Friday, May 30, 2014

Old Chang Kee

Old Chang Kee: The curry puff retailer cooked up a FY14 net profit of $6.0m (+2% y/y) on revenue of $68.9m (+5%) Top-line growth was led by a 5.9% increase in retail sales to $67.8m on contributions from new outlets as well as higher receipts from the existing outlets. Meanwhile, revenue from other services such as delivery and catering services dropped 31.9% to $1.1m after the group changed its delivery mode in Oct ‘12 to accept only bulk orders. Gross margin remained stable at 62.2% compared to 61.3% a year ago. Other income rose 13.6% to $1.1m, due to gains from disposal of motor vehicles and government wage credits in Mar ’14 but this was offset by an 8.6% rise in admin expenses to $10.1m, and a 42.6% rise in other expenses arising from doubtful debt provisions and lower FX gains. Going forward, management group expects operating leases, labour and raw material costs to remain high over the next 12 months. The group has proposed dividends of 1.5¢ per share for FY14 versus total payout of 6.5¢ (1.5¢ ordinary & 5¢ special) in FY13. At the current price. OCK trades at 19.7x FY14 P/E and 3.75x P/B.

Hotel Properties

Hotel Properties: Offer declared unconditional after the consortium 68 Holdings, which comprises Ong Beng Seng and Wheelock Properties has received 50.26% of Hotel Properties' (HPL) share capital. This follows after the consortium revised its cash offer for HPL for the second time to $4.05 from $4.00/share on 27 May. The offer will be extended to 5.30pm on 26 Jun and the consortium does not intend to further extend the closing date.

Yangzijiang/ SIIC

Yangzijiang/ SIIC: Chairman of Yangzijiang Shipbuilding, Ren Yuanlin, has been reported to the stock authorities in China over several illegal activities conducted, including insider trading, misrepresentation, infringement of the independent operation of a listed company, illegal access to shares of listed company, manipulation of stock price and interference in the truthful disclosure of regular report. The report was filed by Tianjin Guoheng Railway Holding (China-listed), which is currently suspended due to the investigation. Ren's investment vehicle, Newyard Worldwide Holdings, also has stakes in Ione Holdings (982 HK) and SIIC Environment. Do note that these counters may be subjected to short-selling pressure in the near term on the negative news.


Pawnbrokers: DMG initiated on the sector and prefers ValueMax (BUY, TP $0.56) on its valuation relative to peers, more growth areas and its fixed dividend policy. Pawnshops are gaining favour among the younger generation, unperturbed by the stigma such shops were once associated with. Next, the number of pledges received at Singapore pawnshops increased by approximately 46.9% to 4m in 2012 from about 2.7m in 2007. In addition, loans disbursed by Singapore pawnshops soared 343.8% to $7.1b in 2012 from around $1.6b in 2007. With instant cash approval and lower interest rates than credit card loans, this uptrend will likely continue. The ideal scenarios for most pawnbrokers are: i) a steady increase in gold prices, or ii) steady movement in gold prices with minimal violent fluctuations. In addition, the big decline in gold prices has already been reflected via impairments made to their inventories. Gold prices have since recovered and remained steady at US$1,100-US$1,300. If gold prices continue to remain steady with minimal fluctuations, house reckons there may be a turnaround in these companies’ FY14 revenue and profits. House has Neutral rating on MoneyMax (TP $0.34) and Maxi-Cash (TP $0.27).

Stamford Land

Stamford Land: Counter featured on DBSV's 52-week high radar. Fundamentally, revenue grew 4.5% to $278.7m in FYMar14. The hotel segment reported an overall 3% increase in revenue in AUD but was significantly impacted by the slide in the AUD during Apr-Aug 2013. The property development segment reported higher revenue from the sales of more apartments. A 3¢ dividend was declared that translates to a 4.8% yield. The Group is optimistic of its hotel business prospects for FY2015. Capitalizing on the robust Sydney residential property market, management plans to unlock greater value from 2 of its existing Sydney hotels, Stamford Grand North Ryde & Sir Stamford at Circular Quay, by redeveloping them into residential properties for sale. It will realize benefit from these property development initiatives only upon their completion. Technically, the stock triggered a 52-wk high this morning, the first time in a year, when it rose above $0.62. Simultaneously, a multi-year downtrend line in existence since January 2011 is also broken to the upside today. Both are potential positive technical signals. The near term base is at $0.61. The upside potential is taken at 20% above the 52-wk high trigger, at $0.745. The stop loss is 5% below the 52-wk high trigger, at $0.59.

Pacific Radiance

Pacific Radiance: UOB Kay Hian maintains Buy with TP $1.55. The house note that PACRA has delivered better-than-expected earnings in the last two quarterly results, resulting in earnings forecast upgrades. This is testament to its superior management ability to exploit opportunities to earn an above-industry return on its assets. Thus, despite a 38% appreciation in share price ytd, valuations are still undemanding on higher earnings forecasts.

Chasen Holdings

Chasen Holdings: 4QFY14 net profit turned around y/y to $2.1m vs loss of $7.4m, on the absence of arbitration write off, lower provision for doubtful trade debts and less legal and professional fees. Revenue surged 46% to $26.5m mainly from its relocation business to $10.7m (+231%) from the continuation of several projects, but partially offset from its technical and engineering segment of $9.1m (-6%) from fewer projects secured. Gross margin improved 13pts to 25% from the change in sales mix. This brought FY14 earnings to $2.5m, from loss of $5.4m, and revenue of $101.5m (+28%). Final dividend to be announced.

Courts Asia

Courts Asia: 4QFY14 net profit slumped 25% y/y to $11.8m, despite revenue growth of 10% to $207m. This brought FY14 earnings to $28.3m (-32%) which missed estimates by 9%, while revenue of $830.3m (+5%) came in line. For the full year, Courts saw increased sales from both S'pore (+4.4%) and Malaysia (+5.1%), on higher bulk sales of digital & electrical products, two new stores in Singapore, as well as larger credit sales and six new stores in Malaysia. However, the bottom line was weighed by 1) higher impairment allowances on trade receivables from the larger credit portfolio, 2) increased occupancy costs, 3) greater depreciation from new stores in Singapore and Malaysia, 4) higher interest costs on borrowings and 5) the migration to a new third party logistic service provider in Malaysia. Overall gross margin slipped to 30.9% (-0.7ppts) on a shift in mix. Group proposed final DPS of 0.76¢, bringing FY14 DPS to 1.52¢. Going forward, management expects a pick-up in demand in Singapore as more new HDB flats are completed in the next two years, while its recently-opened second megastore in Malaysia should contribute to higher sales. The widely anticipated flagship megastore in Indonesia remains on track for launch in Sep this year, and the group intends to have an additional two to be operational in 2015. At $0.535, Courts Asia trades at 8.2x forward P/E and 0.99x P/B.

Tat Hong

Tat Hong: 4QFY14 results came in below estimates, as net profit plunged 77% to $4.2m taking FY14 net profit to $32.8m (-53%). Revenue for the quarter fell 22% to $155.9m (-22%) largely due to a 33% decline in Distribution revenue to $60.3m and 20% decline in Crane rental revenue to $57.9m. This was offset partially by a 35% rise in Tower Crane rental revenue to $23.3m. Gross margin came in at 36.8% versus 38.1% from the previous year, with the Crane Rental and Tower Crane Rental divisions posting lower margins, partially mitigated by improved margin from the General Equipment Rental division whilst margin from the Distribution division remained stable. Bottom-line was further weighed by a 23% rise in distribution expenses to $8.9m, cushioned slightly by a 43% rise in other income to $5.1m, led by gains on the disposal of a subsidiary in Singapore and government subsidies received. Management note that FY14 was a challenging year for Tat Hong as all its markets, with the exception of China, did not perform well. The group however remains optimistic of its future prospects as Asia’s infrastructure requirements are estimated at US$750b a year till 2020, with Tat Hong, well-placed to participate in this infrastructure ramp up. The group further expects performance at its Australian subsidiary to perform better this year as urban infrastructure and major LNG projects are expected to pick up momentum, and remain cautiously optimistic that all its other markets will perform better in FY15. Tat hong has declared a dividend of 1¢ per share, taking FY14 payout to 2¢ per share, half that of the 4¢ declared in FY13. At the current price, Tat Hong trades at 16.4x FY14 P/E. Latest broker ratings as follow: CIMB downgrade to Reduce from Hold with TP $0.72 OCBC maintains Hold with TP $0.89

SG Market (30 May 14)

US Market: US shares rose, sending the S&P 500 to its 13th record close for the year as investors shrugged off disappointing 1Q GDP data and focused on better-than-expected jobless claims and deal new in the F&B industry amid a very thin trading session which saw 4.88b shares exchanging hands. The DJIA gained 66 pts to 16,699 (+0.4%), while the S&P 500 advanced 10 pts to 1,920 (+0.5%) and the Nasdaq added 23 pts to 4,248 (+0.5%). The US economy contracted for the first time in three years as 1Q14 GDP fell 1% as harsh weather disrupted business operations and hampered inventory growth, suggesting that the setback is temporary, giving scope for pent-up demand and new orders in the next few quarters. Meanwhile, initial jobless claims fell to 300,000 last week, pointing to a strengthening labour market. Among stocks in focus, Apple gained 1.8% to hit its highest level in a year, after announcing a US$3b deal to buy Beats Music, while Hillshire Brands jumped 17.7% after Tyson Foods offer of US$50 per share trumped Pilgrim’s Pride bid of US$45. Following the positive US market close, the STI is expected to stay above its previous 3,285 peak with next resistance at 3,320 and underlying support at 3,260 (20-day moving average). Stocks to watch: *Tat Hong: 4QFY14 net profit plunged 77% y/y to $4.2m (-77%), taking FY14 net profit to $32.8m (-53%). Revenue slid 22% across most segments except tower crane rental to $155.9m (-22%), impacted by subdued activities due to weaker commodities and mining/LNG sectors in Indonesia and Australia, declining rupiah, increased competition in S’pore as well as completion of major projects in Malaysia. Bottomline was shored partly by a 43% rise in other operating income to $5.1m, from a disposal gain and government subsidies. Final DPS cut to 1¢, bringing FY14 total payout to 2¢ vs 4¢ in FY13. *Courts Asia: 4QFY14 net profit slumped 25% y/y to $11.8m as margins shrank and finance and admin costs rose despite revenue growth of 10% to $207m. This brought FY14 earnings to $28.3 (-32%) on revenue of $830.3m (+5%). The sales improvement came from increased bulk sales of digital & electrical products, two new stores in Singapore (+4.4%) and higher credit sales plus six new stores in Malaysia (+5.1%). But gross margins narrowed to 30.9% from 31.5% due to shift in sales mix towards electrical and bulk sales of digital products. Earnings were also hit by higher impairment allowances on trade receivables, increased rents and higher interest costs. Final DPS of 0.76¢ proposed, taking FY14 DPS to 1.52¢. *King Wan: 4QFY14 net profit fell 29% y/y to $2.1m, taking FY14 net profit to $6.7m (-4%). Revenue declined 30% to $20.7m on lower recognition of M&E contracts. Gross margins widened to 17.1% from 9.9% but earnings was damped by lower interst income and higher admin expenses related to doubtful debts, higher inventories, staff costs and FX losses. Final DPS of 1.5¢ brings FY14 total payout to 2¢, higher than the 1.5¢ in FY13. *PEC: Secured new contracts worth $100m, including EPC works for crude oil storage and handling facilities in UAE for an existing client with completion in May ’16 and a range of mechanical, piping and structural steelworks for a tankage project in Jurong Island, to be completed in 10 months. #ASL Marine: Secured $91m worth of shipbuilding contracts for the construction of three units of infield support vessels and one seismic support vessel, from customers in Australia and Norway. The four vessels are scheduled to be completed in 1Q16. *Frasers Centrepoint Trust: Raised net proceeds of $157.7m through a private placement of 88m new units at between $1.79 and $1.835 per unit, to part finance the recently-announced $312.5m acquisition of Changi City Point. *Pacific Andes: Disposing 26.5m shares in Tassal Group (18.1% stake) at A$3.65/share for A$96.7m, realizing a gain of A$36.9m ($0.009/share). Post-completion, group will have 6.8m (4.64%) shares remaining in Tassal. This follows the group's inability to leverage on Tassal to capture growing demand for its products internationally, as Tassal has maintained its focus on production for the Australian domestic market. *GRP: Terminated LOI with MGS Resort & Entertainment Co to acquire 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. #Chasen Holdings: 4QFY14 net profit turned around y/y to $2.1m vs loss of $7.4m, on the absence of arbitration write off, lower provision for doubtful trade debts and less legal and professional fees. Revenue surged 46% to $26.5m mainly from its relocation business to $10.7m (+231%) from the continuation of several projects, but partially offset from its technical and engineering segment of $9.1m (-6%) from fewer projects secured. Gross margin improved 13pts to 25% from the change in sales mix. This brought FY14 earnings to $2.5m, from loss of $5.4m, and revenue of $101.5m (+28%). Final dividend to be announced. #GP Batteries: 4QFY14 net loss widened y/y to $26m from loss of $19.2m, mainly due to a provision for impairment loss of $17.6m on Gold Peak Industries (Taiwan) from the shutdown and consolidation of its battery plants, and a $5m provision for compensation from an unfinished project caused by the shut down of operation of Vectrix. This was partially offset from lower loss from associate, Vectrix, and decreased admin expenses due streamlining efforts. Meanwhile, revenue climbed 3% to $165.5m from higher sales of primary batteries. Group declared final DPS of 1¢, bringing FY14 DPS to 1¢ (FY13: 2¢).

