Thursday, March 28, 2013


Midas: In a recent note out by NRA on Midas' fourth contract win for 2013 worth Rmb182.8m (EU22.7m) issued by Siemens AG and Sinara Group of Russia, brings YTD total contract win for Midas of Rmb1.34b. NRA highlights that they are still awaiting the elusive high speed contract, which were stopped in Nov 2011 following the Shanghai train accident. The newly revamped Transport Ministry and the new private company running the trains are some of the changes implemented by the new Xi Jinping Government are in their opinion positive for Midas. Other things being equal - 2012 should be the earnings low point for Midas especially since its secured these four new contracts in 2013. NRA noted that UOB Kay Hian's recent technical alert for Midas' share price weakness with range of $0.48 to $0.52 presents a good fundamental buying opportunity for investors who are prepared to take a 12-24 month investment view.

Bumitama (technical)

Bumitama: UOBK Technicals tips Buy with TP $1.12, Recommends tight stops below $0.99. Notes the stock is tading near its support at $1.00 and its lower Bollinger band could be acting as a support. Stochastics has formed a bullish crossover and could trend up. Says watch to see if MACD can form a bullish crossover. The house has a fundamental Buy rating with TP $1.12

Yangzijiang (technical)

Yangzijiang: UOBK Technicals says Buy with TP $1.08, with tight stops placed below $0.95. Notes prices appear to be supported near its mid Bollinger band and above its 50 day moving average. RSI has rebounded from 40 and MACD has formed a bullish crossover. Tips to watch if the stock can close its gap down on 16 Jan '13, which is likely to be the immediate resistance level. Fundamentally the house has a Buy with TP $1.45.

Pollux Properties

Pollux Properties: owns Pavilion Square in Geylang Road, which saw all its 93 retail units snapped up on Saturday. Business Times understands that the prices achieved range from $2,000 psf for 3rd-flr units with open terraces and to a whopping $10,879 psf for a 118 st street-fronting F&B unit on the ground floor -- a record price for a retail unit outside the city and the Orchard Road shopping belt. This compares with the highest psf price of $18,000 psf achieved for a prime Level 1 unit in the freehold Lucky Plaza in Orchard Road sold early last year. Besides the $10,879 psf deal, 6 other ground-floor F&B units in Pavilion Square sold at above $10,000 psf. Market watchers said that the buyers are predominantly investors. Pavilion Square's 93 retail units, comprising shops and F&B units, have sizes of between 86 - 926 sf. The majority of the units are between 108 - 129 sf. The retail space sales at Pavilion Square couldn’t be more timely, as on Tuesday, the URA rolled out a min average size of 50 sm (538 sf) for retail units, citing planning reasons. While Pavilion Square's retail units have sold fast, demand has been slower for its apts. Only 15 of the 42 apartments are said to have found buyers, with prices ranging from $1,400 to $1,600 psf. Apt sizes start from 398 sf for a one-bedder; the biggest unit is an 818 sf, two bedroom-plus-study unit. Pollux shares may take cue from Chip Eng Seng, which shares saw keen interest after news that retail units at its Alexandra Central devt (beside Ikea) were sold at btwn $4,000 – 8,000 psf. Pollux purchased the Pavilion Square land site in Dec ‘11 for $25m. The freehold plot has a total land area of 1,350 sm, and has a plot ratio of 3 for commercial devt and 2.8 for residential devt. This translates to a psf land cost of approx $600 psf. At $0.077, Pollux shares trade at 1x P/B. P/E is not meaningful as the co just broke even in 1HFYMar13.


UOL: Nomura reiterate Buy and lifts TP to $8.20 from $6.60, note that value enhancement at UIC does not need to wait. UIC, SL and MCH remain the key drivers for stock performance. UOL’s outperformance YTD has much to do with MCH, where the conversion of Marina Bayfront into additional retail space could now take place with the provisional permission obtained. the marked-to-market valuation of MCH’s assets alone would have added $0.37/share to UIC’s book value, all else equal. House raise NAV estimate to $10.01 (from $8.16) to principally reflect the higher valuation of UOL’s commercial properties and its stakes in UIC and PPAC. UIC and MCH represent a collective 31% of UOL’s intrinsic value on numbers. With the other 13% represented by the SG residential projects mostly secured by sales already, believe the implied up-cycle valuation is justified.


Kreuz: UOB Kay Hian maintains Buy with $0.68 TP. Note that Kreuz has recently inked a deal to build a game-changing deepwater subsea vessel, which will lift the group’s capability to match that of leading global subsea players. Expect the vessel to contribute a net profit of US$6m-11m per year, lifting earnings by 13-23%. Maintain BUY with higher target price of S$0.68 (previously S$0.53), given attractive 2014F PE of 4.5x and a respectable 4-year EPS CAGR of 15% (2011-15). Kreuz’s current tenderbook remains at about US$450m-500m, unchanged from three months back. House expect Kreuz to win 20-30% of its current tenderbook. Ytd, Kreuz has clinched US$15.5m worth of orders, bringing end-12 orderbook to US$205m.

Yoma Strategic

Yoma Strategic: Grp reported that it would take a 70% stake in Chindwin Holdings which would acquire several connected tourism assets. First, Chindwin would acquire 75% of a balloon tour co “Balloons over Bagan (BOB)” for US$10.7m. BOB is the only hot air balloon operator in Myanmar and has had a profitable track record since it began operations 13 years ago. House e understand that this acquisition price translates to a forward PE multiple of 6 to 8x. In addition, Chindwin would acquire a 75% stake in 21.2 acres of land in Bagan for US$3.75m. This acquisition is conditional on the present owner converting the existing land-rights to allow for the construction and operation of a hotel business. Overall see these acquisitions to be positive and allows Yoma to capitalize on the burgeoning demand for luxury tourism in Myanmar. While believe the co holds meaningful franchise value as a leading developer in Myanmar, most positives are likely priced in at current prices. Maintain SELL with a 12-mth fair value estimate of $0.71 (20% premium to RNAV)


SPH: Could see positive sentiment, with SCB and Macquarie coming out with positive reports on the Co. - SCB maintaining O/p with a $4.99 TP. Note that SPH has risen 7% following the co’s announcement that mgt was exploring the possibility of a REIT listing on SGX. A REIT listing is likely to provide a secure dividend stream and will be value enhancing. House considers 2 likely scenarios, in the first, SPH will take a 40% stake in the REIT and pay a special div in FY13. In the second, SPH will invest most of the proceeds in a value-accretive media opportunity, and take a 40% stake. House note however that SPH offering a special dividend of $1.46 is the likelier of the two scenarios. Add that despite rising 16% last year, SPH remains cheap on dividend yield and growth. Its 6.1% (2013E) yield is the highest among classic Singapore yield plays and is 39% above the peer group average. House raise price target 14% to factor in the prospect of a special dividend in its DDM valuation. -Macquarie maintains O/p, TP $4.71, note that probable Reit listing triggers value. Reiterating that the property part of SPH’s business is grossly undervalued and see another 6% upside plus ~6% dividend yield in the stock. REIT listing could be at S$3.5-4.0bn equity value. Believe Paragon and Clementi malls will be injected and Sengkang mall (opening end-2014) will be kept as a pipeline asset. Additional income could be distributed via special div or in specie: see an additional value creation of ~S$0.95cents/sh for SPH. Incorporated minimal 2-3% profit growth in its core media business over the next 3 yrs and given it a 12x 1 year forward target multiple. A solid defensive stock with div yield of ~6% and the Reit listing could trigger another 5-10% run.


MINT: will develop and lease a build-to-suit (BTS) facility for Equinix Singapore to be used as a data centre. Equinix is a US$10b mkt cap global interconnection and data centre company, routing >90% of the world’s internet traffic over 900 telco exchanges. The proposed BTS will be a 7-storey high spec building with 385k sf gfa. Equinix has committed to fully take up the entire devt and will lease the BTS with an initial tenure of 20 yrs with option to renew for two additional 5-yr terms. MINT will develop the base building at an est cost of $108m and the project is expected to be completed in 2H14. In addition, MINT has granted Equinix options to enhance two floors with additional infrastructure to support data centre activities. If the option is exercised, the est total cost will be $217m and additional rent would be payable. This is MINT’s second data centre devt after the completion of Tata Communications Exchange in 2010 and strengthens MINT’s foothold in this growing segment. This will also help lengthen its relatively short-lease expiry and boost medium term growth. Assuming the BTS is fully debt-funded, gearing is expected to head up progressively from the current 37.1% to 44% including committed capex. Deutsche estimates a 1.5% to 3.6% accretion to FY15/16e DPU depending on whether the infrastructure option is exercised. The house maintains at Buy with TP 1.50; likes MINT for its stable and attractive yield of 6.5% with potential upside from further efficiency gains through AEIs and selective devts.

First Resources

First Resources: BNP initiates on First Resources at Buy with TP $2.36, pegged to 14.7x P/E. Likes First Resources as the best-in-class planter. Notes the company is among the most efficient low-cost producers of CPO in Asean, has the highest EBITDA margins of 50-57% over FY13-15e, and was the only plantation to deliver strong net profit growth in 2012.

Olam (technical)

Olam: Trading Central notes the stock remains bullish above a rising trend line. The 20 and 50 day moving avgs are turning up, which should maintain buying pressure on the stock. Also RSI has rebounded from its neutral area, indicating further upside. Tips as long as $1.61 (trailing stop loss) is not broken, look for further advance to $1.84 and $1.92 in extension.


Noble: Maybank KE maintains Buy. Says it is positive on Noble’s new strategic direction toward a leaner asset model. Sees an uplift to earnings, driven by i) cheaper financing – latest pricing of the 5 yr US$400m MTN at 3.8% yield-to-maturity compares with the avg debt cost of 7.3% last yr. ii) overhead costs trending down following a healthy streamlining exercise The house adjusts FY13-15e earnings up by 1-2%; raises TP to $1.53 from $1.48, pegged to 13x FY13e P/E.


Singtel: CLSA has a report solely on Singtel's Digital M&A, and are confused as to Singtel's intentions regarding its digital acquisitions. Highlighting that the $500m (20% of FCF) spent in 12 months is not minor, given that there is no indication as to how or when they will turn profitable. The Group's historical focus on associate stakes in regional telcos has been deployed into digital acquisitions in the past 12 months, with the investments into unprofitable companies which are difficult to monetize, and has an average age of 5.5 years. CLSA is concerned that Singtel is trying to build an eco-system, and don't think it is feasible for a telco to stick another layer of restriction – under the guise of additional or proprietary content – on top of the existing operating system platforms. It would be like volunteering to go back to AOL Online or CompuServe’s interface having tasted the internet proper. CLSA has a SELL on Singtel, with TP of $3.55.

Nam Cheong

Nam Cheong: In its second contract announcement for the yr, Nam Cheong has secured RM 223.6 (US$72.1m) in sales contracts from Icon Offshore Berhard, one of Msia’s largest OSV grp, bringing its order book to RM1.3b, underpinning earrings visibility for the next 4 yrs. Ytd grp has secured abt RM626.6m worth of contracts. The contracts are for 2 AHTS and 4 units of emergency-response and rescue vessels. The vessels were sold to two of its existing customers and are scheduled for delivery between 2q13 and 4Q14. and are expected to contribute positively to the earnings of the group for FY13 and FY14. Nam Cheong’s share price has been pretty muted, despite a recent strong qtrly earnings, and latest set of contract wins could just be what is needed to give share price a kicker. To recap, Petronas has guidance for among the highest capex plans in the region and Asia over the next few yrs, and Nam Cheong stands as a direct beneficiary from the expected O&G boom in Msia. OCBC maintains Buy with $0.30 TP.

