Friday, August 29, 2014


Powermatics: Potential hidden value in overlooked network products distributor. The distributor of networking products is a textbook deep value play, trading at 0.5x P/RNAV and offering a recurring 5.8% yield, based on a consistent dividend of 1¢ annually. Key to Powermatic’s valuation is its investment property – two adjoining six-storey freehold industrial buildings located at 7 & 9 Harrison Road. The properties are recorded at a book value of $18.7m, against a market valuation of $32.4m, more than Powermatic’s entire market cap of $31.2m. In addition, Powermatic holds the following key items on its balance sheet: - cash of $17.5m ($0.10/share) - financial assets of $7.1m ($0.04/share) - no debt and minimal liabilities From an asset-valuation standpoint, Powermatic could be worth an additional $0.14/share from current levels, implying ~78% upside. As a possible catalyst, if Powermatic decides to adopt fair value accounting for its investment property in its FY14 results, the group may be able to record a tidy one-off gain (~$13.7m) and lift its stated NAV from the current $0.26/share to ~$0.34/share. Key risks in the stock are: - Generally low trading liquidity - Potential business obsolescence, due to the increasing popularity of online purchases by end users, and substitution from system-on-chip products.


Vard: gapped down more than 6% on 6 Aug as the shipbuilder of OSVs took a hit from news that it may face hefty tax fines from the Brazilian government. VARD recovered the bulk of its losses over the next two weeks, before pulling back again. Macquarie (MER) believes the tax issue will be out of the way in 3Q14 and focus will shift back on growth and orders. Sees a re-rating continuing from 4Q14, maintains TP of $1.45. Vard mgt presented at MER’s ASEAN Conference in Singapore. Key takeaways: Focus 1: Tax provision to be taken in 3Q14: VARD said that although they have a strong case against the Brazilian tax authorities for the NOK200m additional tax (includes penalty and interest costs of 9% over 4 years), they will take some provisions in 3Q14 itself. MER believes the actual additional tax could be much lower at NOK100-150m. Focus 2: Progress in Brazil: Although Brazil contributes around 20% to VARD’s revenues now, it is contributing 0% to profit according to management due to ramp up costs in the new Promar yard and the phasing out of old Niteroi yard. The good news is that the staffing for the new yard is complete with VARD having hired 1,400 employees. The construction of the new yard is also progressing on track. Focus 3: New order forecasts for 2H14: VARD expects 2H14 to be softer than 1H14 where it won a record NOK8.2bn of new orders. VARD expects NOK12-14bn of new orders in FY14. Jul and Aug are slow months due to the summer season and VARD is in discussions for new and large OSCV orders over the next 4 months. Focus 4: Order inflow outlook for 2015-16: While the new cost focus of oil companies and reduction of capex is shrinking the overall pie, VARD being a niche and not a volume player is not dependent on the overall market pie, according to management. VARD’s designs and niche products are the deciding factors for new orders which is why it seeks opportunities in customized high end categories like AHTS and PSV to be able to procure NOK12-14bn of new orders annually. Focus 5: Relationship and synergies with the new parent: VARD informed that the new parent Fincantieri is more synergistic than the old parent STX Corp. However, it is not involved in day to day operations, but on a strategic level, to help VARD cross-sell products and expand geographically.

Yamada Green Resources

Yamada Green Resources: The shiitake mushroom supplier saw 4QFY14 net profit surged to Rmb17.3m (4QFY13: Rmb0.2m), on revenue of Rmb81.4m (+46%), buoyed by favourable factors in all segments. The top line benefitted from higher yield (+53%) of self-cultivated shiitake mushrooms of 3,880 tonnes on favourable weather conditions, increased average selling prices (+20%) from revised contractual payment terms with its 12 distributors and better sales in both domestic and Japanese markets in processed food product business segment. Meanwhile, earnings were boosted by fair value gain of Rmb13m on its plantations. This brought FY14 earnings to Rmb102.6m (+48%) and revenue to Rmb611.4m (+20%). Yamada Green is expected to increase its harvesting capacity in moso bamboo for FY15, after expanding its total plantation area by almost three-fold to 33,845 mu (from 11,302 mu) after its harvesting season in FY14. Secondly, the group intends to increase its product offerings by developing new convenience food products in the processed food segment to capture the growth from increasing urbanisation and greater health-consciousness among the middle-and-upper income consumers. At $0.164, Yamada Green is valued at 4x P/E and 0.53x P/B.


GuocoLand: delivered $186.1m (+478% y/y) profits in 4QFY14, bringing FY14 profits to $304.2m (+651% y/y). Core profit less one-off fair value gains for 4QFY14 rose 81.4% y/y to $62.6m and for FY14 multiplied 18x to $173.4m (vs FY13 $8.9m), impressive nonetheless. Revenue recognized was higher at $492.9m (+192% y/y) for 4QFY14 and $1.25b (+85%) for FY14 due to units sold in Goodwood Residence in Singapore and Seasons Park in Tianjin, China. GuocoLand derives 57.3% of its revenue from Singapore and 32.9% from China. The bulk of bottomline increase came from fair value gains in investment properties (4QFY14: $122.6m; 4QFY13L $0.6m and FY14: $122.6m; FY13: $32.3m) and gain on disposal of interests in subsidiaries and associates (FY14: $98.9m; FY13: $3.9m). Expenses were in check, as operating costs as %Rev is proportionately less in FY14. Despite its good earnings ability, balance sheet ratios may raise some concerns. Net gearing is as high as 1.46x as at Jun14 (Jun13: 1.60x) and quick ratio is only 0.43x (Jun13: 0.57x) giving it little cushion in times of short-term liquidity squeeze. With BVPS at $2.36, Guocoland trades at 11.4% discount to NAV and 7.9x trailing P/E.

Sim Lian

Sim Lian: FY14 net profit inched up 2% to $171.0m on revenue of $714.7m (-4%). The slight dip in revenue was due to a 14% decline in revenue from the group’s property division segment to $506.7m, as it saw reduced contribution from Waterview and several completed property development projects. This was partially offset by increase in revenue contribution from Centrale 8 At Tampines and Parc Vera project which is at the peak of the construction cycle. The construction division fared better with revenue rising 34% to $172.4m, due to an increase in percentage of work done. While margins were aided by an 8% drop in raw materials and consumables costs to $481.9m, fairvalue losses of $15.5m for the group’s investment properties versus fairvalue gains of $1.6m from the previous year, weighed on the group’s bottom-line. Going forward, Sim Lian guides that with the past rounds of property cooling measures and the loan restrictions measures, the group expects the operating environment for private residential property market to continue to be challenging. The group aims to seek strategic investment opportunities for its continued growth and is focused on building a stable base of recurring income to smoothen its fluctuating profits from the property development division. The group has declared a first and final dividend of 4.6¢ per share (FY13: 4.6¢).

Sin Heng

Sin Heng: 4QFY14 net profit fell 21.4% to $3.4m taking FY14 net profit to $13.8m (+0.3%). Revenue declined 4.7% to $59.0m, due to lower contributions from both the equipment rental and trading business, which both fell 6.1% to $12.8m and 4.2% to $46.2m respectively. Weakness in the equipment rental segment was attributable to the completion of several major projects in the previous quarters and pending the start of new projects, while the fortunes of the trading business is largely tied to the volume and tonnage of equipment sold. Gross margin rose to 15.5% from 13.9%, led by improved margin from the Equipment Rental Business as a result of lower repair and maintenance costs incurred during the quarter, although this was offset by lower margin from the Trading Business due to lower trading revenue recorded. Bottom-line was largely impacted by a 63.2% decline in other operating income to $1.0m, due to lower spare part sales, and the absence of income from forfeited deposits received in the previous year. This was offset partly by a 21.1% drop in admin expenses to $4.0m as a result of lower staff costs. Sin Heng is cautiously optimistic that the key markets which it operates in remains encouraging. The group has declared a first and final dividend of 0.65¢ per share (FY13: 0.45¢). At the current price, Sin Heng trades at 8.3x FY14 P/E and 0.92x P/B.


AusGroup: Full year revenue of $302.4m (-48%) was in line with the street’s forecast, while net loss of A$11.9m (FY13 net profit: A$9.7m) came in above expectations. For 4QFY14 net profit surged 328% y/y to $2.2m, boosted by a one-off $5.8m gain mainly from disposal of a Singapore property. Revenue plunged 39% y/y to A$84.1m, due to reduced levels of activity in the mining-related sector, but rebounded 15% q/q. The significant downsizing of the business over 9MFY14 may have been completed, and AsuGroup is reaping the rewards of a shift away from construction services to the mining sector to the oil & gas sector and long-term asset maintenance contracts. Management notes acitivity levels are increasing in line with the order intake achieved over the last nine months. Work on hand stands A$375m. BVPS at A$0.303

SG Market (29 Aug 14)

