Wednesday, January 29, 2014
Hankore: OSKDMG Initiates Coverage with Buy Call and $0.161 TP. The house notes that in a game-changing deal, HanKore is set to acquire all of China Everbright International Ltd’s water assets. Assuming the acquisition takes place successfully, house expect a 21% fully diluted EPS CAGR in earnings until FY16. Trading at 17x FY15F P/E, HanKore is undervalued against a peer average of 30x. In a reverse takeover (RTO) deal, HanKore will acquire all water assets of HK-listed China Everbright International, which turns the former into CEI’s subsidiary. With an SOE backing, it now possesses a strong differentiator in parentage. The house expect a strong, systematic ramp-up of running capacity on organic plants to 1.14m tonnes/day by 2QFY16 from the existing 590,000 tonnes/day, as well as a lift in tariff rates on completion of HanKore’s upgrading and plant expansion initiatives. In addition, contribution from CEI’s portfolio of 1.84m tonnes/day capacity will greatly boost revenues from FY15F onwards. Water treatment revenues will hit CNY258m in FY14F and CNY1.1bn in FY15F, significantly up from FY13’s CNY201m. Recently acquired EPC arm Jiangsu Tongyong Environment Group (JTEG) will allow HanKore to recognise CNY456m in revenue in FY14F – a sharp 170.5% spike from FY13F’s CNY168.6m – and on higher gross margins of around 25% vs 9.1% previously. HanKore’s pipeline of expansion plans, valued at CNY1.5bn, should further boost JTEG’s EPC orderbook, as well as its own revenue and earnings visibility. Overall, the house ntoes that HanKore is undervalued against a peer average of 30x. Believe its strong growth profile and the top-tier SOE parentage backing does not warrant such a low valuation.
OEL: Counter had a case of profit taking after announcing a property acquisition deal, which valued the company at an unattractive proforma P/B of 1.2x (based on $0.13/share). Following the news release, share price has now adjusted to a proforma P/B of 0.83x, which reflects the execution risk of the group entering into a new business. Recall on 16 Jan, OEL entered into a heads of agreement to acquire two property investment companies in S’pore from a vendor linked to Heng Fai Enterprises, which is helmed by high profile deal maker Chan Heng Fai. The consideration of $53.9m will be satisfied by payment of $10m in cash, and the issue of $43.9m of secured convertible bonds. Based on proforma FY12 numbers, and taking into account the disposal of its distribution business, OEL estimates that post-acquisition, the group’s NTA will rise from 4.42¢ to 10.93¢, and EPS to rise from -4.38¢ to 0.11¢. Nevertheless investors may be hopeful that if Chan fully converts the bonds into 399m new shares at $0.11 each, he will emerge as the new majority shareholder of OEL with a 37.4% stake in the enlarged share base, paving the way for a change of control and a new lease of life for the company.
SMM: Trading Central notes the stock has broken below its key support at $4.15 and accelerated downwards. Furthermore, the daily RSI indicator is capped by a declining trend line, and is still bearish, without showing any reversal signals. In addition, both 20-day and 50-day moving averages are heading downwards. As long as $4.35 is not surpassed, see a likely decline to $4 and $3.9 in extension
Wilmar - Co. has been pretty quiet on the corporate front, although we note that recently Sugar prices fell to a 3 ½ year low late last week, as strong global production added to a global glut. Sugar futures for delivery in Mar fell to US$0.1513 a pound, the lowest level since Jun’10. Meanwhile, Brazil, the world’s largest producer and exporter of sugar, crushed more cane versus the prior year, and Thailand, the second largest sugar exporter, also recorded robust output. SGX’s largest commodity trader Wilmar, has significant exposure to sugar. The segment accounted for 8.5% of the group’s pretax profit in 3Q13 (albeit partially overstated due to seasonality patterns). The current global excess capacity of sugar and plunge in prices may put a dampener on Wilmar’s sugar operations and earnings, notwithstanding the hedging strategies implemented by the group. Moreover, Wilmar is currently in the midst of finalizing the purchase of a 25% stake in Shree Renuka Sugars, India’s largest sugar refiner, and is tipped to inject up to Rs7.4b (US$120m) of fresh equity into Renuka, assuming the deal is priced at the high end of the indicative issue price of Rs30-33 per share. Nevertheless, Wilmar’s recent share price weakness may reflect investors’ unhappiness with the deal valuations. With Renuka shares last traded at Rs21 on the Bombay Stock Exchange, this means Wilmar would be effectively paying a hefty 30+% premium for a non-controlling stake. Longer term however, Wilmar (Buy, TP $4.30) remains Maybank-KE’s top pick in the commodity sector because of its superior earnings visibility, and strong balance sheet, which makes it the least vulnerable to a shrinking global liquidity and rising cost of debt. Today's rise could perharps be sparked off by some bargain hunting amongsts investors.
Global Invacom: responded to SGX query on trading activity that it is contemplating a secondary listing of its shares on the Alternative Investment Market (AIMS) of the London Stock Exchange and is in process of appointing nominated advisers and brokers to advise the company on such a listing. There is no certainty or assurance that the company will proceed with the proposed AIM listing. The shares have surged 50% over the past week
DBS: BNP lifts forecasts, reiterates as Top Regional Bank. BNP lifts EPS forecasts 6%-9% for 2013-14 on Singapore Non-Oil Domestic Exports growth, DBS 3Q operating performance, disposal of remaining 9.9% stake in BPI. Sees core ROE rising to 11.4% by 2015 from 10.2% in 2013 Raises TP 4.6% to $22.19 (upside 33%)
CDL Hospitality Trust: renames Orchard Hotel Shopping Arcade to Claymore Link under a rebranding exercise. The property will undergo asset enhancement, and is scheduled to reopen by end 2014. Management projects a return on investment of more than 8% with increased NLA and rental uplift.
City Dev: its JV with TID Residential submitted a top bid of $226m ($350 psf ppr) for a 2.85ha executive condo (EC) site in Canberra Drive near Sembawang Shopping Centre. The price was within market forecasts of $320 to $380 psf ppr, but lower than the winning bids (between $355 to $382 psf ppr) for other recent EC sites, reflecting caution amongst developers. City Dev plans to build an 11 storey mid-rise project with an estimated 660 units. Market watchers tip a selling price of ~$750 psf,
Keppel REIT is looking for buyers for Prudential Tower. KREIT is reported to be asking $531m ($2,400psf) for its 92.8% stake, c.10% above its Dec 31 valuation. The divestment could be used to fund an acquisition. Recall that management had stated at its 4Q results briefing KREIT is looking to sell older assets to help fund acquisitions and may approach Keppel Land to acquire its stake in MBFC Tower 3. Strong liquidity in the strata office market, reflected in the sale of Westgate office tower, could help KREIT achieve an attractive exit price. Deutsche values Keppel Land’s 33.3% stake in MBFC Tower 3 at $1.1b, in a scenario where KREIT funds the balance of the acquisition fully via debt, Deutsche believe that the acquisition would be slightly accretive (c.3%). Assuming that management keeps gearing level at 42% currently, this would imply c.$350m in equity fundraising, making the acquisition dilutive, suggesting a potential need for income support. Deutsche maintains a Hold at TP $1.28
First Resources: UOB Kay Hian maintains Buy with TP $2.60. The house note that 2013 FFB production was above expectation boosted by the contribution from newly-acquired plantations. Believe that FR would continue to outperform peers and its 2013 full-year results are likely to exceed our expectation with better-thanexpected FFB production and better contribution from downstream operation as it switches to biodiesel production amid narrowing refining margin.
According to Bloomberg and local press articles (Straits Times), Keppel REIT is looking for buyers for Prudential Tower. KREIT is reported to be asking $531m (S$2,400psf) for its 92.8% stake, c.10% above its Dec 31 valuation. The divestment could be used to fund an acquisition. Recall that management had stated at its 4Q results briefing KREIT is looking to sell older assets to help fund acquisitions and may approach Keppel Land to acquire its stake in MBFC Tower 3. Strong liquidity in the strata office market, reflected in the sale of Westgate office tower, could help KREIT achieve an attractive exit price. Deutsche currently values Keppel Land’s 33.3% stake in MBFC Tower 3 at $1.1bn, and in a scenario where KREIT funds the balance of the acquisition fully via debt, believe that the acquisition would be slightly accretive (3%). However, this would take gearing up to c.47%. Assuming that management keeps gearing level at 42% currently, this would imply $350m in equity fundraising, making the acquisition dilutive, suggesting a potential need for income support. Continue to see a weakening DPU trend given the fall off in income support and hence maintain Hold recommendation. Valuations are fair at 0.81xP/B and 6.6%/5.7% FY14/15 yield.
Fragrance: 4QFY13 net profit spiked 288% to y/y $133.7m primarily attributable to fair value gain of $102.5m. Meanwhile, revenue improved 34% to $136.4m on the back of higher property sales (+40.7%) of $121.5m which comprised maiden revenue contribution from Kensington Square (60% JV), as well as progressive recognition of Parc Rosewood, Novena Regency, Wak Hassan, Suites @ Bukit Timah, Le Regal and Urban Vista. Its hotel segment declined 1.4% to $15.0m due to a decrease in average occupancy rate (91.4% to 88.3%) and revenue per available room (from $97.5 to $92.3). NAV of $0.18. Group proposed final dividend of 0.4cts/share, 220% above last year's 0.125cts/share.
