Wednesday, August 31, 2011

Comfort Delgro

Comfort Delgro: Deutsche maintains Buy with TP$1.70. Co is of view that the Downtown Line (DTL) is a critical milestone for co’s rail operations and compares the expected ridership no of 700k to NEL’s 420k. The DTL will add over 14k sqm of commercial space more than 4 times that of NEL which is expected to boost rev and profitability further.

House estimates that DTL would lift rev by approx 5% when fully operational as well as strengthen its positioning for future rail tenders. Mgmt has indicated that DTL’s breakeven could take longer than NEL’s 3 yrs and depress margins. However, asset-light model is viewed favourably which reduces co’s capex burden.


Rubber: Rubber futures in Tokyo gained for the third straight day by as much as 0.7% to 378 yen / kg before trading at 377 yen.


Hankore: FY11 results out, rev of Rmb196.1m a -45.5% yoy with a Rmb405.7m loss compared to prev yr profit of Rmb222.1m. Co was formerly Bio-treat and is undergoing restructuring charges now. Recently, counter has seen a spike over the past few days.

Govt of Xianyang Shaanxi has approved the 2nd phase of the wastewater treatment plant. Co is expecting that this will start in Sep 2011 and operations to commence before 30 June 2012. The total invt amts to Rmb150m, and upon completion, the daily treatment capacity will increase by 100k tons.


OKP: Wins $46.8m contract from PUB for improvement to Alexandra Canal with commencement date on the 5th Sept 2011. The contract is expected to be completed on 4th Mar 2014. Co’s order book is approx $433.3m with some projects due in 2014. OKP now trading at current P/E of 7.1x

Chip Eng Seng

Chip Eng Seng: Awarded a $113m contract by HDB for building works at Hougang. The contract comprises of the construction of 5 blocks of residential buildings with 792 units, a multi-storey carpark and other community facilities. The construction period is approx 27 months. As of 30 June, co’s order book stood at $295.5m but most recent net profit declined by 14.2% from fewer projects.

Comfort Delgro / SBS Transit

Comfort Delgro / SBS Transit: Awarded tender for Downtown Line for licence charge of $1.6b over a 19 yr period. LTA will retain ownership for all assets and will pay for asset replacement while co will pay for operations, maintenance and insurance. LTA will hand over operations in 3 phases in 2013, 2015 and 2017. Ridership nos are expected to be approx over 700k with 34 stations and approx 14k sqm.

Comfort Delgro owns over 75% of SBS Transit and is a more liquid proxy to SBS. Comfort Delgro trades at 12.4x current P/E and SBS at 12.1x. Peer SMRT now trades at 17.2x current P/E. Barclays has lowered Comfort’s TP from $1.60 to $1.54 and expects no meaningful contribution for Comfort till 2015.


Wingtai: 4Q results in-line.
Net profit at $170.6m, +148% yoy, while rev at $115.1m, -48% yoy. Earnings surge largely due to fair value gains on investment properties of $74.6m. Result brings FY11 earnings to $314.2m, while Rev -21% yoy to $649.1m, primarily due to a 32% drop in rev from development properties

Further boosting bottomline was an increase in share of profits of associated and JV Co’s from $32.7m vs $111.3m qoq, namely HK listed associated Co. Wing Tai Properties and the Floridian project in Singapore's Bukit Timah area.

For latest year, contribution came mainly from progressive sales recognised from Helios Residences at Cairnhill Circle and additional units sold at Belle Vue Residences along Oxley Walk. Rev from retail operations +12.6% to $202.4m in FY11, due to higher sales from grp’s portfolio of popular retail brands include Miss Selfridge, Topshop and Topman, Uniqlo, Dorothy Perkins, Warehouse and G2000.

Grp has proposed a 7c div (3c first and final and 4c special) for FY11, representing a 5.6% yield. At current price, valuations are compelling, with grp tradeing at 0.51x p/b, while gearing ratio remains comfortable at 0.35x. Kim Eng maintains Buy with $1.86 TP (40% discount to RNAV) while Goldman Sachs remains neutral with $1.72 TP.


Olam: 4Q11 results in-line with expectations, albeit at the higher end of estimates.
Rev at $4.6b, +46.1% yoy and -2.1% qoq, while net profit at $127.4m, +38% yoy and flat qoq. Sales vol at 2.3m mt, +24.3% yoy and +2% qoq. Result brings FY11 Rev to $15.7b, +50.5% yoy and net profit to $444.6m, +23.6% yoy.

Strong rev led by increase in sales vol during FY2011 and enhanced margin per ton, with NC margins increasing 12.5% from $129 to $145 per ton. Edible Nuts, Spices & Beans, Confectionery & Beverage Ingredients, Food Staples & Packaged Foods and Industrial Raw Materials segments all contributing strongly to growth in Sales Vol during the period.

Net Contribution margins for 4Q11 declined slightly to 9% vs 10.6% yoy but ahead vs 6.5% qoq. Overall FY11 Net Contribution margins declined slightly to 7.8% vs 8.6% yoy. Going forward, grp note that Co. has been performing well ahead of its original five year plan, formed in 2009 and now expects to post Net Profit of US$1b by FY16 and aims to achieve this growth with no further equity dilution.

A first and final div of 5c has been recommended (2.1% div yield). At current price, valuations are compelling with grp trading at 13.3x P/E vs historical average of 23.3x. Kim Eng maintains Buy with $2.79 TP and DMG maintains Buy with $2.98 TP.

SG Market

SG Market: Spore shares expected to play catch-up after missing out strong advances on Wall Street & regional bourses on expectations of policy stimulus from the Fed amid more gloomy economic data. The Spore exchange was closed on Tues for a public holiday, a day which saw most regional bourses end higher following strong gains on Wall Street on Mon with HK putting in quite a strong performance, rising 1.7%, so we may expect the STI to gain that much and close the breakdown gap at 2820 set on Aug 18 with next line of resistance at 2890. Technical indicators are also pointing up, suggesting positive short term momentum. Olam may be in focus after posting robust 4Q results with net profit +38% while sales volume jumped 24.3%. Wing Tai 4Q results were in line, largely due to revaluation gains. OKP and Chip Eng Seng may also be in limelight after both announced contract wins.

Monday, August 29, 2011


Wilmar: SG plantation stocks are mostly higher, tracking improved broad market sentiment, while analysts say changes to Indo's palm oil export tax rules are mostly positive. CIMB, which remains Neutral on sector, says the new rules are positive for Indo refiners in the near term, and upstream producers in the medium term. Key beneficiaries are players with refining capacity in Indonesia such as Wilmar, Golden Agri, Indofood Agri and SIMP, while Malaysian refiners and oleochemical producers such as IOI and Mewah may face stiffer competition from the Indonesia refiners.

Credit Suisse says Indonesia's downstream players will now enjoy even fatter margins from this new tax structure because export tax for refined/value added products like refined olein (7% vs 12.5% previously) and refined palm kernel olein (5.0% vs 12.5%) have been cut. It adds, Wilmar, rated Outperform, is a clear winner from the changes as it is the largest refiner in Indonesia.


Ezra: CLSA downgrades to Underperform from Buy and slashes TP to $1.10 from $2.10, implying 10x FY12 P/E, 15% below its peers. CLSA expects more pain in the near term as the integration with AMC is progressing slower than the management had indicated, even though it likes Co’s long term positioning. The house estimates Ezra needs to recognize at least US$45m in subsea revenues in 4Q11 for AMC to break even for FY11; however, it only has one US$30m contract that it will partly be recognizing this qtr.

Estimate that it will post a US$5m loss in 4Q11. House lowers its FY11/FY12 forecasts by 52%/31%, but notes the subsea business should turn around in FY12 and Ezra's target of US$1b in net order book is achievable while Ezra''s core business will remain stable. Expect offshore support services revenues to grow by 50% over the next 3 yrs.


Noble: +4.8% at S$1.515, remaining well bid amid bargain hunting after slumping to an almost 2-yr low at $1.30 last Mon. DMG, which rates Noble at Buy with $2.00 TP says the stock is among those which have experienced a severe share price correction, though any earnings contraction is unlikely to be as severe. Add that the recent selloff offers a buying opportunity; Noble's results were below street's expectations, and led to a downgrade in street FY11/12 EPS estimates.

Coupled with the global sell-down in equity markets, Noble''s total return has fallen 26% since end-Jul11. However, it says despite a weaker economic outlook, house continue to like the counter for its earnings growth momentum, and still expect a strong 27% core earnings growth for FY11 to act as a share price catalyst." Likes Noble's stable earnings growth (46% CAGR from FY07 to FY10), acquisitions that provide steady income streams and small exposure to upstream assets. Orderbook quotes suggest $1.54 cap in the near term.


Midas: China will spend Rmb1.27tr by 2015 to build 2,600 km of subways and light-rail train systems in urban areas. The investment will include Rmb170b for urban rail in Beijing and Rmb128b in Shanghai. This could lead to more order wins for train set makers such as Midas, whose shares have been hit by bad sentiment surrounding 2 high-speed train collision & a high level corruption scandal. The company recently clinched 2 metro contracts worth $3.13b by its 32.5%-owned associate, Nanjing Puzhen to supply 402 train cars for Nanjing Metro Line projects. Valuations are undemanding at ~8x FY11 P/E.


Goodpack: FY2011 results out. Rev up 28.8% at US$158.6m with net profit at US$43.2m +28.7% yoy. Growth in rev was due to improvement in natural and synthetic rubber sectors which grew 14% and 34% yoy. Co attributed increase in net profit due to demand recovery and penetration of business lines. 2.0c div declared up from prev 1.0c declared in prev yr 2010. Co is now trading at 15.6x P/E


OCBC: CIMB has Technical Buy Call. Note that prices continued on its fall once it plunged through the bearish flag support earlier in the mth. At current levels, see potential for a short term rebound, which may interest aggressive traders.

Double inside days suggest a possible reversal here. A short below $8.43 is possible but not required. Whether this short push occurs or not, stock looks decent enough for a punt on the long side. Aggressive traders could buy now with stop at $8.30. If a rebound occurs, prices could rebound towards the flag support turned resistance levels of $9.05-9.10, which is also its 38%FR levels. However, caution that house is bearish on OCBC for the longer term. Expect prices to drop below the $7.50 mark in the medium term.


UOB: CIMB has Technical Sell Call. Note that Prices have been trading sideways within a large trading band of $17.90-21.10 for the past two yrs. It broke below this trading band late last wk and this breakdown is negative for stock

MACD continued to stay in sell mode while RSI has hooked downwards from neutral levels. With breakdown, expect prices to fall towards $14.70 in medium term. However, near term rebound is expected given ST indicators are now oversold. Selling near the
recent swing high of S$19.24 is a good option if there is a rebound. MA’s would also act as a near term resistance. Short term support is at $16.10.


DBS: CIMB has Technical Buy Call. Note that Prices fell sharply after the bulls failed to regain the support-turned-resistance trend line. Prices could continue on lower towards the $12.50-12.60 levels first before a rebound sets in. House are already seeing a slowdown in short term selling moment.

