Friday, November 28, 2014

Giken Sakata

Giken Sakata (GSS): Religare initiated with a BUY rating and TP of $0.51. GSS has the following current sources of value; 1) the initial fields valued by Senergy and 2) the most recently acquired fields for which Senergy valuation reports have yet to be released and 3) GSS’s legacy precision machining business. Upside to current valuation could come from the acquisition of new fields for drilling, the release of Senergy valuation reports for GSS’s most recently acquired Kawengan, Trembul, and Gabus fields, and value unlocking of GSS’s legacy machining business through a sale.

Container shipping / NOL

Container shipping / NOL: HSBC believes that the US West Coast ports (52% of US container imports) have faced congestion due to factors such as container peak season , as well as longer term issues such as the shortage of chassis and contract disputes btwn port employers and labor unions, and believes a let up in congestion is likely to last until 1Q15. Port congestion is the foremost reason for shipping delays, with shipping lines skipping port calls, rerouting vessels and speeding up sailings, all of which entail additional costs. Liners have limited ability to pass on the costs in the short term. HSBC estimates the congestion could erode 2% EBIT margin in 4Q14 for lines , with Hanjin, Yang Ming and NOL most exposed to the transpacific route. Air cargo is the clear beneficiary, as the current air peak season looks like the best since 2010, with some demand switching from sea to air. Cathay Pacific is the most leveraged to the airfreight sector.

Mapletree Greater China Commercial Trust (technical)

Mapletree Greater China Commercial Trust (MGCCT): Riding the firm technical uptrend, with $1.02 as the next resistance level. Volumes have been steadily building up over the recent weeks.

Wing Tai

Wing Tai: CIMB notes that the developer is "cheap enough" at 44% discount to RNAV and 0.43x FY15e P/B (-1 std dev). The stock has shed 10% in the past three months, when the STI and FTSE Real Estate Index was flat. Investment properties account for a third of Wing Tai's total assets, and occupancies are healthy (86% for SG commercial, 70-80% for serviced residences in SG and MY). These should help support earnings. Meanwhile, weakness in the residential mkt has likely been priced in . Key risk is in Wing Tai's Nouvel 18 and Le Nouvel Ardmore projects, but any impact from the extension premium will only reduce RNAV by 5% at most. Wing Tai boasts a healthy balance sheet with net gearing at a mere 13%. Add with TP $2.09


Innovalues: According to The Edge, share price more than doubled since start of 2H14 thanks to the company's improved financial performance, which has generated increased analyst coverage in recent mths. A more favorable sales mix and improved operational efficiency drove earnings for the Sep quarter up 68% y/y to $4.2m , its best quarterly showing so far this year. Bottom line of $10.4m for 9M14 has exceeded its entire FY13 earnings of $8.7m. Innovalues makes customised machined parts and components for the auto, office automation eqpt and oil and gas sectors. OPerations are in Msia , Thailand and China, and counts among its customers several MNCs including Sensata Tech, HP, Flextronics, and Lexmark.

Keong Hong

Keong Hong: FY14 net profit slipped 10% to $19.7m, even though revenue soared 86% to $272.8m on recognition of ongoing and new projects such as Alexandra Central, J Gateway and Skypark Residences. Gross margin contracted 9.6% due to higher project costs recognized during initial stages of construction. Bottom line was further weighed by other operational costs. Final DPS of 1.25¢, brings full year DPS to 2.25¢ (FY13: 2.5¢). Keong Hong’s order book currently stands at $463m. Apart from abovementioned names, pipeline projects include Twin Waterfalls and the 378-unit executive condominium at Edgedale Plains. Aside, Keong Hong has diversified its efforts overseas. The lease agreements it has entered with the Maldives government to operate the Kooddoo Domestic Airport, a hotel and a resort will provide diversified revenue streams amid a tepid property outlook in Singapore, compounded by labor cost pains. Keong Hong trades at 1.14 P/B and 3.5x FY14 P/E

Super Group

Super Group: Featured 17 small-cap companies in CLSA’s Asean Access day. The Singapore stock which the house found most interesting was Super Group, where the group highlighted that 2014 was a year of consolidation as they were beset by volatile commodity prices in a period of change as they underwent their rebranding exercise. However, a decline in soft commodity prices, combined with rebranding efforts gaining traction should support margins, and Super expects that the group should improve operationally from 2H15 onwards as their rebranding exercise starts to pay dividends.

SG Banks

Banks: The market is increasingly expecting SGD SIBOR to rise from the middle of next year, underpinned by the Fed rate rise. Maybank-KE believes rates will climb to 1% by end-2015 and 2% by end-2016, from the current 0.4%. However, with global inflationary pressures receding, commodity prices falling and the global economy still limp, there is less reason for a Fed rate rise, and a similar impact to the tightly-correlated SGD SIBOR rate. If rates remain unchanged until end-2015, DBS would see the most earnings downside, while UOB may be better insulated. Nevertheless, Maybank-KE expects the re-rating on banks to continue in 2015 on further earnings deliveries. The sector have already bucked low interest rates to deliver three quarters of positive earnings surprises. For exposure, DBS (Buy, TP $23.50) is its first choice, followed by UOB (Buy, TP $26.70). House remain cautious on OCBC (Hold, TP $10.70) over its Wing Hang Bank integration.


Oil: Crude tanks to four-year low after OPEC decides not to intervene OPEC’s decision yesterday not to intervene in the oil market, and cut production to ease the supply glut, led crude oil to post its biggest decline in three years. Both WTI and Brent crude slumped to US$68.69/bbl (-6.8%) and US$72.58/bbl(-6.6%), respectively, to hit new four-year lows. Standard Chartered slashed its Brent forecast by US$16 to US$85/bbl for 2015. While the US markets were closed for the Thanksgiving holiday, the global oil majors listed in other exchanges were sold off heavily. In Brazil, Petrobras shares declined 4.7%; in Europe, falls of between 2.8% and 4.1% were recorded in Gazprom, Shell and Total. Similarly, expect the Singapore-listed O&M companies to face selling pressure today. Notably, the large cap plays like Keppel Corp, Sembcorp Marine, and Ezion have stronger correlations to oil prices, given their institutional investor following, and may see volatility in their share prices spike today.

Super Group

Super Group: Super undergone a rebranding exercise from 2013 till 2014, where the packaging and logo was changed, product categories rationalised from 12 to 7, as well as the relocation of the group’s Singapore plant from Woodlands to Tuas. Management sees 2014 as a year of consolidation, beset by volatile commodity prices in a period of change as they underwent their rebranding exercise. Group expects operational improvement from 2H15 onwards.

Sinarmas Land

Sinarmas Land: Saw interest during the CLSA corporate access day, Sinarmas is the largest diversified Indonesian developer with a market cap of $1.8b and 8-9k hectares of landbank. Partnerships with HKL and AEON malls are gaining traction, with BSD City seeing strong demand for units at a hefty 85% profit margin due to the depressed land cost, with land all marked at historical costs on the books. Post election in Indonesia, interest in industrial land has hit a new high. Recently, Sinarmas Land sold 3 plots of land at ~US$155psm and targets to sell 100 ha per annum. In Singapore, there are plans to divest their 21% stake in Orchard Towers which is now valued at ~$200m. In the medium term, Sinarmas Land hopes to increase its recurring income portfolio predominantly in the prime office segment in Indonesia. With this current portfolio valued $700-800m, there are plans to unlock value through a REIT listing or sale to private funds when it crosses $1bn. SML may also venture more into China, citing the possible rise of distressed assets in the market, as well as Europe (excluding London).

SG Market (28 Nov 14)

US Market: Closed for Thanksgiving holiday. S’pore shares are likely to consolidate recent gains as US market was closed for Thanksgiving holiday, while European bourses extended a two-day rally as German jobless rate dropped to a record low and on renewed prospects of quantitative easing. Energy-related counters, particularly the upstream players and rigbuilders Keppel Corp and Sembcorp Marine, may be hit as OPEC kept production targets unchanged despite an oil supply glut, sending the US crude more than 6% lower to below US$70 per barrel. As expected, oil stocks Petrobras (-4.7%), Gazprom (-2.8%), Total (-4.1%) and Shell (-3.7%) tumbled. Beneficiaries of lower oil prices would include airlines, shippers and transport operators, SIA, NOL and ComfortDelgro as fuel takes up the large part of their cost component. Plantations could also face downward pressure as falling oil price reduces the economic viability of biodiesel, and therefore demand for palm oil as a feedstock. With technical indicators exhibiting few signs of directional change, the STI is unlikely to break out of its current trading range bounded by upper resistance at 3,360 and downside support at 3,310. Stocks to watch: *Keong Hong: FY14 net profit slipped 10% to $19.7m, even though revenue soared 86% to $272.8m on recognition of ongoing and new projects such as Alexandra Central, J Gateway and Skypark Residences. Gross margin contracted 9.6% due to higher project costs recognized during initial stages of construction. Bottom line was further weighed by other operational costs. Final DPS of 1.25¢, brings full year DPS to 2.25¢ (FY13: 2.5¢). BVPS at $0.34. *Casa Holdings: FY14 net profit slumped 62% to $3.7m, dragged by a goodwill impairment in Uno Casa ($1.3m), whereas FY13 bottom line was padded by other gains from write-backs on investment ($3.8m). Core net profit fell 17%, mostly attributable to higher operating expenses incurred on new property development in Iskandar, partially offset by higher contribution from associates. Revenue dipped slightly to $30.2m (-3%). BVPS at $0.347. *Compact Metal: Proposed to divesify into the cement business. The group will leverage on the expertise of new Executive Chairman - Ma Zhao Yang, who currently is a non-executive director of HK-listed West China Cement. *IPS Securex: Secured a US$1.6m contract to sell 50 sets of Hyperspike acoustic hailing devices and accessories. *Straco: Completed the $140m acquisition of the Singapore Flyer.