Keppel Corp

Keppel Corp: Announced four jackup rigs worth US$820m for Mexican company Grupo R. The jackup rigs will be built to Keppel’s proprietary KFELS B Class design and are scheduled for delivery progressively from 2Q 2015 to 4Q 2015. Recall that KEP also secured contracts to build two similar rigs for PEMEX in Dec last year for US$420m. Contract brings Keppel's YTD orders to $1.59b. Street estimates 2013 orders of $5b-$5.5b. 2012 saw total order wins of $9.9b (of which $5b from Petrobras); 2011 total order wins $10b; 50% of its $15b order book are orders from Brazil PEMEX, the Mexican national oil company has announced investment plans of US$25.3 billion for 2013, of which US$20 billion will be targeted at upstream activities. On a visit to Keppel FELS on 30 January 2013, Mr Emilio Lozoya Austin, CEO of PEMEX, said that the company is embarking on its most ambitious drilling program in decades and plans to add between eight and 12 offshore platforms to its fleet. Grupo R's main clientele are Petroleos Mexicanos (PEMEX) and Federal Electricity Commission, both companies are closely related to the govt.

SG Market (28 Mar 13)

SG Market: S’pore shares are likely to see muted trading today given the mixed reaction on Wall Street. Market sentiment will remain cautious ahead of the reopening of Cypriot banks and traders may be unwilling to take fresh positions ahead of the long Good Friday holiday. However, Asia may be a beneficiary of any potential capital flight out of Europe with funds seeking safe havens such as S’pore. Resistance for the STI is kept at 3320 with support now at 3300. Stocks to watch out for: *Keppel Corp: Secured US$820m order from Mexican drilling company Grupo R to build 4 KFELS B Class jack-up rigs for delivery progressively from 2Q15 to 4Q15. *Nam Cheong: Secured sale contracts for 6 vessels worth US$72.1m to 2 existing customers, comprising 2 build-to-stock 5,150-bhp AHTS vessels to Icon Offshore and 4 build-to-order emergency response and rescue vessels to a S’pore-based company. The vessels are scheduled for delivery between 2Q13 and 4Q14. *Yanlord: S&P revised its rating outlook to stable from negative and reaffirmed its BB- long term corporate credit rating, citing improving sales execution and liquidity. *Azeus: Won arbitration case against customer and awarded HK$40.9m or $6.6m in compensation. This relates to a HK$60.7m IT service contract secured in Nov 07, which were interpreted differently by Azeus and the customer.

Wednesday, March 27, 2013

First Resources (technical)

First Resources - Prices appears to have breached the 20 and 50 day MA, with RSI and stochastics all hooking downwards from Over bought territory, while ADX DI- is about to Crossover ADX DI+, which could sugest more downside ahead. The recent low of $1.78 could offer some support.

SGX (technical)

SGX: Trading Central notes share price remains in consolidation, but stands firmly above its support base around $7.40. Highlights , the 50 day moving avg is still tilted up, and daily RSI has just jumped above its neutrality area at 50%, calling for further advance. Tips as long as 47.40 support is not broken, a new move up seems more likely toward $8, and then to $8.20 in extension.

Global Invacom

Global Invacom (formerly Radiance): The satellite communications company is planning for greater involvement in the Asia-Pacific. A boost for this strategy came in 4Q12 when it secured a US$20 m contract from a major Asian customer, involving the supply of satellite comms eqpt to an unnamed major player in the Asian satellite pay TV market. CEO Tony Taylor, said at a media briefing yesterday that the move was of strategic importance, giving the co an Asia footprint. Prior to this, it was very much US and Europe-centric. He now expects Asia to contribute around 25% of sales. Separately, in response to rising costs of production in China, the co is currently subcontracting certain parts of its manufacturing process to a third party in Selangor, Malaysia, but will be opening its own facility sometime this quarter. Global Invacom picked Malaysia after considering among others, Vietnam and India. However, most of the manufacturing, especially the high-margin ones, will remain in China. Mr Taylor expects Asia to contribute more to the company's bottomline in the years to come. He said that the company is aware of the dangers of moving too fast, especially after a quality control debacle it had experienced last year. The company had run into quality control problems that affected 3 pdts for a major US customer. Product recalls subsequently led the group to record a $1.2m loss in FY12. But Mr Taylor added that new quality controls have been put in place and that relations with the affected customer have not been jeopardised. He expected business with the affected party to continue, and assured investors that the whole debacle will have little impact on FY13 performance and after. The stock is +0.6% at $0.18.

Jiutian Chemicals

Jiutian Chemicals: Counter's rise today might be on the back of the positive outlook on oil price, increasing 1.6% to a 4-week high yesterday- possibly due to the improving economy in the US, inventory stockpiles on oil has been increasing on expected increasing demand.

RH Energy

RH Energy: update on RTO by Chiwayland previously announced 25 Jan 2013. RH Energy will acquire Chiwayland for $399m, or 55% of the realizable NAV of Chiwayland as at 31 Jan 2013 as determined by an independent mkt valuer, whichever is lower. The purchase consideration takes into account, - Chiwayland’s net profit of Rmb 105.7m, Rmb 97.3m and Rmb 126m for FY10-12. - NAV of Chiwayland of Rmb 202.4m - Indicative RNAV of Chiwayland of approx Rmb 3.5b, based on a 29 Feb 2012 independent valuer’s rpt The purchase will be satisfied by a cash payment of $20m and issue of 549.3m new RH Energy consolidated shares at $0.69 a piece (co has proposed a 3-into-1 share consolidation). Grandale Enterprise, the arranger, shall be issued 16.5m consolidated shares. The long stop date is currently set at 12mths from date of the sale and purchase agreement. Immediately after the proposed transactions, the vendor will own approx 81.1% of the enlarged share base. The co proposes to carry out a compliance placement through the placement of new consolidated shares of up to an aggregate value of $11m. In conjunction, RH Energy will dispose of its existing oil & gas services businesses for $36m. This compares with the NTA of the sale assets at US$32.8m. The est loss of proposed disposal is approx $4.7m. Expect RH Energy to come into focus, given the recent focus on penny stocks with corporate activity. At $0.16, the counter trades at a 30% discount to the $0.23 pre-consolidation RTO transaction price.

Halcyon Agri

Halcyon Agri: UOB Kay Hian has an unrated note on the counter. House note that early momentum points to a positive 2013 outlook. For 2013, Halcyon has already received committed orders for the delivery of 42,730mt with customers’ option to increase by 12,701mt. This compares to a total delivery of 67,046mt in 2012. It has completed the addition of 10,500mt new capacity (+11%), positioning it for another year of growth. Halcyon generated FCF of US$7m in 2012 and this boosted its cash balance by 42% yoy to hit US$12m. House see the potential for M&As in the upstream segment, which would enhance Halcyon’s position in the natural rubber supply chain, expand its earnings potential and capture better margins. Halcyon touts a robust risk management model that allows it to reference its raw material prices to market movements. In a typical cycle, Halcyon purchases the amount of raw materials needed one month in advance at a cost that is pegged to the current market rubber price. The US$/Rp rate is also fixed simultaneously. At month-end, Halcyon locks in the selling price and prepares for delivery. This approach allows it to consistently secure its target gross material profit of at least US$350/mt and to effectively manage its forex exposure.


OKP: OCBC maintains Hold with $0.48 TP. To recap, 4Q12/FY12 results were generally in line with expectations. While FY12 net income of S$104.5m (-5% YoY) was 5% lower than house estimate, net profit of $12.4m (-53% YoY) was 6% higher than what we expected. The lacklustre results were due to a weak economy, price competition and climbing labour costs. OKP declared a first and final dividend of 1.5c/share, lower than the 2c that the street had expected. FY12 dividend translates into a yield of 2.9%. House believe that mgt is conserving cash to increase its flexibility to tender for government projects. Following a change in analyst, house have adjusted forecasts for OKP’s FY13 and FY14 performance.


NOL: OCBC maintains Buy with $1.38 TP. House note that the Shanghai Containerised Freight Index has exhibited relative stability since the start of the year, and this should provide a good base for upcoming generate rate increases such as those enacted under the TSA for Apr. Although there is a possibility of a supply outpacing demand, several liners have expressed confidence in the resilience of rates this year and continue to push through GRIs beyond Apr. Nonetheless, the major liners acknowledge potential threats to profitability and have reiterated the need for the industry to strike a balance between competition and sustainability. Although some liners have taken heed – such as the G6 and CKYH alliances who have cancelled their planned Asia-Europe service launches this year, there remains some routes that are particularly susceptible to rate fluctuations, and house adjust estimates downwards for NOL accordingly. Regardless of this adjustment, view on NOL’s turnaround in FY13 remains intact and maintain BUY rating.

Stats Chippac

Stats Chippac / Semi conductor: CS Asian Investment Conference hosted key semi-con co’s, namely TSMC, ASE, Mediatek, SPRD, RDA and SMIC. Overall, note that the foundry position remains intact but pausing near-term. TSMC and SMIC both affirmed a muted outlook for 2Q13 following early pull-ins and believe some Apple chain weakness. Stats Chippac key customer TSMC however still sees above industry growth for the full year and expects its 28nm technology to remain full, with strong mix shift to HKMG offsetting some competitive share shifts as 28nm LP matures. Mgt remains optimistic investing in growth and potential on 20nm, announcing up to US$1.5 bn bond offering and spending US$1b last yr and US$2-4 b on 20nm ahead of 2013. Separately, recall that Stats Chippac is set to replace HPH Trust in the STI Mid Cap Index, with HPH Trust shifting up to the STI index to replace F&N. One would expect mutual funds/etfs which track the performances of such index to do the necessary adjustments/weightings within their portfolio, which could be beneficiary for the HPH Trust and Stats Chippac.


Breadtalk: Unrated note by Maybank-KE. House note that primacy Investment, a wholly-owned subsidiary of Minor International (MINT) in Thailand, surfaced as a shareholder in Jan and purchased an additional 2.58% last week at an average of $0.83 a share, reaffirming house suspicions that Minor may just be getting started. With BreadTalk’s premium reputation as a bread operator, and entrenched position in Asia, this could be the prized jewel which Minor has been waiting for. BreadTalk offers MINT an excellent portal to extend its cross-selling channels, as well as an opportunity to strengthen and add prominent brands to its growing overseas portfolio. It is a leading bakery chain, which has restaurants and cafes also figuring in its portfolio. Current valuations of BreadTalk are below peers with a forward consensus P/E of 15.6x against 16.5x. House believe BreadTalk deserves a premium valuation for its multi-country success in growing its bakery chain.