Long term technical landscape remains bearish. But short term indicators are oversold, which leaves room for a rebound. Fri’s small bodied candle suggests indecision, a potential reversal signal. Aggressive traders may go long around within the $12.50-12.60 range with stops below $12.35. Long term players should just unload on strength, nearer to the $13.62-14.14 resistances. On downside, next support levels are $12.50 and $11.16.

GK Goh

GK Goh: To sell a 9.6% stake in Eastern & Oriental (E&O), comprising 84.0m ordinary stock and 22.0m convertible secured loan stocks, for RM243.8m ($99.1m). The price was approx a 58.6% premium over E&O last traded price Co will continue to hold a 3.5% stake in Eastern & Oriental. E&O is listed on the Mainboard of Bursa Msia and is engaged in property dev, invt, hospitality and lifestyle businesses.


Epicentre: Posted disappointing results. Though 2H11 rev was up 50.2% yoy -23.5% hoh, net profit experienced a 98.6% decline yoy -99.5% hoh. Attributed to lower gross margins from Apple products (14.7% in 2H11, 15.0% in 1H11) and higher admin costs up 71.9% yoy 45.0% hoh higher corporate expenses from entry into new markets, higher headcount. Total div of 4c declared (2c special, 2c final). FY2011 EPS of 5.1c with current P/E of approx 9.6x.


Guocoland: FY results above estimates. 4Q Rev at $278.5m +68.0% yoy, more than 2 fold qoq even after revaluation gains with net profit at $93.2m +79.3% yoy. Co recorded $58.8m in revaluation gains for this quarter. Despite stellar 4Q results, co saw a FY2011 11.7% decline in rev to $647.3m and net profit -3.0% yoy to $130.2m. 4Q top line was driven by revenue recognition from an office block in Shanghai Guoson centre and higher contribution from dev projects in Sg. Current projects include the JV with Msia’s Employees Provident Fund to dev Tanjong Pagar site at Peck Seah Str/Choon Guan Str. A final dividend of 8c has been declared and co now trades at approx 0.9x P/B


Fund plays on S-REIT: (Key Feature on the Edge) Phillips launching SG’s first Unit Trust that will invest primarily in locally listed REITs. Aim to pay annual div yields of ard 6%, vs 10 yr govt bond yields of 1.5%. Fund will hold only 15-18 listed REITs in its portfolio out of the 25 listed. Fund is most bullish on Mapletree Industrial Trust, Mapletree Logistics Trust and Frasers CentrePoint Trust.

Tip Mapletree Industrial and Logistics Trusts to benefit from its strong sponsor and add that rentail yields for industrial proerpties in SG have been on an uptrend since early this yr, with investors switching their attention to industrials. Other names like Suntec REIT and CMT, both of which have good sponsors will be among the funds top holdings.


Yamada: (Key feature from Edge) Rev set to surge in 2Q as plantation, sales network expand.

Co. saw 1H11 rev, +31.8% yoy at Rmb 218.6m, while net profit at Rmb70.4m, +16.9% yoy. Expect top-line to double in 3mths to Dec as mushroom prices are on the rise, coupled with enlarged planting area and expanded distribution network. Grp has also change financial yr end to June, to reflect its business cycle. DMG maintains Buy Call with $0.32 TP, tipping grp’s expanded cultivation to be the key drive of rev growth.


Tiger: Announced its acting CEO Chin Yau Seng, will take over as the permanent head of the budget carrier on Nov. 1 to replace Tony Davis, who is leaving the Co. Davis is leaving to take up a new position outside the Co. and will cease to be an executive director at Tiger. Tiger is in the process of appointing a replacement for Davis as the CEO of Tiger Airways Australia.

Meanwhile Citi maintains Sell with $0.65 TP, tipping Tiger’s proposed rights issue to be ‘Painful’ to shareholders, tip operating landscape to remain challenging.

Genting HK

Genting HK: Annouced1H11 results which was in-line.
1H11 rev at US$227.0m, +22.9% yoy, while net profit at US$61.8m, +445.6% yoy. Contribution from Travellers was US$25.7m (within expectation, expect 2H11 to be stronger as the gaming operations grow), while contribution from NCL was US$12.3m (looks low vs FY10 of about US$70m, but expect 2H11 to be much stronger, as it was traditionally)

Kim Eng remains wary of how the potential economic turmoil may affect its cruise business. Conference call is at 10am today and we will follow up with more information after.

Jaya Holding

Jaya Holding: 4Q profit plunges 93%, from $31.3m to $2.2m, while Rev -91.7% to $16.9m. For FY11, net profit fell 19.2% to $83.8m and Rev fell 64% to $127.4m, led by a decrease in rev from its shipbuilding division.

In FY11, division sold 3 vessels vs11 it sold in FY10. Grp said that this was consistent with increasing focus on asset growth and expanding the charter fleet. On offshore shipping front, rev +5% to $67.4m due to charter rates from having more high-specification vessels in the charter fleet. Charter utilisation for FY11, however, was lower at 61% down from 71% in FY10 as charter market conditions softened.

Mgt note that outlook for the chartering business remains a muted one, although E&P activities have picked up and heightened demand for offshore vessels, charter rates remain soft with the mkt still absorbing excess tonnage, Tip utilisation rates to improve, but charter rates are unlikely to see any material change in the near term. Grp trades at 0.62x P/B.

China MinZhong

China MinZhong: Announced strong set of 4Q11 results which was above expectations.
Rev at Rmb416.1m, +45.4% yoy and -40.9% qoq, while net profit at Rmb96.9m, +32.9% yoy and -65.9% qoq. Fall in qoq results was largely attributed to seasonal patterns. Result brings FY11 rev to Rmb 1.9b, +35.6% yoy and net profit at Rmb 566.7m, +54.2% yoy.

Strong performance driven by increased sales in both Grp’s cultivation and processed business segments. Cultivation business segment contributed 31% of total reve in FY11, while processed business accounted for the remaining 69.0%. Rev from fresh vegetables produce increased by 38.7% to Rmb510m, on back of a 33.1% growth in cultivation vol, which was boosted by improving yield from maturing farmland and fresh contributions from newly acquired farmland. Underpinned by improved product mix and higher ASP.

Overall gross margin improved by 1.1ppt to 41.5%, driven by a better product mix but partially offset by lower productivity from new farmland. Going forward grp remains confident of prospects and expects to maintain its growth momentum for FY12. At current price, valuations are compelling, with grp trading at 5.8x FY11 P/E vs historical average of 10x.

SG Market

SG Market: Spore shares are likely to open higher following gains on Wall Street & slim margin win for govt’s preferred candidate in Spore’s presidential election but activity will likely be muted ahead of a public holiday on Tue. On the corporate front, China Minzhong 4Q results came in above forecast while Genting HK 1H11 earnings were in line. Goodpack turned in strong profit growth for FY11, which were within expectations. Tiger Airways may also be in focus after announcing the exit of former CEO Tony Davis, who was transferred to its Australian unit. Upside for STI tipped at 2780 with support at 2720.

Friday, August 26, 2011


Wilmar: Goldman notes that the 10.5% tax differential btwn current CPO and RPO tax is very positive for Indonesian refining margins. All things equal, the house estimates this could boost margins by ~US$105/t, based on US$1000/t palm oil price. Estimates that 70% of Wilmar’s refining capacity is in Indonesia, and that it processes ~65% of its Palm and Laurics volumes, which implies that margins could be US$48/t higher (70% * 65% * US$105/t). Believes the mkt will take this policy change positively. Assumes that even if Wilmar only captures a quarter of this additional margin (ie US$12/t), 2011-13E EPS forecasts for Wilmar could be raised by 3-12%. Estimates that every additional US$10/t margin for Palm and Laurics could boost FY12E EPS by a further 10%. House keeps Neutral rating and TP $5.60.


PEC: DBS downgrades to Hold lowering TP to $0.90 from $1.52. FY11 core net profit at $29.5m was 19% below expectations due to losses of $6.6m from associates. Gross margins remained firm at 27.8% but order wins assumption revised downwards to $300m for FY12/13 on limited order pipeline visibility and uncertain macro outlook. Despite support of net cash of $0.62 per share, there are lack of catalysts and limited visibility on order flows.

Indofood Agri

Indofood Agri: Goldman Sachs upgrades to Buy from Neutral as the negatives are already priced in with the stock down 53% ytd, off 23% since its PT SIMP spin-off. "Investors seem to have reacted negatively to the SIMP spin-off. However, we believe that these negatives are already included in the price given the current 21% holdco discount; meanwhile, its P/E multiples are the lowest in the sector."

Goldman notes IndoAgri's 2010-12E volume growth CAGR of 13.6% is the highest among plantations stocks under its coverage (7% average), owing to yield recovery and a young plantations profile. Also sees strong long-term volume growth potential, given its large immature and unplanted land-bank. At 2.3X its planted area, IndoAgri's land-bank is the highest in the sector. The house lowers TP to $1.85 from $1.95, based on 15% holdco discount, noting JC&C, Astra Intl’s holdco, average discount to NAV is 13%.
Stock +2.3% at $1.325.

Sheng Siong

Sheng Siong: DBSV says, technically, it sees little or even no upside to the current rally in the short-term. Advises that for short-term traders who wish to buy, don’t chase at current level; for traders who are already in the stock, consider locking in some gains and wait to buy at lower level.

Notes Sheng Siong has attracted much attention after its strong performance since debut but there is increasing likelihood that the trend could turn from current up to sideways. Says one reason why this stock is able to attract interest recently is because it plans to give 90% of net profit as dividend which sounds good under the current uncertain macro environment.

While the house does not cover the stock, it notes that the co had highlighted higher operating expenses, a possible drop in profit margin and a drop in other income in their prospectus under the section “Prospects Business and Future plans - Trend information”. Using FY10 historic numbers (profit $42.6m) the current price level at $0.49 would yield 5.8%, while historic PE is expensive at ~15.4x. Says, at 5.8% yield, there are alternate choices for investors to choose from within REITs and telcos.

Technically, from here in the short-term, a 38.2% downward retracement to $0.435 or a 50% downward retracement to $0.415 provides better entry opportunity but not now.
Stock is flat at $0.475, pulling back from its earlier intraday high of $0.495.


CapitaLand: CIMB technical call. Prices fell below its downtrend channel support but the selling momentum appears to be weak.
Hence, house says, would not be surprised if it was only a false breakdown. If so, then prices are likely to rebound sharply from current levels.
MACD is improving and with its RSI sporting bullish divergence signals, expect the bulls to hit back strongly.
Aggressive traders should go long now with a stop placed below $2.35. This rebound could take prices back up to at least $2.64. The gap at $2.71-2.80 and also its moving averages would also attract prices towards it.

Genting SP

Genting SP: CIMB technical call. The stock is still in a downtrend but the house sees some potential for a rebound taking place soon.
Prices are now testing the downtrend channel resistance and a breakout could send prices higher to close the $1.60-1.645 gap. However, the upside is likely capped by the larger downtrend channel support turned resistance at $1.78-1.80.

The technical landscape is ripe for a rebound but not for a lasting bullish run. Hence, this is likely going to be only a bullish rebound. Aggressive buyers could choose to get in now with a tight stop placed below $1.48. Take profits quickly should prices reach the resistance levels mentioned above.