Thursday, November 27, 2014


Cosmosteel: Positive 4QFY14 results with revenue and net profit growing 23% and 74% y/y, respectively. Gross margin also improved from 18% in 3QFY14 to 20.1% in 4QFY14. During FY14, certain regions such as Australia, Singapore (+43%) and Vietnam (+110%) saw strong growth while mkts such as Brunei and Japan saw lower revenue. On the whole, the company's strong level of geographical diversification helped to offset soft or one-off projects in further away regions such as ALgeria (via a Japanese customer). Voyage remains constructive on CosmoSteel's performance at least into 1HFY15, with ongoing projects in Singapore and Vietnam continuing to be supportive of revenue levels. Projects still make up 60-70% of group revenue. Mgt also remarked they have been receiving new customers with ad hoc purchase orders, on account of CosmoSteel's large inventory holdings.

Keppel Corp (technical)

Keppel Corp: since expectations are low for any positive outcome from tonight's OPEC meeting, traders who think that the negatives have been priced in to KEP stock may consider the counter as a potential rebound play. KEP traded to a low of $9.10 before bouncing back up, and has been consolidating for about two weeks between $9.10 to $9.30. MACD and RSI in the process of recovering but more upside only above the temporary $9.30 resistance level. Above this, expect a recovery back to $9.55, $9.70 then $10 which was the original support it broke down from. Those looking to average down of bargain hunt can consider near $9.10 support.


Oil: Takeaways from UOBK's roadshow in the US. KEP, SMM, SCI, and Ezion garnered the most interest. Fund mgrs wanted to know Keppel and SMM would be affected by lower oil prices, beyond the lower drilling rig orders that we have already seen in 2014, on expectation of a rig overcapacity in 2015-16. Fund managers also questioned whether the two Singapore yards are undertaking what seems to be a very low-margin (or potentially profitless) capex on drillship building.South Korean yards continue to price their drillships at low prices given their ample capacity and to maintain their dominance in drillship building. Among the mid/small caps, there was strong interest in Ezion, albeit some fund managers remained perplexed over its various JVs (ie Charisma, JK Tech, AusGroup and Triyards). There were pockets of interest in Pacific Radiance and Nam Cheong. Overall, fund mgrs remained wary of catching falling knives, and await better clarity on oil prices despite cheap stock valuations. The next 6-9mths will be a period of stock differentiation. UOBK top Buys in Singapore are SCI, Ezion, PAcific Radiance, and Triyards.

Cambridge Industrial Trust

Cambridge Industrial Trust: CIMB maintains Hold but lowers TP to $0.70 (from $0.78), on lower DPU forecasts. 3Q14 results were stable, with gross revenue of $2.5m (+5% y/y) and DPU of 1.25¢ (-0.1%), but NPI margin dipped y/y in 3Q14 from 85% to 78.6%, due to costs involved in conversion of two industrial properties from STBs (single tenant building) to MTBs (multi tenant building). At the DPU level, weakness was largely offset by the $0.6m mgt fees issued in units instead of cash. CIMB notes in the initial stage of converting STBs to MTBs, a REITs earnings could be negatively impacted in several ways, including: i) dip in efficiency of space as units are cut out, ii) loss of triple net leases, and iii) dip in occupancy. Though this could be offset by higher rent in the long run.

Keppel T&T

Keppel T&T: lodged the IPO prospectus for Keppel DC REIT yesterday, after obtaining shareholders’ approval on Tuesday to spin off the latter via a listing of 261.36m units at an indicative price range of $0.90-$0.93 on SGX’s mainboard. Eight new assets will be injected into the new data centre trust, comprising: 1. Keppel Digihub in Singapore 2. Keppel Datahub 1 in Singapore 3. Gore Hill Data Centre in Sydney, Australia 4. iseek Data Centre in Brisbane, Australia 5. Basis Bay Data Centre in Selangor, Malaysia 6. GV7 Data Centre in London, UK 7. Almere Data Centre in Amsterdam, Netherlands 8. Citadel 100 Data Centre in Dublin, Ireland Separately, nine cornerstone investors have agreed to subscribe 290.32m units, but DBS Bank is the only cornerstone investor subject to a lock up period. The total amount to be raised is between $496.5m and $513m, making it the second biggest listing this year. Indicative timetable: Opening date for Public Offer: 5 December, 5pm Closing date for Public Offer: 10 December, 12pm Completion of acquisition of Singapore properties: 12 December at or before 2pm Commence trading: 12 December, 2pm

Genting SP

Genting SP: Bloomberg highlights that the difference between analysts‘ target price forecasts and Genting’s (GENS) share price narrowed yesterday to its lowest level since Dec ’13, with average consensus TP at $1.24 versus yesterday’s closing price of $1.155. Some analysts however opined that the recent 12% rally, which was sparked by GENS’ share buyback, could be short-lived weighed by a slump in Chinese visitors and a lack of visible catalysts for the group’s outlook ahead, adding that valuations are not cheap at 23.1x forward P/E versus peers Sands China 18.1x and Galaxy Entertainment at 19.5x. Yet, some fund managers are guiding that the downside for GENS appears limited, as the recent share buyback could provide support in the short-term, and could also signal management’s confidence on the long-term outlook of the group. Maybank-KE opines that while it may be too early to call for a bottoming out in earnings, growth is likely to be stable in the upcoming quarters, led by rising growth in mass-gaming market revenue and the opening of GENS’ 550-room hotel in Jurong, adding that GENS’ hotels in RWS saw a 95% occupancy rate in 3Q14. In a recent report by a foreign broker, GENS should buy its shares below the $1.25 mark, as beyond that, the benefit of EPS accretion would be less meaningful when compared against the cash yield of the group.

Thai Beverage

Thai Beverage: SCB Downgrading it to U/p from O/p, highlighting intensifying competition in the core spirits segment, and that Thai Bev’s dominance in the sector and outstanding ROE could be under threat from new entrants. Meanwhile, shrinking margins, lower leverage and declining asset turnover are likely to drive a secular decline in ROE. F&N’s potential loss of stake in Myanmar Brewery could also dampen restructuring prospects, which could lead to a loss in synergy gains. Following disappointing earnings in 9M14, the market is focusing on line items, with market watchers highlighting that Thai Bev’s interested party transactions are higher than royalty payments by peers. At 19.8x FY15 P/E and 15.8x EV/EBITDA, valuation is at an all-time high. SOTP suggests that a potential disposal of F&N’s stake in Myanmar Brewery will weigh on the stock, and the 11% YoY decline in 3Q14 spirits volume could signal an earnings disappointment.

Silverlake Axis

Silverlake Axis: Won 2 new software upgrading contracts from existing customers totaling approximately RM40m. One of the contract is the upgrading of the Singapore ops of a leading ASEAN bank, while the other is upgrading of the integrated provident fund system for Tabung Amanah Pekerja, Brunei’s social security organization. These are expected to contribute positively to Silverlake’s performance in the current and following financial years. Our back-of-envelope estimate is that the latest contract would bring delivery backlog to ~RM320m. Notwithstanding, Silverlake Axis’ nearest catalyst remains post-merger works for the OCBC-Wing Hang integration, while the impending CIMB-RHB-MBSB merger will likely bode well for Silverlake Axis. CIMB and MBSB are already existing customers, and the merger would likely bring RHB into their platform. Silverlake Axis is currently trading at 24.5x FY15e P/E. The street has 3 Buys, 2 Holds and 2 Sells on Silverlake Axis with a mean TP of $1.29

Mermaid Maritime

Mermaid Maritime: Record breaking FY14 results in line with street expectations, as net profit surged 187% to US$45.2m, mainly boosted by contribution from 33%-owned Asia Offshore Drilling, which commenced operations of two additional new jackup rigs for Saudi Aramco for 3+1 years starting mid-2013 at lucrative dayrates of US$180k/day. Meanwhile, top line improved 16% to US$313m, buoyed by subsea (+11%) and drilling (+18%) segments, primarily due to healthy project growth at Saudi Aramco, the Middle East region and in Indonesia, and increased utilisation for its drilling business. Its subsea order book stood at US$470m, which will be executed over FY15-16. The group's longer-term growth catalyst would come from the delivery and utilisation of new assets (two tender rigs and a DSV), to be delivered in 2016 and expected to further scale up operations. Maybank-KE reckons that Mermaid’s exposure to shallow water and production phases provide some insulation against oil price volatility. House notes that it had to charter in three more vessels to fulfil short-term subsea contracts recently, a sign that demand for its services remain unabated. Management proposed final DPS of US$0.0047, with the intention of a further dividend up to US$0.003/share, upon receiving income from associate. Maybank-KE maintains Buy rating with TP of $0.42.