Guocoleisure: DMG has Buy Call on the co. with $1.25 TP. House note that GuocoLeisure, the listed leisure and hospitality arm of the Guoco Group, is an undervalued gem sitting on a portfolio of cash-generative, hard-to-replace assets. Its key investments are: 1) the Guoman/Thistle hotels, the largest hotel operator in London with over 8000 rooms under management; 2) the Bass Straits Royalty Trust, entitling GLL to a perpetual stream of cashflow from oil and gas production in designated areas in the Bass Straits; 3) 54,000 acres of land in Molokai island, Hawaii, 4) Clermont Leisure, a casino targeted at high rollers.The stock is under-covered and house is the only broker with a rating on the stock. Trading at massive 53% discount to our SOTP valuation. House value GLL using a SOTP methodology to best capture the disparate nature of its various investments. Value its Guoman/Thistle hotel portfolio at EUR250,000 per key for its London hotels, a 21% discount to the average transaction of EUR316,000 per key in 2012. Use NPV to value the cash flow stream from Bass Straits Royalty Trust, without factoring in upside from future reserve growth.

First REIT

First REIT: Acquired two new hospitals in Indonesia- Siloam Hospitals Bali in Bali (SHBL) and Siloam Hospitals TB Simatupang in South Jakarta (SHTS), for a total consideration of $190.4m. With expected annual initial base rents of approximately $9.7m for SHBL and $9.3m for SHTS, both properties will offer an initial net property yield in excess of 9%. The acquisition will boost NPI by $18.8m, DPU to rise by 5.5% to 6.94¢, and increase NAV by 8.4% to $0.90. All prior figures are from Group's last reported earnings as at 31 Dec 2012. Seller of both hospitals is a wholly-owned subsidiary of PT Lippo Karawaci. Financing will be done by a combination of a drawdown of committed debt facility, and issuance of new units to Lippo Karawaci. Based on the average of two independent valuations, SHBL and SHTS will be acquired at an attractive discount of 13.3% and 12.5% respectively. These acquisitions will further expand First REIT’s portfolio to 14 properties across three regions, namely Indonesia, Singapore and South Korea, as well as expand its total asset size to over $1.0b.

Global Logistic Properties

Global Logistic Properties: Group announced that it has pre-leased ~91,000 sqm (977,000 sqft) to Deppon Logistics, one of China's largest 3rd-party logistics providers. The lease area would make Deppon Logistics the second largest customer in China, with a total of 267,000 sqm (2.9m sqft), or 4.1% of GLP's total leased area in China. Deppon Logistics has an extensive national network that serves more than 550 cities across 31 provinces in China. They are one of China’s leading integrated logistics provider offering a full range of products including express road shipping, road freight and air freight, founded in 1996. GLP trades at 1.2x P/B, has 525 completed properties in 194 logistics parks spread across 62 cities and states in China, Japan and Brazil, forming an efficient logistics network with properties strategically located in key logistics hubs, industrial zones and urban distribution centres.

Rotary Engineering

Rotary Engineering: Group announced two contracts worth $42m, for the construction of three storage tanks for specific conditions and the fabrication and installation of pipe rack modules, both projects on Jurong Island. Contracts will commence in the 1st quarter of 2013. Mgmt stated that infrastructure services in the oil & gas industry is still robust, underpinned by the strong demand for energy from China, India and the ASEAN, supported by a stable oil price. Current order book stands around $770m.


Olam: opens it’s A$60m, 12k sm almond hulling and processing plant in Victoria, Australia. The plant is expected to de-hull and shell 14 tons of almonds per hr. The group believes the almond business has strong growth potential, particularly given its proximity to Asia. Expects the plant’s total capacity to reach 40k mt of almond kernels each yr, meeting all of its upstream orchard volumes and positioning the group to meet the rapid growth in almond demand in India, china, SE Asia and Middle East. Olam Australia owns 12k ha of orchards across 11 farms in the Sunrayasia district. Olam group is one of the top three almond orchard owners globally. Olam shares have been trending up ytd, as the impact from Muddy Waters’ accusation that Olam used accounting tricks to distort its financial statements fades. Olam W180129 have similarly been seeing positive gains. Independent director Jean Paul Pinard picked up 225k warrants from the open mkt earlier this wk.

Chip Eng Seng

Chip Eng Seng: has proposed a collective purchase of all units of San Centre, an office building located at Chin Swee Road, with a land area of 2,668 sm and a gfa of 12,253 sm, at purchase price of $113m. This translates to a price tag of $857 psf ppr. Subject to approval by relevant authorities, the site with 55 yrs lease remaining, may be redeveloped into a 20 storey commercial or mixed commercial and hotel devt. The stock may be in focus, as market watchers extrapolate Chip Eng Seng’s recent success with its recent redevelopment of Alexandra Central. Recall, the developer paid ~$789 psf ppr ratio for the Alexandra site, vs reported selling prices of approx $5,000 for strata shop units, which could result in an estimated surplus amounting to ~$0.33 per Chip Eng Seng share. Philip, which does not have a rating, ascribes a FY15e RNAV of $1.49 to the stock.

SG Market (27 Mar 13)

SG Market: S’pore shares may extend gains as stronger economic data in US overshadow concerns in Cyprus and Europe. The STI has broken above the 3270 congestion area and is poised to test the 3300 psychological resistance before heading towards the recent high of 3320. Dowmside support lies at 3230. Stocks to watch out for: *GLP: Pre-leased 91,000 sqm at 2 new logistics parks in Harbin (completion in Jan 14) and Wuhan (completion in Jun 13) to Deppon Logistics, its 2nd largest customer in China with 267,000 sqm or 4.1% of total leased area. *Chip Eng Seng: Entered into collective purchase of San Centre at Chin Swee Road with GFA of 12,253 sqm for $113m or $857 psf ppr. The 99-year leasehold property can be redeveloped into a 20-storey commercial or mixed commercial cum hotel development. *Rotary Engrg: Secured 2 contracts worth $42m for work on Jurong Island. The 1st contract worth $30m involves EPC of 3 storage tanks for a leading independent storage O&G operator, while the 2nd contract with value of $12m is for fabrication and installation of pipe rack modules for an international speciality chemicals company. Both contracts will commence this quarter. *Chuan Hup: Terminated the leases of its Jalan Samulun shipyard. The 5,281 sqm property has less than 3 years tenure remaining and will make a $1.1m admin fee payment for the premature termination of the leases. *Global Invacom: Expanding in Asia-Pac satellite market following RTO of Radiance. This comes after securing a US$20m contract in 4Q12 to supply of satellite communications equipment to an unnamed major player in the Asian satellite pay TV market.

Tuesday, March 26, 2013


GLD 10US$: the counter hasn't broken out of its medium term downtrend, and the recent hook down in share price from last wk suggests that buyers should remain cautious. Nevertheless, there are signs that the technicals could be improving, eg. rising RSI and MACD indicators. We suggest adopting a wait-and-see approach until one of the following scenarios to materializes, i) Watch for a successful breakout above US$156.25 resistance, which could clear the way for a test of US$158 (50day MA ) as the counter seeks to cover the Feb gap down, or ii) Watch for a pullback toward US$152 support, in conjuction with oversold Stochastics. This would provide a lower risk entry point for a rebound play.

CapitaCommercial Trust

CapitaCommercial Trust: OSK DMG notes that CCT's next growth driver, CapitaGreen, offers 700,000 sq ft of Grade-A office space, scheduled to receive its TOP by 4QCY14. DMG expect CapitaGreen’s utility cost to be lower than that of other office towers, due to its unique architectural design. CapitaGreen is located in the heart of Singapore’s CBD, and is served by the Raffles Place and upcoming Telok Ayer MRT stations. In addition, CCT has indicated that tenants of CapitaGreen will have priority access to the GoldenShoe car park which currently features 1,053 parking lots. CapitaGreen is a joint development by CapitaLand, CCT and Mitsubishi Estate Asia. In this project, CCT owns 40% equity interest as well as a call option to acquire the remaining 60% within three years upon receiving its temporary occupancy permit (TOP). DMG expect the building, involving a total development cost of SGD1.4bn, to generate a forecast yield of 5.1%-6.3% when occupancy stabilizes. DMG maintains NEUTRAL, with TP of $1.70, as the contribution from CapitaGreen would only stream in by FY15.


KLW: proposes a 1-for-1 renounceable non-underwritten rights at issue price of 1 ct a piece. The co intends to use the net proceeds of approx $12.2m to, i) fully or partially fund the setting up of a door manufacturing factory in Vietnam (approx $0.25m), and ii) for strategic growth and M&A opportunities, and to provide the group with additional capital for capex and growth of such acquired entities. The rights issue will be tabled for shareholders’ approval at an EGM. KLW is in top volume at 2.3 cts, +15%.

DBS (technical)

DBS: Trading Central notes the stock has rebounded off its rising 20 day moving avg and is now challenging its nearest resistance at $15.70. An upside breakout seems likely in sight, as the stock remains supported by a medium term ascending trendline since Nov '12. Daily RSI stands firmly above its neutral area at 50%. As long as the shares stay above $15.25, expect a new up move towards $16.55

GuocoLeisure (technical)

GuocoLeisure: Technical Buy Call by OCBC. Note that GuocoLeisure is likely to see further recovery after rebounding off its 4-month uptrend support recently; this was followed by a strong bullish break above the $0.80 key resistance on heavy volume yesterday. The MACD has just initiated a sharp bullish crossover; this suggests that the upside momentum is accelerating. Next resistance at $0.90. The counter could head higher towards the next key obstacle at around $0.90 (key peak) in the weeks ahead.

DBS / Yangzijiang Warrants

DBS / Yangzijiang Warrants: Macquarie note that for the third day running, investors accumulated puts over DBS as the stock climbs back to its recent highs and calls over China A50 as China rebounds from recent lows. Investors bought another 1.2M of DBS MB EPW130606 (R4YW, strike $14.50) on Mon as the stock climbed another 1.2% to $15.73 - near its recent high of $15.75 on 15 Mar. R4YW was down another 11.9%, taking the total decline over three days where investors bought a total of 2M warrants, to 22.3% as the stock climbed 1.7%. Monday's newly listed put DBS MB EPW130726 (S1FW, $14.80) also saw interest, with investors buying 500k of this warrant. The bullishness with China may have spread onto Chinese shipbuilder Yangzijiang, where saw 580k of call YANGZIJIANG MB ECW130701 (RG2W, $1.10) was bought. Over in the HSI, a 0.6% rebound in the HSI April futures led to profit taking on 5.6M of top traded warrant HSI 22400 MB ECW130429 (RR7W), which closed up 2.6%.

Wing Tai (technical)

Wing Tai: Trading Central has Technical Sell Call with $1.80 and $1.77 as near-term targets. Note that the RSI is below its neutrality area at 50. The MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at $1.9 and $1.91).

HPH Trust and Stats Chippac

Index changers: F&N to be removed from index amid uncertainty over the future listing status, and HPH Trust will replace F&N on the FTSE STI, will Stats Chippac will replace HPH Trust on the FTSE Mid Cap Index. One would expect mutual funds/etfs which track the performances of such index to do the necessary adjustments/weightings within their portfolio, which could be beneficiary for the HPH Trust and Stats Chippac

Venture Corp (technical)

Venture Corp: Trading Central has a Technical Buy Call with $8.87 and $8.96 as near-term target. Note that the MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at $8.59 and $8.43). Venture Corp is currently trading near its 52 wk high reached at 8.75 on 13/03/13.