Aus Group

Aus Group: 4Q Rev at A$148.3m at 20.3% yoy -4.3% qoq with a net profit of A$4.4m compared to loss of A$5.3m prev yr and +50.7% qoq. FY rev at 602.0m was a 64.2% improvement yoy and over 4 fold yoy. Better earnings for the quarter were due to gross margins rising to 12.4% from low base of 8.4% in 3Q11. Co expects higher level of demand for its Western Australia operations and has seen tendered margins improving driven by demand for commodities. Losses on two existing construction projects are expected to be concluded by nxt quarter. Co has current order book of A$246m and is positive over nxt 12 mths but has guided for reduced rev lvls nxt quarter due to timing of project start ups. A final dividend of 0.64c has been declared


CMA: StanChart believes that CMA’s major sh/h Capital Group has finished selling part of its interest in CMA. Capital Group originally had an 11.2% stake in CMA (a third of the free float of 33%). The investor then began to offload part of its stake from Jul ’10 onwards. A yr later on 22 Jul ’11, Capital Group disclosed its take in the co had dropped below 5% to 4.982% and no longer had to disclose its transactions.
StanChart believes StanChart continued to sell down its stake (accounting for ~75% of daily volume), and this weighed on CMA’s share price and investor confidence.
The block trade of >40m shares yday may have mopped up the remaining overhang. StanChart estimates Capital Group could have another 40-50m CMA shares left, but believes it has finished selling and is likely to retain whatever is left.

House notes CMA has falled 39% ytd, and is trading at 0.8x P/B, and 0.6x P/RNAV. Sees substantial value in the stock, and is one of its top picks in the Spore real estate sector. Says positive invmts such as the recent acq of 2 Shanghai malls will be immediately earnings accretive and should boost investor confidence. Reiterates Outperform with TP $1.76.


Amtek: Results below consensus. 4Q Rev at US$175.8m +6.7% yoy +6.8% qoq with net profit at US$9.6m up 15 fold from 2010 but -2.8% qoq. FY2011 rev was positive up 6.8% yoy although net profit was up 108.6% yoy.

Growth was experienced in all segments except Casing & Enclosures segment and Mass Storage segment which saw weakness due to Japanese customers being affected by the earthquake. Fastest growth experienced in Electrical/Electronic Component product segment in terms of sales of industrial products to energy and power sectors (+36% yoy) Imaging and Printing segment (+24% yoy) and Automotive product sales (+21% yoy).

Co generated positive cashflows from operations of $13.8m with net gearing falling from 25% to 13%.

Final dividend of 5.5c declared for this yr. At last traded price of $0.65 current div is a yield of 8.5%.

CS lowers TP from $1.60 to $1.00 but maintains Outperform. CIMB lower TP from $1.43 to $1.14 but maintains Outperform as well.


CMA: Analysts are of view that after a block trade of 42m shares (approx 1.1% of total issued shares) was completed, the overhang on CMA share price might be over. The major sh/h who sold is rumoured to be Capital Grp which has been consistently paring down its stake with last reported 4.95% as of end-July. At current price CMA is trading at approx 0.8x to book.

Stanchart maintains Outperform with TP$1.76 and that co is a value play at 0.6x RNAV. CS upgrades to Outperform with TP$1.78 with current price a discount at 0.6x RNAV as well. CMA posted a 8.5% gain closing at last traded price of $1.28.

Nam Cheong

Nam Cheong: secured new contracts for the sale and charter of a 5220bhp AHTS vessel worth RM 41.4 m. This is the 4th vessel sold in a month, to new customer Omni Marissa, a Msian O&M co that specializes in various logistic, oil and gas svcs for O&G cos in Asia Pac.
Order book rises to 11 vessels with total contract value of ~RM 590m (~S$239m). Of these, 6 vessels are scheduled for delivery in 2H11 and 5 will be delivered in 2012. The co recorded RM 131m revenue in 2Q11.
Stock trades at 12.6x annualized 2Q11 P/E, 1.5x P/B.

SIA / Tiger Air

SIA / Tiger Air: halted lifted at 9am this morning for both companies.
SIA”s 32.8% associate Tiger Air has proposed a 1-for-2 renounceable rights issue to raise $158.6m at $0.58/sh. The exercise is expected to be completed by mid-Nov ’11, subject to sh/h approval at an EGM.

SIA and Temasek have committed to take up their rptv allocated rights, and will subscribe the excess rights up to 90% of the issue. In such a case, SIA’s stake in Tiger will rise to 49%. The joint mgr, DBS and StanChart will underwrite the remaining 10% of share issue.

With the new equity, gearing will fall from an estimated 3.7x to 1.5x for FY11, strengthening the equity base of the carrier and removing funding concern on the stock (recall Tiger has to partially finance the payments for its committed orders of aircraft through 2015).

We expect that the steep 39% discount of the rights issue price to last traded price of $0.955 will not sit well with minority sh/h. Expect investor confidence in mgt to be shaken, as Tiger mgt in the past, had always insisted that there would be no need for equity fund raising within 3 yrs of IPO. Nevertheless, this should not come entirely as a surprise, as a number of analysts have highlighted this risk since the latest results.

CIMB maintains its Underperform rating, with ex-rights TP at $0.46. Notes Tiger’s widening gap with peers, as it struggles to catch up with AirAsia and Jetstar, which are expanding into the Philippines and Japan rptvly, while Tiger is still recovering from its suspension in Australia.

SG Market

SG Market: Spore shares are likely ease off tracking the drop in Wall Street as investors brace for Fed chairman Ben Bernanke’s speech tonight. Traders may also take profits off the table ahead of the Muslim holiday on Tues. On the corporate front, Tiger Airways is likely to open lower following the anncmt of its $158m 1-for-2 rights issue, given the dilutive impact. However, the injection of fresh capital into Tiger will may minimal impact on SIA. Amtek may face some selling pressure as its 4Q results came in below expectations. Support for STI tipped at 2720 with resistance at 2780.

Thursday, August 25, 2011

CapitaMalls Asia

CapitaMalls Asia: +8.1% at $1.275 with 66m shares changing hands after 42.15m shares were traded in a married deal at $1.20. An analyst at a foreign brokerage says the block deal is probably the main reason for the gain, as it removes a share overhang; "I'm not too sure who the buyer is, but it seems like (substantial sh/h) the Captial Group Companies is selling.". YTD, The Capital Group has pared down its stake in CMA from just under 10% to 4.95% as of late July.
The analyst adds, other factors are also driving CMA's shares, such as news Wednesday that non-executive director Olivier Lim bought 370k CMA shares, raising his stake to 0.023% from 0.013% while CEO Lim Beng Chee recently bought 100k shares, raising his stake to 0.006%; "that's sending out quite a good signal and definitely positive". The analyst adds, CMA currently trades at about a 20% discount to book value, and has underperformed substantially year to date.

Sheng Siong

Sheng Siong: not seeing any new recent news flow or new analyst reports.
The stock is likely the focus of interest due to its recent IPO status.
We note however that the public tranche of the IPO issue was small. With trading volumes so high, and actual free float being small, large stock price moves should not be unexpected.

Fraser Centrepoint Trust

Fraser Centrepoint Trust: A leasehold plot at the rear of The Centrepoint mall could be put on sale together with some 66 apartments. Co reportedly owns 64 of the apts and has around 40-50% of strata area on this plot. A sales committee for the collective sale has been set up and co has representation though not majority in this committee. A min of 80% of both share value and strata area have to agree for any collective sale to go through. Co is expected to be a natural contender in any sale and an expected sale price would be approx $1700-1800 psf ppr. Accessibility issues also have to be sort out due to the leasehold site sharing the same carpark as Centrepoint mall and owning the land in which the carpark entrance is on.

In separate news, co shed some light on the funding of the acquisition of Bedok Point. Up to 55m units could be sold at $1.38 per unit, raising $75.9m of the $127m needed with $65m raised in debt to finance the acquisition. Co has guided gearing to increase to 33.5% from 31.7%. This acquisition will increase DPU yield from current 5.86% to 5.92%

Advance SCT (ASCT)

Advance SCT (ASCT): Announced it is set to acquire the working capital of Qingyuan Shengli Copper Material (QSCM), which will provide more resources for ASCT Qingyuan's copper smelting operations and enable it to leverage on the established business network and infrastructure of QSCM.

Add that group's stronger rev growth in 1H11 was party due to collaborative efforts with QSCM and said this acquisition of working capital is 'necessary' to sustain the strong growth of ASCT's manufacturing operations in China.

The Rmb17.4m ($3.3m) price tag for the Chinese copper smelter, which comprises primarily cash and inventory, will be fulfilled via the issuance of 148.9m new ordinary shares in capital of ASCT to QSCM at issue price of 2.2c, which is VWAP of trades done for one trading day prior to signing of agreement. New shares issued translate to about 15.5% of the existing issued and paid-up capital of ASCT and 13.4% of the enlarged issued share capital of ASCT.


OUE: Co. will be proposing a share purchase mandate to allow it to purchase its issued shares. Grp will be holding an EGM to seek shareholders' approval for the share buyback plan, where more details will be provided in its circular.

The proposed mandate follows Tue's move by Lippo Grp, the controlling shareholder of OUE, to unwind a derivative transaction that was said to have possibly caused mkt confusion and created a further overhang on OUE's share price. OUE however denied claims that the planned mandate is related to the announcement by its controlling shareholder.

Latest rating on grp was by CIMB yesterday, who maintained its O/p Call with $3.01 TP. Continue to expect catalysts from higher achieved rents and RevPAR, and more acquisitions.


SIA: May be considering calling its new low-cost Carrier, Scoot Airlines.The domain name was registered by SIA's advertising agency TBWA in late Jun, according to Flightglobal.

SIA's application indicates it plans to use the brand name for airline and air travel services, reported Aviation Wk. An SIA spokesman did not confirm nor deny the news, noting that several names have been under consideration but the mgt of the new airline is not able to confirm details of the branding at this stage.
Aviation Week said SIA's trademark application gives some insight into how it may use the Scoot brand in the future, with trade mark possibly aimed at covering aircraft chartering, travel agency services, luggage storage services and loyalty privileges among other things.

Sino-Environment / AVIC

Sino-Environment / AVIC:
Chinese state firm Aviation Industry Corporation of China is looking to spin off its Spore shipbuilding mgt arm for a listing here. It aims to do this by taking over the listing of the insolvent Sino-Environment.
Once listed, AVIC Spore, which registered a net profit of $15m last year, plans to establish shipbuilding and ship trading operations within 2 years. It will start by acquiring shipyards from its parent company, AVIC Int’l, before looking overseas. The focus will be on engineering vessels, offshore vessels, environmentally friendly technology and energy-saving technology.
Under the plan, AVIC Spore will issue $6m worth of consideration shares to Sino-Environment's creditors and sh/h at $0.50/sh to help clear all its debt. It will also exchange one AVIC Spore share for every 250 Sino-Environment shares that they currently own.
AVIC Singapore will also issue 65m compliance placement shares to institutions at btwn $0.20-0.50 / sh.


PEC: Disappointing results. 4Q rev at $101.4m -18.5% yoy +15.6% qoq and net profit at $3.5m -63.6% yoy -63.6% qoq. A loss of $6.0m was from JVs which posted a gain of 362k last yr largely attributed to a $5.6m provision of unconfirmed claims from variation works. The settlement of such claims has yet to be concluded. On a full yr basis, rev fell 13.0% due to a more competitive business and macro environment. Co has guided for the same conditions in the future.