SG Market (27 Nov 14)

US Market: US stocks climbed to fresh all-time highs in a quiet session as investors digested a slew of mixed economic reports amid slumping oil prices ahead of the Thanksgiving holiday. The blue-chip DJIA edged up 13 pts to 17,828 (+0.07%), while the broad-based S&P 500 advanced 6 pts to 2,074 (+0.3%), and the tech-heavy Nasdaq Composite added 29 pts to 4,787 (+0.6%). In economic news, consumer confidence rose in Nov to its highest level in 7½ years, while consumer spending showed a modest 0.2% increase in Oct, along with personal income. There were conflicting signals in the housing market as sales of new homes ticked up 0.7% in Oct but pending home sales fell 1.1%. Separately, core durable goods orders, excluding aircraft, declined 1.3% in Oct, while Chicago PMI dropped steeper-than-expected to 66.2 in Nov from 66.2 the prior month. Meanwhile, weekly jobless claims spiked by 21,000 to 313,000, its highest since Sep. Markets saw big data and little action as much of the data was shrgged off as volatile and in some cases, backward looking. Technology shares rose 9% as a group, with Hewlett-Packard jumping 4.1% on speculation that margins may benefit from its restructuring plan to spin off its PC and printer operations after its 4Q earnings met expectations. Chipmakers also surged with Analog Devices gaining 5.5% aftr its 4Q profit and sales exceeded projections. Telecom companies also outperformed, led by AT&T (+0.9%) and CenturyLink (+2.2%). Energy stocks were the biggest losers as crude oil fell 0.5% to US$73.69 per barrel to reach its lowest level since Sep ’10. Drillers Diamond Offshore (-10.9%), Transocean (-8.1%) and Noble Corp (-5.1%) all tumbled, while Seadrill sank 22.8% after suspending its dividend, citing a significant deterioration in the demand for rigs. Among other stocks in focus, farm equipment maker Derre & Co slid 0.9% as its 2015 sales forecast trailed estimates, dragging rival Caterpillar 0.4% lower. Online retail gaint Amazon eased 0.4% after slashing the price of its Fire mobile phones for the second time in an effort to move sales. Volume was very thin with 4.9b shares traded on US exchanges, 26% below the three-month average as most traders took off early for the holiday season. Advancing issues outpaced declining ones by almost 2 to 1 on the NYSE. Bond prices rose, sending the 10Y Treasury yield down 3bps to 2.23%, while the US dollar fell for a second day, losing 0.2%. S’pore shares are likely to muddle along as investors await fresh catalysts ahead oof the outcome of OPEC’s meeting later today. Topside resistance for the STI remains capped at 3,360 with immediate support at 3,310. Stocks to watch: *Mermaid Maritime: Record FY14 net profit which surged 187% to US$45.2m, boosted by contribution from associate, Asia Offshore Drilling (US$31.1m) which commenced operations of two additional rigs. Revenue climbed 16% to US$313m, buoyed by subsea (+11%) and drilling (+18%) segments. Gross margin slipped 0.4 ppt to 18.4%. Order book dwindled to US$470m, from US$750m in Jan ‘14. Proposed final DPS of US$0.0047, with intention to declare an additional DPS of up to US$0.003 upon receiving income from its associate. BVPS at US$0.40. *Technics Oil & Gas: 4QFY14 net loss narrowed marginally to $8.4m from loss of $8.6m a year ago, despite a 160% y/y jump in revenue to $20.1m on higher contribution from subsidiaries. Bottom line was impacted by an impairment charge and share of losses in an associate, as well as higher admin expenses (+44%) arising from increased staff costs, and newly acquired and newly setup subsidiaries. BVPS at $0.296. *Forterra: Final offer price by Nan Fung Int’l at $2.25 per unit, raised from $1.85 initially. Offer closing date extended to 5 Jan ’15. *Fragrance: Acquiring a property in Perth, Australia, for total consideration of A$30m, following the exercise of an option. The property has a freehold tenure with a total land area of ~3,560 sqm, and is situated in the CBD area proximate to the renowned King Street precinct. *Silverlake Axis: Secured two new software upgrading contracts from existing customers totaling ~RM40m. *YuuZoo: Inked a partnership deal with Etisalat, the fastest growing telco network in Nigeria, which will target Etisalat’s 20m subscribers and bring YuuZoo’s social e-commerce model to the current US$500m e-commerce market. *Singapore Medical Group: MOU with Samsung Life & Science to set up a proposed 51/49 JV to engage in the aesthetics and dermatology businesses and distribution of dermatological and cosmeceutical products in Asean. The MOU is valid for 6 months. *Linc Energy: Detected oil shows in the Stuart Range formation at the Pata 1 exploration well in the Arckaringa Basin. Cutting samples have been dispatched for lab analysis with first results expected in 6-8 weeks. *Keppel DC REIT: Lodged its preliminary prospectus yesterday.

Wednesday, November 26, 2014


MGCCT: in general, the REITS sector is performing well today. No company specific news, but we have liked MGCCT for its 6.6% annualized yield against its closest Singapore peer, Suntec 4.8%) and HK peers which offer between 3.6% and 6% yield. Technically, a close above $0.96 bodes well for the counter as a bullish breakout play . A re-rating to a more reasonable 5.5% yield would translate to a fair value of $1.16 for MGCCT.

Ezion (technical)

Ezion - Technicals appear rather neutral at this point, with RSI just trending forward, although Stochastics still points to an upward bias. The 20 day MA at $1.47 will be the critical resistance level.

Sembcorp Industries (technical)

Sembcorp Industries Technicals: $4.75 should be a tough resistance to beat, but if breached, next resistance should be 50 dma (~$4.90). Price should either move sideways, or have downside bias, with support around $4.50.

HPH Trust

HPH Trust: UBS maintains Neutral with TP US$0.67. Notes that there could be possibility for the Pearl River Delta ports to raise tariffs , and mgt is already negotiating with liners for a potential tariff hike in 2015 to cover additional costs. Already, some other Chinese ports (Shanghai, Qingdao, Ningbo and Xiamen ) have already raised tariffs for 2014. However, this is balanced by concern on dividend downside in 2015. With the company on 100% floating rate, a potential interest rate hike in 2015 is a major risk that could lead to potential dividend payout ratio reduction.

United Engineers (UE)/ UE E&C

United Engineers (UE)/ UE E&C: UE will be holding its EGM this Friday, for the sale of its 68%-owned UE E&C to Southern Capital group at $1.25/share. With the current share price of UE E&C currently trading above the offer price at $1.29, it'll be interesting to see how the deal pans out, given that Southern Capital will be making an unconditional offer for the remaining 36% of UE E&C, after it had received 74% irrevocable undertakings on its offer. On one side, there may be a possible angle for a counter-offer, after UE E&C's second largest shareholder raised its stake from 4.9% to 6.1% via the market at prices above the offer price of $1.25. However, there is also a possibility that a potential counter bid may not come through and share price of UE E&C will move back towards the offer price. Ultimately, the sale of UE E&C would pave the way for a potential sale of UE's remaining property assets, after the successful divestment of its other businesses in the past three months. With just the property assets, it may be easier for any potential bidders to conduct their due diligence. At $2.90, UEL valued at a 12% discount to consensus RNAV of $3.30, based on property valuations as at Dec 2013.


Oil: Crude oil fell further, over 2% yesterday, below US$75/bbl, on news that meetings among Saudi Arabia, Venezuela, Mexico and Russia oil ministers failed to yield any production cut meetings. An AFP article reports that for tomorrow’s OPEC meeting, it is largely expected that Saudi Arabia, the cartel’s largest crude producer, will not cut production to maintain its market share. Market-watchers were quoted that the Saudis will be incentivized to maintain production volume, given: 1) As oil prices move towards the US$70 range, the prime loser will be shale players as prices dip below their marginal cost, shoving them out of the market. This will shave excess supply, and help moderate prices. 2) The Saudis are in a stronger financial position relative to less friendly oil producers, such as Iran which would come under pressure as prices fall. Again, this would bode well for the kingdom in the long run.

China Sunsine (technical)

China Sunsine: Technical alert. The counter experienced a typical sell on news after a stellar but well-flagged 3Q14 results showing, but looks primed for an extended rebound after the perfect bounce off the classical $0.42 support . With a firm bottom now established, and the key indicators hooking back up, momentum could lift share price back to the recent $0.515 high , and $0.595 all-time-high, in extension. Market Insights likes this stock as a value play , and has a fundamental fair value of $0.73.

Interra Resources

Interra Resources: key focus remains its cum-bonus warrants exercise . XB date on 1 Dec. 1 free bonus warrant (exercise price: $0.235) for every 10 Interra shares owned. 1 free piggy back warrant (Exercise price $0.175) upon exercise of two bonus warrants.

NOL (technical)

NOL: NOL showing a nice V-shaped recovery. $0.84 as first near term cap, followed by $0.92 in extension.

Keppel Datacentre Reit (IPO)

Keppel Datacentre Reit: Seeking to raise as much as $512m from its Singapore IPO. Indicative pricing at between $0.90 and $0.93, with prospective dividend yield of as much as 7.1% for FY15. At US$393m , Keppel DC REIT will be the second biggest IPO in Singapore this year after Accordia Golf Trust (US$610m). Keppel DC REIT's portfolio will include two datacentres each in Singapore and Australia, as well as one property in Msia and three in Europe. Order book to open tmrw, with expected trading on 12 Dec.


SPH: Morgan Stanley warned that SPH’s dividend policy is not sustainable and downgrades it to U/W. SPH paid out 114% of recurring earnings in FY14 and payout ratio for FY15E is expected to be 104%. Income from Seletar Mall opening in December 2014 is unlikely to sufficiently mitigate the decline in Media. As such, the counter risks downward adjustment of dividend by 5%, implying a yield of 4.9% vs the average of 5.8% since 2010.