Raffles Medical Group

Raffles Medical Group: CIMB maintains O/p with $3.81 TP. House note that RFMD had been hit by a series of setbacks in the last two weeks. Think this is the time to revisit its financials, operational expansion and various greenfield projects. Conversation with mgt suggested that house are on the right track with this argument. No change to EPS but TP has been raised, now based on 25x CY14 P/E (from 22x), on par with its regional peers given its proven execution. Maintain Outperform with the resumption of operating efficiencies providing potential catalysts.

Global Palm

Global Palm: OCBC maintains HOLD with lower TP of $0.17 (from $0.19) Grp continues to see a rise in its inventory of CPO, this time more than doubling to 7.7k tons from 3.4k tons at end 3Q12 (also up 19% YoY). And with the continued high production of CPO (which is likely to continue into Mar as company expects FFB production to increase some 11% this year), Grp may see its stock pile inching even higher going into 2Q13. Meanwhile, new planting has been slow, as Global Palm has only added 331k ha last year and plans to plan 300-400ha this year, citing tough negotiations with the local population. Recent FY12 results were slightly disappointing. GPR reported a net loss of IDR39.8b; but if strip out the bio-asset fair value losses, core earnings would have come in at IDR51.5b, or 10% below house forecast. In view of the still muted outlook for CPO, cut FY14 forecast for rev by 13% and core earnings by 12%; this also brings fair value down from $0.19 to $0.17, still based on 10x FY13F EPS.


UE E&C: OCBC upgrades to Buy with $0.82 TP (from $0.68) House met the mgt of UE E&C last week for an update. Despite the labour crunch in the construction industry and the cooling measures introduced by the government, mgt remains upbeat. The group has implemented productivity enhancement measures and adopted new technologies to facilitate work processes to help mitigate the tighter manpower constraints and rising costs. Meanwhile, the group has an estimated order-book of $600-800m, anchored by four key residential developments: Austville EC, Watercolours EC, Prince Charles Crescent and the new Punggol EC. House now roll forward estimate to FY13F and incorporate projections for the new Punggol EC project.

Ying Li

Ying Li: UOB Kay Hian maintains buy with $0.65 TP, based on a 21.8% discount to RNAV. House hosted Ying Li in a series of investor meetings recently. Note that recent Sell-down unwarranted due to Ying Li’s limited exposure to residential properties, as the co’s current portfolio of developing properties comprises less than 15% in residential properties (mainly International Plaza, where more than 95% is sold in all the four phases). The financial impact of these new policies to Ying Li appears limited. Ying Li has plans to transfer its retail malls into a trust vehicle for listing to monetise the assets and recycle the capital. This is positive as the proceeds could be recycled into accretive new investments as mgt believes in the long-term growth prospect of Chongqing and sees opportunities to secure good land parcels for commercial property developments. RNAV surprises will come from Wuyi Rd project and San Ya Wan phase 2. House have yet to receive the breakdown in the type of properties in Wuyi Rd project from mgt. Overall, stock is currently trading at a 46% discount to its RNAV despite gaining 21.6% ytd. With the appointment of a new CEO, see potential new growth drivers. Share price catalysts include a potential spin-off of its retail properties into a REIT to recycle capital.

Suntec Reit

Suntec Reit: Maybank KE raises TP to $1.90 from $1.81, reiterates Buy call. Suntec has issued a $280 convertible bond due 2018 at an interest rate of 1.4% (initial conversion px of $2.15). The bulk of proceeds will be used to refinance its existing debt, which includes redemption of a $270m CB issued in 2008 (coupon interest of 3.25%). This could result in an estimate interest savings of ~$5m pa. Meanwhile, Suntec’s AEI is making good progress -- pre-commitments for Suntec City Mall Phase 1 post-AEI leases hit 83% in 4Q12 were secured, above the target $12.59 psf, while 37% of Phase 2 has been pre-committed. Overall AEI works are likely to wrap up as scheduled by 4Q14. Investors may be comforted that Suntec retains cash from the past sale of Chijmes in 1Q12, and has the flexibility to top up DPU over FY13-14. Suntec trades at 5.2% FY13e yield, vs peers FCT at 5.1% and CMT at 4.9%.

Sheng Siong

Sheng Siong: Daiwa initiates Coverage with Buy Call and $0.80 TP. House note that the retreat of inefficient grocery retailers should provide growth opportunities in the supermarket space. Expect grp to post a healthy EPS CAGR of 19% over 2013-15 on market-share gains and rising profit margins. Forecast a sales CAGR of 11% over 2013-15, driven by floor-space expansion and improvements in same-store sales. Expect demand for Sheng Siong’s low-priced supermarket products to remain strong, supported by overall population growth, competitive price and convenience. Expect a further acceleration in sales of the company’s high-margin fresh produce and own-brand goods. Believe SSG’s ability to optimise the supply-chain capabilities of its logistics infrastructure, offer an improved product mix, and strengthen its ecommerce supply-chain logistics will help drive higher sales growth and gross-margin expansion.

Golden Agri

Golden Agri: To invest $1.6b in Liberia to expand oil palm plantations and build mills. Co. plans to plant oil palm in 260,000 ha of land in Liberia, including 40,000 ha of plasma program; expect yields of 5-6t per ha, which is in-line with current production. Co. expects to produce 1.5m tons of palm oil in Liberia As a guide, grp currently has abt 463,000 ha of total planted area, with CPO production at 2.9m tons p.a as of its latest financial yr end. It would appears that GGR it is going into Liberia in a very strong way to boost its current production, as land price in Indonesia has risen substantially, giving rise for planters to source for more viable alternatives.


Swissco: may be in focus after announcing move into higher value oil rig construction. Swissco has taken a 46.5% stake in SPV Rockwood Asset, to enter into EPC contracts for oil rigs. Its JV partners are Golden Arch (45.3%) and Pulau Investments (8.2%). In conjunction, Rockwoods has secured an order from Jiangsu Rongsheng Heavy Indsutries and Rongsheng Offshore & Marine, for the construction of an oil rig, with an option to construct a second oil rig. Swissco will fund its portion of invmt in Rockwood amounting to US$8.2m through a convertible loan from Golden Arch. The loan can be repaid via issuance of 35.6m Swissco shares (8.2% dilution) at issue price of $0.2835 per share (7.0% premium to last close at $0.265), or at an interest rate of 8% pa. The venture marks a milestone for Swissco, which embodies the progression of Swissco as an offshore support vessel player, into the higher value rig construction segment. Nevertheless, newsflow suggests that Chinese yards such as China Rongsheng have been compressing rig prices to grow market share. Execution is therefore key for Swissco’s new JV, as lower contract prices and scaling the learning curve could entail lower margins initially. Swissco trades at 7.0x P/E, 1.0x P/B.

Anchun International Holdings

Anchun International Holdings: Group has secured a contract worth ~Rmb5m for its patented Isothermal Low Temperature High CO Shift Technology- which is able to harness harmful carbon monoxide, a waste gas emitted by industrial plants, and convert it to hydrogen for ammonia production. Ammonia is a common feedstock for the production of fertiliser and other industrial products. Proprietary technology expected to be new revenue driver for the Group, as more customers may opt for the implementation of this technology as PRC’s environmental policy tightens up. Mgmt stated that the China government has tightened rules on CO emissions for the 12th five-year period, which bodes well for their new technology that is capable of reducing such emissions. The customer who ordered Anchun’s CO Shift Reactor which uses the Isothermal Low Temperature High CO Shift Technology, is Shanxi Yangmei Fengxi, a fertilizer producer. Anchun International Holdings Ltd. is a leading integrated chemical systems engineering and technology solutions provider to China’s petrochemical and chemical industries. Anchun’s patent application for this technology was approved by the China Patent Trademark Office in November 2011. The technology was successfully commercialised in Nov 2012.


BBR: Secured a $102.8m contract from HDB to build 755 flats, comprising of two 31-storey and two 32-storey HDB blks, including a multi-storey carpark, a precinct pavilion, shophouses and a supermarket, in Kallang Whampoa. Fifth contract win from HDB since 2009, boasting BBR's order book to $1.12b, lasting to 2016. Work for the contract has started in Mar 2013 and is scheduled for completion by Apr 2016. Swee Hong (albeit small mkt cap of $101m)- another contractor with govt projects, has order book of $34.9m as at 31 Dec 2012, trades at 15.4x trailing P/E;

Tiong Seng

Tiong Seng: Concurrently, Tiong Seng announced 2 contracts worth $223.4m, one of which, a condominium development called Eco Sanctuary, comprising 483 units at Chestnut Avenue worth $135.4m, and the second contract for a terrace housing project called The Springside, made up of 114 units of 3 storey terrace dwelling houses at Jln Ulu Seletar and Sembawang Rd, worth $88m. Construction for the project is scheduled to commence in Mar 2013 and Apr 2013 respectively. Both developments are owned by SP Setia International. The Group's total order book stands at $1.47b. New contract boosts order book to $1.47b, currently trades at 7.3x trailing P/E; Closest peer (based on mkt cap) Lian Beng, trades at 5.5x trailing P/E; Peer Chip Eng Seng has a net order book as at 31 Dec 2012 of $575m, trades at 6.3x P/E.

Lian Beng

Lian Beng: Group clinched a contract worth ~$220m, for the development of a condominium at Mt. Vernon Road, Bartley Ridge. The condo is the first residential development to be built on the upcoming Bidadari New Town, and is located just next to Bartlet MRT station. The developer, Mount V Development, is owned by Hong Leong Holdings, City Developments Limited, and TiD Pte Ltd. (JV between Hong Leong Group and Mitsui Fudosan). Contract of 36 months for Phase 1, and 38 months for phase 2 is expected to commence in Mar 2013, comprises of 8 blocks of 18-storey and 1 block of 19-storey apartments (total 868 units) with common basement carparks, landscape deck and communal facilities on lot 10478C MK 24. Expected Date of T.O.P. (latest) to be 1 Oct 2018. New contract boosts order book to $884m, currently trades at 5.5x trailing P/E; Closest peer (based on mkt cap) Tiong Seng, trades at 7.3x trailing P/E; Peer Chip Eng Seng has a net order book as at 31 Dec 2012 of $575m, trades at 6.3x P/E.

SG Market (26 Mar 13)

SG Market: S’pore shares may be muted as investors keep a wary eye on developments in Europe where the last minute bailout deal for Cyprus has raised concerns that bank deposits across Europe could one day become targets of creditors. It is also premature if events there will lead to more funds flow to Asian and S’pore in particular. The STI has yet to break clear of the immediate resistance at 3270 convergence area for the 20 and 50 dma. Underlying support remains at 3230. Stocks to watch out for: *Lian Beng: Clinched $220m contract for the construction of the 868-unit Bartley Ridge, a JV project by City Dev, Hong Leong Holdings and TID. The contract will boost the group’s orderbook to $884m. Construction will commence in Mar 13 with completion due in mid 2016. *BBR Holdings: Bagged a $102.8m contract from HDB to build 4 blocks of flats at the Kallang Whampoa area. Work has started in Mar 13 with completion due by Apr 16. This is its 5th HDB contract won since 2009 and takes its orderbook to $1.12b. *Tiong Seng: Secured 2 contracts worth $223.4m, comprising a $135.4m condo project Eco Sanctuary from SP Setia and a $88m terrace housing project The Springside in the Seletar/Sembawang area from Kallang Development. These contracts will boost orderbook to $1.47b. *Swissco: Takes 46.5% stake in SPV, Rockwood Asset Holdings, to diversify into oil rigs. Initial US$8.2m investment will be funded via a convertible loan, payable through an issue of 35.6m Swissco shares @ $0.2577 (7.6% of enlarged share cap). For a start, Rockwood has entered into a EPC contract with Rongsheng Heavy Industries and Rongsheng O&M for the construction of an oil rig with option for a second rig. *Anchun Int’l: Secured Rmb5m contract from a China fertilizer producer for its CO shift reactor, which converts harmful carbon monoxide emissions into useful feedstock products.