CDL Hospitality Trusts: 4Q13 results were in-line with estimates, as distributable income of $28.5m (+1.3%) and DPU of 2.92¢ (+0.7%) took FY13 DPU to 11.0¢ (-3.1%). Net property income (NPI) was up 2.5% to $36.5m, in tandem with a 2.8% rise in gross revenue of $39.4m, led by strong contributions from the Angsana Velavaru resort in Maldives from which there was a recognition of $5.0m (inclusive of a $3.0m 11 months variable rent) revenue contribution. The resort has performed remarkably since its acquisition in Jan’13, with revenue per available room (RevPar) up 21.1% y/y. Domestically, the Singapore portfolio recorded a decline in revenue, dragged by additional new supply of hotel rooms, exacerbated by an overall weaker corporate market as many companies globally exercised restraint in travel budgets. As a result, RevPAR for the REIT’s Singapore hotels fell by 6.0% to $187 during the quarter. Performance was also impacted by tenants progressively moving out of the Orchard Hotel Shopping Arcade (OHSA) during the quarter, as part of a major asset enhancement exercise, while the weakening Australian dollar (AUD) also led to lower fixed rent contributions from the group’s Australian operations. Going forward, CDLHT expects demand for the Singapore's hospitality industry to be supported by more large-scale corporate and sporting events slated to be held in 2014, while the slower pace of the Australian economy and weaker AUD may affect the performance of the Australia Hotels but its effect will be mitigated by the largely fixed rent structure. The acquisition of Jumeirah Dhevanafushi, which was completed on 31 Dec’13, making it CDLHT's second Maldives resort following that of the successful acquisition of Angsana Velavaru, is expected to contribute positively to the group’s performance. Overall, CDLHT’s Singapore portfolio occupancy stood at 87.0%, a slightly drop versus 88.9% in the corresponding period, while aggregate leverage was at a comfortable 29.7% with a debt maturity profile of 2.6 years. At current price, CDLHT trades at an annualized 7.3% yield and 0.97x P/B versus peer average of 6.9% current yield and 0.93x P/B. Latest broker ratings as follows: OCBC places its Buy rating and $1.84 TP under review
SMRT: SMRT 3QFY14 results missed estimates, with net profit lowered 44% y/y to $14.2m due to higher operating expenses mainly attributable to staff costs (+21.4%) from increased headcount in train and bus operations, and the recent wage revision exercise. Meanwhile, revenue improved 4.1% to $293.3m on the back of growth from rental (+11.2%), advertising (+27.4%) and engineering and other services (+46.8%). Operationally, bus and LRT remains loss making for the group, while train profits are slowly chewed off (-97%). Notably, rail operations (train and LRT combined) recorded its first ever quarterly loss of $0.2m, while its overall fare business (train, bus and LRT) suffered a $9.0m operating loss, in contrast to 3QFY13’s S$7.4m operating profit. Net gearing ballooned 7x to 64% on a $392.7m payment for 17 trains and operating assets taken over from LTA. At $1.19, SMRT trades at a 1.7% FY14 yield and 19.8x forward P/E, slightly above its historical average of 18.4x. Latest broker recommendations as follows: Maybank-KE maintains Sell with TP $0.60 DB maintains Buy with TP $1.80 OCBC place their Hold rating and $1.30 TP under review
Market Roundup: US stocks joined a global rebound as jitters over emerging markets faded and upbeat results from Pfizer, Ford, D.R. Horton and a rise in consumer confidence lifted sentiment ahead of the FOMC meeting on Jan 28-29. The market has been primed for a technical bounce after steep losses last week and a more modest decline on Mon. European shares recovered from their biggest three-day decline in seven months, while the MSCI Emerging Markets index rose from its lowest level since Aug as some countries took steps to address recent currency volatility to head off a potential crisis. Economic news was mixed. Consumer confidence climbed to 80.7 in Jan, its highest point since Aug but durable goods orders fell sharply, down 4.3% in Dec, while home prices surged 13.7% y/y in Nov for its biggest annual gain since Feb 2006. The STI is showing some stability after regaining its footing above its 3,020 support but the market could remain volatile depending on the outcome of the Fed meeting today with short term upside capped at the 3,100 resistance. Stocks to watch: *SMRT: 3QFY14 net profit slumped 44.1% y/y to $14.2m even as revenue picked up 4.1% rise in revenue to $293.3m on increased ridership. Operating performance was hit by higher staff costs (+21.4%) and depreciation (+10.2%). Operating profit crumbled 37.2% to $20.1m with rentals ($18.5m) and advertising ($6.9m) the biggers earners. Taxi ($1.4m) and train operations ($0.4m) were profitable but bus ($-8.9m) and LRT operations ($-0.6m) remained in the red. No dividends were declared. *CRCT: 4Q13, DPU came in 4.3% lower at 2.2¢ due to dilution effects from the preferential offering in Oct ’13, bringing FY13 DPU to 9.02¢ (-5.5%), slightly below street expectations of 9.2¢. Distributable income rose 5.6% to $17.7m despite the closure of CapitaMall Minzhongleyuan (CMLY) for asset enhancement. Net property income (excl CMLY) grew a robust 15.2%, underpinned by strong rental reversions of 17.5%. Tenants’ sales increased 10.5%, while shopper traffic grew 3.9%. Overall occupancy was 97.2% (+0.7ppt q/q, -1ppt y/y). Gearing rose to 32.6% (+6.8ppt q/q) following the acquisition of CMGC, with average maturity of 2.4 years and 2.6% cost of debt. NAV at end ’13 stood at $1.48. *CDL Hospitality Trusts: 4Q13 results were in line with estimates, as distributable income of $28.5m (+1.3%) and DPU of 2.92¢ (+0.7%) took FY13 DPU to 11.0¢ (-3.1%). NPI was up 2.5% to $36.5m, in tandem with a 2.8% rise in gross revenue of $39.4m, led by strong contributions from the Angsana Velavaru resort in Maldives, offset by weaker contributions from its S’pore and Australian portfolios. S’pore portfolio occupancy rate stood at 87%, while overall aggregate leverage was a comfortable 29.7% with a debt maturity profile of 2.6 years. End 2013 NAV was $1.63 per unit. *Fragrance: 4QFY13 net profit spiked 288% to y/y $133.7m, boosted by fair value gain of $102.5m, while revenue jumped 34% to $136.4m on higher property sales from Kensington Square (60% JV), and progressive recognition of Parc Rosewood, Novena Regency, Wak Hassan, Suites @ Bukit Timah, Le Regal and Urban Vista. Hotel revenue slid 1.4% to $15m due to lower average occupancy rate (88.3% vs 91.4%) and room rates ($92.30 vs $97.50). Final DPS raised to 0.4¢ from 0.125¢ in prior year. *Global Premium Hotels: 4Q13 net profit rose 20.1% y/y to $50.2m despite 1.4% dip in revenue to $15m (-1.4%), taking FY13 earnings to $19.4m (+5%) on revenue of $60.6m (+0.6%). Hotel room revenue was dampened by closure of Fragrance Hotel-Elegance in Nov ’13, weaker occupancy of 88.3% vs 91.4% in 4Q12 and softer room rates of $92.30 (-5.3%). But lower administrative expenses, finance cost and tax charges saved the bottomline. A revaluation gain of $259.5m boosted NAV/share by 64% to $0.64. Final DPS cut to 0.26¢ from 1.01¢ in FY12. *Eu Yan Sang: 2QFY14 net profit tumbled 31% y/y to $3.2m despite delivering strong revenue of $91.9m (+18%) led by better sales performance in HK and Macau (+35%), while S’pore retail sales (-5%) faced challenging conditions. Bottomline was depressed by a combination of lower margin sales mix, higher production costs as well as increased operating, interest and tax expenses. Group saw a net addition of three outlets and closed four franchise stores, bringing the total retail network to 298. *Global Logistic Properties: Leased 46,000 sqm at GLP Park Langfang in Hebei, China to Suning, one of China’s largest retailers with a strong online presence to serve as its regional distribution centre supporting both e-commerce and retail stores in Northern China. *Keong Hong: URA has awarded an 8,238.5 sqm land parcel at East Coast Road to a joint bid by Keong Hong and Master Contract Services at a tender price of $352.8m. The JV intends to develop a hotel on the land site. #AsiaPhos: Received approval to resume commercial mining operations for its Mine 2 in Sichuan province, expected to commence in 2Q14. *IPC: FY13 net profit leapt 282% to $18.2m alongside a 175% surge in revenue to $46.9m, boosted by the completion of two condominium projects in 2Q and 4Q13 as well as contributions from five newly acquired business hotels. This was supplemented by other income of $19.8m comprising $11.8m revaluation of its Japan assets and unrealized FX gains of $7.6m from its JPY loans. End Dec NAV inched up 1¢ to 21.6¢. *Hisaka: 1QFY14 net loss narrowed to $0.3m vs $1.1m a year ago, even as revenue fell 13.3% to $4.3m on weak global manufacturing sector. Bottomline was aided by a 70.3% drop in other charges and positive associate contributions of $0.04m versus $0.1m loss in 1QFY13 due to an improvement in an Indian unit. *Asia Enterprises: 4Q13 net profit of $0.4m reversed from a net loss of $2m a year ago, taking FY13 net profit to $3.7m (+124%). Despite revenue dipping to $23m (-11%), on declining sales volume and lower average selling prices, earnings were buoyed by an jump in gross margins to 11% vs 1% y/y, due to prudent stock management. Final DPS of 0.5¢ proposed.
52 wk highs: United Envirotech, Global Invacom 52 wk lows: property and financials lead the trend PROPERTY / REITS -- Tee Land, FCT, Far East Hospitality, Far East Orchard, Wheelock , FINANCIALS -- SGX, OCBC, MoneyMax OTHERS -- Parkson Retail Asia, Artivision, GP Batteries, China Flexible Packaging, S i2i SMM, Scintronix, Lyxor MSCI EM Latin America
Tuesday, January 28, 2014
Jaya: OSK-DMG notes the 2QFY14 results released last week were in line. Vessel chartering earned US$10.2m and shipyards lost US$2.7m on healthy charters and low yard utilisation respectively. As highlighted in the previous quarter, Jaya’s strong chartering performance is suffering a 25% drag by the under-utilised shipyard. Valuation looks high with Jaya now trading at a 14x FY14F P/E premium and the stock is back to near book value, even though ROE is only 7%. While yield is attractive at 5-6% yield, representing a 66-79% payout ratio, OSK-DMG believes the stock is fully priced with slow mid-term growth and limited dividend upside. For exposure to the offshore support vessel (OSV) sector, the house says choose Nam Cheong (BUY, TP $0.45) for exposure to the OSV segment. Expects Nam Cheong share price to outperform over the next 12 months, as it is trading at 7x FY14F P/E, with 25% growth and 25% ROE.
Serial System: unveiled last month its growth strategy following a major review. Serial currently supplies ~60% of the components per pdt per customer. It aims to raise this metric to 90%, by i) targeting growth areas such as the automotive and mobile industries, and ii) offering packaged solutions rather than standalone components. This should translate into higher margins and more revenue. On the back of these initiatives, Voyage raises its FY14e revenue growth forecast to 15% from 10%, and lifts its profit margin forecast to 1.8% from 1.5%. Accordingly, the house has a higher TP of $0.193 (from $0.18), and maintains its Overweight rating.
Sunvic: CIMB released an unrated/tatical report on the counter. Note that in a rare blockbuster deal in the chemical industry, the world’s leading chemical producer, Arkema, is set to acquire a portion of Sunvic’s (SVC) production capacity for Rmb3.9b. Disposal gains (Rmb1.9b) alone are about 120% of SVC’s current market cap. SVC’s earnings and stock price have been on the mend in the past year, reflecting the industry’s overall turnaround. The latest transaction could lead to special dividends to reward shareholders, though the house see more than this in the stock. Believe that this transaction will effectively wipe out SVC’s debt, as Arkema will take over SVC’s largest geared-up facilities (Rmb2.2bn debt, 480k tonnes/year). SCV will also be able to save c.Rmb120m/year in interest costs. House understand that there is no non-competing clause in place, meaning it can rebuild capacity cheaply using its new-found wealth and some leverage. A cheaper option is to start the rebuilding when volatile AA and AE prices come down in the distant future. Reckon that SVC’s founder/major shareholder, Mr Sun, might even seize full control of the listed company and start the rebuilding process under the radar. Re-listing the company on other bourses in the future might be a better idea, given higher valuation multiples. Note that the Stock is worth at least $1.35. See the current market mispricing as its biggest investment merit. Post-transaction, SVC’s NTA is estimated at $1.50. In seasonally stronger years, the market used to price SVC at above 0.9x P/NTA (1 s.d. above its mean since listing), such as in FY10-11 when SVC had smaller capacity and record earnings due to favourable commodity prices. Its current valuation of 0.4x FY14 The house believe its stock has the potential to hit S$1.35/share (0.9x FY14 P/NTA).
OUE: UOB Kay Hian maintains Buy with TP $3.04. The house notes that a special 1-for-6 distribution-in-specie of OUE H-Trust (or S$0.15 dividend and 6.3% yield) is in sight following the listing of OUE C-REIT. A further 8% dividend payout is a possibility following the example of OUE HT. OUE has established a capital recycling platform to enable the parent to focus on higher-value development activities while simultaneously deriving a stable income stream through its stakes in its trusts and property management platform. Maintain BUY with a lower target price of $3.04 (from $3.12), based on a 30% discount to our revised RNAV of $4.34/share (post 21 cent dividend).