IHH: 3Q at the lower end of estimates although profits rose 26% y/y to RM146.9m as revenue and EBITDA climbed 7% and 8% respectively on growth in patient volume, average revenue per inpatient admission and contributions from two new hospitals. Most notably, Mount Elizabeth Novena Hospital revenue up 72% YoY and EBITDA more than doubled. Bottom line was also helped by reduced dependence on purchased and contracted services and lower finance costs, but management expects higher staff costs and other inflationary pressure. Management remains upbeat on the prospects as demand for quality healthcare in Asia continue to increase and the ramp up in utilization of its new hospitals in Malaysia and Singapore are mostly on target (but not for Turkey). BVPS at $2.27, trades at 0.83x P/BV. Post results, Maybanke-KE reiterates Hold and UBS reiterates Buy

SG Market (26 Nov 14)

US Market: US stocks ended little changed, snapping a three-day run on mixed economic reports, as the economy expanded more than previously forecast last quarter but soft readings in consumer confidence and house prices kept the moves within a tight range. The blue-chip DJIA retreated 3 pts to 17,815 (-0.02%), while the broad-based S&P 500 dipped 2 pts to 2,067 (-0.12%), but the tech-heavy Nasdaq Composite added 3 pts to 4,758 (+0.07%). The CBOE Volatility Index fell 2.9% to 12.25. The Commerce Dept revised 3Q GDP growth to 3.9%, much stronger than the 3.5% initial estimate and higher than 3.3% median forecast. This came after the 4.6% increase in 2Q, marking its biggest back-to-back advance since late 2003. However, an unexpected drop in consumer confidence to a five-month low in Nov and further moderation in home prices to its slowest pace in two years, unsettled the markets. Energy producers led the declines with a 1.6% slide as US crude fell 2.2% to US$74.09 a barrel, its lowest level since mid 2010, ahead of the keenly anticipated APEC meeting on Thu. Meanwhile, a meeting between Saudi Arabia and Venezuela with non-OPEC Russia and Mexico failed to garner any commitment to curb oil output. ExxonMobil and Chevron slid more than 1%, while both Halliburton and Schlumberger sank 3.3%. Tech giant Apple also made headlines, hitting a high of US$119.75 to reach the US$700b market cap mark, before closing down 0.9% to US$117.60. Among other stocks in focus, Tiffany rose 2.5% after posting same-store sales growth which was ahead of estimates. United Technologies gained 2.7%, recovering from Mon’s 1.4% drop following the abrupt departure of its CEO. Cable providers Comcast and Time Warner Cable jumped 2.9%, while Netflix lost 2.1%. Volume was thin ahead of Thanksgiving holiday with 6.1b shares traded on US exchanges, 8% below the three-month average. Advancing issues outnumbered declining ones by 1.2 to 1 on the NYSE and was about even on Nasdaq. S’pore shares are likely to trade sideways, tracking the grossly overbought US market, as investors stay on sidelines to await OPEC’s decision on oil production this Thu. Topside resistance for the STI is still capped at 3,360 with immediate support at 3,310. Stocks to watch: *IHH Healthcare: 3Q net profit rose 26% y/y to RM146.9m as revenue climbed 7% to RM 1.78b on growth in patient volume, revenue intensity of existing operations, as well as new contributions from Acibadem Atakent Hospital and Pantai Hospital Manjung. Notably, revenue from Mount Elizabeth Novena Hospital jumped 72% and EBITDA more than doubled. Bottom line was further buoyed by reduced dependence on purchased and contracted services and lower finance costs. *Sapphire: Acquiring Ranken, China’s second largest privately owned integrated rail infrastructure company, for Rmb360m via issue of new shares worth $16.5m at $0.10 each to all 34 beneficial owners of Ranken, and a subsequent capital injection of Rmb282m. Ranken achieved 1H14 revenue of Rmb347m and net profit of Rmb19.4m, and has an outstanding order book of Rmb2.1b. The deal is subject to shareholder approval at an EGM, with expected completion in 1Q15. *Blue Sky Power: Its 60% owned subsidiary, Waypost has inked a series of deals with ASX-listed Triple Energy, an oil and gas exploration company, whereby 1) Waypost will subscribe for 158m Tranche 1 placement shares (19.9% of enlarged stake), for A$0.79m, or A0.5¢ per Triple share, 2) Waypost will make a A$0.5m loan to Triple, which is convertible into 83.3m new Triple shares @ A0.6¢; 3) Triple will conduct a further placement of 333.3m Tranche 2 placement shares @ A0.6¢, of which 208.3m shares will be underwritten by Waypost and 125m shares reserved for existing shareholders of Triple, 4) Waypost will procure a drilling company to drill for Triple at a consideration of not more than US$2.75m, payable by the issue of up to 525.4m new Triple shares @ A0.6¢. *Addvalue Tech: Developing a radiation-resistant satellite-based communication modem to be experimented on the new VELOX-II satellite built by NTU, targeted for launch in 4Q15. Management says if the project is successful, it would allow the group to tap on the market potential of the growing space industry, and put the company in good stead to enable many Internet-of-Things applications via satellites.

Tuesday, November 25, 2014

Saizen REIT

Saizen REIT: NRA Capital has an Overweight rating and raised TP to $1.07 (from $1.03), supported by a potential 20% upside with 6-7% dividend yield projection. House believes it is still too early to conclude the end of Abenomics given that steps are needed to reduce any negative impact on consumers from the increase in sales tax from 5% to 8% in Apr. On the other hand, NRA believes Japan's output will benefit from the recent sharp decline in the yen. In addition, the Blackstone Group agreed to buy GE Japan Corp.’s residential property business for more than JPY190b to expand its apartment holdings in Japan. Last month, Singapore’s GIC put US$1.7b into Tokyo commercial real estate and City Developments has acquired a JPY30.5b historical site in Tokyo as it steps up expansion plans overseas. Saizen’s net gearing inched up from 30% in 4Q14 to 30.5% mainly due to 2 new loans obtained. Recently, MAS has released the new ruling for REITs, allowing for an increase in gearing level from 38% to between 40% and 45%, these should provide headroom for loans growth and acquisition.

NOL (technical)

NOL: Technical rebound alert. Shares have been sold down massively after the disappointing 3Q14 results, and subsequent broker downgrades. At 0.8x P/B now, valuations are low compared to the historical average 1x multiple, setting the stage for a potential rebound play. Over the past one month, a bullish divergence has been taking place, as share price slid, while the key technicals indicators rose. With RSI and Stochastics emerging from an extended period of being oversold, and share price rebounding off the $0.735 floor, a bottom may have been found. Near term target at $0.84, which is the Oct high cluster, and close to the 50 day moving average. Risk reward looks attractive relative to the $0.735 cut loss level.


Riverstone: Maybank-KE reiterates Buy on Riverstone with TP $0.97 after hosting an NDR with institutional clients in Malaysia. The company commands dominance, good reputation and strong client relationship in the high-end cleanroom glove market and better-than-expected penetration in the low-end cleanroom glove market. There are strong barriers to entry into the niche high-end industry, which includes strong relationships formed through direct supplies, ability to customise solutions, best-in-class product features, as well as stringent qualifications. Better-than-expected penetration in the lower-end segment provide upside to earnings estimates. Management believes it can sustain its ASPs and margins through: 1) constant customisation and innovation to offer product differentiation, 2) serving quality rather than cost conscious customers. The stock is now trading below peer average and is valued at 15x FY15E P/E, on par with peer average.

Golden Agri

Golden Agri: At CIMB's recent NDR, questions revolved around the group’s recent oilseeds losses, margins prospects from its downstream division, CPO price outlook, and growth strategies. The performance of its China oilseeds unit could remain weak in 4Q but should improve in 2015. The unit is looking for potential long-term strategic partners to improve sourcing or distribution of its soybean products in China to boost performance. CIMB also gather that the margins for its palm and laurics business in Indonesia may remain compressed in the near-term due to overcapacity issues. The group explained that it expanded its downstream business mainly to reduce its dependence on offtakers (given its large CPO production) and take advantage of the more favourable export duties for refined palm products against CPO in Indonesia. The group also highlighted that it is still keen to grow its estates and is currently scouting for M&A possibilities. As for the CPO price outlook, it expects prices to remain range-bound till 1H15. CIMB believes that some of its estates were hit by the dry spell in 3Q, and this may negatively affect yields in 2015, though it is still too early to assess its full impact. House cites the unexciting earnings prospects in the near-term, due to lower CPO prices and downstream contributions, have already been priced-in with the recent share price corrections. House maintains Hold rating with TP of $0.50.


DBS: Citi believes that DBS undoubtedly benefits from US rates normalization, but recent market activity (some days’ turnover 2x the 1-year average) and >2S.D. price ratio outperformance vs. the FSSTI, suggest this is a clear consensus long. Risks include: 1) US rate hikes may be modest: Eurodollar Futures is pricing in 80bps by end-2015, from 110bps two months before. At 80bps US rates, implied 3M SGD SIBOR may be c.55bps (vs. 42bps now). 2) Growth outlook is uncertain: Citi have concerns for Singapore domestic growth and regionally. DBS management also pared loan guidance, citing China’s macro outlook as a key variable. Citi remains positive on the DBS medium-term growth story, calling a Buy with TP of $22.10.

SG Market (25 Nov 14)