Thursday, May 29, 2014

Global Yellow Pages

Global Yellow Pages: FY14 results turned around to net profit of $5.1m from loss of $124.3m in FY13 mainly due to the absence of the one-off impairment charge, as well as new associate income from Yamada Green and lower operating expenses. Revenue slipped 10% to $27.2m due to a decline in search solutions as well as the effects of the Personal Data Protection Act on the direct sales solutions business, offset partially by Singapore River Tour and Taxi Services business.


Goodpack: StanChart cites the disappointing offer price of $2.50/share from KKR, 8% below its fundamental price for the company. House thinks that the deal may not proceed that smoothly given the offer via a scheme of arrangement, and hypothesize that there may be potential counter offers given Goodpack's strong profitability and growth profile. StanChart notes that in particular, the offer specifically addresses what could happen if there are counter offers, and in the event of one, KKR could make a voluntary conditional cash offer to acquire all the shares of Goodpack, on the same or better terms and a consideration greater than the current offer price. StanChart maintains its Outperform rating and TP of $2.71.


Biosensors: 4Q14 results came in below estimates, with net profit slumping 80% to US$6.1m taking FY14 net profit to US$40.6m (-65%). Revenue for the quarter fell 8% to US$81.6m, largely due to a 14% decline in revenue from interventional cardiology to US$63m, with the segment contributing to 77% of Biosensor's total revenue. This was partially offset by higher revenue from the group's other product segments - critical care and cardiac diagnostic – which grew 12% to US$3.5m and 73% to US$4.5m respectively. Gross margin also fell to 76% from 84% previously, largely due to distribution activities in Japan for the Nobori stents and the consolidation of the group’s newly acquired cardiac diagnostic business, both of which have lower margins. Bottom-line was further weighed by a 25% rise in sales and marketing expenses to US$29.7m and provisions of US$3.9m for restructuring, offset partially by a 58% drop in R&D expenses to US$4.3m. Biosensors noted that In FY14, the global DES market experienced increased competition and price erosion, while going into fiscal year MarFY15, the group expects these challenging market conditions to continue. Biosensors aims to however continue bringing in new innovative products, expand its existing product portfolio, and enter new geographical territories to improve its performance. At the current price, Biosenors trades at 35.5x FY14 P/E. The group remains in a healthy net-cash position of US$222.2m, representing 16.4¢ per share. Latest broker ratings as follow: CIMB downgrades to Hold from Add with TP $1.01 Deutsche maintains Sell with TP $0.64

Singpost (CIMB)

Sing Post: CIMB reckons SingPost’s strategic partnership with Alibaba opens doors via access to funds for larger-scale M&As and the opportunity to leverage on Alibaba’s customer base to scale up its regional e-commerce logistics operations. SingPost will benefit from tremendous business volumes originating from Alibaba’s e-commerce businesses, and the enlarged scale of the business will bring cost efficiencies, giving SingPost leverage over its competitors in a price-competitive ASEAN market. While SingPost guided that FY14 EPS would have been 10.4% lower with the equity issuance, CIMB thinks that the dilutive impact will only be in the near term (FY15), as the synergies created and growth from the new JV should outweigh the dilution from FY16 onwards. Latest broker ratings: CIMB maintains its Add rating and TP of $1.86 UOB Kay Hian maintains Buy with $1.73 TP

Sing Post

Sing Post: Sealed a landmark investment deal with Alibaba Group to issue 220.1m new and treasury shares at $1.42 each (8.4% discount to last close of $1.55), to the world’s largest and fastest growing internet-based e-commerce firms with a projected net worth of over US$150b by 2016. Post-issue, Alibaba will control 10.4% of the enlarged share base of the postal company, making it the second largest shareholder, just behind SingTel’s 23.5%. Proforma FY14 NTA will increase from 36.52¢ to 47.22¢ per share. In conjunction with the proposed share issue, both companies has entered into a business cooperation to create a defining platform to tap into e-commerce opportunities in South-east Asia and beyond by giving access to SingPost’s international logistics capabilities, infrastructure and delivery networks, as well as end-to-end solutions for Alibaba’s customers and merchants. From the net proceeds of $308m, one-third will be earmarked for its e-commerce business, another one-third will be used for M&As and property development projects and the rest for working capital purposes. The strategic investment and business collaboration with Alibaba is a signigfiant milestone for SingPost in its transformational plan to become a regional key e-commerce logistics player. The group stands to benefit from Alibaba’s expertise in e-commerce, technology and financial backing to pursue its growth opportunities and development pace in the region. The group's e-commerce and related businesses currently account for 26% of total revenue. This must come as a breath of fresh air for SingPost, which is facing falling revenue from its mail and traditional logistics businesses. At $1.62, Sing Post trades at 21x forward P/E and offers a 3.8% dividend yield.

SG Market (29 May 14)

US Market: US shares ended slightly lower after flirting with new record highs, as investors turned skittish after benchmark Treasury yields fell to lows not seen since last summer ahead of US GDP data out on Thurday. The DJIA fell 42 pts to 16,633 (-0.3%), while the S&P 500 slipped 11 pts to 1,910 (-0.1%) and the Nasdaq dipped 12 pts to 4,225 (-0.3%). Sentiment was hit after yields on US 10-year Treasury yield fell 8bps to 2.44%, its lowest level since Jul ’13. There is a clear disconnect with stock markets buoyed by supportive economic data, improving earnings and expectations of monetary easing by the ECB but the bond markets signaling caution With a dearth of economic releases on Wed, investors were looking ahead to a busier Thursday, which features the second GDP estimate for 1Q14, pending home sales and weekly jobless claims. Earnings came in mixed after apparel retailer Michael Kors (+1.3%) reported better-than-expected profits, while budget store-chain DSW’s (-27.4%) 1Q14 earnings missed estimates. Among other stocks in focus, Twitter surged 10.7% following a broker upgrade, while homebuilder Toll Brothers rose 2.1% after earnings topped estimates and its CEO guided that the housing market is in a ‘levelling’ period, before it takes off again. Following the negative US market close, the STI is expected to open lower with support tipped at 3,255 and topside resistance at 3,285. Stocks to watch: *STI Index: Ascendas REIT has been included as one of STI constituent stocks wef 4 Jun in place of CapitaMalls Asia, which has been deleted following its takeover offer, while Ezra has been added to the FTSE ST Mid Cap Index. *Transport: LTA has unveiled the first bus package under the government contracting model, which will be tendered out in 2H14. This will comprise 24 existing bus services operated by SBS (16) and SMRT (8), largely serving the Jurong East and Bukit Batok areas and will be based at the new Bulim bus depot to be completed in 2015. It will start with 380 buses in 2016 before growing to 500 buses in 2021, in tandem with the ridership growth and development of Tengah New Town and Bukit Batok West. *Biosensors: 4QFY14 net profit slumped 80% y/y to US$6.1m taking FY14 net profit to US$40.6m (-65%). Revenue slid 8% to US$81.6m due to lower product revenue of $71m (-7%), attributable to reduced stent sales of $63m (-14%) as well as a 14.4% drop in licensing and royalty fees. Gross margin of 76.2% (-7.7ppts) was compressed by its distribution activities in Japan for the Nobori stents and consolidation its cardiac diagnostic unit, while bottomline was further eroded by increased trial expenses and higher marketing costs. *The Hour Glass: FY14 net profit rose 4% to $54.9m on revenue of $682.8m (+13%) as the group continued its sales growth momentum throughout the year. Gross margins held at 23% despite severe global pricing pressure but bottomline was weighed by rsisng wages, selling and promotion expenses and rental expenses. *Global Yellow Pages: FY14 results turned around to net profit of $5.1m from loss of $124.3m in FY13 mainly due to the absence of the one-off impairment charge, as well as new associate income from Yamada Green and lower operating expenses. Revenue slipped 10% to $27.2m due to a decline in search solutions as well as the effects of the Personal Data Protection Act on the direct sales solutions business, offset partially by Singapore River Tour and Taxi Services business. *Stratech Systems: FY14 net profit came in at $1.4m, reversing a net loss of $9.4m in FY13 on revenue of $11.1m (+337.7%) generated from projects, maintenance contracts and sales of products. Gross margins widened to 83.3% from 30.9% a year ago due to higher profit margins from the group’s executed projects. *Soilbuild Construction: Awarded $21.3m contract to provide excavation and earthworks for development of a 7-storey industrial development at 60 Jalan Lam Huat with works expected to begin in Jul and to be completed within 9 months. Meanwhile, its 60/40 consortium with Enviro-Hub has also won the $179.5m construction contract for the project, which is scheduled to commence on Aug ’14 with expected completion by 4Q16. The contracts bring its latest order book to $512.8m. *WE Holdings: Secured US$1.7m contract from China-based Ningbo Foreign Trade Co to sell 30,000 tonnes of iron ore lumps at US$57/tonne by 30 Jun 2014. *Sarine: Cooperating with Rapaport's RapNet Diamond Trading Network to provide Sarine Loupe imagery on polished diamonds showcased for sale on Rapaport’s its industry-standard website. *ASJ Holdings: Offer of $0.065 by Ralec Electronic has turned unconditional upon receiving 50.42% acceptances; closing date has been extended to 7 Jul. *Sunlight Group: FY14 net loss of $0.9m vs loss of $1.2m in FY13, while revenue dipped 7% to $39m on lower project value. Despite this, gross margin improved 3.4ppts to 20.2% through better projects selection. Group continues its focus on reducing unit cost through standardisation of products and parts, and also exploring a few new market segments both locally and regionally.

