Thursday, May 31, 2012

Next Gen Sat Comm

Next Gen Sat Comm: lifts halt at 3.45pm. To acquire 51% stake in Scientific Discovery Devt SA (“SDD”), a licensed provider of disaster back up services to financial institutions in China, for Rmb 51m ($10.3m). This compares with the NTA and net profit of $2.94m and $1.16m respectively, for SDD’s key operating subsidiary Beijing Satbit. Payment will be in 3 tranches, i) Rmb 15.3m upon gaining full control of SDD, ii) Rmb 15.4m by Jun ’13, and iii) Rmb 20.4m by Jun ’14. Next Gen also has an option to acq the remaining 49% of SDD within 3 yrs from the date of completion of the acq. This will depend on whether Beijing Satbit will be able to attain an EBITDA of not less than Rmb 17m for each of the 5 FY12-16. The group expects to fund the acq through internal resources. The stock is down 6.3% at 1.5cts.

HK Land

HK Land: CIMB technicals says the charts tip Sell. Says, the stock violated its wedge support recently and is now holding a tad below its 50-day simple moving average. MACD is hovering in the negative territory while RSI is below the 50-point mark. Notes any rebound toward its 50-day and 30-day SMAs at US$5.93-US$6.00 is an opportunity to take profit. Adds, the odds are favoring the bears and prices could fall back towards US$5.46 and US$5.23. Tips placing a Buy stop above US$6.12. The stock is down 1.1% at US$5.67.


CMA: UOBK technicals says the charts tip a Sell with TP $1.24. Says, the stock appears to be resisted at $1.44, which is also below its trendline. Its 50-day moving average is likely to form a dead cross with its 200-day exponential moving average. The daily Stochastics has also formed a bearish crossover. Tips placing a stop above $1.45. The stock is up 1.1% at $1.39.

Which sectors should investors consider and why?

We are looking not so much at specific sectors per se but investment themes focusing on defensive, higher-yielding names such as REITs and telcos to form the core of a portfolio. These sectors tend to outperform in an uncertain market and offer some support in relation to their yields. Other higher beta stocks such as rigbuilders and oil and gas plays may be looked as oil exploration activity accelerate into deeper waters and harsher environments. We also like the China consumption-related beneficiaries. We will consider overweighting other sectors as and when fear and selling reach a fever pitch or when the Europe situation sees more positive developments.

What is the outlook for the 2nd half of the year?

The crystal ball for the 2nd half of the year remains hazy with markets likely to be choppy in the near term. A key catalyst which may change our view is when the situation in Europe reaches a firm conclusion, be it a Greek/Spanish default leading to the collapse of the European Union in the worst case scenario or a sizeable bailout which will ring fence the danger of indebted nations going under. Until then, markets will continue to muddle along and run in circles. Over in Asia, there are concerns if China can engineer a soft landing as it transitions from an export-led to a domestic consumption-based economy. Another potential flashpoint is the price of oil; that threat seems to have eased somewhat recently but there is no telling when tensions in the Mid-East with Iran and Syria will flare up again. As an open economy, Singapore is extremely vulnerable to these external trends as reflected by the sluggish export figures. Labour constraints and wage pressures may also eat into corporate earnings. In short, there are several headwinds that could make things worst before it gets better, hopefully towards the end of the year.

How has the STI performed for the last 5 months?

The STI has not done too badly and has outperformed several key markets with the exception of Shanghai Composite and Nasdaq. Ytd, the STI is up 5.4% vs 1.7% for the Dow, 1.4% for the Hang Seng, 8.4% for Shanghai Composite and 2.9% for the KLCI. We had expected the STI to be volatile but the timing and velocity of its moves has been a surprise. After an early rally of 14.5% from 2650 to 3000 level, the index then went through a consolidation phase before tumbling below 2800 to its current level. The rally was in our opinion a bit too rapid and a correction was probably overdue. However this dip is unlikely to be a mere correction and looks to drag on pending developments in Europe.

SembMarine SMM / Baker Tech

SembMarine SMM / Baker Tech: The High Court has released its judgment together with the Grounds of Decision on SMM’s claims against PPL Holdings (PPLH), which is not favorable to SMM. The company is obtaining legal advice with a view of appealing the decision and will make the appropriate announcement in due course. Recall, in 2010, SMM had sought to invalidate Baker Tech's sale of its 15% stake in PPLH to QD Asia Pacific (a unit of the Qatar sovereign fund). The news is neutral for SMM, since the Street has not factored in the scenario of a positive settlement in SMM’s favor. Nevertheless, the court decision is good news for Baker Tech, which had deferred the gain on disposal of PPLH of $58.2m (equivalent to 8.3cts/sh based on the current 700m shares out). This development should also reduce the overhang on Baker Tech shares, given investor worries about a claw back on the US$116.25 ($150.5m) cash from sale of PPLH. Baker Tech recently completed a 2-for-5 rights cum warrants issue. The expected date of issuance of the warrants is 6 Jun. Assuming the warrant entitlements are fully taken up, we estimate Baker Tech to have $194.3m net cash (based on Mar ’12 results), which translates to $0.278/sh. This compares with the counter’s last close at $0.275. The stock trades at 9.7x P/E. The counter remains halted until further notice. Details of outstanding warrants: i) Baker Tech W20121116, 282.6m units out, $0.32 exercise price ii) Recent 2-for-5 warrants, 280m units out, $0.27 exercise price


Swiber: -0.9% at $0.53, broadly in line with the STI's 0.7% decline, after saying it plans to sell S$75m worth of fixed-rate notes with a 6.25% yield. An analyst notes the company has had to refinance its debt; pricing is reasonable for a smaller company with a decent amount of leverage. Says the interest rate is "pretty good." Next support at $0.51, its ytd low.

Parkson Retail Asia

Parkson Retail Asia (PRA): announced that it has signed a lease agreement to open its first Parkson branded store in Jakarta in Sep ‘13. The store will be located at The St Moritz, a 35 ha mixed devt developed by the Lippo Group, at the heart of the Puri CBD, West Jakarta. At present, Parkson’s only presence in Indonesia is via 6 Centro-branded stores which were acquired in Jun ‘11. Mgt will pursue a dual branding strategy in Indonesia with Centro targeting the low-middle income and Parkson targeting the upper-middle income segment. DMG is bullish on the long-awaited decision and believes Parkson will gain a lot of traction in the market given its strong retail know-how and branding. Says this is already evident in Centro’s recent results where same-store-sales exceeded expectations, growing 9.8% YoY in 9MFY12. The house reiterates Buy with TP $1.68.

Yeo Hiap Seng

Yeo Hiap Seng: Lift of trading halt. To privatise Yeo Hiap Seng Msia (YHSM) of which co owns 61.1% of. Co will take YHSM private at RM3.60 per share for a total of RM213.6m. The closing price of YHSM per share was approx RM3.16 after adjusting for dividendsand the offer is at a 13.9% premium to it. The acquisition is approx at 22.5x P/E and 2.0x P/B Co trades at 8.1x P/E and 1.2 P/B

Macq Intl Infra Fund

Macq Intl Infra Fund: Toll rate on Hua Nan Expressway to be reduced from avg rate of Rmb0.75/km to Rmb0.60/km. This was after notification from Guangdong authorities to standardise all highway tolls at the rate of Rmb0.60/km. The notice also changes the methodology of calculating toll-able distance of slip roads. Co has a 81% interest in the expressway and expects revenues to be reduced by 20-25% for the expressway. Co will seek a resolution on this matter and is currently in discussions with the govt. A semi-annualdividend of 2.75c has been declared. Another company to highlight would be China Merchant Hldgs although co does not appear to operate in Guangdong and the actual toll rate per km is unknown. The company has a highway in Guangxi.


LionGold: Co records FY12 loss of $26.4m compared to $815k last year. Higher admin costs and impairment charges ballooned which resulted in the net loss. Impairment charges amounted to over $21m of which $16.0m were from goodwill, 1.8m was from an AFS asset and 3.9m on receivables to ASWA. Admin costs were attributed partly to provisions as well as fees for the proposed acquisition of Signature Metals. To reduce investment in African Stellar West Africa (ASWA) to a 41% stake, lower than the 51% in earlier announcements. Co is of the view that financial resources diverted would be more meaningfully deployed in Ghana at Owere Mines, 70% owned by Signature Metals (76% owned by co). Co will cease to be the exclusive funder of ASWA and has made impairments on its investments in it. Co currently trades at P/B of 14x


DBS: Deutsche hosted co. in its investors conference. Key discussion topics are outlined below: Loan growth remains healthy - total loans grew 3% QoQ in 1Q12, and DBS believes its full year target of 11-12% growth is still achievable. Expect growth to be broad based. Trade finance still a key driver, albeit starting to slow. DBS believes key downside risk to loan vol remains a sharper-than-expected slowdown in China, though its base case is a moderate slowdown in Asia in 2H12 with domestic consumption remaining robust. Mgt indicate current loan pipeline remains healthy enough to maintain guidance. Because DBS's mortgage demand is mainly driven by local customers, control measures (mainly aimed at foreigners) haven't really affected the bank. Mgt noted underlying demand remains strong and a pick-up in investment property demand recently. With average LTV of 54%, DBS appears to have a comfortable buffer against potential credit losses. Margins are holding up well, while DBS indicated it will remain focused on growing fee revenue. The bank has built up $10bn of liquidity (of which $4b deposit, $4b wholesale and $2b other) as a buffer against potential market volatility

Swing Media

Swing Media: FY12 results that were in line with our expectation with HK$50.4m net profit (+4.7% YoY) on the back of HK$865.3m revenue (+2.8% YoY) as its current optical disc business continued to deliver. While market for optical media has been cannibalised by internet and mobile devices, demand for Swing Media’s products remain resilient. Going forward, DMG expect FY13 to be an exciting year for the group with two new businesses contributing significantly to the full year performance. DMG Reiterate BUY, with an unchanged TP of $0.244 based on 0.5x (industry average) FY13 P/B.


Yangzijiang: CIMB maintains at O/p with $1.30 TP. House note that YZJ is cheap at 1.2x P/B, its trough during GFC. After a strong 1Q12, believe FY12 is likely to beat consensus expectations on margin strength. Securing jack-up rig orders could also be its game changer. House note that trough unwarranted, as the stock had outperformed the STI by 20% year to Apr before sliding in May following a resurgent EU debt crisis. Think that stock has been oversold, to 1.2x P/B (GFC valuations in Oct 08). With no news of order cancellations, foresee a rapid recovery in its share price if and when euro-zone concerns dissipate. YZJ beat house expectations in 1Q12 with shipbuilding gross margins of 27.2% against house 23.5% expectation for FY12. Believe progressive execution of its remaining 18 pre-GFC high-margin container-vessel orders from COSCO in FY12-13 could support margins. YZJ’s entry into rig building should be imminent as it prepares itself by developing the Taicang yard and hiring personnel to beef up its offshore division. Given its shipbuilding track record, believe its learning curve could be less painful than for other Chinese shipbuilding aspirants such as Cosco Corp and JES. Mgt is confident of securing 1-2 jack-up rig orders by end-2012.