US Market: US stocks extended gains to record highs, led by small caps and retailers in a quiet session ahead of s deluge of US economic data tomorrow and Thanksgiving holiday on Thu. The blue-chip DJIA climbed 8 pts to 17,818 (+0.04%), its third straight record close, while the broad-based S&P 500 advanced 6 pts to 2,069 (+0.3%), and the tech-heavy Nasdaq Composite added 42 pts to 4,755 (+0.9%). But it was the small caps that stole the day with the Russell 2000 jumping 1.2% to the highest level since Jul. Sentiment was lifted by hopes that China will take further accommodative monetary policy and an unexpected rise in German business confidence in Nov. I the US, the services sector expanded at a slower pace this month as growth in new business declined. Consumer discretionary stocks rose the most, led by Urban Outfitters (+5.4%), Gap (+4.6%), Coach (+2.6%) and Best Buy (+2.3%) before Black Fri on 28 Nov kicks off the holiday shopping season. Retail sales are expected to rise 4.1% this year, compared to 2.9% average of the past 10 years, as consumers increase spending, spurred by lower gasoline prices. Helping the Nasdaq and tech stocks was the 1.9% jump in Apple shares to US$118.63 to within US$700b market cap as a broker raised its target price to US$135 on strong demand for its iPhone 6. Intel also rallied 1.9%. Energy stocks weighed with declines in ExxonMobil (-1.1%) and Chevron (-0.8%) as crude oil slid 1% ahead of an OPEC meeting this week, where members are facing calls to cut production to arrest the recent slide in oil prices to a four-year low. The biggest drag was in telecos (-1.4%) with Verizon Communications (-1.4%) and AT&T (-1.6%) both down on concerns of higher capacity costs and slower revenue growth from increased competition. Industrial conglomerate United Technologies lost 1.4% following the retirement of its Chairman and CEO, while electric car maker Tesla rose 1.6% on news that it was in collaboration talks with BMW to develop batteries and light-weight parts. Among other stocks in focus, Trina Solar tumbled 5.2% after it posted 3Q flat earnings, while in M&A news, Platinum Underwriters surged 21.1% on a takeover offer by RenaissanceRe (-2.7%). Volume was thin with 5.6b shares traded on US exchanges, 15% below the three-month average. Advancing issues outnumbered declining ones by 1.65 to 1 on the NYSE and 2.45 to 1 on the Nasdaq. Investors will be looking out for a stack of economic releases this week, including updates on housing, inflation, consumer sentiment, durable goods orders and 3Q GDP. S’pore shares are looking a little tired after nearly completing a V-shaped recovery from its Oct bottom with the STI facing stiff resistance at 3,360. Some momentum technical indicators have also crossed into overbought territory, suggesting limited upside in the short term, as there are few market catalysts to attract new funds flow. Immediate support is now seen at 3,310. Stocks to watch: *IHH Healthcare: 60%-owned GHK Hospital awarded a HK$2.5b (RM1.1b) contract for superstructure works in Hong Kong to Hip Hing-Chun Wo JV, for the development of a private hospital in Aberdeen Inland. *Pacific Andes: Proposed renounceable underwritten 4-for-5 rights issue at $0.051 apiece (53% discount to last close). Net proceeds of $192.3m will be earmarked for working capital and/or reduction of debt. *Asiaphos: Disclosed that its total measured and indicated phosphate resources increased to 30.3m tonnes as at 30 Sep (+31.2%), largely due to the granting of an exploration permit on 12 Aug by the Sichuan Land Dept, for a larger exploration area of ~1.54 sqm (old license: 0.55 sqm). The group is also currently awaiting approval from the relevant authorities on the renewal of it exploration rights relating to its Mine 2, which covers an area of 1.28 sqm. *Sapphire Corp: Acquiring Ranken Infrastructure, a China railway infrastructure EPC specialist, for Rmb360m ($75.9m). The consideration will be funded by new placement shares worth $16.5m (165m at $0.10/share) and a subsequent capital injection of Rmb282m ($59.4m). *Soup Restaurant: Won its litigation suit against Y.E.S F&B after the court ruled that the defendant was in wrongful possession of a sub-lease area. As such, Y.E.S will have to pay the group damages, which will be assessed separately. *Singapore Kitchen: Divesting a nine-storey light industrial building, One Commonwealth, to an unrelated third party for $0.73m, a tad below valuation of $0.77m in Jan ‘14. The group will record a post-disposal net gain of ~$0.2m. *euNetworks: Appointed Canaccord Genuity as independent financial adviser for its mandatory unconditional cash offer.

Saturday, November 22, 2014

Shares Buyback

SGX insider/ buyback week ending 21st Nov: Insider Buys: 22 Companies recorded 41 purchases worth $16.5m, vs. previous week’s 9 companies, 14 purchases worth $1.83m Insider Sells: 2 firms with 3 disposals at $2.95m, vs. 2 previous week’s 2 companies worth $640,000 Coy Buyback: 14 companies posting 77 repurchases worth $63.3m, vs. 12 companies, 37 repurchases worth $22.5m. Key transactions: Osim – Buybacks (283,000 shares at $1.98) and initial filing by The Capital Group Companies (1.88m shares at $1.95/share). Pan-United – Share buyback and insider trade (by deputy chairman Patrick Ng) transacted 4.4m shares at average of $0.853 Karin – Executive chairman Philip Ng bought 10,000 shares at $0.30 Gaylin – CEO Desmond Teo bought 950,000 shares at average of $0.59 Haw Par Corp – Chairman Wee Cho Yaw bought 1.2m shares at $8.50 City Dev – Aberdeen bought 465,000 at $9.49, lower than its May sale price. ST Eng – Temasek bought 3.4m at $3.46, higher than March sale price.

Friday, November 21, 2014

Ying Li

Ying Li: CIMB has an unrated report on the counter, estimating the counter is worth $0.23-0.25, based on 40-45% discount to CY14 RNAV, excluding the impact from potential partnerships for new projects. Given its focus on high-end commercial development in Chongqing, Ying Li is expected to benefit from China’s Great Western Development Strategy. China Everbright (CEL)’s strategic investment into Ying Li could improve Ying Li’s Outlook. Potential re-rating catalysts include strategic JVs with CEL for a possible future REIT listing.

Novo Group

Novo Group: The steel trader which is dual listed on both SGX and HKEX, saw its share price surged ~56% over the last two days, to close at $0.25, sparking a trading query from HKEX, where the group highlighted that it was not aware of any reasons or info which could explain the recent price movements of its share price. Novo was recently placed on the SGX watchlist on 3rd Sep ’14, after recording pre-tax losses for the three recent financial years, and posting an average daily market cap of less than $40m over the last 120 trading days. In a feature by The Edge this morning, the magazine highlighted that despite the unknown reason on what had caused the surge in share price, Novo Group has had its work cut out in turning itself around, given that the group’s current market cap after the recent price surge now stands at $42.7m. The Magazine however cautioned that the group is still far from being out of the doldrums, with demand for steel in China having plummeted, coupled with abundant supply. Based on its FY14 financials, Novo group’s current ratio stands at only 0.82x with net gearing at 71%. Meanwhile, current liabilities exceed current assets by US$37.2m, suggesting weak liquidity ratios. At the current price, the group trades at 0.76x P/B.

Ying Li

Ying Li: CIMB has an unrated rpt on the counter. The house notes that given its focus on high-end commercial development in Chongqing, Ying Li is expected to benefit from China’s Great Western Development China Everbright (CEL)’s strategic investment into Ying Li could improve Ying Li’s Outlook. Given its key investments locations in the core CBD area of Chongqing, Ying Li is likely to be a prime beneficiary of Chongqing’s endeavours to become the financial centre of Western China. CEL’s strategic investment in Ying Li has significantly improved its outlook. The house estimate that Ying Li is worth $0.23-0.25, based on 40-45% discount to CY14 RNAV.

SG Market (21 Nov 14)

US Market: US stocks notched fresh records, led by energy and small caps, as a batch of encouraging economic data alleviated concerns over continuing signs of slowing growth in Europe and China. The blue-chip DJIA climbed 33 pts to 17,719 (+0.2%), while the broad-based S&P 500 advanced 4 pts to 2,053 (+0.2%) and the tech-heavy Nasdaq Composite added 26 pts to 4,702 (+0.6%). The small cap Russell 2000 rallied 1.1%. The CBOE Volatility Index, a measure of market fear, eased 2.7% to 13.58. Ahead of the opening bell, stock futures were pressured by weak economic indicators from Europe and Asia. A flash purchasing managers’s index for business activity in the euro area dropped in Nov to a 16-month low, while the HSBC PMI for China fell to 50 in Oct, right at the edge of a contraction. Markets turnoved positive after strong US economic releases showed the Philly Fed index jumping to 40.8 in Nov, its highest level since Dec 1993 and more than double the 18.3 forecast, while existing home sales unexpectedly rose in Oct to a one-year high as low borrowing rate helped sustain the recovery in the housing market. Separately, the Conference Board of leading indicators widened more than estimated last month, while consumer prices were flat in Oct and initial jobless claims fell by 2,000 to 291,000, below the 300,000 mark for the 10th straight week. The only weak spot was seen in Nov’s Markit manufacturing PMI, which slid to 54.7 for its third monthly decline. Energy (+1.1%) and retail (+0.9%) sectors gave the biggest lift to the market. Oil stocks, including Chesapeake Energy (+3.9%), Apache (+3%), Halliburton (+1.6%) and ConocoPhillips (+1.5%) all rose as crude oil advanced for the first time in four days. Retailers rallied as the peak holiday season nears sparking hopes of higher sales, with Urban Outfitters gaining 7%. Best Buy jumped 7% after the electronics chain reported earnings that beat expectatations on better comparable store sales. Discount retailer Dollar Tree, which is seeking to merge with rival Family Dollar, gained 5.2% after beating 3Q sales and profit estimates snd posting its best sales figures since 2011. Tech shares also outperformed, led by Intel (+4.7%), after the chipmaker gave an upbeat 2015 forecast and raised its annual dividend by 6.7%. But cloud computing company skidded 4.5% after forecasting 4Q earnings which missed estimates. Among other stocks in focus, Keurig Green Mountain tumbled 7.4% after forecasting earnings which fell below estimates, whle Ceasers Entertainment soared 5.4% on news that the casino operator plans to turn its largest unit into a REIT. Volume was thin with 5.7b shares were traded on US exchanges, 12% below the three-month average. Advancing issues outnumbered declining ones by 2 to 1 on both the NYSE and Nasdaq. S’pore shares may advance, tracking the record-breaking run on Wall Street with the STI headed towards the next objective 3,360 with downside support at 3,270. Stocks to watch: *GDS: FY14 net profit soared 161% to $4.5m, as revenue jumped 52% to $23.9m due to increase in door and shutter system sales from industrial and commercial demand, and from spillover sales from FY13. Gross margin dipped 2.4ppt to 46.5%. High operating leverage allowed bottom line to grow at faster clip than revenue. First and final DPS of 1.3¢ (FY13: 0.7¢). *Keppel Land / Keppel T&T: Deppel Data Centres Holding, a JV between KPLD and KT&T, will acquire the Almere Data Centre 2 located in Almere, the Netherlands, adding more than 5,000 sqm of data centre space to its capabilities. The JV also signed up a major tenant who will commit ~40% of the space at Almere Data Centre. *First REIT: Clarifies that operations of its properties in Manado, namely Siloam Hospitals Mandao & Hotel Aryaduta Manado were not affected by the earthquake that rocked the Maluku Islands in Eastern Indonesia on 15 Nov. *DeClout: Its wholly-owned Acclivis unit launched a cross-platform Blackberry Enterprise Mobility Management solution to customers in Asia Pacific, marking its foray into enterprise cloud security space. *Starland; Expects to report full year net loss due to lower revenue, an impairment loss on property in Singapore, and because the pre-sales of its Singapore Garden Project in Chongqing will only be recognized in FY15.

