Friday, June 28, 2013


Sarin: Share price flirts with its all-time high of $1.60, registering a 55% return year-to-date, as Sarin shrugs and defies the recent market weakness which has plagued most counters. To date, Maybank-KE remains the only broker with a coverage on the stock, where we note that industry fundamentals remain buoyant with Debeers recently citing that overall demand for diamonds in 2013 will outpace the 3% growth registered in 2012. Strong first quarter sales reported by US Jeweler retailers such as Tiffany, Signet and Blue Nile lends further support to this thesis. In its recent 1Q13 results, Sarin’s revenue pushed to a record US$20.2m (+3% y/y, +42% q/q), while net profit expanded to US$8.1m (+3% y/y, +111% q/q). The stellar performance was underpinned by improved business sentiments in the diamond sector and increasing penetration of Sarin’s Galaxy system. Meanwhile, recurring revenue continues to grow, contributing c.30% of total revenue. This ratio is expected to grow as more Galaxy systems are deployed.


AHT - The group's recent preferential offering which was issued at $0.88/share started trading today. In light of the weak recent share price, majority of the REIT's minority shareholders had reframed from undertaking the preferntial offering, as they could purchase the shares in the open market at a lower price. This has resulted in AscendasLand International Pte Ltd accepting in full its provisional allotments of 18.5m New Stapled Securities under the Preferential Offering and applied for 35.6m excess New Stapled Securities pursuant to its irrevocable undertaking. The failed attempt to meaniningfully engage the majority of the grp's shareholders could have weighed negatively on the REIT's sentiment.

Wing Tai (technical)

Wing Tai: corporate news flow is thin. Mgt has been highlighting cautious views regarding the property market, and the company has not announced any recent tender wins. Technically, the long term uptrend remains intact. The bounce from the $1.925 low (25 Jun) , coupled with upward reversal of the key indicators bodes well for near term price action. If resistance at $2.10 is broken, momentum could drive the stock back to test the recent ~$2.40 multi year high. However, should share price head back down and break below the $1.90 support, we would correct to a negative technical view.

King Wan

King Wan: No announcements has been made in relation to the listing of KTIS on Stock Exchange Thailand as yet. The listing is scheduled sometime in mid Jul, translating King Wan's sale of its Thai associates into cash which the company will pay out as special dividends.


NOL: industry news continues to be the main driver. Investors may watch for the kicking in of rate hikes come 1 Jul across members of the Transpacific Stabilisation Agreement. This increase will hopefully help to boost rates ahead of the peak shipping season. However, note that the carriers continue to be plagued by over capacity issues. The industry will likely continue to rotate between periods of cooperation on supply discipline and independence, resulting in continued freight rate fluctuations. As freight rates are a key driver of liners' share prices, this could entail a sustained period of range bound trading.

ISDN (technical)

ISDN: the stock's 12x increase from $0.115 at the start of the year to $1.445 at the peak in mid Jun, makes it vulnerable to volatile retracements such as the one we saw last wk. The sliding technical indicators suggests near term weakness, though there are multiple levels that may kick in to offer support - $1.10 (10 Jun retracement close), $1.00 (50day MA), $0.90 (close to 8 Apr peak). From a technical perspective, would reassess toward a more bullish near term position only when the indicators reverse back upward.

First Reit

First Reit (FREIT): Concerns over the tapering off of the U.S. Federal Reserve’s quantitative easing programme have driven bond yields up and adversely impacted high-yield stocks. While FREIT offers one of the most resilient portfolios given its defensive long-term master leases which has downside revenue protection, OCBC see risks coming from higher borrowing costs in the medium-term as ~72% of its debt is based on a floating rate structure. In the near future, however, short-term interest rates in Singapore are likely to stay low as it is driven by the U.S. federal funds rate, which may only be raised in 2015. With an estimated leverage ratio of 34.0%, OCBC believe that its next major acquisition would likely have to be funded by a combination of both debt and equity, unless it obtains a credit rating. OCBC has a HOLD rating, with TP of $1.20 (from $1.31) due to an increase of its cost of equity from 7.7% to 8.3%. Although FREIT’s FY13F distribution yield of 6.7% represents a spread of ~410 bps over the Singapore 10-year government bond yield, it is still below the historical average spread of 730 bps since its IPO.

St James

St James: was queried by SGX on its trading activity just two days back. In response, the co said pursuant to ongoing reviews of its business operations, the Board is considering restructuring the company’s business. Such restructuring may include: entering into joint ventures, divestments of existing business units and acquisitions of new businesses. In this regard, the Board has appointed PrimePartners as financial adviser in relation to the potential acquisitions of new businesses by the company. Separately, the co informs about occurrence of theft at the company’s outlets in recent months. It has made a police report, and the quantum of losses is estimated at $0.38m. The company has filed an insurance claim with its insurers.

Geo Energy

Geo Energy - Note that Coal prices have been lacklustre in recent weeks, on back of weakening demand from China. Note that prices for thermal coal recently touched a three-year low of below $90/ton, a far cry from their post-2008 rebound on the back of demand from China and India. At this price, some producers are digging coal at a loss. In addition to soft global prices, Indonesian miners face two regulatory threats. The first is China’s proposed import ban on low-quality coal, which Chinese utilities are resisting but which has the support of domestic producers. Around one-fifth of annual imports, or 50m tons, would be banned, the FT reports. Naturally the proposed ban is welcomed by struggling Chinese miners who are located inland, far from the coastal cities where electricity demand is highest and seaborne imports are often cheaper to source. By burning less low-grade coal, China can reduce emissions and start to tackle its foul air (Beijing’s current pollution reading: Unhealthy). Domestic coal would also be subject to a lower quality cut-off. The second regulatory risk comes from Indonesia’s own government, which is hunting for more tax revenues and has been hurt by softer commodity prices. It wants to double the royalty on coal mined under a certain type of local permit, which would most affect smaller producers. Indonesia is the world’s largest exporter of thermal coal and is ramping up production despite sinking prices, with a forecast of 410 million tons this year, up from 375 million in 2012. This is another reminder of how commodity exporting nations are prone to externally-driven booms and busts, and why Indonesia needs to invest more into industry and services if it’s to take its place among Asia’s stronger economies.


Starhub: Macquarie upgrades to o/p from Neutral, TP $4.50. While risks on StarHub’s pay TV business could be alleviated by the MDA’s decision (pending appeal by SingTel) to mandate the cross carriage of Barclay’s Premier League, the increased pressure in the broadband space form SingTel could yet keep risks elevated for a while. In the meantime, at 9.9x adj FY13E EV/EBITDA and offering a 4.9% dividend yield, believe StarHub’s shares are poised for a rebound as equity markets settle down. Within the Singapore telecoms space, top pick remains SingTel (TP $4.22, OP) followed by M1 (TP $3.72, OP) for a pure Singapore market exposure.


Biosensors: Nomura lower its earnings for FY14F and FY15F by 6% to reflect the higher costs the group will likely incur as it expands its product base and supports its newly acquired medical imaging business. The higher costs is expected to be mitigated by stronger revenue growth from new product launches. Nomura forecast EPS growth of 8% this year before accelerating to 15% CAGR over the following two years. Nomura reiterate its BUY rating with a TP of $1.80. Biosensors has pulled back by 9% post the 4Q results at the end of May. Valuations are attractive at 12x FY14 EPS, underpinned by SOTP valuation of $1.80 per share and net cash of USD337m ($0.25 per share). In addition, the group will pay a dividend of USD0.02/share by early August 2013. Nomura believe the SD medical imaging business will broaden Biosensors’ revenues and will likely contribute more materially from FY16. Meanwhile, house believe its core DES business will show good revenue growth underpinned by new products including Biomatrix NeoFlex and BioFreedom.


Noble: HSBC keeps at Neutral, lowers TP to $1.07 from $1.22. Notes Agri segment pressures will continue to be a major headwind through the medium term, with 1Q13 showing the segment’s first operating loss. Besides the weak sugar business, lower utilization levels at the Argentinean soybean crushing plants were a key driver, due to difficulties in obtaining sufficient feedstock, as farmers horde supplies and go on strike, amid unfavorable domestic economics. Moreover wheat prices on the Buenos Aires Exchange are trading at a near 60% premium to soybeans, incentivizing farmers to switch crop. Given Noble’s participation in bulk agriculture where pdt differentiation is low, the house believes margins will continue to surprise on the downside. Lowers FY13-15 agri gross profits per ton by 16-18% to reflect these issues, which then impact earnings by 14-15%.


Olam: hosted an Investor Day for its edible nuts, spices & vegetable ingredients businesses, as part of its strategy to promote better understanding of the company. While the US$34 bn edible nuts industry is expected to grow by 5- 7% pa, Olam believes it could potentially deliver stronger earnings growth through: 1) market share gains in cashew and hazelnuts 2) expansion into new nut categories like pecans and walnuts, and 3) contribution from upstream assets. In particular, some of its previous plantings in the US and Australia almond orchards are expected to reach full maturity in the coming years. Within spices and vegetable ingredients, the focus was on its tomato processing assets in the US. Mgt noted positive signs of a turnaround, with an increase in processing volume expected for the 2013 crop. While Olam has taken initiatives to raise industrial exports, global demand supply conditions have also improved. Credit Suisse is confident that Olam’s past invmts can drive decent earnings growth in FY14. But keeps at Neutral with TP $1.65. Morgan Stanley maintains Equal weight with TP $1.75. HSBC lowers TP to $2.10 from $2.35, under Olam’s new strategy that may see project cancellations, but reiterates Overweight, as the group should deliver robust, above-peer medium term growth while near term bottlenecks are being resolved.


MCT: CS upgrade MCT to OUTPERFORM (from neutral) with a TP of $1.45 due to its recent share price weakness. CS believe the selling has been overdone as fundamentals continue to be resilient, underpinned by its quality retail assets (mainly VivoCity) and long leases at two of its three offices. House view this as an opportunity to accumulate quality at cheaper valuations. Despite noise concerning potential slowing visitation to Sentosa due to haze (and subsequent impact to VivoCity, due to its proximity), CS understand from management that feedback from mall managers seem to suggest that shopper traffic remains strong. Meanwhile, near-term vacancy risks at its offices are mitigated by the longer leases at BoaML HF and Mapletree Anson. Both VivoCity and BoAML HF make up 71% of NPI. At current levels, valuation for MCT is now looking attractive, where MCT now offers FY14 yields of 6.1% and trades on 1.1x P/B, in line with historical average. Maintain its DDM-based target price of S$1.45, which implies 32% total return.


SingPost: To offset the growth and margin drag from the decline in traditional mail volumes in Singapore (67% of Group revenues), Singpost has embarked on a strategic initiative to change the mix of its business, driven by better growth in logistics (38% of revenues) and retail (11% of revenues) customer segments. Singpost is focussed on the regional logistics business to lead the next leg of growth. Rapid growth in inbound e-commerce volumes into Asia provides a big opportunity for Singpost’s e-commerce fulfilment arm Quantium Solutions. Singpost is also building capacity and competencies in international logistics in the region. With its strategic revamp underway, management targets to improve both margins (higher share of non-mail business) and growth prospects (overseas and non-mail) medium term. Singpost is also open to inorganic opportunities to increase scale and competencies in the logistics business. Singpost currently trades at 15.7x FY14 consensus P/E and offers a 5% dividend yield.