US Market: US stocks stepped back, with the S&P 500 retreating back below the 2,000 level, as intensified fighting in Ukraine overshadowed a batch of encouraging economic data. The blue-chip DJIA slid 42 pts to 17,080 (-0.3%), while the broader-based S&P 500 dipped 3 pts to 1,997 (-0.2%) and the tech-heavy Nasdaq Composite shed 12 pts to 4,558 (-0.3%). Volume continued to be light ahead of the long-weekend with just 4.2b shares exchanging hands, below the 5.3b month average. Markets were pressured by news that Russian forces backing pro-separatist rebels gained ground inside Ukraine, with NATO reporting that Russia had set up a southern front with 20,000 troops. The latest flare-up in Ukraine cast a cloud over positive economic data, which showed the US economy expanded 4.2%, up from an initial 4% estimate, in the 2Q, propelled by the biggest gain in business investment in more than two years. Meanwhile, jobless claims fell for the second straight week to 298,000, off a seven-year low, while pending home sales climbed in Jul to a 11-month high. Financial stocks were amongst the biggest losers (-0.4%), with JPMorgan dropping 0.7% leading decliners amid a FBI investigation into a possible cyber-attack on the bank. Visa (-1.2%) fared poorly following a broker downgrade on a lack of positive catalysts. Earnings from from retailers mainly disappointed. Abercombie & Fitch lost 4.8% after its 2Q results missed estimates, while Guess sank 8.8% after the retailer cut its earnings forecast, but Signet Jewelers gained 7.7% after its results beat expectations. Among other stocks in focus, discount store chain Dollar General rose 0.8% after its 2Q sales trended higher but cookware and home furnishing seller William-Sonoma tanked 12% after its 3Q earnings forecast fell short of estimates. Radioshack jumped 31% on speculation that it will get a rescue financing package to stave off bankruptcy. Volume was the lowest for a full day session this year with only 4.2b shares traded on the US exchanges and advancing stocks outnumbered declining ones by 1.4 to 1 ratio on the NYSE. S’pore shares are likely to pull back following the retreat on Wall Street and softer openings on Asian bourses. Lastest FYJun14 results from Olam, Wing Tai, Amtek and ASL Marine all appeared to have missed estimates. The STI is exhibiting a bearish engulfing pattern, suggesting some short term downward pressure to immediate support at 3,320 level, while topside resistance remains capped at 3,380. Stocks to watch: *Olam: 4QFY14 results missed. Net profit plunged 44% y/y to $31.8m, against consensus of $116m, impacted by an exceptional loss of $16.7m (4QFY13: exceptional profit of $9m). Excluding the one-offs, a targeted volume reduction in lower margin businesses helped to shore up core net profit to $48.5m (+1.5%). Revenue fell 11% to $5.76b, as overall sales volume declined 18.6% to 3.5m mt. Net gearing improved to 1.82x (FY13: 1.93x), well below the FY16 target of 2.0x. Final DPS of 5¢ and an additional special Silver Jubilee DPS of 2.5¢ proposed. *Wing Tai: 4QFY14 results below estimates, mainly due to timing of development profit recognition. Revenue plunged 42% y/y to $179.8m, and net profit collapsed 48% to $143.1m. For the full year, revenue was down 40% to $803.4m, and net profit halved to $254.4m. Final DPS of 3¢ and special DPS of 3¢ proposed, bringing FY14 payout to 6¢ (FY13:12¢). BVPS at $3.78. *GuocoLand: 4QFY14 surged nearly six-fold to $186.1m (+478% y/y), boosted by higher fair value gains and stronger revenue recognition for its projects. Revenue almost tripled to $492.9m, attributable to units sold for Goodwood Residence in Singapore and Seasons Park in Tianjin, China. Other income jumped 158% to $129.0m driven by fair value gain on its investment properties. DPS of 5¢ maintained. BVPS at $2.36. *Sim Lian: FY14 net profit inched up 2% to $171.0m on revenue of $714.7m (-4%). Top line was weighed by the property division segment (-14% to $506.7m), due to lower contribution from Waterview and several completed property development projects. This was offset slightly by a 34% increase in construction revenue to $172.4m, due to an increase in percentage of work done. The effect of better margins was negated by fair value losses on investment properties of $15.5m (FY13 fair value gain: $1.6m). DPS maintained at 4.6¢. BVPS at $0.98. *Sin Heng: 4QFY14 net profit fell 21% y/y to $3.4m, taking full year net profit to $13.8m (+0.3%). 4QFY14 revenue dipped 4.7% to $59.0m, due to lower contributions from both the equipment rental (-6.1%) and trading (-4.2%) segments. Gross margin rose to 15.5% (+1.6ppt), helped by lower repair and maintenance costs from the equipment rental business. Bottom line was impacted by a 63% decline in other operating income to $1.0m, due to lower spare part sales, and the absence of income from forfeited deposits received in the previous year. First and final DPS of 0.65¢ (FY13: 0.45¢). *GuocoLeisure: FY14 net profit slipped 11.4% to US$39.0m, weighed by a jump in personnel expenses (+18%) for additional staff in hotel management in UK, as well as lower Bass Strait oil and gas royalty of US$41.5m (-7%). Revenue rose 6.8% to US$406.0m on higher hotel RevPAR and gaming win ratio. Management guides for lower room sales in FY15 due to planned hotel refurbishment. DPS maintained at 2¢. BVPS at US$0.93 ($1.16). *ASL Marine: Fell into a 4QFY14 net loss of $3m, from a net profit of $14.4m a year ago. Revenue plummeted 83% y/y to $26.2m, dragged by reversal of revenue recognition due to cancellation of a $51.8m shipbuilding contract and lower completion of projects from shiprepair and conversion. Bottom line was further weighed by absence of one-off gains last year. The group’s shipbuilding order book stood at $321m, of which 21% is expected to be booked in 1H15, and its shipchartering order book was $74m. DPS halved to 1¢. *Amtek: 4QFY14 net profit collapsed 84% y/y to US$1.8m, mainly due to the absence of one-off gains and higher finance costs relating to the acquisition of Interplex Group. Revenue dipped 5% to US$152m, attributable to overall weak end-market demand across the Enterprise Server/Storage, Mass Storage products and IT products industries, partially mitigated by higher sales of home appliance and electronic products. Final DPS of 1¢, brings FY14 payout to 2.3¢ (FY13: 3.3¢). *GLP: Signed new leases for 49,000 sqm of space in Eastern and Northern China to three leading e-commerce companies, of which two are existing customers. *Lum Chang: Awarded a $87m contract to design and construct a six-storey ramp-up warehouse at 5B Toh Guan Road East over an 18-month period. Construction to commence Aug ’14. Order book raised to $490m. *Boustead: Partnering Abu Dhabi Investment Council to develop / redevelop modern logistics and high quality industrial facilities in Singapore. The initial combined equity contribution in Boustead Development Partnership (BDP) will be $250m, which will allow investment of up to $600m with leverage. BDP will be the investor for Boustead’s future design-build-and-lease projects. *TEE Land: 49%-owned associate, Chewathai, will acquire a freehold 792-unit shoe-box condo project in Bangkok for not more than THB780m, with the price to be finalized upon project completion (target Mar ’15). *Cosco: Market talk that Sevan Drilling may delay or cancel its US$525m rig contract with Cosco on grounds of late delivery, due to the current weak ultra-deepwater market.

Thursday, August 28, 2014

Ezion (technical)

Ezion: current situation looks mixed, as share price is hovering around the key $2.17 level (coincides with the 200 day MA). There are slightly higher odds of a near term pull back toward the $2.05 support, given that the key indicators have hooked back down from overbought levels. Traders would refrain from being bullish for now, until a break out of the recent $2.25 high is triggered.


Straco: To lift halt at 8.30am tmrw. Confirms earlier news reports regarding the potential acquisition of the Singapore Flyer. Straco’s 90% owned subsidiary, Straco Leisure will acquire Singapore Flyer Pte Ltd (SFPL) as a going concern, which includes the giant observation wheel and the lease of the property located at 30 Raffles Avenue, for purchase consideration of $140m. The acquisition represents an expansion of the group’s core tourism related business.

Thai Bev (technical)

Thai Bev Technicals: prices testing strong resistance, susceptible to break on the upside if $0.70 is broken. On the other hand, if $0.62 support is not held prices may head towards the lower support trend line. As prices have been trading mostly in the upper channel and did not retrace meaningfully despite failed attempt to break resistance, I think upside break is possible. Note resistance is very strong because it also coincides with historical high.

China Water & Environment

China Water & Environment: Nomura is overall positive on China’s waste-water treatment (WWT) industry and expect rapid growth after the National Development and Reform Commission announced in July more than 20 provincial investment plans totalling Rmb23b. WWT companies are split into three types: Rural private companies with low penetration and high organic growth opportunities, (ii) municipal SOE companies with higher penetration and growth through acquisitions, (iii) industrial players in small niche market but with advanced technical know-how, enjoys high profitability and high barrier to entry. Nomura is particularly optimistic in rural private companies (although they are also highly exposed to tariff collection risks) and recommends buy on Sound Global (967 HK), Beijing Enterprises Water (371 HK) CT Environment Group (1363 HK), China Everbright Int (257 HK) and Kangda Env (6136 HK) in such order. Separately, there are three major WWT listed on SGX that are worth watching: SIIC Environment, Hankore Environment and United Environment. Hankore resembles a rural water company pre-merger, SIIC is a municipal SOE and United Env, the first membrane-based WWT in China, is an industrial player. SIIC is the most favoured (5 Buys, no Hold and Sell calls) for its strong local-government backing, management track record, as well as strong balance sheet and easy access to capital to carry out M&A. The street view on Hankore is mixed (2 Buys, 0 Hold, 1 Sell). The positive effect expected of the China Everbright (CEI) RTO is weighed against rich valuation and mediocre YTD results. United Envirotech has 1 Buy, 2 Holds as upbeat outlook in membrane-based WWT sector is offset by rich valuation.


MGCCT: 1QFY15 DPU beat; offers one of the best commercial REIT yields Mapletree Greater China Commercial Trust (MGCCT) 1QFY15 DPU jumped 11.9% y/y to 1.56¢, coming in 9.3% above the IPO forecast. Gross revenue grew 8.6% to $63.8m and NPI increased 9.9% to $52.6m, thanks to higher than expected rental rates. Portfolio occupancy remained high at 99.2%, with 82% of the expiring leases in FY15 renewed with robust rental reversions (between 21% and 33%). MGCCT’s portfolio comprises two key assets, Festival Walk and Gateway Plaza. At Festival Walk, one of the top ten retail malls in HK, gross revenue and NPI expanded 6.7% and 6.8% y/y, respectively. The property remained 100% occupied for both the retail and office sectors. Shopper traffic and tenants sales rose slightly by 0.5% and 0.1%, respectively. Of the retail leases expiring in FY15, 90% have been renewed or re-let with rental uplift of 21%, thereby underpinning MGCCT’s y/y growth for the subsequent three quarters. At Gateway Plaza, a premier Grade A office building in Beijing, gross revenue and NPI rose 14.2% and 18.8% respectively. Property occupancy stood at 98.6%. Similar to Festival Walk, 80% of the leases expiring in FY15 have been committed with rental uplift of 33%. Management believes MGCCT’s portfolio is well positioned to benefit from the continued performance in both the HK retail sector and the Beijing office sector. MGCCT had net gearing of 38.6% with a weighted debt maturity of 2.7 years, and average cost of debt of 2%. MGCCT trades at 0.9x P/B and offers 6.9% annualized yield, against its closest Singapore peer Suntec (5.0% yield) and Hong Kong peers Champion REIT (5.8%), Fortune REIT (5.7%) and Link REIT (3.8%).

Croesus Retail Trust

Croesus Retail Trust: 4QFY14 distributable income and DPU both beat forecast by 2%, at ¥707m and 2¢ respectively, attributed to lower property expenses. Gross revenue of ¥1,584m missed forecasts by 1%, mainly from lower than expected rental income from Mallage Shobu, its only property (of six) with a variable rent component, dragged by the country-wide decline in consumer consumption due to the consumption tax rate hike to 8% (from 5%) in Apr, conducted by the Abe administration. Shopper traffic and tenant sales benefitted from the Trust's promotional activities and the rise in consumer spending, just before the tax hike. Meanwhile, net property income of ¥1,020m beat IPO forecast by 3%, from cost savings on lower property management and repair expenses. Portfolio occupancy stood at 99.4%, with 79% and 91% of FY15 and FY16 rental rates locked in. Leverage ratio dropped 1.8ppt to 51.7%, on average interest cost of 2.13% and debt tenor of 3.7 years. This leaves the trust additional debt headroom of ¥16.2b for additional acquisitions, based on 60% leverage. Coming up in Nov'14, management expects favorable rental reversion at Mallage Shobu, with 148 of 242 leases expiring, as the prior rates were entered in 2008 on not so buoyant market conditions. In the longer term, counter offers an exposure to the recovery in the Japanese consumer market, underpinned by firming confidence in the country's economy. At $1.02, Croesus Retail Trust is valued at 1.1x P/B and FY15 forecast DPU yield of 7.3%.

Grand Banks Yachts

Grand Banks Yachts: The luxury boat maker announced stellar 4QFY14 results, boosted by higher sales and underpinned by stringent cost-cutting efforts, spearheading the group to record its best year since FY09. Revenue improved 12% y/y to $13.2m, propelled by luxury boat sales in North America and growth in Asia. Gross margin was lifted 11.2 ppts to 17.7%, mainly attributed to higher productivity and utilisation rates. Subsequently, earnings turned around to $0.8m from a loss of $2.3m in 4QFY13. Notably, operating costs declined 44%, from improving cost-of-sales efficiencies, realigning sales, marketing and admin expenses through headcount reduction, lower travel and entertainment expenses and restructuring of its offices in the US and Australia. This brought full year earnings to $1m (FY13: -5.2m) and revenue to $40.3m (+15%). Following the watershed results, Grand Banks to submit an application to exit from the SGX Watch-List, after fulfilling the criteria for a profitable year. Order book stood at $19.8m. Market Insight reiterates its value call on Grand Banks. In a scenario whereby the company is able to obtain approval to exit the Watch-List, share price may lead to a potential re-rating. At $0.265, Grand Banks is attractively valued at 0.9x P/B, supported by net cash of $0.154/share.


Valuetronics: For now, the key indicators are sliding, hence the counter appears to be on the down leg , within a longer term uptrend. Immediate support is at $0.48 (50day MA), though if the level fails to hold, share price could pullback further to the next support at $0.44. The stock is likely consolidating now after the recent sharp run up. Bullish traders may consider entry when the slide in the indicators has played out and is reversing back up.