Wednesday, May 28, 2014

Singapore Post

Singapore Post: Signed strategic collaboration with Alibaba Investment. Sing Post will issue an aggregate 220.1m shares at $1.42/share, comprising 190.1m new shares and 30m existing treasury shares. This represents 10.35% of enlarged share capital. In conjunction, Sing Post entered into a MOU to create a defining platform for international eCommerce logistics, where Sing Post will negotiate exclusively with Alibaba to enter into a JV in the business of international eCommerce logistics. The vote of confidence from Alibaba signals a move towards considerable strategic advantages, such as the creation of new relationships and opportunities for cooperation, expected to increase the Company’s regional growth and development pace and accelerate the Company’s transformation and pursuit of additional opportunities. Sing Post believes that this strategic collaboration will enable it to leverage on eCommerce logistics as a strengthened revenue stream, even as its core business continues to be eroded by declining traditional domestic mail volumes. In addition, fund raising will assist the group’s funding requirement to drive growth in its eCommerce offerings in the region, as it scales up its eCommerce logistics infrastructure to meet greater volumes in this area.


Rowsley: Counter has been consolidating since the beginning of the year. Recent positive engulfing candlestick on 23 May and the rising volumes suggests that the counter may attempt to break out of its range in the near term, with the resistance at $0.295 (200MA). Support at $0.27.

Valuetronics (technical)

Valuetronics: Technical breakout today to all-time high, supported by good volumes. In the near-term, the counter may attempt to break past the $0.40 psychological level on the positive momentum, supported by the rising indicators- ADX, RSI, Stochastics, MACD. Fundamentally, Valuetronics trades at an attractive ex-cash trailing P/E of 2.7x and 8.5% dividend yield.


Jubilee - Serial System has agreed to sell its entire 13.6% stake in Jubilee Industries Holdings to WE Holdings for $7.7m. The price works out to 24.2c a share, a handsome premium to the closing price of 12.5c as at May 23. Serial System had bought the shares at an average price of 18.8c apiece. The co said the board considered the sale as non-core assets, and is of the view that the disposal would enable it to realise returns on its investment in Jubilee, and also to avail itself of cash which can be deployed into its core businesses or utilised for other business opportunities .

Global Yellow Pages/ Yamada

Global Yellow Pages: Acquired 672k shares of Yamada Green Resources via the market between 16-26 May, for an average $0.1735/share, raising its stake from 19.87% to 20%.

Bukit Sembawang

Bukit Sembawang: 4QFY14 net profit slumped 29% y/y to $18.2m, despite revenue spike of 95% to $89.5m, as the bottom line was weighed by lower gross margin of 45.17% (-25.4ppts) due to higher land and construction cost, as well as a $17.5m recognition of foreseeable loss on the Paterson Collection development project caused by the weakened property market. Group declared final DPS of 4¢ and special DPS of 12¢, bringing FY14 total to 16¢ (FY13: 15¢). NAV of $4.76/share.

HL Global Enterprises

HL Global Enterprises: Entered agreement to purchase the remaining 55% stake in Augustland Hotel Sdn Bhd (AHSB) for an aggregate RM16.5m ($6.5m). Since 1994, HL Global held a 45% stake in the hotel developer & operator, which owns 7,113 sqm of freehold land in Cameron Highlands, Pahang, Malaysia and the Copthorne Hotel Cameron Highlands (former Equatorial Cameron Highlands) that is situated on the site, which has 269 guest rooms and total gfa of 341,075 sf. For FY13, AHSB recorded net profit of RM2.1m ($0.85m) and proforma NTA and EPS per share will increase to -0.3¢ (from -0.7¢) and 0.27¢ (from -0.17¢) respectively.

Singapore Windsor

Singapore Windsor: Entered into JV with Golden Infrastructure Group (GIG) to set foot in the telco business in Myanmar. Subjected to obtaining a master service agreement with a telco service provider in Myanmar, the JV will engage in the business of owning and operating telco infrastructure, provide services to telco operators, tower companies, service providers, equipment companies and users of telco services in the country. In relation to the agreement, GIG, which has the expertise and resources to build communication towers in Myanmar, will provide its services to the JVCo for US$750,000/year over a 10-year term.

Frencken Group

Frencken Group: CIMB has an unrated report on the counter. The group believe Frencken could be worth more. Estimate that the stock could trade up to $0.44, based on 7.4x FY15 P/E (consensus FY15 EPS: 6 Scts), a 20% discount to its peers. This represents an upside potential of 19%, coupled with attractive dividend yields of 4.3% and 4.6% for FY14 and FY15 respectively. While earnings performance has historically been erratic in part due to the cyclical semiconductor industry and difficulties faced in integrating acquisitions, the challenges appear to have been overcome. CIMB believe the strong rebound in earnings for FY13 and 1Q14 is evidence of a turnaround, and expect revenue growth to be sustained due to its added capabilities and network in a growing industry. Frencken has consistently paid a 30% dividend payout from its earnings since listing. Even when the company posted a net loss in FY12, it paid a dividend of 0.5 Scts. Expect the payout ratio to remain steady in the years ahead. Shareholders should benefit from higher dividends in line with the expected growth in earnings.

PACC offshore

PACC offshore: 1Q14 net profit jumped 76% to $36.7m despite revenue declining 6% to $52.9m, as bottom-line was aided by recognition gains on the sale of vessels. The decline in revenue was due to lower utilisation from the Transportation and Installation (T&I) and Offshore Accommodation (OA) segments, coupled with revenue being recognised by JVs resulting from the transfer of vessels to JVs. This was partially offset by higher revenue registered from the Offshore Supply Vessels (OSV) segment arising from deployment of four new Platform Supply Vessels (PSVs) and one AHTS. Gross margins improved to 29.9% from 21.8% due mainly to decrease in project costs as a result of fewer lump sum projects in the T&I segment. With some vessels being transferred to JVs, their corresponding costs are now recognised by the JVs. Bottom-line was also boosted by a 138% rise in other operating income to $35.8m due mainly to recognition of gain on sale of 5 vessels upon completion to a JV. Going forward, PACC remains positive on its prospects noting that with oil prices still at robust levels and expected to stay elevated in the longer term, there will be continued spending on exploration and production activities, which will translate into increased drilling operations and maintenance activities which require the services of offshore support vessels. The Group has also expanded into the deepwater offshore accommodation market, and recently announced a one-year contract worth ~$80.5m to charter its Semi-Sub Accommodation Vessel (SSAV), the POSH XANADU, currently under construction, to Petrobras in Dec ‘14. The contract has an option to extend for another year and if extended, total contract value will be in excess of US$144m. POSH currently trades at 16.8x forward earnings and 1.5x P/B versus its Asian peers average of 12.1x forward earnings and 1.5x P/B. Latest broker ratings as follow: DBSV initiates coverage with Buy call and TP $1.36


Valuetronics: FY14 net profit surged 88% to HK$147.9m on revenue growth of 10% to HK$2.4b, as well as the absence of losses from its disposed licensing business. The strong top line was attributed to broad-based growth, particularly from higher demand in the industrial & commercial electronics segment (+24%). Consequently, gross margin expanded 1.2ppts to 13.4% on the change in sales mix. Group proposed final DPS of HK16¢ and special DPS of HK4¢, bringing FY14 total to HK20¢ (FY13: HK8¢). In addition, group pledged to pay out 30-50% of earnings going forward. Notably, Valuetronics has net cash of HK$477.9m, which translates to HK$1.297/share ($0.21/share). At $0.38, Valuetronics trades at 6.1x forward P/E and 8.5% dividend yield

EuroSports Global

EuroSports Global: FY14 net profit spiked 153% to $17m, on the back of a one-off $16.2m gain from the sale and leaseback arrangement of the property at 30 Teban Gardens Crescent. Meanwhile, revenue halved to $39.8m as the group only sold 15 Lamborghinis, compared to 42 in FY13, as a result of the new government regulations- additional registration fees and financing restrictions, as well as the end of life cycle for the Gallardo model. The other segments- after-sale services gained 6% to $5.3m and sale of deLaCour watches grew 40% to $3.2m, which subsequently propped up overall gross margin to 22.2% (+2.3ppts) on the change in mix. Going forward, EuroSports expects the launch of Lamborghini’s new Hurac├ín model in Sep 2014 and the Alfa Romeo 4C model in Jul 2014 to have a positive impact on sales in 2H15. Taking a cue from the previous launch of the current Lamborghini Gallardo and Aventador in 2011 and 2012, the number of cars sold during those years stood between 50-55. Group declared final DPS of $2.8¢, in line with its intention to distribute the proceeds from the sale and leaseback arrangement. At $0.28, EuroSports trades at 2x P/B.

SG Market (28 May 14)

US Market: US stocks advanced, with the S&P 500 notching a record high for the second straight session on some solid economic data and expections of a RCB rate cut. The DJIA gained 69 pts to 16,676 (+0.4%), while the S&P 500 added 11 pts to 1,912 (+0.6%) and the Nasdaq rallied 51 pts to 4,237 (+1.2%). Volume remained light with only about 5.4b shares exchanging hands, short of the 5.8b average for the month of May ’14. Sentiment received a boost from a surprising rise in durable goods orders (+0.8%) for a third consecutive month in Apr, resurgence of consumer confidence for May and higher home prices for Mar (+12.4%). In Europe, ECB President Mario Draghi signaled a readiness to act on low inflation. Investors appear to be returning to smaller companies and leading technology names, including Facebook (+3.5%), Priceline (+5.2%), Apple (+1.9%) and Tesla Motors (+2.1%). Among other gainers, BofA climbed 3.4% after resubmitting its capital plans to the Fed. Following the positive US market close, the STI is expected to inch up higher although the index needs to clear the immediate resistance at 3,285 before moving higher. Support remains at at 3,255. Stocks to watch: *Goodpack: Received $1.4b buyout offer from US private equity fund KKR at $2.50/share, 6.8% above last close but at bottom end of 2.50-2.80 expected range, via a scheme of arrangement. This requires sanction by the High Court and a majority of shareholders jointly owning at least 75% of the company to vote in favour of the all-or-nothing deal. It has already obtained the support of largest shareholder David Lam, who holds a 32% stake. If successful, Goodpack will be taken private and delisted. *CapitaMalls Asia: Parent CapitaLand has raised its stake in CMA to 85.2%, bringing it closer to the 90% mark that would enable it to delist its shopping mall arm. The takeover offer closes on 9 Jun. *Technics: Awarded $7.4m worth of contracts to supply booster compressor package for a wellhead platform in Vietnam and construction of a steel structure. *PACC Offshore: 1Q14 net profit jumped 76% y/y to $36.7m despite revenue dipping 6% to $52.9m on lower utilisation from transportation and installation, and offshore accommodation segments. Bottomline was boosted by a 138% rise in other operating income to $35.8m due mainly to recognition of gain on sale of five vessels to a JV. *CSC Holdings: 4QFY14 returned to the black with net profit of $1.8m vs a net loss of $5.5m a year earlier, taking FY14 net profit to $6.2m (FY13: $0.8m net loss). Revenue for the quarter slipped 13.4% to $111.2m, in tandem with the slowdown in the overall demand for construction services. The stark difference in bottomline was largely due to doubtful debt provisions of $8.6m in the previous year. *LottVision: FY14 net profit tumbled 86% to HK$1.4m despite revenue jumping 79% to HK$91.2m, mostly generated by its 55% interest in NutryFarm Chengdu Biomedicine (NFC). Bottomline was dragged by a 71% drop in other net income to HK$4.7m due to the lack of disposal gains and tax refunds, as well as sharp spikes a 138% spike in distribution (+138%) and admin expenses (+29%) due to comsolidation of NFC only from 2HFY13. *LionGold: Profit warning of a loss for FY14 due to maintenance costs of its operations in Bolivia and Ghana and substantial fair value losses on its financial assets, as well as significant impairment losses on goodwill and exploration expenditure. #Tiong Seng: JV with Dongah Geological Engineering was awarded a $316m contract for the construction of the Great World Station and tunnels for the Thomson Line by the Land Transport Authority. #Valuetronics: FY14 net profit surged 88% to HK$147.9m on revenue growth of 10% to HK$2.4b, as well as the absence of losses from its disposed licensing business. The strong top line was attributed to broad-based growth, particularly from higher demand in the industrial & commercial electronics segment (+24%). Consequently, gross margin expanded 1.2ppts to 13.4% on the change in mix. Group proposed final DPS of HK16¢ and special DPS of HK4¢. In addition, group pledged to pay out 30-50% of earnings going forward. #Falcon Energy: FY14 net profit turned around to US$60.8m from loss of US$3m, mainly due to income of US$128.4m from disposal of two jack-up rigs. Subsequently, revenue spiked 202% to US$350.8m, also from stronger performances from its core marine (+32%) and oilfield services segments (+210%), as more vessels were deployed and procurement contracts secured increased. Group declared final DPS of 1¢, bringing FY14 total to 1.5¢ (FY13: 0.5¢).