Advance SCT

Advance SCT: Proposed a renounceable 2-for-5 rights issue of 1.17b new shares at $0.008 each, or a 20% discount to its last closing price of $0.01. The rights issue will enlarge the current share capital by up to 40%, and raise gross proceeds of $9.35m upon full subscription. Proceeds will be used to fund the group's expansion (43.4%, $4m), repayment of debt (41.3%, $3.8m) and the remaining for working capital.

Nam Cheong

Nam Cheong: CIMB initiates coverage with O/p Call and $0.35 TP. House note that by turnover, Nam Cheong is Msia’s largest OSV builder. The group has over 20 years of track record in building OSVs and has delivered over 80 vessels since 2007. Using Chinese yards to support its build-to-stock business model, Nam Cheong has achieved a 3-year average gross margin of 19% vs. Singapore peers’ 9%. In terms of ROE, it achieved a 3-year average of 30% vs. Singapore peers’ 7%. Although build-to-stock is not unique to Nam Cheong in Msia, the company stands out with its close relationships with Malaysian OSV owners. Malaysia’s Petronas has budgeted RM300b (US$100b) in E&P spend over 2012-17, up 70% from the previous five years, to arrest a production decline and boost reserves. Initiatives such as marginal and deepwater field developments as well as enhanced oil recovery mean more work for the Malaysian OSV sector. Given the improving OSV market, Nam Cheong has launched its most ambitious newbuild programme to date, which should propel earnings growth. Although its share price surged 96% in 2012, Nam Cheong trades at 6x CY14 P/E on a 3-year EPS CAGR of 15%. SG OSV builders are trading at 7x on flat earnings. Also, cross-sectional P/B to ROE regression analysis shows that the stock is relatively undervalued.

Genting SP

Genting SP: UOB Kay Hian maintains Sell with $1.17 TP. House continue to expect Genting SP to deliver weak EBITDA trend through 2014, albeit the seasonally slower 2Q13 EBITDA should improve meaningfully from 1Q13’s dismal level of S$250m, as win rate normalises. GEN SP continues to be dogged by difficult industry conditions – sluggish mass-market and VIP patronage. House trim 2014 EBITDA forecast by 4%.

First Resources

First Resources: UOB Kay Hian maintains Buy with $2.60 TP. House note that no hotspots have been spotted on FR’s Riau estates so far. The haze problem might affect the productivity of harvesters and slow down transportation of FFB or CPO. The downstream business is getting competitive as new capacities are coming on-stream slowly, but this has been partly offset by biodiesel demand from EU as the anti-dumping issue has been concluded with FR being charged with 0%. FFB peak production to come after Raya festive season. FFB production is likely to peak in Sep 13 after the fasting month in July and the Raya festive season in August. Based on historical trends, production tends to slow down during the Raya festive season as workers will be away, and then peak in the following month as harvesting activities resume. Overall, house maintains BUY with target price of $2.60, based on 15x 2014F P/E. House have raise valuation from 14x to 15x PE given the improving CPO price uptrend momentum. Like FR for its hands-on management team, young age profile and efficiency.


CosmoSteel: 10 days following the group's plan on exploring the possibility of establishing a strategic business relationship with a Myanmar counterparty, Cosmosteel announces that its wholly-owned subsidiary Kim Seng Huat Hardware has entered into a MOU. The non-binding MOU between Kim Seng Huat and the Myanmar counterparty will see both parties working exclusively to seek opportunities in the production, sourcing and/or distribution of piping system components and other steel products in the Energy, Marine and other industries in Myanmar. The counterparty reportedly has a headquarter in Yangon and operates in diversified business areas which include construction, hotel and tourism and trading. The share price of CosmoSteel has risen 27% since the start of May, and is currently trading at a forward P/E of 8.3x based on its last closing price of $0.33.

China Fishery/ Pac Andes

China Fishery/ Pac Andes: China Fishery has announced that the call option for an 8.97% stake in Copeinca ASA has not been effected due to a breach in terms from the seller. This takes China Fishery's takeover bid of Peru-based Copeinca from an effective control from 74.23% to 65.26%. The latest offer from China Fisheries to shareholders of Copeinca is at NOK68.17 per share. China Fishery plans to begin legal proceedings against Veramar Azul for failing to transfer its 6.3m shares of Copeinca for NOK376m (based on NOK59.70 per share), despite having agreed upon earlier in the week.

TEE Land

TEE Land: entered into an Option to Purchase Agreement to acquire a f/h land with an existing industrial complex with est land area of 96,649 sf in Petaling Jaya, Selangor, Msia, for purchase consideration of RM40m. The site, presently zoned for “industrial” use, has potential to be re-zoned for “commercial” use and redeveloped into a mixed devt project, with a potential plot ratio of 4. The acq will be funded by IPO proceeds and external bank borrowings and is expected to be complete with 6-8 mths from the date of the option. This adds to TEE Land’s existing project at Cyberjaya, also in Selangor. Mgt notes the acq continues the group’s regionalization strategy, particularly in Singapore, Msia and Thailand.


SATS: proposed disposal of 40% stake in Adel Abuljadayel Flight Catering Co (AAFC) for US$18.4m (~$23.4m) cash. This compares with the Mar ‘13 book value and NTA of the sale shares of $24.1m and $4.8m respectively. The transaction is not expected to have any material impact on the NTA/sh and EPS for the current financial year. SATS has reviewed its invmt in AAFC and believes the proposed transaction is in its interests as it continues to pursue other attractive invmt opportunities in the Middle East region. The co remains focused on leveraging its core competencies in gateway and food to access suitable opportunities and grow its presence in this mkt. According to latest data from Changi, passenger traffic in May rose 4.7% yoy to 4.28m. This represents a recovery from Apr’s muted 0.8% increase (partly boosted by the Good Friday holiday this year). Pax growth was supported by firm intra-Asia traffic demand, with Japan, Msia, Thailand registering double digit increases. Deutsche expects traffic to pick up further in Jun, reflecting the school holidays. Also notes 2H tends to be seasonally stronger for SATS. Hence while SATS may have had a fairly subdued start to its FYMar14, the house maintains its view of a 7% increase in pax handled for the full year. Reiterates Buy with TP $3.54, supported by dividend yield of up to 8% pa over 5 yrs (under a blue skies scenario of no M&A and gradual increase in gearing).


ISDN: has inked a non-legally binding MOU to acquire an 80% stake in each of three Indo energy-related companies - PT Sisira, PT Anggocci and PT Parduaan for a combined US$2.45m. PT Sisira has entered into a 20-year Power Purchase Agreement (PPA) with PT PLN of North Sumatra, Indonesia’s state-run power distribution company, to build, own and operate a 4.6MW mini hydro electric power plant. The facility will commence construction next year and be completed over the next 18-24 months. It is estimated to generate ~US$2m in revenue p.a. once it achieves full operations. The PPA states a tariff rate of IDR 787 (or US 8cts per KWh), compared to the expected running costs of between US 0.5-0.7cts per KWh. Based on projections, the facility could earn a total of ~US$40m operating profit over the 20-year contract period, vs the estimated investment cost of ~US$10m. PT Anggocci and PT Parduaan are at the signing stage of entering into PPAs with PT PLN in the same constituencies of North Sumatra to build, own and operate a 9MW and 10 MW mini hydroelectric power plant, respectively. Previously, ISDN had indicated its target of developing a series of hydropower projects that could total 100MW by end FY14. To date, the group has announced hydropower invmts in Sumatra, amounting to a combined 42MW energy pdtn capacity when fully realized.

SG Telco

SG Telco: In what is seen as a disappointment to Singtel and Yoma, Myanmar has appointed Norway's Telenor and Qatar Telecom to become Myanmar's first foreign telecommunications operators, as the 2 co’s clinched the country’s hotly contested licenses to develop its nascent but potentially lucrative telecommunications industry. France Telecom which partnered Japan's Marubeni for its bid, has been named as a back-up candidate, and would replace Telenor or Qatar Telecom if either co fails to meet certain post-tender requirements. Interesting to note however is that none of these 3 companies had any tie ups / alliance with a local partner, which was previously touted as critical in increasing a consortium’s chances of winning the contracts by market watchers. While most analysts expect a near-term negative reaction in response to the news, most are seeing limited impact to the group’s fundamentals, with some touting that not winning the bid was a ‘blessing in disguise’. Maybank-KE note that SingTel did not this is not a bad outcome as a win would have meant billions of dollars of investment, an opaque regulatory environment and more short-term losses. Instead, Singtel can now focus on getting opportunities to clinch sub-contracts from the winners who will be under great pressure to deliver active services in 9 mths’ time, 25% mobile coverage in a year and 80% coverage within 5 years. Deutsche similarly note that Singtel’s Myanmar loss may be a blessing in disguise. House note that even in an optimistic scenario of 50-60% penetration and US$3-4 mobile ARPU within 5 yrs, a Myanmar mobile venture could be loss-making for at least 5-6 years. Meaningful earnings accretion may materialize only towards the end of the 15-year licence period. Believe the Myanmar venture would have at best been marginally accretive to SingTel’s EV, but more likely mildly dilutive. Seperately, we note that smaller players which are involved in the build up / support of Telco networks and infrastructures could benefit from an increased in capital expenditure as the country ramps up its network coverage. Notable SGX companies with an exposure / expertise in this segment in Myanmar includes Ntegrator, MDR and Neratel, which should benefit positively from the latest news.