As of 30 June 2011, order book was approx $300m.

A dividend of 3c has been declared, 2c final, 1c special.

Raffles Education

Raffles Education: uninspiring FYJun11 results.
Revenue at $157.6m, -16% yoy, due to persistently weak student enrollment in China, and headwinds from the appreciating SGD (85% of revenue derived from overseas).
Net profit at $41.9m, -20% yoy, but the bottom line would have been a net loss if not for the $76.8m fair value gain on invmt properties.
Co proposed a final div of 0.45cts. Including interim div of another 0.45cts (post 3-for-1 split), this translates to 2.1% yield.

Looking ahead, mgt will not be pursuing any aggressive regional expansion as it intends to focus mainly on improving the profitability of its existing schools.
NAV/ sh is 65.8cts, vs last close at 43.5cts.
Stock trades at 9.1x P/E, but is expected to widen to 18.4x FY12E P/E.
Credit Suisse maintains TP at $0.45, but upgrades to Neutral from underperform on valuation grounds.

SG Market

SG Market: Spore shares are expected to rebound following US markets 3rd gain in a row on upbeat durable goods data & hopes of additional Fed stimulus from Fri’s summit as well as firmer openings on regional bourses with Japan’s Nikkei, Australia’s ASX 200 & Korea’s Kopsi all up more than 1%. However, the formation of a bearish engulfing pattern yday may limit gains on the STI as investors remain wary of any surprises from the Fed this Fri. The STI is likely to take its cue from HK as there is little domestic news to stimulate the market. Topside resistance remains at 2820 with support at 2680. On the corporate front, both 4Q results from Raffles Edu & PEC disappointed.

Wednesday, August 24, 2011

JP Morgan & BOA

JP Morgan & BOA: There is a rumor circulating on Wall St. that JP Morgan will take over Bank of America within the week. The govt will support the deal with a $100b investment in preferred shares issued by the combined entity. Alternatively, the govt may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon. The merger would completely destroy the value of BAC’s common shares.

The govt feels that the deal may be necessary as Bank of America struggles unsuccessfully to close several transactions to bolster its balance sheet. The Wall Street Journal reported that Business Insider speculated that the financial firm will need to raise $200b which would be another possible event that would wipe out common shareholders.

Note however that this is a mkt rumour, and whether or not the event will actually happen is questionable.

SP Corp

SP Corp: SGX has queried co on the activity. So far we have not heard anything on co. Tuan Sing holds over 80% of the stock. Note that Tuan Sing has only fallen 0.005 -1.8% only and SP Corp has fallen from $0.255 to current $0.075 since yest. Perhaps a long-short strategy can be employed in absence of news to profit from the trade if shares can be found for borrowing

Prev mkt at $0.255 is approx $89.5m and mkt cap now is approx $26m with NAV per share of 10.9c. Tuan Sing has a mkt cap of $311.7m

Tiger Airways

Tiger Airways: CIMB Has Technical Buy Call. House see a lot of positive at current levels. Prices appear to have completed a 5-wave move down from the high of $2.25. It tested the Elliott channel and rebounded off it. Technical landscape also looks appealing with both its MACD and RSI sporting triple bullish divergences.

Trading volume has been brisk as well, supporting the view that there are buyers at current levels. Aggressive buyers should get in to buy now as the downside risk is very low at the moment. Keep a stop placed below the recent low of $0.88. Expect prices to rally towards its moving averages around the $1.10 levels followed by retesting the recent high of $1.245.

Shares buyback

#First REIT: CEO buys 25k shares increasing stake from 0.0575% to 0.0615%.

#Viking: Andy Lim buys 500k shares from open mkt.

#Oxley: Sub Sh/h Tee Wee Sien buys 401k from open mkt increasing stake from 11.76% to 11.79%

#FJ Benjamin: Aberdeen Asset Mgmt buys 470k shares from the open mkt increasing stake from 7.92% to 8.01%

#OCBC: Buys 100k shares.

#Armstrong: Buys 200k shares.

Tiong Woon

Tiong Woon: FY2011 rev at $106.9m -27.9% yoy with a net profit of $1.0m -96.0% yoy. Poor results continued from 3Q where 9M2011 reported a net loss of -439k. The decline came mainly from the heavy lift and haulage segment where net profit declined -78.9% yoy.

Prev yr profits was boosted by a $10.6m gain from disposal but even excluding it, profits decline 92.9% yoy. Mgmt has guided for challenging business conditions in the future due to the global economic situation. A final div of 0.4c was declared, maintaining the same amt as prev yr.

Peer Tat Hong has also seen a fall in profit of 47% as of last reported results facing higher expenses and lower profits but has guided for a better half in 2012.


Asia-Env: Offer for shares at either $0.30 per share or 1-for-1 swap for offeror Ciena Enterprises. Offeror is a BVI vehicle of major sh/h's brother. Mr Wang H.C. Ciena has secured 52.8% of co accepting the offer and intends to delist co. Last traded price of co is $0.225 and offer represents a 33% premium but disc to NAV of $0.309. The reason cited was the low liquidity in the counter.

Technics O&G

Technics O&G: Awarded 2 contracts worth $8.5m in total. The contracts involve fabrication of a structural module for a Msian customer and construction of Power Generation module for a FPSO. Latest results were stable with net profit posting a 6% gain yoy +37.6% qoq. As of 3 Aug co reported an order book of $103m. Co has current P/E of 7.6x and peer Dyna-Mac trades at approx 13.7x


OUE: CIMB Maintains O/p with $3.01 TP. Note that Golden Concord Asia (GCAL), controlling shareholder of OUE, announced that it will be closing its share-financing transaction with Credit Suisse, started in Jan 11. With immediate unwinding of position, GCAL shall acquire remaining 13m OUE shares (1.32% of OUE’s issued capital) from Credit Suisse and relinquish the right of return of the whole lot of 53.3m OUE shares.

Add that deal had caused much confusion in mkt and now the overhang on OUE’s stock would be lifted. GCAL says it has not entered into other derivative transactions in relation to OUE shares. OUE shares are now on trading halt, but expect its share price to react positively once the halt is lifted. Continue to expect catalysts from higher achieved rents and RevPAR, and more acquisitions.


Cosco: Co. have seen some Share Buy Back, with Senior officer Mr Dong, the managing director of COSCO (Zhoushan) Shipyard Group Co, a subsidiary of the Co. buying 60,000 Cosco shares at 99.5c/share, bringing his current shareholding to 360,000 shares, representing a 0.016% stake in the Co.

Meanwhile in separate news, Baltic Exchange, said some members has raised concerns over allegations that China Cosco Holdings (Cosco’s sister Co.) failed to make charter payments for vessels it hired. Concerns will be reviewed by the membership committee when it meets in the next. Any behavior deemed unethical can lead to membership being suspended or canceled.

China Cosco had at least 3 ships arrested in past 2 mths as owners sought late charter payments, according to legal filings in the US and SG. In each case China Cosco was locked into long-term contracts at rates higher than market prices.


Noble: 63% owned Gloucester Coal reported full year net profit that rose 67% yoy to A$54.6m due to rising prices, higher sales and accounting changes.
The co had offered guidance of A$57 - 59m earlier this month.
Core net profit, which excludes one-off and accounting items, came to A$61.0m, compared to A$36.4 m yoy.
Revenue came to A$306.6m, +34% yoy.
There was no dividend declared.

Gloucester has benefited from rising coal prices as a result of weather disruptions to Australia's main coal-producing regions during the southern summer and autumn. Gloucester's own operations were less affected than those of some of its rivals in the Hunter Valley and Bowen Basin coal regions.
Sales from Gloucester's mines region rose 17% yoy to 2.1m tons.
The co bought out privately held Donaldson Coal and Ellemby Holdings for A$585m during the year, as well as spending A$97.6m on a 20% stake in the Middlemount mine in Queensland's Bowen Basin.
Noble said the acquisitions put the company "in an attractive and sustainable position for the longer term".

Separately, Noble just concluded a roadshow in Europe with HSBC. A key client concern was the value proposition of traders in a backdrop of increasing direct contracts between producers and end-users. Noble believes this will be the exception and not the rule as traders like itself de-risk the supply chain for customers, especially during periods of supply disruptions, due to its multi-sourcing strategy. Other producers may be less likely to fulfil their delivery obligations increasing counterparty risks.

At 8x FY12E P/E, HSBC notes Noble is trading at a 23% discount to its 5yr PE average. Says, Noble delivered a 27% y-o-y increase in volumes in FY09 despite a slowdown in global demand and expects 27% earnings CAGR over FY10-13E supported by a highly liquid balance sheet. Maintains Overweight and TP $2.06.

SG Market

SG Market: Spore shares expected to recover lost ground after growing hopes for another Fed stimulus package powered a 3% rally on Wall Street. First stop for the STI would be to close the breakdown gap at 2820 before heading towards the next resistance at 2910. While the market may be primed for a technical rebound from oversold levels, sentiment remains fragile & there may be another selldown if nothing substantive comes out of the Fed’s Jackson Hole summit.

On the O&M front, Daiwa became the 1st to downgrade the rigbuilding sector to Neutral from Positive, to factor in potential headwinds from macro-economic uncertainties & increase likelihood of a recession. Notes the sector has a high share-price correlation with oil prices & was sold down during the global financial crisis despite strong fundamentals. The house maintains Outperform on Keppel Corp, but lowers TP by 25% to $10.24. Highlights Keppel as the sector top pick given its lowest earnings risk, attractive valuations & share price upside potential. Downgrades both SembMarine & Sembcorp Industries to Hold from O/PF with TP slashed 37% & 27% to $3.81 & $4.22 respectively.

Tuesday, August 23, 2011


OUE: Substantial s/holder Golden Concord Asia (GCAL) had disclosed that pursuant to a financing arrangement in Jan 11, it has delivered 53.3m OUE shares to a counterparty (Credit Suisse) with a right of return. This resulted in GCAL’s direct interest in OUE being reduced to 5.43% but deemed interest increasing by 5.43% but its total stake remained unchanged at 67.07%.

It now appears that CS has disposed of 42.6m of the pledged shares back in Jan 11, leaving a balance of 13m shares. GCAL has decided to unwind the financing transaction & take back the remaining shares while relinquishing the right of return of the 53.3m shares.

Accordingly, the unwinding has resulted in a fall in GCAL’s total interest in OUE from 67.07% to 62.98%. This also means that GCAL has failed to report the shareholding change since Jan 11.

What was essentially a `share sale' (with a call option) was denied by GCAL until now. A poor case of corporate transparency here by the Lippo Group indeed.

The share sale took place 8 months ago, yet nobody is the wiser. Although there is no fundamental impact on the company, the credibility of OUE mgmt will be called into question. Note that the stock price plunged 27% prior to this anncmt. However, it may be a good opportunity for GCAL to pick back the shares if the price falls low enough.