Straco: According to the Business Times, Straco could be getting ready to announce its acquisition of the Singapore Flyer. Does not come as a surprise, as Straco has been guiding that it was on the look out in recent years for an acquisition, given its growing net-cash position, which currently stands at $100m. Both revenue and earnings growth have also been very strong over the last few years, with share price surging abt 157% from a year ago. As a brief background, Straco operates 2 aquariums in China, the first being Shanghai’s popular Ocean aquarium and xiamen’s aquarium. The acquisition would reduce their concentration risk in China, although it remains to be seen on how Straco will be able to turn around the Singapore flyer. The company behind the flyer was placed under receivership in 2013 after failing to meet its financial obligations. General sentiment is that most locals find the price of $33 for a half-hour ride to be too expensive.


ISOTeam released a stellar set of results as core FY14 earnings came in above estimates. FY14 net profit was up 0.8% to $6.1m, as bottom-line saw the absence of contributions from a one-off property plant and equipment disposal gain at $4.2m in 2013. Barring, which pre-tax profit for FY14 would have almost tripled to $6.7m. Revenue jumped 44.8% to $69.9m, largely due to the group’s Repairs and Redecoration (R&R) business segment, which soared 83.2% to $48.3m, derived largely from projects awarded by SKK, Moulmein-Kallang Town Council, Tanjong Pagar Town Council and Pasir Ris-Punggol Town Council. Meanwhile, sales contribution from the group’s Addition and Alteration (A&A) business segment decreased 6.4% to $20.4m, while contribution from the others business segment was up from $0.1m to $1.1m as the home retrofitting business continued to gain increased traction. Gross margin improved to 19.3% from 17% due to higher revenue contributed by R&R works, although bottom-line was weighed partially due to a 15.7% rise in general and admin expenses to $6.3m. Going forward, ISOTeam expects to benefit from the general increase in public sector upgrading, retrofitting and maintenance of buildings and facilities activities in Singapore and will continue to bid for these projects as well as projects in the private sector. The group has plans to extend its services into other untapped sectors, including public sector projects such as education institutions and army camps, and non-public sector projects such as Management Corporation Strata Title, industrial and commercial projects. ISOTeam’s order book of $73.2m is expected underpin revenue visibility over the two years. At the current price, ISOTeam trades at 8.0x FY14 P/E and is in a net-cash position $13.4m. The group has declared a first and final dividend of 1¢ per share, unchanged from the previous year.

GLP (technical)

GLP: current momentum is strong , given the recent upward charge in share price. $3 is the immediate resistance level. The RSI and Stochastic indicators have been rising steadily but have also entered overbought territory for a few days already. A pullback toward the $2.85 support may offer more cautious investors a better window to accumulate.

SG Market (28 Aug 14)

US Market: US shares ended little changed in a lethargic session with no hard news to spur any significant movements. The blue-chip DJIA edged up 15 pts to 17,122 (+0.1%), while the broader-based S&P 500 stayed flat at 2,000 and the tech-heavy Nasdaq dipped 1 pt to 4,570 (-0.02%). Volume was low with only about 4.2b shares changing hands. Impact from the ongoing geopolitical crisis in Ukraine, the Gaza Strip and Iraq appears muted in recent days, with investor sentiment buoyed by expectations that the Fed will continue to keep interest rates low and signals by the ECB to introduce an asset-buying plan. With no major economic reports on tap, traders focused the rebound by Best Buy, Aplle’s impending product launches and results from some retailers. Telecom and utility stocks saw the biggest gains, while energy, financial and technology sectors fell the most. UnitedHealth added 1.5% to pace the gainers on the Dow, while United Technologies topped the losers, sliding 0.5%. In the technology space, Apple gained 1.2% in anticipation of its upcoming launch of iPhone 6 and iWatch in Sep, but Facebook and Google shed 1.8% and 1.2% respectively. Tiffany (+1%) and apparel chain Express (+12.7%) rose on quarterly revenue that beat expectations and both raised their profit forecasts. But women clothing retailer Chico FAS slumped 4.6% on lower-than-estimated sales. Among other stocks in focus, electronics retailer Best Buy rebounded 6.3% from a 6.8% plunge on Tue after posting 2Q profit that topped estimates. Burger King declined 2.1% amid criticism that its US$11.4b takeover of Canada’s Time Hortons was in part motivated by the aim to cut its tax bill through the relocation of its headquarters to Canada. Volume was depressed ahead of the Labour day long holiday weekend in the US with only 4.2b shares traded on the US exchanges and advancing stocks outnumbering declining ones by 1.3 to 1. S’pore shares may drift sideways, tracking the lackluster close on Wall Street and mixed openings in Asian bourses. Topside resistance for the STI is capped at 3,380 with immediate support at 3,320. Stocks to watch: *STATS ChipPAC: Confirms yesterday’s Bloomberg report that Jiangsu Changjiang Electronics Technology and Tianshui Huatian Technology have contacted the company with regard to a possible acquisition. *Straco: Local news says Straco could make a bid to acquire the Singapore Flyer. The company behind the iconic observation wheel, which was built at a cost of $240, was placed under receivership last May. Straco shares were placed on halt since Wednesday after market. *Grand Banks Yachts: Posted FY14 net profit of $1m, reversing losses to post its first full-year profit in six years. The group achieved its highest full year revenue in five years of $40.3m (+15%), driven by recovery of the North American boat market and growth in Asia. Gross margin jumped to 19.4% from 13.6% a year ago, boosted by substantial operating cost cuts, higher productivity and utilisation rates. In Aug, Grand Banks completed its acquisition of Palm Beach Motor Yacht, and the enlarged group now boasts an aggregate net order book of $19.8m. The group will submit an application for its exit from the Watch-List, after the audit of the FY14 results. BVPS at $0.295. *ISO Team: Excluding the one-off disposal gains booked last year, FY14 core net profit surged 224% to $6.1m. Revenue jumped 45% to $69.9m, driven by a substantial increase in contribution from the Repairs and Redecoration (R&R) business segment (+83% to $48.3m), attributable to projects awarded by SKK, and the town councils of Moulmein-Kallang, Tanjong Pagar and Pasir Ris-Punggol. Gross margin improved to 19.3% from 17.0%. FPS maintained at 1¢. *Civmec: 4QFY14 net profit jumped 25% y/y to $11.6m (+26% q/q), while revenue spiked 110% to $166.7m (+42% q/q), mainly due to an increase in contracts. This helped buoy full year earnings to $35.1m (-3%) and revenue to $433.7m (+7%). FY14 gross margin slipped 2.6 ppt to 14.6% due to the re-classification of occupancy costs to cost of sales and an increase in the proportion of larger, higher-value projects (which are more stable but relatively lower margins). First and final DPS of 0.7¢ maintained. *Croesus Retail Trust: 4QFY14 distributable income and DPU both beat forecast by 2%, at ¥707m and 2¢ respectively. Gross revenue of ¥1,584m missed forecasts by 1%, mainly from the country-wide decline in overall consumer consumption due to the increase in consumption tax rate to 8% (from 5%), while NPI of ¥1,020m beat by 3%, from lower property management and repair expenses, partially offset by higher utility and promotional expenses. Portfolio occupancy at 99.4%. Leverage dropped 1.8ppt to 51.7%, on average interest cost of 2.13% and debt tenor of 3.7 years. BVPS grew 6% to $0.902. *Japfa: 2QFY14 net profit grew 21% y/y to US$39.1m, boosted by a US$9.6m disposal gain, as revenue climbed 9% to US$767.3m. This brought 1HFY14 earnings to US$61m (+6% y/y) and revenue to US$1,457.4m (+6%), attributable to better sales in dairy and animal protein segments, but partially offset by consumer food. Gross margin slipped 1.4 ppt to 17.6%, due to lower contribution from the higher margin animal protein and consumer food business in Indonesia, as well as delays in passing on raw material cost increases arising from the depreciation of the Rupiah against USD in 2013. *China Automation: 1H14 net profit rose 4.1% y/y to Rmb68.3m, buoyed by lower operating expenses and the absence of bad debt provisions booked last year. However, revenue declined 11.2% y/y to Rmb1.1b and gross profit fell 7.8% to Rmb387.9m on contraction in both petrochemical (-5.0% y/y, Rmb828.4m) and railway (-27.5% y/y, Rmb243.1m) segments. *Keong Hong: Awarded a $118m contract from MKH (Punggol) to construct six buildings for an executive condominium located at Edgedale Plains/ Punggol Central, with expected completion by Nov ‘16. *Polaris: 31.4%-owned PT Trikomsel Oke has been appointed as an authorised distributor for Xiaomi products in Indonesia. *Tat Hong: Terminated the proposed conditional sale and leaseback agreement with TransLinkQ regarding the divestment of five in Australia due to failure to reach a final agreement. *Wilmar: Acquiring Nexsol (Malaysia) for RM27m, and a 30 acre plot of land in Johor Bahru which houses Nexsol’s 100,000 MT pa biodiesel and glycerine refinery for RM23m. *Cosmosteel: CEO Ong Chin Sum and ED Ong Tong Yang were called in by the Corrupt Practices Investigation Bureau, in relation to illegal gratification to an agent. Both men are currently released on bail.

Wednesday, August 27, 2014


GLP: shares broke above the $2.85 resistance today. The current price of $2.89 is the highest level reached since mid Feb ’14, with next resistance at ~$2.95. Market Insight continues to favour GLP as a constituent in the model Growth portfolio, given its leadership position in modern warehousing, and as a proxy play on the e-commerce boom taking place across Asia, in particular China. Recall, in Aug, GLP announced a strategic partnership with China Materials Storage and Transportation Development Co (CMSTD) to develop modern logistics facilities in China. Through its 49% stake in the JV, GLP will have access to more than 9m sqm of CMSTD’s land resources in prime locations in China, effectively tripling its land bank available for development. GLP’s steady share price rise since early Aug suggests that investors are coming to recognise the enormous potential growth that the deal could bring. In fact, both management and sell-side analysts have been actively engaging investors to boost GLP’s profile. The group is scheduled for yet round of meeting with institutional investors in Sydney over today and tomorrow. Expect sentiment in GLP to improve with mounting investor awareness. GLP shares trade at 1.2x P/B. The street has 13 Buys, 3 Holds and 1 Sell with consensus TP of $3.21.


STATS ChipPAC: Bloomberg article cites Jiangsu Changjiang Electronics Technology Co. and Tianshui Huatian Technology Co. are considering bids for STATS ChipPAC, and a potential offer could be reached early next month.

Serial System

Serial System: Voyage reiterates OVERWEIGHT with TP $0.205, says this is a quality business that is unnoticed by the market . Serial exceeded expectations with net profit of US$5m on revenue of US$262.9m for 2Q14. Net margin rebounded from 1% in 1Q14 to 1.9% in 2Q14, suggesting the company is starting to enjoy economies of scale following yrs of expanding its network. Going forward the company intends to : i) further target customers in the auto, mobile devices and enterprise cloud solutions businesses , and ii) execute more M&A transactions to expand market share. Serial recently announced the proposed acquisition of the distribution entities of Achieva and GSH. Accordingly the acquisitions will add new suppliers and customers to Serial's portfolio and expand the company's reach into Central Asia, Vietnma, Cambodia, Bangladesh and Australia.

United Engineers

United Engineers: CIMB reiterates the sale of non-core assets will be a re-rating catalyst for UE. The latest disposal of its auto division for $455m will reduce net gearing to ~39% by end FY14, factoring in the sale of MFS and the upcoming sale of orchardgateway. It also raises UE's appeal as a potential takeover target for Charoen as the auto segment may have limited synergy with his S'pore properties. UE's assets are now largely properies, ie 64% investment property and ~20% residential devs in S'pore and China. Any potential takeover at 5-15% discount to RNAV would value UE at between $3.02 and $3.38 per share. The house arises TP to $2.85 from $2.53, keeps Hold rating.