SG Market (28 Jun 13)

SG Market: S’pore shares are likely to nudge higher as Wall Street rallied for a third straight day on positive economic data and reassurances by several Fed governors that the central bank would keep its easy monetary policy in pace until the economy is back on its feet. The gains followed a drop in weekly jobless claims, rebound in consumer spending and rise in personal income in May, while pending home sales jumped to its highest level since 2006. Ten-year Treasury yields lost six basis points to 2.47% as Italian and Spanish bonds rose. Oil surged 1.6%, while gold dipped to a 34-month low below $1,200/oz. Expect some short term disappointment to weigh on Yoma and SingTel after both missed out on the two highly coveted Myanmar telecoms licenses but it may be a bad outcome, given the huge investment outlay required and long gestation period. Interest may now spill over to the possible subcontracts that will be dished out by the two winners to deliver the massive infrastructural rollout under tight schedules. Some of the potential beneficiaries could include SGX-listed NeraTel, Ntegrator, Polaris and mDR, all of which have business exposure in Myanmar. Some quarter end window dressing and technical rebound from oversold levels are expected to keep the STI on a firmer note with immediate resistance tipped at 3,150, followed by 3,196, while underlying support sits at 3,065. Stocks to watch for: *SingTel/Yoma: Both SingTel and Yoma are out of the running after Myanmar awarded two highly sought mobile licences to Norway's Telenor and Qatar's Ooredoo. The two winners will operate alongside Myanmar's two existing telecommunications operators. The new licenses are valid for 15 years and require holders to meet population and geographical coverage targets. *ISDN: Inked a MOU to acquire 80% stake in three Indonesian energy-related companies, PT Anggocci, PT Parduaan, and PT Sisira, for a combined US$2.45m. PT Sisira has entered into a 20-year power purchase agreement (PPA) with Indonesia’s state-run power distribution company PT PLN to build, own and operate a 4.6MW mini hydro electric power plant in Sumatra. PT Anggocci and PT Parduaan are at the signing stage of entering into PPAs with PT PLN to also build, own and operate a 9MW and 10 MW mini hydroelectric power plants respectively in Sumatra. *Freight Links: FY13 net profit grew 19% to $38.4m, while revenue climbed 15% to $171.1m. The better performance was attributable higher warehousing and chemical logistics sales and fair value gains of $13.8m from its investments in Sabana REIT and Sentosa Asian Credit Offshore Feeder Fund. Group proposes a first and final DPS of 0.5¢ versus 0.45¢ the previous year. *Popular Holdings: FY13 net profit dipped 25% to $23.3m on the back of a 8% slide in revenue to $524.2m due to the closure of four stores, absence of annual bookfest event at Suntec and no new property launches. Final DPS of 1¢ proposed, down from total of 1.3¢ in FY12. *XMH Holdings: FY13 net profit rose 20% to $11.4m on 57% jump in revenue to $97.6m. However, gross margins slipped to 23.5% from 25.2% in FY12 due to higher sales from its lower margin distribution business. For 4QFY13, the group turned in net profit of $3.5m (+22%) on revenue of $29.7m (+13.4%). Group declared a final plus special DPS totaling 1.2¢, up from 1¢ a year ago. *TEE Land: Buying a 96,649 sf freehold site with an industrial building in Petaling Jaya, Malaysia for RM40m ($16.3m), which has potential to be re-zoned for commercial use and redeveloped into a mixed-development project with 4x potential plot ratio. *SATS: Disposing its 40% stake in Adel Abuljadayel Flight Catering Co for US$18.4m ($23.4m) against its book value of $24.1m. Group will continue to pursue other attractive investment opportunities in the Middle East region. *China Fishery: Disclosed that it is commencing arbitration proceedings against Veramar for the transfer of its call option shares but gave the assurance that this will not affect the new offer for Copeinca. Even without Veramar’s stake, the group owns 8.22% of Copeinca shares and has received pre-acceptances for 57.04%, giving it effective control of 65.26% of the Peruvian fishmeal producer. *CosmoSteel: Entered into non-binding MOU with Myanmar-based group of companies to explore a potential strategic business relationship in the areas of production, sourcing, distribution of piping system components and other steel products in the energy, marine and other industries in Myanmar. *Advance SCT: Proposing a 2-for-5 renounceable non-underwritten rights issue at $0.008 per rights share. Net proceeds of ~$9.2m will be used to finance the expansion of the group’s business and repay borrowings. *Chemoil: Signs US$800m syndicated banking facilities with several international financial institutions from Asia, Europe and US to finance general corporate and working capital requirements. As at Mar 13, the group has a net gearing of 0.68x. *China Gaoxian: Shareholders has approved its Rmb2.2bn project to expand its polyester production capacity. The Huaxiang project is expected to commence polymer production of differentiated polyester yarn and polythene terephthalate chips by 3Q this year.

Thursday, June 27, 2013

Eu Yan Sang

Eu Yan Sang: The group had its website hacked this morning. A group of hackers known as "Indonesia J.A.M.5 Team" left haze-related messages, which read: "Do not insult our country just because of smoke in the air in your country." "You should not just blame Indonesia for the polluted air. Blame the wind, and who told the wind to blow to your country." EYS internal IT team has since restored the websites at 8.30 am today. Says no client / patient data and online payments were compromised, as those data resided on a different system. Interestingly, EYS may be a potential beneficiary of the haze - its Traditional Chinese Medicine products which have detoxifying properties and strengthen immunity may be highly sought after during this period. Reportedly, green beans (known for the detox ability) were cleaned off the shelves of supermarkets just not too long ago. EYS is up 0.7% at $0.755 on thin volume.


Gold: Reuters Technicals notes gold has accelerated losses since June 20 and on June 26 marked the lowest level since August 2010. Investors who had purchased it as a hedge against higher inflation have been squeezed out aggressively this year. On a long-term basis, gold broke below US$1,281/Oz, the 38.2% Fibonacci of the uptrend between Mar 2001 and Sep 2011. In the short-term, the sliding gold faces downside targets at US$1,180/Oz from the 1.236% Fibonacci projection of the downtrend between Sep 2012 and Apr 2013, and then at US$1,093/Oz (1.382%). Only a close above US$1,281/Oz would signal that the oversold gold formed at least a short-term bottom.


No adverse corporate news at ISDN to account for the sell-down. However substantial shareholder Karl Walter Braun has cut his stake to 6.11% from 7.29% on 20 Jun via the disposal of 4.3m shares in the open market. The group has also recently called for a third round of capital raising through a 1-for-2 rights issue of warrants at $0.02 each and is seeking to expand into the hydropower sector in Indonesia and coal mining in Myanmar. But these plans are still at the preliminary stage and bear significant execution risks. Note that this stock is also susceptible to bouts of steep declines, last seen on 10 Jun and in Apr.

OCBC (technical)

OCBC: Uptrend still looks to be intact. There could be a possible upside if the counter could close about its 20MA at $10.15 today, supported by the rising RSI and Stochastic indicators. The next resistance above the 20MA would be the 50MA at $10.60.

CapitaLand (technical)

CapitaLand: Downtrend looks to have loss strength as shown in the ADX. The counter has to close above its 20MA to indicate further upside could be possible. Support at the recent week's low of $2.98 levels, followed by $2.75. The near-term resistance is at $3.13 followed by its 20MA at $3.23.

DBS (technical)

DBS: The recent short-term downtrend which started on 13 May see some respite supported by the loss of strength shown from the ADX. For a confirmation on its further upside, the counter would need to close above its 20MA at $16.03. Near-term support is at $15.22, followed by $14.78. Resistance at $16.12.


Hyflux: OCBC maintains Hold but sees value emerging. HOuse note that Hyflux Ltd recently saw a massive correction in its share price, plunging nearly 13.1% from a high of $1.37 on 10 Jun to a low of S$1.19 on 24 Jun; it was down 6.1% on 24 Jun itself, no doubt spooked by recent reports of credit tightening in the mainland. But these worries while valid – are overwrought. House believe that Hyflux should still have access to funds from overseas, and this should put the company on a better footing against local Chinese companies when it comes to bidding for projects. Nevertheless, as the market appears to be taking a more “risk off” approach, house now use a lower 20x peg (versus 22x previously) against FY13F EPS, which results in fair value easing from $1.44 to $1.30. However, value is starting to emerge, especially closer to its recent $1.19 low; hence house maintain HOLD rating on the stock.

CMA (technical)

CMA - Technicals looking positive for further upside with RSI and STochastics all hooknig upwards from OVersold territory, while ADX appears to be exhasuting, indicating that the current downtrend is over. Counter appears to have bounced off its downtrend support at $1.70 and near-term resistance could be seen at $1.86 (20 day MA)

First Resources (technical)

First Resources - While Stochastics does look oversold, RSI and ADX do not rule out further downside ahead. Furthermore, the counter is trading below its key moving averages. The near-term support for the share price is at the recent low of $1.73. Any upside would be dependent if the stock can clear its 50 day MA at $1.81.


Gold: prices have tumbled in recent days as a number of bearish factors have combined. Particularly worrisome for bulls is that investor liquidation remains significant; Stanchart expect further price weakness in the short term as the market searches for a floor. Several positive factors that Stanchart highlighted, that prices should reach a floor soon: i) Producers remain reluctant to hedge for now; ii) High-cost producers are under severe pressure to cut output in places such as Australia; iii) Central banks have continued to buy; From a technical perspective, gold still looks weak. The drop below previous support around USD1,320/oz potentially targets USD1,160/oz, with congestion support expected just above this at ~USD1,170/oz. Stanchart expect prices to regain ground in Q3 on supply cuts and short covering.

TEE International

TEE International: On the recent developments for the company, SIAS believe group is looking to develop its infrastructure and recurring income division. The company is likely to evaluate its recent MOUs and carefully select the appropriate projects to go into. Back in November 2012, TEE announced a MOU to develop and operate a fully integrated cement plant in Myanmar. This proposal is undergoing feasibility study now. The company also has three other recurring businesses now, namely Nordam, Rom Klao and GETCO, which generated combined attributable profit of S$3m+ annually. Based on SOTP following the listing of TEE Land, SIAS maintains INCREASE EXPOSURE, with a TP of $0.485 based on a 8.8x P/E for its engineering and infrastructure business. Recent contracts include: i) $49.1m value of projects from established clients such as SMRT, HSBC, Singapore Institute of Technology and others. These new contracts help to boost its engineering order book to $270.1m; ii) TEE’s 49% owned Global Environmental Technology Co., Ltd (GETCO, a waste water treatment company in Thailand) entered into a consortium with Cisco Engineering and Lam Water Solution to manage and control the water level at Makkasan Water Catchment area. The contract is worth approximately S$8.61m with a contract term of three years. TEE’s effective interest is 14.7%; iii) Entered into an MOU with Pioneer Environmental Technology to evaluate the possibility of investing in a waste water treatment plant in Huzhou, China;

Super Group

Super Group: Macquarie upgrades to O/p, TP $4.80. Note that buying opportunity. fundamental growth drivers are still intact, current undemanding valuations is an attractive entry point to a high quality, cash generative business. Branded Consumer sales set to recover in 2Q. Margin expansion story still intact, albeit only in 2013 now. Currently trading at 19x 2014E PE, backed by a solid 21% EPS CAGR (12-14E)

Comfort Delgo

Comfort Delgo: Deutsche adds on to the recent increasing list of brokers calling for a buy on the counter, with a Buy Call and $2.13 TP. House note that share price has fallen abt 17% over the past mth and at current price offers a decent 3.7% yield. House recent key discussions with management revealed that mgt remains optimistic on the regulatory and operational outlook in Singapore. On the regulatory front, mgt cited recent govt initiatives (e.g. redistribution of bus shelter advertising revenues and suspension of rental charges for bus depots) as indications of an improving regulatory environment. Mgt welcomes any potential move by the government to tender out bus routes on a cost-plus basis. The potential migration of the Northeast Line (NEL) to the new (capex-light) rail financing framework would also be viewed positively. The grp now targets 60% overseas contributions; Australia/China in focus. In terms of key growth markets, emphasis remains on Australia and China. Management expects impact of the loss of the two Australia bus routes (effective Sep) to be mitigated by recent acquisitions in NSW and Victoria. Over the longer term, management expressed optimism around growth prospects in Australia, supported by anticipated privatization of the bus segment.