China Water and Environmental sector: Stan Chart remains bullish on China’s water and environment sectors. Says its checks and discussions with Greenpeace and China Water Risk affirms its views that pollution and water shortage are real issues, and raises demand for quality turnkey providers. The house notes new growth opportunities in industrial parks (single-digit penetration) and rural China (1%) for non-SOEs with technological expertise, given the stricter environmental standards. Sound Global (967 HK) is Stan Chart’s new top pick for its meaningful exposure to industrial users and rural projects. Its BOT integration has been quicker than expected, providing a re-rating opportunity. The house also likes China Everbright International (257 HK) and Beijing Enterprises Water (371 HK). Meanwhile, the latest govt data suggests waste-to-energy (WTE) capacity has to grow 36% over 2013-15e to achieve 2015 targets, faster than the 28% in 2011-15e. The house believes CEI is exposed to several provinces where growth could accelerate, and New Environmental Energy (3989 HK) is well positioned to grow from a low base, with execution waiting to be proven. In Spore, the top actives that offer exposure to this sector and are enjoying positive momentum are Hankore, SIIC, Memstar, United Envirotech, China Environment.
SG Telcos: Following M1’s generous payout, HSBC highlights Starhub and SingTel’s financially capable for potential dividends. In Starhub’s context, a consistent 20¢/share annual dividend plus gradual de-leveraging that has led to an underleveraged net debt/EBITDA ratio of 0.6x. For net debt/EBITDA to hit comfort level of 1.5x, HSBC estimates an annual dividend increase of 1.2x for 5 years. This also implies an est. 2014 dividend yield of 6.5% (vs current estimate of 5.4%) For SingTel, HSBC forecasts an 85% payout vs SingTel’s normal 55-70% commitment. On that front, if HSBC assumes an increase to 85% every three years, even a100% payout would not stretch the balance sheet. A 100% payout would increase the estimated FY14 dividend yield to 6.4%, up from HSBC’s estimate of 5.5%. On the M1 front, Deutsche highlights data monetization and reduction in handset subsidies will remain key themes in 2014, and remains Deutsche’s top pick in the Singapore telco sector Deutsche said that there is significant potential for an accelerating ARPU momentum, supported by further re-contracting, the recent doubling of excess data charge and greater LTE (and beyond 2014, LTE Advanced) adoption. Deutsche also thinks that industry conditions are increasingly conducive for a further pullback in handset subsidies, which, if executed successfully, should have a significant positive impact on mobile margins. Increasing competition amongst leading handset vendors will also keep pricing in check. Latest broker ratings M1: Deutsche maintains a Buy with increased TP of $3.82 from $3.72, but HSBC rates an U/W with TP:$ 2.94 Starhub: HSBC rates U/W with TP $4.40 SingTel: HSBC rates Neutral with TP $4.02
Ramba: Commenced well testing at Akatara-2, the third well drilled at the Lemang block. Initial appraisal drilling at the well indicated potential reservoir layers and the group expects to take approximately 30 days to complete well testing. This isn’t the first discovery in the Lemang block. In May last year, it was announced that Akatara-1 well had initial flow rates of 11.0mmscfd (million standard cubic feet of gas per day) and 380 of condensate/day, and in December, the Selong-1 well recorded an initial flow of 790 bopd and 16.8mmscfd Ramba, through its local subsidiary, PT Hexindo Gemilang Jaya, holds a 51% working interest in the Lemang block. Ramba is currently trading at 3.2x
Figtree Holdings: Awarded largest contract-to-date of $178m by Tech Link Storage Engineering Pte Ltd to design and build LF Logistics Distribution Centre, located at Wenya in Jurong West, Singapore. The facility will be leased to LF Logistics Services, a wholly-owned subsidiary of Li & Fung, the world leader in consumer goods design, development, sourcing and distribution. The integrated distribution centre will have a gfa of 1.0m sf, the largest warehouse facility in the region for Li & Fung, and is expected to be completed in 4Q2015. The significant new order brings Figtree's order book to $269.9m from $91.9m (as of 3 Oct 2013).
Hafary: 1HFY14 net profit dived 81% to $4.5m on the absence of one-time gains on sale of development property ($23.8m), disposal of motor vehicle ($0.1m) and foreign currency adjustment gains ($0.1m). Excluding the one-offs, core operating profit would have declined 25% to $5.1m. Revenue climbed 15% to $48.9m primarily from a 26% acceleration in its project segment (whose customers include architecture firms, property developers and construction companies) to $22.8m, driven by the higher volume of surfacing materials for use in HDB residential projects, which includes Hedges Park @ Flora Drive and Parkland Residences. The top line was supported by the stable growth from its general segment (whose customers include home-owners, architecture, interior design and renovation firms) of 5.8% to $25.7m, which is closely correlated to the volume of residential unit resale transactions. Subsequently, gross margin lowered 3ppts to 38.6% from the change in sales mix towards project sales. With the series of property cooling measures in 2013, HDB resale applications slid 28% to 18,100 which translated to lower growth in the general sales segment in 1H14 compared to the previous year. As we hypothesize that 2014 should see similar phenomena, Hafary's overall margins may have recorded its cyclical peak in 2012/13. At $0.19, the largest tile supplier trades at 9.1x 1HFY14 annualized P/E and 2.1x P/B, compared to loss-making peer NH Ceramics' 1.7x P/B.
Wing Tai: Reported in line results with high end segment still sluggish; 2QFY14 net profit halved y/y to $48.4m (-45%) mainly from the absence of one-off disposal gains in associate income and lower operating profit (-26%) due to lower contributions from development properties. Revenue dipped 23% to $247.6m from lower contribution of L'VIV after it obtained its temporary occupation permit in the quarter. Wing Tai's net gearing remains comfortable at 0.2x with cash of $663.7m, which should allow the company to tide over headwinds in the Singapore residential sector. DB believe that the second half of FY14 should be stronger as the company recognizes earnings from its Tembusu project which has sold 256 out of 337 units at an estimated 39% gross margin. Maybank-KE estimates Wing Tai to sustain a dividend of 7¢/share, which implies an attractive yield of 4% per annum. Valuations are reasonable at 0.5x P/B and 47% discount to RNAV/share of $3.37 given sustained weakness in the high end residential market. Latest broker recommendations: Maybank-KE maintains Buy with TP $2.60 DB maintains Hold with TP $2.02 CIMB maintains Hold with TP $1.88
Marco Polo Marine: 1QFY14 net profit slumped 27.6% y/y to $3.3m despite revenue spike of 99% to $30.1m, after gross margin lowered 8.2ppts to 30.4% due to lower utilization of the group's tug boats and barges on weakened demand in Indonesia for shipment of coal and other commodities. In addition, the group recognized lower other income of $0.1m (-86%) from the absence of a one-off gain on fair value of convertible bonds, as well as increased finance cost of $2.0m (+538%) due to vessel loans by PT Pelayaran Nasional Bina Buana Rara Tbk (BBR) and the group's drawdown on its multicurrency medium term note program. The stellar top line came on the back its ship chartering business, which mushroomed 233% to $18.3m, attributed mainly to BBR (which status has been upgraded from associate to subsidiary, following its IPO), as well as strong demand for offshore supply vessels in the region. Ship chartering operations is expected to remain buoyant as gas exploration and production activities remain strong regionally. The acquisition of MP Prevail plus incoming deliveries of new vessels underscores management’s optimism that the chartering business would spearhead growth in the next 12 months. That said, Ship Building and Repair Operations is expected to be weigh on bottom line as competition is strong in the region. NAV at end Dec was 47¢, which translates to a P/B of 0.8x.
Osim achieved its 20th consecutive quarter of earnings growth, as 4Q13 net profit rose 22% to $27.6m, in tandem with a 16% growth in revenue of $178.6m. This brought its FY13 earnings to a consecutive 5th year record profit of $101.6m (+17%). Revenue for the quarter was mainly driven by high consumer demand for the group’s products like its uInfinity, uDivine App, uAngel and uPhoria Warm etc, while TWG Tea which became a subsidiary in Oct'13 further buoyed Osim’s top-line. Geographically, the three main regions which the group operates in, North Asia (+13%), South Asia (+17%) and others (+25%), all contributed to higher sales growth for the quarter, although bottom-line was weighed by a 91% rise in Other operating expenses to $103.8m (impairments of Brookstone and ONI Global), offset partly by a 880% spike in Other operating income of $46.5m (fair value gains of TWG Tea). For the year ahead, market watchers are expecting OSIM to launch a new product, aimed at replacing the highly successful uAngel, and other product enhancements to smaller products, while TWG is expected to be a significant growth contributor going forward. Following the consolidation, Maybank-KE estimates TWG to contribute around 10% of Group revenue currently, and will increase to 20% by FY16E. Overall, the group’s fundamentals remain solid with a net cash position of $113m, representing 15.6¢ per share, and at current price, Osim trades at 16.5x FY13 P/E versus regionbal peers average of 23x. To sweeten things up, Osim is proposing a 4Q Final dividend of 2¢ per share, taking FY13 total payout to 6¢ per share (FY12: 6¢). Latest brokers ratings as follows: Maybank-KE maintains Buy with $2.78 TP Credit Suisse maintains O/p with $2.60 TP OCBC maintains Buy with TP $2.90 UOB Kay Hian maintains Buy with TP $2.85
Market Roundup: US stocks extended last week’s retreat on ongoing turmoil in emerging markets and uncertainty over further reductions in Fed’s stimulus package. Trading was tentative as investors weighed whether last week’s selloff was the start of a bear trend or just a long overdue correction after the market has rallied 30% last year. The market was initially helped by an earnings beat from Caterpillar, which reaffirmed investors’ expectations of an improving economy in 2014 but succumbed to late selling as nervourness overtook sentiment. Another dampener was housing data which showed new home sales fell more than expected to 414,000 in Dec vs a 458,000 estmate. Investors are keenly awaiting three major events this week – The State of the Union address, the House GOP strategy retreat and the FOMC meeting on Tue with most analysts expecting the central bank will likely trim another US$10b from its monthly bond purchases. The concern is that the Fed is in a no-win situation. If it continues to taper, this could ve viewed as a lack of support but if it holds its axe, it could be interpreted as a lack of confidence in the economy. While regional bourses sold off hard yesterday, the STI may have found a temporary support base after rebounding off near the 3,02o level. But sentiment remained very fragile with next line of defence at 2,990. Sunvic and United Envirotech remain in focus for their M&A activities. Stocks to watch: *Osim: Maintained its fine run, registering 20 consecutive quarters of profit growth as 4Q13 net profit of $27.6m (+22% y/y) rose in tandem with 16% growth in revenue to $178.6m, taking FY13 earnings to a record $101.6m (+16%). The sales increase was driven by higher consumer demand for its products and TWG but higher operating costs shaved its pretax margin to 18.8%. All regions contributed to the better sales growth led by Rest of the World (+25%), South Asia (+17%) and North Asia (+13%). Final DPS of 2¢ proposed, bringing FY13 payout to 6¢. *Wing Tai: 2QFY14 net profit slumped 45% y/y to $48.4m on 23% revenue drop to $247.6m with lower contributions from development properties and absence of one-off gains from disposal of its apparel branded business and listed subsidiary in HK. Group booked sales from L’VIV, Foresque Residences, Helios Residences in S’pore and Jesselton Hills in Penang and the Lakeview in Suzhou. Net gearing was a comfortable 17%, while NAV declined 2.5% to $3.57. *Marco Polo: 1QFY14 net profit dived 28% to $3.3m despite revenue doubling to $30.1m following the consolidation of BBR, a former Indonesian associate turned subsidiary. But gross margin contracted to 30.4% from 38.6% in 1QFY13 due to lower vessel utlisation amid weakened demand in Indonesia for coal and commodity shipments. Bottomline was also weighed by absence of fair value gains, loss of associate contributions from BBR and higher taxes from its Indonesian chartering operations. *Hafary: 1HFY14 net profit crumbled 81% y/y to $4.5m on absence of one-time gains from sale of development property ($23.8m), other assets and FX gains. Excluding the exceptional items, core operating profit would have declined 25% to $5.1m. Revenue climbed 15% to $48.9m due to higher volume of surfacing materials delivered to HDB projects but gross margin contracted 3ppts to 38.6% from a change in sales mix towards project sales. *Nam Cheong: Secured its maiden contract for the year worth US$70m from repeat customer, Sentinel Marine to build four emergency response and rescue vessels and one anchor handling towing supply vessel with deliveries scheduled in FY15-16. The latest orders lift group’s order book to RM1.5b. *Global Logistic Properties: Signed three new leases totalling 43,000 sqm across four parks in China to 1) third party logistics provider Sankyu Logistics (16,000 sqm) at two parks in Tianjin, making it one of GLP's top 10 customers, 2) NYSE-listed inline retailer LightinTheBox.com (15,000 sqm) at GLP Park Suzhou and 3) global retail gaint Watsons (12,000 sqm) at GLP Park Jiangxia in Wuhan. *Ramba: Commenced well testing at Akatara-2 appraisal well in the Lemang block, which the group has a 51% working interest. This is the third well that is drilled and tested at the Lemang block and completion is expected to take 30 days. With the successful discovery of Selong-1 and Akatara-1 exploration wells, the Indonesian government has mandated Ramba to transition from exploration work program to plan of development in preparation for commercial production. *KrisEnergy: Acquired a 60% working interest in block G3/48 in the Gulf of Thailand from Mubadala Petroleum. Its other Thai partners are Tap Energy (30%) and Northern Gulf Oil (10%). The block covers 2,917 sq km in shallow waters of less than 20m up to 50m in the northern area of the Gulf of Thailand. *Keppel Reit: Seeking to sell its 93% owned Prudential Tower for $531m, or $2,400 psf vs $490m valuation. Management had highlighted that it is looking to sell older assets to help fund acquisitions, including Keppel Land’s stake in Marina Bay Financial Centre Tower 3. *GRP: Signed LOI with MGS Resort & Entertainment Co for the acquisition of 30-year leasehold rights to a 32,670 sf land plot in Tamwe Township in Myanmar, which includes the rights to develop, manage and operate service apartments on the site. MGSR is currently negotiating to acquire the land rights from the land owner. *Figtree Holdings: Awarded largest contract to-date of $178m to design and build the LF Logistics Distribution Centre in Jurong West. The 1m sf facility will be leased to Li & Fung, and is expected to be completed in 4Q2015. This significant new order brings group’s order book to $269.9m. *China Print Power: Expects depper losses for FY13 duw to impairment on plant and machinery.