Tuesday, May 27, 2014


KSH: FY14 net profit surged 23% to a record $44.5m, mainly propped up by sales of property development projects, which brought associate income to $27.7m (+66%) and property development segment to $32.5m (+63%). Consequently, revenue spiked 40% to $324.5m, also driven by the other two remaining segments- construction (+39%) and investment properties (+13.5%). However, major revenue contributor- construction segment (88%), recorded a negative operating margin as costs outpaced sales. Construction order book stood at $410m and management expects construction costs to continue the uptrend as a result of rising cost pressures due to progressive tightening of manpower policies, more stringent regulatory controls on construction industries and increase of construction material costs. Management declared final DPS of 1.75¢, bringing FY14 total to 3¢ (FY13: 2.5¢). At $0.555, KSH trades at 5.2x trailing P/E and 5.4% dividend yield.


Q&M: Maybank-KE maintains Buy with TP $0.55, following the recent emergence of Private Equity (PE) Fund, Heritas Helios Investments (HHI) as a substantial shareholder. The house highlights that this is the first investment by a major PE fund in Q&M and the fact that HHI is willing to pay full market price, highlights the confidence it has in Q&M. Going forward, Maybank-KE expects Q&M’s earnings to be driven by: 1) Organic growth in both Singapore and Malaysia, and 2) A major M&A-led push into the high growth China dental market. Furthermore, the potential for a highly-valued listing of Q&M’s businesses in China within the next two years would be a major positive. The house TP of $0.55 is based on 39x FY14E proforma earnings, after incorporating contributions from the acquisitions of Aoxin Stomatology Group and Qinghuangdao Aidite.


Boustead: 4QFY14 results were largely in line with net profit coming in at $25.5m (-8%) taking FY14 net profit to $70.7m (-13%), dragged by lower value of non-recurring items. Total non-recurring items in FY14 were $10.8m versus $24.6m in FY13. After adjusting for this difference, FY14 net profit would have been 6% higher than that for FY13, and the second highest in the history of the group. Gross margin was maintained at 34.1%. Revenue for the full year was led by the Energy-Related Engineering Division, which achieved record revenue of $181.3m (+49%), driven by a strong management performance on the back of a robust recovery of the downstream oil & gas business. Amidst the continuing competitive landscape globally, the Water & Wastewater Engineering Division saw revenue decline 53% to S$16.3m, while revenue for the Real Estate Solutions Division was down 17% to $209.2m due to a reduction in design-and-build revenue as fewer projects were implemented throughout FY14. Going forward, Boustead expects to see continued growth in its core businesses, but caution that profitability may be affected by intense competition and rising costs. Boustead’s order book backlog as at end Mar ’14 stood at $380m, comparable to the $378m in end Mar ’14, underpinning earnings visibility for the year. The group has declared dividends of 5¢ (3¢ final and 2¢ special) taking FY14 dividend payout to 7¢ per share (same as FY13), which translates to a yield of 3.7%. At the current price, Boustead trades at 2.7x P/B, and 13.5x FY14 P/E.

SG Market (27 May 14)

US Market: Closed for Memorial Day holiday. S’pore shares may track European and Asian markets higher as the STI attempts to clear the 3,285 immediate resistance, towards the next hurdle at 3.312 level with technical indicators turning supportive. Downside risk remains at 3,255 Stocks to watch: *Cosco: Option contracts for four platform supply vessels, with total value of US$120m, awarded by a S’pore based ship owner to 51% owned Cosco Guangdong Shipyard has been exercised, with delivery of the four vessels is scheduled from 2Q16 to 1Q17. The shipowner has also secured additional options for another two vessels. *Boustead: 4QFY14 net profit declined 8% y/y to $25.5m taking FY14 net profit to $70.7m (-13%). Revenue dipped 3% to $142m weighed by weaker energy-related engineering (-13%) and real estate solutions (-29%) segments, offset partly by a 52% jump in sales from engineering services. While gross margins contracted 4.6ppts to 34.2%, bottom-line was aided by a 24% decline in admin expenses to $11.6m. A final DPS of 5¢ declared, taking full year payout to 7¢. *Yongmao: 4QFY14 net profit nearly doubled to Rmb11m (+94.4% y/y), taking FY14 earnings to Rmb51.3m (+130.4%). Revenue for the quarter jumped 68.8% to Rmb220.5m across all markets due to higher demand for its towercranes especially in Israel/UAE, Malaysia and Hong Kong/Macau region, while China (+61%) continued to be the group’s largest market, accounting for 61.6% of total sales. Gross margins remained relatively stable at 27.6% vs 28.1% in 4QFY13. First and final DPS of 0.5¢ proposed. *KSH: FY14 net profit rose 23% to a record $44.5m on increased revenue of $324.5m (+40%), which was achieved on the back of higher construction revenue (+39%) and sale of development properties in S’pore and China (+63%). Core construction business in S’pore remained strong with order book of over $410m but earnings were hit by negative margins. Property was the saving grace contributing to both top-line and share of associate profits. Final DPS of 1.75¢ proposed, bringing FY14 total payout to 3¢ (FY13: 2.5¢). *Mapletree Logistics: Acquired Daehwa Logistics Centre, its 9th property in South Korea, for KRW25.5b ($31.2m). The property is a three-storey Grade A warehouse with a gfa of 25,600 sqm located 50km from Seoul and is fully leased to three tenants – eBay, Acushnet and Daehwa with weighted average lease expiry of 3.5 years at NPI yield of 8.3%. *Thakral: Partnering a private Australian developer to invest A$46m in FV, a mixed development project with up to 950 apartments and 5,500 sqm of retail space and car park lots, in Brisbane, Australia. Phase 1, comprising 650 apartments, 2,200 sqm of retial and over 550 car park lots in two towers (Flatiron, Valley House), will be launched for sale in mid 2014, while phase 2 may include serviced apartments. Other capital partners may be brought on at later stage. *Roxy-Pacific: Launched 222-unit Trilive, located at Tampines Road. The freehold condominium has three 13, 14 and 18-storey blocks with 70-80% dual-key units targeting at three-generational families. *China Essence: Profit warning that it expects to incur a net loss for FY14, citing heavy floods in North-east China during 2QFY14 that has damaged its potato and starch yield, as well as high finance and operating expenses for its dismal performance. Group will report its Fy14 results on 30 May. *ISR Capital: Auditors issued a disclaimer of opinion for its FY13 accounts, citing ongoing CAD investigation in the company, five wholly owned subsidiaries and two funds for securities offences.

Hankore (technical)

Hankore - Technicals appear to be trending higher, as supported by ADX, RSI and STochastics. The next resistance level is the 50 day MA at $1.21, followed by the recent top at $1.24. Note however that movement of the stock is more likely impacted by the ongoing RTO with CEI, whose deadline (barring any extension) is due this Friday.


Q&M: Granted 2-year call option to Heritas Helios Investments (HHI), a healthcare private equity fund seeded by IMC Group, for the right to be granted 63m new shares for a minimum issue price of $0.48/share. In conjunction, Q&M has granted to unlock the moratorium on the sale of shares by controlling and substantial shareholders- Quan Min Holdings, Dr Koh Shunjie Kelvin and Dr Koh Shuhui Felicia, to sell an aggregate 10% of share capital in Q&M to HHI. The shareholders have agreed to extend their shareholders agreement by three years to 2021. HHI, managed by Heritas Capital Management and key sponsor, IMC Group, focuses on investments in the healthcare sector with an emphasis on growth and sustainability, and seeks value through partnerships within portfolio companies. The strategic partnership is expected to boost Q&M's presence in the region to achieve further growth in Singapore, Malaysia and China, as well as other new markets. China remains the key catalyst for Q&M, with acquisitions of Chinese dental players still ongoing. The five value-accretive acquisitions on its pipeline come with 10 years minimum profit guarantee, and are expected to start contributing to Q&M's financials from Apr 2014 onwards. The group's sound expansion strategy allows it to obtain instant penetration into the enormous fragmented Chinese market, a market with massive potential in the dental industry. The street expects Q&M to continue its acquisition spree in the country with more than 1,000 private dental hospitals. At $0.485, Q&M trades at 44.1x forward P/E. We do not rule out that visibility may expand for the counter, which currently has coverage from two brokers, both with Buy calls.

Monday, May 26, 2014

Sharing will resume on 27 May 15

Friday, May 23, 2014


Strategy (Myanmar): The Central Bank of Myanmar is expected to submit a new monetary policy during Parliament’s next session, which begins 28 May. According to a local news source, the central bank is working on new guidelines to allow foreign banks to operate in Myanmar as part of reforms to modernize the creaking financial sector. But this is likely to meet opposition from 20 local banks, fearing that they will be crowded out by the big global banks. Currently, the 34 foreign banks with representative offices in Myanmar can only provide limited financial services. Among the lenders that have expressed interest in deepening its presence in the country and are ikely to be the first to be granted new banking licences are DBS and OCBC. The progress on the policy framework is critical to providing much need funding to the country’s cash-strapped infrastructure sector and downstream industries. Existing SGX-listed companies with business links in Myanmar include Yoma, Interra Resources, Yongnam, Tiong Seng, UPP, Super Group, Keppel Land, UOL, Parkson Retail Asia, NeraTel, Ntegrator, mDR, Sin Heng, Tat Hong, Tee International, AsiaMedic, ISDN, WE Holdings and Goodland.