Yangzijiang: of the Rmb 1169m in pretax profit generated in 2Q, half came from forex gains, subsidy gains, and interest income.

i) Interest income of ~Rmb 330m was generated from held-to-maturity (HTM) investments. These are offered by various Chinese banks and trust companies, and are used in the financing of Chinese corporations and entities in various industries, such as Real Estate, Manufacturing and Local Govt Project, etc. These pdts yield an avg return of approx 10 - 15% p.a., and are backed by various securities such as listed shares, land titles and other forms of collateral and guarantees.

ii) Interest income of Rmb 14m came from Runyuan, the company’s subsidiary in the micro financing business.

iii) Other gains of Rmb 229m was largely due to exchange related gain received from USD/RMB currency forward contracts due to the gradual appreciation of RMB against USD, USD/SGD currency forward contracts entered by the company to hedge currency risk on SGD dividend payout, and the positive mark to market variation for the outstanding orders denominated in EUR.

YZJ issued an announcement yday, clarifying that it has a sound investment process and conservative approach in investing in the products. See link for details:$file/CorporateClarifications.pdf?openelement

Mgt says the invmts are secured against various collaterals and it insists on a collateral to debt coverage ratio of no less than 2x, and that the collaterals have to be unencumbered. Adds, YZJ has not experienced any default of such invmts since 2008.

Nevertheless, we have come across industry news reports that highlight the risk of investing in such products. China banks have apparently been repackaging commercial / infrastructure loans into short term, high risk products not unlike what the US banks were doing with the subprime loans. And in some cases, no one is really monitoring the collateral.

Sino Environment

Sino Environment (suspended since 23 Sep 2009): SIAS has advised minority sh/h of the insolvent co to give serious consideration to accepting the offer of an exchange of one AVIC Singapore share for every 250 Sino-Env shares (worth $33.75 at last close at $0.135) that they currently own. This is based on a projected compliance placement price of $0.50. It is envisaged that AVIC shares will be traded on SGX, expected to be no later than 30 Sep 2011.
SIAS said that, given that the co is insolvent, the scheme of compromise and arrangement currently appears to be the "only viable option available to sh/h to extract value for their investment in Sino-Env". SIAS said that if the scheme fails, Sino-Env will be delisted and likely to be placed in liquidation. The court meeting of Sino-Env sh/h is scheduled for Friday.
Stirling Coleman, as the independent financial adviser, also says the financial terms offered are fair and reasonable, given the prospects of a delisting and unlikely event of recovery in any value from the shares, and recommends sh/h to vote in favor of the resolution.


SIA: Qantas’ planned Asian unit will have cabins more luxurious than those on the group’s flagship Airbus A380s in a bid to lure fliers from SIA. Qantas CEO says it “will be a top premium product”, and have a “private-jet feel”.
Qantas is considering setting up the new unit in either Spore or KL. It will operate under a new brand, and will begin services with 11 single-aisle A320s. That will enable the new unit to fly to Australia, India and China.

This move may add to pressure on SIA, whose main flying unit made a loss in 1QFYJun12, on competition from budget airlines and Middle Eastern carriers.

The stock price has already been hard hit, and is down almost a third from its recent $15.64 peak in mid Sep ’10. Technically, support is at $10.50 and a close below that could see a next move toward the psychological $10 level. Resistance at $11.


DBS: CIMB has Technical Sell Call. Note that the bulls tried to fight back after prices violated triangle support. However, sellers at the support-turned-resistance trend line proved a tad too strong. Looking at the chart, think there is still risk to the downside. Yesterday, prices broke below its previous swing low of $13.35, indicating that the correction is not over yet.

Technical landscape remains subdued. MACD is falling deeper into the dungeon while RSI has hooked downward. These indicators can stay depress for some time before stronger momentum set in. As the bears have the upper hand here, strategy is to unload on strength, preferably near the $13.62-14.14 resistances. On the downside, next support levels are $12.50 and $11.16. Stop loss at $14.30.


Noble: CIMB has Technical Sell Call. Note that recent violation of its neckline support shows that the bears are gaining momentum fast. Expect prices to continue its downward trajectory in the near term, possibly towards the $1.24 and $1.18 support levels over the next few days.

MACD fell deeper into the negative territory while RSI is now below the 30pts mark. Hence, any rebound is an opportunity to unload on strength. Sustainability remains its biggest challenge here as the candles are trading below its key moving averages. Intermittent rebound could take place but traders should continue to stay with the bear’s camp. Near term gains are likely capped at the $1.395-1.425 gap. House will only review call if the candles can push above the support-turned-resistance trend line. Stop loss at $1.60.


Capitaland: Daiwa cuts TP to $3.10 vs $3.50 but keeps Outperform rating as it believes that its share price has more than discounted any potential policy risk and value impairment from the impending global downturn CMA to $1.14 from $1.47.

However, the house says it has upgraded CMA to Buy from Hold after the recent selldown. Believe CapitaLand's risk-reward ratio has improved, with the stock having underperformed the market for the past 12 mths. CapitaLand closed 1.7% higher at $2.43 on Mon while CMA was up 2.2% at $1.165.

SG Telco

SG Telco: CIMB upgrades telco sector to O/w from Neutral and believe it is time to re-visit the relative safety of telcos amid market turmoil and as house turn more bearish on the mkt. Telcos offer fairly stable earnings and attractive div yields of about 7% which are backed by FCFE yields of 6-8% and fairly low net debt/EBITDA.

Upgrade StarHub to O/p from Neutral with unchanged TP of $3.03 on stabilising margins and slower than-expected competition from NGNBN. Likely re-rating catalysts are economic uncertainties and div announcements. Also upgrade SingTel to O/p from Neutral because of its recent de-rating and an improving outlook for its key units. M1 remains a NEUTRAL as it lacks catalysts but downside should be supported by its attractive yields of 6-7%.

Key risks to our calls are a more competitive environment, margin pressure, investors’ shifting preference for cyclicals once economies stabilise, any further erosion in fixed broadband/pay TV and in the longer term, the ongoing substitution of voice by data and slowing population growth.


Amtek: CIMB maintains Buy with $1.43 TP. See the recent sell-down of Amtek along with the broader market as a buying opportunity. Amtek now trades at less than 5x CY12 P/E. Its major shareholder, StandardChartered, had accumulated its shares at above 90c between May and June, raising its stake to 29.9%.

House believe FY11 profit forecast of S$49.7m is achievable. Although may trim some expectations for FY12-14 after the results to factor in slowing economies in the US and Europe, likely to retain O/p rating in view of its strong cash flows, attractive yields and undemanding valuations.

Substantial sh/h purchases

Substantial sh/h purchases:

#Ying Li: Major sh/h Fang Ming buys 700k shares raising stake by 0.03% from 38.64% to 38.67%

#Osim: CFO buys 300k of stock. Major Sh/h Ron Sim buys 500k of stock

#HPH Trust: Capital Group Intl purchases 1.3m shares increasing stake from 9.99% to 10.00%

Share Buybacks by various companies:

#OCBC: 100k at $8.65

#Xin Ren Aluminium: 200k at $0.315

#Boustead: 30k at $0.84


Kreuz: Awarded subsea installation contracts worth approx US$25m, by leading offshore construction company in the oil and gas business located in Middle East. The contract wins come with an added optional scope of US$10m for associated works. Subsea installation works shall commence 3QFY2011 and scheduled to be completed in 2QFY2012. Current orderbook stands at US$93.8m. Co is trading at current 5.2x P/E and Swiber owns 63.2% of co.

Keppel Corp

Keppel Corp: 50% owned assoc co Aqua Pellentesque (Aqua) has entered into an amalgamation agr with another 32% owned associate Floatel Intl to form a Bermuda exempted co. Shares of both co will be converted into shares of the new co in 50/50 equal proportion.

A consortium of Floatel sh/h including Keppel Corp, Barclays and JPM have indicated a positive vote for this proposal. Other Floatel sh/h outside the consortium whose shares are not converted will receive NOK19.5 (US$3.59) in cash consideration and have their shares cancelled. Each Floatel share has book value of US$2.35 and last traded share price was NOK18.1 (US$3.33). The amalgamation will require the approval of Floatel shareholders and the intention is to take Floatel private.

The Oslo listed Floatel builds accommodation semi-subs and delivered two such units. Floatel Reliance in Oct 10 and Floatel Superior in Apr 10. Keppel Corp secured an order in Jun 11 to build a third such unit for Floatel due for delivery in 2014.


KTL: Has issued profit warning for FY11, due lower demand for products from the oil and gas segment, higher operating expenses as a result of increased headcount, advertising and promotional activities and withholding taxes incurred in respect of foreign-sourced income.
Technically, See initial support at $0.125, followed by $0.09 (3 yr low)


NOL: Jul operating data.
Container shipping volumes at 235.2k FEU, +7% yoy, mainly due to higher volumes carried on the Intra-Asia and Asia-Europe trade lanes.
Avg revenue per FEU at US$2557, -17% yoy, mainly due to lower rates in the Asia-Europe trade and greater Intra-Asia mix.

Transpacific peak season surcharge of US$400/FEU has been implemented since Aug-15 for most carriers including NOL.
Citi expects this to lift volumes and rates in the coming months, although the magnitude of increase is not expected to be as much as last yr due to weak consumer and business confidence and influx of large ships into major trade lanes.

But the house keeps at Sell (TP at $1.20 seems outdated?), doesn’t think that the data will significantly alter investors’ negative sentiment towards the sector as risk-averse investors look beyond traditional seasonality and focus on broader economic worries.
Stock trades at 0.7x P/B.

FJ Benjamin

FJ Benjamin: FYJun11 results largely in line, if forex losses and exceptional items are excluded.
Net profit came in at $13m (+57% yoy) on revenue of $354m (+22% yoy).
Revenue growth was driven by strong consumer demand across all its major markets in SE Asia and North Asia. Sales in Indonesia alone grew by 7% YoY.
The Timepiece segment showed the strongest YoY growth of 34.8% while Fashion and Licensing segments grew by 16.5% and 18.9% YoY rptvly.
Gross margin trended higher to 42.8% (+1.5ppt) with corresponding net margin of 3.6% (+0.8ppt).

FJB has a total of 166 stores as at FYJun11. It plans to increase this to 190 stores in FY12, with new stores mainly in Msia and Indonesia. Capex for FY12 is expected to reach $12.6m, including expenditures to improve existing stores. This is part of its organic growth strategy to expand its brand portfolio and capture market share amidst the uncertainties in the global economy

With regard to possible softening in consumer sentiments in the US and Europe, mgt does not think that the co will be majorly affected as contribution from these regions are still low. However, it cautioned that growth may be slower than expected.

Div of 2cts, translates to 6.3% yield. Stock trades at 13.8x FY11E P/E, 1.4x P/B.
KE maintains Buy, but lowers TP to $0.39 from $0.50, citing global uncertainties which may soften consumer demand.

SG Market

SG Market: Spore shares are expected to be range-bound with high intraday volatility following a bumpy ride on Wall Street as investors await the keynote speech by Fed chairman Ben Bernanke at an annual central bank conference this Fri. Speculation is widespread in financial markets that Benanke will announce a new monetary stimulus or QE3 but unlikely to be as ambitious as last year. There is still a feel that policy makers are working on borrowed time here with investors still wanting to unwind any stale positions still out there. STI is expected to trade in a 2720-2800 range. NOL will be in focus after releasing weak operating numbers while FJBen posted a good set of results.

