could be emerging given recent underperformance. Add that annual Transpac rate negotiations will likely result in flat or slightly lower rates and there is no sign yet of a peak-season driven vol recovery either….

2Q11 will likely be another lossmaking qtr for NOL, and industry at large, athough 3Q11 earnings should benefit from peak season surcharges, visibility remains poor at this point. At current prices, NOL is trading close to or below book value, which house feel is near the floor of its trading band, given that huge losses reminiscent of the recent shipping crisis in FY09 are unlikely to be repeated.


Singtel: Daiwa maintains O/w and believe the share price will rise in absolute terms over the next 60 days. Note that stock has traded off recently, making short term valuation much more compelling. Stock's discount relative to NAV has widened to more than 16% in the last 3 wks from close to 11% previously. See room for this valuation gap to narrow in the coming weeks.

IndoFood Agri

IndoFood Agri: Citi maintains Buy but decrease TP to $1.90 from $3.54. Cite of underleveraged B/S and opportunities to Create Value. Add that CPO outlook in 2011 still remains favorable. House lowers FY11-12E earnings by 16%, to reflect earnings dilution. Also ascribe a 15% holding disc. and raise risk rating to Medium (from Low) to factor uncertainty risk entailed in asset acquisition plans.

Mirach Energy

Mirach Energy: Announced the term sheet in relation to the proposed placement of 151.8m new ordinary shares, representing 19.8% of total no of issued shares at $0.15. This is approx. a 22% prem to its VWAP on 17 June…

Subscribers are Permanent Rich Energy (subscribing to 14.9%) – principally engaged in the business of energy exploration and production – and Mr. Wang Fuzhu (subscribing to 4.9%) – a substantial sh/h of China Mengniu…

Funds will be used to acquire and develop new production oil fields in SEA and for general working capital purposes. The proposed placement is still subject to negotiation. Stock currently trades at 2.2X P/B. Coy made a loss of US$260k last quarter and a loss of US$1.5m for FY10.


HISAKA: TDR Issue price is NT$11.90 for each TDR which approx $0.51 per TDR share. Issue is approx 6.3% premium to last traded $0.48. 51.3m new TDRs will be offered via priv placement and another 5.7m TDRs will be offered through public subscription. An expected $10.2m will be raised for the dev of a new medical product a portable blood warmer system.


FibrechemTech: Update on trading resumption proposal (suspended since Feb 2009). Co has released results for 31 Dec 2009 and June 2010. Co was previously suspended due to accounting irregularities.


ForelandFabrictech: Found and exec chairman to sell 30.8m of his own shares at $0.16 approx 33% to closing of $0.12. One investor who is also one of the top ten major customers of co will take up 20m shares. After the placement, his stake will fall from 58.1% to 51.9% but will cont to have majority control…

Co expects that the performance of 1Q2011 (net profit of Rmb28.3m 22-fold yoy) to continue on to 2Q2011. Co trades at 6.3x P/E and has a net cash position of $111.4m (mkt cap approx $60m). However, the overhang caused by prev S-chips accounting problems is likely weighing on the stock.

Genting HK

Genting HK: more than a hundred passengers of the 1700 on board, suffered food poisoning last wk, while on board a SuperStar Virgo cruise heading for Ho Chi Minh, Vietnam. There were so many affected passengers, it overwhelmed the ship’s private clinic...

The affected people were believed to have had lunch at a restaurant in Ho Chi Minh during a one-day tour. They then had a Mediterranean buffet dinner on board the ship.
There has been no claim of responsibility nor any mention of compensation so far.
GENHK operates Star Cruises, which runs the SuperStar Virgo cruise.
Macquarie values the Star Cruises contribution to GENHK at US$0.12/sh, and has a TP of US$0.56 for the stock.

ST Engrg

ST Engrg: aerospace arm, ST Aerospace forms a 50/50 aircraft engine leasing joint venture with Japan's Marubeni Corp. The JV will be known as Total Engine Asset Mgt, or TEAM, and will have an initial leasing portfolio comprising CFM56-3, CFM56-5B and CFM56-7B engines to power narrow-body aircraft such as the Airbus A320 and Boeing 737. The JV will invest ~US$100m in assets within the first 2 years and an equity injection of up to US$40m. It is expected to commence operations in 2H11...

The JV will leverage ST Aerospace’s expertise in total engine support, including engine technical mgt and engine Maintenance-By-the-Hour, and broadens its range of aftermkt services, alongside Marubeni’s experience in financing and marketing knowledge.
Street has mix of Buy, Sell and Hold calls with recent TP ranging btwn $2.66 – 4.00

While stock indicators are in oversold territory, the recent breakdown from the $3 support level (now turned resistance) suggests the long term trend may have turned negative. Share price is now hovering around a Fibo support at $2.85, and a break below that could see the stock test the next Fibo support at $2.65.

KS Energy

KS Energy: Will see positive interests after Co. announced that Pacific One Energy intends to make a mandatory conditional cash offer for all the issued shares of KS Energy at $1.07/Share. Offer represents a premium of approximately 10.9% to the last transacted price of $0.965/Share on 16 Jun11…..

Offeror intend for Co to continue with existing activities and has no intention to introduce major changes to business of Co or operations of any of its subsidiaries. Offer will only be accepted if Offeror and parties acting or deemed to be acting in concert with the Offeror secures more than 50% of the voting rights attributable.


F&N: Annouced the opening of its new $110m canned milk plant in Thailand, advancing grp’s plans to become a leading and innovative f&b FMCG player in APAC. Facility will play pivotal role for F&N to grow presence in Thailand and Indochina and seize export opportunities in the fast-growing mkts of Indo and MENA…..

Grp plans to double rev of Thai dairy operations to $700m by 2016, buoyed by continuous mkt penetration and export demands beyond Indochina. Thai plant will serve as a blueprint for Grp’s new $150m plant at Klang in Msia, scheduled to complete in 2H11 which will collectively make the Dairies division of the F&N Group the largest canned milk producer in the world…..

For 1H11, the Thai dairy business registered a rev of about $200m, contributing 24% to total revenue for F&N Holdings Bhd. We note that majority of street has buy rating on grp with a mean TP of $7.43.