Cosmosteel (technical)

Cosmosteel: Good volume supporting the share price spike of 7% today, indicating a technical breakout. A close above $0.45 today may portend to a test of the counter's 3-year high of $0.49, supported by positive momentum on the rising indicators. Most notable news was on 4 Feb when the group disclosed that it is exploring the possibility of undertaking a corporate action, including a potential new share issue.

Comfort Delgro

Comfort Delgro: SCB strongly reiterate its O/p rating and raise its TP to $2.73, where they expect Singapore bus revenues and profitability should expand under the new model, with less capital intensive earnings and no revenue-risk, in the house view. Forecast an exceptional 20% dividend yield in 2016 from a disposal gain, as the government acquires CD’s bus assets from SBS Transit. Also expect an increase to a 90% payout ratio from 2017E, as CD’s Singapore’s bus business turns asset-light.


Yoma: Seeing quite a few houses reiterating their Buy call on Yoma after their recent FY14 results. After CIMB and UBS buy calls yesterday, CLSA this morning also reiterated its Buy call with a $0.97 TP. The house believes that while there are no there are no new updates on the approval for Landmark Development project, believe this approval will be obtained eventually given management’s strong track record. Management has also reiterated their confidence in getting the approval with no change to the current long stop date of 30 June 2014. Also note that operating results are healthy. Yoma remains as one of the best proxy for Myanmar property play where housing demand continues to be robust with the condominium Act to provide as the next catalyst for future housing demand.

Index changes

Index changes: MSCI Singapore Small Cap Index changes will take place at the close of 30 May 2014. Additions : Pacific Radiance, Silverlake Axis, STATS ChipPAC Deletions: Blumont, Courts Asia, CSE Global, Geo Energy Resources, Hi-P International, International Healthway, SPH Reit, Transpac Industrial


Noble: Noble's 51% stake sale of its agriculture unit to COFCO appears to be underway after news sources reported that COFCO has approached banks to seek financing for the US$1.5b deal. Upon completion, Noble will also rake in an estimated US$64.8m gain from the divestment of the loss-making unit, which would be intended to pare down Noble's debt and expand its existing businesses, notably its more profitable Energy and MMO business segments. We note that in the recent 1Q14 results which beat street expectations, Noble's robust performance highlighted the group's successful shift in focus from volume growth to margins, with significant margin recovery across all its three business segments.


Olam: The unconditional offer by Breedens Investments of $2.23/share closes today at 5.30pm. As of yesterday (22 May), the offeror holds an aggregate 78.1% of Olam. JP Morgan sees a strong likelihood of share price correction post the expiry of the offer if control does not cross 90% to trigger a privatization, and/or if Olam remains a listed entity (e.g. MINZ SP: -26%, FNN SP: -17% post GO with listing status maintained).


GLP: Reported 4QFY14 results which were at the higher end of estimates, as 4QFY14 core pro forma net profit came in at US$54m (+31%) taking FY14 core pro forma net profit to US$250m (+17%). Accounting for revaluation gains, FY14 pro forma net profit would have been US$685m (+31%). Pro-forma figures were adjusted for the sale of assets to J-REIT and FX-related effects to enable a like-for-like comparable base. Revenue for the quarter was up 20% to US$150m, mainly attributable to the completion and stabilization of development projects in China with increasing rents, increase in asset, development and property management fee income from GLP J-REIT and joint ventures in China and Japan, partially offset by the sale of properties in Japan to GLP J-REIT. Bottom-line was however weighed by a 64.7% drop in contributions from jointly-controlled entities to US$46.7m and finance costs of US$29m (FY13: Finance income of US$12.2m), partially offset by a 29.8% rise in fair value gains of US$92.4m recognized during the quarter. Operationally for the full year, China remains the key driver of GLP’s growth, with earnings up 42% y/y, due to the completion and stabilization of the group’s development projects, increasing leasable area of properties owned, increasing rents, and contributions from newly acquired subsidiaries. Japan meanwhile saw revenue sliding 40.3% mainly due to the sale of properties in Japan to GLP J-REIT in 4QFY13 and the weakening of Japanese Yen against the USD, partially offset by asset management and development fee income and dividend income from GLP J-REIT. Over in Brazil, revenue surged 233.5% from a low base, mainly due to the increase in development management fee from jointly-controlled entities. The group however recorded operating losses of US$18.5m, mainly due to the share of fair value loss of investment properties of jointly-controlled entities, arising from the reassessment of certain property values. Going forward, GLP remains positive on its prospects, noting that China, Japan and Brazil have attractive supply and demand dynamics for logistics facilities in the medium and long-term, and expects its market leading positions, strong management team and solid balance sheet to position itself well for continued growth. As at end Mar ’14, GLP’s net asset value stood at US$1.84 which translates to 1.2x P/B. The group is recommending a dividend of 4.5¢ per share, up from 13% versus the previous year.

SG Market (23 May 14)

US Market: US stocks closed modestly higher led by snall caps and a biotech rally amid mixed economic data. The DJIA added 10 pts to 16,543 (+0.1%), while the S&P 500 advanced 4 pts to 1,892 (+0.2%), close to its all-time high of 1,897 and the tech-heavy Nasdaq jumped 23 pts to 4,154 (+0.6%). The Markit preliminary US manufacturing index rose to 56.2 in May from 55.4 a month earlier as output accelerated. Other data showed existing home sales rebounded 1.3% in Apr fror the first time in four months. But initial jobless claims jumped 28,000 to 326,000, reversing a big drop the previous week. Homebuilders rallied on the positive housing data with PulteGroup (+2.1%) and DR Horton (+2.4%) among the gainers, while earnings from retailers Best Buy (+3.4%) and Dollar Tree (+6.6%) topped estimates. Hewlett-Packard (-2.3%) slimped after its 2Q sales missed forecasts, prompting it to announce further job cuts. Market watchers note that while markets are edging higher, the disconnect between low bond yields and economic growth, and divergence between small and large caps are becoming a concern for investors. S’pore shares are likely to track higher following the Wall Street advance and slightly firmer opening in Tokyo (+0.8%) but the STI is expected to stay within a tight trading range between 3,285 and 3,255 with little catalyst to push it in either direction. Stocks to watch: *Global Logistics Properties: 4QFY14 results were at higher end of estimates, as core proforma net profit (adjusted for J-Reit and revaluation gains) jumped 31% y/y to US$54m taking FY14 core earnings to US$250m (+17%). Revenue for the quarter rose 20% to US$150.4m, driven by completion and lease-up of developments in China with increasing rents as well as continued growth in GLP’s fund management platform. The group also booked revaluation gains of US$92.4m (+30%) from its China and Japan properties, lifting NAV/share to US$1.84. Including revaluation gains, net profit for 4QFY14 and FY14 would have come in at US$160m (-29%) and US$685.2m (+0.1%) respectively. *OKP: Awarded $50.6m PUB contract to construct the Stamford Diversion Canal. Work will take 42 months commencing Jun. The new project will bring its order book to $240.2m, stretching till 2017. *KS Energy: 80% owned KS Drilling has secured contract extensions for three of its drilling rigs (KS Medstar-1, KS Discoverer 1 & 3) with total value of US$60m. *JES: Secured contracts for construction of six 64,000dwt Ultramax bulk carriers plus five options to build another 30 vessels for US$974m or US$27m each. The win takes total orders secured to US$1.54b ytd (US$436m in contracts and US$1.1b in options). Delivery of the six vessels is scheduled between Dec ‘15 and Jan '16 while vessels under options, if exercised, are expected to be delivered from late 2016 onwards. *Sarine: Secured first orders for Sarine Light in US and Taiwan, two large luxury consumer markets. Sarine Light accurately and consistently measures a diamond's light performance, which quantify the aesthetics of a diamond. *Hiap Tong: FY14 net profit fell 19.1% to $3.7m despite chalking up 18.7% rise in revenue to $45.7m. The strong topline performance was mainly due to the group's leasing income, led by an increase in its lifting and haulage equipment fleet but earnings were was weighed by gross margin compression to 29.1% from 35% due to higher staff, depreciation, rental and maintenance expenses.

Thursday, May 22, 2014

Manhattan Resources

Manhattan Resources: Acquiring Singxin Resources for $1b via an issue of 1,369.9m new shares @ $0.73, which will result in a RTO. Post acquisition, the group will offer a 1-for-1 bonus issue of warrants at an exercise price of $1.00 each. Singxin Resources is in the business of mining serpentine, chrome, nickel and other minerals and holds exploration permits for chrome over 27 sq km in Xinjiang, China. Post acquisition NTA/share will rise to $0.796 from $0.222, assuming all warrants are exercised.


Yoma: According to media reports, Burma's Central Bank is expected to submit a new monetary policy during the next parliamentary session late this month, which could entail plans to gradually allow greater participation from foreign banks. UBS believes modernization of the banking sector is structurally positive and improved access to mortgage loans would likely lift property prices, benefitting Yoma ultimately. Burmese press releases indicate that Yoma's affiliate company, FMI, was awarded a government contract for a mass-market housing project (~2,700 flats) near Yangon International Airport. Since Yoma has the right of first refusal over the development, UBS thinks it could acquire a stake once the terms of the deal are finalized. According to the house, the proposed acquisition of Landmark Development is slated to occur by the end of Jun if the government grants the land lease extension on time. UBS maintains its Buy rating and TP of $0.87.

UEL (technical)

UEL Technicals are looking positive of further upside, with RSI and Stochastics both hooking upwards from Oversold territory. The 20 day MA of $1.297 will act as the near-term resistance.

Ausgroup (technical)

Ausgroup: Counter testing its 20MA today at $0.44. A close above may portend to a continuation on the positive momentum from a MACD crossover and increasing strength denoted by the ADX, supported by rising RSI and Stochastics. However, a close below the $0.44 level may see continued consolidation for the counter. Near term support at $0.415 followed by $0.37. Resistance at $0.44 followed by $0.46.


Olam: JP Morgan sees a strong likelihood of share price correction post the expiry of the offer if control does not cross 90% to trigger a privatization, and/or if Olam remains a listed entity (e.g. MINZ SP: -26%, FNN SP: -17% post GO with listing status maintained). Offer expires tomorrow. Currently, the offeror holds an aggregate 69.2% of Olam JPM downgrade the stock to Neutral with TP of $2.00.