Thursday, November 20, 2014


Hi-P: DMG reiterates Buy with TP $0.87. Says that the gloomy days impacted by Motorola and Blackberry are over, and share price is very attractive at current levels, given the company's prospective turnaround. Hi-P now has a bright outlook ahead, backed by its robust pipeline of projects, supported by the ramping up of Xiaomi (world's 3rd largest mobile phone maker) , and the upcoming worldwide launch of the dual-screen YotaPhone 2. YotaPhone is headquartered in Russia, and at the recent APEC meeting in Beijing, Russian President Vladimir Putin gave his Chinese counterpart Xi Jinping a YotaPhone 2, hinting at a potential future cooperation on this device, which is slated for offical launch in Russia and Europe in Dec.

Genting SP

Genting SP: Over the past five trading days, Genting SP (GENS) has bought back 26.7m shares, representing 0.22% of total outstanding shares, at an average price of $1.06 per share. Shares bought back will be cancelled, which could aid in shoring up the group’s earnings per share (EPS) base. Under the GENS’ share buyback mandate, the group is allowed to purchase a maximum of 1.2b shares, or up to 10% of total outstanding shares, which would cost $1.3b based on current market price. GENS currently has $3.2b cash and $1.5b available-for-sale financial assets, while it has total bank borrowings of $1.8b coupled with perpetual securities holdings of $2.3b. This provides the group much leeway to continue its buyback program. According to a foreign broker, GENS should buy its shares below the $1.25 mark, as beyond that, the benefit of EPS accretion would be less meaningful when compared against the cash yield of GENS. From a chart perspective, the stock may have bottomed out at the psychological $1 support level. Initial resistance could be found at the $1.10 (50 day moving average), followed by a firmer cap at $1.20 in extension.


UOL: CIMB likes UOL, as the stock offers value through its diversified business model. As a direct and indirect (via UIC) owner of one of the largest retail and office properties in Singapore as well as a sizeable hotel portfolio, it has a strong recurrent income base in addition to a stream of residential earnings in FY15-16 from locked-in presales. In the longer run, the target to establish a 70/30 asset split in Singapore vs. overseas would enable it to widen its geographic footprint to both developed and emerging economies. CIMB thinks the potential for corporate exercise exists as the group’s stake in UIC inches closer to 50%. CIMB maintains Add with TP of $8.37, based on a 20% discount to RNAV of $10.46.


Cosmosteel: The one-stop inventory specialist’s 4QFY14 net profit rose 74.1% y/y to $2m, bringing full year net profit to $5.5m (-12.9%). 4Q14 revenue rose 23.4% to $41.5m, from higher sales in the Energy sector (to $35.1m, +38.8%), offset by declines in the Marine Sector ($4.6m, 33.7%). Gross profit margin increased 1.1ppt to 20.1% on increased revenue. In line with revenue growth, distribution ($2.8m, +12.7%) and admin ($3.2m, +24.5%) expenses both grew. Gearing ratio grew 0.3ppt to 0.97x. Cosmosteel counts Keppel Corp, Sembcorp Marine, Alstom, Chevron and Shell among its key blue-chip customers. Management expects both the Energy and Marine sectors to continue contributing to FY15 financial performance. Particularly, the regional upstream energy sector will be driven by large order sizes. Management also aims to grow revenue from Vietnam, China and Philippines via marketing efforts, given these countries have a healthy pipeline of energy-related projects. Final and full year DPS halved to 0.5¢, implying a yield of 1.35%. Cosmosteel is trading at 17.6x FY14 P/E


Oxley: Management said its healthy earnings stream was from >$3b in Singapore presales while overseas launches were progressing well too with steady take-ups in London and Cambodia booking $1.6b in sales. High gearing was a talking point, but OSK DMG expects this to steadily decline with ongoing progressive collections. House likes the counter for its dynamic management and solid earnings visibility, and believes good execution of overseas projects will drive the next round of NAV and share price re-rating. OSK DMG maintains BUY with TP of $0.91.


UE E&C: In the midst of a voluntary conditional offer by Southern Capital group, a private equity firm, at $1.25/share. The company will be seeking shareholders' approval at an EGM scheduled on 28 Nov. United Engineers, parent of UE E&C, has given its undertaking to sell its entire 68.2% stake in the company. However, we note second largest shareholder, Singapore Tong Teik, has increased its stake in UE E&C from 4.9% to 6.1% on two occasions following the offer announcement, snapping up 1.23m shares at an average $1.257 each, from the open market. With UE E&C currently trading above the offer price, we do not rule out the possibility that rubber trader, Singapore Tong Teik could be angling for a counter-offer. At $1.275, UE E&C trades at 4.8x forward earnings and 1.3x P/B.


SIA: UBS believes although the consolidation of Tigerair’s net losses through the recent rights issue by Tigerair will negatively impact SIA’s earnings performance in the short-term, SIA is strategically in a better position to defend its market share and have greater control over yield in the longer run. Meanwhile, Singapore’s market overcapacity should ease over time, as limited capacity injections by SIA, Tigerair and Jetstar Asia should help offset modest traffic growth. However, this is unlikely to be sufficient to buffer downward price pressure and SIA may suffer further passenger yield declines in FY15 before a more broad-based market consolidation and sustained traffic recovery support a market turnaround. Ultimately, SIA has to focus on addressing competition on the Australasia-Europe routes as well as regional and long-haul LCC routes. UBS maintains Neutral on SIA, with TP lowered from $10.50 to $10.30 based on anticipated traffic growth decline and to account for consolidation of Tigerair’s net losses.

SG Market (20 Nov 14)

US Market: US stocks dipped lower as Fed minutes did little to move the market and gave no additional clarity as to when US interest rates would be hiked. The blue-chip DJIA slipped 2 pts to 17,686 (-0.01%), while the broad-based S&P 500 eased 3 pts to 2,049 (-0.2%) and the tech-heavy Nasdaq Composite lost 27 pts to 4,676 (-0.6%). The small cap Russell 2000 retreated 1.1%. Minutes of the latest FOMC meeting showed a divided view amongst policy makers over the outlook for inflation and the economy, with some wary about a possible downshift in longer term inflation expectations amid weaker outlook and increased downside risks in Europe, China and Japan. As such, markets were left clueless on where inflation and interest rates are heading, with some investors preferring to remain on the sidelines. In economic news, construction starts unexpectedly fell 2.8% in Oct, but permits surged to its highest level in six years. However, the headline number was slightly below forecast. Tech and telecom shares were amongst the biggest losers, with Yahoo down 2.3% and Microsoft declining 1.1%, while Verizon retreated 1.4%. Qualcomm shed 2.1% after it gave a more conservative five-year outlook compared to its past. Retailers outperformed, up 1.2% as a group, led by strong corporate earnings, with Target surging 7.4% after its 3Q results came in ahead of estimates, while home improvement retailer Lowe’s jumped 6.4% after forecasting full year earnings which exceed consensus forecasts. Office supply chain Staples leapt 9.1% after lifting its 4Q earnings guidance. Among other stocks in focus, Oplink Communications soared 13.8% after being acquired by Koch Optics for US$445m, while Cliff Natural Resources slumped 20% as it looks to exit from its Eastern Canadian iron ore operations. About 6.3b shares were traded on US exchanges, 2% below the three-month average. Declining issues outnumbered advancing ones by 1.6 to 1 on the NYSE and 2.5 to 1 onn the Nasdaq. S’pore shares likely to stay muted as both Wall Street and the STI are crossing into overbought territory. Recent gains on the STI were led mainly by the banks, which were the few to report better-than-expected 3Q results. Short term upside for the index remains capped at 3,360 with support at 3,270. Stocks to watch: *Cosmosteel: 4QFY14 net profit soared 74% y/y to $2m as revenue rose 23.4% to $41.5m, driven by higher sales in the energy sector, offset by declines in the marine sector. Gross margin expanded 1.1ppt to 20.1%. First and final DPS halved to 0.5¢. *Yoma: Formed a 9/45.5/45.5 JV with JALUX and Mitsubishi Corp to operate the Mandalay International Airport under a 30-year concession. Operations are scheduled to commence around Mar ’15. Separately, Yoma has raised its interest in KOSPA, a cold chain related business to 50%, after acquiring the 20% stake from its sister company, First Myanmar Investment Co, for US$20k. *Yanlord: S&P revised its outlook on Yanlord from “stable” to “negative”, while maintaining its 'BB-' long-term corporate credit rating, and 'BB-' long-term issue rating on the company's outstanding senior unsecured notes. Accordingly, the rating agency lowered its long-term Greater China regional scale ratings on Yanlord and downgraded the notes to 'cnBB' from 'cnBB+'. *CNMC Goldmine: Its Sokor Gold project produced another record single gold pour of 2,945.01 oz of gold dore bars, +27% from the previous record. *Weiye: Disposing an industrial property at 17 Kian Teck Road for $5.3m (4.5% below mkt valuation) to Chye Joo Construction, given the sluggish outlook of the property market. The factory sits on a land area of 4,877 sm and has 18 years left remaining on its lease. Weiye is expected to book a net disposal gain of Rmb3.8m (0.04¢/share), and improve proforma FY13 NTA/share by 0.9% to Rmb0.41. *Sarine Technologies: Opened its service centre for Sarine Loupe diamond imaging at its offices in New York's Diamond District at 47th Street, Manhattan. *AVIC Int’l Marine: Its subsidiary, Deltamarin will be providing Aker Arctic Technology with basic design services for two polar class heavy deck carriers. The contract is valued at ~€2m and shall be carried out over ~7 months. *Digiland: Obtained in-principle approval from SGX to be removed from the Watchlist wef today. *GLP: Ex-Chairman Jeffrey Schwartz, who stepped down in early Nov citing health reasons, passed away yesterday.