Chasen Holdings

Chasen Holdings: Grp has again demonstrated its ability to grow. With the latest financial ar's result, grp’s rev has shot up about 5X from just $20.8m in 2007, the year it launched its IPO. Net profit has similarly risen, from $2.0m to $7.3m. Sharing insights into the business, Chasen’s lead independent director note that there was pent-up demand from MNCs which had deferred the relocation of grp’s operations during the 2008/2009 global financial crisis. Rev from China, in particular, shot up to about $20m out of the Group's $44.5m in relocation business revenue in FY12. Going forward, Chasen is expecting delays in clients' relocation moves to China due to the euro crisis. All in all, Chasen is hopeful that its relocation business will be able to maintain the rev level it achieved last year. The strategic direction for Chasen is increasingly to develop its capabilities to offer turnkey solutions to customers -- build their plant, put in facilities, move the manufacturing equipment over, etc. Given the FY12 profitability, some investors expect 0.6 c/share in dividend, unchanged from FY2011 #HI-P: Major customer RIM which has already fallen 74% in the past year dived another 15% in after hours trading after warning of a potential loss this qtr, due to continued market share loss to Apple and Google’s Andriod phones. RIM is planning to cut 2-3K jobs and warned that their financial performance will remain challenging for the next few qtrs. Hi-P is reducing their dependence on RIM from 60% in the last year to less than 40% this year, replacing them with faster growing customers such as Apple, P&G, Colgate, Seagate as well as new customers such as Nike and Amazon. Mgt is tripling their capex to US$180mln this year to cater to the growing demand from their non-RIM customers.


SingXpress: entered into a conditional subscription agreement with Mr Chua Swee Wah for the issue of 243m new shares (5.3% of existing sh base) at 1.26cts/sh. This represents a 16% discount to the last closing px at 1.5 cts. There will be a 6mth moratorium on the new shares. Mr Chua was introduced by Mr Toh Soon Huat, a sh/h of the co, to Mr Chan Heng Fai, the Managing Director of the co. Prior to this, the co had issued a convertible bond, and a private placement in Apr ’12. The NAV and EPS effects are shown below.

SG Market (31/ 5/ 12)

SG Market: Spore shares are likely to succumb to the doom-and-gloom weighing regional markets after US and European markets tumbled on new Spanish banking worries taking over Greece's spotlight. The crisis in the eurozone slipped from bad to worse last night as Spanish and Italian yields spiked up and the euro fell to a new low as confidence fades further. Safety is the name of the game as traders dumped risk assets. Watch the 2750-2760 support zone on the STI. If that breaks, the next support is tipped at 2700, followed by 2645. News flow is virtually dry. Among stocks in focus, SingTel was fined $400,000 for mobile-service disruptions last year. Creative Technology launched a new version of its SoundBlaster card, adding a speaker and microphone. Commodity plays likely to take a hit as oil prices slip below US$90/barrel.

Wednesday, May 30, 2012

Genting HK

Genting HK: Macquarie says the current share price offers "free" entry into Resorts World Manila; estimates RWM's 1Q12 volumes rose 69% on-year, with robust gross gaming revenue; notes RWM expects more overseas players in coming quarters, while the new 712-room Remington hotel is expected to draw more mid-tier VIP players. While two new casinos are set to open in 2013, Macquarie expects they will increase the pie and cannibalize local public casinos first; it notes RWM has another 9 months of monopoly left and Macquarie expects it to further strengthen its products, marketing and client base. RWM also targets a 2016 open for new casino Resorts World Bayshore. After the stock's recent decline, ex-cruise and other businesses, Macquarie believes RWM is available free currently. Adds, there is a strong possibility of the IPO of its U.S. cruise liner in the next 12 months. Keeps an Outperform call with TP US$0.47. The stock is down 1.6% at US$0.32.


Europe: Mkts are coming off. ECB was reported by FT to have rejected a deal to use govt debt to recapitalise Bankia. The Spanish govt was planning to use EUR19b in sovereign bonds for the recapitalization. The ECB was of the view this was in danger of violating a ban which disallows central banks to finance govt. Bankia was down 16% yesterday, after falling 13% on Monday. Spain's borrowing costs is of concern as they inch close to 7%, a range at which other nations seeked financial aid after.


Noble: +1.3% at $1.13, possibly bolstered by analysts tipping brighter outlooks for resources stocks, recently decked by eurozone-debt and economic-slowdown concerns; Noble is exposed to coal and metals. Citi sees opportunities in Australian resources stocks; noting that despite the euro-zone debt crisis, global economic growth has held up reasonably well and may continue to do so as a disruptive Greek exit is becoming less imminent; with China now focused on maintaining growth, global industrial production could continue to grow at or even a little above trend. CLSA shares a similar view on the China resources sector; recommend adding exposure in an opportunistic manner given that valuations are cheap, the sector appears 'under-owned' by generalist investors and as we expect Chinese macro data and sentiment to improve in 2H12." Bid-ask spreads suggest the $1.15 intraday high may cap gains.

Cosco (technical)

Cosco: the stock has seen a decent bounce since bottoming out at $0.865 in mid May. While the indicators are tilting upward and suggest positive near term momentum, we note that the stock has yet to break out of its longer term downward trend. We would turn more bullish if the stock breaks above the 200day and 50day moving averages at $1.03 and $1.05 respectively, accompanied by higher volume. See support at ~$0.90.

Yangzijiang (technical)

Yangzijiang, Stochastics and RSI does suggest that counter is still on an uptrend, although caution that ADX has started to hook downwards, while could mean that current uptrend is running out of steam. Near Term resistance is tipped at the 20 day EMA of $1.06 followed by $1.15 (200day EMA). Support can be found at the psychological level of $1.00 followed by recent low at $0.91


Midday: The STI currently -0.4% at 2790.7, up from 2779.3 earlier this morn. Most counters are down although Noble is a notable exception +1.8%, only news being its small divestment yday. Total local volume is approx 713.5m shares with total value of $502.2m The market saw a bit of a dip attributed to Chinese paper Xinhua which announced that China would not introduce a stimulus the size the same of that in 08. This dampened expectations and was suggested as the reason for this morning's weakness

Metro (update)

Metro (update): FYMar12 net profit rose 12% to $91.9m, boosted by a disposal gain of $98.7m from the sale of its 50% stake in its Beijing retail mall, Metro City Beijing. DMG notes this transaction once again highlights Metro’s track record as a real estate investor in China, coming on the back of a string of earlier successful divestments including One Financial Street and Metropolis Tower in Beijing. The sale proceeds bolstered the group’s net cash to $429m ($0.52/sh), while NAV/sh rose from $1.30 to $1.35, translating to valuation of 0.6x P/B. To reward shareholders, the group is declaring a final dividend of 2cts/sh and a special dividend of 4cts/sh, amounting to a payout ratio of 54% and a yield of 7.7% based on the last closing price of $0.78. Following the sale of Metro City Beijing, Metro will continue to have a significant presence in China with an investment property portfolio worth o> $500m in Tier-1 cities. Operationally, its commercial properties in China continued to perform well with rental income growth driven by higher occupancies (95% vs 88% in prior year) and the completion of asset enhancement initiatives (AEI) at its flagship Metro City Shanghai. Meanwhile, its retail operations in Singapore were boosted by broad-base sales growth, in line with improved consumer sentiments and strong sales at its recently refurbished Metro Woodlands. DMG continues to like the stock for its undemanding valuations and management’s ability to drive accretive NAV growth. Maintains Buy with TP of $0.89.

United Envirotech

United Envirotech: FY12 results in line. Although revenue +9.4% to $85.3m, net profit slipped 34.6% to S$10.5m. But stripping off exceptional items, the drop in core net profit would have fallen 15.0% to $12.5m. Grp also declared a final dividend of 0.3c per share, unchanged from last year. Going forward, mgt continues to remain upbeat about its prospects in the waste-water treatment industry in China; and intends to expand its stable and recurring treatment income by actively seeking suitable TOT/BOT/BOO investment projects in China. OCBC note that house will be speaking with management to get more insights into its expansion plans and will update forecasts accordingly. For now, maintain BUY rating but place our $0.52 fair value under review.

Midas (technical)

Midas: UOB Kay Hian has Technical Buy Call with a potential 22.9% return and a $0.375 TP. House think the stock could have formed an interim bottom at $0.27 and may resume its uptrend. Coupled with the rebound in its daily Stochastics indicator, its MACD indicator has formed a bullish crossover, supporting the view of a further upside. Stops could be placed at prices below $0.265

China MinZhong (technical)

China MinZhong: UOB Kay Hian has Technical BUY Call with TP of $0.71. The stock could be consolidating after its recent sell-off and prices could be moving towards its mid Bollinger band. The daily Stochastics is appearing to make a higher low and has appeared to form a bullish crossover. Stops could be placed at prices below $0.50. House retail research has a fundamental BUY with a target price of $1.65.


Rubber/GMG: Rubber stockpiles in China’s Qingdao port, the main shipment hub for the commodity used in tires, are starting to expand as demand slows in the world’s largest consumer. Note that demand from downstream tire makers seems to be weak at the current stage, so destocking has slowed down, said exchange chairman Li Xiangou, who correctly forecast in March that high inventories may pressure prices. Futures have plunged 49% from a record in Feb 2011, cutting costs for tire makers such as Bridgestone Corp., Goodyear Tire & Rubber Co. and Michelin & Cie. Prices slumped as China, the biggest car market, expanded last qtr at its slowest pace in almost three years and Europe struggled to contain its debt crisis.

Tat Hong

Tat Hong: Kim Eng note that improvements to Tat Hong’s operating statistics (fleet size, utilisation and rental rates) have been evident in recent qtrs. House believe this would continue for the next 2-3 yrs. Note that there is potential for its China business to turn around after it successfully transferred the problematic China JV’s assets to another JV over which it has better control. Tat Hong’s net profit has rebounded from $3.8m in 4Q11 to $11.2m in 4Q12, and given its stable improvement so far, it would not take long before it again hits its earnings peak of $90m achieved in FY08.

HK Land

HK Land: MCL Land emerged as the top bidder for a 99 yr leasehold site near Jurong East MRT with a price of $369.4m. The other bids were in the range of $369.1m to $251.0m. The land area is approx 124.7k sf with max GFA of 523.9 sf which translates to $705.1 psf ppr. This is the 2nd highest unit price for a private non-landed resi site this yr. Break-even is expected to be approx $1200 ppr. Co currently trades at 0.55x P/B and is 50.2% owned by Jardine Strategic Hldgs.


Olam: To invest US$240m in its first sugar milling asset in Brazil. Co will spend US$128.8m on acquiring Usina Acucareira Passos (UAP) and another US$115m over the nxt 5 yrs to improve its capacity and efficiency. UAP owns and operates a sugar mill in Passos, Brazil with 1.75m MT p.a and output of 200k MT of sugar per yr. Currently approx 75% of crushing comes from UAP's own cane plantations. Olam expects an IRR of 20% on this investment. Co highlighted that after expansion, transaction will be done at approx US$80/MT compared to other recent acquisitions at US$110-128/MT and Greenfield costs of approx US$125-150/MT. It is expected to be earnings accretive from the 2nd yr. Olam has other investments in sugar, two refineries, 1 in Indonesia and 1 in Nigeria and two other sugar mills in India. Among Wilmar, Noble and Olam, Olam is cheapest based on P/E valuations, currently at 10.2x P/E and is 22% down YTD compared to Wilmar at -26%. Noble is -3.9% YTD partly due to a lower base from the prev resigning of its CEO and unexpectedly poor results before the yr started.


Metro: Announced good set of 4Q12 results. Rev at $48.1m, +6.7% yoy, while net profit at $78.5m, +439.7% yoy, largely attributed to gains from other income. Grp saw higher turnover of both the ppty and retail divisions, although gross profit at $16.6m was 10% lower as operational costs were higher. Other income at $102.1m, due to $98.7m gain on disposal of the Group’s 50% interest in Huamao, which owns Metro City Beijing. Grp has declared divs of 6c/shares (2c ordinary, 4c special) translating to a 7.7% yield.