Religare Health Trust

Religare Health Trust: 4QFY14 results in line with estimates, as distributable income rose 6.2% to $11.4m, in tandem with DPU growth of 5.6% to 2¢. Meanwhile, revenue slipped 1.8% to $27.2m and net service and hospital income grew 3.9% to $16.4m, due to INR/SGD depreciation. Excluding FX effects, revenue and service income grew 6.3% and 11.6% respectively, on the back of tighter cost controls. Portfolio occupancy slipped 5ppts q/q to 73%, largely due to seasonal effects. Aggregate leverage at 6.7%, with debt headroom of $483.9m based on a 40% target ratio. At $0.885, Religare Health Trust trades at 9.3% FY14 yield and 0.99x P/B. Latest broker ratings: CIMB maintains its Add with TP of $0.91


SATS: 4QFY14 results missed estimates, as net profit lowered 7.8% y/y to $42.6m, while revenue slipped 3.2% to $434.6m, weighed to continued manpower cost pressure, further exacerbated by poorer performance from gateway associates/JV (-46%) due to lower cargo volumes and higher staff costs. Meanwhile, top line was affected by translation loss on the weakening JPY and decreased unit meal volumes (-6.3%) after Qantas moved its hub for European flights to Dubai, partially mitigated by the modest growth in flights (+6.7%) and airfreight (+4.4%) handled. FY14 earnings of $180.4m (-2.4%) missed street estimates by 8%, while revenue of $1.79b (-8%) missed by 2.2%. Final DPS of 8¢ declared, bringing FY14 total DPS to 13¢ (FY13:15¢). On the outlook, management expects operating landscape to remain challenging from rising costs and ongoing pressure in regional aviation, while they expect moderate growth in passenger traffic and marginal growth in airfreight. Latest broker ratings: OCBC maintains Hold with TP of $3.35 under review


Yoma: UBS maintains Buy with $0.87 TP. The house notes that Yoma reported FY14 headline earnings to S$16.4m (+13.5% YoY). Excluding revaluation gains of S$5.2m on PHGE Lakeview Block G and other non-cash adjustments, core FY14 net profit of $13.9m (+13.4% YoY) was slightly ahead of consensus and UBS estimates. Underlying home sales momentum was positive, with 150 units sold at Star City Zone A & B for ~US$150psf during the quarter. Based on existing pre-sales, unrecognized revenue of S$42.2m will be progressively booked over the coming quarters. Management plans to launch Star City Zone C (940 units) in H214 and think asking prices are likely to be ~US$200psf and targeted at more affluent buyers. The proposed acquisition of Landmark Development is slated to occur by the end of June if the government grants the land lease extension on time. The deal is expected to be RNAV-accretive and will be funded by a 1-for-4 rights issue. Separately, Burmese press releases indicate that Yoma's affiliate company, FMI, was awarded a government contract for a mass-market housing project (~2,700 flats) near Yangon International Airport. According to media reports, Burma's Central Bank is expected to submit a new monetary policy during the next parliamentary session late this month, which could entail plans to gradually allow greater participation from foreign banks. UBS believe modernization of the banking sector is structurally positive and improved access to mortgage loans would likely lift property prices.

Sembcorp Marine

Sembcorp Marine: CIMB maintains Hold with $4.30 TP. The house believe that more relaxed payment terms (10:10:80) were one reason for Hercules Offshore (previous customer of Keppel) to award SMM its latest US$236m jack-up contract. The positive is, this rig will be backed by a 5-year charter to Maersk, for deployment in the North Sea. It will also probably be the only jack-up ordered in 2014 with a charter contract, with most units built on a speculative basis. This brings SMM’s YTD orders to $1.93b and order book to S$13.2b. The house keeps its EPS as they have forecast S$4.5b of orders for 2014. Prefer Keppel Corp in the O&M sector.


Transport: In what is seen as a game-changer for the local bus industry, the Land Transport Authority (LTA) had announced the restructuring of the public bus industry to a “Government Contracting Model”. Under the model, bus operators will undergo a competitive tendering to operate the bus services, where operators will be paid for their services, while the government will retain all fare revenues. Meanwhile, the government will own all bus infrastructures, lowering the barriers of entry to the market and attract more bus operators. Bus services will be bundled into 12 bus packages with about 300-500 buses each. For a start, LTA will tender out three packages of bus services, starting from 2H14 for the first package, for implementation from 2H16. The contracts will be for five years, and can be extended by another two years. In total, the three packages will comprise about 20% of existing buses. The other nine bus packages (remaining 80%) will continue to be operated by the incumbent operators. LTA will negotiate with the incumbents to run the nine packages under the contracting model, for durations of about five years until their licenses expire on 31 Aug ‘16. After these contracts expire, more bus services will be tendered out. With the transition to a bus contracting model, the government intends to raise bus service levels. All bus services will have waiting time of no more than 15 mins during both the morning and evening peak periods. An estimated 45% of bus services will have shorter intervals during peak periods. Overall, we note that the government’s plan to own all bus assets is a positive development for the operators, as it relieves them of future cash outlay for the purchase of operating assets. Assuming that bus assets worth ~$200m and $900m on SMRT’s and ComfortDelGro’s (CDG) respective balance sheets are sold to the regulator at book value, their debt levels would reduce significantly with the latter transiting to a net cash position of > $1b. Meanwhile, losses at their respective bus segments will also reverse, and an asset-light strategy will similarly see depreciation of assets taken off their balance sheets, all of which could aid in a meaningful earnings uplift. Following the latest announcement, Maybank-KE expects the market to look to the rail transition. If the regulator decides to purchase rail assets on the operator’s balance sheet at book value, SMRT could potentially gain cash infusion of approximately $800m. The house however cautions that transition for the rail business model is far more complicated due to the challenging process of unwinding contractual agreements under the old regime. Going forward, the house believes that the market will look to price the stock of SMRT and CDG using a “sustainable level of earnings”. With the impending transition for their bus units in Singapore, Maybank-KE adjusts its 2016E forecasts to estimate a sustainable level of earnings. Consequently, the house raise its TP for SMRT (Sell: TP $0.80) and CDG (Buy: TP $2.50), based on 15x P/E. With the positive sector development, raise its rating on the sector to Neutral from Underweight.

SG Market (22 May 14)

US Market: US stocks finished Wed with sharp gains as retailers bounced back after a broad selloff and the latest Fed minutes reassured investors with its stated policy course and offered no faster time-table to raising interest rates. The DJIA rallied 159 pts to 16,533 (+1%), while the S&P 500 advanced 15 pts to 1,888 (+0.8%) and the tech-heavy Nasdaq added 35 pts to 4,132 (+0.9%). The VIX Index, which is a measure for market volatility, fell 8.1% to 11.91, it lowest level since Aug last year. The minutes of the latest FOMC meeting in Apr showed policy makers discussing ways to manage the impact of an interest rate hike expected in mid-2015. Retail stocks (+1.2%) were again in the spotlight with Tiffany (+9.2%) and Target Corp (+1%) after reporting results, while TJX rebounded 4.9%. Internet shares also gained led by Facebook (+3.3%), TripAdvisor (+2.7%) and Linkedin (+1.9%). Netflix jumped 5.1% after unveiling big plans to expand in Europe. Energy shares ExxonMobil (+1.4%) and Chevron (+1.4%) advanced as oil rose to a one-month high after US stockpiles tumbled last week as imports driopped to a 17-year low. Regional markets have a positive opening with Tokyo (+1%) and Seoul (+0.2%). S’pore shares are likely to track Wall Street with an upward bias but upside is expected to be capped at the 3,285 resistance with immediate support at the 3,255 level. Stocks to watch: *Land Transport: Singapore's public bus industry is set for a major overhaul to a contracting model starting 2H14, under which the government will own all the bus assets and infrastructure, set routes and service standards and retain the face revenue and outsource the operations of bus services (bundled into 12 bus packages) through a competitive bidding. SBS Transit and SMRT will continue to run 9 bus packages comprising 80% of buses, until their existing licenses expire in Aug ’16, after which LTA will re-negotiate the contracts for another 5 years under the new scheme. *SATS: 4QFY14 results missed estimates, as net profit fell 7.8% y/y to $42.6m on lower revenue of $434.6m (-3.2%), weighed by continued cost pressure and poorer performances from gateway associates (-46%) due to lower cargo volumes and higher staff costs. Revenue was affected by translation loss on the weakening JPY and decreased unit meal volumes (-6.3%) after Qantas moved its hub for European flights to Dubai, partially mitigated by the modest growth in flights (+6.7%) and airfreight (+4.4%) handled. Final DPS of 8¢ declared, bringing FY14 total payout to 13¢ (FY13: 15¢). *Manhattan Resources: Acquiring Singxin Resources for $1b via an issue of 1,369.9m new shares @ $0.73, which will result in a RTO. Post acquisition, the group will offer a 1-for-1 bonus issue of warrants at an exercise price of $1.00 each. Singxin Resources is in the business of mining serpentine, chrome, nickel and other minerals and holds exploration permits for chrome over 27 sq km in Xinjiang, China. Post acquisition NTA/share will rise to $0.796 from $0.222, assuming all warrants are exercised. *KrisEnergy: Acquiring MP G10 (Thailand) from Mubadala Petroleum for a base consideration of US$102.5m, subject to a working capital adjustment and an earn-out payment. MP G10 holds a 75% working interest (KrisEnergy has remaining 25%) in the G10/48 concession in the Gulf of Thailand, which covers 4,696 sq km of the Pattani Basin, and estimated to hold 2C resources of 19.6m barrels of oil. To-date, there have been three oil discoveries, which are under development with first production in 2H15 and expected to peak at 10,000 bpd. Another 17 oil prospects have been identified and will be drilled in 2014 and 2015. *Lian Beng: Secured a $44.5m contract from Westlite Dormitory to build a 13-storey workers’ dormitory at Woodlands Avenue 10. Work will commence in May with completion in 12.5 months. *Oxley: Appointed Accor, the world’s leading hotel operator and market leader in Europe, to operate its two new hotels on the former Pines Country Club site along Stevens Road. Scheduled to open in late 2016, Novotel S’pore on Stevens will have 254 rooms, while Ibis S’pore on Stevens will have 528 rooms. The projects mark the group’s maiden venture into the hospitality business.

Wednesday, May 21, 2014


Riverstone: DBSV also features Riverstone in this month's small mid caps radar. While the rubber glove industry may be swarmed by an influx of new capacity over the next few years, Riverstone appears to be a shimmering gemstone embedded in a muddy riverbank. The company is enjoying the favourable industry shift towards nitrile gloves and is gaining market share in the relatively inelastic high-end cleanroom gloves. The stock is trading at a 20% discount to its Malaysia peers, which is unwarranted given its stronger ROE and growth profile. DBSV expect the commencement of new production lines to drive earnings growth in 2H, and a re-rating of stock valuation closer to peers. Apart from the potential revaluation gain, Riverstone offers an attractive dividend yield of 4-5%.


Ausgroup: DBSV feature Ausgroup in this month's small mid caps radar. Ausgroups’ share price has gone from strength to strength, rising some 31% since Feb. Its latest corporate developments, in particular the proposed partnership with Ezion, is notable as it offers potential for Ausgroup to embark on an entirely new growth chapter. At a valuation of 17x FY15 PE, it appears the market has already priced in a potential turnaround in its existing business, and also some potential upside from opportunities surrounding Port Melville. At this juncture, details on the strategy for Port Melville’s expansion are still lacking. But, house believe the eventual unfolding of the Ezion-Ausgroup’s grand plan could be a strong catalyst for the latter.


LionGold: BusinessTimes cites the second resignation of a key personnel over at the company, after CEO Matthew Gill's resignation following a "disagreement over operational matters". The mining veteran had joined LionGold in September 2012, after it took over Castlemaine Goldfields, where he had been managing director. Earlier this month, LionGold's non-executive independent director Gary Francis Paul Scanlan, who is also Castlemaine's non-executive chairman, stepped down from the board.