Tuan Sing

Tuan Sing: Group entered into an agreement to acquire Robinson Point for $349m from a spv. The 21-storey freehold commercial building at 39 Robinson Rd has a gfa of 169k sf and net lettable area of 135.3k sf which translates to $2,580 psf. As at 26 Jun 2013, valuers reported a valuation of $350m for Robinson Point. The purchase will be mainly funded by bank loan, increasing the group's net borrowings to $696m and net gearing to 0.97x (from 0.48x). The acquisition is in line with the company's strategy of expanding its core property business and securing recurring income business. At the last closing price of $0.34, Tuan Sing trades at a 3.7x historical P/E


Sembcorp: Sembcorp Utilities' 49% joint venture Thermal Powertech Corporation in India signed a 20-year agreement with Mahanadi Coal Fields (subsidiary of Coal India) for the supply of 2.1m tonnes per year of domestic coal for its 1,320MW power plant. The agreement will commence in 2H14 when the plant is in operation. The coal-fired power plant is Sembcorp’s first power project in India, located in Krishnapatnam in Andhra Pradesh’s SPSR Nellore District. In addition to this fuel supply agreement, the company has also secured a coal supply contract for one million tonnes per year of coal over 10 years with PT Bayan Resources in February 2012. Together, both contracts will supply approximately 60% of the plant’s total coal requirement. The company also recently signed a long-term power purchase agreement in April 2013 for the sale of 500 megawatts of power to the Andhra Pradesh Power Distribution Companies for a period of 25 years.


Heeton: Group proposed a bonus issue of 44.8m new shares attached with warrants on the basis of 1-for-5. The warrants has an exercise price of $0.70, and is at a 4.5% premium to its last closing price of $0.67. The gross proceeds of $31m from the exercise of warrants will be used for general working purposes & repayment of existing loans. As at 31 Mar, Heeton had $5.5m in cash and $166m in short-term loans. The group has a net gearing of 1.33x.

Asian Pay TV Trust

Asian Pay TV Trust (APTT): Taiwan Broadband Communications (TBC) has received approval from the National Communications Commission of Taiwan to commence the partial expansion of its Hybrid Fibre Coaxial cable network. The expansion would provide TBC coverage of up to an additional 400,000 homes in the greater Taichung area. Separately, the manager of the trust has reaffirmed its distribution of 4.8¢ per unit for 1H13, part of the 8.93¢ per unit for FY13. At the last closing price of $0.84, APTT trades at a forward yield of 10.6%.

Mirach Energy

Mirach Energy: Group proposed a private placement of 152m new shares at an issue price of $0.1242 per share to 6 individuals. The issue price of $0.1242 is at a 11.3% discount to its last traded price of $0.14. Net proceeds of $18.1m will be used to redeem the 3% senior convertibles bonds (CBs) due 2014. Separately, the group entered into a term sheet for a proposed 2-year convertible loan with the 10 individuals of an aggregate $36m, with a conversion price of $0.1242 per share. The interest of 7% will be calculated and payable in the form of shares at the conversion price from each drawdown on the loan. The maximum issuance from the convertible loan of 310m new shares makes up 34% of the enlarged share capital after the placement shares. The group currently has a net gearing of 47%, mainly made up of its CB of $16m.

Keppel Land

Keppel Land: Has acquired a 50% stake in a freehold office building, 8 Exhibition Street in Australia, for A$160.2m (S$192.4m). E&Y building. Located in the Melbourne CBD, the 35-storey freehold commercial building has a total NLA of about 480,309 sq ft with 3,304 sf of retail space on the ground floor. The acquisition is immediately DPU (distribution per unit) accretive and is 100% leased to tenants in the financial, aviation, financial advisory, tax and transaction services sectors. It has a weighted average lease expiry of approximately five yrs, and the leases have fixed annual rental escalations, which will provide income certainty and stability to unitholders. Keppel could be purusing for more acqusitions in Australia, as office buildings in SG CBD gets more scarce. They currently have other properties in Sydney, Brisbane and Perth.

Myanmar Telco

Myanmar Telco: Investors will be disappointed after Myanmar's Parliament announced that it has voted to delay awarding the award of its two highly coveted telecommunications licenses, agreeing unanimously to wait until a new telecommunications law governing the industry is passed, according to a lawmaker. In comments to The Wall Street Journal, Myanmar note that the "industry risked being monopolized" if the winners of the telecommunications license were announced before a new telecommunications law is passed. Interesting to note that in its new proposal to parliament, a clause was included that only foreign companies with a local joint-venture partner should be granted a telecommunications license, although it is unclear whether this new rule will be adopted, or when the winners will be announced. If this clause is adopted, we note that it could effectively place a couple of bidders as ineligible, as some of the 11 bidders are not partnering any local partners in their bid.

SG Market (27 Jun 13)

SG Market: S’pore shares are poised to extend its mild rebound as US stocks rallied after a surprisingly sharp downward revision to 1Q GDP growth raised hopes that the Fed would hold back from withdrawing its bond purchases. US economy grew at only 1.8% in 1Q, down from the prior estimate of 2.4%. In addition, moves by China’s central bank to calm bank liquidity fears and supportive comments by ECB on the need for continued stimulus helped underpin sentiment. 10-year Treasury yields lost 7 bps to 2.54%, while gold and silver slumped more than 3% as the Dollar Index climbed. At home, banking and property stocks will be in focus, especially the index-linked names on 2Q window dressing. News that Myanmar has postponed the award of its two highly anticipated telco licenses would be disappointing to the two Singapore bidders, SingTel and Yoma. Despite the recent market sell-off, the STI remains in oversold territory with overhead resistance seen at around 3,150 and the 200-day moving average at 3,196 and underlying support at 3,065. Stocks to watch for: *SingTel/Yoma: Myanmar's Parliament has voted to delay awarding two highly coveted telecoms licenses until a new telecommunications law governing the industry is passed. A new rule is being proposed that only foreign companies with a local joint-venture partner be granted a telecoms license. Among the two Singapore firms out of 11 bidders in the running, SingTel has tied up with local partners KBZ and M-Tel, while the Yoma/Digicel/Quantum consortium is helmed by prominent Myanmar businessman Serge Pun. *Wilmar Int’l/Golden Agri: Both have admitted doing business with some of the eight named companies under investigation by the Indonesian authorities for allegedly starting haze-related fires on their lands and are currently in the midst of reviewing their business dealings with these companies. Both have reiterated that they strictly adhere to a zero-burn policy. *Tuan Sing: Acquired Robinson Point, a 21-storey freehold commercial building with a net lettable area of 135,270 sf for $348.9m or $2,576 psf ppr. The deal would be funded mainly by bank borrowings, which will push its net gearing to 0.97x from 0.48x. The purchase is in line with the group's strategy of expanding its core property business and securing recurring income business. *Keppel Reit: Acquired 50% interest in 8 Exhibition Street, a freehold prime office building in Melborne’s CBD for A$160.2m ($192.4m). The 35-storey property has a net lettable area of 480,309 sf with 3,304 sf of ancillary retail space, which is 100% occupied on a weighted average lease expiry of five years. Funding for the acquisition would be via a combination of equity and debt. On a pro forma basis, the deal is 2.4% DPU accretive to unitholders. *Asian Pay Television Trust: Announced that its sole asset, Taiwan Broadband Communications (TBC) has received approval from the Taiwan authorities to expand its cable network in one of its five franchise areas. If implemented, the expansion would add enable TBC to penetrate another 400,000 homes in the greater Taichung area. Separately, the trust has refinanced its primary debt facilities with a NT$27b ($1,129m) seven-year senior revolving credit facility, resulting in an effective interest cost of less than 4% per annum. *Mirach Energy: Proposed private placement of 152m new shares (representing 19.8% of existing share base) to 10 individuals at $0.1242 each, or 11.3% discount to its last closing price of $0.14. Part of the $18.1m proceeds (net of 4% referral commission) will be used to redeem its $16.9m 3% senior convertible bonds due 2014. At the same time, the group has granted a two-year 7% convertible loan of up to $36m to six of the above individuals. The first tranche of the loan will be used to repay the interest payable on the bond redemption and the rest to expand the group’s business, including possible acquisition of new production oilfields. *Heeton Holdings: Proposing a 1-for-5 bonus issue with 1 free bonus warrant. Exercise price of the warrants is set at $0.70 with an expiry period of two years. *UIC: Parent UOL purchased another 390,000 shares at an average price of $3.00, raising its stake to 43.5%.

Wednesday, June 26, 2013


ROwsley - Not much co. news to highlight, and share price has been trending around at these levels in the past few weeks. Latest news was beginning of the mth where For FYMar13, Rowsley continued to generate minimal revenue (mainly dividend income), and posted wider net losses of $5.9m - mainly due to $3m impairment on financial assets and $1.1m loss from an associate. The group ended the year with cash of $15.1m. At a burn rate (i.e. negative operating cash flow) of $3.2m, the group may continue to operate as a going concern for another 4.7 years. This leaves sufficient time for Rowsley to work towards the completion of the proposed acquisitions of RSP Artchitects Planners & Engineers and the 9.23ha land in Malaysia’s Iskandar region. Management expects the deal to be completed in 2H13 after regulatory and shareholders’ approval. Rowsley will fund the purchases, worth a combined $545m, by issuing an aggregate 3.6b new shares at $0.15 per share. Subject to the acquisitions being completed, Rowsley is also proposing 2-for-1 bonus warrants with exercise price of $0.18 per share, to be issued to the existing shareholders. The stock with market cap of $430m, trades at 12.1x P/B. However, note that valuations are less meaningful at this point in time, while the group is undergoing a major transformation from a shell company into a large-scale Malaysian property developer.

Sin Heng

Sin Heng: Group proposed a renounceable underwritten rights issue of 115m new shares at an issue price of $0.16 per rights share, on the basis of 1-for-4 existing shares. Issue price of $0.16 is at a 33% discount to its last closing price of $0.24 and 28.6% to the theoretical ex-rights trading price of $0.224/share. Net proceeds of $17.9m will be raised, with 50% to be used for expansion of the group's business and operation, 28% to reduce its debts and 22% will be utilised for its general working capital. The group will lodge the Offer Information Statement for the rights issue following the approval-in-principle from SGX. UOB Kay Hian and Canaccord Genuity Singapore will be the joint underwriters for the rights issue. Sin Heng lifted its trading halt at 12.45pm.

China Minzhong (technical)

China Minzhong: remains in the medium term downtrend which began in Mar this year. We may reassess toward a more positive view, if the stock can convicingly break above the $1.14 level, thereby dispelling the recent series of low highs and lower lows. Expect further downside pressure if the stock breaks below the 200day MA ($0.95) and the recent $0.91 low. The indicators are mixed now, with RSI flat, Stochastics declining and MACD rising, suggesting a near term period of consolidation around current levels.


OUE - As a general rule of thumb, OUE should benefit from the spin off of its assets into a REIT, as it enables the group to unlock and recycle its assets, thus generating free cash flow. In OUE's case, the group The group has mentioned that it would initially dispose of its flagship properties - Mandarin Orchard Singapore hotel and Mandarin Gallery mall . The total asset value amounts to $1.7b, and upon a successful listing, OUE plans to pay down existing debt of $750m and distribute up to 50% of the net-cash proceeds, or up to $0.33 per share, as a special dividend.