Biosensors: 4QFYMar12 results in line, above mgt’s previous guidance. Net profit at US$28.6m, on the back of a 98% jump in revenue to US$88m. While revenue and gross profit were ahead of expectation, higher SG&A and R&D costs brought the numbers more in line. OCF rose to US$32.4m, +143% yoy. Product revenue grew 65% yoy in 4Q, with strong growth recorded in EU / EMEA and China (consolidation of JWMS). China saw qoq growth and did not see destocking in the channels. Licensing and royalties revenue jumped 378% yoy to US$22.8m, as Terumo gained market share in Japan to ~30% presently. Mgt guides for revenue growth of 20-30% for FY13, driven by continued strong DES revenue growth as well as modest licensing and royalty revenue increase. Mgt expects the overall FY13 profitability, excl exceptional items, to increase but anticipates that the higher revenues will be partially offset by increased expenses required to support revenue growth and devt of future pdts. Also acknowledges potential price decline in FY13, but did not provide further numbers. The stock trades at 15x P/E (before exceptional items).

SG Market (30/ 05/ 12)

SG Market: S’pore shares may track higher following Wall Street's positive cue and some follow-through technical rebound but gains are expected to be limited as there is still a lot of uncertainty in the market. The market is likely to remain range-bound until we get more visibility around Jun 17, when Greece goes to the polls. Immediate resistance for the STI stands at 2820 with 2750 acting as underlying support. Among stocks likely in focus, Olam is acquiring a Brazilian sugar miller for US$240m, while Biosensors reported 4QFY12 net profit rose 49% yoy to US$27.2m, which is generally in line with expectations. Reuters reported UOB is among short-listed bidders for ING's Asia asset-management business. Pan Hong reported FY12 net profit fell 24.6% to Rmb177.6m.

Tuesday, May 29, 2012


Armstrong: Lim & Tan says the co may benefit from the potential pickup in China's auto market after Beijing agreed to revive financial incentives to boost demand for passenger cars. Says ,with the revival of the program, Armstrong, which has a one-third exposure to the sector, will see a pick up in business momentum again. Keeps a Buy call. The stock is up 1.9% at $0.265.


YZJ: Shipping news agencies have reported 6 newbuilds ordered by Lomar to be built by Yangzijiang. The 1100 TEU capacity vessels are to have improved fuel consumption and ability to carry up to 220 reefer containers. These are scheduled for delivery from May 2014 onwards and take Lomar's fleet to over 50 vessels. No amount was mentioned. The contract pales in comparison to the prev twenty-five 10k TEU containerships contract for Seaspan at US$2.5b. This contract is for six 1100 TEU vessels. YZJ has not announced this contract yet on SGX but has a history of disclosing order wins periodically Co has an outstanding orderbook of US$4.5b as at 31 Mar 2012 and currently trades at P/B of 1.4x


Yoma: Maybank Kim Eng notes, Yoma is "living up to the hype" after reporting strong FY12 earnings of $6.0m last week, up from FY11's $2.8m. Notes FY12 cash generated from operations improved significantly to $19m, pushing cash balances to a plump $20m from $2.5m a year earlier. The co is benefiting from heightened interest in Myanmar real estate, with Yoma's cash putting it in a strong position for future expansion plans. Adds, the U.S. suspending sanctions and an overhaul of the complex currency system will simplify investing in Myanmar, potentially benefiting Yoma's key real-estate segment. Says, although the share price has undergone a sharp sell-off of late, few other companies can claim to have such a focused exposure to the emerging market of Myanmar and its potential in real estate market growth. The stock is up 17.1% at $0.445, accounting for nearly 5% of shares traded.

Tiong Woon / Best World

Tiong Woon / Best World (Myanmar plays) With the Key Myanmar stocks (Yoma, Interra and Sin Heng) all up on high vol today, we like to highlight other potential Myanmar stocks which are still lagging today, namely Tiong Woon and Best World. See some posts regarding the 2 Co’s below: Tiong Woon - Plans to set up a Myanmar office to prospect for new business, Kim Eng says, noting the company won a maiden contract with an Indian conglomerate for a Myanmar infrastructure project in November. Kim Eng notes Tiong Woon will supply cranes and provide marine-transportation services; "this is a good example of the company leveraging on its various capabilities to win projects." It doesn't rate the stock. Best World - Co. has evaded the attention of investors, vs the more well-known names. Best World International has been in Myanmar for 3 yrs already, since 2009 and sells its range of quality skincare, personal care, nutritional and wellness products wholesale to an agent in Myanmar who in turn sells the products to retail outlets as and more wealthy Myanmarese. Best World does not disclose its Myanmar sales in its financial reports as it is booked at export price, although co. note that the export price, being a % of the distributors' price, in which the Grp's rev are being booked in, is not significant. Best World chalked up $41.5m in sales last yr with top markets SG and Thailand contributing $10.1m and $7.8m, respectively. The stock traded recently at 18c, translating into a market cap of S$36.9m. This is just a little above Co’s net cash position of $29.8m as at FY11. The business' profitability, however, has yet to recover from the sharp drop in FY10 ($2.45m vs $9.7m in FY09).


Wilmar: is -0.5% at $3.74 in nearly transparent volume after its associate Czarnikow said Macquarie Group acquired Wilmar's 42.5% stake in the sugar trader, with the transaction to be completed early in 3Q12. An analyst says, associates don't really contribute that much, and is not really meaningful to Wilmar's bottom line. Nevertheless, KELive wonders why Wilmar is selling off a sugar trading unit, shortly after making several large scale sugar acquisitions in Australia last yr (recall Sucrogren and Proserpine). Technically, the stock's $3.70 ytd low may offer support, while last week's $3.96 peak may be a near-term cap.

Raffles Hospital

Healthcare China / Raffles Hospital: recently the govt launched a series of policies and opened up the medical service sector to social capital. Private hospitals and medical service providers may also enjoy favorable tax policies and local govt subsidies. Moreover medical services in private hospitals can be covered by govt medical insurance schemes as well. According to the Ministry of Health, there were 8053 private hospitals by end ’11, accounting for 37.2% of the total no of hospitals in China. As at end Mar ’12, the no reached 8864, +21.2% yoy. Moreover the no of pte hospital visits in 1Q12 was 51.2m, +37.6% yoy, indicating that private hospitals will become a new catalyst for mkt expansion and help to ease the pressure of ltd service capacity in large hospitals. The growing private hospital sector in China offers a positive backdrop for Raffles Medical which is making inroads into this new market. Recall which Chairman Loo Choon Yong said in Feb this yr, that the group’s loss making medical centre in Shanghai (opened in 2010) may turn profitable next yr as costs stabilize and more patients come. The group has also said previously that it is prepared to invest up to $300m to build a 300-bed hospital in China, to tap the rising affluence and growing demand fro higher quality healthcare in China. The stock trades at 21.8x P/E, offers 1.9% yield. The Street has 6 Buys, 5 Holds and 1 Sell, with TP btwn $2.46 – 2.90.

Gallant Venture (technical)

Gallant Venture: UOB Kay Hian has Technical Buy Call with a potential 25% return and $0.35 TP, which could be the key resistance level should the stock cross above $0.30. The stock is likely to rebound further from its support level at $0.265, with stops placed at prices below $0.25. The daily Stochastics indicator has rebounded from oversold levels and the MACD indicator is likely to form a bullish crossover at this juncture.


Valuetronics: UOB Kay Hian note that results ahead of expectations. Valuetronics reported FY12 net profit of HK$130m, up 7.5% yoy. Excluding the impact of an increase in net foreign exchange gains of HK$4.5m and the write-back of a provision for impairment loss of HK$3.7m related to the flash flood incident in 2008, net profit was HK$121.8m, slightly above house forecast of HK$117.5m. FY12 revenue increased 20.7% yoy to HK$2,378.6. This was due to: 1) OEM revenue increasing by 24.3% yoy to HK$2,010.3m largely due to the growth in the LED lighting segment, 2) ) ODM revenue decreasing by 13.0% yoy to HK$278.0m due to a slowdown in demand from major ODM customers, and 3) ) licensing business revenue growing 170.3% yoy to HK$90.3m due to a ramp-up in marketing efforts in the US. Grp announced a 16.0 HK cents (2.6 S cents) final dividend and 1.0 HK cents (0.2 S cents) special dividend, implying dividend yield of 11.0%. House maintains Buy with $0.31 TP.


STX OSV: Trading Central has Technical Sell Call. House note that downside prevails as long as $1.56 is resistance. Alternative scenario: above $1.56, look for $1.65 and $1.71. Note that the RSI is below its neutrality area at 50. The MACD is negative and below its signal line. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at $1.57 and $1.67). Finally, stock is trading below its lower daily Bollinger band (standing at $1.45).


JEL/GSH: Koh Boon Hwee has sold 20.968m shares at an undisclosed price on last Thury (May 24). Assuming 7 cents a share, the sale could have brought him about $1.4m profits. In February, Koh Boon Hwee had paid merely 0.35c/ share for 283.9mrights shares. This is a massive allotment to him as he had subscribed for excess rights shares not taken up by minority shareholders. Now, will his recent 21m share sale result in a perceived overhang in the market for GSH? Time will tell.

Tat Hong

Tat Hong: Posted a +192% YOY increase in earnings to $11.19m for 4Q12. Rev rose 19% to $181.94m yoy, on improved performance in all business segments. Gross profit margin rose to 39.4% from 34.7% for the corresponding previous quarter, on improved rental rates and higher utilisation from the crane rental and general equipment rental divisions. Citi upgrades to Buy from Sell and increases TP to $1.40 from $0.64. Upgrade is underpinned by a recovery in equipment sales and rising utilization levels for its crawler crane division across the region. As a result, believe the strength of recovery has been overlooked and expect net profit to reach $70m and $78m in FY13E and FY14E respectively. House EPS is the highest in the Street and suggests FY12-15E CAGR of 26%. We do not rule out possibility of investors switching out of Sin Heng into Tat Hong, on back of these strong set of results, and the disappointing price stake sale in Sin Heng.