Kreuz: DBSV has a BUY, with TP of $0.58, based on 6x FY13 earnings. DBSV expect Kreuz to deliver steady 11% earnings CAGR over FY12-14; current valuation is undemanding, given its earnings delivery track record to date, healthy growth prospects and strong FY13F ROE of close to 25%. House noted that earnings delivery has consistently exceeded expectations in FY12, as Kreuz continued to secure additional work at higher margins from customers, based on their execution track record. Margins improved as the group reduced reliance on third party vessel chartering, with a new vessel acquisition earlier in FY12. Current orderbook stands at US$205m, of which about 90% will be recognised in FY13. The subsea market is expected to register robust growth in future, backed by an increase in the development of oil and gas fields in deeper waters /harsher environments and development of marginal fields which need tie-backs to existing infrastructure.

Monday, March 25, 2013

Geo Energy (technical)

Geo Energy - Stochastics appears to be testing the Oversold territory, although RSI appears pretty neutral. Near-term support could be found at the recent low of $0.54, while the 20 day MA at $0.575 will be the near-term resistance.


OSIM: DBSV initiates coverage with Buy Call and $2.25 TP. House believe OSIM is no longer the entity it was before the write-off of Brookstone in FY08. Quarterly results from 1Q09 to 4Q12 have shown that earnings growth has been sustainable. OSIM is now a stronger entity and better positioned for further growth. Beneficiary of rising income in China. OSIM is a beneficiary of the rising middle class population in China, with 56% of revenues originating from North Asia. Rising disposable income, a strong Rmb and increasing availability of credit will encourage Chinese consumers to spend more. OSIM currently has 435 stores in North Asia including 278 stores in China. OSIM now creates demand by innovating new products to target new market segments. OSIM has better control over its technology with tighter IP protection. Other than massage chairs, its range of small products help to supplement growth. OSIM produces massage chairs of various sizes for customers to suit small and larger space requirements, as well as foot, head and waist massagers for specific customer segments. Project FY12-FY14F earnings to grow at CAGR of 16%, driven by China and product innovation. OSIM currently trades at 13.5x FY13F PE vs peers’ 18x. $2.25 TP is based on 16x forward FY13F earnings, translating to a PEG of only 0.9x.


IEV: announces plan for biomass production in Vietnam, firming its entry into the Renewable Energy segment. IEV plans to construct its first plant to manufacture pellet forms of rice-husk biomass in the middle of the Mekong Delta (ie. the “Rice Bowl of Southern Vietnam”), with first pellet-production in 1H14. The Co aims to target the international market, starting with North Asian countries such as Taiwan and Korea for power generation and industrial use. The Co is currently in the process of finalising its plans in Vietnam and obtaining tenders for the construction of the plant in connection with the Biomass Project. Further updates will be made in due course. The stock trades at 3x P/B; P/E is not meaningful due to FY12 losses. IEV is +1.1% at $0.475.

Courts Asia

Courts Asia: Philip adds to the recent chorus of initiations on the counter, starts at Buy with TP $1.14, implying 15.6x P/E, 2.1x P/B. Sees growth in Courts underpinned by strong market demand from Singapore and Malaysia, inline with the increase in population and spending power. Adds, new store openings should bolster revenue growth; while Court’s in-house credit facilities expand the addressable consumer segment and provides resilient, and recurring earnings.

China Fishery

China Fishery: Group announced a formal warning to Copeinca ASA through a letter to the board of directors, to refrain from actions which may hinder or obstruct a successful completion of the Voluntary Cash Offer. Actions include the issuing of negative statements on the Voluntary Cash Offer on several occasions, as well as indications that Copeinca's board of directors is considering to issue new shares pursuant to an authorisation granted at Copeinca's 2012 AGM, which China Fishery has reasons to believe that the purpose of such a share issue would be to hinder or obstruct a successful completion of the Offer.

Dukang Distillers

Dukang Distillers: MBKE issued an unrated report on Dukang, noting that the Company could potentially be worth more, given its current valuation of 4.4x trailing P/E, and 0.6x P/B is quite attractive when compared with its Ashare listed peers. Undemanding valuation perhaps may be due to the low brand recognition and poor acceptance by overseas investors. MBKE think further enhancement in the brand value would probably narrow the valuation gap between Dukang and other top brands. Since the merger of the two Dukang brands in 2010, Dukang has increased its market share in Henan to around 3%. Management is targeting a market share of 10% by way of capacity expansion, distribution network development and marketing efforts. MBKE notes that the biggest risk for Dukang is that downward pressure on price and consumption of premium baijiu brands, such as Moutai and Wuliangye, due to the restriction on luxury baijiu consumption by government and army officials might pass down to mid-end brands in the future.


CMT: Maybank KE reiterates Buy with TP $2.36, says CMT remains one of its top picks amongst the S-REITs. The house sees catalysts in announcement of AEI plans pertaining to Tampines Mall and/or Funan to be announced soon, while ION Orchard remains a medium-term acquisition possibility following its recent round of rental reversions. Notes over the longer term, CMT remains well-positioned to capitalize on accelerated development at the Jurong Lake District via its three malls – Jcube, IMM and Westgate. In the longer term, the three strategically-located malls will further benefit from a larger catchment area with the development of Tengah New Town, facilitated by greater connectivity from the future Jurong Region MRT Line.

Raffles Medical

Raffles Medical: announced that it was again unsuccessful in its re-submission for change of use of the commercial podium of 30 Bideford Road (Thong Sia building) to a medical centre. Nomura notes this rejection was not entirely unexpected by the market; stock reaction should be neutral to mildly negative. Nomura estimates that rental income on a fully rented basis should bring in operating income of at least ~$4m. Alternatively, the year-end valuation for the property is slightly above the purchase price and, as such, the company will at least recoup its initial investment cost in a sale. Nomura believes RFMD does not necessarily need to be in the main Orchard area to operate a specialist centre. In the meantime, thinks that RFMD could expand its operations in rented premises, while buying time and optionality to purchase an alternative location to house its planned specialist centre. The house keeps its Neutral rating and TP $2.81.


MLT: has agreed to divest its property at 30 Woodlands Loop to Advanced Holdings for $15.5. The transaction is expected to be completed by May 2013. Advanced Holdings intends to utilize the property for its own use, housing all operations of the Group, which also allows it to cater for future expansion. The pricing is attractive at a 41% premium to the last valuation with an expected divestment gain of $4.95m. This is in line with mgt’s strategy to optimize returns through proactive asset management. This provides MLT with greater financial flexibility to pursue other attractive investment opportunities offering better yield. Mgt intends to distribute the divestment gain (0.2ct/sh) to unitholders, subject to tax clarification with IRAS. Deutsche likes MLT’s geographically well-diversified portfolio skewed towards long leases which should underpin earnings stability, with potential upside from acquisitions. Forward yield of 5.9% is attractive, implying 435bps spread. The house reiterates its Buy rating and TP $1.29.


Guocoleisure: (The Edge) SCB was engaged as the independent financial advise and is due to publish a report on Guoco’s asset valuation nxt mth. Market watchers note that Guocoleisure could be unlikely to offload its main hotel assets, but it could divest off some of its non-tel assets. In particular, its pty development units Molokai Properties and Tabua Investments could be up for a sale / spin-off. Molokai properties owns a 54,677 acre property on the island of Molokai in Hawaii, where according to DMG, several parcels of land have been transacted at prices above book value. Tabua Investments is Guocoleisure’s pty investment arm and the Co. has ben actively looking for buyers for its Fiji assets. Meanwhile, GuocoLeisure is receiving a steady stream of cash froman O&G investment, where it essentially earns royalties from BHP and Esso. While the valuation report for Gucco Grp might not necessarily spark a re-rating for Guocoleisure, it is worth noting that the former offered to take Guocoleisure private at $1.25/share in 2005.

Genting HK

Genting HK: UOB Kay Hian maintains Sell with US$0.39 TP. Note that while GENHK’s 2H12 earnings recovery was impressive, its near-term valuations would be dampened by concerns of rising competition for its 50%-owned RWM in the intermediate term. While there will be potential long-term upside driven by the cruise divisions, valuations are rich for now.


Ezion: UOB Kay Hian maintains Buy with $2.40 TP. Note that Ezion has secured two new charter contracts and approvals for its marine supply base in Australia in March. Raise o 2013-15 earnings forecasts by 6-13%, but target price remains at $2.40 after factoring in a 5% EPS dilution from a placement of 50m new shares. Expect Ezion to clinch more charters following its recent breakthroughs in Indonesia, Malaysia, Vietnam and India.

Sino Grandness

Sino Grandness: UOB Kay Hian hosted co. at UOB Kay Hian’s Taiwan conference recently. House adjusts earnings marginally higher for 2013, to take into account the possibility of higher production capacity post the fund raising activity. Forecast that grp will report a yoy rev and net profit growth of 42.1% and 28.0% in 2013 to Rmb2.33b and Rmb370.1m respectively, driven by increased production capacity despite higher A&P expenses. Despite the strong price performance, valuations remain compelling at 3.9x 2013F earnings. House maintain BUY with a lower TP of $1.23 as house account for the additional new shares that were recently issued (11% of existing share capital). Still favour SGF for its undemanding valuation, explosive earnings growth for its beverage segment and the potential for this subsidiary spin-off and listing in an approved exchange. House TP assumes the listing of Garden Fresh to be successful in 2014 with a PE of 12x coupled with a holding company discount of 20% and a 4.0x 2014F P/E valuation for its remaining business. At the current share price of $0.955, it is trading at 3.9x 2013F PE, vs peers in HK which are trading at an average of 31.2x FY12 P/E. House believe 2014 estimate PE of 12x for the listing of its subsidiary to be conservative.


STX OSV: SCB resume coverage after lifting of restrictions and downgrade stock to Hold with $1.30 TP. House acknowledge that STX OSV is one of the top builders of large, complex support vessels. However, it is facing industry headwinds such as over-supply in certain vessel segments and labour issues in Brazil. A decent yield and undemanding valuations, especially EV/EBITDA, should provide price support at current levels. A rise in orders should lift shipyard utilisation in 2014-15 and translate into margin improvement.

Del Monte

Del Monte: (The Edge) Taps Asian consumption with more emphasis on branded products. Based in the Phillipines, Del Monte is the world’s largest fully integrated pineapple products Co. it has some 23,000 ha of leased plantations in the Phillipines , where it operates a cannery capable of processing up to 700k tons of pineapples a year. Co. sells its fresh and canned Pineapples under the S&W brand in the rest of APAC and the Middle-East. Grp has been investing in some of the region’s markets for yrs and efforts have been bearing fruits, and intend to channel more funds towards expanding in India, including substantial investments in marketing and advertising. Grp is also benefitting from strong growth in the Phillipines, where the co. has a market share of more than 50%. This yr co. aims to increase its number of retails pts by another 38,000 to 150,000 and is investing in the logistics infrastructure and distribution net work, as well as in logistics infrastructure and distribution network. Now Del Monte is trying to gain a foothold in Myanmar , with plans to have its products available for Sale in Yangon and Mandalay by year end. Del Monte expansions on home front will also be supported by a new US$3m canned juice line at its cannery, which could double its total canned juice capacity to 288m cans of pineapple juice a yr.