Wednesday, November 19, 2014


UE E&C: In the midst of obtaining shareholders' approval for its voluntary conditional offer by Southern Capital group in an EGM scheduled to be held on 28 Nov. United Engineers has given its undertaking to sell its entire 68.2% stake in the company. We note that share price of UE E&C has been rising to the current $1.275, indicating that there may be a potential for a counter-offer. From SGX disclosures, we note that since the announcement of the voluntary offer on 3 Oct, Singapore Tong Teik acquired shares at an average $1.257/share, raising its stake from 4.9% to 6.1%.

Kepcorp (technical)

After breaching current resistance ~$9.25, nearest resistance is 20 MA ~$9.40, followed by ~$9.60. Support around ~$8.80. MACD points towards an uptrend, whereas RSI and Stochastics suggests that it is exiting the oversold territory

Mirach (technical)

Mirach: Downtrend still intact, although there may be a slight uptick on both the Stochastics and RSI indicators. The counter may attempt to test the $0.142 resistance in the near-term. Support at $0.133, followed by $0.095.


Midas: 3Q14 results were way below OCBC's expectations, led by higher start-up and finance costs arising from its new plants. OCBC downgraded the counter to Hold with TP of $0.30, with a view that the higher expenses will continue to be a drag to its performance in the next 12-18 months. Being the supplier of basic materials, OCBC expects the business model to be low margin and high volume. The outlook remains uncertain on Midas' ability to gain market share in this competitive market. Hence, OCBC expects revenue contribution to be slow in 2015 and will not be able to offset its operating expenses meaningfully.

QT Vascular

QT Vascular: UOB Kay Hian reckons QT Vascular has all the right ingredients as a possible takeover target - exceptional topline growth, expanding product acceptance and an innovative product growth strategy. House expects its 120-140% y/y sales growth to sustain through 2014-15 as 4Q14 revenue is expected to benefit from China and Japan shipment orders. We view its flagship product, Chocolate® PTA, as well as regulatory approvals in Asia as potential near-term catalysts. UOB Kay Hian maintains BUY with TP of $0.60.


NOL: UOB Kay Hian maintains Buy with TP of $1.01. House reckons BUY on cheap valuation. NOL’s share price has dropped 22% since end-June to a five-year low, driven by the expectation of a third year of losses, weak freight rates, port congestion on the US West Coast and the potential sale of its profitable logistics business. House thinks the market has overacted to these negative factors. Current valuation at only 0.74x 2015F P/B is very cheap, vs its historical 0.9-1.0x P/B and peers’ average of 0.8x P/B.

Keppel Infrastructure Trust/ CitySpring Infrastructure Trust

Keppel Infrastructure Trust/ CitySpring Infrastructure Trust: Will be combining to form an enlarged entity, with market cap of $1.9b, and assets of $4b. CIT will acquire KIT’s assets for $1.326b via issuance of new CIT units, where the swap ratio is 2.106 new CIT units for every KIT unit. There will be a special distribution of $30m to CIT holders before the completion of the merger, and another special distribution of $30m to enlarged base of CIT holders (i.e. inclusive of KIT unitholders who have swapped into CIT) post-merger, but before the equity fund raising. The expected completion of the combination is 2QCY15. Post-combination, CIT will be the surviving trust, and be renamed as Keppel Infrastructure Trust (nKIT). The new Keppel Infrastructure Trust will acquire a 51% stake in Keppel Merlimau Cogen (KMC) which owns a 1300MW combined cycle gas turbine power plant in Jurong for $510m, from Keppel Corp. The acquisition is payable cash, for $255m shares and $255m interest bearing notes issued by KMC to nKIT. The funds required will be raised via equity fund raising, specifically, by way of an institutional placement and a preferential offering. This acquisition is also expected to be completed in 2QCY15. The deal is expected to be earnings accretive.

SG Market (19 Nov 14)

US Market: US stocks rallied, sending the Dow and S&P 500 to fresh records on supportive economic data from Europe and US, with a mega biotech M&A driving gains in the healthcare sector. The blue-chip DJIA climbed 40 pts to 17,688 (+0.23%), while the broad-based S&P 500 advanced 10 pts to 2,052 (+0.51%) and the tech-heavy Nasdaq Composite added 31 pts to 4,702 (+0.67%). The small cap Russell 2000 rebounded 0.5% after three days of losses. Markets had a positive start as investor sentiment in Germany rebounded strongly in Nov in its biggest increase in 11 months, suggesting that the economy could be turning around. Meanwhile, European auto sales rose for the 14th consecutive month in Oct. Investors also cheered news that Japan would delay a planned sales tax hike as PM Shinzo Abe called for snap elections. The enthusiasm spilled over to the US, which reported a nice rebound in home-builder confidence and benign wholesale inflation in Oct, as higher costs of services and food outweighed a slump in enery prices. Among the 9 out of 10 industry groups that advanced, healthcare (+1.6%) and raw materials (+1.1%) outperformed. Newmont Mining surged 3.4% as gold advanced to a two-week high. The healthcare sector was led by biotech stocks that continued to surge following the US$66b takeover of Botox maker Allergan (+2%) by drug firm Actavis (+8.7%) in the year’s biggest pharmaceutical deal. Medical equipment maker Medtronic jumped 4.7% after its 2Q earnings met expectations and on possibility of a repeal of a medical device tax. The group will also go ahead with its proposed acquisition of Ireland-based Covidien (3.7%) despite new offshore tax rules. Other healthcare gainers include UnitedHealth (+1.8%) and Gilead Sciences (+3.3%).. Home Depot slid 2.1% after the home improvement chain reaffirmed its FY14 guidance amid slowing home prices abd sales and reported 3Q earnings that slightly missed estimates. Clothing retailer Urban Outfitters tumbled 6.6% after its 3Q earnings came in below expectations. Among other stocks in focus, Intel rose 1.4% on plans to merge its mobile phone and tablet businesses with its PC chip unit, while Apple was up 1.3% to US$115.47. Volume was light with 6.1b shares traded on US exchanges, 5% below the three-month average. Advancing issues outnumbered declines ones by 1.5 to 1 on both the NYSE and Nasdaq. S’pore shares may track the positive overseas leads from Wall Street and early moves on Asian bourses in Tokyo (+0.5%) and Seoul (+0.1%) but upside for STI is lieklty to be capped at 3,360 with support at 3,270. Stocks to watch: *Keppel Infrastructure Trust/CitySpring Infrastructure Trust: Will merge to create the largest infrastructure-focused business trust listed on SGX, with an estimated market cap of $1.9b and assets of $4.0b. CIT will acquire KIT’s assets for $1.3b via issuance of new units, on the basis of 2.106 new CIT units for every KIT unit. The enlarged trust will acquire a 51% stake in Keppel Merlimau Cogen which owns a 1300MW combined cycle gas turbine power plant on Jurong Island for ~$510m, resulting in an equity fund raising of up to $525m, via issuance of new units (preferential offering and placement). Keppel Corp (22.9% stake) and Temasek (19.97% stake) intends to subscribe for their pro-rata entitlements under the preferential offering. The deal is expected to be earnings accretive and CIT unit holders will receive a special distribution of $30m before the completion of the merger, and another $30m post-merger but before the equity fund raising. The expected completion of the merger is 2Q15. *Keppel Corp: Selling its 51%-stake in Keppel Merlimau Cogen (KMC) to Keppel Infrastructure Trust for $510m, via shares ($255m) and interest-bearing notes ($255m) issued by KMC to KIT. KMC is a 1,300 MW combined cycle gas turbine power generation facility, which will enter into a 15-year capacity tolling agreement with Keppel Electric. The maximum capacity fee is $108m p.a. as long as KMC meets the availability and capacity test targets. *Genting Hong Kong: Acquiring a 50%-stake in Magical Gains Holdings for KRW130b (HK$917.4m), which will subsequently develop, manage and operate the casino business at the Hyatt Regency Jeju Hotel in South Korea. *Tiong Seng: Awarded a $132.4m contract by DBS Trustee (for Mapletree Industrial Trust) to construct a high-tech industrial facility. Works include the erection of two blocks of 8 and 11- storey high-tech industrial buildings and will be located in the Telok Blangah Industrial Estate at Depot Road. Construction is expected to commence in Nov’14. Latest contract brings Tiong Seng’s order book to $1.5b, stretching revenue visibility till 2020. *Sincap: Entered into a sales and purchase agreement to acquire LTN Land for $38.5m. LTN Land has a 59.5% indirect interest in Richardson Trust, which holds a land parcel in South Perth, WA, Australia. The acquisition will be funded via the issue of 260m new shares at $0.148 apiece. The land will be developed into a mix-property development consisting of a 10-storey office building and a 14-storey mixed-use development comprising a ground floor commercial unit and residential apartments. *Asiatic Group: Entered into a non-binding MOU with CGNPC Solar-Biofuel Power to pursue joint development of renewable energy type projects throughout the Asia Pacific region.

Tuesday, November 18, 2014

GLP (technical)

GLP: Recent downtrend may see some respite if today's candlestick forms a hammer. Further, Stochastics and RSI are at/close to oversold levels. Otherwise, counter may continue to trade downwards towards the next support at $2.40. Resistance levels are at $2.65 and 2.74.