Monday, August 22, 2011

AIMS AMP Cap Industrial Reit

AIMS AMP Cap Industrial Reit: has proposed a 5-to-1 consolidation of units. This is likely to reduce volatility of AAREIT's trading price, improve trading liquidity and profile of the trust. The consolidation is subject to EGM approval. StanChart has an Outperform rating with TP $0.26.

Genting HK

Genting HK: CIMB maintains Outperform with higher TP US$0.51 up from US$0.48. Catalysts are expected from Resort World Manila (RWM), better-than-expected NCL and Star Cruises performances and opportunities to enter other jurisdictions.

House is cautiously positive on US cruise industry but both Philippine and Star Cruise businesses show prospects. NCL posted a net profit of US$29m in 2Q11 turning from US$15m loss yoy and EBITDA margins expanded despite a 17% yoy rise in fuel prices with operational improvements in almost all areas. However, headwinds are possible esp if the US economy slumps.

Phillipine gaming mkt is still in early growth stage despite operations over 30 yrs and gaming rev grew 1% after RWM was launched, highlighting a supply driven model. RWM has first-mover adv in integrated-resort space and should allow it to create customer stickiness. Travellers is also the only experienced co among the other licensees in Manila Bay which should give RWM an edge operationally.

CapitaMalls Asia

CapitaMalls Asia: Daiwa upgrades to Buy from Hold, noting that the sell-down of its shares has more than surpassed any potential deterioration in the underlying China retail-property sector but lowers its target price to $1.47 from $1.85. House trims its EPS forecasts by 10.5%-13.8% for 2011-13 to reflect lower rental assumptions due to slower 2012 GDP growth forecast of 8.5% vs 9.0% prev. Also factoring in a 30% discount to CMA's unlisted China-mall assets to account for rising supply risks, higher more prolonged start-up costs & the possibility that its business model is destroying value during the build-out phase. Adds that at the current share price, the market is already assigning no value to the China-mall business & estimates CMA would be worth about $1.21/share, assuming a zero value for the unlisted China-malls. The shares are currently +1.3% to $1.155.

City Dev

City Dev: CIMB has Technical Sell Call. Note that stock broke below its key head and shoulders neckline support trend line early last wk and hit a low of $9.66. The rebound thereafter tested this neckline again but the bulls failed to push prices back above this resistance. A break back below the $9.66 levels would likely suggest that there is more downside ahead.

With its RSI and MACD heading lower again the odds continue to favour the bears. However, there is a note of caution that there is a possible bullish divergence forming on both indicators. Renewed buying strength that lift prices back above the neckline at $10.25 and the recent high of $10.38 would likely trigger stop loss. Recommends continue to sell into strength and expect prices to drop below $9.66 to close the gap at $8.57-8.88. The next strong support is at $7.71.


Gallant: CIMB has Technical Sell Call. Note that sellers took prices below its support trend line in early Aug and also saw a dead crossover of its 50-day SMA against the 200-day SMA. Both of these incidents are negative for the stock for the medium to long term.

The technical landscape remains weak with both its MACD and RSI at a new 1.5 yr low. Reckon that there is still some selling left in the days if not weeks ahead. Continue to look for rebounds to sell. The stock should fall towards $0.255-0.275 to close the gap in the near term. The next support is at $0.225-0.24. Stop loss placed at $0.325.

HP / Venture

HP / Venture: HP is planning a sweeping overhaul of its businesses, agreeing to a US$10.3b acquisition of Autonomy Corp (enterprise software co), and considering to spin off its PC division which contributes 30% of sales last quarter. HP said it would take 12-18mths to decide what to do with the PC unit.

While the co said it did not intend to dispose of its printer business, part of the strength of that business could be due in large part to the sale of its PCs. Hence outlook for this segment is now becoming more uncertain. Venture counts HP as one of its biggest customers for its Printing & Imaging business. That segment contributed 17% of sales in 2Q11.

Venture mgt gave a positive outlook for 2H11, but would not have been able to factor in the new developments from HP.

Stock trades at 10.4x P/E, 1.1x P/B and offers 7.8% yield at last close at $7.05.


Midas: : (Key Feature in The Edge)Midas maintains expansion stance despite fallout from China train crash. Probe pertains only to the bullet-train service and not metro lines.
Sept will offer clarity as that is when findings of govt investigations are likely to be known. Midas was not a supplier to CSR Corp, the builder of the 2 trains involved in the accident. In any case, Midas stands to gain on increased focus on rail safety.

Most analysts however still advise caution on share, preferring to stay on the side of caution until more clarity emerges on future order flow on China’s railway investment policy. CIMB and Kim Eng has Neutral Call with $0.46 and $0.44 TP, while DBS maintains Buy with $0.72 TP.

China Fishery

China Fishery: (Key Feature in The Edge) Refutes Moody’s red flags and pledges stronger performance. Recall moody cited 8 red flags on Co, among other things, including negative free cash flows, high customer concentration, unusually low tax rates and a family share holding structure.

CEO refutes Moody’s claims, calling it unfair, as Negative cash flows due to aggressive expansion, on back of strong rev growth and steadily increasing asset base, while high concentration of customers allows Co. to solidify its partnership with clients and attributes Co’s success to acute mgt by Family. Co. recently reported 3Q11 results, which saw rev at US$109m, -19% yoy and net profit at US$37.4m, -5% yo. Lower yoy performance due to En Nino, which brought warmer waters to Pacific Ocean and affected migratory patterns of fishes.

Going forward, CEO positive on outlook, tip the South Pacific Fleet to realise potential when fishing season reopens nxt yr. SCB and UOB maintains Buy call with $1.75 and $1.82 TP.


Sarin: (Key Feature in The Edge) New diamond processing products opens new mkt and boosts earnings.
Co. note that its Galaxy 1000 has been gaining popularity and has helped boost dd for its other products such as its rough diamond planner, the DiaMark. Grp is targeting entry into the polished diamonds mkt and plans to launch in Sept a product called D-Light, that employs light performance technology on diamonds. Add that if grp is successful in entering mkt for polished diamonds, it could dbl its rev base over time.

Recall that 2Q11rev was at a record US$15.6m, +8.8% yoy while net profit was at US$5m, +8.4% yoy. In the absence of any negative industry signals, Kim Eng has Buy Call and $1.34 TP, citing grp’s revolutionary product and recurring rev to sustain performance.


Jasper: its drillship, Jasper Explorer, has cleared the required acceptance and performance tests, and will commence its drilling contract with AGR once it arrives in West African waters in early Oct.
AGR also exercised its option for the Jasper Explorer to drill a second well in offshore Guinea for Hyperdynamics Corp. This brings the estimated value of the drilling contract to ~US$26m from US$15m previously, and extends the duration of the drilling programme to ~90 days.
AGR has the option to deploy the Jasper Explorer for another 5 wells on mutually agreeable terms.
The co generated US$0.5m revenue in FYMar11 and made a loss of US$39.4m.
Stock trades at 0.5x P/B.

Yongmao Holdings

Yongmao Holdings: CIMB initiates coverage with Buy Call and $0.17 TP.
Note that with urbanisation rate still below developed countries, growing infrastructure needs and mass housing projects to soothe the populace, demand for towercranes is expected to remain strong over the next few years and Yongmao has a new plant ready to ride on this demand.

TP pegged at 30% liquidity discount to its average forward P/B of 1.07x. For the moment, house have penned in mgt’s aspiration of a 20% payout ratio for div. This remains subject to cash flow clarity with the new plant in operation. If management reads the market correctly, earnings will see significant growth, especially in FY13 and FY14.


OKP: Co has sold 15m vendor shares to China Sonangol Intl at $0.66 per share, or a total consideration of $9.9. China Sonangol's parent is an overseas conglomerate engaged in the oil, gas and minerals business as well as national infastructure construction projects.

China Sonangol now holds 14.2% of OKP and has awarded a contract to OKP in the past, a condo dev in Anguilia Park. Most recently, co also won a $4.9m contract for sewer works in Tuas. OKP has current P/E of 8.7x vs hist avg of 15.0x.


OCBC: Lion Global Investors (LGI) has been sued for US$50.6m ($61.2m) by liquidator overseeing Madoff’s assets claiming that a feeder fund had transferred funds to LGI. US$45m of this feeder fund was sold to investors reported in Singapore during 2008.

OCBC owns a 91% stake in LGI.

LGI is one of the largest asset mgmt co in SEA with AuM of approx $28.7b.

While lawsuit is potentially detrimental, an earlier claim of US$9b involving HSBC and feeder funds were dismissed by US courts in July this yr.

Keppel Land

Keppel Land: Increasing China exposure.
Announced that it has secured a 21.5-ha lakefront residential site in Wuxi, China for Rmb1.937b ($368m) or Rmb5,999 psm GFA for the development of around 2,500 residential units and commercial space. Grp is not new to city and is currently developing township project.

Site is last available for development in vicinity and is situated within Binhu District in a high-end residential precinct which encompasses a national wetland park and Li Lake. Proposed dev will comprise low density homes such as villas, terraces, duplexes and mid-rise units of 1-4 bedroom units. First phase expected to be launched in early 2013.
With acquisition, KepLand's China residential pipeline increases further to 43,860 homes. Deutsche estimates a breakeven cost in region of Rmb11,000 psm, implying gross margin of around 20% based on ASP of Rmb14,000psm, resulting in 4c/shr accretion to NAV (+1%). Deutsche maintains Buy with $5.30 TP.

ARA Asset Mgt

ARA Asset Mgt: Citi initiates at Buy with $1.90 TP. House like ARA for its scalable, asset-light business model which generates a steady and defensive stream of income from mgt fees and offers a high ROE of over 30%. Positive on ARA’s ability to continuously grow its AUM and forecast a 3-year CAGR of 13% for AUM to reach $24.4b by end-2013.

Add that ARA is a beneficiary of the continued economic growth in Asia as investors remain positive on the prospects for Asian real estate. Another milestone would be the exit of ARA’s flagship fund – ADF I – in 2013. Pending market conditions, performance fees will be paid and investors could potentially be rewarded with a special div/bonus issue.

SG Market

SG Market: Spore share may be in for another rocky week & fall in line with losses on Wall Street, which has turned decidedly bearish. Volatility remains high & the STI is likely to breach the Aug low of 2720 before we see a technical rebound near the key support at 2650.

Keppel Land is in focus after acquiring a 21.5 ha lakeside residential site in Wuxi for Rmb1.94b to build 2,500 homes. OKP may also attract interest after China Sonangol bought an additional 15m shares, increasing its stake to 14.2%. Shipping related counter may face further slide from weak trade figures while commodity firms may get a little reprieve from the 0.9% rise in the CRB index.

Friday, August 19, 2011

Sg Economy

Sg Economy: Credit Suisse sees a 30%-40% probability that Asian economies may fall into recession. The US ISM New Orders Index now suggests zero exports growth and would hit Asia’s most open economies with Taiwan, Korea and HK most badly affected followed by Sg.

This bearish view joins a number of bank calls from BofA, Citi and UOB that Sg may face a technical recession. The only reason CS has not built in a technical recession in its forecast is the biomedical manufacturing side which may tide the economy over with yoy growth.