OCBC: (The Edge) Grp has aggressively staked out its position in the Wealth Mgt space over the past decade, but has leapt at the opportunity to grab a larger pie in various segments following the GFC. Grp cite its massive growth in its trade finance business in the last 3-4 yrs and the significant growth of its wholesale banking business after the GFC. Following a $3.2b sales gain from the sale of F&N and GE, grp intends to use the funds to support its growth in the region, either via organic or inorganic growth. Cite Indonesia as a key growth market for grp, where the bank is targeting the SME and its consumer segment. Also aims to broaden its business towards large corporate and expand its investment banking capabilities in Indo. Also see further growth from China, where grp is targeting an offshore-offshore strategy by serving Chinese clients in Asean and HK. The next phase of OCBC expansion will be in Asean, focusing in emerging markets like Vietnam and Myanmar, although cite that Myanmar’s regulations is not at a stage where it is conducive for the co. to make any major investments. In its private banking segment, BOS has seen AUM growing steadily, at US$43bil, +35% yoy, and aims to focus on AUM growth further going forward, to build up its earnings base.


Starhub: (The Edge) Share price hit an all-time high on Fri. Market is positive on the co’s offerings of Internet Protocol Television Space (IPTV) to commercial customers, which could pave the way for future internet offerings. Instead of delivering Starhub’s traditional network, Starhub TV on Fibre will use the NGNB net work broadband net work. Aim to roll out new services in stages, moving from the current commercial customers to residential customers going forward. Move is positive as Starhub had in 2002, signed a network leasing agreement with Singtel, preventing it from using leased cable infrastructures to service non-residential properties, forcing commercial customers to either pay for expensive network rollout to their premises or subscribe to over the air DDTV Services. CIMB warns that Singtel continues to increase its rev market share in the Pay TV space as it has aggressively secured more and more TV content. Despite its looming challenge, Starhub has been the best performer, trading at 19.7x earnings and a 5.7% div yield.

HK Property

HK Property: HK homes face 20% price drop risk as banks raise rates. The biggest banks in HK have raised mortgage rates, and Deutsche is predicting that prices could fall as much as 20% the next two yrs. HSBC and Standard Chartered has raise their home loan rates by 25 bp in response to tighter risk rules. Midland Holdings, the city's biggest publicly traded realtor redicted that as many as one third of real estate agent branches in HK will close. Developers are responding, with Cheung Kong Holdings cutting prices at one of its projects by 11% on March 5, while Sun Hung Kai Properties, cut its target for the fiscal year ending June by 8.6% to HK$32b. New World Development lowered its sales target in response to the curbs.

SG Market (25 Mar 13)

SG Market: S’pore shares are set to enjoy a mini rebound, tracking the firm close on Wall Street and on latest news that Cyprus and the so-called troika of EC, ECB and IMF have an agreement on a bailout package that is currently being presented to eurozone finance ministers in Brussels. The STI needs to reclaim back lost ground above the 20 and 50-dma at around 3270 level for the market to be on more solid footing, else expect further slide to next support at 3230. Stiffer overhead resistance seen at 3320. Stocks to watch out for: *Mapletree Logistics Trust: Sells Woodlands Loop property to Advanced Holdings for $15.5m. MLT expects $5m net disposal gain, which will be distributed to unitholders, subject to tax treatment. *Tiger Airways: Carrier will consider whether to continue with its loss-making Aussie operations if its bid to sell 60% stake in Tiger Australia to Virgin Australia fails to secure regulatory approval. *IEV: Ventures into renewable energy with a biomass production project in Vietnam. *Sinotel: Recovered the last of remaining Rmb31.3m lost to fraud.

Friday, March 22, 2013

Silverlake Axis

Silverlake Axis: UOB Kay Hian initaites Coverage on SilverLake with Buy Call and $0.91 TP. House note that Silverlake Axis dominance in the Southeast Asia (SEA) market will enable it to ride the positive trends in Asia Pacific’s banking sector. Its strong financials are backed by visible earnings, a recurrent revenue stream and superior margins. Healthy cash flows (FCF of 3.0-4.3 S c/ share) will support its dividend distributions and open up the potential for earnings-accretive M&As. Also note the possibility of a re-rating should its Chinese associate successfully complete its Shenzhen listing. An existing orderbook of about RM400m gives Silverlake earnings visibility until FY14. Maintenance & enhancement services revenue continues to build up as existing and new clients avail of necessary maintenance works and upgrades. House expect this segment to be resilient and to grow at a 27.8% CAGR over FY13-15.

IndoAgri (technical)

IndoAgri: shows prospect as a technical rebound play. The key RSI and Stochastics indicators, while oversold , have started to hook up, suggesting a positive reversal could be in place. There is strong support around the $1.14 level, defined by the three occasions when the level was tested and held. These bottoms took place in Aug '11 , Oct '11 and Jun '12. A stop loss can be placed just below $1.14 to enjoy a low risk exposure set up. Risk reward ratio is favorable, given possible upside to $1.25 first , followed by $1.32 (200 day MA).

Noble (technical)

Noble: 52 wk chart appended below. 52 wk high at $1.395, 52 wk low at $1.02. From a technical perspective , share price has flat lined in the near term, along with the RSI and MACD. See the counter continuing to be range bound btwn $1.15 - $1.20. Would wait for a breakout in either direction before taking a view.


Straco: Makes a new 5 year high at $0.315 today. See our recent postings on the counter below. - Straco: Reported FY12 results. No major surprises at the operating level with the co delivering revenue and profit growth of about 20%. The pleasant surprise was a dividend which total 1.25c vs 0.75c in 2011 comprising a final dividend of 0.75c and a special dividend of 0.5c. Grp’s balance sheet healthy with net cash of $95.9mn or about 11.3c per share. Going forward, grp expect business to remain robust in view of the fast-growing domestic tourism market in China and the government’s initiatives to boost the tourism industry. NRA Capital note that organic growth in this business is usually about 10% and house comforted by mgt's positive forward looking statement of robust growth and remains in its Stock Picks Yield list. House raise the fair value using dcf and cash calculation but the stock like Cerebos is likely to see slow and steady gains supported by its reasonable yields and strong cash backing. Straco Corp: Counter has been gaining traction with the investor’s radar, with NextInsight featuring the co. after NRA’s Kevin Scully recommended accumulating the stock late last yr. Note that following the world's largest aquarium at RWS, tons of cash have poured into the coffers of the business, which leads to the topic of Straco Corporation, who owns and operates 2 aquariums, 1 in Shanghai and another in Xiamen. Add that Straco’s businesses not only are very visible and easy to understand but also generate tremendous free cash flow. As a result, Straco has no bank borrowings, and has amassed $91 m cash in the bank (as at end-Sep12) vs its recent market cap of $230m. Two interesting snippets: - The ground breaking ceremonies of Straco’s aquariums were graced by no less than Lee Kuan Yew (in Shanghai) and Goh Chok Tong (in Xiamen, for Phase 2) in their capacities as Senior Ministers then. - Straco is 54% owned by its SG chairman-cum-CEO, Wu Hsioh Kwang. An investment-oriented Chinese state-owned enterprise, the China Poly Group owns 22%, and its chairman, Chen Hong Sheng, sits on the Straco board as a non-executive director. The standing of the China Poly Group is reflected in the fact that its current chairman He Ping, the son-in-law of late Chinese leader, Deng Xiaoping Business background & financial traits: 1) 9 years ago, in Feb 2004, Straco was listed on SGX at 26c. Recently, the stock price was still at the 26c level. There is no need, for comparison purposes, to adjust the IPO price for corporate actions such as rights issues, bonus issues or placement of new shares since Straco has never carried out any of these exercises. 2) Its high free cash flow ensures it doesn't need to ask shareholders for money. 3) While its recent stock price is almost unchanged from its IPO price, Straco's earnings have soared over the years -- from $7.7m in 2002 to $16.5m in 2011. For 9M2012, net profit was $16.58m. 4) Straco’s rev contributors are the Shanghai Ocean Aquarium (about 2/3), Xiamen Underwater World (1/3) and the Lintong Cable Car business (small contribution) in Xi’an. 5) Straco has no bank borrowings since 2008. Unlike its Shanghai asset, which it developed from scratch (for USD$50m), the Xiamen Underwater World was bought over by Straco ready-made in 2007 (for $12.5m). These assets are carried on Straco’s books at historical cost. By estimates, these aquariums would cost around US$100m and US$30m to develop today

Olam (technical)

Olam: Trading Central is bullish as the stock remains above rising trend line. Notes the 20 day and 50 day MAs are turning up, which should maintain buying pressure on the stock. Daily RSI has rebounded from its neutral area, indicating more upside. As long as $1.61 (trailing stop loss) is not broken, the house sees further advance towards $1.92.

Comfort Delgro

Comfort Delgro: Barclays maintains Underweight , TP $1.82 from $1.51, says good but expensive. Sees opportunities emerging for the company’s Australia bus operation unit as the govt pushes harder for the privatization of bus services. For the Singapore taxi business, expect the increased popularity among taxi drivers to rent taxis to drive earnings growth faster than previously expected. Raises 2013E EPS by 11% and 2014E EPS by 12% . Despite the upward earnings revision, the house still finds the stock’s valuation demanding (15x 2013 PE) and relatively less attractive than peers (12x). Believe the main upside risks are stronger-than-expected growth in the Australia bus operation and Singapore taxi business, as well as lower-than expected operating costs such as labour and fuel.

Pan Hong

Pan Hong: made a successful bid for the land use rights in Hangzhou, Zhejiang province for Rmb 506m. The 20,482 sm land site, with planned construction floor area of approx 81,928 sm, is slated for commercial use. The stock trades at 11.3x P/E, 0.5x P/B. This compares with China property peers, China New Town (P/E not meaningful, 0.9x P/B) Ying Li, 13.2x P/E, 1.6x P/B, Yanlord , 8.1x P/E, 0.9x P/B.


Rickmers: its 1-for-1 rights issue at $0.24/sh has received a collective 39.9% undertaking with the latest pledge of support from The Capital Group (6.5% stake). Sponsor Rickmers Group (combined 33.1% stake) and two independent directors had earlier undertaken to subscribe for their respective pro rata entitlement. Recall the rights proceeds will be used to pare debt, and allow Rickmers to keep within its debt covenant agreements. The trust intends to maintain its FY13 distribution at US 0.6 ct per quarter, which translates to a c.10% yield over the TERP of $0.30, based on a last cum-price of $0.36.


SMM: has secured an exclusive license from Seahorse Platform Partners (SPPL) to use its patented technology in the design and construction of Minimum Facilities Platforms (MFPs) for the North Sea, Irish waters and other territorial waters of the UK. SMM also signed an OUE by which, subject to contract, SPPL will award an additional exclusive license for the technology for use for SE Asia and Australasia (excluding Malaysia and Brunei). Mgt believes the acquisition would give SMM a presence in Britain and reach out to its North Sea clientele. SMM is +0.5% at $4.48.