OCBC (technical)

OCBC - Technicals indicate of further upside after the recent sell-down. COunter has just surged above its 200 day MA, which could indicate further upside if counter is able to close above those levels. the 20 day MA at $10.18 would provide some near-term resistance.

DBS (technical)

DBS: Trading Central says near term outlook remains bearish, as the stock has broken below its key ascending trend line, which remained as a strong support since mid-Nov '12. RSI has fallen below its rising support, and remains stuck underneath its neutral area at 50%. With the 20day MA heading down, this calls for a new pullback to $14.75 and $14.30 in extension .

Auric Pacific / Food Junction

Auric Pacific / Food Junction: Auric Pacific has offered to take Food Junction private for $0.255 per share, 40% above the last transacted price. Excluding a one-off impairment charge and restaurant losses in FY12, this values the food courts segment at an ex-cash PE of just 4.8x. Hence, Auric will only need to fork out a net sum of $6.5m to take the remainder of Food Junction private (38.6% stake). Maybank KE views this deal as highly attractive, and a positive step in CEO Saw Phaik Hwa’s transformation of Auric Pacific. Going forward, Food Junction could become Auric’s earnings driver. Food Junction’s food courts are highly profitable, as net margins averaged 17.6% in the last five yrs. Auric is trading at a historical 10.8x PE and 11x EV/EBITDA – cheap, as it does not factor in the potential growth prospects after a possible restructuring of the restaurant business, and possibly rationalization of its various F&B brands to build up economies of scale. Maybank KE does not have a rating on this stock.


CMT: Lend Lease’s Jen mall in Jurong Gateway opened on 15 Jun with much fanfare. Nevertheless, Maybank KE believes Jurong is big enough for all players. On the ground checks showed CMT’s malls (eg. IMM, JCube) continued to see healthy footfalls. As a catalyst, CMT’s upcoming Westgate Mall is already >60% pre-committed ahead of its completion at the end of this year. This will add another 420k sf of retail NLA to meet the demands of the region’s 1m population catchment. Visitors to the upcoming 700bed Ng Teng Fond Hospital and office workers at the office towers of Westgate and Jem will provide additional shopper traffic. The Jurong Lake District’s growth into a regional commercial hub will allow the four malls in the vicinity to co-exist symbiotically to serve the large population. Maybank KE expects CMT’s three malls in Jurong to contribute up to 19% of the portfolio’s NPI on a stabilized basis. Keeps Buy with TP $2.45.

Tat Hong

Tat Hong: OCBC downgrade to Hold with $1.31 TP, recommending investors to take profit. Since ast upgrade on Tat Hong Holdings, the group’s crane fleet grew by ~20% (in tonnage), utilization rate by 5 ppt and rental rates by an estimated 10-15%, resulting in a 66% jump in FY13 PATMI. In house view, the easy money has already been made. Investors who have heeded our call would have made 45% return in 1.5 yrs and should now consider taking some profit. Looking ahead, the macro environment looks increasingly uncertain with sluggish data points coming out of China. Tat Hong’s crane fleet expansion is also expected to slow after a 79% surge in crane tonnage over the past five years. Finally, there is a possible share overhang resulting from private equity AIF Capital’s conversion of convertible preference shares to 53.3m ordinary shares.

Sembcorp Industries

Sembcorp Industries: OCBC initiate with Buy Call and $6.48 TP. House note that SCI is a major industrial group primarily involved in the businesses of 1) utilities, 2) marine and 3) urban development. The nature of its utilities business is relatively stable, while growth is driven by asset acquisition and construction. SCI’s marine arm is also well-positioned to capitalise on demand from the offshore oil and gas industry, given its market-leading position. Finally, the urban development segment possesses growth potential with its focus on emerging markets. The long-term outlook for its businesses look bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. The group has been consistent in paying out dividends of at least $0.15/share each year since 2009, implying a minimum dividend yield of 3.1% at current prices.

Gallant Venture/ PT Indomobil

Gallant Venture/ PT Indomobil: After the completion of acquisition of 52.35% shares of PT Indomobil (IMAS) at Rp5420/share, Gallant is required to undertake a mandatory tender offer for all outstanding Indomobil shares that are not held by Gallant; representing 29.6% shares (public shares). The remaining 18.05% owned by PT Tritunggal Intipermata (a member of Salim Group) will not participate in the mandatory tender offer. The mandatory tender offer price is set at Rp5,426/ share, starts on 25 Jun 2013 and ends on 24 Jul 2013. IMAS' Nissan volume in May was 5,910 units, or up 6% y/y (+76% m/m) coming from a low base in April, when the production in its Purwakarta factory was disrupted by strike for more than a week. 5M13 volume was down 9% y/y to 25,908 units, or came in below CS estimate (37% of its FY13E). 5M13 market share was 5.2% (down from 6.6% last year). As Nissan will launch its LCGC only by 1Q14E, Astra should be the only auto player to produce it by 2H13E. Therefore, CS expect Nissan’s FY13 market share to decline. CS has an UNDERPERFORM rating on IMAS with a TP of Rp4800.


ComfortDelgro: Alpine Bau, a key contractor for Downtown line 2 (DTL2), filed for insolvency after failed attempts to restructure the company’s debt. The LTA which oversees the construction of transportation infrastructure has stated that a delay of 3-6 months can be expected. CS expect the impact on ComfortDelgro’s (CD) earnings to be minimal given that DTL2 will start to contribute to group earnings only in 2016. In addition, rail will likely make up only c.4% of the group’s operating profits for 2015E. No material change in earnings growth outlook for CD as its TP is based on 16x FY14E P/E. CS believe an improved earnings profile of the company justifies a P/E multiple closer to what prevailed in its higher growth period prior to 2007 (versus a 15x ten-year average). Sustainably strong dividend yields of 3.7-4.0% should also provide support to CD’s stock price. CS maintains OUTPERFORM with TP of $2.10.


Enviro-Hub: to lift halt at 8.45am. 51% owned EH Property will acquire F2S1 Investment for an estimated consideration of ~$164.5m (net of debt and other assets). F2S1 holds the PoMo building located at 1 Selegie Road – a 99yr 9-storey retail and office commercial building with 177.4k sf NLA. Its market valuation was $273m as at FY12. As at FY12, F2S1 recorded NTA and book value of approx $116.9m and net profit of $7.4m. Completion is expected to take place on 18 Oct ’13. The acquisition will be funded by EH Property through a combination of internal resources and bank borrowings. The acquisition is in line with Enviro-Hub’s diversification strategy to achieve long term growth, and gives the group further exposure to the property sector.

WE Holdings

WE Holdings: together with Myanmar businessman, Nay Win Tun, have acquired a JVCo in Singapore, WE Dragon Resources, to assess potential petroleum, oil and gas and related resources business opportunities in Myanmar. In addition, the co has entered into a non-binding MOU with Nay Win Tun for a proposed collaboration through a ProjectCo, to carry out petroleum operations projects (incl exploration, drilling, extraction, recovery and trading of petroleum pdts) in five target oilfields in Myanmar. Separately, the ProjectCo shall also seek business opportunities and collaboration with small scale local owners of oilfields. The proposed collaboration is conditional upon the ProjectC’s successful application of a large scale petroleum operations permit from the Myanmar Govt.

Goodland Group

Goodland Group: Group's jv company Goodland KBS (GKPL) announced that the Phase I of its residential project Golden Dragon Condominium (GDC) comprising 12 units have been sold out. GDC is a 12-storey condominium comprising a total of 66 exclusive apartments. GDC is located next to Insein Road situated at the upmarket downtown area within 10km radius of Yangon City Hall. GKPL is a 50-50 joint venture between Goodland Glory and KBS Construction (Myanmar) which will undertake residential property development projects namely Shwe Pyi Tan Complex and GDC.

Baker Tech

Baker Tech: Group has sold its entire 20.29% stake (13.3m shares) in Discovery Offshore S.A. at NOK199.33m (S$41.4m), and will be paid fully in cash by the end of the week. The sale on its stake was completed through a mandatory offer by Hercules Discovery at NOK15/share. Discovery is a Luxembourg-based listing company that owns two Keppel FELS Super A Class high specification harsh environment jackup rigs. The valuation of the offer was based on a 28.5% premium over the net book value of $32.2m as at 31 Mar 2013, and the management of Baker Tech is of the view that the disposal is in the best interests of the group. The net proceeds of $41m will be used for general working capital and future investments. At the last closing price of $0.28, Baker Tech trades at an undemanding historical P/E of 2.7x and 0.8x P/B.


Yongnam: Wholly-owned subsidiary Yongnam Engineering (HK) was awarded two contracts with an aggregate value of HK$166m (S$27m). The first subcontract was awarded by the joint venture of Chun Wo-CRGL-MBEC, for the Central-Wan Chai bypass tunnel. It will include the construction of temporary steel bridges between the tunnel's north point section and Island Eastern Corridor Link, with an expected completion date in Apr 2014. The second subcontract was awarded by the joint venture of Samsung-Hsin Chong, for two MTR stations for the Shatin to Central Link (SCL). Yongnam will undertake the design, supply, install and subsequently dismantling of c.10,000 tons of steel struts for the tunnels and entrances of Sung Wong Toi and To Kwa Wan stations, and has an expected completion date by 2016. This takes current order book to c.$350m, with another $1.3b worth of projects that the group is targeting. At the last closing price of $0.345, Yongnam trades at a forward P/E of 7.8x and has a 12-month TP of $0.41.


Declout: Wholly-owned subsidiary Acclivis has been appointed as Microsoft's first partner in Asia to offer the Partner Hosted Productivity Cloud solution to Microsoft's customers. Acclivis will provide cloud services to the clients of Microsoft with the hosting of an enterprise grade Microsoft Software-as-a-Service solution. Acclivis will be progressively switching its cloud operating systems to Microsoft platforms for the partnership agreement, enabling the hosting solutions for customers using the Microsoft Productivity Suite consisting of Microsoft Exchange, Microsoft SharePoint and Microsoft Lync. This will provide organizations to offer its employees with efficient access to emails, calendars and contacts and knowledge sharing within the organization. Currently, Declout services corporates like Deutsche Bank and SIA, outsourcing clients include IBM and HP. Segment revenue growth has been decent at $15m – 18m in each of the past two years, which translates into growth of 96% and 41% in FY11-12, respectively. Declout's Vertical Domain Cloud platform, which focuses on the games segment – will be the growth catalyst. Group intends to create a games eco-system with online payment and community networks across SE Asian markets beginning with Singapore, Malaysia, Indonesia and Thailand. The platform will support both PC and mobile games. Initial launch expected to take place in 2H13 with full services expected by 2014. If successfully executed, DeClout could find a new beachhead into the SE Asian gaming market that is expected to grow to US$1b comprising 117m gamers by 2016 - according to Niko Partners, which specializes in Asian games market intelligence. At the last closing price of $0.22, Declout trades at a forward P/E of 17.5x. Declout has a 12-month consensus TP of $0.41, implying a whopping 86% upside.