Monday, January 27, 2014
Sunvic: CIMB just released an unrated/tatical report on the counter. Note that in a rare blockbuster deal in the chemical industry, the world’s leading chemical producer, Arkema, is set to acquire a portion of Sunvic’s (SVC) production capacity for Rmb3.9b. Disposal gains (Rmb1.9b) alone are about 120% of SVC’s current market cap. SVC’s earnings and stock price have been on the mend in the past year, reflecting the industry’s overall turnaround. The latest transaction could lead to special dividends to reward shareholders, though the house see more than this in the stock. Believe that this transaction will effectively wipe out SVC’s debt, as Arkema will take over SVC’s largest geared-up facilities (Rmb2.2bn debt, 480k tonnes/year). SCV will also be able to save c.Rmb120m/year in interest costs. House understand that there is no non-competing clause in place, meaning it can rebuild capacity cheaply using its new-found wealth and some leverage. A cheaper option is to start the rebuilding when volatile AA and AE prices come down in the distant future. Reckon that SVC’s founder/major shareholder, Mr Sun, might even seize full control of the listed company and start the rebuilding process under the radar. Re-listing the company on other bourses in the future might be a better idea, given higher valuation multiples. Note that the Stock is worth at least $1.35. S see the current market mispricing as its biggest investment merit. Post-transaction, SVC’s NTA is estimated at $1.50. In seasonally stronger years, the market used to price SVC at above 0.9x P/NTA (1 s.d. above its mean since listing), such as in FY10-11 when SVC had smaller capacity and record earnings due to favourable commodity prices. Its current valuation of 0.4x FY14 The house blieve its stock has the potential to hit S$1.35/share (0.9x FY14 P/NTA).
CapitaLand: Trading Central notes the stock remains capped by a declining trend line in place since Aug 2013, and recently accelerated on the downside. As both the ST & MT moving averages are heading downwards, and continue to push the prices lower. Besides, the momentum indicator RSI is bearish, confirming a negative outlook. As long as $3.05 is resistance, the house expects a new down leg to $2.75, and even to $2.6 as possible.
HSBC: its London unit has imposed restrictions on large cash withdrawals, citing a change in bank policy, to the ire of its customers. http://www.bbc.co.uk/news/business-25861717 However, there have been a series of unfortunate events of late at HSBC, that when taken together, have sparked bank-run fears on financial forums. http://www.zerohedge.com/news/2014-01-24/bank-run-fears-continue-hsbc-restricts-large-cash-withdrawals Eg. - last wk, Forensic Asia, a HK-based research firm issued a Sell on HSCB citing "questionable assets"on its balance sheet. The analysts involved reportedly worked at HSBC for 15 yrs and suggest that the giant bank could have overstated its assets by more than GBP50b. - in recent yrs, the bank has come under scrutiny from regulators for its lax controls against money laundering, and its FX traders were suspended follwoing a global probe into possible currency market manipulation.
Grand Banks Yachts: swung to a net profit of $0.3m in 2QFY14 - its first quarterly profit in four years - reversing from a net loss of $0.8m a year ago, driven by efforts to improve sales and efficiency, along with the recovery in the US luxury boat market. Revenue rose 42% to $9.5m, while operating expenses declined 29% to $1.7m, mainly due to reduced headcount and recovery of doubtful debts and forfeiture of deposit. However, orders arising from the international boat show last Nov have been slower than anticipated, resulting in the group’s net order book declining to $9m as at end ’13, vs $16.8m from a year ago. Earlier this wk, a subsidiary of the group was also served a writ of summons from a customer seeking claims for a yacht purchased. The company has sought legal advice and will update accordingly on the potential financial impact, if any. The group will continue to participate in boat shows in the next few months in San Diego, Seattle, Miami and Palm Beach in the US as well as in S’pore, and further its efforts to streamline operations. The group remains on the lookout for investment opportunities to widen its market reach and broaden revenue streams. As Grand Banks remains on the SGX Watch-list, it will be assessed on its FY14 results to determine whether it meets the requirements for removal from the list or the counter facing delisting. At $0.22, the counter trades at 0.8x P/B, 32.4x annualized 2QFY14 P/E.
Economy: Singapore's Dec industrial activity rose much faster than all economists had expected, coming in at +6.2% YoY, vs the consensus for a 1.4% YoY fall, outperforming Taiwan and South Korea. The stronger numbers were driven by better electronics and petrochemical output. Compared with its North Asian rivals, Singapore's export outlook looks good over the medium term. As an economy open to the vagaries of the trade cycle, CS believe that Singapore's industrial activity will continue to improve over the coming quarters. With the US looking more buoyant, coupled with a Europe that is continuing its climb out of the mire, world trade growth should be stronger in 2014 than in 2013, benefiting Singapore's exports and manufacturing sector. CS doubt that the MAS will choose to ease the pace of exchange rate appreciation at its upcoming meeting in Apr. Growth looks to be getting better, while MAS core inflation looks to be picking up sequentially too due to the lagged impact of stronger wage growth.
Mapletree Greater China Commercial Trust (MGCCT): Post results, StanChart reiterates Outperform rating, raises TP to $1.02 (from SGD 1.00) after raising DPU estimates by 2%. MGCCT has underperformed peers Link REIT, Fortune REIT and CapitaMall Trust by 8-9% in the past three months and currently offers an 8.3% FY14/15E DPU yield. While leverage of 40.5% remains higher than its peers, management has fixed 71% of its debt financing costs for the next two years.
Wing Tai: CIMB upgrades to Hold with TP $1.88. The house notes that with Wing Tai’s more attractive valuation following the sell-off over the past three months and in view of its strong finances, upgrade its rating from Reduce to Hold. Although RNAV-based target price is lower as the house raise its discount rate to 30% due to Wing Tai’s high-end exposures in Singapore, increase its FY14-15 EPS forecasts by 25-33% to account for the earlier recognition of its Tembusu project. While lacklustre sales of high-end Singapore developments and Wing Tai’s depleting landbank will continue to pressurize earnings, the company has a strong balance sheet and an attractive valuation at 0.47 P/BV.
Guocoland: 2QFY14 net profit inched up 3% to $12.9m, despite revenue being up 8% to $254.3m, as gross margins dipped 5.5 ppt to 19.4%. Bottom-line was partly aided by other income which more than quadrupled to $14.2m, led by FX gains and a buyer’s deposit which was forfeited, while the group’s higher top-line was mainly due to progressive recognition of its Singapore residential projects and profit recognition of its Seasons Park units in Tianjin, China.
Breadtalk Group: Maybank-KE initiates Coverage with a Buy Call and $1.40 TP, implying a 50% upside. The house postulates that BreadTalk is by far the most successful Singapore F&B company, boasting a solid regional presence for its homemade brands via more than 800 outlets across 15 countries, with plans to raise its store count to 1,000 in 2014. Operational statistics are also healthy with EBITDA growing rapidly, which should allay fears on the group’s lacklustre profit growth, while Breadktalk’s higher margin businesses should also help lift earnings going forward. The house draws a prelude of a potential takeover offer by Thailand-based Minor International in the next 12-24 mths, who currently owns an 11% stake in Breadtalk. While the Thai hospitality and F&B group is noted for its history of acquisitions but reputation aside, its portfolio complements that of BreadTalk. Breadtalk’s TP is based on 7X FY14E EV/EBITDA, which is only half of its regional peers’ average, and coincidentally gels with Maybank-KE’s alternative SOTP valuation of the group. The house expects BreadTalk’s net profit to grow at 26% CAGR over the next three years as store expansion moderates slightly.
Technics O&G: 1QFY14 net profit slumped 52% y/y to $343k despite revenue surge of 40% to $15.7m, as a result of decreasing gross margins (-12.9 ppts to 31.5%) and lower share of profits from associates (-71%). The stong topline came on the back of increased contributions from subsidiaries. The group has embarked on an upgrading of its existing jetty to cater for future usage by offshore vessels. In addition, construction of a new building block at its existing property at 72 Loyang Way Singapore has started. Subjected to the approval of the Jurong Town Corporation, the group intends to sublet some of the premises in this new building to potential users who are operating in the marine-related and offshore oil & gas industry. This is intended to add a new revenue stream to the Group and to enable the Group to foster a closer working relationship with the relevant industry operators, with a view to creating new business potential for its core business activities as an offshore oil and gas service provider. At $0.64, Technics Oil & Gas trades at 1QFY14 annualized 133.3x P/E and 2.1x P/B.