CapitaLand: DB notes new CEO Lim Ming Yan articulated a strategy to streamline CAPL’s structure, refocus on core markets and businesses, and drive up ROE. A strategic review of the businesses (including Australand) has been initiated, with a view to divest non-core assets. More aggressive efforts to move inventory for Singapore residential projects (selling c.465 units in Jan/Feb, largely from d’Leedon after reducing prices 10-15%). The acquisition of a 51% stake in a $3.2b integrated development at Danga Bay, Iskandar was also announced in 1Q. CapitaLand’s well diversified portfolio in retail, office, serviced apartments and mixed developments buffers its exposure to policy headwinds in the housing market. These asset classes have generally been insulated from policy intervention and accounts for the majority of CAPL’s asset base. DB maintains BUY with TP of $4.39, states that over the past 8 years, CAPL’s traded at an average 11% disc to NAV vs. 28% currently. Group has rarely traded below a 30% discount to NAV for an extended period.

Rising bond yields and its implications

Rising bond yields and its implications: UOB Kay Hian has sector report. House note that rising bond yields and regulatory risk could crimp share prices of developers. Conversely, banks and cash rich companies are beneficiaries of a potential gradual rise in interest rates. Since 14 Nov 12, US 10-year govt bond yields have risen 36bp to 1.91%. Comparatively, SGD denominated 10-year government bond yields have also trended upwards by 23bp to 1.55%. This could put upward pressure on interest rates on corporate debt. In terms of interest rates forecast, UOB Economics Treasury Research (UOB ETR) projects interest rates to rise in 4Q14. Effects are as per follows: 1) Banks: Higher bond yield would typically have a positive impact for the banking sector. Higher bond yield would support wider spreads for loans to businesses, thus providing a stabilising effect for NIM and growth in net interest income. House positive view for the banking sector is based on attractive valuations, a potential abundance of liquidity flooding the stock market and brighter economic outlook for 2H13. Re-iterate BUY on DBS (TP: $19.90) and OCBC (BUY/TP: $12.68). 2) Developers: Although rising interest rates are clearly negative for developers, particularly residential developers, more concerned over regulatory risk. A gradual rise in interest rate is indicative of a general improvement in the economy and given expectations of resilient employment, think residential demand will remain buoyant. Nevertheless, due to rising supply and the recent property cooling measures that could rein in investment demand, forecast a 5% yoy fall in physical residential prices and a 20-40% yoy decline in transaction volume in 2013. Top pick is OUE (BUY/TP: $3.36) 3) REITS: Limited impact on REITs. Although a rise in I/R could compress the spread of S-REITs’ yield over risk-free rates, believe the spread is still sufficiently compelling. Currently, the S-REITs’ spread over risk free is 4.06%, which compares to its LT spread of 3.83%. Also, vs REITs in other countries, which offers a lower spread of 2.03-3.27%, S-REITs still offer one of the highest spread over risk-free rates. Top picks include Suntec REIT (BUY/TP: $2.03) and CCT (BUY/TP: $1.79). 4) Cash Rich Co’s: A rise in interest rates will benefit cash-rich co’s. Within house coverage, co’ with the highest net cash as a percentage of its market capitalisation include SIA, Venture, Wheelock, Genting SP, SIA Engineering and Super Group. Out of these stocks, top picks are SIA Engineering (BUY/TP: $5.20), Super Group (BUY/TP: $4.54) and Venture (BUY/TP: $9.10). 5) Highly geared Co’s: Conversely, highly-geared Co’s will be adversely affected by rising interest rates. Analysis of house universe indicates that the top five highly geared co’s in descending order include Swiber, Guocoland, Olam, NOL and Ezra. All these stocks have net gearings of more than 100% and could be negatively affected by rising rates. Overall, house remain selective on the market with a year-end target of 3,500 for the FSSTI. See deeper value in the mid-cap space, particularly the oil services and consumer segment. Top picks in SG are DBS, OUE, M1, Ezion, Courts, Suntec REIT, Sino Grandness, Triyards and Ho Bee.

Armstrong Industrial

Armstrong Industrial: CIMB maintains U/p with $0.29 TP. House believe Armstrong’s post-FY12 results share price outperformance has priced in all the positives from its automotive segment and cost saving measures. In addition, channel checks reveal an unexciting outlook for the HDD industry in 1H13. Estimates are unchanged as house have already factored in strong sales growth from the automotive segment and recovery in data storage in 2H13. TP stays at $0.29, pegged at 8x CY14 P/E, its 5-year average. Following the strong share price gains recently, house downgrade rating to an Underperform from a Neutral. De-rating catalysts could come from potential earnings disappointments.

KSH Holdings

KSH Holdings: Placement exercise to raise $13.9m. KSH recently conducted a placement for 30.9m new shares and 4.1m existing treasury shares at 40.8 S-cents per share. This was at a 5.2% discount to the weighted average traded price of 43.0 S-cents on 11 Mar 2013 and raised S$13.9m of capital for the group. Shortly after the placement, KSH deployed S$1.9m to increase its stake in its Beijing condominium project (Liang Jing Ming Ju, Phase 4) from 26.24% to 45.00%. Pending further visibility on capital deployment, OCBC overall neutral on this placement but note it would increase the size of the public float and possibly improve the counter’s trading liquidity, which has been low historically. House Maintain BUY on KSH, but fair value estimate dips mildly to $0.61 from $0.62, due to a mild dilution effect, but forecast for buoyant earnings growth over FY13-14 remains unchanged.


Uni-Asia: Latest featured on next insight on how Grp is largely a play on a potential recovery in chartering income and asset values of cargo ships that have plummeted following the global financial crisis and the overbuilding of vessels. The co made a net profit of US$3.25m from its ship-owning and chartering business last year, up from US$1.1m in 2011. It owns 4 handysize bulkers, one of which operated for only half a year in 2012. A fifth handysize vessel will join the fleet in 2Q or 3Q this year and the profit for this business segment is likely to be higher yoy. Its 4 handysize vessels accounted for the bulk of the US$3.6m net profit made last year by the entire group, and in the next few years, Uni-Asia targets to increase its fleet size to 10 with each vessel hopefully earning US$800K-US$1m net profit a year. Add that the supply-demand equation is expected to achieve a better balance going forward, leading to prices of handysize bulkers to rise perhaps next year. Briefly, the other businesses of Uni-Asia Finance are property investment and development in HK, China and Japan, and hotel investment and operations in Japan. Yamasa is the largest shareholder of Uni-Asia with a 33.46% stake which was boosted largely by its subscription of excess rights shares which amounted to 41.8% of the rights issue in 2011. Yamasa is a private Japanese manufacturer of amusement-related hardware and software.

Pan-United Corp

Pan-United Corp: SCB has an unrated note. Note that Pan-United is Singapore‘s largest producer of ready-mix concrete (RMC). According to management, the co had a 33% market share in 2012. As SG ‘s leading supplier of concrete to construction companies, Pan-United is a potential play on SG‘s growing population and infrastructure investment and a rising population on back of SG Govt’s ‘White Paper’. Pan-United entered Vietnam in July 2011. Mgt believes that it is currently the No. 6 player in the RMC market. It stated that the market is highly fragmented, and the co aims to be a top-3 player over the next five years. Pan-United also owns 51.3% of Changshu Xinghua port, which serves the Pearl River Delta and is one of the top-10 river ports China. Based on Bloomberg consensus estimates, Pan United is trading at 10.9x FY14 P/E, with a 2014 ROE of 13.75%, and a dividend yield of 4.49%.

JES International

JES International: Group announced Letter of Intent signed for designing and building up to 4 offshore accomodation vessels valued at US$147m each. Buyer from a Singapore-based offshore company, and the arrangement with the buyer is likely to be in the form of an order contract for 1 OAV and 3 options of 1 OAV each. The Group expects to sign the formal agreements with the buyer before May 2013 pending finalisation of certain details of the terms. The OSVs, a DPIII type, are equipped with offshore construction capabilities and is expected to be capable of accommodating about 400 to 500 crews and staffs. On its FY12 results, Group stated that they will continue to venture in the offshore space, that Group has four UT 755 LN platform support vessels and one 94,000 dwt bulk carrier, with total contract value of about USD140.2m in total.

Otto Marine

Otto Marine: Fabrication contract worth $6.3m, to fabricate, assemble and deliver four pre-erected columns and pontoon blocks. Projects are scheduled for delivery in June 2013. Customer details not released, but Group stated that it is from a renowned Singapore-based customer, and that contracts are a significant milestone in Otto Marine’s bid to expand and to strengthen its shipyard operations and presence in the robust offshore oil and gas industry in the region. Over 2012, Group only announced ship chartering contracts and repair works. In 3Q12 results presentation, Group stated that their existing shipbuilding order book were at the tail-end construction stage. Year-to-date, Otto marine announce a $35m shipbuilding contract, as well as the $6.3m fabrication contract. Company did a rights issue to raise $75.6m, entered a $20m loan agreement with OCBC over 2012. To note that the Group performed several sale and leaseback transactions over 2012, and provided profit warnings for 1st, 2nd and 4th quarters for 2012.

Genting HK

Genting HK: CIMB maintains O/p with US$0.55 TP. House note that FY12 core EPS is 9% ahead of expectation because of lower interest expense at Resorts World Manila (RWM). Underlying operations at its integrated resort were in line, though house had not expected the RWM's interest expense to halve from an interest-rate swap. No change to EPS as house believe the interest savings to be off and our RNAV-based target price is maintained. RWM remains a strong proxy for GDP growth in Metro Manila while GENHK’s cruise operations have a unique footprint in the Asian leisure-travel market. The re-rating of Norwegian Cruise Lines (NCL) since its IPO in Jan 13 is an additional catalyst.

Ho Bee

Ho Bee: The Metropolis, Ho Bee’s one-north office devt, is just moths away from completion. The 1.1m sf Grade A building is expected to receive TOP for the first tower in Jul, and for the second tower in Sep. To date, the devt has a 60% tenant pre-commitment rate for its total lettable area, secured by MNCs such as P&G, Shell, NOL and SGX. Ho bee has also engaged gym operator Fitness First, and F&B outlets such as Starbucks, Simply Bread and Peach Garden. The group is shifting its own HQ to the new building as well. Mgt expects to have full occupancy by next yr. One factor in its favor is the building’s low devt cost of $800m. Ho Bee stated an avg px of $6-7 psf for office leases and $8-15 psf for retail. Mgt Mgt expects Metropolis to pull in around $80m in annual income by 2015, underpinned by growing popularity of the one-north district. In comparison, Ho Bee reported net profit of $183m in FY12. Ho Bee added it is not ruling out launching a REIT in the next two years, which would comprise its commercial properties, including The Metropolis. Given the positive share price response of SPH and OUE shares after announcing their REIT plans, Ho Bee shares could benefit from similar sentiment improvement. The stock trades at 7.1x P/E, 0.7x P/B.