NOL: Credit Suisse upgrades to Outperform from underperform, as liner sector gets a lift. Raises TP to $1.15 from $0.90, based on 1.1x P/B. The house sees port congestion in major ports (especially for large vessels) and potential box shortages constraining supply combining with demand that is surprising on the upside as being conductive to rate increases ahead of expectations.

Cambridge Industrial Trust

Cambridge Industrial Trust: Daiwa reiterated Underperform with revised TP of $0.680 (prev: $0.670) a slight premium to NAV despite new acquisition of 12 Ang Mo Kio Street 65 announced yesterday. The acquisition is a 6-storey purpose built light industrial building with 180,424sf GFA with 36 years remaining tenure, bought at $220psf (vs last transacted $319psf in vicinity). The building is occupied by 2 tenants, making up 85% occupancy rate, therefore comes with concentration risks. Yield on cost of 5.3% is unattractive. The house accounts for new revenue contribution and expected rental rates and occupancy rate increase based on expressed intention of existing tenants to take up the remaining space, but TP is only marginally higher at $0.680. TP is undemanding at 1.05x DDM multiplier vs historical average of 0.88x.


OSIM: shares are down 5.3% to $2.67, giving back most of the gains chalked up over the recent 3 mth rise. The share price move reflects a "sell on news" effect. This morning, OSIM announced that it has fully placed to institutional and accredited investors $170m in principal amount of zero-coupon unsecured convertible bonds (CB) due 2019. The CBs have a term of 5 yrs, with conversion price of $3.525 per new share (25% premium to last close). The CBs will not bear interest, but are redeemable at ~110 , and have a yield to maturity of 2% pa. On full conversion, the dilution is 6.2% of existing share base.


Halcyon: The ‘Popiah King’ effect lives on with food tycoon Sam Goi set to emerge as a substantial shareholder in Halcyon Agriculture, after agreeing to subscribe for a total of 25m new shares at $0.738 apiece via a private placement. The proposed placement price represents a 9.4% discount to the last traded price of $0.815 and will raise gross proceeds of $18.5m. On completion, Goi will emerge with a 5.94% stake in the enlarged share capital of the company. Gross proceeds raised from the placement will be used to further strengthen the capital base of the Company and facilitate continued growth and expansion. The latest fund raising does not come as a surprise, with Halcyon having been on an aggressive acquisition trail over the last 15 months, expanding its rubber licensed capacity by 6.8x to 748,000 tons after the acquisition of Anson Company from Lee Rubber for $450m. Halcyon is also proposing to acquire New Continent Enterprises (NCE), which could enable the company to align its customer mix to match the consumer profile of Natural Rubber, by providing direct access to non-tyre industrial consumers in Europe, North America and China. The acquisitions of Anson and NCE will transform Halycon to become a Top 5 rubber producer globally. Commenting on the deal, Halcyon guided that Goi’s extensive experience of running successful businesses would present an important source of counsel and advice to the group. Separately, Halcyon guided that it is exploring and considering a proposed transfer of listing from Catalist to the mainboard of SGX, which could allow the group to better attract institutional investors and reach out to a wider investor base in future. Investor interest in the stock may be revived, given that Sam Goi’s share purchases are typically closely followed by market watchers. Other SGX companies which Sam Goi has built stakes in include the likes of GSH, Yamada, Serial System, Etika, Super Group, Hanwell and JB Foods.


OCBC: Macquarie reports post-briefing takeaways: OCBC is considering to sell some non-core assets (ii) further earnings dilution cannot be excluded since the fully loaded Basel 3 CET 1 ratio remains below the level of peers (iii) the WHB synergy story remains very much focused on the revenue side. Adjusting for 12.6% rights issue dilution and an increase in stake in Bank of Ningbo, Macquarie maintains Underperform with 12-m TP at $8.20.


Hafary: FY14 net profit tumbled 64% y/y to $8m from an absence of $23.8m disposal gain on development property, while revenue improved 11.3% to $92.7m, buoyed by general (+6%) and project (+17%) segments, on higher demand of surfacing materials. Excluding the gain, profit before tax slumped 21% from the challenging business environment, as gross profit margin declined 3 ppt to 37.3% on a lower sales mix in project segment and commencement of depreciation of its main warehouse at Changi. Despite the discernible drop in resale property transactions after a series of property cooling measures, Hafary's general segment saw a slight improvement in sales volume, attributed to its ramp-up of marketing efforts and widening of customer base. Meanwhile, the growth in project segment came from higher volume of deliveries of tiles for use in HDB developments under the BTO scheme and Home Improvement Programme, as well as private developments- Hedges Park and Parkland Residences. Management declared final DPS of 0.3¢, bringing FY14 total to 1.3¢ (FY13: 6.5¢).

Saizen REIT

Saizen REIT: 2HFY14 DPU came in at 3.1¢ (-1.6% y/y), while distributable income was flattish at $8.8m, on weakening of JPY against S$. 4QFY14 gross revenue increased 3.4% to $12.1m, while NPI rose 2.6% to $8.3m, mainly from the 7 properties acquired over the course of FY13, offset by the divestment of 1 property in FY14. Average occupancy stood at 91%. Aggregate leverage stood 37%, with interest for 88% of its loans fixed. While rental reversions were marginally lower at 0.5% from previous contracted rates, management is optimistic that rental reflation will gradually filter through the entire Japan. The divestment of Saumur Meinohama II, was done at 19% premium over valuation. Following that in July, Sun Port 6 was divested at 12.8% premium over valuation NAV at end Jun was $1.22, translating to 0.8x P/B. Annualized 2HFY14 is 6.5%

Silverlake Axis

Silverlake Axis: FY14 net profit rose 27% to RM248.9m, while revenue rose 26% to RM500.7m, with all segments delivering growth (except software project services, on lower progressive revenue recognition). Notably, Maintenance and enhancement revenue saw strong growth of 21% to RM 210.3m on completion of contracts in Malaysia, Singapore, Indonesia and Thailand, as well as the consolidation of CBSB’s revenue. Gross margins slipped 3ppt to 61% due to margins from certain projects. Bottom line was also boosted by increases in other income and share of associate’s (Global InfoTech) profits. Management cites cautiously favorable outlook with implementation existing and new projects being key in FY15. Successfully completed project will result in additional recurring maintenance income, as well as potential future projects, as Silverlake has a strong foothold in S.E Asia. Positive developments with from the OCBC-Wing Hang Bank merger, as well as CIMB-RHB merger would likely favor Silverlake, as both OCBC and CIMB are existing clients of Silverlake. Final DPS of 1.2¢ and special dividend of 0.6¢ announced, bringing full year dividend to 4.5¢, or a 3.9% yield. Silverlake Axis is trading at 26.1x FY14 P/E.

SG Market (27 Aug 14)

US Market: US shares pushed higher, sending the benchmark S&P 500 above the 2,000 psychological mark for the first time, helped by encouraging data on durable goods orders and consumer confidence. The blue-chip DJIA gained 30 pts to 17,107 (+0.2%), reaching an all-time intraday high, while the broader-based S&P 500 addded 2 pts to 2,000 (+0.1%), and the tech-heavy Nasdaq Composite advanced 13 pts to a fresh 14-year high of 4,571 (+0.3%). Markets trended higher as US durable goods orders jumped a record 22.6% in Jul, skewed by a surge in aircraft bookings, while consumer confidence rose more than expected in Aug to its higest level since Oct ’07. Energy shares outperformed (+0.5%), following a WTI oil price rebound from a seven-month low, with ExxonMobil (+0.9%) and Chevron (+0.3%) pacing the gains. Biotech stocks rallied 1.3% to new highs, staging a sharp recovery from a 21% decline from Feb to Apr, amid overvaluation concerns. Among other stocks in focus, Twitter rose 4.5% after expanding its ad sales across Europe, while Amazon climbed 2.3% after striking a deal to buy over videogame streaming network Twitch for US$970m. Burger King slid 4.3%, reversing its 19.5% gain yesterday after announcing a US$11.4b takeover of Canadian coffee and doughnut chain Tim Horton (+8.5%). Electronics retailer Best Buy lost 6.9% after reporting a steeper than expected drop in same-store sales and making a weak forecast. Volume was light with 4.5b shares traded on the US exchanges, 20% below the three-month average. Advancing stocks outnumbered declining ones by 2 to 1. S’pore shares may lose traction despite the record close on Wall Street as the daily technical indicators are to lose upward momentum with few catalysts in sight. The STI is also looking tired and may test the downside support at 3,320 before finding firmer grund at 3,280. Topside resistance is capped at 3,380. Stocks to watch: *Silverlake Axis: FY14 net profit jumped 27% to RM248.9m, keeping pace with the 26% increase in revenue to RM500.7m, with all segments (except software project services) delivering growth. Gross margin slipped 3ppt to 61%, but bottom line was boosted by substantial increases in other income and share of associate’s profits. Management is cautiously optimistic on outlook, with implementation projects being key in FY15. Final DPS of 1.2¢ and special DPS of 0.6¢ declared, bring FY14 payout to 4.5¢ (FY13: 3.1¢). *Hafary: FY14 net profit tumbled 64% to $8m, as last year’s bottom line was boosted by a $23.8m gain on disposal of development property. Revenue grew 11% to $92.7m, driven by higher sales in both the general segment (+6%) and project (+17%) segment, due to higher demand for surfacing materials. However, gross margin fell 3 ppt to 37.3% due to lower mix of revenue from the project segment and commencement of depreciation of its main warehouse at Changi. Final DPS of 0.3¢, bringing FY14 payout to 1.3¢ (FY13: 6.5¢). *Saizen REIT: 2HFY14 DPU dipped 1.6% y/y to 3.1¢, while distributable income was flat at $8.8m. For the quarter, 4QFY14 gross revenue edged up 3.4% y/y to $12.1m, while NPI rose 2.6% to $8.3m, as full year contribution from the seven properties acquired over the course of FY13 offset the divestment of one property in FY14. Average occupancy stood at 91%, and aggregate leverage at 37%. BVPS at $1.22. *China Yuanbang: FY14 net profit jumped 49% y/y to Rmb 143.7m, as revenue swelled 53% to Rmb 1.3b, mainly derived from the sale of three development projects. Although gross margin fell 3.6ppt to 30.0%, bottom line was boosted by fair value gains on investment properties (Rmb96.2m) and a doubling of rental income to Rmb21.1m. BVPS at Rmb1.16 ($0.235). *OCBC / Great Eastern: in exclusive discussions with the TCC Group, which is controlled by Thai tycoon Charoen Sirivadhanabhakdi, to sell their combined stakes in United Engineers (estimated 34% to 36% stake) and WBL, which could lead to a mandatory general offer for UE shares. *Halcyon: Sam Goi will emerge as a substantial shareholder with a 5.9% stake, after agreeing to subscribe for a total of 25m new shares at $0.738 apiece (9.4% discount to the last close). Gross proceeds of 18.5m will be used to further strengthen the capital base of the company and facilitate growth and expansion. *QT Vascular: Proprietary technology used in its Glider PTCA balloon catheter received key patent in Japan. *Sincap: In a response to SGX query, the group announced the potential acquisition of another piece of land in Australia. *Miyoshi Precision: Entered into a JV with Green Galaxy to develop, manufacture, assemble and sell light electric vehicles in China. Miyoshi will acquire 55% stake in the JVCo for an aggregate $3m, comprising i) $1m cash and ii) the issue of 32m new shares at 6.25¢ apiece. *SBI Offshore: In negotiations to build and manage up to five jack-up drilling rigs with a consortium of six Middle East-Chinese parties. *W-Corp: Hired Macquarie to issue 50m shares at $0.50 each, on a best efforts basis, to raise gross proceeds of not less than $25m. *OSIM: Issued $170m in principal amount of zero coupon convertible bonds due 2019, with an upsize option of $30m. *Digiland: Entered into a call option to acquire Goodwood Associates (GA), for consideration being the lower of $8.3m, or 4x FYJun15 P/E. GA is a wholesaler of petrochemical products, including LNG and the acquisition is in line with its strategy to expand into the oil and gas industry.