Yangzijiang: Deutsche hosted Yangzijiang it its latest Asian conference, where YZJ highlighted its strong visibility with its order book of US$5.2b, which should allow its yards to remain well utilised through 2016. YZJ has secured a total of 26 shipbuilding contracts YTD with an aggregate value of US$1.07b. The group also indicated its interest to focus on larger vessels such as 14,000 TEU containerships and LPG vessels, and hopes to secure a number of such contracts in future. YZJ however catuions that many yards in China would face challenging conditions in 2014 as they deliver previous low cost orders. Of the >2,000 yards in China, the group believes less than a hundred of them are stable and most of these are government yards. YZJ has seen orders gravitate towards the stronger private and state-owned yards as ship owners have concerns over many of the weaker players that are facing cash-flow problems. Maintains buy with $1.48 TP.


Ezion: CLSA trims FY14-16 earnings by 3-6%, to factor in significant project delays announced in the recent 1Q14 results. This resulted in a lower TP of $2.82, while house maintains its conviction Buy rating on the counter. Four additional projects are facing significant delays of over 4-6 months. Most notable is a 4 months delay as well as additional US$10m capex in the Caspian Sea contract which is incidentally Ezion’s largest project. Unit 24 (North sea class vessel) has also been delayed by around 4 months but the company expects to soon find a charter in North Sea rather than deploying it in South east Asia as originally planned. House analysis indicates that Ezion is currently trading close to the NAV of its existing fleet and thus any future fleet growth is not priced in. CLSA notes that the stock is extremely cheap on PER basis of 7.6x F15 PER.


Ezra: Announced an aggregate US$95m worth of contracts (including options) across subsea services and offshore support services. Subsea services arm, EMAS AMC, secured work in the North Sea and Gulf of Mexico worth US$40m, with a variety of cable lay and subsea installation which includes one of the longest high voltage alternate current cable lays in the world, at 160km in the North Sea. Meanwhile, offshore supply services arm, EMAS Marine, was awarded US$55m in contracts, for the deployment of one anchor handling tug and supply (AHTS) and two platform supply vessels (PSV) in Africa, and another five AHTS and one PSV in Asia. The latest wins brings order book to more than US$2b, with the bulk expected to be executed over the next 12 to 18 months. At $1.03, Ezra trades at 14.5x forward P/E, in line with regional peers' average of 14.8x. Majority of the street maintains a Hold/Sell rating on Ezra with a 12-month TP of $1.13, mainly due to continued scepticism about the group’s execution.


Yoma: Announced 4Q14 results which were in line with estimates as net profit came in at $5.8m (-44.9%) taking FY14 net profit to $16.1m (+16.4%). Revenue for the quarter rose 34.4% to $27.5m while gross margins inched up 4.5ppt to 46.4%. The strong top-line was led by revenue generated from the sale of residences and land development rights (LDRs), namely driven by its key flagship projects - Star City and Pun Hlaing Golf Estate. The group also benefitted from the recent revenue contribution of its ‘Balloons Over Bagan’ tourism business. Bottom-line was however weighed by a 39.2% drop in other income due to a lack of contribution from fair value gains versus the previous year, and a 61.7% rise in admin expenses due to higher staff costs to meet the expansion of its businesses. Operationally, Yoma guided that sales at its Star City sales have remained robust, with the group selling ~528 units in Star City’s Zone A Buildings A3 and A4, which amounted to ~$61.1m in revenue as at Mar’14. The balance of unrecognised revenue of ~$36.3m is expected to be recognised within the next 9 to 15 months as construction progresses. Meanwhile out of 1,043 units in Star City Zone B, the group sold during the current financial year 622 units, of which 148 units were sold in 4Q14. Furthermore, the group has received booking deposits for an additional 111 units as at Mar’14. Going forward, management remains optimistic about its growth prospects, and believe that its real estate developments will continue to benefit from Myanmar’s ongoing urbanisation as well as the mismatch in supply and demand. The group also expects its more recent investments to build new growth engines for the future that will help achieve greater long-term sustainable growth for its shareholders.

SG Market (21 May 14)

US Market: US stocks slumped, halting a two-day advance, as a batch of disappointing earnings from retailers and hawish comments by a Fed official weighed on investor sentiment. The DJIA dropped 138 pts to 16,375 (-0.8%), while the S&P 500 fell 12 pts to 1,873 (-0.7%) and the tech-heavy Nasdaq lost 29 pts to 4,097 (-0.7%). Investors appear to be favouring fixed income over equities as concerns of overvaluations roiled stocks, particularly the high growth Internet shares (0.7%) and small caps (-1.5%). Selling intensified in the afternoon after comments from Philadelphia Fed President Charles Plosser endorsed a speedier rise in interest rates as the economy improves. Retail stocks swooned after a handful of dismal earnings from office supplier Staples (-12.6%), clothing and home furnishing seller TJX (-7.6%), specialty retailer Urban Outfitters (-8.8%) and Dick’s Sporting Goods (-18%). General Motors (-3.5%) slumped after making another vehicle recall, while Caterpillar (-3.6%) retreated after reporting a sharp drop in Apr machinery sales. Apart from the FOMC minutes due today, there little potential catalyst on the economic and earnings fronts to spur markets between now and Jun. Regional markets in Tokyo (-0.4%) and Seoul (-0.2%) opened in negative territory, tracking the weakness on Wll Street. S’pore shares likely to see lacklustre trading with STI trapped within the 3,285-3,220 trading range and the 20-dma providing immediate support at the 3,254 level. Stocks to watch: *Sembcorp Marine: Secured a US$236m contract to build a high specification jack-up rig for new customer Hercules Offshore, scheduled for delivery in 2Q16. This brings its new orders secured in 2014 to $1.93b and its order book to $13.2b, with deliveries extending into 2019. *Ezra: Won several contracts totaling US$95m, including subsea cable works (US$40m) in the North Sea and Gulf of Mexico and offshore supply services (US$55m) in Africa and Asia. The latest wins brings order book to US$2b, with a majority expected to be executed over the next 12 to 18 months. *RH Petrogas: Disclosed that its controlling shareholders have been approached by an investor regarding a potential proposal which may lead to a takeover offer. *BH Global: Awarded $18.8m worth of contracts, including one with a Japanese shipyard for the electrical/telecom outfitting of a mobile offshore vessel and another to design and integrate engine exhaust jet systems for jack-up rigs in the Gulf of Mexico, both to be delivered in 2016. The third project is for the supply of marine cables and lightings for both local and global shipyards with delivery in 2014. The new contracts will bring its rder book to $47m. *Swee Hong: Secured a $7.9m contract from PUB for the ABC Waters Project at Pang Sua Pond and Toa Payoh Lorong 8 with completion due on Dec 2015. *TA Corp/ King Wan: TA Corp (62%) and its partners King Wan (38%) and SKM Development (38%) have jointly secured a land tender for a 9,200-bed worker accommodation facility for $113.9m. The 37,170 sqm plot located in Tuas South has a lease term of 20 years, which will be developed into one of the largest workers' accommodation facilities in Singapore, with targeted commencement by 2016. TA Corp has a right of first refusal to be the main contractor for the project. *CNMC: Commenced production at its third leach yard at Sokor Gold project. This raises the group's total production capacity by 67% to 1m tpa. Following this, CNMC will begin design work for the fourth leach yard. *Yongnam: Both its CEO and finance director have been cleared by CAD of securities infringement and the cases against them have been closed. *Biosensors: Updated that CITIC Private Equity Funds Management is still considering options available to enhance its investment value, including a restructuring of its shareholding interests. *WE Holdings: Extended the cut-off date for its proposed acquisition of Dragon Cement from 20 May to 20 Aug '14.


Rex: Positive momentum on the counter with both RSI and Stochastics rising, supported by the MACD crossover and rising ADX. Support at $0.575, while resistance is at $0.65.

Midas (technical)

Midas: Counter still in consolidation; May face near-term pressure as strength on the downtrend picks up, supported by the rising ADX. Support at $0.435 followed by $0.425, while resistance is at $0.475.

QT Vascular

QT Vascular (QTV): UOB Kay Hian initiated with a Buy rating with $0.51 TP (+36% upside), based on a 2015F p/S ratio of 10x, in line with completed medical device M&A deals since 2012. House notes the agreements with distributors Century Medical for Japan, Weihai Weigao Medical Devices for China and Cordis Corporation for the US and the rest of the world give QTV immediate access to potential end-user accounts. In the US, this grows the group’s contact network by at least 10x to over 1,500 hospital accounts. This works out to drive projected 176% 3-year sales CAGR. The agreements provide topline visibility as they set out minimum volume or projected sales target commitments to be fulfilled by the distributors. UOB Kay Hian expects the group to begin recognising gross profits in 2014 as it achieves scale.


HanKore: CIMB reckons that the recent underperformance of HanKore’s share price can be partially attributed to the uncertainty surrounding the deal. A scenario analysis in its initiation report indicated a TP of $0.101 for HanKore if the deal eventually failed. Management still remains positive that the deal would go through and said that negotiations regarding the terms of the deal were ongoing. CIMB also believe the acquisition will eventually go through as the deal will benefit both parties- HanKore will benefit from significant interest expense savings and a better chance of clinching future projects while CEI will own a controlling stake in HanKore, which specialises in water investment, thus allowing CEI to unlock resources to focus on its own waste-to-energy business. CIMB reckons that the one-month extension is reasonable, considering the complexity of dealing with a China SOE and all the necessary negotiations for more favourable terms. House maintains Add rating with $0.156 TP.

Hotel Properties (HPL)

Hotel Properties (HPL): 68 Holdings and concert parties now controls 46.5% of HPL’s share capital, bringing it one step closer to its objective of acquiring a majority stake in HPL. HPL is asset-rich; it owns and manages 28 hotels and resorts spread across 13 countries and operated under brands such as Four Seasons and Concorde. In Singapore, the group’s three hotels along Orchard Road include the 422-room Hilton Singapore, the 254-room Four Seasons and Concorde Singapore. Along with adjoining assets such as Forum the Shopping Mall and HPL House, HPL’s properties and hotels bounded by Cuscaden Road and Orchard Road seem ripe for redevelopment, which DMG thinks will unlock the group's real estate value. According to DMG, HPL's hotels are still recorded at historical cost that dates back to 1996. House estimates HPL's RNAV at $4.85/share. In addition, its resort hotels in Maldives and Bali are currently doing very well, buoyed by higher chinese tourist arrivals and will continue to underpin revenue going forward. Adding flavour to the situation, the Fu family which owns a 29% block in HPL, has been silent on its intentions amid all the corporate developments at HPL. The family is not part of the 68 Holdings consortium, and it could have other plans up their sleeves, or could go along with any future development plans that Ong Beng Seng must have promised Wheelock in bringing it in as a strategic partner.

Tuesday, May 20, 2014

Keppel Land

Keppel Land: Management notes that while sales progress remains sluggish in Singapore, the company plans to launch its Highline Residences project later this year. Management noted that it can afford to have a longer view on sales given its strong balance sheet. With moderating land tenders, it will look to acquire additional development sites in Singapore in 2014 and 2015. In China, management noted that YTD sales have also been slower than 2013, and expects this to be the case through 2014. Keppel Land remains positive on the Shanghai market, and believes that demand should remain firm for its Park Avenue project given its location and limited supply in the neighboring area. The company notes that distressed opportunities are starting to appear in China, and will look to add to its China land bank. Management believes that bidding for sites has become less exuberant and more opportunities will emerge. Strategically, management intends to increase its focus in China, and will concentrate on five key cities: Shanghai, Beijing, Wuxi, Chengdu and Tianjin. DB has a Buy rating with TP of $4.00.