Swissco: Awarded three contracts worth an aggregate of $8.24m for its crew boats. Its new addition Swissco Cheetah crew boat was delivered and immediately deployed on 18 Apr 2013 to Brunei for a 12-month period. Swissco Spear secured a six-month extension in Malaysia with Petra Energy and Swissco Spur secured a minimum 90-day job in Brunei. In addition, Swissco is scheduled to take delivery of Swissco Puma, a crew boat with an estimated completion in Jul 2013. The contract for Swissco Puma is currently under negotiation. In view of the increased demand for crew boats, the group has made plans to expand its fleet of crew boats due to the increase demand, with an additional two to be delivered in 1H14. Mgmt is seeing heightened activity levels in the offshore marine sectors, and believes the demand is sustainable. The Group has 14 vessels under construction for the vessel chartering segment, 7 of which will join in 2H2013, and 6 in FY2014. At the last closing price of $0.235, Swissco trades at historical P/E of 6.2x.

Sunpower Group

Sunpower Group: Awarded a Rmb130m engineering, procurement and construction (EPC) contract from Shanxi Lu'an Mining to supply flare systems for the oil-chemical-power-heat integrated project of high-sulphur coal clean utilisation. The contract is the largest by far for the group, and is expected to be delivered in 2014. Sunpower is a China‐based heat transfer technology specialist engaged in the design, R&D and manufacture of energy‐efficient and environmental protection equipment for diverse industries. At the last closing price of $0.167, Sunpower trades at 4.3x historical P/E and 0.5x P/B.

SG Market (26 Jun 13)

SG Market: S’pore shares are likely to tick following overnight gains on Wall Street on upbeat US economic data and as concerns over China’s credit crunch eased. While bond yields continue to push higher, investors were focused on signals that showed the US recovery is picking up. New orders for durable goods rose 3.6% in May, while housing prices surged 12.1% y/y in Apr, the most since Mar 2006 and sales of new homes climbed 2.1% in May to the highest level in almost five years. In addition, the Conference Board’s index of consumer confidence jumped to 81.4 in Jun from 74.3 in the prior month. Bolstering sentiment, China’s central bank stepped in yesterday to calm markets and add some liquidity to the banking system. With the Jun quarter coming to a close, we might see some window dressing among the index-linked stocks. Bank stocks may rise on bargain hunting as fears of a cash squeeze in China abates. The market is also in a technically oversold position, which points towards a possible a short term technical rebound. Reflecting this, the SGD rallied on Tue against the greenback after recently sliding to its lowest levels in a year. Upside resistance for the STI is tipped at 3,195 with support at 3,065. Stocks to watch for: *Yongnam: Secured two specialist civil engineering subcontracts worth HK$166m ($27m) to supply steel for bridge construction on Hong Kong’s Central-Wan Chai Bypass Tunnel (completion due Apr 14) and steel struts for two MTR stations along the Shatin to Central Link (completion by 2016). The contracts are expected to contribute positively to the group’s financial performance for FY13. *Swissco: Announced $8.2m worth of contracts for three of its crew boats. Delivered in Apr, Swissco Cheetah has been deployed on a 12-month charter (with sale option) to Brunei, while Swissco Spear secured a six-month charter extension in Malaysia and Swissco Spur a minimum 90-day charter with an oil major in Brunei. Swissco Puma will be completed in Jul, bringing its crew boat fleet to eight vessels. In all, the group has 14 vessels under construction in the chartering segment, of which seven will join in 2H13 and six in FY14. *Sunpower: Secured a Rmb130m EPC contract from Shanxi Lu’an Group to supply flare systems for an oil-chemical-power-heat integrated project. This contract is the largest by far for the group and is expected to be delivered in 2014. *Baker Technolgy: Divested its 20.3% stake in Discovery Offshore to Hercules Offshore for NOK199.3m ($41.4m). Discovery’s main assets are two Keppel FELS Super A Class high specification harsh environment jack-up rigs. The first rig was delivered in Jun and delivery of the second rig due in Oct. The group will reap a net gain of $8.8m from the sale, which would lift its NTA and EPS by 1.2¢ *WE Holdings: Acquired a JV company, WE Dragon Resources to assess potential petroleum, oil and gas and related resources business opportunities in Myanmar. In addition, the group has entered into a non-binding MOU with Myanmar businessman Nay Win Tun for a proposed collaboration to carry out petroleum operations projects (including exploration, drilling, extraction, recovery and trading of petroleum products) in five target oilfields in Myanmar. *Goodland Group: Announced that Phase 1 of its 50/50 JV residential project Golden Dragon Condominium (GDC) in Myanmar has been sold out. GDC is a 12-storey condominium comprising 66 apartments in downtown Yangon and is the group’s first property development in Myanmar. The launch of 12 units under Phase 1 in May was fully taken up. *Enviro-Hub: 51% owned EH Property will acquire F2S1 Investment for ~$164.5m (net of debt and other assets). F2S1 holds the PoMo building located at Selegie Road – a 99-year nine-storey retail and office commercial building with 177,400 sf NLA. As at FY12, F2S1 recorded NTA and book value of $116.9m (against market valuation of $273m) and net profit of $7.4m. The acquisition is in line with the group’s diversification strategy into the property sector. *DeClout: Wholly owned subsidiary Acclivis, an IT solutions and hosting services provider has been appointed by Microsoft as its first partner in Asia ex-Japan to offer partner hosted secured private cloud services to Microsoft’s customers. *Ellipsiz: Entered into business transfer agreement to purchase the business and assets of financially-stricken probe card manufacturer Tokyo Cathode Lab (TCL) for US$3.5m against its adjusted book value of US$6.1m. TCL has a production and distribution network in Japan, Taiwan, China, Hong Kong and Singapore. The group believes the acquisition would expand its product offerings and customer base in Japan. *Annaik/TEE Int’l: Both have entered into a MOU to evaluate the possibility of investing in sewage treatment facilities/wastewater treatment plant in Huzhou, China. *Leader Environmental: Proposes placement of 31.7m new shares (6% of enlarged share base) at issue price of $0.063 each to six individuals and one corporation. Half of the $2m net proceeds will be used for investment opportunity through acquisition, JV and strategic alliances, and the remaining half will be used for working capital. *Genting HK: Newswires report that GENS’ 50% owned Travellers has deferred its US$842m IPO to Sep or Oct, in view of local and global stock market weakness. GENS shares dropped 4.6% to US$0.415 yesterday. *SPH: Declined to shed light on media claims that it has delayed the IPO and listing of its retail Reit amid turbulent market conditions. The group recently obtained shareholder approval for the Reit IPO and a 18¢ special dividend.

Tuesday, June 25, 2013


Ramba: Counter is trading at a 13% discount to the minimum price of $0.60 that was offered by a potential buyer to Ramba's majority shareholder. Recall on 6 Jun, Ramba disclosed that the Soeryadjaya family and concert parties, which own a controlling 33.1% stake, have been in discussion with a potential buyer for their entire stake. Family patriarch Edward Soeryadjaya has also received a conditional expression of interest for a possible acquisition of 51% of Ramba shares by way of a voluntary conditional cash partial offer at an indicative offer price of $0.60-0.70. Based on SGX ruling, any new shareholder that has acquired 30% of outstanding shares will tigger a mandatory takeover bid. The offer price cannot be lower than the highest price paid by the offeror six months leading up to the trigger of the offer.

Nam Cheong

Nam Cheong: OSK DMG found from house analysis that street estimates of Nam Cheong (NCL) are too low. FY13F net profit forecast of Rm181m is 10% above the average estimate, which is predicated on gross margin narrowing to 18.65%. The twin effects of a higher-margin vessel mix and the recent charter of NCL’s 12,000bhp AHTS at an estimated 50% gross margin should arrest any margin slide. House expect consensus upgrades following the company’s 2QFY13F results, and reiterate BUY call.


Yongnam: Yongnam has made an announcement with regards to the article dated 21 Jun 2013 on the halting of work at 3 Downtown Line stations as the contractor (Alpine Bau) goes insolvent. The group stated that they supported Alpine in the supply, lease, installation and removal of steel struts and walers for a Cut and Cover Tunnel and the Tan Kah Kee Station, in a subcontract valued at $25m. Yongnam estimates its exposure to Alpine’s insolvency for the remainder of the Project to be approximately $5m and the Group is in communication with the Land Transport Authority for the next course of action. From yesterday's posting, LTA has stated that they will be working closely with the new contractor to continue engaging the existing subcontractors to ensure a minimal impact on the schedule.

Gold / Silver

Gold / Silver: HSBC further slashes its gold and silver price forecasts. Cites the following reasons: - prospect of Fed tapering (ie reduction of quantitative easing asset purchases) was more aggressive than initially envisaged, and has resulted in higher US treasury yields, which are traditionally negative for gold. - Turmoil in emerging markets have weighed on bullion - Slowdown in China may reduce consumer appetite for physical gold

Genting SP

Genting SP: While all attractions at GENS have remained open through this crises, visitation to its outdoor water park has dropped. Credit Suisse notes outdoor activity (20% of revenue) may suffer for as long as the haze lasts, but may be compensated by higher “indoor” gaming revenue (80% of revenue). Having experienced an exceptionally weak win rate in 1Q13, the win rate in future quarters should eventually improve and normalize. Additionally, mgt expects potential legislative change in Japan in Oct/ Nov (towards legalizing casino gambling) which could boost sentiment on GENS. The house maintains Outperform on GENS with TP $1.80.

China Minzhong

China Minzhong: The grp attended CIMB’s APAC conference, where the key highlight was that the board is seriously considering paying dividends in FY13 but nothing is firm yet. It is possible that Minzhong will look to match Indofood’s 40% payout over time, although for now, an estimated 10% payout would translate to a yield of 2.2%. FY13 operating cash flow is guided to be about Rmb700m-800m The cultivation business rather than the processed business that will drive earnings, and to capitalise on this, CMZ will be ramping up industrialised farming facilities and is targeting to open three new facilities in Tianjin, Jiangsu and Sichuan. Indofood is likely to get a board seat but this tie-up will take time to yield significant impact on earnings. Supply contracts for the processed business can be achieved within six months but the potential JV to build cultivation facilities in Indonesia will take time.


NOL: OCBC downgrade to HOLD in light of weaker than expected freight rates and poorer industry-wide action on capacity management. According to the SCFI, average freight rates have declined by more than 13% QoQ as compared to an increase over the same period last year. This downward trend could reduce the impact of the upcoming general rate hike on 1 Jul – enacted by the Transpacific Stabilisation Agreement – unless greater effort on reducing capacity is undertaken by carriers ahead of the peak-season. While the low-fuel cost environment and ongoing cost-saving initiatives will benefit NOL, house lower forecasts in anticipation of a slightly disappointing peak season. Lowering P/B peg to 1.1x (1.3x previously), fair value estimate falls to $1.17.