Fortune REIT: Results in line with street estimates; DPU increased 16.1% y/y to HK9.72¢, while distributable income rose 27.8% to HK$182.1m. NPI gained 33% to HK$275.2m, while revenue surged 34.6% to $392.6m driven by improved occupancy rates of 98.7% (+1ppts y/y), strong rental growth of 20.4% and additional income from Fortune Kingswood acquired in Oct '13. Portfolio occupancy rose to 98.7% (Dec FY12: 97.7%). Aggregate leverage was 32.7% (Dec FY12: 23.4%). NAV at end Dec was HK$10.26. Latest broker recommendations: StanChart reiterates Outperform and lowers TP to HK$7.50 (from HK$8.08)
Parkway Life REIT: Results in line with expectations; 4QFY13 DPU and distributable income grew 4.5% to 2.82¢ and $17m respectively. Gross revenue rose 3.1% to $24.7m while NPI improved 3.4% to $24.7m, on the back of the acquisitions of seven nursing homes in Japan in Jul and Sep '13 and higher rent from Singapore properties, offset by the yen depreciation. Occupancy is full (except M’sia carpark), with a WALE (by gross revenue) of 10.6 years. Aggregate leverage lowered 2.2 ppts to 33.0% with cost of debt of 1.47%. NAV at end Dec was $1.63. Latest broker recommendations as follows: UOB Kay Hian maintains Hold with $2.47 TP CIMB maintains Hold with $2.37 TP
Starhill Global REIT: 4Q13 results was in-line with expectations, as distributable income of $26.5m (+21% y/y, +2% q/q) and DPU of 1.23¢ (+9% y/y, +2% q/q) took FY13 DPU to a record 5.00¢ (+14% y/y), representing an FY13 yield of 6.5%. Net property income (NPI) was up 3% to $38.8m, in tandem with a 4% rise in gross revenue of $49.1m, led by the continued strong performance of the REIT’s Singapore portfolio, comprising interests in Wisma Atria and Ngee Ann City, which saw high occupancies and positive rental reversions. Meanwhile further contributions from Plaza Arcade in Perth which was acquired in 1Q13, contributed positively to top-line, although this was partially offset by lower NPI from the REIT’s remaining overseas properties in China, Japan and Malaysia. Starhill’s future growth drivers include the potential asset redevelopment of David Jones Building and Plaza Arcade in heart of Perth CBD. In addition, there will be an upward-only lease review for David Jones Building in Aug’14, which Starhill guides for a possible 6% positive rental reversion. Heading into 2014, Starhill guides that the US and European economies are showing positive signs of a turnaround and Asia should benefit from the positive knock-on effect, as well as through macroeconomic trends including tourism growth and rising consumption in the region, enabling the group to refine its portfolio and tap on emerging opportunities. Overall portfolio occupancy stood was robust at 99.4% with a weighted lease to expiry of 3.2 years, while aggregate leverage stood at a comfortable 29% with an average financing cost of 3.03%. A net revaluation gain of $137.5m was also recorded in FY13, largely driven by Starhill’s Singapore portfolio, bumping up NAV by 7% q/q to $0.93 At current price, Starhill trades at an annualized 6.4% yield and 0.82x P/B versus its local peers average of 6.5% current yield and 0.93x P/B. Latest broker ratings as follows: Maybank-KE maintains Hold with TP $0.84 CIMB maintains Hold with TP $0.80 OCBC maintains Buy with TP $0.90 UOB Kay Hian maintains Buy with TP $0.93
Market Roundup: US stocks skidded 2% to cap its worst week 2012 on fears about weakness in China and emerging markets. The Dow fell bleow the 16,000 mark while the broader-based S&P 500 tumbled below the critical 1,800 level and below its 50-day moving average, signaling possible further selling ahead. The VIX, a measure of investor anxiety, surged 32% to 18.14 and has rallied 48% for the biggest weekly increase since May 2010. Investors fled equities as emerging market currencies were hit by worries of slower growth in China and political instability in Turkey, Argentina and Ukraine ahead of this week’s Fed meeting when the central bank is expected to further cut back its monthly bond purchases. Stocks came under pressure despite decent corporate results from Microsoft, Starbucks and P&G. Lossese were borad-based but fell hardest on industrials, materials and financials. Treasuries rallied on the rush to safety with the yield on the 10-year note falling 6bps to 2.73%. The S’pore market is set to react negatively to the equity and emerging currency rout as well as freah news that HSBC may be in trouble. Downside support for the STI will be at 3,020 with technical indicators turning decidedly bearish. Stocks to watch: *Parkway Life: 4Q13 distributable income gained 4.5% y/y to $17m, translating to a DPU of 2.82¢ and takes FY13 DPU to 10.75¢ (+4.2%). NPI improved 3.4% to $23.2m, in tandem with the 3.1% growth in revenue to $24.7m as guaranteed rent revisions of 4.44% at its S’pore hospitals and contributions from 7 nursing homes acquired in Jul and Sep ’13 offset the JPY impact on its Japan porfolio. Group achieved full occupancy with average lease expiry of 10.6 years. JPY net income has been hedged for the next 5-6 years and 91% of properties have downside protection. Aggregate leverage remained at 33% with weighted term maturity of 3.16 years and low effective interest cost of 1.47%. Two AEIs in Japan and one in Malaysia are ongoing. End Dec NAV edged up to $1.63. *Starhill Global REIT: 4Q13 distributable income rose 20.6% to $26.5m alongside an 8.8% increase in DPU to 1.23¢, taking FY13 DPU to 5.00¢ (+13.9%). NPI climbed 3.4% y/y to $38.8m, in tandem with a 3.6% revenue gain to $49.1m, mainly attributed to high occupancy and positive rental reversions from its S’pore portfolio, (Wisma Atria and Ngee Ann City) and contributions from Plaza Arcade in Perth. There is also a net revaluation gain of $137.5m. Portfolio occupancy stood was steady at 99.4% with a weighted lease to expiry of 3.2 years. Aggregate leverage stood at a comfortable 29% with an average financing cost of 3.03%. End 2013 NAV was $0.93 per unit. *Guocoland: 2QFY14 net profit inched up 3% to $12.9m, while revenue was 8% higher at $254.3m supported by progressive recognition of its S’pore residential projects and profit recognition of its Seasons Park units in Tianjin, China. Gross margins dipped 5.5 ppt to 19.4% but bottom-line was underpinned by other income which more than quadrupled to $14.2m, led by FX gains and a forfeited deposit. NAV/share was $2.26 as at end Dec. *Fortune REIT: 4Q13 distributable income rose 27.8% to HK$182.1m, while DPU increased 16.1% y/y to HK9.72¢. NPI and revenue were 33% and 34.6% higher at HK$275.2m and HK$392.6m respectively, on higher occupancy rates, strong rental reversions and additional income from Fortune Kingswood. Portfolio occupancy rose to 98.7%, while aggregate leverage was 32.7%, up from 23.4% in FY12. NAV at end Dec was HK$10.26. *Grand Banks: Recorded first quarterly profit since 2009, with 2QFY14 net profit of $0.3m, reversing from a net loss of $0.8m a year earlier, benefitting from effeciency improvements, writebacks of doubtful debts and lower operating expenses (-29%) from reduced headcount. Revenue rose 42% y/y to $9.5m as the US luxury boat market continues to recover, although its recent Fort Lauderdale International boat show in Nov recorded lower-than-expected orders, which resulted in a dip in its net order book to $9m (-37% q/q and 46% y/y). *Micro-Mechanics: 2QFY14 net profit jumped 39% y/y to $1.4m on gross margin improvement to 50.4% (+1.8 ppts) arising from higher capacity utilization, rental income and an increase in scrap sales. Revenue grew 13% to $10.5m attributed to higher sales of both semiconductor tooling (+9.4%) and custom machining & assembly (+29.6%) divisions, but slowed 5.4% q/q due to seasonally factors. Interim DPS of 1¢ declared. *Technics O&G: 1QFY14 net profit slumped 52% y/y to $0.3m, while topline grew 40% to $15.7m on increased contributions from subsidiaries. Bottomline was impacted by thinning gross margins, which contracted 12 ppt to 32% and lower profit share from associates, which slumped 71% to $223,000. NAV at end Dec was 30¢. *Olam: Divested part of its forestry and saw milling assets in Gabon for US$18m, which will result in a one-off loss of US$4.5m. In addition, the group will record a one-time restructuring charge of US$6.5m. The sale is expected to generate annual cost savings of US$13.5m from FY15, reduce fixed capital by US$22.5m and release US$20m of average working capital invested. *Yoma: Proposed to acquire 30% of Asia Beverages Co’s (ABC) assets and businesses for US$11.1m. ABC is engaged in the production, branding, marketing and distribution of bottled water, spirits, wines, beers and alcoholic beverages in Myanmar, and currently operates a strong proprietary distribution network comprising over 22,000 points of sale across the country. *ASL Marine: Proposed to acquire a 12.2 ha Batam shipyard with berthing and 200m of repair quays for US$20m. *Hi-P: Group expects to report a loss in 4Q13, instead of a profit as previously guided due mainly to the Tianjin plant consolidation and relocation exercise. The loss is also due partly to an inventory provision of $4.7m on slow moving projects in 4Q13. *Serial Systems: Issued a positive profit guidance as group expects to achieve its $1b target revenue in FY13 (9M13 revenue: US$764m) with improvement in net margin. Group also outlined a three-pronged strategy to expand its product portfolio beyond semiconductor to other higher value added product segment such as auto, mobile devices, cloud solution and component modules and is seeking to establish JVs and M&A opportunities to establish a footprint major markets such as the US and Europe. *S’pore Shipping Corp: Sale of car carrier MV Singa Ace to Western Overseas for US$5.1m, which will result in a disposal gain of US$0.9m
Friday, January 24, 2014
Blumont: According to a BT article, group yesterday made an offer for Australia-listed mineral exploration and development company Genesis Resources at an implied bid price of A$0.169 per share, which represents a whopping 87.78% premium over Genesis' closing share price on Thursday. To pay, Blumont will be issuing 5.3 new shares at S$0.0719 apiece for every two Genesis shares. This is a 1.27% premium over its closing share price on Thursday. Genesis's core asset is the right to a majority stake in the highly prospective gold-silver-copper project, located in Plavica, Macedonia, within the Carpathian Volcanic Arc, a major epithermal province running through Eastern Europe. Purchase consideration for Genesis Resources adds up to ~$36.6m, or 19% of Blumont's current mkt cap of $186m.
Global Invacom: No notable news on today's 19% spike. Latest was on 2 Dec, when group acquired 100% stake in Raven Manufacturing Limited (RML), a UK satellite antenna manufacturer, for £1.98m ($4.1m). The consideration was based on the estimated NAV of RML. Management believes the acquisition will increase Global Invacom’s capacity and capabilities in the UK as the group continues to move up the value chain, and will strengthen its value proposition as an integrated Sat Comms equipment supplier.
SG Med: Latest was Jan 14, where it has signed a non-binding MOU with the Ciputra Group to establish the Ciputra SMG Eye Clinic in Ciputra Medical Centre, located in the Ciputra World Jakarta 1 shopping mall. Marking SMG's first overseas foray, the proposed clinic will provide patients in Indonesia with FDA-approved laser vision correction technologies as well as safe and reliable cataract surgery. Yet, uncertainty relating to SMG’s financial position may keep a lid on its expansion drive. The recent change in ownership of the firm and management has triggered a “change of control” event, meaning that SMG may have to redeem its $7.1m worth of convertible preference shares, and appeal to banks over a possible breach of loan covenants. The group has since proposed to raise $7.4m in net proceeds via a 1-for-2 rights issue at $0.105 each, to enhance its financial flexibility. Completion of the fund raising alleviate investor’s concerns regarding SMG’s ability to execute on its growth plans.