Boustead: Positive set of results. 4Q Mar-end rev at $131.8m +19.7% yoy +38.3% qoq with net profit at $32.4m up from a loss in 4Q10 and up 484% qoq. 4Q net profit formed approx 58.3% of FY12 net profit. Of note, Geo-Spatial Tech segement displayed strong growth for the first time FY12 rev up $108.2m +14% yoy. This also resulted in better margins despite FY12 rev being lower by 27.1% and improved overall profitability. An expanding portfolio of industrial leasehold properties also added to improved profitability. A div of 3.0c was declared bringing FY12 total div to 5.0c compared to last yr of 7.0c, which included a special div of 3.0c. Co’s orderbook currently stands at $337m


Telco: The IDA and MDA have decided not to go ahead with Project NIMS, which is the universal set top box that would have allowed sharing of just one set top box for delivering video and other digital services over the Next Generation Nationwide Broadband Network (NGNBN). Under the current system, all operators deploy their own set top box, hence households subscribing to StarHub, mio TV and 1box (from M1) would have required 3 set top boxes to be installed in their homes. The cancellation of Project NIMS would likely have a negative impact on M1, given its lack of content relative to StarHub and SingTel. M1 had hoped to ride on the platform to advance its Pay TV plans. StarHub is the likely beneficiary, as the barriers to distribution are retained. StarHub has the most number of Pay TV customers under its belt, and viewed as having the strongest content offering. Trailing 12m yield for the 3 telcos as follows. SingTel – 8.4% (incl special div of 10cts) StarHub – 6.2% M1 – 5.9%

SG Market (29/ 5/ 12)

SG Market: S’pore shares are likely to mark time as investors are expected to remain on sidelines watching developments in Europe. The STI has slumped 7.3% since the start of May and short term technical indicators are pointing towards a rebound from the 2750 support area. Both stochastics and RSI appear to be finding a bottom with the STI exhibiting an engulfing bull candlestick yday. Overhead resistance is at 2812, which represents the top end of a recent breakdown gap. On the corporate front: *Tat Hong 4Q12 net profit soared almost 4-fold to $11.2m from $3.8m yoy, revenue +19% to $182m as all 4 core businesses recorded sales growth. Proposed final dividend of 1.5¢ *Boustead 4Q12 net profit came in at $32.43m, turning around from $1.0m loss, revenue +20% to $131.8m. Secured $400m in new contracts during FY12 coupled with healthy enquiry pipelines, the company is in a strong position in FY13. Proposed final dividend of 3¢ *Wilmar sold its 42.5% stake in sugar trader Czarnikow to Macquarie in an unexplained move. *Sembcorp Industries has completed its final test for its 60% JV, US$1bn Salalah water and power plant in Oman, which is ready to start ops *Sunpower secured a Rmb25.3m contract to supply two dry gas-holders and provide accompanying services for the production of magnesium. *Telecoms: IDA drops plans for standardised set top box, which comes as a blow to M1, which had hoped to use the platform to advance its Pay TV plans

Monday, May 28, 2012


Hanwell: halted since 11.20am this morning. No reason given yet for halt. Note that Hanwell announced a series of key mgt changes in early May, shortly after changing its name. It was previously known as PSC Corp. Interesting that Sam Goi purchased ~4.5m Hanwell (back then, PSC) shares via the open mkt in early Apr , taking his stake to 13.1%. Recall the recent heavy trading activity over Sam Goi's other big investment in GSH Corp (formerly known as JEL ).

TT Int’l

TT Int’l: stock is trading just above the 0.62 Fibo level (coincide with 20day MA), with Stochastics and RSI resuming their climb. MACD also looks like it could pull off a positive crossover soon. This bodes well for near term price action. Risk reward looks favorable, with next key resistance near $0.16, vs tight stop if price closes below $0.13.

China MinZhong

China MinZhong: Yet another fund manager, Prudential, sold shares and in the process, ceased to be a substantial shareholder. (GAM Singapore sold almost a million shares on May 11, just before the release of the disappointing results.)

Hyflux, Hankore and UEL

Water Plays (Hyflux, Hankore and UEL): With China’S GDP growth at a 3-year low, monetary easing is on the cards, which could be good news for co’s building water treatment plants in China where there is huge demand for water infrastructure and capex is high. So, a drop in interest rates would be most welcome to these co’s. In its 12th 5-year plan (2011 to 2015), China set aside Rmb 104b for wastewater treatment, some 28% above the amount budgeted for the previous 5 years. There is a total budget of Rmb 430b on wastewater treatment and water recycling facilities. The challenge for co’s in the sector is investment costs which could run as high as Rmb 500m or more per project for building water treatment facilities. So, lower interest rates can only lighten the heavy debt-financing burden of this business. This is especially significant for SGX-listed water co’s as equity financing is often a last resort, given the low mkt valuation accorded for S-chips.


MTQ: (The Edge) Boosted by new Bahrain plant and premier grp. For FY12 Grp reported a 37% yoy rise in earnings to $14.6m on back of a 40% yoy increase in rev, as 2 new acquisitions provided a lift to grp’s full yr top and bottom lines. Going forward, grp plans to keep capex low in SG and focus mainly on equipment upgrading and replacement, and intends to consolidate operations btwn Premier and MTQ, with MTQ focusing on larger components and Premier on smaller component manufacturing. Investors have however shown little interest in MTQ, with co. trading at 5.1x trailing P/E , although Grp has been paying div of 3-4c every yr, for the last 3-4 yrs.

Anwell Tech

Anwell Tech: To acquire Lopburi Solar for THB120.5m ($4.9m) and THB4.5m (182k) for a piece of vacant land. Lopburi Solar has a agreement with the provincial authority to sell electricity of up to 5MW per annum for 10 yrs and the power plant in relation will be built on the piece of land.


IPC: To undertake rights issue of 1 rights share for every 2 existing shares at issue price of $0.08. This is a discount of approx 42.9% from the last traded price of $0.14. The rationale is to raise funds for general working capital purposes and expansion of potential acquisition of properties in countries where the grp operates.

KSH Hldgs

KSH Hldgs: Proposed bonus issue of 1 share for every 10 existing shares. Co is of the view that it will increase trading liquidity of co's shares. FY12 Mar-end results lower yoy. FY12 rev at $170.6m -35.1% yoy, with net profit at $18.3m -16.8% yoy. Co currently has orderbook of $467m. Dividend of 0.5c declared as compared to 1.0c last yr. Tender prices are expected to remain competitive and costs may increase.


Mencast: (The Edge) Disparate acquisitions and drive singular growth plan. CEO note that Mencast is moving from just making propellers and rudders to becoming a full MRO provider for the O&G industry. With latest acquisition of Vac-Tech (specialises in cleaning insides of refinery tanks and pipelines), Co. is moving towards serving major energy players that are making a slew of investments in the region. Since FY06, grp’s earnings have grown at a blistering 36% p.a, with half of grp’s rev from its offshore business, and abt 30-40% from marine services, while mkt cap has grown from $40m to $140m. Grp however has guidance that its new waste energy unit could generate as much as half of grp’s rev gonig forward.

Global Premium Hotels

Global Premium Hotels: Global Premium is planning to spend $25.1m from its IPO proceeds and working capital to acquire Fragrance Heritage (FHPL)from parent, Fragrance Group. FHPL is a special-purpose co whose sole real estate asset comprises a freehold 2,254.2 sqm development site on Tyrwhitt Road, which Global premium intends to develop a hotel. According to 2 independent valuers appointed by FHPL, as at May 24, the estimated open market value of the Tyrwhitt Road property is $78m.


Boustead: Awarded multi-million dollar contract to design and build a demineralisation and condensate polishing plant on Jurong Island for Sembcorp Industries. Other projects undertaken by Boustead include several wastewater treatment plants in Tembusu Multi-Utilities Complex, SMAG Complex and Pulau Seraya Power Station. This raises co's orderbook to $417m. Boustead currently trades at 19.8x trailing P/E but gave a 8.1% yield last yr. Their dividends are irregular but co included a special div in the prev 2 yrs.

China XLX

China XLX: Intends to construct a new 5th production plant to expand its production capacity for urea and compound fertiliser and the production of melamine. This project will comprise of 3 major parts, will cost approx Rmb2.7b and is expected to be completed by end 2016. Firstly, the acquisition of land in the Xinjiang Uygur Autonomous Region. Secondly, the construction of new production and office buildings. Lastly, the purchase and installation of new equipment and machinery. This project is expected to increase co's expected capacity for urea from 2.1m tons to 2.6m tons of which 0.3m will be used for production of 100k tons of melamine and another 50k tons of urea for 150k tons of compound fertiliser (total capacity 900k tons). China XLX currently trades at P/E of 7.3x

Sin Heng

Sin Heng: Toyota Tsusho Corp (TTC), member of Toyota grp takes 27% stake, 123.8m shares in Sin Heng for $26m from controlling sh/h SEAVI. The price done per share was at $0.21. Co has also entered into a business alliance with TTC as TTC seeks to leverage on co's network in SEA. Co also expects to benefit from the alliance with access to a wider marketplace and network as well as expand its product portfolio to include other construction machinery. Also, co will gain valuable insight in the "Toyota Method" which is expected to better its efficiency. While the price done by Toyota at $0.21 compared to last traded mkt price at $0.26 will likely result in a knee-jerk sell off, there could be intangible benefits in the long-run by a global name such as Toyota.


Noble: has proposed to sell 100% of TMM, which owns a liquid bulk terminal at the port of Itaqui in Brazil, to Ultrapar Participacoes SA (listed in Bovespa and NYSE). The sale is subject to approvals from the local port authority, owner of the land where the railway serving TMM is located, and from Ultrapar’s shareholders. Total consideration will comprise, i) R$68m (derived from TMM’s enterprise value of R$160m less est net debt of R$91.2m and est working cap adj of R$0.8m), and ii) additional consideration of no less than R$12m over the 7 yrs after closing provided certain conditions are met. * USD 1 = approx 2 Brazilian Real As at end Mar’12, TMM had net liability of US$3.4m, and negative net tangible asset value of US$5.9m. While Noble is likely recognize a one-off gain on completion of the transaction, the sale proceeds from TMM is small relative to Noble’s asset size of US$5.5b. Hence see minimal financial impact. The stock trades at 1.1x P/B, 16.2x P/E.

SG Market (28/ 5/ 12)

SG Market: S’pore shares are likely to open mixed with a downward bias following the weak showing on Wall Street last Fri amid concerns of Spanish banks seeking life support. Watch the 2,750 support on the STI with the next level at 2,700. Overhead resistance is at 2,820. Corporate news flow is tight but companies with exposure to Myanmar such as Yoma, Interra, Sin Heng could see some play on news that some Asian private equity firms are lining up US$500m to invest in Myanmar, targeting at the natural resource and infrastructure sectors. Toyota Tsusho Corp acquired a 27% stake in Sin Heng for $26m or $0.21/share from from SEAVI, making it the 2nd largest shareholder behind the Tan family's 28%.

Friday, May 25, 2012

Sin Heng (update)

Sin Heng: Toyota Tsusho to buy ~27% stake from Seavi. Transaction price tipped at 21cts/sh vs last close at 26.5cts. Seavi will continue to hold 7-9% stake in Sin Heng.


STX OSV: is -3% at $1.485 , on moderate volume. Earlier news wires and broker reports (Citi, Goldman) suggested that the sale of STX Group's 51% stake in STX OSV would be finalized this wk. There have been no fresh updates since, hence we suspect the sell down as the wk draws to a close, may be partially due to winding down of short term trading positions.

Asiasons Capital

Asiasons Capital: 1Q12 results showed revenue at $5.3m, +34% yoy, driven by larger gains from private equity investments. Net profit almost doubled to $16m, boosted by $13.8m of other income, arising from increase in fair value of its financial assets. Recent notable shareholding movements include Sunmax Global Capital Fund as new significant sh/h with 5.3% stake, and Asiasons Investment Managers paring down its stake by the same 5.3% to 34.6%, by virtue of pledge shares to Sunmax. The stock trades at 2.2x P/B. Interesting to note that Asiasons Capital website lists SGX –listed Chaswood Resources and LionGold amongst its investment portfolio.

Viz Branz

Viz Branz: resumed from trading halt at 1.45pm. Co proposes 1-for-1 bonus share issue, subject to sh/h approval. Stock is +6% at $0.535. Interesting to note that the stock earlier marked an all-time high of $0.555, in contrast to the current broader market weakness. The stock trades at 16.1x P/E, 11.4x fwd P/E, offers 8.7% yield.