Oxley: to engage in its first hotel development, after its $318m purchase of The Pines club on Stevens Road, which sits on a land area of 18.5k sm. The developer has plans for a new 735 room hotel housed in two 8-storey blocks, as well as a couple of 2-storey commercial buildings. Oxley will convene an EGM to seek sh/h approval for the proposed devt, which has been given provisional approval by the URA. Oxley says the purchase would be funded by internal resources, bank borrowings as well as $100m in 6% guaranteed bonds due 2015. The stock trades at 34.9x P/E, 5.1x P/B, and has net gearing of 445%.

SG Market (22 Mar 13)

SG Market: S’pore shares are likely open lower following weakness in global markets amid continued uncertainty about the fate of a bailout plan for banks in Cyprus. The uncertainties arising for this risk event are likely to weigh on sentiment for the coming session. The STI could move back below its 50-dma and head towards the underlying support at 3230 with upside resistance now seen at 3275. Stocks to watch out for: *Oxley: Proposed purchase of the Pines Club for $318m to redevelop into a 735-room hotel and commercial buildings. *Ho Bee: Not ruling out launching commercial Reit in the next 2 years. It owns 5 commercial properties, including its latest mixed development The Metropolis at Buona Vista, which is scheduled to be completed by Sep this year. *Saizen Reit: Acquired residential property in Japan for $10m, comprising 61 residential units and 28 parking lots. Property generates ~1.9% and 2.1% of trust's FY12 annual revenue and net property income. *ST Engrg: Clinched US$100m order for a 2nd barge unit from Bouchard Transportatiion. Construction of the 1st barge will begin in Apr, with delivery scheduled for mid-2015. Construction of the 2nd barge will begin in 4Q13, with delivery slated in 1Q16. *JES: Signed LOI with S’pore-based offshore company to construct up to 4 offshore accommodation vessels valued at US$147m. *Otto Marine: Secured $6.3m worth of fabrication contracts for pre-erected columns and pontoons with delivery expected in Jun 13. *Pan Hong: Wins Rmb506m bid for commercial land use rights of a 20,482 sqm site in Hangzhou, China

Thursday, March 21, 2013

Sound Global (technical)

Sound Global: Counter is up 4% today, on back of recenet Buy Calls by SCB and DBSV, on back of compelling valuations and a pick up in industry capex/investments by the PRC govt. Technically, share price appears to be hooking upwards from Oversold territory, with RSI and Stochastics both signalling further upside, after share price bounced off its recent low support at $0.49. The 200 day MA at $0.575 would serve as near-term resistance.


SIA: The International Air Transport Association (IATA) has revised upward its 2013 profit forecast for the global airline industry because of stronger than expected growth in both passenger and cargo markets. IATA now expects airlines to produce a combined net post-tax profit margin of 1.6% this year with a net post-tax profit of US$10.6 b. That is up from its Dec forecast of a 1.3% profit margin and a post-tax profit of US$8.4b. Against a backdrop of improved optimism for global economic prospects passenger demand has been strong and cargo markets are starting to grow again. Stronger revenues (US$671b, up US$12 b from the Dec outlook) are the main driver of the slightly improved financial performance. Cargo demand is expected to grow by 2.7%, reversing the declining trend of the last two years, while passenger demand is forecast to grow by 5.4%, up from the 4.5% increase projected in Dec. On the down side, fuel costs are increasing and are now expected to average US$130/bbl for the year. That will increase the industry's projected fuel bill to US$216 b in 2013, a US$6b increase over Dec's projection. Asian-Pacific airlines are expected to see their net profits rise to US$4.2 b in 2013, up from US$3.2b in the Dec projection. The improved earnings outlook is positive for SIA, which at 1.0x P/B, reflects valuations closer to cyclical lows. In fact JPM last wk kept its Overweight rating on the stock, noting that the market tends to underestimate SIA’s total potential return. Sees potential upside from capital mgt in May ’13. ie. if SIA pays out one-third of its current net cash balance or $1.06 DPS, yield would be c.10%. Alternatively it could partially divest its stake in SIA Engg via a div in specie.

ST Engineering

ST Engineering: Group announced that Bouchard Transportation has exercised its option for an additional Articulated Tug Barge unit that was announced on 15 Feb 2013. The value of the unit is in the region of US$100m (S$125m). Both barges will measure 625 feet by 91 feet by 47 feet and each will have a 250,000-barrel capacity. They will be used to transport liquid petroleum. The barges will be American Bureau of Shipping and United States Coast Guard certified for Jones Act service. The 10,000hp twin screw ATB tug, classed by ABS as A1 Towing Vessel, Dual Mode, USCG Sub-chapter M, will be equipped with an Interconnected Coupler System. The construction of the first barge will begin in Apr 2013 at ST Engg's US shipyard, VT Halter Marine, with delivery scheduled in mid-2015. Construction of the second barge will begin in 4Q2013 with delivery scheduled in 1Q2016. Group trades at 22x trailing P/E, above its 5-year historical average P/E of 18.5x; and +1 std. dev. P/E of 21x.


OUE: Confirms that it is in preliminary discussions with banks (including Credit Suisse, Goldman Sachs and StanChart) over the establishment of a Reit to be listed on SGX. However, the group cautions that the properties to be injected in the Reit, the pipeline assets, the size and timeframe of the offering are all under review and have not been decided. The trading halt on the stock will be lifted at 1300 hours.

Tiong Woon

Tiong Woon: has entered into a legally binding MOU to sell its fabrication yard business (wholly owned subsidiary) at a consideration of $18.0m. DMG views the disposal positively. Despite the subsidiary having been generating losses over the past few years (FY12: $-3.8m, FY11: $-3.9m), Tiong Woon was still able to sell it at a surprise gain of $2.0m. Now that the losing-making unit is gone, the group can channel its resources to focus on its main crane chartering business. The house believes Tiong Woon is on track for a strong recovery underpinned by the robust crane chartering demand in the region. It also bodes well with the latest mapout from the Singapore infrastructure white paper. Once the transaction is completed, DMG thinks the group may look into increasing its dividends payout in view of the huge cash inflow. The counter has been overlooked by the Street, with no active coverage, whereas its peer Tat Hong has been receiving much attention. Tiong Woon had a difficult year last yr. But its 9.4x fwd P/E , 0.8x P/B means it is more attractively valued vs Tat Hong's 12.8 fwd P/E and 1.3x P/B. The stock has riding on a positive longer term uptrend since Aug 2011 (albeit with some volatile interim periods). The clear rebound off the $0.325 low suggests that the worse could be over for the stock, from a technical perspective. Chart watchers may watch for a clear break of the $0.40 levels which would position Tiong Woon as a bullish breakout candidate. A pullback towards support at the $0.36 level could provide a window for accumulation.

Jason Parquet/ Koon Holdings

Poh Lian Construction judicial management – impact: i) Jason Parquet: makes additional provision for doubtful debts of ~$0.4m for FY12; notes potential exposure risk of an additional ~$0.3m from Poh Lian in relation to works done in 2013 to-date to be provided in FY13 results. The counter trades at $0.20, the lowest since its all placement IPO in Sep 2012. ii) Koon Holdings: adjusts FY12 net profit from $3.0m to $46k, in view of increase in costs of sales arising from additional allowance for inventories, and increase in doubtful trade receivables. Nevertheless, given its robust financial position, size of retained earnings and strength of orderbook, mgt makes no chg to the final 0.5 cts /sh final div previously declared. The counter is down 4.4% at $0.22.

Mermaid Maritime

Mermaid Maritime: proposes to undertake a non-renounceable non-underwritten rights issue of new shares and a private placement of such no. of new shares, which would be equivalent to the remaining unsubscribed excess Rights Shares, to raise gross proceeds of approx $176.1m. Up to 628.8m Rights Shares will be offered at an issue price of $0.280 for each Rights Share on the basis of 4 Rights Shares for every 5 existing shares held. The proceeds will be used for repayment of existing loan facilities, initial payment and other related expenses for construction of two new rigs and general working capital. The counter is down 5.3% at $0.355.

Sound Global

Sound Global: DBSV maintains Buy with $0.81 TP. Note that Sound Global is the Cheapest water stock and stock was sold down after its weak 4Q12 results, CFO departure and the ensuing management shuffle. The stock is now trading at 9x FY13F PE or –1SD of its historical mean. It is the cheapest water stock in the region, trading at >40% discount to peers’ average of 15x PE. Is something amiss? Earnings-wise, 4Q12 was indeed disappointing due to higher borrowing costs. But, with a record Rmb3-4bn order backlog and an expanding BOT portfolio to generate higher recurring Operation & Maintenance (O&M) income, the company’s earnings should continue to grow, albeit at 10% and not 20-30% as in the past given today’s much bigger base. More importantly, the industry’s outlook remains positive with more contract wins expected. As for management changes, house neutral as long as Chairman Wen, who also owns 50% of the company, maintains his position and shareholding. Apart from consistent earnings delivery from execution ofits orderbook and BOT portfolio, SGL’s depressed valuations could draw privatization interest. The stock still offers 62% upside even as house lower TP to S$0.81, pegged to historical mean of 13.5x FY13 PE.

UOB (technical)

UOB: Trading Central says the stock remains supported by a key rising trend line, and stands firmly above both the near term and medium term moving avgs. RSI is above the neutral area at 50% confirming a bullish bias. Believes as long as $19.15 holds on the downside, it anticipates a further advance to $20.40 and $20.85 in extension.


Midas: OSKDMG hosted Midas on a roadshow in Singapore. Key takeaways are: 1) 1H13 will be challenging for Midas, but 2H13 could be stronger if things pick up. Although visibility on the speed at which the Chinese govt will award high speed rail contracts remains low, management is optimistic that the govt will meet its Twelfth 5-Year Plan target. This is supported by continued strong demand for railway transport in China; 2) The future is promising, as Asian countries plan to improve their connectivity by building high speed railways to neighbouring countries. As a preferred partner for global train manufacturers (Alstom and Bombardier), Midas is in a good position to ride on this trend; 3) Gearing is likely to increase, as Midas takes on loans for its new aluminum plates and sheets JV plant. This plant is expected to be ready by 2015, and would contribute to revenue growth. We have a BUY recommendation with a TP of $0.75.

Amarda Group

Amarda Group - Co. annouced today that 2 China Mobile Satellite Communications Group (CMSCG) and Thuraya Telecommunications Co (Thuraya), has jointly announced a partnership with China Telecom Satellite (CTS), which will see from early April, the '1349' mobile satellite SIM Cards available for commercial use. CMSCG and CTS will also be distributing the Thuraya SatSleeve from the same date. CTS official launch of its mobile satellite service marks the transformation of original ‘1349’ service into an official service by CTS to its customers. Based on initial market feedback, the response to CTS’ service have been very positive, attracting customers in sectors such as maritime, oil and gas and disaster relief. Recall that Amarda has a 45% stake in CMSCG.

Ramba & IEV

Ramba and IEV saw candle spikes yday, which may trigger interest amongst the chart watchers.


SGX: Group signed a MOU to develop fixed income access between Singapore and Philippines. Also included in the MOU is the development of trading platforms to support cross-border fixed income trading. SGX and Philippine Deal System will also explore the development of cross-border and intra-regional clearing, settlement and depository services for these fixed income markets. With bond markets in Asia growing significantly and strong demand from investors for price transparency and liquidity in this asset class, this collaboration between SGX and PDS is therefore timely and beneficial to investors. SGX trades at 28x trailing P/E; HK Exchange at 36x.