Tuesday, August 26, 2014


Sincap: just queried by SGX for its trading activity. Stock is up 12.6% today at $0.161 and has doubled since the start of Jun. No overnight news to highlight. Focus remains on its proposed diversification into property development in South Perth in Western Australia. Repost from 12 Aug: Sincap entered into a preliminary agreement with the vendors to acquire LTN Land, which holds a 59% stake in a plot of land situated at 1 Richardson Street, South Perth, Australia, which is being developed into a mixed-property development. The purchase consideration of $38.5m (15% discount to independent valuation) will be satisfied by the issue of 260m new Sincap shares (74% of existing share base) at $0.148 each. The parties have an exclusive period of three months for negotiations.

Otto Marine

Otto Marine: announced two positive developmentsthis week: - exploring strategic options to develop its subsea operations business, which include a potential listing on the SGX, and - secured A$57m contracts for two of its 16,300 BHP AHTS. The first news will help Otto to secure new funding to grow the subsea business and helps to rerate the company’s valuation. The second news reflects the buoyant chartering market and provides greater visibility to chartering forecast. Voyage reiterates its Invest rating with TP $0.116


Ezion: Nomura held an investor conference. Notes the group is almost ready to embrace cabotage rules in SEAsia CEO, Mr Chew Thiam Keng, said the group is in final phases of finding the right ownership and operational structures to better accommodate the cabotage rules in Malaysia and Indonesia. These would be applied to the next charter-out contract wins in these 2 countries. As a recap, Ezion’s niche supply of liftboats / service rigs to support fixed production platforms in SE Asia has gained increasing acceptance in the past 2-3 years. The contract win momentum will be better and contract duration will remain long, if Ezion can bid for charter-out contracts in Southeast Asia using local-flag liftboats, vs the current need to seek exemption for each contract using Singapore-flag unit. MEanwhile, demand for Ezion’s liftboats in ASEAN is good; amidst weak competition. On future vessel delivery delays, it blamed the tight equipment supply and less experienced yards for delays in 1H14, but stressed that these vessels are either delivered or will be delivered in the rest 2H14. Nomura maintains Buy with TP $3.13

Genting SP

Genting SP: JPM remains Underweight with TP $1.21. Management remains cautious and expects the next two to three quarters to remain challenging, with soft VIP demand and flattish mass and slot growth. The house sees demanding valuation (24x FY14E P/E), given soft growth expectations, and believe it is still early to price in significant value for the Japan project given its uncertainties and remoteness. Believes GENS’s weak earnings quality (less mass contribution and credit-driven VIP growth) may limit room for re-rating

Pacific Radiance

Pacific Radiance: JPM adds to its Focus list. Tips the company (Overweight, TP $1.75) as its top pick in the OSV space given its unique ‘recycling’ model, plus presence in cabotage protected markets (Indonesia, Malaysia) with 10- 12% potential upside to consensus FY15E/16E earnings (26% FY13-15E EPS CAGR). It has a unique ‘niche' presence in the super-large offshore accommodation market (via its semi-sub vessels).

DBS (technical)

DBS: Share price is near 20day MA (which is historically a good support). But if this support is breached, look at $17.5 for next support. Nearest resistance at $18.23

UOB (technical)

UOB: chart looks poised for a near term recovery from the recent ~ $22.50 low earlier this month. The key indicators are rising positively, with RSI just breaking above neutral level and MACD just displaying a positive crossover. See resistance at the $24 psychological mark. Support at $22.50. Longer term trend remains positive

Wilmar (technical)

Wilmar: chart looks weak with share price approaching its 52 wk low again. The indicators have been trending down, with RSI and Stochastics in oversold territory with no signs yet of a reversal. Firm support at the critical $3 level, hence a break below that would give a strong trading Sell signal . $3.20 is the current resistance.

RH Petrogas (technical)

RH Petrogas -Technicals appear to be trending higher with RSI and Stochastics heading higher. Share price has also broken past the 50 day MA at $0.79. A close above these levels could see further upside. Next level resistance is tipped at $.84.

Singapore CPI

Singapore CPI: Headline inflation eased to +1.2% y/y in Jul 14 from +1.8% y/y in Jun 14, mostly the result of correction in COE premiums. M/m, headline inflation was -0.3% (Jun: -0.7% m/m). Stripping accommodation and private road transport, prices were up 2.2% y/y in Jul (Jun +2.1% y/y), mainly attributed to inflation in services industry. Food increased +3.0% y/y, slower than +3.2% y/y in June. Slower inflation came from non-cooked items and prepared meals. Cost of private road transport was 1.6% lower in Jul14 than Jul13, while it was 2.1% higher y/y in Jun14. COE premiums were lower in July this year but it was partially offset by higher petrol pump prices, which rose 3.1% y/y in Jul14 (Jun: +6.4% y/y). It is widely expected for COE prices to fall further in the Aug-Oct bidding season as COE quotas rise in car categories. Mass market Category A will see a 13.0% surge from 1,011 to 1,143 COEs monthly and Category B will see a 4.55% rise from 966 to 1,010 COEs monthly.

Sky One

Sky One: share price has been rising steadily since mid Aug, after an extended period of consolidation. From a technical perspective, the counter looks poised to make a bid for the $0.20 resistance (early Nov '13 high). Nevertheless, caution is advised as the indicators are reflecting very overbought conditions. 1QFYMar14 results released around mid Aug showed improvement, but weren't particularly meaningful. Net loss narrowed to HK$0.9m from HK$2.2m a year ago. Revenue jumped 52% y/y to HK$62.2m, driven by higher volumes of its Express Land transport and Coal Logistics division. BVPS at HK$0.21 ($0.034) The key focus remains Sky One's on-going proposed acquisition of Energy Prima, an Indonesian coal mining business.

Straits Trading

Straits Trading is selling its 999 yr leasehold Straits Trading Bldg in Battery Road for ~$450m or >$2800/psf based on ~159k sqft net lettable area. Net yield ~3%. Mkt watchers noted px is in line with current mkt values, taking into account its 999-year leasehold tenure and Grade A location in Raffles Place; px wld be highest for an office blk in 6 yrs, since the record $3125/psf achieved for 71 Robinson Rd in Apr'08.


CRCT: Daiwa notes how CRCT had had a 24.1% price run YTD and feels valuations not justified. The house attributes it to 1) low base at start of year, coupled by equity fundraising exercise), 2) strong operating results, 3) pricing in positive M&A activity into the stock following privatization of CMA by CaptitaLand. With CapitaLand coming under increasing pressure to improve ROE and recycle capital, some investors might assume that it would spur divestment to CRCT. On the third point, Daiwa is not so sanguine because market value of any well managed mall in China is much higher than what CRCT can pay. CRCT is constrained by DPU accretion, while CapitaLand looks at extracting full value of assets. CMA’s China malls are calued at net cap rates of 5.8-7.0%, but Daiwa feels any real serious buyer would be paying much more than that. Hence the house downgrades to Underperform from Hold with a lower TP of $1.45 (from $1.49)

United Engineers

United Engineers (UE): 67.6% owned subsidiary WBL will sell its car distribution and retail businesses to StarChase Motorsports for $455m on a debt-free, cash-free basis. UE expects to realize a net disposable gain of ~$17.1m from the net proceeds of ~$292.1m. Based on FY13 numbers, UE’s EPS would have risen 20% to 29.3¢, and NTA would have grown 3¢ to $2.63. The WBL Automotive Division retails, imports and distributes a premium vehicles in Singapore, Malaysia, Greater China, Thailand, Indonesia and Vietnam. Its portfolio boasts brands like Bentley, Jaguar, Land Rover, McLaren and Volvo. United Engineer was last trading at 1x P/B


SGX: Starting from 19th Jan ’15, SGX will reduce the standard board lot size of securities listed on SGX from 1,000 to 100 units, making it more affordable for retail investors to invest in a wider range of equities, including blue chips, and enable them to build more balanced and diversified portfolios. The reduction will apply to ordinary shares, including shares traded on GlobalQuote, REITS and business trusts, company warrants, structured warrants and extended settlement contracts. Existing counters with board lot sizes of 100 or less units will remain unchanged. The reduced board lot size will benefit all investors and make it easier to invest in blue chips and index component stocks which tend to be higher-priced. It will also allow institutional investors to better manage their risk exposures through finer asset allocation of funds. Board lot sizes for exchange traded funds, American Depositary Receipts and fixed income instruments, including retail bonds, Singapore Government Securities and preference shares will remain unchanged. In light of the changes, SGX aims to implement a minimum subscription and allocation of $500 for mainboard counters and $200 for Catalist counters, on investors applying for shares during the a company’s IPO period. We opine that the latest move could possibly aid to increase the trading volumes of Blue Chip stocks on SGX, which are often perceived as being “too expensive” by retail investors, in terms of absolute value per lot. SGX currently trades at 22.5x forward P/E.

SG Market (26 Aug 14)

US Market: US stocks ended broadly higher, bolstered by prospects for increased stimulus in Europe and a handful of M&A deals. The blue-chip DJIA gained 76 pts to 17,077 (+0.4%), while the broader-based S&P 500 advanced 10 pts to 1,998 (+0.5%), just shy of the psychological 2,000 level and the tech-heavy Nasdaq Composite added 19 pts to 4,557 (+0.4%), its highest level in 14 years. Stocks rallied as ECB President Mario Draghi and BoJ chief Haruhiko Kuroda raised the likelihood of quantitative easing measures to support growth during a meeting of central bankers. Markets were also helped by Fed chair Janet Yellen’s commitment to keep interest rates low despite warnings from a growing minority of inflation hawks. All main industry groups advanced with financial, energy and healthcare stocks rising at least 0.7%. Financial shares rose 0.8%, latching on expectations that Europe may see more aggressive monetrary stimulus with Morgan Stanley (+2.2%), JPMorgan (+1.5%) and Goldman Sachs (+1.4%) among the best performers. Fresh takeover news led to the biggest moves in the market. Burger King surged 19.5% on merger talks with Canadian coffee and doughout chain Tim Hortons (+19.3%) and plans to move its domicle to Canada to take advantage of lower corporate tax rate. Biotech stocks outperformed, continuing its recovery from its sharp drop earlier in the year, rising 2.4%. Pharmaceutical firm InterMune soared 35.4% following a US$8.3b buyout offer by after Swiss drug gaint Roche. Volume was light with 4.3b shares were traded on the US exchanges, 23% below the three-month average. S’pore shares are likely to edge higher following the Wall Street rally but upward momentum appears to be waning due to absence of positive catalysts. Topside resistance for STI is pegged at 3,380, while immediate support lies at 3,320. Stocks to watch: *United Engineers: 67.6% owned subsidiary WBL is selling its car distribution and retail businesses to StarChase Motorsports for $455m on a debt-free, cash-free basis. UE expects to realize a net disposable gain of $17.1m from the net proceeds of $292.1m. Based on FY13 numbers, proforma EPS would rise 20% to 29.3¢, and NTA would add 3¢ to $2.63. *Cordlife: FY14 net profit surged 125% y/y to $30.4m, on the back of strong revenue growth, healthy margins, and net fair value gains of $12.4m. Revenue jumped 42% to $49.1m, driven by increased client deliveries from the Philippines, India and Indonesia. Final DPS of 1¢ maintained. Meanwhile, group has acquired US$25m China Cord Blood Corp (CCBC) 7% senior convertible bonds for US$44m. Upon full conversion, Cordlife’s stake in CCBC will be increase from 10.0% to 17.8%. *HanKore: Disappointing 4QFY14 results with net loss of Rmb62.7m, reversing from a net profit of Rmb3.8m a year ago. Revenue slid 30% y/y to Rmb54.6m, and gross margin collapsed to 21.7% (4QFY13: 58.3%). For the full year, HanKore’s net loss widened to Rmb114.7m, from a net profit of Rmb72.4m in FY13. BVPS at Rmb2.83 ($0.575). *Otto Marine: Clinched A$57m worth of time charter contracts in Australia from two oil majors, for two of its large deep water AHTS vessels. *KrisEnergy: Drilling at Mancharee-1 reached a total depth at 12,205 feet measured depth, or 10,460 feet true vertical depth subsea. Gas shows were encountered at several levels but no significant pay zones were identified. *Civmec: Awarded subsea projects for the Shell Prelude Floating LNG project and the Wheatstone LNG project. *Ley Choon: Secured contracts for trenching works, and water and gas pipe works, worth a combined $14.5m. *Cambridge Industrial Trust: Acquiring a six-storey light industrial building at 12 Ang Mo Kio Street for $39.8m. The 16,762 sqm property has a remaining land tenure of 36 years anad is currently 85% leased. *SGX: To reduce the board lot size of securities to 100 units from 1,000 wef 19 Jan.