Hankore: UOB Kay Hian INITIATES coverage with a Buy call and $0.137 TP, although note that Due to a lack of details, the house have not factored in the potential asset injection by China Everbright Water Investments (CEWI), although both companies had signed a definitive agreement in Dec 13. Under the 12th Five-Year Plan (2011-15), China will increase its wastewater treatment (WWT) capacity target from 125m tons/day in 2010 to 208m tons/day by 2015. However, data from the Ministry of Housing and Urban-Rural Development show that as at 1H13, the country had added only 20.5m tons/day of new WWT capacity to 145.5m tons/day. To achieve the above target, the government will have to roll out massive BOT projects in the next 2.5 years. Hankore has signed a framework agreement with CEI to acquire all the environmental water investments of CEWI and China Everbright International (CEI) via an allotment and issue of new shares to CEI. Hankore has advised there is no certainty or assurance that the proposed acquisition will proceed and has not provided the details and valuation of assets to be acquired. As at 1H13, CEI’s environmental water segment had a reported net book value of HK$3.36b. If CEI injects these assets into Hankore, the company will issue 7.8b new shares to CEI, resulting in CEI owning 63.0% of Hankore. This will boost Hankore’s assets to 30 operational WWT projects and 4 reusable water projects, up from the current 11 assets.
Ezra: its subsea services division has been awarded projects worth a total of ~US$80m, including options. The scope of these projects cover a large spectrum of subsea work, including the decommissioning and towage of an FPSO in Asia and the deployment of an inspection, maintenance and repair vessel in the Americas. Work for a majority of the contracts is expected to commence by 1H14. The group’s subsea orderbook stands at more than US$1.4b, and is currently tendering for ~US$9b in projects worldwide.
Thai Bev: StanChart notes Suntory’s bid last week of US$15.9b for Beam, the world’s 7th largest spirits producer, translates to a deal multiple of 20.5x EV/EBITDA – a 56% premium to the global alcoholic beverage industry average, and a 41% premium to Thai Bev’s FY13e EV/EBITDA. Attaching the M&A valuation multiple to Thai Bev would give the stock a blue-sky SOTP valuation of $0.88, according to StanChart. Meanwhile, using sector average multiples suggest a more conservative SOTP-based valuation of $0.58 for Thai Bev. Thai Bev trades at a 41% discount to the liquor sector average in terms of FY14e P/E. StanChart maintains Outperform with TP $0.72.
Mapletree Greater China Commercial Trust (MGCCT): DPU beat estimates for third consecutive quarter Mapletree Greater China Commercial Trust (MGCCT) recorded 3QFY14 distributable income and DPU above IPO forecast by 16.6% to $40.6m and 1.518¢. This came on the back of better than expected rental uplifts for both Festival Walk in Hong Kong (+20%) and Gateway Plaza in Beijing (+78%), new committed leases, as well as lower operating expenses. Subsequently, gross revenue came above forecast by 9.9% to $65.7m while NPI beat by 13.2% to $53.8m. Overall portfolio occupancy slid marginally to 97.9% (-1.1ppts) with weighted average lease to expiry of 2.6 years. Aggregate leverage of 40.5% with debt maturity of 3.2 years at 2.0% cost of debt. Management is positive that the two properties will continue to benefit from the positive demand dynamics in China, given the resilient domestic demand in Hong Kong and rental reversions in Beijing office sector. Bloomberg consensus estimates 12-month TP of $0.99. At $0.795, MGCCT trades at 7.2% annualized yield (7 Mar 13 - 31 Dec 13) and 0.85x P/B.
Suntec REIT’s 4Q13 results came in at the higher end of estimates, with distributable income at $58.2m (+11% y/y, 12% q/q), alongside DPU at 2.56¢ (+10% y/y, +12% q/q), inclusive of a 0.175¢ capital distribution support. The latest DPU contributions took FY13 DPU to 9.33¢, translating to an annual yield of 6%. Gross revenue rose 30.2% to $71.6m and NPI grew 62.9% to $49.8m, buoyed by the opening of Suntec City mall (Phase 1) and Suntec Singapore following the completion of its AEI works, and the better than expected performance of the group’s office portfolio and jointly controlled entities. The REIT's office portfolio occupancy was near full at 99.6%, and its retail portfolio at 97.3%, while operationally, Suntec guides that its major AEI tracking well within management’s target, with 97% of Suntec’s Phase 2 NLA being pre-commited. Phase 2 works will complete in April while Phase 3 AEI will commence next month. Fundamentally, the group’s balance sheet remains fair with an aggregate leverage of 38% with an average financing cost of 2.5%. and a debt tenor of 2.4 years. Going forward, the REIT guides that its current priorities are to focus on the smooth execution of Phase 2 and 3 of the AEI as well as proactive lease management to strengthen the lease commitments and maintain the high occupancy level of its office and retail portfolios. At the current price, Suntec REIT trades at an undemanding annualized 4QFY14 yield of 6.4% and 0.75x P/B, versus its peers average of 6.6% forward yield and 0.84x P/B. Latest broker ratings as follows: Maybank-KE maintains Buy with TP $1.75 CLSA maintains O/p with TP $1.75
Tiger Airways: The ailing tiger continues to bleed, showing no signs of a turnaround, as the group reported 3QFY14 net loss of $118.5m versus a profit of $2m y/y, taking 9MFY14 net loss to $127.5m (9MFY13: $30.0m net loss). The group’s bottom-line was dragged largely by exceptional charges of $88.3m, consisting of a $30.3m loss on the planned disposal of Tigerair Philippines, an impairment of associates of $58.0m in the quarter, and a $23.1m associate losses. At the operating level, total revenue declined 31% to $172.1m, while total expenses fell 21% to $180.9m. The contraction was largely due to the exclusion of Tigerair Australia as the airline ceased to be a subsidiary from 8 Jul'13. The major disappointment however came from Tigerair Singapore which recorded an operating loss of $17.0m versus an operating profit of $27.0m y/y. This came despite an increase in traffic volume (+9.2%), with revenue declining 3% to $168.0m, as yield fell 11% and load factor dropped 9.8 ppt to 76%. Associate carriers in Indonesia (-$11.2m), Australia (-$7.4m) and Phillipines (-$4.5m) continued to bleed, contributing to $23.1m losses at the bottom-line. Going forward, management continues to expect a challenging outlook, Tigerair Singapore expected to face near-term pressure on yield and load factors in the current seasonally quiet quarter amid an overcapacity situation in the industry. Meanwhile, Tigerair Mandala will continue to focus on its business turnaround and the divestment of Tigerair Philippines to Cebu Pacific is expected to be completed by FY14, and pave the way for the strengthening of the strategic alliance between Tigerair and Cebu Pacific. We note however that given the challenging operating landscape, and the failure to remain profitable in the traditional peak season, market watchers appear unconvinced that ‘The Cub’ would be able to turnaround its fortunes anytime soon. Based on its latest NAV of $0.39, Tigerair currently trades at 1.25x P/B and has a net gearing of 32%. Latest broker ratings as follows: CLSA maintains Sell wit TP $0.35 UOB Kay Hian downgrades to Sell with TP $0.33
Keppel Corp: FY13 core net profit of $1.41b (-26%)missed estimates of $1.51b, while 4Q13’s net profit was $332m (+9%). The miss was mostly resulted by an unexpected estimated $150-200m provision taken by Infrasructure division. Revenues for FY13 were $12.4b (-11%) FY13 saw Offshore & Marine revenue, which contributed more than half of topline, fell 11% to $7.1b as many jobs started in the year had not reach revenue recognition stage. Revenue contribution from Infrastructure Division of $3.5b was 22% higher due mainly to higher revenue contributed by the co-generation power plant in Singapore. Property Division revenue fell 41% to $1,3b largely due to drop in sales recognition of Reflections at Keppel Bay units as a result of the deliveries of residential units sold under the deferred payment scheme in 2012. For 4Q13, KEP’s O&M segment reported a sharp 35% q/q jump in revenue to $2.1b, as more jackup projects reached recognition milestones. Segment operating margin, while healthy at 14.2% in 4Q13, was 2.3ppt lower q/q, due to fewer rig deliveries and change in revenue mix. Meanwhile, the provision taken by the Infrastructure business resulting in a 4Q13 $111m loss in was due to cost overruns and other costs at its Doha and Manchester EPC projects. The unit has also made claims for variation, prolongation and extension of time for two Qatar projects. Going forward, Net orderbook at end Dec was $14.2b, with visibility to 2019. Infrastructure wise, the Runcorn EPC is expected to be substantially completed in 2014. Keppel sold 900 homes in Asia in 4Q and MBFC T3 is now 95% full. Still, KEP remains the street’s preferred large cap pick in the sector, backed by its strong order book visibility. The group ended FY13 with a net order book of $14.2b, with deliveries stretching into 2019. NAV as at end Dec was $5.37, translating to P/B of 2x. Final dividend of 30₵ declared, bringing full year dividends to 49.5¢/share, yield attractive at 4.5% Latest broker ratings: CLSA: Maintain Buy, TP: $12.40 CS: Maintain O/F, TP reduced to $12.70 from $12.90 MKE: Maintain Buy, TP: $12.48 Deutsche: Maintain Buy, TP reduced to $12.20 from $ 12.70 Daiwa: Maintain Buy, TP increased to $13.70 from $13.20
Market Roundup: US stocks tumbled on China growth worries amid another mixed set of results. Market sentiment was rattled after the flash HSBC/Markit Purchasing Managers’ Index for Jan contracted below the key 50 level, suggesting a sharp slowdown in China’s factory output. Conversely, a euro-area manufacturing index climbed to 53.9 from 52.7 in Dec. Stocks to watch: *Keppel Corp: FY13 and 4Q13 results missed estimates with core net profit of $1.41b (-26%) and $332m (+9%) on revenue of $12.4b (-11%) and $3.6b (+20%) respectively. While the O&M and property segments performed well, further large provisions in infrastructure were a drag on bottomline. For 4Q13, the O&M segment reported a sharp 35% q/q jump in revenue to $2.1b, as more jackup projects reached recognition milestones. O&M operating margin slipped 2.3 ppt q/q to a still healthy 14.2% due to fewer rig deliveries and change in revenue mix. End Dec order book was $14.2b, with visibility till 2019. Infrastructure incurred a $11m loss from large provisioning charges of ~$150-200m arising from cost overruns and other costs at its Doha and Manchester EPC projects. Property earnings were about flat. Final DPS of 30¢ brings FY13 payout to 49.5¢ (inclusive of Keppel REIT distribution-in-specie). *Tiger Airways: Turned in a 3QFY14 net loss of $118.5m reversing from $2m net profit in same period last year, quadrupling 9MFY14 net loss to $127.5m. Bottom-line was dragged largely by exceptional charges of $88.3m, including a $30.3m loss on the planned disposal of Tigerair Philippines and an $58m impairment on associates. Operating performance was also hit by industry overcapacity which led to lower yield and load factors. Tigerair S’pore came under pressure with revenue declining 3% to $168m and reported an operating loss of $170m vs $27m profit a year ago. *Suntec REIT: 4Q13 distributable income climbed 11% y/y to $58.2m alongside a 10.1% increase in DPU to 2.56¢ (including 0.175¢ from capital distribution support), taking FY13 DPU to 9.33¢. NPI surged 62.9% to $49.8m after gross revenue jumped 30.2% to $71.6m, boosted by the opening of Suntec City Mall (Phase 1) and Suntec Singapore following renovation works. Office portfolio occupancy was stable at 99.6% and retail portfolio at 97.3% with weighted lease to expiry of 2.4 years. Aggregate leverage stood at 38% with an average financing cost of 2.5%. End 2013 NAV was $2.13 per unit. *Mapletree Greater China Commercial Trust: 3QFY14 distributable income exceeded IPO forecast by 16.6% to $40.6m with DPU of 1.518¢. Gross revenue came 9.9% above estimates to $65.7m while NPI beat by 13.2% to $53.8m, on the back of better than expected rental uplift for both Festival Walk in Hong Kong (+20%) and Gateway Plaza in Beijing (+78%), new committed leases, as well as lower operating expenses. Overall portfolio occupancy dipped 1.1 ppts to 97.9% with weighted average lease expiry of 2.6 years. Aggregate leverage of 40.5% with debt maturity of 3.2 years at 2.0% cost of debt. End Dec NAV was $0.94. CapitaLand: Acquired a prime residential site on the Chinese coastal city of Ningpo for Rmb1.1b ($232m) in a government land tender. The 617,514 sf site can yield 1.36m sf of GFA on which the group plans to build 1,100 small to medium-sized units to target first-time homebuyers and upgraders. The tender price works out to Rmb809 psf ppr. Construction will start in 3Q14 with first phase is scheduled for launch next year. *Swee Hong: Expects to report a loss for 2QFY14 attributed to decline in revenue from operations and significant costs increases.