Moya Asia

Moya Asia: Secured a 25 yr BOT contract with municipal govt to provide water supply for Bekasi Regency in West Java by constructing a fresh water treatment complex worth approx US$15-20m. The project is expected to be completed in 2017 but the 25 yr agreement will run from FY2012.

Co is a small cap with below 100m in mkt cap and currently loss-making.


TiongWoon: 51% subsi has won contract for Tuas New Yard Phase 1 project. The contract are for marine works including the removal of existing shore protection, sand dredging and rock protection for the proposed docks, wharves, quays, piers and other ancillary works but the contract value cannot be disclosed due to confidentiality reasons. The project is expected to be completed in March 2013.

Most recent results were loss-making with Tiong Woon now trading at 19.1x P/E.

Grand Banks Yachts

Grand Banks Yachts: To place 136.1m new shares at $0.33 each for approx $44.9m to Investindustrial Asian Dev Hldgs, an investment fund. Upon completion new shares make up approx 58.7% of the enlarged share capital of the co and a mandatory general offer will have to be made. This agreement is subject to shareholders approval.

The offer price is a 9.6% discount to last traded price on 4 Aug at $0.365 but counter has been thinly traded. Completion of placement is conditional on SGX and shareholders approval.


CMA: Entered into conditional agreements to acquire 50.0% stakes each in Minhang Plaza and Hongkou Plaza in Shanghai for about US$789.0m (S$949.7m).

The stake in Minhang will be acq for US$262.6m ($316.0m) based on independent valuation of $632.5m and following the acq, CMA will own 65.0% of Minhang with expected yield of 5%.

Stake in Hongkou was acq for US$526.4m ($633.7m) based on price of $1267.3m though independently valued at $1278.1m. Following acq, CMA will own 72.5% of Hongkou and expects a yield of 4%.

The remaining stakes in both malls are held by CMA's associates as well. Co now has 42% of property portfolio value in China. CMA now trades below book at P/B of 0.8x.

SG Banks Strategy

SG Banks Strategy: BNP Paribas rates UOB as its Top Pick with $23.30 TP. (We note of the recent increasing preference for UOB by various houses for the bank’s high quality assets)

House cuts Banks EPS in view of weaker economic outlook, reflecting less sanguine economic outlook. Remain positive on banks and believe they are equipped for further shocks this time around. Sector trades at attractive forward P/E of 11.4x vs historical rolling P/E average of 14x. Based on estimates, sector earnings have to collapse by 17% before taking sector P/E valuations to historical averages. In terms of P/B, banks are valued at 1.3x 2011E BV.

UOB is top sector pick given its earnings resilience and its ability to outperform sector peers in uncertain times. Unlike sector peers, UOB’s earnings are less vulnerable given its large exposure (24% of 1H11’s core operating profit) to the more resilient Thailand, Msia and Indonesia economies.

In uncertain times, OCBC’s 87%-owned Great Eastern tends to present an earnings wildcard given its reliance on the health of capital mkts. On the other hand, DBS’s large exposure to Greater China (26% of group operating profit) and its relatively weaker asset quality could pose a threat to earnings. Note that DBS’s sharper credit quality deterioration during the 2008 global financial crisis.

House sequence of preference is now UOB, OCBC and DBS. In view, SG banks are better equipped for another round of global economic shocks as they have de-risked their balance sheets substantially by writing down CDOs and reducing exposure to EU and US banks-issue debt securities. With core equity tier-1 ratios of at least 11%, SG banks are highly ranked from a global perspective.

SG Telcos

SG Telcos: DBSV has Telco report, with Starhub as Top Pick.
Note that M1’s higher gearing than peers and weak free cash flow may limit earnings payout to 80%, but yield healthy at 6%. StarHub trading at assured 7% yield vs 6% for M1 & SingTel continues to gain mobile rev share while StarHub is delivering well in the non-mobile segment

Quick recap of 2Q2011 results. M1’s & StarHub’s earnings inline while SingTel 5% below house expectations. SingTel disappointed on lower than expected contribution from Bharti and Optus. Bharti hit by 3G rollout costs and higher tax rate in India. Optus witnessed higher mobile competition as smaller player VHA joined market share battle with incumbent Telstra.

M1 may not gear up significantly vs peers. At end of 2Q11, M1 had net debt to annualized EBITDA of 1.1x versus 0.7x for StarHub and SingTel each. M1’s gearing spiked from borrowing $81m to partly pay for FY10 divs. StarHub is top pick as free cash flow is likely to be 120% of FY11F earnings, as Co. pays minimal cash tax due to its deferred tax assets. StarHub has a fixed div policy of 5c per qtr for FY11, which will be maintained in the coming

Msia Smelting Corporation/Straits Trading

Msia Smelting Corporation/Straits Trading: Indonesia announced that the country is looking to revise its royalty payments made on all domestic tin shipments, to close a tax loophole and make it in line with existing charges on exports in the world's top refined tin exporter. Add that the current royalty charge on intl exports can be as much as 3% vs domestic exports of 1%. Straits Trading owns a 54.8% stake in MSC which mines tin in Indonesia and Msia.

Manchester United IPO

Manchester United IPO: Have filed an application with SGX for a public listing, a source close to the deal said. SGX will study the application and, if approved, will issue the club an 'eligibility to list' letter, after which Man U can lodge its prospectus with MAS.

Man U plans to issue their IPO in 4Q, with press reports nothing that United is aiming to generate US$1b with the IPO of 30% of the club's shares. Source with knowledge of the IPO said that the club chose Asia over London for the listing because the region accounts for 190m out of the estimated 330m United followers worldwide. In addition, most of the club's sponsors are also based in Asia or generate a large part of rev from the region.

United were ranked Forbes earlier this year as the world's most valuable football club with a value of US$1.86b. Media estimates of US$1 b for 30% of the club's shares means a total valuation for Co. of more than US$3b.


SATS: is taking a 51% stake in a JV firm that will provide food and allied services to firms operating in remote areas around the world. Its partner is OCS Ventures, an investment holdco, which has the relevant experience.
The JV, to be HQ in Spore, will start out by focusing on the industries of oil & gas, mining, marine, defence, and industrial & infrastructure construction. Geographic coverage would include Asean, China, Australia, New Zealand and Papua New Guinea.
SATS's latest JV is not its only attempt to diversify beyond the aviation food service business. Just recently, SATS said it would manage and operate the $500m International Cruise Terminal (ICT) at Marina South that is being built.
SATS trades at 12.8x P/E. Street ratings are mixed with 5 Buys, 6 Holds and 4 Sells. Recent TP ranges btwn $2.15 – 3.30.

SG Market

SG Market: Spore shares are expected to open weaker after US stocks tumbled on growing worries of a global recession after some poor US economic data & amid fresh concerns over the risk exposure of European banks. As equity markets suffered another day of heavy losses, both Morgan Stanley & Goldman Sachs have cut their forecasts for global growth this year & in 2012. There are also fears that German banks may be downgraded, which let to the 5.8% rout in the DAX. Meantime, Danish banks are dumping assets to escape the debt funding wall while Austria is demanding collateral from Greece in exchange for bailout loans & Sweden warns of a collapse in the interbank market.

Although the STI has held up quite well due to heavy capital inflow into Spore in the past few days that has brought the SGD swap offer rate to negative levels & support for the Jardine stocks, the nascent recovery from last week's 2720 low looks to be running out of steam & could be re-tested in the near term. Immediate support uis at 2780 but that mey be taken out as the next wave of selling is just starting. Amid renewed fears of a recession, watch for downside in cyclical sectors such as shipping, offshore support, rigbuilders & commodities.

Thursday, August 18, 2011


Swiber: says it is looking to raise new capital (est $100-200m). DMG says this is no surprise given that Swiber’s net gearing at 1.2x now, has been on an uptrend since its last pte placement in Jun ’09 (84m new shares at $0.88/sh), due to new capex and higher working capital.
While mgt says the fund raising is to strengthen its balance sheet and use it for earnings accretive exercise, DMG warns this could be earnings dilutive in the near term if the funds are not deployed immediately.
Following the 1H11 results and mgt briefing, DMG cuts FY11-12F core net profit by 5-6% to reflect lower margins and higher minority interest. Slashes TP to $0.50 (previously $0.87), pegged to 0.5x FY12E P/B, reflecting the low adjusted net profit to assets (FY11E: 2%) and to equity (FY11E: 6%), as well as concern over the high net gearing. House maintains Neutral rating.

Noble Group

Noble Group: Woodside Petroleum, Australia’s 2nd largest oil & natural gas producer, is considering selling stakes in its Browse & Pluto liquefied natural gas projects. The group plans to invest in A$75b of LNG projects to meet rising demand in Asia as the market has been tightening up since the Fukushima nuclear disaster in Japan.

Would Noble be interested? Currently, the group owns downstream energy assets such as oil storage, terminals & distribution facilities in the US following its acqn of SemFuel assets in Aug 09 & Northville Product Svcs in May 10 & retail marketing unit of Sempra Energy in Sep 10. Coincidently, Noble has just established a US$3b medium-term note program, which should boost its war chest to well over US$5b.


F&B/Cerebos: Suntory announced that it will establish a new company in Spore to oversee M&As in SE Asia. The Jap brewer will transfer M&A-related functions for the region to the newco, which will begin operating from Sep 11. Group companies in Thailand & Indonesia will be placed under the Spore umbrella & continue to expand operations locally. In the face of a sluggish alcohol market in Japan, leading brewers are speeding up M&As abroad. Earlier, Suntory has acquired an Indon beverage maker while rival Asahi has been snapping up F&B companies in Australia & NZ & Kirin recently bought a Brazilian brewer.

Suntory is the major shareholder of Cerebos, with a 83% stake in the Spore-listed beverage company & we wonder if Cerrebos will play part in Suntory’s future M&A deals.

SG Rig Builders

SG Rig Builders: Citi has sector report. Note that earnings intact despite rising headwinds. After a period of resilience, O&M sector outperformance has started to reverse sharply amid growing concerns over likelihood of a double-dip recession. Sell-down has brought valuations back closer to Aug 08 levels, and could provide a floor to the share prices in the near term.

See risks to E&P capex spend in 2012 and rig demand to moderate; however, expect sector earnings will remain intact and valuations look inexpensive. Oil prices at current levels remain conducive for E&P investments. Fundamentally, house does not expect a repeat of a Lehmanstyle systemic collapse to occur. Add that SG rig builders better positioned currently vs 08-09 downturn for following reasons:

i) back end loaded payments with yards financing the working capital
ii) better quality customers with lesser proportion of speculators
iii) Day rates have bottomed and currently on an uptrend vs the peak levels witnessed in 2008.

House maintain 2011 orderbook estimates but cut sector order win 2012-13E forecasts by 14-25%. Still prefer Keppel and believe it is better positioned than many regional yards in the event of a sharp slowdown given i) higher margin prospects ii) stronger backlog iii) lower downside from a valuation standpoint.

ASL Marine

ASL Marine: FY2011 Rev falls to $363.2m -22.5% yoy and net profit at $33.2m was -15.4% . 4Q rev at $92.6m was -11.9% yoy +7.7% qoq and net profit at $6.3m was down 21.9% yoy -25.1% qoq. Fall in revenue came from all 3 segments and mgmt guided for conditions to remain challenging amidst oversupply in industry.