Monday, August 25, 2014


UEM: CIMB upgrades UEM from Reduce to Hold, believing that the OCBC-GE plan to sell stakes in UEM and WBL will come true. If Charoen is the buyer, the house believes he is most likely attracted to the S$2b worth of investment properties. Based on historical transactions, he should be willing to pay 0.8-0.9x RNAV (~$2.54-2.85/share) for UEM, implying 3-16% upside from pre-trading halt price. If transaction fails to materialise, UEM is expected to de-rate to ~30% discount to RNAV (~$2.21)


STI by DBSV: Post results, EPS growth for STI is decent at 8.4% for FY14F and 8.8% for FY15F. This compares favourably to the last two years’ growth of +3% (2012) and -1%(2013). With the potential halt to downward earnings revision coupled with the high single digit EPS growth, this should support the STI at 3,250 ( 13.7x 12-mth forward PE) . on a pullback. The STI could head towards 3500 or 14.48x (+0.5SD) in the event that earnings revision trend turns positive in subsequent quarters.


Epicentre: Expects to report a loss for its FY14, mainly attributable to lower sale from certain Apple products as well as erosion of gross margin derived from the sale of third party accessories as a result of increased price competition. The group guides that retail sentiment in the Information Technology and Consumer Electronics segments has generally been soft. We highlight that the latest profit warning from Epicentre, could potentially be viewed as a proxy for other “Apple related players”, as an indication that demand for Apple products could be waning in recent months, which could potentially translate to weaker demand for their related sales and services. Prominent SGX listed counters which counts Apple as a key client would include Hi-P and ECS.

FJ Benjamin

FJ Benjamin: FY14 saw core net loss of $20.8m, relative to core net profit of $1.6m last year, while revenue slid 1% to $368.2m, on the back of slowing luxury spending in North Asia, coupled by a sharp fall in tourist spending in Singapore from Indonesian and China tourists. Gross margins fell from 4ppt to 39%, as margins were pressured by increased costs in Singapore, further pressured by deep discounting among SE Asian retailers. Bottom line was further weighed by non-cash provisions of $5.1m and unrealized translation loss of $2.1m booked by the Indonesian associate. FJ Benjamin, which distributes luxury and premium mass market brands, does not expect meaningful recovery in consumer spending sentiment in Singapore, Malaysia and North Asia in the near to medium term. To offset a persistent gloomy outlook, it expects to close/ down-size stores and reduce inventory and costs to improve productivity. Meanwhile, management recaps the Indonesian alliance with Saratoga, in which there will be a 25% investment in the group’s Indonesian business. FJ Benjamin is expecting a gain of $11.5m from the transaction, and guides that the alliance will help the Indonesian business grow faster. FJ Benjamin is trading at 1.05x FY14 P/B, while P/E is unmeaningful as it is unprofitable.

SG Market (25 Aug 14)

US Market: US stocks ended mostly lower on Fri following renewed tensions in Ukraine, and a cautious outlook on the US jobs market by Fed Chair Janet Yellen. The DJIA retreated 38 pts to 17,001 (-0.2%) and the S&P 500 shed 4 pts to 1,988 (-0.2%), while the Nasdaq Composite gained 6 pts to 4,359 (+0.1%). The CBOE Volatility Index slipped 2.5% to 11.47, the lowest level since mid-July. Geopolitical tensions sharpened after the US called on Russia to withdraw a convoy of vehicles from Ukraine or risk facing additional international sanctions. Russia claimed that the trucks were on a humanitarian mission, while Ukraine charged that Kiew did not authorize the border crossing, calling the intrusion an invasion. Meanwhile, Yellen told a gathering of central bankers at Jackson Hole that slack remains in the labour market despite improved economic data, leaving some market watchers disappointed by the lack of clarity about the timeline of the Fed’s interest rate normalization cycle. The Nasdaq was lifted by a rally of software companies, after cloud-computing company leapt 7.3% on strong earnings and a bullish FY15 sales forecast. Bargain clothing store Ross Stores jumped 7.4% after posting a 12.4% rise in 2Q earnings. Among other stocks in focus, Gap rose 5.2% after its 2Q earnings climbed nearly 10% and the apparel retailer announced plans to enter the Indian market via franchises, while Keurig Green Mountain surged 13.3% after a deal food giant Kraft to sell Kraft’s coffee brands in Keurig’s home brewing systems. About 4.3b shares were traded on the US exchanges, the slowest full day session this year. S’pore shares may inch higher after the STI nicked above the 20-day moving average at 3,320 but sentiment could be weighed by the pullback on Wall Street and geopolitical concerns. Downside support seen at 3,280. Stocks to watch: *FJ Benjamin: Adjusted for exceptional items, the group swung into a FY14 net loss of $20.8m from a net profit of $1.6m a year ago. Revenue dipped 1% y/y to $368.2m, due to a slowdown in luxury spending in North Asia, coupled with a sharp fall in tourist spending in Singapore, particularly by the Indonesia and China visitors. Gross margin fell 3.6ppt to 39.1%, pressured by higher Singapore operating costs, as well as competition in the form of deep discounting amongst the SE Asian retailers. *Singapura Finance: FY14 net profit rose 22% y/y to $6.7m. Net interest margin rose 15% to $19.1m, while non-interest income dropped 40% to $1.8m. Other operating income marginally increased due to recovery of bad debts previously written off. Management expects a moderate growth for the loan portfolio in view of the government cooling measures on property investment and car ownership. Unchanged first and final DPS of 5¢. BVPS at $2.15. *Singapore eDevelopment (SeD): Will hold non-deal roadshows with retail and institutional investors in Singapore this week, regarding its diversification in property development in the US and Australia, and plans for its info-comms technology business. Meanwhile, Dr Toh Soon Huat (founder of Novena Holdings) has emerged as a substantial shareholder after acquiring 30m SeD shares cum-rights. *Otto Marine: Appointed UOB Kay Hian to advise on a potential SGX-listing of its Subsea Services division, and/or other strategic options. *Jasper: Warns of potential breach of financial obligations under its five-year US$165m Jasper Explorer bonds, as soon as 31 Aug 2014, if certain waivers or relief are not met. The group is in the midst of broader restructuring discussions given that the Jasper Explorer vessel has not generated any revenue since coming off-hire at end Feb ’14. *Tritech: Terminated its proposed acquisition of a 49% equity interest in Jining Zhongshan Public Utility Water Co. *SGX: To delist five Global Depositary Receipts wef 28 Aug, for not having paid the annual listing fees. They are Accentia Technologies, Bombay Rayon Fashions, Confidence Petroleum India, Karuturi Global, Visesh Infotechnics. *Epicentre: Profit warning. Expects to report FY14 loss, mainly attributable to lower sale from certain Apple products, as well as gross margin erosion of retailing of third party accessories arising from price competition. *Trading halt: United Engineers, Halcyon Agri

Friday, August 22, 2014


Sunvic: to lift trading halt at 2.45 pm Former Executive Chairman and CEO Sun Liping (last position as non-executive director) has passed away. Sun was also the indirect majority shareholder (61.7% stake) of the company. The board says Sun's passing will have no adverse impact on the group bcs a succession has been put in place. Sun's son, Sun Xiao has been CEO of Sunvic since Jan '13. Sunvic also clarifies there will be no impact on any on-going transactions, including the JV with Arkema which received EGM approval in Jun. The group is in the process of executing and implementing the terms of the JV.

Raffles Education

Raffles Education: FY14 net profit rose 80% to $54.5m, despite revenue being relatively flat and steady at $127.4m (-1%), as bottom-line was aided by a 53% jump in other operating income to $102.5m. The increase in other operating income was due to: 1) Gain of $45.5m (before taxes) on divestment of investment properties of 490 mu land and properties in Oriental University City 2) gain of $40.8m on disposal of 50% equity interest in Value Vantage Investment and Management; 3) compensation income of $4.1m confirmed by Langfang City Government, in Oct ‘13. Bottom-line was also aided by a 51% decline in other operating expenses to $63.4m, due to the absence of net reversal of government grant receives of $57.1m from the previous year, and a decrease in rental expenses. This was however partially offset by an 82% decline in fair value gains on investment properties to $7.3m. Going forward, Raffles Edu guides that its PRC college revenue is stabilizing and the group continues to see positive outcomes from implementing new transformational strategies in PRC. The group is also continuing to see positive outcomes from its expansion strategy in the Ex-PRC region, and will look at opportunities into other education related investments to achieve sustainable growth. Raffles Edu currently has a net gearing of 0.37x. At the current price, the group trades at 0.67x P/B.

IPS Securex Holdings Limited

IPS Securex Holdings Limited has recently announced its FY2014 results with a 41% increase in its net profit EXCLUDING IPO expenses and share based payments. Other highlights include: · Revenue increased by 31.2% to S$12.4 million with more than a 25% increase in both Security Solutions and Maintenance and Leasing businesses respectively · Gross profit up 49.2% to S$6.0 million · Gross margins improved by 5.8 percentage points (FY2014: 48.2% ; FY2013: 42.4%) · The Group has recently been recognised as an authorised distributor of PepperBall Technologies Inc. brand products and services which is expected to contribute positively to the Company’s financial performance Below are some of the following information on PepperBall technologies. PepperBall Technologies: · Supplier of non-lethal PAVA (Pelargonic Acid Vanillylamide)-based launchers and projectiles for those launchers and supplies thousands of users and major agencies including the Federal Bureau of Prisons, the United States Border Patrol, thousands of police and sheriff departments in major United States cities, as well as private entities, security services and bail enforcement agencies around the world

Mirach Energy (technical)

Mirach Energy: the Aug rebound looks like it has petered out, with today's gap down. The short term trend may be turning back negative, with the key indicators flipping back down. In particular, Stochastics has cut down from overbought levels. A close below the $0.20 (50day MA) would bode negatively for near term price action, with $0.16 as support. Upside may be capped at the $0.24 resistance.