Thursday, January 23, 2014
Sunvic will be selling its Taixing plants in phases, so the cash payment will not come in one lump sum. Stage 1 will involve seeting up of a JV to house the Taixing assets. In Stage 2, Sunvic will transfer of 55% stake in JV to Arkema for Rmb1.45b within 9 months. Thereafter, Sunvic will grant 3 call options for Arkema to buy over the remaining 45% stake for Rmb1.45b. Post deal, Sunvic will receive a cash consideration of $1.55/share.
Sunvic: to lift halt at 3.30pm. Sunvic announced the proposed disposal of its acrylic acid (AA) and acrylate ester (AE) Taixing production facilities for an aggregate transaction value of ~Rmb3.9b. The buyer is a subsidiary of Euronext Paris-listed Arkema, a leading French chemicals producer with market cap of €5b. The latter’s support represents a vote of confidence, and is a strong testament of the quality and competitiveness of Sunvic’s operations and products. Sunvic will receive an initial payment of Rmb1.45b in exchange for Arkema’s initial 55% stake in the facility, and the balance Rmb2.45b and transfer of remaining stake will be completed in subsequent stages. In aggregate, Sunvic will recognise a pretax gain of ~Rmb1.9b (~$0.75 per share, representing ~93% of market cap) from the disposal. The group expects to use the proceeds to reduce its bank borrowings and continue to grow its intermediate chemical business in the PRC through the establishment of new facilities and expansion of new sales channels. The group will seek shareholder approval for the disposal at an EGM. The Taixing facility has production capacity of 320,000 tons of AA and 180,000 tons of AE, with an additional 160,000 tons of crude AA slated to come on stream by 1Q15. Further to the sale, Sunvic has secured an offtake agreement for the supply of AA and AE until Arkema acquires full ownership of the facility. Meanwhile, Sunvic will retain a production facility with annual AA and AE production capacity of 205,000 and 250,000 tonnes respectively in Yancheng City, Jiangsu province. Post sale, Sunvic's 3Q13 NTA per share will rise from $0.83 to $1.49. Based on the last closing price of $0.795, this implies an attractive P/NTA of just 0.5x.
Viking: Offshore and Marine company, Viking, is focusing its efforts on building its portfolio of offshore and marine assets and developing a chartering business. They are optimistic about demand in the new business area as they expect many to be looking to upgrade old rigs. In the shorter term, group will be looking to acquire rigs that have already existing contracts that will help to bring in some steady, stable revenue to the company. The firm has plans to continue expanding overseas, with new orders from overseas markets secured in FY2013 up 58 per cent on-year. Its order book has more than doubled to S$85 million as at 31 December 2013 from S$42 million a year ago. Viking currently specialises in providing support services and equipment to the offshore and marine industry, after having completely divested its non-core retail and distribution businesses last year.
DBS - The bank is in advanced stages to secure the bid for Societe Generale's Asian private bank, which is expected to cost an ~$300-$400m, which is expected to propel the bank into Asia's top 6-7 largest Asian Private bank. However with no disclosure on how the bid will be funded should it be successful, sceptical investors could be wary of any potential cash call / dilution in the near-term. Seperately, DBS announced today that it has sold its stakes in Hwang-DBS Investment Bhd (Hwang-DBS) and its assets worth RM1.36b, to Affin Holdings. Hwang-DBS is the country's third largest stockbroker with a market share of 12% and manages more than RM18.1b worth of assets.
Soilbuild REIT: Turned in a strong set of 4Q13 results this morning. NPI came in at $13.7m, 2.1% above its prospectus forecast due to higher carpark income and higher income from Eightrium and Tuas Connection. The growth was further boosted by lower finance expenses, thereby pushing the distributable income 3.5% above its prospectus forecast at $12.2m. As such, DPU for the quarter was 1.51 S cents, representing a 3.4% increase over its prospectus forecast. This brings the DPU from the period from listing date (16 Aug 2013) to 31 Dec 2013 to 2.27 S cents, slightly above our DPU projection of 2.19 cents (prospectus forecast: 2.199 S cents). OCBC keeps its BUY rating on Soilbuild REIT but put its fair value of $0.82 under review as they incorporate the results into its projections.
Aspial: Aspial acquired a 28,255 sf freehold site in Melbourne, Australia, for A$42.3m (S$47.9m), with an intention to build a 312m tall residential and commercial tower, being the tallest building in Melbourne with more than 1m sf gfa upon completion. Located in downtown Melbourne adjoining the CBD at 70 Southbank Boulevard and adjacent plot 115-131 City Road, the property has two active planning permits, of which one for redevelopment into a 388m tower subject to aviation clearance. Currently, the tallest skyscraper in Melbourne is the 297m Eureka Tower, just a few blocks away from Aspial’s acquired property. The latest deal comes shortly after the company had announced that it has acquired another freehold property in Melbourne’s CBD area at King Street. At $0.43, Aspial trades at 2.5x P/B.
Keppel Land: Turned in FY13 and 4Q13 net profits of $885.9m (+6%) and $567.3m (+8% y/y) on record revenues of $1.5b (+6%) and $505.7m (+7%). Excluding fair value gains of $331.1m (-11%), FY13 and 4Q13 earnings of $583.7m (+22%) and $265.1m thrashed street estimates. This was driven by mainly by its China projects (8 Park Avenue, The Botanica The Springdale), property investments (MBFC Tower 3, Keppel REIT) and sale of stakes in Jakarta Garden City and Hotel Sedona Manado, which yielded divestment gains of $151.8m. Overseas profits rose 64% to $141.1m and contributed 33% to the core bottomline.. MKE thinks that the value drivers remain intact, and expects Keppel Land continue focus in China, where MKE thinks demand from upgraders and first-timers can be sustained. That said, Management still expects a “soft landing” for Singapore residential and will be more selective on land acquisitions. The Tiong Bahru site is expected to be launched in 1H14. On MBFC Tower 3, pre-commitment has reached 95% but there are no firm plans to sell the asset, although it might be in the cards if a good offer is received. If the sale does go through however, StanChart expects a potential divestment gain of $350m, which translates to 17¢/share dividend, given Keppel Land’s commitment of a one-third payout ratio. Net asset value at the end of Dec was $4.52. Final dividend of 13₵ proposed, which translates to a 4% yield. Latest broker ratings as follows: OCBC: Maintain Buy with TP: $4.09 MKE: Maintain Buy with TP: $4.60 CS: Maintain Neutral with reduced TP of $3.80 from $4.24 Deutsche: Maintain buy with increased TP of $4.00, from $3.99 StanChart: Maintain O/PF with TP: $4.14 UOB Kay Hian: Maintain Buy with TP: $4.30
Frasers Commercial Trust: 1QFY14 results in line; Frasers Commercial Trust (FCOT) 1QFY14 distributable income spiked 33% y/y to $13.7m and DPU accelerated 30% to 2.05cts as a result of lower interest costs from capital management initiatives, as well as the conversion of Series A CPPUs. Gross revenue dipped 3% to $28.8m and NPI declined 4% to $22.1m on the back of a weaker AUD and slightly lower occupancy for Central Park, offset by the improved performances of S'pore properties. Average portfolio occupancy rate at 97.1% (-0.8ppts q/q) with weighted average lease to expiry of 4.4 years. Aggregate leverage of 37.9% (+0.3ppts) at an all-in interest rate of 2.7%. NAV of $1.54. At $1.27, FCOT trades at 6.5% forward yield and 1.2x P/B. Latest broker recommendations: CLSA maintains Outperform with $2.00 TP StanChart maintains Underperform with $1.15 TP
Mapletree Commercial Trust: 3QFY14 results above estimates; Mapletree Commercial Trust (MCT) reported 3QFY14 distributable income of $38.7m (24.2% y/y), while DPU grew 11.9% to 1.865cts on the back of maintained performance from VivoCity, improvement in occupancy rates at PSA Building and the acquisition of Mapletree Anson in Feb'13. Subsequently, gross revenue grew 22.4% to $68.4m , while net property income (NPI) accelerated 24.9% to $49.4m. On a 9MFY14 basis, Vivocity (62.5% of MCT's NPI) had a solid rental uplift of 38.7%, supported by stable shopper traffic growth of 2.1% y/y and tenant sales growth of 6.6%. With its proximity to Resorts World Sentosa to attract a good mix of locals and tourists, the shopping centre should continue to underpin MCT's strong rent reversion in the coming quarters. Overall portfolio occupancy as at 31 Dec 13 was at 98.7% (committed occupancy of 99.9%), which comprises retail at 97.5% and office occupancy of 100%. Weighted average lease to expiry of 2.2 years. Aggregate leverage remained stable at 40.8% with average term to maturity of 2.7 years at an average cost of 2.18%. At $1.165, MCT 9MFY14 annualized DPU 6.2% yield and 1.1x P/B. Latest broker recommendations: CS maintains Outperform with $1.45 TP DB maintains Buy and raises TP to $1.47 (from $1.42) StanChart maintains Outperform with $1.28 TP
SGX released 2QFY14 results which came in at the lower end of street estimates. Net profit was $75m (-1% y/y, -19% q/q), on the back of revenue of $165m (+2% y/y, -10% q/q). The significantly lower q/q performance was attributed to seasonality patterns, with 2QFY14 traditionally being the weakest quarter for the exchange. Revenue from the securities business, accounting for 32% of total group revenue (37% previously), fell 13% to $52.2m, as securities total traded value declined 18% to $64.1b. The fall in trading was partially offset by a 6% rise in average clearing fees to 3.2 b.p., due to an increase in uncapped trades. Derivatives revenue which also accounted for 32% of total group revenue was up 16% to $52.5m, as increased volumes for the FTSE China A50 futures, Nikkei 225 futures and options, and iron ore swaps contributed to its top-line. Total volumes grew 18% to 26.3m contracts, while average month-end open interest grew 45% to 3.6m contracts. During the quarter, a total of nine listings in the quarter raised $1.4b versus the eight listings which raising $0.8b y/y. Total equity funds of $2.6b were raised, compared with $2.1b previously, while a total of $33.7b was raised from 144 new bond listings, versus 90 bonds raising $39.7b y/y. Going forward, SGX guides that the global economy is showing moderate signs of recovery, and the exchange will continue to invest in new products and services, expand international distribution, and strengthen its regulatory and risk management capabilities. In the next few quarters, SGX aims to introduce products such as foreign exchange futures and new ASEAN equity index futures. At the current price, SGX trades at 20.5x forward P/E, in-line with its regional peers of 22x. Latest broker ratings as follows: CLSA maintains U/p with TP $7.00 Credit Suisse maintains Neutral with TP $7.00 Nomura maintains Neutral with TP $7.60 OCBC maintains Hold with TP $7.22 OSKDMG maintains Neutral with TP $7.80