The Hour Glass

The Hour Glass: decent set of FYMar12 results. Revenue increased by 17% to $607m, mainly due to the full year contributions from the new boutiques at Knightsbridge, Raffles Place and Marina Bay Sands. Gross margin improved to 24.1% from 22.4%, driven by a more dedicated focus on its portfolio of brands. Net profit increased 29% to $54.7m. The group’s balance sheet continues to be in good shape, with net cash of $50.6m (or 21.5cts/ sh). While mgt remains cautiously optimistic of its outlook for FY13, it notes the weak economic conditions and slowdown of luxury goods industry in Asia, could translate to downward pressure on consumer sentiment. But says it will continue its efforts to enhance its premium retail network and explore new businesses. In addition to refreshing its boutique environments and improving merchandize mix, it plans to add more retail stores, eg. a new multi-brand boutique at Paragon, and two new boutiques in Brisbane and Central Hong Kong later in Nov ‘12. The group declares 6cts div (+20% yoy), translating to a payout ratio of 25.7% and yield of 4.5%. The stock trades at 1.06x P/B, 5.7x P/E, based on $1.32 last done.

Felda (Malaysia)

Felda: newswires say Msia's state-controlled plantation firm is seeking to list on Bursa Msia on Jun 28, once it completes its >US$3b IPO. The co will launch its roadshow and start book building from May 31 until June 15, and is set to price the IPO on Jun 15. Felda plans to sell up to 2.19b shares, of which ~1.5b shares will be sold to institutional investors at an indicative price of up to RM 4.65 per share, while retail investors will be allotted shares at a lower price to be determined later. Felda accounts for ~18% of the country's total palm oil output, making it the biggest palm oil producer globally by plantation acreage. Felda owns 300k ha of the land it manages, and manages 500k ha on behalf of small holders who own the land.


Fragrance: has bought Novena Ville, a freehold mixed-use devt, in a collective sale exercise for $131.5m, inline with the asking price of $125 -135m. The development comprises 33 apartments and 10 shop units. Each apartment owner stands to receive gross sales proceeds of btwn $2.1m and $2.7m and each shop owner, btwn $4.8m and $6.3m. Credo Real Estate, who handled the sale, said the sale price reflects a land rate of $1,730psf pppr. No development charge is payable for redevelopment of the site. The freehold site, launched on Apr 26, has a land area of ~ 51.1 ksf. It has a gross plot ratio (GPR) of 1.4 and an allowable height of up to four storeys. The development received four bids, when the tender closed on May 24. Credo said Novena Ville's key attraction lies in its mixed-use zoning and location on Thomson Road and its proximity to shopping centres like Novena Square, Square 2, and United Square.

Bumitama Agri

Bumitama Agri: DBSV initiates at Buy with TP $1.35, based on DCF valuation. This implies 15.7x FY12e P/E on 0.54x PEG. Says the Indonesian oil palm planter has been aggressively planting/ acquiring estates since 2004 – it is now the 4th largest Indonesian planter under DBSV’s coverage, with planted area of 98.6k ha, of which 48% is immature. DBSV believes Bumi to be in a strong growth phase, offering FY11-14e earnings CAGR of 29%, with plantable reserves of 63k ha to support expansion to FY15e. Tips the company as best in class, and an attractive stock to own, because i) the refining build up in Indonesia will lead to overcapacity in two yrs time, and ii) its strong volume growth over the next 3 yrs should be able to offset any CPO price weakness better than peers.

China Animal Healthcare

China Animal Healthcare: Announced that it is in advanced stages of considering a possible delisting of its ordinary shares in HK, although co. will maintain its primary listing in HK. The delisting will be done by a selective capital reduction and all shareholders will be entitled to tender their shares for cancellation at a cash exit offer at $0.30. #China Animal Healthcare: Normally exit offers are priced at a premium so that shareholders have an incentive to accept the offer. Admittedly, not in all cases. In any case, the idea of a delisting suggests that mgmt is of view that the company is likely undervalued. Those shareholders who do not accept will have their shares transferred to the HK branch register and their shares will continue to trade on the HK stock exchange. Why the share price is not trading even closer to $0.30 could be due to 1) transaction costs 2) the possibility that it might not happen (this is still proposed and requires approval from authorities and sh/h)


Olam: BofA-ML maintains Underperform with TP$1.00. Cites performances in past two quarters have proved Olam’s growth consistency is not bullet proof, coupled by high gearing and lag profit hit from cotton defaults. 9M12 core profit of S$209mn was only 52% of consensus expectations excluding Gabon Special Economic Zone earnings. Furthermore, profits have been boosted by goodwill and bio asset gains. Houses estimates are 30-50% below consensus with possible deviation from strong margins recovery. Prefers Noble for more visible profit profile.


Noble: GS upgrades co to Buy with TP$1.50. Noble’s share price has declined 22% in the last 3 months (vs. STI’s -5%), largely driven by a wider commodities sell-down and has not taken into account its improved fundamentals, in their view. Share price is near Nov 2011 lows which was aft a 3Q11 loss, CEO resignation and negative credit rating outlook. However, situation has improved and ROE has improved consecutively in 4Q11 and 1Q12. 1Q12 earnings we up 95% qoq although mkt may take a few more quarter to affirm recovery. Other positives include its Sugar Cane mills increasing utilization rates and any possible divestments to recycle capital.

Sky China Petroleum & HISAKA

Sky China Petroleum & HISAKA : Sky China has proposed to dispose 49% interest in Wenling Xinghai Ocean Shipping (Xinghai) to HISAKA for $192.5m. Xinghai will be the primary business of HISAKA after the acquisition. Xinghai is currently engaged in the business of transporting petroleum products for petro-chemical companies through its fleet of 7 oil product tankers. HISAKA will issue 196.5m shares at $0.48 to co which represents approx 32.6% of enlarged share cap.

Memstar Tech

Memstar Tech: Has been awarded a Rmb60m contract to supply membrane products for two wastewater treatment plants with total capacity of 260k cubic m per day. The first project is a 200k cubic m per day municipal wastewater treatment plant upgrading project in Liaoning and the second is a 60k cubic m per day industrial wastewater treatment plant in Shandong. The products are to be supplied by end Sep 2012.


PSL: Awarded 2 foundation engrg contracts amounting to $24m for bored piling works which includes the Yale-NUS College and the expansion of a major oil plant on Jurong Island. Co's total orderbook of contracts secured YTD amounts to approx 30m In a separate announcement, co has signed a non-binding MOU with an Indonesian individual who controls a portfolio of coal exploration concessions in Sumatra. Co has obtained rights to carry out due diligence and discuss relevant info on the concessions. YTD orderbook is approx $30m including these contracts.


DBS / Indonesia bank rules: Bank Indonesia, Indonesia’s central bank, is expected to limit the max stake a single shareholder can take in the country’s banks from the current 99% to below 50%. This could ruin DBS’ plan to buy Temasek’s 67.4% stake in Bank Danamon, if DBS cannot negotiate an exemption. If the new rules are applied retrospectively, this could also spell uncertainty for OCBC and UOB, which own 84% of PT Bank OCBC Nisp and 99% of PT Bank UOB Indonesia, respectively. The Indonesian market accounts for about 4% and 6% of OCBC’s and UOB’s earnings respectively. The new rules are expected to be announced early next month and will apply to both domestic and foreign investors, although govt-owned banks are unlikely to be affected.


Yoma: good set of 4QFYMar12 results. Revenue at $16.1m, double yoy, mainly due to the increase in the sales of housing and land development rights (“LDR”) in Myanmar. LDRs equivalent to 98 plots of land were sold in 4Q12, vs 20 plots yoy. There was also $0.5m revenue contribution from the newly set up auto business. Gross profit at $5.5m, +260% yoy. Gross margins expanded to 34.4% from 20%, mainly due to higher ASP of LDRs and houses (approx + 20% to 25% yoy). Core net profit significantly improved. However, headline net profit at 2.1m, -46.8% yoy, mainly due big one-off boost from associate contributions (revaluation surplus) in 4Q11. Post restructuring, Yoma has ceased to hold that associate. For FY12, core net profit at $6.0m, +130% yoy. Balance sheet improved significantly. Yoma now has net cash at $20.1m (3.8cts/sh), vs net debt of $1.7m a yr ago. The group cash balances rose to $20.1m from $2.5m a yr ago, and pared down debt to zero from $4.2m. Mgt notes the positive sentiment in the real estate market in Myanmar reported at the end of 3Q12 has continued into 4Q12, and if anything, has become even more positive. Prices on a psf basis have continued to increase through the yr and have continued to do so after the end of its FY12. Says outlook for the coming 12 mths is positive. Adds, sales at Star City, the major new property devt that it has agreed to purchase 70% stake in (pending EGM approval on 25 May ’12), has continued to be very strong. For building 3 it will acquire, 172 apts hav been sold, with a further 30 reserved, out of a total of 264 apts. Revenue from these sales will be accounted for on a completion basis and is expected to be booked in FY13. For Yoma’s agri division, planting of black pepper is underway, with ~700 acres of land cleared and >250 acres of black pepper already been planted. By end July, it expects to have planted 500 acres of black pepper. While not expected to have financial impact in the current yr, mgt says it offers promising prospects in the medium term. The group declares 0.5cts div, translating to 1.3% yield. The stock trades at 33.3x P/E, 1.5x P/B. Reminder that Yoma goes ex-rights on 31 May. 4-for-5 rights offer at $0.24/sh.


GLP: Results generally in line with expectations. 4Q Rev at US$153.3m +23.2% yoy with net profit at $156.5m +217.9% yoy. This included a revaluation gain of US$55.8m which was mainly due to its China properties which contributed $49.4m. FY11 rev was up 19.4% at US$565.6m with net profit at $540.8m -23.4% yoy. Increase in rev was attributed to development projects in China with EBIT growth for 2012 +70% yoy and partly due to the strengthening Yen and RMB against the USD. Leasing remained strong with 1.6m sqm of new leases signed in FY12 and existing same store rents growing 4.0% yoy Co indicated that land cost has increased by 30-40% due to land scarcity and construction cost has escalated over time. Targets 2m sqm development starts in China with current 4.2m sqm of backlog demand and 0.4m sqm development starts in Japan for FY13. Continues to see demand from 3rd party logistics and on-line retailers with demand from domestic cos accounting for increasing proportion of business. Proposed maiden dividend of 3c Ratings BofA-ML maintains Buy with TP$2.20 Daiwa maintains Outperform with TP$1.985 Goldman maintains Buy with TP$2.34 JPM maintains Overweight with TP$2.50

SG Market (25 / 5 /12)

SG Market: S’pore shares are likely to open flat following the lacklustre close on Wall Street as uncertainty about both the euro-zone outlook as well as US monetary policy keep investors sidelined. After such a sharp sell-off, some major indices have hit multi-month lows that have triggered technical buying but nothing material has changed for investors on the grim outlook for the global economy. The STI has just penetrated its near support at 2780 with the next line of defence possibly at 2750 with overhead resistance at 2820. Stocks in focus include Global Logistic Properties after its 4Q earnings came in generally in line with expectations and Yoma, which surprised with a rather strong set of FY12 results ahead of its rights issue. Uncertainty over Indonesian bank ownership rules could affect its DBS’ bid for Bank Danamon.

Sin Heng

Sin Heng: Co. will holding a cocktail reception today, in conjunction with a major corporate update on a business alliance at 3.45 p.m tomorrow at Mandarin Oriental. Recall that Sin Heng had disclosed recently that one of its shareholders, SEAVI is planning to sell its stake, as PE players have a mandate defining how long they can stay invested after a company lists. Co. however declined to comment on market speculations that a global Fortune 500 company is poised to buy SEAVI's Sin Heng stake. Tomorrow’s event does raise interests on what the co. has to say abt a business alliance going forward.