Capitaland: OCBC believe recent PMI and interbank liquidity datapoints from China point to increasing macro uncertainties as authorities attempt to engineer a more sustainable albeit slower tempo of growth. This being so, see heightened downside risks for CAPL’s Chinese residential sales and rental outlooks. In Singapore, increasing visibility of a QE exit scenario have moved bond yields to recent highs and a trend of rising mortgage rates would likely ensue from here. House judgment is that while rising rates alone are unlikely to trigger dramatic residential price downside, it would likely weigh on primary sales volumes ahead. House ower fair value estimate to $3.77 but maintain a BUY rating as consider CAPL shares to be likely oversold at this juncture at a 45% discount to RNAV. Note that 36% of CAPL’s value is constituted by its stake in listed CMA which has dipped only 8.2% YTD versus CAPL’s whopping 19.5% correction. Moreover, highlight that CAPL continues to hold a strong balance sheet ($5.4b cash, 44% net gearing) which would buttress its businesses through potential headwinds.

Oxley Holdings

Oxley Holdings: Pushing its way further into Malaysia as the group announced it has acquired a leasehold site in Johor Bahru for RM 92.8m ($40.0m) from Global Capital and Development Sdn Bhd. With an area of about 17,280 sqm, the site is to be used for commercial and hotel development, with plans to develop the land, subject to approvals from the relevant authorities. The acquisition is to be funded by internal resources and bank borrowings.

Lian Beng

Lian Beng: Group has won a $115m contract to build a condominium along Flora Drive in Pasir Ris, bringing its orders secured year-to-date to $950m and stretches its order book to a whooping $1.4b. The contract period is between Jun13 – Oct15.


OKP: Has secured a $14.98mcontract from PUB wich involves the construction of drains and culverts in residential areas such as Parbury Avenue, Sennett Avenue, Lucky Gardens and Upper East Coast Road. Work on the project starts today, and is expected to end on Jun15. The addition of its largest contract in the year-to-date boosts OKP's order book to stand at $408.5m. Contract is expected to contribute positively to the group, but has no material impact on, the EPS and NTA for FY13.

Keong Hong

Keong Hong: Awarded $161.9m to be the main contractor for J Gateway by MCL Land (Gateway), a subsidiary of MCL Land. The residential development site at Boon Lay Way, Jurong East, has a land area of 124,732 sf and will consist of two towers of 20-38 storeys of 1-4 bedroom units with a total of 738 units. Construction works will commence on 28 Jun 13 and is scheduled to be completed within 39 months. Keong Hong has an order book of $690m, with projects up to 2016. On the street, Keong Hong has an estimated 12-month TP of $0.71 (albeit only having a single coverage).

China Fishery/ Pacific Andes

China Fishery/ Pacific Andes: China Fishery makes the third takeover bid for Copeinca, an offer of NOK68.17/share totalling NOK4b (US$653m). The new offer is a 14% increase from its second bid of NOK59.70/share, and 27% above its first bid of NOK53.85/share. The group currently owns 8.22% stake and another 8.97% in option shares. The group has received pre-acceptances of 57.04%, giving them an effective 74.23% control with the new offer. Seems like this deal is likely to go through, with the pre-acceptances from some of the majority stakeholders that were against the deal previously. The acquisition will raise China Fish’s catch quota in North and Central Peru from 6.2% to 16.9%, and its catch quota in South Peru from 11.7% to 14.7%. It will also boost China Fish’s positioning as the largest fishmeal company in Peru and one of the top producers in the world. China Fishery had previously raised $344.2m from its rights issue and secured a loan facility of up to US$295m, on top of its cash balance of US$26m. With the new offer of US$653m, China Fishery will require an additional US$75.4m on top of its US$295m loan facility. However with the new offer, China Fishery's gearing will increase substantially from 75% (28 Mar 13) to 118%. Fitch has cautioned that Copeinca's debt ratios would soar above 5x from 2.3x if China Fish’s bid is successful. China Fish now trades at 5.2x historical P/E and 0.4x P/B. According to Bloomberg consensus, China Fish has an estimated 12-mth TP of $0.37.

SG Market (25 Jun 13)

SG Market: S’pore shares are expected to open lower, tracking overnight weakness in Wall Street and overseas bourses in the absence of positive leads. US stocks sank in heavy volume amid concerns over a stimulus cutback from the Fed and worries that a credit crunch would threaten China’s growth outlook. But the market pared earlier losses in late session after some Fed officials downplayed talk of an eventual end to the central bank’s bond purchases. Still the market volatility index or VIX jumped above 21 to its highest level this year, before easing back slightly. The STI may continue to face selling pressure in property and commodity stocks as bond yields spike up and commodity prices extended their slump. Investors also fret that a tightening of liquidity in China could further slow the global economy. The SGD has also weakened to a 12-month low of $1.28 against the greenback, signaling a capital flight out of Asia. The STI is pinned below its 200-day moving average, suggesting that a mid-term correction is well underway. Downside supports are found at 3,065, followed by 2,980 with overhead resistance at 3,195. Stocks to watch for: *China Fishery: Launched a new cash offer for Peruvian fishmeal company Copeinca at NOK68.17 per share, which is 14.1% above its previous revised bid of NOK59.70. Together with its existing 8.22% stake, a call option for another 8.97% from Vermar Azul and pre-acceptances representing 57.04% holdings, the group has gained effective control of 74.23% of the total outstanding shares of Copeinca, elevating China Fishery to become Peru’s largest fishmeal and fish oil producer. *Lian Beng: Secured a $115m contract from Tripartite Developers (JV between Hong Leong Holdings, City Dev and TID) to design and build a 396-unit condominium development, comprising nine residential blocks, a clubhouse, basement car park and other auxillary facilities at Flora Drive. The project is expected to commence in Jul and be completed in 28 months. Separately, the group has also clinched a $85m contract to construct a 12-storey office block. The two projects take total contracts secured year-to-date to $950m, boosting its order book to a record $1.4b. *Keong Hong: Won a $161.9m contract from MCL Land to build the 738-unit J Gateway condominium development, comprising two 38 and 20-storey tower blocks. Construction for the project will commence in Jun with completion in 39 months. The latest contract takes its order book to $690m, with projects stretching till 2016. *OKP: Awarded $15m contract from national water agency PUB to improve drainage in in residential areas such as Parbury Avenue, Sennett Avenue, Lucky Gardens and Upper East Coast Road. Works will commence this month and be completed in Jun 15. This addition brings its gross order book to $408.5m. *Oxley Holdings: Pushing its way into Malaysia after subsidiary Oxley Zest successfully tendered for a 99-year leasehold land in Johore for RM92.8m. The 186,000 sf site is zoned for commercial and hotel development, subject to approvals from relevant authorities. The acquisition will be funded by internal resources and bank borrowings. *Logistics Holdings: Acquired all the strata lots and the common property in Minton Court for $13.4m, marking the group’s foray in the property development business. Located at Paya Lebar Crescent, Minton Court is a freehold site with a land area of 13,271 sf, which the group plans to redevelop the property into a high-end cluster housing, comprising 6-8 units. The estimated cost of acquisition works out to be ~$1,010 psf of land area. *Amplefield: Entered into framework agreement with Sing Viet City to undertake joint venture projects in the 363.8-ha township development in Binh Chanh district in Ho Chi Minh City Vietnam. Both Amplefield and Regionaland, which owns 94.3% of Sing Viet City share similar major shareholder and directors. *Artivision Technologies: 40% owned Artimedia HK has sealed a deal with China consumer internet platform Xunlei to enable the latter to broadcast advertisements over its online video streaming website Xunlei Kankan using the group’s Advision platform. According to iResearch, Xunlei Kankan has 27.2m unique views per day with a 9.3% reach in China. *Serial System: Seeing renewed interest from long time investor Sam Goi Seng Hui, who bought 1.6m shares @ $0.128 on 21 Jun, raising his stake to 11.02% from 10.84%. Last week, the group agreed to subscribe for new shares in Jubilee at $0.1543 apiece, representing a 7.7% stake. Upon completion this will bring Serial’s shareholding in Jubilee to 13.6%.

Monday, June 24, 2013

Auric Pacific/ Food Junction

Auric Pacific/ Food Junction: Auric Group has an offer to take Food Junction private, at an offer price of $0.255 (40% above last traded price of $0.182) per share. The formal offer document will follow (typically between 14-21 days). The offer price represents a premium of ~34.2% to the NAV per share of $0.19 as at 31 Dec 2012. Auric Group (Auric Pacific Group and Auric Pacific Investment Holdings) currently hold an aggregate of 61.4% of the share capital in Food Junction.

Suntec REIT

Suntec REIT - Weakness is pretty much in-line with the entire REIT sector, as the slump continues, as the sector is viewed as potentially one of the most exposed to rising rates. Note that Suntec REIT is one of SGX most heavily geared counter with its leverage ratio at close to 39%. Only K-REIT and MCT has a higher gearing according to Deutsche screen. Hence, any potential rise in rates could potentially result in a drop in higher DPU for REITs which are highly geared.

Hiap Tong

Hiap Tong: "Growing investor interest after share price more then doubles year-to-date", Mobile-crane specialist Hiap Tong has seen a pick-up in trading activity, while share price has more then doubled since the start of the year, helped in part by wider broker coverage on crane operators amid a buoyant construction sector in Singapore and the region. Hiap Tong’s niche lies in its fleet of 120 mobile cranes, which are primarily employed in the oil and gas sector and contributes to the bulk of its revenue. As part of its expansion strategy, the group had placed orders for another $40m worth of cranes in 2H12, which are expected to be delivered this year, after taking into account the six to 12-month lead-time. In a recent interview with The Edge magazine, the group projected the utilization rate of its fleet to remain at 80% and rental rates to stay firm, thereby sustaining its earnings momentum in the current year. Hiap Tong however has no plans to expand overseas aggressively for now, citing capacity constraints due to high demand in Singapore. Nevertheless, it has recently opened an office in Johore to tender for jobs in Trengganu and Kuala Lumpur. Meanwhile, the group is proposing a private placement of 50m new shares at $0.217 each to 17 investors to raise $10.9m, to fund its capital expenditure, marketing expenses and working capital. The placement represents ~19.4% of the group’s existing share capital, which could improve its free float of ~24% and potentially enhance its stock liquidity. At the current price of $0.28, the stock trades at 14.7x trailing P/E versus larger peers Tat Hong at 11.6x and Tiong Woon at 19.8x.


NOL: CIMB reduces its profit forecasts for NOL due to the very weak spot rates in 2Q13, which are below 2Q12 levels for the Asia-Europe and transpacific trades, and TP annual contracts were likely renewed at flat levels. This is offset by the group's cost reduction efforts, as the mgmt indicated that it is likely to perform better in 2013 than in 2012. NOL will take delivery of 14 new vessels this year and 10 next year, while at the same time return 31 high-cost charters over 2013-14. This will lower its structural costs. Separately, with a large number of carriers announcing general rate increases (GRI) from 1 Jul, and with rates reaching desperate levels, there is a high chance of spot rates rising, but sustainability is still a question mark. NOL has an UNDERPERFORM rating with TP of $1.10, based on a 1.1x P/B valuation.