Market Roundup: US stocks finished on a mixed note as disappointing results from IBM, AMD and Coach weighed on the Dow. After a 30% rally in 2013, buoyed by the Fed’s massive stimulus, investors are now looking to corporate profits to justify current valuations. But corporate results so far has been mixed with yellow falgs raised as most earnings are still being driven by cost cutting instead of revenue growth. With little to go by, the STI remains trapped within its tight 3,120-2,160 trading range. Stocks to watch: *Keppel Land: Turned in FY13 and 4Q13 net profits of $885.9m (+6%) and $567.3m (+8% y/y) on record revenues of $1.5b (+6%) and $505.7m (+7%). Excluding fair value gains of $331.1m (-11%), FY13 and 4Q13 earnings of $583.7m (+22%) and $265.1m thrashed street estimates. This was driven by mainly by its China projects (8 Park Avenue, The Botanica The Springdale), property investments (MBFC Tower 3, Keppel REIT) and sale of stakes in Jakarta Garden City and Hotel Sedona Manado, which yielded divestment gains of $151.8m. Overseas profits rose 64% to $141.1m and contributed 33% to the core bottomline. End ’13 NAV climbed 13% to $4.52. Final DPS of 13¢ (+1¢) declared. *SGX: As expected, 2QFY14 net profit of $75m came in 1.8% weaker on revenue of $164.6m (+1.7%). Faced by challenging market conditions, securities revenue declined -13% with daily average traded value of $1b (-19%). This was offset by sustained growth in derivatives business (+16%) hitting 26.3m contracts (+18%) and other auxillary services. Total equity funds raised was $2.6b ($1.4b from 9 IPOs) vs $2.1b previously, while $33.7b (-15%) was raised from 144 new bond listings. Cost-to-income ratio rose to 46.4% due to higher depreciation charges, processing and royalty fees and marketing expenses. Interim DPS of 4¢ was maintained. *Mapletree Commercial Trust: 3QFY14 distributable income jumped 24.2% y/y to $38.7m, while DPU rose 11.9% to 1.865¢. NPI swelled 24.9% to $49.4m, in tandem with gross revenue growth of 22.4% to $68.4m. VivoCity maintained its robust operating performance, while PSA Building delivered strong earnings growth. Mapletree Anson, acquired in Feb '13, also contributed an additional income stream. Overall portfolio occupancy improved to 98.7% with weighted average lease to expiry of 2.2 years. Aggregate leverage remained stable at 40.8% with average term maturity of 2.7 years at an average cost of 2.18%. End Dec NAV stood at $1.07. *CapitaCommercial Trust: Delivered gross revenue of $386.9m (+3%) in FY13, driven by improved performance from most properties, notably Six Battery Road, Raffles City Singapore, HSBC and full year contribution from Twenty Anson. Accordingly, distributable income rose to $234.2m (+2.5%), and DPU edged up to 8.14¢ (+1.2%), implying a yield of 5.5%. Portfolio occupancy climbed to 98.7% (+1.5ppt) from a year ago. CCT ended Dec ’13 with aggregate leverage of 29.3% and NAV per unit of $1.71. *Frasers Commercial Trust: 1QFY14 distributable income surged 33% y/y to $13.7m driving DPU up 30% to 2.05¢, aided by lower interest costs arising from capital management initiatives and conversion of Series A CPPUs. Gross revenue dipped 3% to $28.8m and NPI declined 4% to $22.1m on the back of a weaker AUD and slightly lower occupancy for Central Park, which offset by the improved performances of S'pore properties. Average portfolio occupancy rate slid marginally to 97.1% with weighted average lease to expiry of 4.4 years. Aggregate leverage stayed at 37.9% with effective interest cost of 2.7%. End Dec NAV was $1.54. *Soilbuild REIT: Posted DPU of 1.51¢ for 4Q13, exceeding its IPO forecast by 3.4%. From listing date (16 Aug ’13) to end ’13, actual DPU amounts to 2.27¢, implying an annualized yield of 7.8%. For the quarter, the REIT delivered net property income of $13.7m, supported by new take up and lease renewals. As at end ’13, portfolio occupancy stood at ~100%, aggregate leverage was 29.3%, and NAV per unit was $0.80. *Global Logistic Properties: Signed nine new leases totalling 180,000 sqm across multiple locations in Japan, of which six are first-time customers. These are to third-party logistics providers or wholesale distributors catering to domestic consumption. Four of the facilities are under its 50% owned GLP Japan Development Venture, and have reached 82% occupancy. *Boardroom: Major shareholder Salacca has bought over Third Avenue Management’s 10.35% stake, lifting its shareholding to 44%. Salacca will make a mandatory conditional cash offer of $0.575 per share for the rest of the shares it does not own. *Aspial: Acquired 28,255 sf freehold site in downtown Melbourne for A$42.3m ($47.6m) and plans to redevelop into the city's tallest building at 312m with >1m GFA of residential and commercial space. *Cordlife/Asia Medic: Cordlife has launched a lawsuit against AsiaMedic’s JV, Cryoviva Singapore for breaches including use of Cordlife’s proprietary information and intellectual property without its knowledge and consent. The application has been fixed for hearing on 24 Jan ’14. *China Essence: Expects to record a loss for 3QFY14 (to be released 27 Jan), citing lower sales volumes due to low production level for the quarter, as well as high finance charges and operating expenses. *Gems TV: SGX has granted a further extension of time up to 31 Aug ’14 for Gems TV to meet the requirements to exit from the Watch-List, subject to certain conditions being met.
Wednesday, January 22, 2014
DBS - Newswires today reported that DBS is in advanced bidding for Soc Gen's Asian private banking unit. It was unclear how much Southeast Asia's biggest lender would be willing to pay for the bank, but previous estimates from financial sources have valued it at between $300m (£182m) and $400m. DBS managed $46b in private banking assets at the end of 2012 and that could rise by another $15b if it takes over SocGen's Asia unit. That would make it Asia's sixth or seventh largest private bank in an industry dominated by UBS and Citigroup with assets of more than $200b each.
Raffles Medical: has announced the acquisition of a land site adjacent to its flagship Raffles Hospital, for $105.2m. The site will have a GFA of ~119,000 sf, which implies a reasonable price of $888 psf, compared to the $1,600 psf that Parkway Holdings (now IHH) paid for its Novena Hospital site. Together with the provision permission previously obtained to increase the plot ratio on the existing Raffles Hospital land, this would increase combined GFA by 72% to ~527,000 sf. The improvement works will cost ~$205m, and are expected to be complete within 24 months. The additional space will be used for expansion of inpatient and outpatient facilities as well as training of staff. With an estimated net cash position of $260m, Maybank-KE believes the company can fund both the Holland V ($120m) and this project ($310m) with debt and internal cashflow. With the project estimated to reap a steady state ROE of 12-15%, Maybank-KE views the expansion positively, for the economies of scale and growth it provides. Maintain Buy with TP $3.80
Genting SP: is reported to be in talks with the Osaka govt on plans for a 500b yen (US$4.8b) casino resort. Although the Japanese government has yet to pass the legislation, Osaka Prefecture Governor Ichiro Matsui was quoted as saying “it’s a matter of time before casinos are legalized”. While GENS has expressed interest in developing and operating an IR in Japan, OCBC notes that it will still be quite some time before these casinos in Japan materialize. Furthermore, all the major gaming companies like Caesars, MGM and LV Sands are also in discussions with the Osaka govt , suggesting that the competition for the initial project is likely to be very keen indeed. For now, the house maintains its HOLD rating and TP $1.48 . Note that Genting will be announcing its 4Q13 results on 20 Feb after market close.
Venture: Maybank-KE reiterates its Buy call with TP $8.70. Notes that in its recent non-deal roadshow, every single client was interested in the company’s budding 3D printing business. Management says that 3D printing is still a new concept, hence growth contribution projects at this juncture may be premature, but Maybank-KE believes the business could grow faster than expected. One of Venture’s highest value-added activities will likely be in the area of material delivery, given its long expertise in ink delivery mechanisms for 2D printers. The house hypothesizes low-single digit revenue contribution in FY14 and a more substantial high-single, if not double-digit contribution in FY14, particularly as the industry is aggressively striving to broaden the market and lower price points. For instance, Stratasys, a leading US 3D printer company, recently guided for revenue of US$660-680m in 2014. In comparison, Venture recorded 9M13 sales of $2.3b. Once the product goes into mass production, Venture could easily achieve a normalized 20% gross margin and 6-8% net margin, considering that it typically earns 25-45% at the gross level for ODM business.
First Resources: reported FY13 production numbers in line with estimates. FFB nucleus grew 6.5% YoY. FFB plasma decline was compensated by a jump in external FFB purchases. Total FFB processed was recorded up 13.1% YoY. CPO production reached 588,792 t (+12% YoY), in line with estimates (100% of FY13E). In terms of productivity, in 2013, FR recorded lower yield (FFB yield and CPO yield at 18.7 and 4.3 tons/ha), contributed by the dilutive effect from higher percentage of young trees and the lower yielding newly acquired plantations. Mgt expects yield to return to 20- 22 tonnes/ha level in 2014 following the recovery of tree stress.
Palm oil: may see lift in sentiment on progress in the biodiesel space. State owned electricity company, PLN has secured 6,720 tons of biodiesel from Wilmar and Sinar Mas (majority owned by Golden Agri) to supply their seven diesel-fired power plants located in Medan (North Sumatra), Dumai (Riau), and West Kalimantan for the whole of 2014. The price is set at 91.37% of Means of Platts Singapore (MOPS), and the company continues to be in discussion with other producers as it aims to use around 1m tons of biodiesel for this year. The targeted biodiesel supply will be equivalent to about 26% of PLN's total diesel consumption needed this year for power generation, and could potentially take out 3-4% of the annual CPO supply in Indonesia. Hence, this is certainly positive for the sector, and also shows that PLN is serious in using biodiesel as an alternative fuel for power generation. Another near term catalyst may come from the from potential good take up in state owned oil distributor Pertamina’s biodiesel tender, which is looking to secure 3.3m KL of biodiesel p.a. or about 12% of annual CPO supply in Indonesia. Pertamina plans to announce the result of second tender sometime end of Jan 2014. As a participant of Pertamina tender, there is potential upside to First Resources if it obtains the tender. The counter remains Credit Suisse’s top pick in the sector (Outperform, TP $2.80).
China Fertilizer sector: SGX counters China XLX and Changjiang Fertilizer may benefit from spillover interest after Deutsche published its inaugural sector note today, which provides demand, supply, prices and geography data. China is the largest producer of nitrogen-based fertilizers (urea, ammonia) worldwide. China produces 2.5x more urea/ ammonia (u/a) than India, 9x more than Russia, 9x more than the USA, and is a major player on the world’s fertilizer markets. Aggregate fertilizer demand in China has grown at an average of 6.5% pa since 2003. Ytd 2013 demand growth (-14.9%) seems to be an outlier. Nitrogen demand has grown at an average 3.1% pa with potash demand at 6.2% pa. China XLX which produces urea and compound fertilizer from coal, trades at 8.6x P/E. Changjiang Fertilizer which produces nitrogenous fertilizer, liquid ammonia and methanol is loss making.