Ascott Residence Trust

Ascott Residence Trust: EU master leases to underpin stability. Despite ongoing uncertainty in Europe, house believe that income from ART’s European assets would be underpinned by master leases arrangements in the 17 properties in France and two in Germany, which contributed a total of 26% of gross profit for 1Q12. In addition, mgt contracts with min. guaranteed income contributed an additional 12% of 1Q12 gross profit. In terms of asset values, 40% is in EU of which the bulk is spilt between France (21%) and the UK (15%). Note that about half of total French exposure fall in prime regions of core Paris. Similarly, in the UK, all four properties are in prime London locations. This being so, house believe their book values would be relatively resilient and unlikely to suffer long term capital value deterioration. With a strong yield of 7.9%, continue to see value in the share price. Also, an undemanding P/B ratio of 0.8x would translate to a reasonable margin of safety for bear case write-downs. House maintain BUY rating with an $1.14 fair value estimate.

STX OSV (technical)

STX OSV: Trading Central has a Technical Buy Call, for a short-term rebound towards $1.74. Alternative scenario is below $1.44, expect $1.34 and $1.29. Note that the RSI is below 50. The MACD is above its signal line and negative. The configuration is mixed. Moreover, the share stands below its 20 and 50 day MA (respectively at $1.59 and $1.68).

Bukit Sembawang

Bukit Sembawang: CIMB note that FY12 core profit came in below at 89% of house full year and consensus on lower profit recognitions. House introduces FY15 and adjust FY13-14 on recognition timing. RNAV/target price (40% discount to RNAV) dips on higher operating costs factored in. Anchored by Luxus Hills FY12 was down 24% yoy on lower recognitions. FY13 earnings will continue to be propped up by pre-sales on completion of Luxus Hills phase 2 and Verdure later in the year. Sales at non-landed projects have tapered down, though substantially sold with 77%, 66%, 80% take-up at Skyline Residences, The Vermont and Paterson Suites respectively. Slower non-landed sales are offset by steady monetisation of landed landbank, with Luxus Hills Phase 5 largely cleared and Phase 6 due for launch at higher ASPs. We understand that construction has/will soon commence at Paterson 2 and St Thomas Walk sites, but see possibility of delays in launch timing. Co’s balance sheet continued to strengthen, ending FY12 with a $23m net cash position (3Q11:0.01x net gearing). FY12 div of 18c exceeded expectations at 26% of NPAT (vs. 18% in prior years), and 4% yield on current share price. With landbank replenishment less likely in the near term, house anticipate higher dividend payouts to be sustained on back of a stronger net-cash position in 2012/13 following cash collections from projects. At 0.9x P/BV, the stock trades below its 10-year historical average of 2.0x despite landed landbank booked at >$1b below estimated development value. Its steep 54% discount to RNAV (2008 levels) is unwarranted with stronger balance sheet this cycle.


Olam: UOB Kay Hian maintains Buy with $2.58 TP. House note that the Financial Times (FT) reported three days ago that China customers have defaulted for several commodities including coal, iron ore, soybeans and cotton. House spoke to Olam, who highlighted that grp’s counterparty default issues were mainly encountered in Bangladesh, not from China or India. As prices have declined yoy and weak demand is setting in, there are heightened counterparty risks and customers may try to renegotiate contracts that were previously entered into at higher prices. According to Olam, most of these have largely been accounted for in 9MFY12. Australian cotton is still a key to recovery. It was re-iterated that low cotton vol in Aus were the main cause of depressed profitability in Olam’s industrial raw material (IRM) segment in 3QFY12. Also noteworthy was that cotton was positive at the NC level despite the challenges during the qtr. Continued weakness is expected in 4Q12 but vol are expected to come through only in 1Q13. Given that Olam has to continue expensing its overheads, house believe Olam has made losses in the cotton business, leading to significant impact at the net profit level. In view, this could reverse in 1QFY13, resulting in improved margins for FY13. Overall, believe that mkt is ignoring defensive nature of Olam’s food commodity business. However, believe the stock is currently overly discounted and is trading at attractive trough PE and P/B valuations. Olam’s relatively defensive food commodity portfolio should provide support to the stock price at current levels.

Share Buybacks

Share Buybacks Same few names have been purchasing their stock over the past few days. All figures are in number of shares purchased. #SIA: 179k #OCBC: 200k #Macq Intl Infra Fund: 1.5m #OSIM: 510k #SC Global: 12k #SATS: 155k #Hyflux: 1m #Hi-P: 150k

ST Engrg

ST Engrg: US non-deal roadshow (NDR) takeaways. Deutsche notes US investor interest focused on the co’s operational resilience, balance sheet strength (backed by AAA-rating by Moody’s and S&P) and growth opportunities. Says group operations appear steady due to sizeable exposure to defence (40% of sales) and govt contracts (20-30%). Adds, the record high orderbook ($12.2b as at 1Q12) provides long-term visibility and accounts for 60-70% of sales each yr. Sees valuations as attractive, with the stock trading at 16x FY12e P/E and offering 6% div yield. Notes STE share price tends to outperform the STI in times of mkt volatility. Reiterates Buy with TP $3.35.

Wednesday, May 23, 2012


Europe: EU leaders are to meet in Brussels today in an informal summit to try to put a lid on the debt crisis from getting out of hand. Merkel's govt has still not changed its official stance from its opposition to Eurobonds preferring structural reforms over monetary solutions. The stage is set for France's Hollande and Germany who disagree on the solution for debt. The formal agenda is for jobs and growth coupled with 3 initiatives. 1) European project bonds for infrastructure 2) To double paid-in-capital to a little over 20b euros. 3) Redirect EU structural funds to other areas where it might produce greater growth This is a stepping stone for the nxt formal summit during the end of June.

GLP (technical)

GLP: OCBC technicals sees more downside ahead. Says the stock is likely to see further correction after breaching the 100-DMA and $2.02 key support recently; this was followed by a failed retest of this key level in the last session. Notes MACD is still trending lower, suggesting that the downside momentum is likely to continue. Tips key resistance-turned-support at $1.88 (coincide with uptrend support) in the weeks ahead. Sees immediate resistance at $2.02, the newly established support-turned-resistance.

Parkway Life Reit

Parkway Life Reit: Parkway Pantai’s $2b Mount Elizabeth Novena hospital is expected to be launched in early July. The 333-bed facility, which received TOP recently, is a 14-storey complex with 37 deluxe wards, 8 VIP rooms, 3 suites and 13 operating theatres. 180 beds will be ready for use from July, with the balance coming on-stream in 2H13. More than 80% of the 254 medical suites are available for sale with at least 170 already sold at between $3588 – 5088 psf. Parkway Pantai acquired the land for the hospital, with a permissible GFA of 778.8k sf, in Feb ‘08 at a record price of $1.25b or $1600psf ppr. StanChart says, an asset divestment could be a natural step, post-IPO, and PLIFE REIT could potentially acquire the asset upon its completion in July. PLIFE is currently leveraged at 35.3% debt-to-assets. An acquisition of this quantum (Stanchart estimates at $1.0b ex the strata titled portions compared to PLIFE’s current asset base of $1.4b), would likely require a combination of debt and equity financing. PLIFE could also issue perpetual securities to partially fund the acquisition. The acquisition could still be accretive if acquired at a 6% cap rate and funded using equity costing 5.5% and debt costing 2.5%. PLIFE offers 5.5% FY12e yield. The Street has 6 Buy and 2 Hold ratings, with TP btwn $1.95 – 2.07.


Street View on NOL ranges a wide spectrum, with some houses trying to call bottom and a turn ard in the industry, while others still see further downside. Deutsche notably, note that the mkt has been taking too pessimistic a view on NOL, without giving it any credit for YTD rate rises, erasing the stock's gains since Dec. The house notes, the recent 1Q12 results don't really reflect the industry's rate increases in Mar, but they will be more evident in 2Q. UOB Kay Hian meanwhile note that carriers’ attempt to raise Asia-Europe (AE) rates by US$400/TEU effective from 1 May has partially failed. According to Shanghai Shipping Exchange, AE rates were US$1,934/TEU (+2.4% wow, +110.4% yoy), implying an increase of only US$200/TEU. For transpacific (TP) trade lane, some carriers will be delaying rate increase of US$500/FEU, which was initially planned to take effect on 15 May. Slot utlisation for two routes has started to show weakness, softening to 85% and 90% for the AE and TP routes respectively. The non-agricultural employment for April in the US was also highly disappointing. Overall, we note that despite the rate increases, mgt expects 2Q performance to be weak (interprets to mean NOL is struggling to break even) because of higher fuel costs, although oil prices has corrected by abt 10% since the resurgence of the recent EU crisis (baring any unforeseen circumstances in Mena) Mkt has an average TP of $1.28 on counter with a wide range of Buy, Hold and Sell Calls.

SMM (technical)

SMM: the technical indicators suggest that a near term bounce could take place, with RSI, Stochastics and MACD showing signs of reversing upward. In particular, RSI has just emerged from oversold levels. Initial resistance at $4.73, support at $4.40, with the range coinciding with the key Fibo levels. Nevertheless, the macro backdrop continues to be murky, with Europe to dictate the broader market direction still. Expect volatility to persist. Traders who are long should observe a stop loss at $4.40.


UMS: UOB Kay Hian note that stock is trading at 5x 2011 PE, the lowest among peers. Based on consensus estimate, UMS has a TP of $1.08 and is set to report earnings growth of 15.8% in 2012 to $32.0m. House view that UMS should be trading at $0.65/share, pegged to the 3-year historical average PE of 7.0x on consensus EPS of 9.3 cents. This gives us an upside of 69%. Technically, the stock has rebounded from support at $0.325 and is hovering near the S$0.40 resistance level. The next resistance level could be at S$0.485 should the stock surpass the $0.40 mark.

KepCorp (Technical)

KepCorp Technical appears to be trending upwards from Oversold territory, with Stochastics hooking upwards, although RSI has just turned down again, which could signal some resistance. near-term resistance is tipped at 200 day MEA at $10.29, followed by the 20 day EMA of $10.44.


Yoma: Updates that a further 172 out of 264 apts has been sold in the 3rd block of the Star City Project. The prices achieved were approx 30% higher than in the 2nd block. The rights issue for 4 new for 5 existing shares has been approved with book closure on 5pm, 4 June.

CDL Hospitality Trusts

CDL Hospitality Trusts: OCBC maintains Buy with $2.04 TP. Note that REIT benefits from focus on quality tourists. The SG Tourism Board aims to grow tourism’s GDP contribution from 4% to as much as 8%. It has also recently been emphasising a focus on attracting quality tourists who spend more, as opposed to simply trying to grow the absolute number of tourists. This strategy would likely continue to pay off for high-end hotels, which have outperformed budget hotels in 1Q12 (RevPAR growths of 14.5% and 5.5% YoY respectively). House foresee that for 2012-2015, growth in demand for hotel rooms of 6.4% p.a. will comfortably outstrip supply growth of 3.7% p.a., with high-end hotels facing better supply-side dynamics.


ComfortDelgro: OCBC initiates coverage with Hold call and $1.53 TP. House note that recent 1Q12 results showed broad-based increases across most operating segments and expect this modest growth to continue but anticipate subdued OP margins, as domestic pressures squeeze margins on its bus and rail segments, and marginalising positive results from its taxi and overseas ventures. Forecasting only slight increases in OP margins in FY12/13, utilised the dividend discount model (DDM) for valuation with a conservative payout assumption of 50% of earnings.