Ascendas REIT

Ascendas REIT: Occupancies for MTBs were flat at 90.6% on a same store basis, while portfolio occupancy fell from 94.4% to 93.9% due to the non-renewal of its C&P Logistic Hub. Demand remains broad based, signing 472,459sqm (+17% YoY) of space across a spectrum of industries while seeing a 14.8% positive rental reversion. Leasing remains on track for its AREIT City @ Jinqiao business park (27% committed + 17% under negotiation). Meanwhile, it has pre-committed 40% of the space at its upcoming mixed-use property in Kallang. Management noted that while demand from Financial institutions and light industrial has weakened, there has been increased demand from the Media and ICT industries. In addition, they have not seen significant tenant movements to Iskandar. In addition to the acquisition of its Kallang asset later this year, management continues to evaluate acquisition opportunities and is currently looking at up to 2 deals in Singapore, and $200m in China. The company notes that it will target green field development projects in China, where it can better leverage its brand value and expertise. DB has a Buy rating with TP $2.55.

Suntec REIT

Suntec REIT: At the ongoing dbAccess Asia 2014 conference, management noted that Phase 2 of the Suntec City AEI was delayed slightly on account of additional health and safety requirements, and that shops are expected to start opening in Jun this year. Blended rents for Phase 1 and Phase 2 are $12.59psf. Looking ahead, management expects TOP phase 3 by the end of this year with 2 anchor tenants. The company noted that additional funds are expected to be paid out from its Chijmes divestment proceeds in Q2 and Q3 owing to the shutdown of two phases over the quarters. DB maintains its Hold rating with TP of $1.68

ST Engineering

ST Engineering (STE): At the ongoing dbAccess Asia 2014 conference, STE highlighted its order book of $13.4b has more than doubled since 2005, providing healthy visibility for the group. Management has maintained its guidance for higher revenues and PBT in FY14 vs. FY13, and indicated that 1H14 would be comparable yoy, which implies a stronger 2H14. On dividends, STE highlighted that its FY13 dividend payout at 80% is healthy and that the reduction from 90% previously was largely to reduce the impact from withholding taxes when funds are repatriated out of the US. In Aerospace, STE highlighted that MRO rates have been steady and they remain in a good position to benefit from continued outsourcing in the industry. ST Electronics sees opportunities for intelligent transportation solutions, increasing demand for Ka-band in satellite communications, cyber security solutions and data analytics. In Land Systems, the division will offer new and improved defence solutions, penetrate new markets and target upgrade opportunities for ageing platforms. In Marine, management highlighted healthy customer enquires in the offshore support segment and is hoping for potential vessel contracts in the subsea construction market. DB has a Buy with TP of $4.30.


M1: At the ongoing dbAccess Asia 2014 conference, management stated the broadband market had become a lot more competitive. But recent competition has been driven by aggressive promotional pricing by incumbents, rather than smaller new entrants. Management views base pricing as having reached a floor, but conceded adhoc promotions/discounts may continue to constitute a pressure point. In response to IDA's recent industry consultation on introducing more players into the mobile market, management appears to see few risks of the sector becoming more crowded in the near term. The business model for a greenfield MNO would be extremely challenging. Management sees limited opportunities for new MVNOs in this market, and does not believe regulated wholesale pricing can be easily implemented or enforced. Management expressed optimism around continued mobile ARPU momentum, with the positive impact of tiered pricing and doubling of excess data charge (effective Jan) still working through the base, as these are applied to new/recontracting subscribers. ARPUs should get an additional boost when the existing 4G VAS charge waiver is lifted. DB has a Buy rating with $3.82 TP.


NOL: At the ongoing dbAccess Asia 2014 conference, mgmt continues to try to reduce costs, which it thinks will differentiate the company from competitors. Industry capacity growth of 6-8%/annum is expected over the next 2-3 years compared to demand growth of 4-5% pa. The demand/supply pressure should cause the operating environment to continue to be tough. The US and European demand appears to be on a recovery trend. Volume on its Transpacific route continues to be firm, with mid single digit growth expected by the company this year. Over the short term, management still foresees a challenging container shipping rate environment. NOL expects its capacity to shrink 5% this year given the contracted return of charter-in vessels. The company expects capex to decline y/y this year because of less deliveries. Financing requirement is mostly for capex. DB continues to be concerned about the oncoming supply of newbuild vessels into the industry, which may prevent the company from quickly returning to ROE levels above their COE. House see downside risk to consensus earnings forecast, and material downside to its TP of $0.81 (Sell rating).


Valuetronics: PhillipCapital initiated with a Trading Buy and $0.43 TP, implying a potential upside of 28%. Established in 1992 and headquartered in Hong Kong, Valuetronics has grown through the years to become more than an integrated EMS provider with principal business segments ranging from Consumer Electronics Products (“CE”) to Industrial and Commercial Electronics products (“ICE”). Today, they pride themselves as a premier design, manufacturing partner for the world’s leading brands in the consumer, industrial and commercial electronics sectors, which span across a wide geographical region that covers America, Europe and Asia Pacific. Investment merits include: 1. Trading at attractive values with net cash accounting for 53% of market cap, a conservatively estimated idle cash of 26% of market cap. P/E of 5.5x, PE ex idle cash of 4.0x; 2. Company shows ability to maintain revenue and bottom line growth in their continuing operations ex loss making licensing business segment; 3. LED lighting for general lighting burgeoning at a value sweet spot - mid expansion phase amidst falling prices.


Lantrovision: PhillipCapital initiates with a Trading Buy and TP of $0.685. House notes the two trends that Lantrovision rides on: 1) The need for globally standardised high quality structured cabling to avoid and quickly deal with critical systems failure; 2) Growth of Data Centres in Asia. Channel checks by PhillipCapital reveal that Lantrovision is “best in class” with an excellent track record on its regional presence. The Lantro Global Alliance Programme (LGAP) that the company has enables it to bid for global structured cabling contracts from the Fortune 500, a key competitive advantage given the increasingly global nature of contracts. Lantrovision has a strong cash position at 75% of equity with no debt. Excluding net cash, counter trades at just 3-4x fwd P/E, based on conservative earnings estimate for FY14F EPS of 4.9¢ (9MFY14 EPS: 4.0¢). We note that visibility have been increasing for the counter, with the recent initiation by UOB (Buy, TP $0.645) as well.


MYP: MYP proposed a share sale which will result in a RTO, transforming the third party logistics provider into a property investment company. MYP will issue 854.7m new shares to acquire Grace Shine Pte Ltd and Affreton Pte Ltd, at $0.22/share. The companies are owned by Indonesian property players, which include Jonathan Tahir, husband of the Lippo Group's Mochtar Riady's daughter. Property assets to be acquired include ABI Plaza, MYP Plaza, and three condominium units in Singapore. Post deal, MYP's proforma as at FY14Mar will grow from $0.23 to $0.252 (+9.6%).


Goodpack: Goodpack updated that the discussions with one of the parties, which may lead to a potential share offer of the company, have progressed. Although no names were given, several news sources have cited that KKR & Co are close to finalizing the deal after almost 1 year of talks, pending financing arrangements. In a recent report from a local broker, the offer price could range from $2.50-2.80/share, based on a P/E multiple of 17-19x. In Sep '13, KKR (Kohlberg Kravis Roberts) & Co raised US$6b for its Asian II Fund, the largest-ever pan-Asian private equity fund. Market observers note that if the deal goes through, Goodpack will be the first of a listed company from the fund.

SG Market (20 May 14)

US Market: US stocks finished higher in one one the slowest trading days of 2014 as small caps and tech companies rebounded, recouping some of their recent losses. The DJIA gained 21 pts to 16,512, while the S&P 500 added 7 pts to 1,885 the tech-heavy Nasdaq added 35 pts or 0.9% to 4,126. In the absence of economic news, investors turned their attention to comments by a Fed official that the central bank is likely to raise interest rates only in 2H15. Tech shares rallied as Internet stocks jumped 1.5% with Pandora Media (+5.3%), TripAdvisor (+5.2%), Netflix (+4.2%) Facebook (+2.1%) and Micron Technology (+3.5%) leading the charge. There was also spillover effect from the truce in the smartphone patent battle between Apple (+1.2%) and Google (+1.6%). Internet and biotech names have been among the most volatile in recent weeks, advancing on signs of improving economy and slumping on concerns of hefty valuations. In deal news, drugmaker Pfizer rose 0.6% after British pharmaceutical firm AstraZeneca rejected its US$117b offer, while telecoms giant AT&T lost 1% after agreeing to buy broadcast satellite service provider DirectTV for US$48.5b. S’pore shares likely to open flat as 1Q14 GDP growth of 4.9% is unlikely to excite the market amid very dry news on the corporate front. The STI is expected to hover between the the 3,285 and 3,220 trading range with the 20-dma at 3,254 providing immediate support. Stocks to watch: *Goodpack: KKR reportedly in advanced talks to acquire the company for >US$1.0b. Founder David Lam, with 32% stake, is said to be open towards a takeover offer. Co rents reusable IBCs to tyre manufacturers, chemical and juice producers such as Michelin, Bridgestone, BASF, Campbell and Heinz, for use in transporting their products. *MYP: Proposed RTO to transform the third party logistics provider into a property investment company. MYP will issue 854.7m new shares @ $0.22 to acquire Grace Shine Pte Ltd and Affreton Pte Ltd, which are owned by Indonesian property players, including Jonathan Tahir, son-in-law of Mochtar Riady of the Lippo Group. Property assets to be injected include ABI Plaza, MYP Plaza, and three condominium units in Singapore. Post deal, FYMar14 proforma NTA/share will increase to $0.252 from $0.23. *Vard: Secured a third contract for the design and construction of a 4,000 dwt platform supply vessel for Carlotta Offshore, with delivery from its Vietnam yard in 3Q15. *Saizen REIT: Divesting Saumur Meinohama II (SM2) from its property portfolio for ¥60m ($0.7m). The property, located in Fukuoka, comprises 14 residential units and contributed about 0.1% of group revenue in 9MFY14. As at 1 May, SM2 was valued at ¥50.4m ($0.6m). *ST Engineering: Acquired Aviation Academy of America, a flight school in Texas, for US$811,000. The acquisition is part of the group’s strategic initiative to grow its pilot training capacity and capabilities.

Monday, May 19, 2014

Fu Yu

Fu Yu: Latest was on 14 May when group announced its 1Q14 results, with net loss of $1.3m from profit of $0.8m a year before, while revenue slumped 12% to $59.5m, due to a reduction in orders from Malaysia. Group cites the competitive industry with over supply issues. Following that on 16 May, Ng Hock Ching acquired 200k shares at $0.088/share through a married deal, raising his stakes from 6.996% to 7.024%.


Oxley: Post 3Q results, Voyage noted that Oxley's overseas projects were well received, with 73% at Royal Wharf in London (Phase 1, about 800+ units) sold. House expects Oxley to launch the next phase over the next three months. In addition, Voyage speculate that more than 60% of The Bridge in Cambodia (1,000+ units) is likely to be sold in the first month of launch, estimated over the next one month. Given the positive response from Oxley’s overseas projects and the large amount of land acquisitions, Voyage believes the management is likely to put more attention there. For the Singapore projects, there are only two unlaunched projects and three with sales of <80%. The company is likely to concentrate on selling the existing projects and acquire new ones only if the returns are attractive. Voyage has a Fairly Valued rating with $0.80 TP.