SPH (technical)

SPH: Technicals do not look positive in the near term with the main indicators indicating that the downtrend could continue as the RSI and stochastics are moving towards the oversold region. The counter was not able to break the 50MA recently on 18 Jun and had moved downwards past the 20MA. The current support levels are at $4.12 and $4.03 thereafter. Near-term support is at the 20MA of $4.31.

Suntec REIT (technical)

Suntec REIT: On the shorter term, historicals suggest a high probability on a relieve to its downtrend which started on 22 Apr, with both the RSI and Stochastics at the oversold region. In addition, the ADX also suggests that the strength on the downtrend appears to be weakening. The next support level is at $1.45, with a near term support-turned-resistance level of $1.56.

Gallant Venture

Gallant Venture: Group is offering Rp5,426 (S$0.695) for each PT Indomobil Sukses Internasional Tbk (IMAS) share that it does not already own, following its Rp78.5tn (S$10m) acquisition of a 52.35% stake in the Indonesia-listed automotive group. The offer price is slightly higher than the acquisition price of Rp5,420 per share. It is also the average of the highest daily traded price of IMAS shares on the Indonesia Stock Exchange on each trading day from Sept 28 to Dec 26, 2012. Gallant will begin its tender offer from 9.30am on Tuesday (Western Indonesian Time). The offer will end on July 24, 2013 at the latest.

CSC Holdings

CSC Holdings: Revealed that it has $5m outstanding progress claims against main contractor Alpine Bau for its foundation works at the three MRT Downtown Line stations (King Albert Park, Sixth Avenue and Tan Kah Kee). The group's subsidiaries were awarded the foundation contracts by Alpine, and had subtantially completed the physical works at the stations. Alpine Bau, Austria's second largest construction firm, had won the contract for the design and construction of the three stations and tunnels along Downtown Line Stage 2 in 2009, and has since been plagued by financial troubles which led to the firm filing for insolvency on 19 Jun. CSC reported its 4QFY13 results in May, with the loss of $2m mainly due to a $3.6m provision of doubtful debts from Poh Lian Construction (a subsidiary of United Fiber System), that applied for judicial management on 13 Mar. Construction works at the three stations have been put at a halt as LTA looks to appoint a new contractor to take over the project. In addition, LTA will be working closely with the appointed contractor to continue engaging the existing subcontractors (CSC Holdings as one of them) to ensure a minimal impact on the schedule.

China Minzhong

China Minzhong: CIMB maintains O/p with $1.27 TP, in anticipation of a re-rating as corporate governance concern eases. House investor relations participated in CIMB’s annual Asia Pacific conference in Kuala Lumpur on 19-20 June and the key takeaways from meeting with investors are: 1) The cultivation business rather than the processed business will drive earnings. And to capitalise on this, it will be ramping up industrialised farming facilities. Management is targeting to open three new facilities in Tianjin, Jiangsu and Sichuan. 2) Indofood is likely to get a board seat but this tie-up will take time to yield significant impact on earnings. Supply contracts for the processed business can be achieved within six months but the potential JV to build cultivation facilities in Indonesia will take time. 3) The board is seriously considering paying dividends in FY13 but nothing is firm yet. It is possible that Minzhong will look to match Indofood’s 40% payout over time. FY13 operating cash flow is guided to be about Rmb700m-800m. CIMB note that the key re-rating catalysts will be Indofood getting a board seat and dividends. These two events should ease corporate governance concerns. Although free cash flow in FY13 will be low given management guidance that free cash flow will hit a below-expectation Rmb1b. A 10% payout would translate into a yield of 2.2%.

Venture Corp

Venture Corp: OCBC maintains Hold with $7.37 TP. House note that conversation with Venture highlighted that sentiment among its customers has largely remained cautious given the still uncertain macroeconomic conditions. This is in line with tepid macro data points which were released recently. House now expect grp’s 2H13 recovery strength to be weaker than its previous expectations. Hence, pare FY13/14F revenue forecasts by 5.4/1.6%, even as house take into account the recent appreciation of the USD vis-à-vis the SGD. FY13/14F net profit estimates are lowered by 7.8/6.6%, respectively. While house like Venture’s strategy of continuing its acquisition drive for new customers and growing its market share with existing customers by leveraging on its strong design and engineering capabilities, prefer to wait for clearer signs of a rebound in the global economic conditions before turning more positive on the stock.


Wilmar: OCBC downgrades to Hold and slashes TP to $3.25 from $3.90. House expect more volatility ahead, with grp’s large exposure to China via its oilseeds crushing and consumer pack businesses, is certainly feeling the impact from the recent slew of sluggish economic data out of the mainland. As such, stock price has been particularly volatile over the past week or so, rising by as much as 7.1% to a recent $3.31 high before retreating by 6.3%. Going forward, continue to expect more volatility in share price, especially if market adopts a less “risk on” approach. In view of this, house reduce valuation peg from 15x to 12.5x, which in turn reduces fair value from $3.90 to $3.25.


Capitaland: UOB Kay Hian maintains Buy with $4.45 TP. House see value emerging from CapitaLand, which has been sold down 32% from its February high, worse than any of the S-REITs. The recent China acquisitions totaling $763.5m of a mixed site in Shanghai and a prime landed property in Singapore result in a RNAV accretion of 5 cents. (0.8%) The stock is currently trading at a steep 42% discount to its RNAV and a 30% discount to its long-term P/B value of 1.2x (vs 0.84 currently). An analysis of the past three cycles suggests a favourable risk-reward ratio of 3.2x (upside 154%/downside 43%) using the average of the upcycle peak P/Bs as the gauge for upside potential and average of the downcycle trough P/Bs as the gauge for downside risk.


GoldenAgri: Indonesia has pinpointed eight co’s - including PT Sinar Mas Agro Resources and Technology (Smart), the parent of GGR, as being responsible for the raging forest fires in Sumatra that have caused hazardous levels of haze in Singapore over the past week. Senior forestry officials were quoted as telling Reuters yesterday that the majority of the hotspots in the province of Riau are inside Smart concessions. Smart came out to defend itself after it was named in various news reports. Golden Agri said that the company knew of no hotspots on its concessions. Given the current situation, grp has intensified its fire surveillance patrols with sufficient firefighting equipment.


Guthrie: United SM Holdings intends to make a voluntary unconditional cash offer of 88c per share for Guthrie to take the company private. Grp note that delisting Guthrie would the company with greater control and management flexibility in utilising and deploying its available resources. The historical trading liquidity of the shares has generally been low with an average daily trading volume of less than 650,000 shares over the 12-mth period, while the offeror also cited compliance costs relating to the listing status and said the company has not carried out any exercise to raise cash funding since 2006.


Cosco: Continues the trend of Chinese shipyards winning contracts for offshore rigs and floating units, as it secured contracts from a Singapore entity for two high-end floating accommodation units valued at over US$170m each. Cosco (Nantong) would be converting two semi-completed hulls to complete the floating units. The units are scheduled for delivery 24 mths after the contracts are declared effective. Cosco has won ~US$700m worth of contracts YTD, CIMB think Cosco is able to meet house expectations as Upstream recently reported that the yard had signed a contract to build two deep-water drillships for US-based newcomer X-Drill, costing US$650m-700m each. Expect this contract to be formally announced soon, pending customer’s deposits and deposits and financing arrangements. House however note that the offshore segment is barely profitable with gross margin at 8-10%, with very little room for error. Cost overruns and provisions are likely to wipe out any profits from these contracts. As a state-owned enterprise, Cosco may be obligated to keep its current scale of operations and workforce, sacrificing profitability. CIMB maintains U/p with $0.46 TP. House note that until Cosco achieves stronger-than-expected earnings for several quarters, think the stock is not worth the punt despite its recent weakness.

SG Market (24 Jun 13)

SG Market: S’pore shares are likely to remain on edge following the modest rebound on Wall Street in a volatile trading, marked by quadruple-witching expiration of index/stock futures and options. US stocks has initially swooned over the mid-week remarks by Fed Chairman Ben Bernanke, suggesting that the central bank may wind down its monetary stimulus by mid 2014 but later recovered after a Wall Street Journal analysis said that the market may be misreading the Fed and that a reduction in bond purchases may not come as soon as some expect. In any case, yields on the 10-year Treasury note climbed 12 bps to break past the 2.5% mark for the first time in 22 months to 2.53%, a technically significant level, which may extend to 2.75%. The market is in a price discovery process to find a floor to adjust to the new reality of higher interest rates The STI may follow the 1.2% rise in the Nikkei in early trades after the index covered the opening gap down last Fri but expect the gains to be capped by stiff overhead resistance is at 3,195, as represented by the 200-day moving average. Downside risk is at last week’s low of 3,065. Stocks to watch for: *Cosco Corp: Secured contracts from a S’pore customer for the conversion of two semi-completed hulls to high-end floating accommodation units, valued at US$170m each. The units are scheduled for delivery in 24 months. *Guthrie GTS: United SM Holdings, jointly owned by substantial shareholders Putra Masagung and Anthony Salim, has made a voluntary unconditional cash offer of $0.88 per share with intention to delist and take the company private. The offer price represents a 21.4% premium above the last close and is the second takeover attempt by the same parties, who collectively control 69.2% of Guthries. Including shareholders who have undertaken to accept the offer, the figure rises to 70.64%. *Oxley Holdings: Subsidiary Oxley Star entered a joint venture agreement with Beverly Heights Sdn Bhd (BHP) to develop a 1.29m sf freehold site in Penang, Malaysia into a residential development. Oxley Star will be entitled to 70% of total sales of the project, while BHP will get 30% subject to a floor of RM500m and cap of RM900m. *Marco Polo Marine: 49.6% owned PT Pelayaran Nasional Buana Binan Raya (BBR IJ) acquired a mid-sized anchor handling tug supply vessel from a distressed yard for US$18m. The AHTS vessel will be chartered to a leading oil company for deployment in Indonesian waters. *Golden Agri: Indonesia has named eight companies, including PT Sinar Mas Agro Resources and Technology (SMART), parent of Golden Agri, as being responsible for the raging forest fires in Sumatra that have caused the choking haze in Singapore over the past week. A top forestry official was quoted as telling Reuters yesterday that the majority of the hotspots in the province of Riau are inside SMART concessions. Separately, Golden Agri has disclaimed knowledge of any hotspots on its concessions. *Straits Trading: Following the disposal of 5m shares in the open market by substantial shareholder Third Avenue Management (on behalf of numerous portfolios), the company’s free float now stands at 10.4% and has accordingly met the minimum 10% public float requirement to maintain its listing status. *Willas Array: Made an application to to dual list on the main board of the Stock Exchange of Hong Kong. The proposed HK listing is expected to give the group greater exposure to potential investors in China and HK. In addition, the dual listing in both Singapore and HK will enable the grouo to attract different investor profiles and have ready access to two different equity markets. *Pacific Healthcare: Proposed a renounceable non-underwritten 1-for-4 rights issue at $0.048 per rights share to raise $5.5m, which will be used to finance the group's expansion and general working capital. *China Fishery/Pacific Andes: Requests trading halt *Mirach Energy: Requests trading halt