China Animal Healthcare

China Animal Healthcare: Announced that it is in advanced stages of considering a possible delisting of its ordinary shares in HK, although co. will maintain its primary listing in HK. The delisting will be done by a selective capital reduction and all shareholders will be entitled to tender their shares for cancellation at a cash exit offer at $0.30. We note that move could spur further interests in privatization plays of S-Chips on STI. Recall that earlier in April, Fund managers from 6 China based PE Firms visited SG this mth to explore opportunities for investing in some Schips and local co’s with operations in China. Co’s met included World Precision, Dukang Distillers, Q&M Dental, China Aviation Oil. Note that all theses co’s all trade at low single digit P/E earnings.


UOL: Wee Cho Yaw picked up 1m shares on Friday at $4.27 each.


Hi-P: Grp has restarted its share buy back program having bought 113,000 shares at 72.78c each on Mon. This is co’s first buy back under a new mandate which allows it to buy back up to 82.6m shares. Hi-P last bought back 200,000 shares on 10 Jan ’12 at 63.41c each. Hi-P’s share buy back programs in the past had helped boost or at least supported its share price, especially in 2010 when it was also accompanied by net profit growth of 27%. Consensus is expecting Co’s net profit to rise 56% this year, translating to a forward PE of 7.5x. Mgt had said previously that they are likely to buy back shares around the company’s NAV of 71c and their latest buy back at 72.78c has indeed fulfilled their guidance.

Hiap Hoe

Hiap Hoe: DMG re-highlights Co’s deep value and maintains Buy with $.61 TP. Note that earnings visibility underpinned by pre-sales. The group has a balance of $360m of progress billings to be recognised over the next 2-3 years, primarily from Skyline 360° and Waterscape at Cavenagh. Meanwhile, construction is progressing ahead of schedule at its Zhongshan Park commercial site along Balestier Road, with the Days hotel and the retail space on track for completion in 1Q13. Deep value emerging once again. Stock price has been on a roller-coaster ride over the past two months on speculation of a breakup of the company due to the family dispute, rising to a high of 69 cents before retracing much of the gains. At current price, deep value is emerging once again with the stock trading at 59% discount to its RNAV of $1.22.

Best World International

Best World International: A potential play? Another SGX company with a presence in Myanmar. Co. has evaded the attention of investors, vs the more well-known names of Yoma, Sin Heng and Interra. Best World International has been in Myanmar for 3 yrs already, since 2009 and sells its range of quality skincare, personal care, nutritional and wellness products wholesale to an agent in Myanmar who in turn sells the products to retail outlets as and more wealthy Myanmarese. Best World does not disclose its Myanmar sales in its financial reports as it is booked at export price, although co. note that the export price, being a % of the distributors' price, in which the Grp's rev are being booked in, is not significant. Best World chalked up $41.5m in sales last yr with top markets SG and Thailand contributing $10.1m and $7.8m, respectively. The stock traded recently at 18c, translating into a market cap of S$36.9m. This is just a little above Co’s net cash position of $29.8m as at FY11. The business' profitability, however, has yet to recover from the sharp drop in FY10 ($2.45m vs $9.7m in FY09).

Hotel Properties

Hotel Properties: 50% owned Leisure Ventures acquires Promus, a Maldives co which operates 45 over-water villas and is the owner of Soneva Gili Resort and Spa for a total of US$37.5m. Co will fund this through internal resources and loans. Co's substantial sh/h Mr Ong Beng Seng is deemed to be interested in the balance of remaining 50% of Leisure Venture. The net tangible assets of Promus were approx US$2.1m. Co currently trades at P/B of 0.7x

RH Petrogas

RH Petrogas: Converts US$61.5m of outstanding debt to shares at $0.492, 1-mth VWAP from 18 May. Co has also appointed CLSA and Maybank Kim Eng to place up to 262.3m shares with 87.4 warrants to raise gross proceeds of $132.0m. This will be done at the min issue price of $0.36 per placement share and the warrants at $0.43 exercise price. The actual price will be determined through a bookbuilding process. Co is of the view that this will expand its free float and promote trading and liquidity of its shares. Co currently trades at 35.2x P/E


PSL: To divest its 80% stake in Antar Crane Services for $15m to JP Nelson Equipment. Antar Crane is in the business of providing and servicing cranes for construction and shipyard needs. Antar was valued at approx $20.1m and the consideration was approx a 6.5% disc. Co will book a 20% gain based on Antar's current net book value. Co intends to re-invest proceeds into the area of coal mining.


Olam: Citi holds conference call to address investors’ concerns post 9MFY12 results. Recall Olam’s stock px has declined 9% post results on 15 May, with key issues being weaker demand for timber, issues with cotton sourcing, and margin weakness for its industrial segment. Mgt noted the worst in cotton px volatility would likely be done by 4Q12, as reduced volumes in cotton sourced by Olam this year suggests that Olam’s (and the industry’s) cotton woes should now have peaked. Nevertheless, farmers holding out for higher prices for the remainder quarter of this season’s harvest will likely weigh on profit contribution from the industrial pdts segment in 4Q12, which will delay recognition into FY13. On debt buy-backs, Olam noted it is watching the trading yields on its debt carefully, but believes that it is better off investing in operational projects vs debt buybacks at close to par values. Its current adjusted net gearing at 0.4x is favorable when compared against the 0.7x at end FY08 during the global financial crisis. Citi notes Olam’s P/E is now at similar lows to those seen during the GFC. Sees the current sell off as somewhat harsh given that i) Olam’s food related divisions (80% of total volume) continue to grow in both volume and margins, and ii) credit conditions were much more severe during the previous GFC than current conditions. The house reiterates Buy with TP $3.10. In overnight news, the Capital Group raised its stake in Olam back to >5% (from 4.97% to 4.02%), via open market transactions. This is its first purchase since its repeated paring down of Olam stock over the past few wks.

Swee Hong

Swee Hong: IPO was 1.5x over subscribed, including placement shares. Grp plans to raise $13.7m in net proceeds from its proposed listing on SGX. Post invitation, Swee Hong will trade at a 6.6x FY11 P/E. This is in contrast to market leader Yongnam, who trades at 5x trailing P/E. Other Peers are TTJ at 4.6x P/E, Hock Lian Seng at 3.8x, and OKP at 5.8x. We note that this will be the 3rd IPO by DMG in which they are the lead Manager, in the last 2 yrs. DMG Securities IPO Performances on 1st day: 08 October 2010 Yamada Green Resources IPO Px: 0.22 1st Day Close: 0.37 22 October 2010 Mun Siong Engineering IPO Px: 0.20 1st Day Close: 0.25 23 May 2012 Swee Hong Engineering IPO Px: 0.225 1st Day Close: ?

SG Market (23 / 5 / 12)

SG Market: S’pore shares are likely to stall as investors trim their exposure following the brief relief rally in global equities markets earlier this week with Greece now back in focus as a risk to eurozone stability. There is really not much in terms of local news flow at the moment, so we're just likely to take the lead of the Wall Street close. The STI is expected to find first support at the 2780 level with resistance around 2850. Cyclical stocks that benefited most from the relief rally such as NOL, Noble Group, Golden Agri, Wilmar and Olam are likely to be in focus. Construction firm makes its IPO debut after being 1.5x oversubscribed.

Tuesday, May 22, 2012

UPP (technical)

UPP: stock has bounced nicely off its 0.38 Fibo retracement level (coincide with the 50day MA). RSI and Stochastics are beginning to reverse upwards, which suggests positive near term price action. The rising 50day and 200day MA suggests that the longer term outlook still mains positive. A break above the 0.375 resistance (coincide with 20day MA) could see the stock re-test its previous $0.46 high. Traders playing the bounce should keep a strict cut loss if price goes below $0.30.


OUE: UOB Kay Hian has Technical Buy Call with 12.9% potential return and $2.28 TP. House note that stock may rebound towards its 200-day EMA after completing its recent retracement. Do keep an eye for a break above its immediate resistance at around $2.16 for further upside. The daily Stochastics indicator has formed a bullish crossover and could trend up. Alternatively exit this long position if prices move below $1.90. House institutional research has a fundamental BUY with TP of $2.90.

Bumitama Agri

Bumitama Agri: UOB Kay Hian initiates coverage with Buy Call and $1.10 TP. House note that young age profile and best OER to support earnings growth. Like Bumitama Agri for its young age profile and best oil extraction rate (OER) to support its 5-year earnings CAGR of 33%. FFB production is likely to double in three years and house expect its fresh fruit bunch (FFB) production to grow at a 3-year CAGR of 24%. This places BAL among the top two companies under coverage in terms of production growth, after Kencana Agri’s 24.4%. The strong production growth is supported by: a) a 15-20% increase in mature areas every year, b) large young areas (35% of total planted area), and c) progressive new plantings of 13,000ha per year would continue to ensure strong production growth.

Daily Share buybacks

Daily Share buybacks #Macq Intl Infra Fund: 150k #Pan United : 100k #OCBC: 100k #Osim: 100k #OUE: 32k #Hi-P: 113k #SATS: 165k

Profit Warning

Armada Grp: To post a loss for 15-mths-Mar-end. Pollux: Loss before tax expected for Mar-end FY12

Interra Res

Interra Res: 60% JV has commenced drilling infill dev well YBNG in Myanmar. This is the 3rd development drilling in the Yenangyaung field and is drilled as a twin to the recently completed YNG 3243 which is currently producing 75 barrels of oil per day.

Darco Water

Darco Water: To sell 60% of wholly-owned Darco Environmental (DNV) for approx Rmb95.8m ($19.1m) to Msia listed co Salcon Berhad. DNV owns and operates a potable water treatment plant well as 84.4% of another treatment plant in Deqing, China.

Otto Marine

Otto Marine: To exercise remaining call option to acquire Go Marine for A$1.8m. Go Marine will also issue an additional 55.2m shares (approx 10% of share cap) to two of Go Marine's founding sh/h who contribute to the mgmt of Go Marine. Otto Marine will hold 90% of Go Marine, which runs the Australia O&G services operations.


PSL: Acquisition of Sindo Resources has been completed. Co now holds 11.5% of Sindo Resources. Sindo owns BMS which is a coal mining company which has alr commenced production and made total cumulative sales of up to 230k tons of coal.


GLP: To start construction of GLP Atsugi a 109.5k sqm large-scale multi-tenant logistics facility in Nov 2012 and is expected to be completed in Dec 2013 with total dev cost estimated at US$169m. This is the 3rd dev of 50/50 JV Japan Dev Fund with Canada Pension Plan launched in Sep 2011 and its 1st and 2nd flrs of NLA of abt 30k sqm has alr been pre-leased out to an existing customer of GLP. This project is the sixth asset under mgmt for GLP in Kanagawa.


JEL: Possible positive sentiments after news wires reported that POPIAH king Sam Goi Seng who looks set to become the controlling shareholder of JEL in a proposed private placement, may come on board the consumer goods distributor as a director as well. At a press briefing yesterday, JEL CEO said that Mr Goi, who is already a substantial shareholder of the co, has asked for a director seat if the placement goes through, adding that while he has invested in many co’s, there are very few in which he asked for a director seat which gives an idea that he's here for the long-term. Technically, indicators look oversold, with RSI and Stochastics all hovering ard oversold positions. Counter is currently testing its 20 day EMA, a close above those levels could potentially indicate higher highs.