Shipbuilding orderbook is approx $310m of which $180m is expected to be recognized in FY12 and charter order book grew 80% qoq to $45m from $25m from bareboat charters.
A final div of 1.5c has been declared.

CIMB upgrades from Neutral to Trading Buy with TP$0.70 due to current valuations of 0.6x below book and believes mkt to have priced in potential negatives. Our in-house also maintains Buy with TP $0.69

Hu An

Hu An: Has obtained approval from Taiwan authorities to launch proposed 2nd TDR programme. Co’s existing TDRs, at 1.25 shares per TDR, trade at TWD12.60 ($0.41 equivalent per share) a 49% premium to current SGX share price of $0.28.


Capitaland: To acquire remaining 50% interest in Innov Tower, a fully leased 23-storey office building located in Caohejing High-tech Park, Shanghai, with a total GFA of approx 40.4k sqm for Rmb298m ($56m). Co exercised its right of first refusal to acquire the property from CITIC Trust Co.
The price was determined by taking into a/c the agreed value of the property of Rmb976m (approx $182m), which is equivalent to about Rmb24.1k (approx $4.5k) psm ppr and the adjusted NTA of Rmb264m.

Co has been recently actively increasing its China portfolio, acquiring a residential site in Hangzhou and increasing its stake in Raffles City Shenzhen.


SembMar: HSBC maintains O/w on grp with $6.05 TP. House positive on offshore spend despite global environment. Forecast US$75-80b average annual O&M spend in 2011-13 with roughly a qtr of this in E&P equipment capex. Existing order backlog for offshore rigs will add around 15% to current global fleet, inadequate in house view to support medium-term E&P plans of oil Co's.

A tight rig market is further exacerbated by a large ageing rig fleet under pressure of growing asset value divergence from newer premium rigs. Add that recent stock slide unwarranted. SMM has fallen 22% since 1 Aug vs STI down 11% due to mkt volatility, fears of a US recession and oil prices falling 12% to US$112/bbl.

Ytd orders are in line with expectation and mgt outlook on shallow and mid water E&P capex bullish. Note that while grp’s share price has a high correlation to oil prices, E&P projects in shallow and mid water are unlikely to slow unless crude falls on a sustained basis well below (unlikely) US$75/barrel. House forecasts and $6.05 TP are unchanged. Value grp on a 10-yr DCF estimate and order outlook does not factor in any new Petrobras contracts.

Mapletree Industrial Trust

Mapletree Industrial Trust: HSBC initiates coverage with Neutral Rating and $1.20 TP, citing positive rental reversions and increases in occupancies as key drivers. Estimate that MIT’s portfolio average passing rent is 20% below current market rents. With a short WALE of 2.6 yrs. MIT is poised to achieve positive rental reversions in the near term as leases expire.

Positive outlook for the industrial sector supports MIT’s organic growth prospects, with Flatted factories and business parks making up 60% and 20% of MIT’s estimated GAV. Expect broad-based rental growth across the industrial sector, with factory rental growth underpinned by high occupancies and business park rents moving higher, in line with fringe office rent growth.

Recent JTC acquisition seems slightly expensive; post-acquisition gearing levels close to 40%, constraining future acquisitions. Growth prospects largely priced in. Conclude that current valuations largely reflect MIT’s growth prospects and prefer Ascendas REIT within the SG industrial sector for its lower gearing and less demanding valuations. FY11E yields are attractive at 7.4%, while grp trades at 1.2x P/RNAV.

Mapletree Commercial Trust

Mapletree Commercial Trust: HSBC initiates coverage with O/w rating and $1.00 TP, citing a portfolio of good-quality Singapore commercial assets with organic growth potential. With 39% of total leases (by rental income) expiring in FY12/13, REIT should benefit from positive rental reversions as average passing rents for VivoCity and PSA Building are 15-25% below spot rents.

Expect this organic growth to be a key contributor to MCT’s two-yr DPU CAGR of 7.9%. Completion of Alexandra Retail Centre (ARC) will add 4% to FY12/13 DPU. ARC, a
retail/office podium adjoining PSA Building, is currently under development and is slated
for completion by end-2011, which will add 4% to FY12/13 DPU. Defensive cash flows backed by diversified tenant mix as well as significant proportion of leases with annual rent step-ups.

At current price, REIT has an estimated 6.5% distribution FY12 Mar yield and 7.4% FY Mar13 and trades at 12% discount to RNAV.

Keppel Land

Keppel Land: wholly owned Alpha Investment Partners has put up 2 office blocks in the CBD for sale through separate expression of interest (EOI) exercises, which could potentially fetch ~$500m in total. Freehold 135 Cecil St's EOI closes on 15 Sep, while Robinson Centre's EOI will close on 8 Sep.

Alpha paid $145m in 2006 for Robinson Centre, which has 132.4k sf of NLA and is currently 96.5% occupied. If Robinson Centre is sold at $2200-2300/psf, the sale would fetch $291-304m.
135 Cecil St has 83.1k sf of NLA, and could fetch $183-191m assuming sale at $2200-2300/psf. Alpha bought 135 Cecil St in 2007 for $108m.


NOL: Maersk issues a more cautious outlook for the full year, forecasts its container unit will have a "modest" profit this yr vs a May prediction of a "satisfactory" profit. Warns that freight rates are falling due to overcapacity and it is unclear when they will recover. Says "the shipping market has been difficult, due to growing capacity, and we expect the slow economic growth and market volatility to continue for the coming quarters".

Maersk reported 1H freight rates that were 8% yoy lower on avg, excluding fuel surcharges. The co’s container activities generated net income of 2.09b kroner in 1H, -70% yoy.

Negative comments from the market leader point to further headwinds for the industry. While NOL’s valuation is cheap at 0.8x P/B, lack of catalysts and negative sentiment may put a cap on share price in the near term. Resistance at $1.32 (20 day MA), support at the psychological $1 level.

Tiger Air

Tiger Air: Thai Airways Chairman says it may not pursue a deal to establish a new low-cost carrier JV with Tiger. "I can't speak for the board as the decision rests with them. But as far as I'm concerned, our prime focus now is on the formation of Thai Wing as well as on our existing budget carrier affiliate Nok Air" Ampon told DJ Newswires.

Ampon’s comments are not unexpected, and give credence to earlier speculation that the Thai Tiger JV will not go through, following repeated delays in progress on the deal.
Still, this means that Tiger has one less avenue for growth.

Technically, the stock is back to under $1, and just shy of its all time low of $0.985. Both the long term trend and technical indicators look weak, and portend further downside ahead. Fibo support at $0.86 (0.382 * all time high of $2.25).

SG Market

SG Market: Spore shares are likely to open with a downward bias following a mixed close on Wall Street as global concerns continue to dampen sentiment. Newsflow has virtually dried up with the end of the corporate reporting season & there is no fresh leads to take the STI to higher ground. Support is tipped at 2780, then 2720 with immediate resistance at 2890.

Tiger Airways may face further downside pressure after breaching the $1.00 support after Thai Airways Chairman indicated that the Thai carrier may not pursue its low cost carrier JV with TAH. In other news, CapitaLand may be in focus after acquiring the remaining 50% stake in a Shanghai office building for $56m.

Wednesday, August 17, 2011

xxx SKY China xxx

SKY China: A damning report has surfaced on (which publishes long & short investment ideas focusing on China companies) on Sinotech Energy (Nasdaq: CTE), which may have links to SGX-listed SKY China.

CTE was listed in Nov 2010 & its IPO was underwritten by UBS & Lazard, both of whom recently have ‘Buy” ratings on the stock. It also has a “Big 4” auditor, E&Y. However, a thorough investigation of CTE (by the same research team that uncovered fraud at RINO, CGA, CBEH, SCEI and LFT) concludes that CTE, its largest customers & suppliers are likely nothing more than empty shells with little or no sales or income. This report shows:

1. CTE’s sole import agent accounting for >US$100m worth of oil drilling equipment orders appears to be an empty shell with no sign of operation, a limited import history & negligible revenue base.
2. CTE’s sole chemical supplier appears to be an empty shell, with little or no revenues, a deserted office & no signs of prodn activity.
3. Likewise, CTE’s 5 largest subcontracting customers, providing the vast majority of CTE’s revenues, appear to be shell companies with unverifiable operations & minimal revenues.
4. CTE’s oil drilling technology is questionable, mispriced & uncompetitive
5. CTE’s audited financial statements filed with Chinese Govt’s State Administration of Industry & Commerce (SAIC) further confirm its negligible business operations.
6. CTE’s board of directors lacks independence & effective oversight of mgmt, evidenced by undisclosed related party dealings
7. CTE stock is theoretically worth less than US$0.63 per share but investors will likely recover nothing.

According to the report, the majority shareholder & Chairman of CTE, Liu Qingzeng also happens to be the CEO of Spore-listed SKY China Petroleum Services, which is also involved in petro-engineering solutions to the oil & gas industry in PRC.

*Please note that the above is for pure information only. Kim Eng or KELive is unable to verify nor vouch for the accuracy of the Alfredlittle report. We will also not take any responsibility or liability for any misrepresentation found in the report.


Mewah: Counter is down -3.0% going against the trend of the broader mkt after dismal 2Q net profit. Co faced a decline in margins attributed to poor margins and losses in West Africa. A slew of downgrades with heavy cuts to TP also continued to weigh down on counter after results. CS downgraded to Underperform from Outperform slashing TP from $1.19 to $0.59. JP Morgan lowers rating from Overweight to Neutral, TP from $1.30 to $0.60. Nomura downgrades from Buy to Reduce cutting TP from $1.16 to $0.50.


Noble: CIMB Has technical Sell Call. Note that Prices broke below the key double top neckline support at $1.50 late last week, and prices seem to have some difficulty in moving back above this level. This is not a good sign for the bulls.

The MACD continued to expand and moved further into negative territory while its RSI has hooked up but remained in the oversold region. Expect the RSI to remain in the oversold region if the $1.50 level is not taken out soon. Stock is a sell now with a stop placed above $1.60. Expect prices to fall below the recent low of $1.36 and fall towards the support band of $1.03-1.20 in the short term as the downtrend from the Jan high is not over.


Cosco: Daiwa initiates at Underperform with a $1.00 target price, citing its premium to its peers over the past 3 years is no longer justified, due to: its exposure to bulk shipping & the operating profit margin contraction trend. Expects Cosco's share price to de-rate from its above-average & higher-than-peers' P/E. Notes the shipbuilder's operating profit margin has been falling since it started on new offshore rigbuilding projects; which was confirmed in the 2Q11 results. Adds Cosco's exposure to bulk shipping is negative given the current oversupply of ships & weak demand due to the global economic slowdown. Notwithstanding the 70% fall in the share price since the group announced worse-than-expected 2Q11 results on Aug 1, house expects further share price downside from further negative margin surprises. Prefers KepCorp, rated Outperform, for its better operational efficiency, earnings outlook & attractive valuations.

Straits Asia

Straits Asia: Co will change its name to “Sakari Resources Ltd” effective from Friday 19 Aug, 9.00am onwards.


UMS: Withdraws Korea dual listing due to current mkt conditions. Recently other dual listings have also been delayed or withdrawn, ECS which withdrew its Taiwan dual listing and Combinewill which has not announced further progress on its Korean dual listing as well.