Lantrovision: Post the stellar FY14 results, Phillip continues to be positive on outlook for Lantro, in view of growing demand for data centres and quality structured cabling in Asa Pac region. The house reiterates Accumulate rating with higher TP of $0.72

OCBC/G.Eastern/United Engineers

OCBC/G.Eastern/United Engineers: Approached by a party for a possible transaction for their combined stakes in UEL and WBL, which may or may not lead to an offer for the shares of UEL and WBL. This comes after Bloomberg reported that OCBC was in talks to sell the combined stake in UEL owned by OCBC/GE/Lee family to Thai billionaire Charoen. UEL shares shot up 7.4% before a trading halt yesterday. OCBC CEO Samuel Tsien had earlier this week mentioned that it would look to divest non-core assets post the $6.2b purchase of Wing Hang bank to shore up capital. As a guide, the recently announced rights issue looks to raise $3.36b. We believe that the deal will more likely than not go through as: 1) OCBC has had good follow through when it announced past stake sales (e.g. FNN) 2) Since UEL’s previous CEO Jackson Yap’s retiring in January, there has been no replacement to-date 3) Potential investor may be eyeing redevelopment opportunities for WBL’s car showrooms As at 10 Mar '14, OCBC, Great Eastern and the Lee family holds an aggregate 33.4% stake in United Engineers, and a sale by these related parties could trigger the 30% takeover rule. UEL is currently trading at 0.9x P/B

Sheng Siong

Sheng Siong: Has entered into a non-binding letter of intent with Kunming LuChen Group to operate supermarkets in China via a joint venture (JV). It is envisaged that the JV company will have a registered capital of US$10m, and Sheng Siong will hold 60% of the equity interest in the JV, while the LuChen group will hold 30% of the equity interest, and Sheng Siong’s executive director, Mr Tan Ling San, will hold the remaining 10% of the equity interest in the JV. We highlight that in the latest news comes as a slight shift in strategy for Sheng Siong, as the group had in the past mooted a potential entry into Malaysia and/or Indonesia, although this was held back as the group had no prior experience, and the markets in both countries are dominated by several big players and it would be an uphill task for the company to muscle its way in. As the proposed JV may or may not proceed, shareholders and potential investors are advised to exercise caution, and to seek independent advice from their bankers, stockbrokers, solicitors or other professional advisers if in doubt as to any action to be taken. On its propects, management notes that the weak external environment has affected retail spending in Singapore. While Sheng Siong aims to open new outlets in areas where it does not have a presence, it expects to face keen competition for new retail space. At current price, Sheng Siong trades at 20.1x forward P/E versus its larger, regional peer Dairy Farm at 28.1x forward P/E.


Oxley: Oxley 4QFY14 net profit collapsed 74% y/y to $9.8m, impacted by a 226% spike in finance cost of $11.3m from higher interest costs of medium term notes. Revenue tumbled 70% to $82.9m as a result of lower revenue recognition from the construction of 12 mixed-residential projects. This brought full year earnings to $286.7m (+315%) and revenue to $1,074.1m (+135%), missing estimates by 5% and 15% respectively. Management cut final DPS to 0.18¢ (FY13: 0.6¢). Developments for the group remains exciting with its foray into overseas markets in UK, China, Cambodia and Malaysia, supported by strong earnings visibility with pre-sales revenue of $2.6b from its Singapore projects and $1b from overseas projects to be progressively recognized over the next 2-3 years. However, investors should be mindful of its highly geared balance sheet, with net gearing of 4.1x as of 30 Jun '14, compared to other SGX-listed property developers Wing Tai (0.5x), Ho Bee (0.2x), Roxy Pacific (2.7x), Chip Eng Seng (1.5x) and Hiap Hoe (0.9x). Hence, we do not rule out the possibility of an equity raising in the near term. At $0.695, Oxley is valued at 5x P/B and trades at a 39% discount to RNAV of $1.14.

Genting SP

Genting SP: Deutsche maintaining its Buy call this morning, but lowering its TP to $1.46. Their TP cut reflects expected lower gaming volume and higher-than-projected bad debt provision. For 2H, DB expects VIP to be weaker given macro concerns, a higher rolling base in 2H13 and World Cup effect in July, while on the mass market, due to GENS lower base in 2H13 and step-up efforts towards attracting quality mass players, the house expect mass GGR to recover into the 2H. Valuations are undemanding though, with Genting trading at 9.1x Fy15 EV/Ebitda, at the lower end of its historical trading band range of 9 to 12x. TP excludes potential upside from regional expansion which we previously estimated to be worth $0.49-0.66/share for Japan IR. Expect the Japan government to pass the IR Promotional Bill before end-2014.

SG Market (22 Aug 14)

US Market: US stocks powered higher, logging its fourth straight day of gains, on a flurry of positive economic data and optimism that the Fed is committed to supporting the economy. The DJIA gained 60 pts to 17,039 (+0.4%), pushing back above 17,000 level, while the S&P 500 advanced 6 pts to a new record of 1,992 (+0.3%) and the Nasdaq Composite added 6 pts to 4,532 (+0.1%). About 4.5b shares exchanged hands, below the five-day average of 5.1b. Traders avoided making big bets ahead of Fed Chair Janet Yellen’s speech on Fri in Jackson Hole, which could provide some guidance on the potential timing of an interest rate hike. Markets took the cue from fresh signs of strength in the US economy with existing home sales jumping a 10-month high in Jul, weekly jobless claims falling to 298,000 from 312,000 the previous week and the Conference Board’s index of leading economic indicators improving sharply in Jul, topping estimates. Meanwhile, the Markit preliminary Aug index of US manufacturing jumped to its highest level since Apr 2010 as production orders and employment picked up, and the Aug reading for the Philadelphia Fed manufacturing index came in above forecasts. Financial stocks rallied 1.1% with BofA (+ 4.1%) leading the gains after the bank reached a US$16.7b settlement with the US government in relation to troubled mortgage-backed securities. The stock’s surge helped push the S&P 500 financial sector index to its highest level since Jun ’08. Technology stocks also outperformed, up 0.5% with Hewlett-Packard (+5.4%) after the tech giant posted its first sales growth in 12 quarters, while eBay (+4.7%) surged on a possible spin-off of its PayPal unit in 2015. Among the losers, retailer Sears Holdings tumbled 7.2% after reporting a wider 2Q loss as sales declined for the 30th straight quarter. Dollar Tree slid 1.3% after the discount chain cut its full year earnings forecast amid costs realted to its bid for rival Family Dollar (-0.5%). About 4.8b shares were traded on the US exchanges, the second slowest full day session this year. S’pore shares are expected to push the STI higher to the next objective at 3,388 after clearing the 3,320 hurdle. Downside support remains at 3,280. Stocks to watch: *OCBC/United Engineers: Approached by a party for a possible transaction for their combined 22.4% stake in United Engineers and WBL, which could lead to a share offer. Discussions are still preliminary. *Oxley: 4QFY14 results missed estimates. Net profit collapsed 74% y/y to $9.8m, impacted by a 226% spike in finance cost to $11.3m, attributable to the higher interest cost of its medium term notes. Revenue plunged 70% to $82.9m, due to lower revenue recognition from the construction of 12 mixed-residential projects. Final DPS slashed to 0.18¢ (FY13: 0.6¢). *Parkson Retail Asia: 4QFY14 net profit dropped 36% y/y to $3.2m, attributable to a 4% dip in revenue to $99.2m, losses from share of associates, and tax penalty levied by the Hanoi authorities which does not allow for offsetting of tax losses between the group’s companies. FY14 net profit declined 12.5% y/y to $34.6m, and revenue slipped 3.3% to $432m, due to negative same store sales growth (-4.2%) in Vietnam and a weaker IDR and MYR. Final dividend of 2.5¢, brings full year payout to 5.5¢. *Raffles Education: FY14 net profit doubled to $55.4m, attributable to disposal gains, and absence of last year’s net reversal of government grant receivable, though offset by lower fair value gains of $7.3m (FY13: $41.7m). Revenue declined marginally by 0.8% to $127.4m. Final dividend of 1¢. *Sin Ghee Huat: 4QFY14 net profit expanded 38% y/y to $1.5m on higher gross profit (+19.0% to $3.9m) but FY14 net profit dropped 14.4% to $3.7m as operating expenses rose. Final dividend of 1.5¢ (FY13: 1.8¢) *Sabana REIT: Acquiring a warehouse located at 10 Changi South Street 2 from Adviva Distribution for a total cost of $55.1m (including JTC upfront land premium of $4.3m). This compares with the independent valuation of $54.3m. The 189.6k sf property is a JTC leasehold estate with remaining tenure of 37 years. The initial annual net rent shall be $4m and is subject to rent escalation at 1.5% pa. The deal is expected to be completed in 4Q14. *GLP: Signed two new lease agreements totaling 34,000 sqm with two leading companies in Eastern and Northern China that will use the facilities for storage and distribution of packaged foods, including products with temperature-control requirements. *Sheng Siong: Entered into a non-binding letter of intent with Kunming LuChen Group to operate supermarkets in China. The initial JV equity investment is estimated at US$10m, with Sheng Siong to hold 60% interest. *NSL: Selling its lime business and assets in Malaysia and Singapore, and a proposed grant of a call option to acquire all of its limestone business in Malaysia, to Lhoist Singapore. The proposed deal is valued at ~$49.1m, implying a valuation of 7.5x FY13 P/EBITDA *Hoe Leong: In preliminary stage of exploring the establishment of a relationship with the Semua Group as strategic partner. Hoe Leong has a 41% deemed interest in Semua. *ASJ Holdings: De-listed following completion of compulsory acquisition by PPCF.

Thursday, August 21, 2014

Oxley (technical)

Oxley - Technicals appear to be reversing from its recent downtrend, with both RSI and Stoachstics heading higher. Share price has just breached past the 20 and 200 day MAs at $0.645. A close above these levels could potentially lead to further upside ahead. Do note that OSKDMG iniatiated coveage on the stock this morning with a TP of $0.91.

OCBC/ United Engineers

OCBC: OCBC is in talks to sell its stake in United Engineers to Thai billionaire Charoen Sirivadhanabhakdi, people familiar with the matter said. Discussions are at an early stage. OCBC, its insurance unit and the bank’s founding Lee family together own 34.1% of United Engineers, according to a filing in August last year. Selling the stake would help OCBC, bolster capital after its $5b takeover of Wing Hang Bank. United Engineers: NAV as at 30 Jun stood at $2.79. At the current $2.41, UE is valued at 0.86x P/B, compared to its 1-year historical P/B of 0.7x.


Starburst: CIMB has a non-rated note, citing 1H14’s profit has already exceeded FY13’s, on the back of contract wins, which will carry on to CY15. . The secured orders will allow Starburst to recognize another $17m revenue for 2H14. Actual revenues are likely higher as there is a maintenance element from previous contracts. Nevertheless, the key isn’t current contracts but what is up for grabs. CIMB says Starburst is expecting 10 contracts over the next 2-3 years, worth ~$100m, Also, with actual contract sizes tripling, the initial guide could be breached. Potential work in Saudi Arabia could also be a great potential, after it build its office in Middle East. At a range of 7.6x – 10.1x CY15 P/E, CIMB estimates Starburst to be $0.87-$1.16


Oxley: OSKDMG initaites coverage on Oxley with a RNAV-derived TP of $0.91 which represents a 44% potential upside return and recommend BUY. Oxley was listed three years ago as a boutique developer of residential projects. Post listing, the group diversified across all segments of the real estate market, launching some 28 projects that have since been substantially sold out. The group’s success can be attributed to its dynamic management and strong ability to execute projects. $1.1b of surplus from Singapore projects. Oxley has chalked up over $700m of surplus for its Singapore development projects, which will be recognized over the next 2-3 years. In addition, the house expect its first hospitality project, The PINEs, to generate a surplus of SGD380m and a recurring income stream of SGD35m upon completion. Since last year, Oxley has amassed an overseas portfolio of 13 prime sites in Malaysia, the UK, China and Cambodia. It has launched two projects, Royal Wharf in the UK and The Bridge in Cambodia, achieving $1bn of pre-sales to be booked over the next 2-3 years. The sustained momentum in upcoming launches could extend earnings visibility into FY18 and beyond. The house value, and the valuation surplus accruing from its local and overseas projects and apply a 20% discount to its RNAV to derive a TP of $0.91. Initiate coverage with a BUY rating.