STX OSV: Citi note that The Maeil Business Newspaper (South Korea's main daily business newspaper) has reported, citing unidentified industry officials, that the STX Group has reached an agreement to sell its 50.75% stake in STX OSV to Italian shipbuilding Fincantieri and PE firm, Carlyle Group, at about $1.60 / share. Report states that a preliminary agreement is expected to be signed some time this week. House note that if the deal goes through, it will most likely trigger a mandatory offer (Fincantieri and Carlyle appear to be acting in concert) which, under local takeover rules, must be at a consideration not less than the highest price paid by the offeror within six months prior to the offer period. Given the min consideration stipulated by law, $1.61 will likely be a near-term floor for the stock price. House is unable to ascertain Fincantieri’s and Carlyle’s intent on taking the STX OSV private, but a general offer price close to $1.61, may signal that the acquirers are not interested in full control. Add that a 10-20% upside ($1.80-1.90 general offer price) is probable should Fincantieri and Carlyle wish to take the grp private.


Myanmar: Japan said on Mon it is in talks with Myanmar on an investment treaty, with Tokyo eyeing terms to help its co’s establish themselves in the isolated nation as it embraces democratic reforms. A second round of the negotiations, will start in Myanmar's capital on Wed between officials from the countries' foreign and trade ministries. Add that Myanmar also hope to seal a deal by later this yr, hopefully by the ASEAN. Ministop, one of Jap's convenience store chains, has struck a deal with Myanmar's largest retailer City Mart "on a possible business tie-up to open convenience stores in Myanmar.


CMA: CMA and Suzhou Industrial Park have broken ground for the largest shopping mall in East China. SIPJUD is owned by the SIP govt, and is the master developer of the SIP CBD, known as the Suzhou Centre. CMA and SIPJUD are developing a 7storey shopping mall and two Grade A office towers on a prime site in Suzhou Centre. This is in the heart of the western CBD of SIP, next to the scenic Jinji Lake and near the traditional city centre in Suzhou. The total development cost of the project is expected to be about Rmb6,740m, $1,331m. CMA and SIPJUD each hold a 50% stake in the JV. SIPJUD note that in 2011, Suzhou's retail sales grew faster than the national average, increasing 17.8% to Rmb283b ($56b) and is confident about the retail prospects in Suzhou. Catering to upper middle and high-income shoppers, the shopping centre offerings will include luxury brands, high-street fashion brands and family entertainment.

Oxley Holdings

Oxley Holdings: Oxley Holdings reports 114% in 3Q12 rev to $48.1m, while net profit was higher by 56% to $8.6m. Kevin Scully of NRA capital cited recent visit to Oxley Holdings, and remains confident on grp being able to unlock value. Cite that grp is on track and now we have to wait for them to recognize the profits from their sales over the next two yrs. Note that most interesting items in 3Q results will be on the projects grp have launched and what is sold. Namely: 1) Oxley Tower (144 Robinson Road) which is 77% sold 2) Commerce@Irving which is 88% sold Add that these two projects were not in his original NAV calculation but could add another $100m to its NAV or about 6-7c per share. The medium term target if Oxley trades to a reasonable discount to its NAV remains at about $0.58-0.66, but a lot of this would depend on how fast they can build and receive TOP from the projects that have been sold.

Spore Market (22 / 5 / 12)

Spore Market: SG shares likely to open higher after Wall Street rebounds on hopes of some stability being restored to the eurozone, with the mkt more confident that Greece will try and tow the line and stay in the EU, although things can change quite drastically. Investors are now awaiting the June 17 Greece election for cues on the eurozone's economic and political future. Expects the STI to trade in a 2750-2800 range in the near-term. Stocks in view include GLP after it announced a US$169m project in Japan, and commodities plays such as Golden Agri-Resources and Wilmar. JEL could also be in focus after new wires reported that Popiah King Sam Goi look set to become a director in the co.


Cityspring: No reports available. Co announced results on the 3 May with distributions of 0.82c per unit with current annualized yield of 8.75%. This was lower than the 1.05c for prev year due to the earlier rights issue. Basslink is still having problems and currently has a dispute with its its service partner Hydro Tasmania over a risk sharing agreement, and both parties are in talks. Co currently has an NAV of 27.9c per unit, down from 35.4 a year ago and trades at current P/B of 1.3x.

Capitaland (technical)

Capitaland, While RSI and Stochastics does appear OverSold, ADX momentum does suggest that there is still some room for the downtrend to continue before any reversal, counter is currently testing the Fibonacci Support of $2.50, following which, next support is seen at $2.40 (Resistance turned support)


STX OSV: Goldman says STX Group’s 50.75% stake sale reportedly imminent, with the Maeil Business Newspaper (dated 18 May) saying that a preliminary agreement would be signed during the wk of May 21, and that the deal value would be based on May 18’s closing price ($1.61 /sh). Recall Bloomberg reported that Italy’s state-owned cruise shipbuilder Fincantieri and private equity firm The Carlyle Group were the likely buyers. Assuming that the deal was done at $1.61 per share, it would value the 50.75% STX OSV stake at $964m, and imply 2012E/13E P/E of 8.0x / 7.9x, P/B of 2.3x / 2.0x and EV/EBITDA of 4.8x / 4.5x. This compares with STX OSV’s historical average (since listing Nov ’10) for 5.3x P/E, 1.8x P/B and 3.6x EV/EBITDA. Goldman notes, according to SGX rules, any buyer would be required to immediately extend a general offer for the remaining shares of STX OSV and at a per share value not less than the stake sale price.

Upcoming IPO: Hospitality REIT

Upcoming IPO: Newswires says Ascendas Group is seeking to list its proposed US$500m hospitality REIT in Spore in early-to-mid June. The group--which is owned by JTC Corp --has received eligibility to list the REIT from the SGX and is currently meeting cornerstone investors. However, the timing of the listing is dependent on market conditions. The listing would incorporate hospitality assets such as hotels in various countries, incl Australia and Japan, and the assets could potentially be worth up to US$1b. HSBC, Nomura and StanChart are managing the deal.


F&N: is +0.8% at $6.46, pausing its recent slide. The stock has bounced off nicely from the ~$6.40 support, with the fast Stochastic hinting of a positive crossover of the slow Stochastic. Traders looking to “play the bounce”, may see resistance at $6.60, with support at $6.40. Strict cut loss if stock closes below support. The medium term technical outlook isn’t very clear now that the positive trend channel (Aug ’11 – Apr ’12) is broken. RSI is still some distance from being oversold, hence it is hard to be sure if price has hit a bottom. A dip below the recent $6.375 low could signal further price weakness toward the 200day MA ($6.28).


Mewah: interview with Reuters. Hurt by falling refining margins in Msia and a general weakness in palm oil prices amid plentiful supply in Msia and Indonesia, Mewah has been forced to reassess its growth strategy and look for new sources of revenue. Mewah will focus on lower-cost Indonesia to grow its palm oil business, while simultaneously expanding its consumer pack segment to include dairy products and rice. The consumer pack business currently incl edible oils, fats, bakery and confectionary oils, and fats in packaged form under the co's own and third party brands. Mewah's agri-business group traded about 45k mt of rice in 1Q12. This was the first foray into this segment and the co is encouraged by the initial response. Mewah is also investing ~US$50m in dairy facilities in Msia. Mewah said it is also on track to complete its Indonesian palm oil refinery by the end 2013. Weaker demand for palm oil in key export markets and the pressure on prices amid bumper production in Indonesia and Msia last year put Mewah's operating margins under pressure in 1Q12, slipping to US$34.2/ton, down from $42.6/ton yoy. Also, hurting Mewah's performance was Indonesia's new export duty structure. To boost domestic refining, Indonesia has changed its export duty structure to have lower duties on refined palm oil products than on crude palm oil. Spot refining margins in Malaysia, where the group presently has refineries, are almost non-existent while margins in Indonesia are ~US$80/ton higher. The stock trades at 10.8x P/E. The majority of Street still rates the stock negatively, with 6 Sells, 3 Holds and 1 Buy. Street TP ranges btwn $0.37 – 0.55.


Sakari: UOB Kay Hian has Technical Buy Call with 17.4% potential return and $1.86 TP. House believe the stock is grossly oversold and a retracement near $1.50 may provide accumulation opportunities. Currently, the stock is trading near its lower Bollinger band and the rebound may test its mid band. The weekly Stochastics indicator appears to form a bullish crossover. The alternative exit for this long position will be if the stock falls below $1.41.

ST Engrg

ST Engrg: its aerospace arm has signed agreements with Airbus and EADS to launch an A330 passenger-to-freighter (P2F) conversion programme. STAerospace will invest €110.5m (S$186.6m), made up of A330P2F engrg devt work and internally funded cash, for a 35% stake in EADS EFW. EADS will hold the remainder 65% shareholding and a call option on ST Aerospace’s 35% shareholding, which will lapse when the A330P2F work is successfully delivered to EADS EFW by the end of 2012. ST Aerospace will be the programme and technical lead during the A330P2F development phase while EADS EFW will drive sales and marketing activities. The investment is not expected to have any material impact on the earnings of STE in the current financial year but will reduce STE’s NTA by $148m. OCBC maintains Buy rating with TP $3.50.


Midas: announced that it has been awarded two metro contracts worth RMB62.2m in total. The first contract, worth RMB33.7m, would involve the provision of aluminium alloy extrusion profiles for 22 train sets, or 132 train cars for the Ningbo Metro Line 1 project, which is Midas’ first penetration into the city. The second contract of RMB28.5m will see Midas supply aluminium alloy extrusion profiles for 21 train sets, or 126 train cars for the Nanjing Metro Line 10 project. Delivery for both contracts is scheduled to take place gradually from 2012 to 2013. This is Midas’ first contract wins announcement for the year. Metro contracts will continue to play a key role in Midas’ operations, given that China’s Ministry of Railways has yet to resume the re-tendering of high-speed rail train car contracts. OCBC maintains estimates as its projections allow for such contract wins. Keeps at Hold with TP $0.33.

Tiger Airways

Tiger Airways: Citi maintains Sell and lowers TP to $0.46 from $0.55. House cut estimates and lower TP to factor in a slower profit recovery due to: 1) Risk of continued losses in Australia upon ramp-up of capacity from Jun-Dec ‘12; 2) Ventures in Indonesia and the Philippines may struggle due to intense competition and overcapacity respectively; 3) While SG unit is expected to turn profitable, it may be insufficient to offset overseas losses; 4) Overall environment continues to be characterized by weak pricing power and high jet fuel costs.

People's Food

People's Food: To sell remaining 36.8% interest in Pine Agritech for Rmb463.6m to co Link Crest. The sum will be paid out in 10 instalments for 5 yrs with an effective interest rate of 5% p.a Pine Agritech is involved in the manufacture and sale of soybean-based products and supplies co with its entire raw material req of Soy Protein Isolates. The sale price is at a discount, est to be 83% of the fair value of Pine Agritech. Pine Agritech has made losses in the prev 3 yrs.


LionGold: Profit warning, substantial loss before tax expected for Mar-end FY2012. In a separate announcement, co will lend $750k to ASX-listed Republic Gold at 8.5% per annum for potential sale of Republic's subsi Vista Gold. Vista Gold owns the Amayapampa Gold Project in Bolivia consisting of 38 overlapping concessions of 3.4k ha. The interest on the loan will accrue only if the share sale agreement of Vista Gold is not signed within 30 days. The agreement will allow co to acquire 100% of the Vista grp of companies and allow Republic to offset the loan with the consideration of the sale.

Sound Global

Sound Global: Announced 2 contract wins. Won the bid for phase II of a BOT project in Xi'an, Shaanxi to increase wastewater treatment capacity by 50k cubic m per day. The project is est to cost approx Rmb58.6m Co also won the bid for a transfer-operate-transfer (TOT) project in Hailun, Heilongjiang which has a wastewater treatment capacity of 20k cubic m per day. Co acquired the project at Rmb30m