CapitaLand: While divestment of its remaining stake in Australand and the successful privatisation of CapitamallsAsia in 1H14 helped CapitaLand to outperform the market YTD, Nomura believes many investors remain sceptical about the stock and management’s ROE target of 8-12% for the next three to five years. As well, there is market concern over the residential projects in Singapore and the impact on valuation in a worstcase scenario. Nomura raises its TP to $4.32 (from $3.94), pegged to a 15% discount to its NAV of $5.08, based on the higher valuation for the Raffles City projects in China.


NOL: NOL had a good 4% boost yesterday to close at $1.02, it's highest one-day gain since Sep '13, following the news report from Reuters yesterday that the group may be looking to sell its logistics division, APL. Based on NOL's target valuation of US$750-$900m (10-12x EBITDA), this translates to $0.36-$0.44/share. However, buyers are more likely to value the logistics business closer to US$600m ($0.29/share). Maybank-KE notes that the logistics unit has been a stable earnings contributor and a sale could unlock value within the group. In an all-cash sale, the group could use the proceeds to: 1) Pay down its high debt of 2.2x to 1.8x; 2) Reinvest in new vessels for longer-term growth; or 3) M&As. House opines that NOL could also return part of the proceeds to shareholders as special dividends, though these would be insignificant, given that a more prudent move would be to reduce debt. Maybank-KE maintains a Hold rating with TP of $1.05.


Ezion: Nomura initiating coverage at Buy with TP $3.13. Believe the Street is overestimating Ezion’s minority interest and tax expenses, while underestimating its revenue outlook. Expect Ezion's liftboats / service rigs in Southeast Asia to increasingly thrive on: 1) the growing recognition among national oil companies that oil & gas production can be improved via more frequent oil field maintenance work, and 2) the use of liftboats /service rigs, which are more efficient and safer choices vs the offshore floating vessels currently used to service fixed production platforms. Ezion’s fleet is also backed by secured charter-out contracts from oil majors, and will anchor the 36% recurring earnings CAGR over the next three years. Separately, the Commonwealth Bank of Australia has emerged as a substantial shareholder in Ezion via the purchase of shares for its client funds. Possibly, there could be interests by some Australian funds in the counter.

SG Market (21 Aug 14)

US Market: US stocks mostly finished higher for a third day, shaking off a temporary dip that came after Fed minutes indicated that policy makers had talked about hiking interest rates sooner than anticipated in their last meeting. The DJIA rose 60 pts to 16,979 (+0.4%) while the S&P 500 gained 5 pts to 1,987, narrowly missing its record high but the Nasdaq Composite slipped 1 pt to 4,526 (-0.02%). The minutes of the Fed meeting on Jul 20-30, showed saw Fed officials agreeing that the labour market is tightening but officials were divided on the speed of job gains and the timing of the Fed’s plan to raise interest rates amid low inflation. With the minutes out, investors turned their attention to the annual summit of central bankers in Jackson Hole where Fed chair Janet Yellen is expected to acknowledge that while economic data has generally been encouraging, there are still significant slack in the labour market. Retailers continued to outperform, with sentiment supported by an uptick on consumer spending. Retailer Target climbed 1.8%, despite trimming its 2014 profit forecast, citing a pickup in US sales last quarter, while Lowe advanced 1.6% after reporting a 10.4% rise in 2Q earnings. Rival home improvement retailer Home Depot also rose 2.9%. Among other stocks in focus, BofA was up 0.5% on reports that the bank was close to a US$17b settlement deal with the US Justice Department with regards to charges linked to mortgage-linked securities. Meanwhile, teen fashion house American Eagle Outfitters surged 12% after its earnings beat estimates. On the losing end, office supply chain Staples declined 2.6% on plans to shut down 140 stores this year as it fights online competition. Hertz slumped 3.9% after guiding that its full year results will miss the low end of forecast. About 4.9b shares were traded on the US exchanges, 14% below the three-month average. S’pore shares are likely to stay on the upward path tracking the strength of Wall Street. A sustained break of the 3,320 resistance would put the STI on the road towards the next objective at 3,388. Underlying support remains at 3,280. Stocks to watch: *SIA: 100% owned Scoot has formalized its 43.75% stake in a joint venture with Thai-based carrier Nok Airlines. The JVC, to be renamed NokScoot, has acquired Pete Air, which holds an air operator's licence. *SPH: Acquires 22% stake in MindChamps Preschool, which operates and franchises early childhood curriculum and enrichment programmes, for $12m. *Fischer Tech: CEO Tan Choon King and Chairman Foo Meng Tong make a privatization offer of $0.16 per share, after acquiring a combined 51.26% stake via off-market trades through their investment vehicle Harmony Holdings. Harmony does not intend to revise the offer price. *Tiong Woon: FY14 net profit jumped 25% to $22.1m, mainly lifted by a $3.2m gain from the disposal of its loss-making fabrication segment. Revenue dropped 18% to $165.3m as a result of a fall in contributions across all four segments - heavy lift and haulage (-8%), marine transportation (-10%), engineering services (-73%) and trading (-38%). Gross margin improved 5 ppts to 34% through better cost control. Final DPS of 0.4¢ maintained. *Lantovision: 4QFY14 net profit rose 29.6% y/y to $3.1m, taking FY14 net profit to $13.9m (+52.5%). Revenue was up 20% to $40.3m, benefitting from more installation projects in Malaysia, China, and the Philippines. Gross margin narrowed to 26.4% from 31.2% mainly due to higher costs incurred by a sizeable project, and reclassification of direct cost of trading activities. *Ezion: Commonwealth Bank of Australia has emerged as a substantial shareholder with a 5.13% stake following the purchase of 3.8m shares for its client funds. *TT International: Chairman and CEO, Sng Sze Hiang increased his total stake from 36.23% to 36.27%, via a married deal of 385,406 shares at an average purchase price of $0.161. *S’pore Windsor: Proposed disposal of its land and factories in Kunshan, China to the Redevelopment Office of Zhangpu Town for Rmb42.6m. The group intends to relocate the existing PCB moulding and punching operations to leased premises in Jiangsu province. transaction will monetizes the value of the factories and raise its proforma FY14 NTA/share to HK$0.9251 (14.93¢) from HK$0.6969 (11.24¢). *Pteris Global: Completed the RTO of Shengzhen CIMC-Tianda Airport Support, transforming the group's business into design, development, manufacture, installation and maintenance of passenger boarding bridges, ground support equipment and baggage handling systems, with a businesses network covering 40 countries and regions. *Giken Sakata: Extended its long-stop date for the proposed acquisition of Cepu Sakti Energy from 31 Aug to 30 Sep.

Wednesday, August 20, 2014

Charisma (technical)

Charisma: Trading appears to be range bound in near term between resistance (50% Fibonacci, at $0.047) and support (61.8%, $0.037). Watch a breach in these lines for breakout.

Q & M Dental

Q & M Dental: Maybank-KE held a non-deal roadshow, highlighting that there is keen investor interest in its business and China growth strategy. House maintains BUY rating but lowers TP to $0.51 (from $0.54). Management reaffirmed that its completed acquisitions will boost profits significantly from 2H14E. Maybank-KE currently forecasts earnings of $6.6m (+27% YoY) for FY14e and $7.6m (+16%) for FY15e, which do not include contributions from acquisitions, would rise to $7.9m (+53%) and $11m (+39%). House believes Q&M is pursuing more acquisitions in China. It can cherry-pick the best targets, as its acquisition of Aoxin has raised its profile in China’s dental industry.

Noble Group

Noble Group: Noble Group is moving closer to the disposal of a 51% stake in its loss-making agri business and subsequent de-consolidation (which it announced in Apr 2014) and it expects the transaction to complete by end-2014. Barclays have incorporated the transaction in its estimates with 2015 being the first year of a clean profitability picture after the transaction. To summarise, the transaction will eliminate agri losses equivalent to c.56% of its 1H14 reported headline net income, while debt reduction could cut its interest expense by 25%. All this will result in 2015E ROEs moving into double-digits, on its estimates. The 2015E P/B would be at a 32% discount to its 8-year average and 50% below the level as recent as the 2011 average, while house see ROEs climbing back to historical averages. Barclays reiterates its Overweight rating and unchanged TP of $1.60.

IFS Capital

IFS Capital: Voyage 2QFY14 results preview; House maintains Invest rating with TP of $0.53. Across the key geographical markets of IFS, Voyage continues to expect the company to deliver growth or capture more market share. Accordingly, the pipeline of deals in Singapore and Malaysia remains positive whilst operations in Thailand are expected to continue to grow in 2014 on the back of a recovery in economic activity in 2HFY14. In Indonesia, the company also reported new clients and account activations. Although business has been affected in 1HFY14 by reduced construction activities and softer property market, house sees that IFS’s business development efforts to expand in other markets and to roll out new products will serve the company well in offsetting slower growth in specific markets.


Biosensors: CITIC PE has decided to not proceed with any take-over transactions at this point of time. Nevertheless, CITIC PE remains committed to cooperate with the company to enhance its investment position in Biosensors. With this news, there seems to have not much conviction to own Biosensors anymore, especially in the nearer term. Recall, latest 1QFY15 results were disappointing, as bottom line slumped 18% to US$9.9m, on lower ASPs and rising costs from new businesses and higher R&D expenses. Competition is also intense, as Biosensors loss market share from Abbott, whilst facing price cuts from various geographic regions. Whilst management is trying to diversify its revenue base into non-drug-eluting stent businesses, investors should take note that ramp up time is likely required for these revenue contributions to be meaningful. Meanwhile, Biosensor’s pale outlook is also compounded by a mid-cycle crisis between a pre-takeoff from BioFreedom and a maturing BioMatrix DES. Biosensors is currently trading at 19.4x forward P/E and 0.8x P/B


NOL: According to Reuters, NOL could be looking to sell its logistics division, with plans to fetch a sale price of more than $750m, and has reportedly appointed banks to assist with the sale. As a guide, the logistics business accounted for 18% of NOL’s FY13 revenue. A stake sale of $750 to $900m would price its logistics business at 10x - 12x earnings before interest, taxes depreciation and amortization (EBITDA), although sources said that buyers were more likely to value the logistics business closer to $600m. We caution however that NOL has just released a statement on SGX, highlighting that the considerations mentioned by Reuters are preliminary and exploratory in nature, and there is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded. Shareholders and prospective investors are therefore advised to exercise caution when dealing in NOL shares and its other securities. The group will release further announcements as and when there are any material developments. In NOL’s recent 2Q14 results, the group stayed in the red for its third consecutive quarter, as net loss widened 55% y/y to US$53.7m (1Q14: -$97.9m). Nevertheless, core EBIT loss improved 52% y/y to US$15m, thanks to cost savings of US$115m. Revenue dipped 1% to US$2.05b on the back of a 6% drop in volume. Going forward, Maybank-KE expects further cost-structure improvements as more chartered vessels are returned upon expiry (2H14: 6, 2015: 14). NOL took delivery of its last vessel on order in 1H and currently does not intend to order more. NOL currently trades at 1.06x P/B. Overall, the street has 3 Buy, 9 Hold and 6 Sell ratings with a consensus TP of $0.95.