Frasers Centrepoint Trust

Frasers Centrepoint Trust: AmFraser initiated coverage on FCT with a BUY rating and TP of $2.24. House expects FCT to continue to deliver steady DPUs from its portfolio of six suburban retail assets, while capturing potential upside from the newly-acquired Changi City Point. Thus, unitholders can look forward to stable DPU yields of ~6% p.a. Despite an increasing supply of retail floorspace, Causeway Point and Changi City Point are unlikely to face competition in their respective primary trade areas. Meanwhile, Northpoint is firmly entrenched in Yishun as it is located right next to Yishun MRT. These three properties, which are the largest in the portfolio and accounted for 83% of NPI in 4Q FY9/14, may continue to register growth.


Centurion: Centurion announced that it has won an open tender for a 12,000-bed dormitory land plot, comprising a 99-year-lease land area of 12.6ha, in Juru, Penang, Malaysia from Penang Development Corporation for $8.1m. This further strengthens its foothold in Penang, with total 17,000-bed capacity expected in Penang alone by 2018. Despite a potential surge of 100k beds coming onto the market over the next few years, OSK DMG remains positive on Centurion as we believe it stands out among its listed peers in terms of cost structure, margins and experience in the dormitory business. House maintains BUY with TP of $0.89 (64.8% upside), and expects earnings from this addition to only come in partially from FY17 onwards.

Thai Bev

Thai Bev: The weak tourism trend in Thailand is the main reason why spirits under-performed in 3Q, becoming the primary reason for the earnings shortfall. While spirits should do slightly better in 4Q, higher A&P spend for non-al and food suggest an earnings upside surprise there is unlikely. Beer offers the best potential for an earnings surprise; it did fine in 3Q vs. terrific in 2Q. CIMB keeps its Hold rating with TP of $0.78.

SG Banks

SG Banks: Maybank-KE upgraded Singapore banking sector from Neutral to Overweight based on two catalysts: earlier wariness over China exposures proved unfounded, instead banks should benefit from fund reallocations and (ii) higher interest rates starting mid-2015 should strengthen NIMs. The house raises FY14E-16E EPS by 10%, bumping up TPs for all three banks, to account for better than expected NIMs and non-interest income. Amongst the three banks, DBS remains the top pick Buy with TP raised to $23.50 (from $23.40). It is best-positioned to benefit from the imminent hike in interest rates. UOB was upgraded to Buy, with TP raised significantly to $26.70 (from $25.30). Although the bank is not as well-positioned for higher rates due to its high loan-deposit ratio, its less-favourable funding profile has been priced in and catalysts should come from stronger deposit growth and improving housing-loan quality. Meanwhile, the house maintains Hold on OCBC despite raising TP to $10.70 (from $10.10). Caution on OCBC stems from the uncertainty of the incorporation of Wing Hang Bank.


Yongnam: CIMB cites that 3Q14 losses were expected. Although 9M14 losses appear deeper than its FY14 forecast due to lack of contracts until now, the contribution of various structural works projects in Singapore and HK in 4Q will stem the losses experienced in FY14. CIMB makes drastic cuts to its FY15 estimate for margin pressure given the current pressing environment but believe the group should return to black then. House maintains Reduce rating with TP of $0.18.

Trans-cab (IPO)

Trans-cab IPO: Having just launched its IPO less than a week ago to list on SGX, taxi operator Trans-cab has cancelled its IPO plans, highlighting that the decision was due to a new premium adjustment charges of ~$1.83m rendered by the group’s insurer against the group’s taxi fleet. Trans-cab guided that the group would need time to evaluate the new info alongside other insurance premium billings received in 2H14, and has thus decided not to proceed with its IPO at this point of time. The group had initially planned to offer 168m shares at a price of $0.68, to raise net proceeds of $97.8m, earmarked for use of the expansion of its taxi operations, diversification into other transport businesses, and working capital use. The initial proceeds received will be returned to applications within three market days from the discontinuation of the offering.

Q&M Dental

Q&M Dental: CIMB initiates with an Add rating and TP of $0.55. House cites that Q&M is under-researched and undervalued, reflecting the market’s lack of appreciation for its almost recession-proof business model, backed by both its strong dentistry franchise and overseas expansion plans. House likes Q&M for its strong recurring domestic earnings and international expansion plans. Re-rating catalysts are the opening of more clinics, higher charges, expansion through acquisitions, joint ventures and/or strategic alliances, as well as the listing of its overseas dental business.

Libra Group

Libra Group: Recently announced that it has been awarded $9.5m of M&E contracts, which brings its order book up to an estimated $94.4m year-to-date. This is ~3.0x of last year’s revenues (FY13: $31.5m) and represents good momentum for the group which has announced $21.6m of new contracts over the last two months. The latest awards comprise a $5.4m M&E sub-contract for a proposed condo project in Tampines (to be completed in Jul-16), and a $4.1m sub-contract for a teaching facilities building at Temasek Polytechnic (to be completed in Aug-15). OCBC believes the new management team is gaining traction in terms of growing business volumes, while leveraging on tailwinds from the firm public construction outlook. Libra is OCBC's top pick in the small cap space and house continues to see value at current levels given significant potential for earnings and dividends growth ahead. OCBC reiterate BUY with TP of $0.33.


Ezion: Nomura reaffirm its Buy and TP of SGD2.64, citing that investors are buying into the sweet spot as the counter faces near-term oil price sentiment issues. House expects fundamentals to improve- net debt to decline, FCF to increase, ROE to sustain above 21%, and core EPS CAGR of 58% y-y.

CSE Global

CSE Global: Clinched two contracts worth US$17m ($22m) from a US energy company for a deepwater project in the Gulf of Mexico. Work has commenced and slated for offshore execution from 4Q14 to 4Q15. OCBC believes CSE’s focus on maintenance brownfield projects has provided the group with a buffer against industry headwinds. Coupled with CSE’s 9M14 order wins of $288.1m, this brings total announced contracts secured YTD to $310.1m, or 79.9% of OCBC's FY14 order wins forecast. House maintains HOLD and TP of $0.68.

Wee Hur

Wee Hur: 3Q14 net profit surged 19-fold y/y to $88.8m, on the back of a gross margin expansion to 43.3% (+30.9 ppts), while revenue spiked to $455.3m (+393%). The stellar results were underpinned mainly from full revenue recognition on completion of 60%-owned industrial development- Premier@Kaki Bukit, which obtained TOP in Aug 2014, as well as progressive recognition of its fully-sold residential project- Parc Centros. This brought 9M14 earnings to $102.5m (+680%) and revenue to $603m (+146%). Wee Hur's construction segment has an order book of $397.2m, which will provide project flow through FY17. Going forward, the group's development arm is currently in the midst of due diligence for its proposed $24m investment in Jiangsu, China, and has commenced development for its 60/40 JV of an industrial project in Woodlands, Singapore. Wee Hur's new dormitory business is on track to be fully completed and operational by Dec 2014, providing the group with a recurring revenue stream ahead. At $0.385, Wee Hur is valued at 1.2x P/B

SG Market (18 Nov 14)

US Market: US stocks edged fractionally higher as stimulus talk by ECB President Mario Draghi and huge deal flows helped offset concerns over global growth after Japan slipped into recession. The blue-chip DJIA climbed 13 pts to 17,648 (+0.07%), narrowing missing a record, while the broad-based S&P 500 crept up 2 pts to 2,041 (+0.07%) and the tech-heavy Nasdaq Composite shed 18 pts to 4,671 (-0.4%). The small cap Russell 2000 lost 0.8% for its third day of losses. The CBOE Volatility Index jumped 5.1% to 13.99, suggesting that traders are getting a little jittery. Reinforcing the sentiment, JPMorgan advised investors to dump US equities in favour of European stocks on valuation grounds and ECB’s stimulus package. Markets were under pressure in the morning trade on news that Japan’s economy contracted 1.6% last quarter instead of an expected 2.2% growth, and less-than-stellar manufacturing data in the US. Industrial production fell unexpectedly in Oct, the second drop in three months, weighed down by declines at utilities, mines and automakers. Separately, the Empire State manufacturing index rebounded slightly in Nov but still well below Sep levels, indicating a downshift in activity. Comments by Draghi that the ECB would be open to buying government bonds, if needed, helped underpin the market in the afternoon session. In deal news, oil services giant Baker Hughes surged 8.9% after agreeing to a US$34.6b takeover offer by rival Halliburton (-10.6%), while Allergan leapt 5.3% on news that it is close to a US$66b acquisition deal by drug maker Actavis (+1.7%%). This is likely to end Valeant Pharmaceutical’s (+1.9%) hostile bid for the Botox maker. Meanwhile, DreamWorks tripped 14% on reports that merger talks between the Hollywood studio and Transformers toymaker Habro (+4.4%) fell through. Nasdaq stocks were weak, weighed by Google (-1.5%), Gilead Sciences (-1.6%) and Apple (-0.2%). Among other stocks in focus, Tyson Foods jumped 5.8% after its 4Q earnings beat forecasts, while Linkedin lost 4.5% on plans by Facebook (-0.9%) to launch a professional version of its social network in the next few months. Ford gained 2.6% after its new aluminium F-150 pickup was named the best buy for 2015. Volume was light with 5.7b shares traded on US exchanges, 12% below the three-month average. Declining issues outnumbered advancing ones by 1.25 to 1 on the NYSE and 1.93 to 1 on the Nasdaq. S’pore shares are likely to remain lackluster, suffering from a lack of catalysts and trading interest as funds head northwards to Hong Kong and Shanghai, which is beneiftting from the trading link,, giving international investors direct access into the vast Chinese market. Topside resistance for the STI is capped at 3,360 with support at 3,270. Stocks to watch: *Wee Hur: 3Q14 net profit swelled 19-fold y/y to $88.8m, boosted by a surge in gross margin to 43.3% (+30.9 ppts). Revenue jumped nearly five-fold to $455.3m, mainly due to the full recognition of industrial development, Premier@Kaki Bukit, which attained TOP in Aug ‘14. Construction order book stood at $397.2m, which will provide work through FY17. BVPS at $0.33. *CapitaLand: Entered into a 50/50 JV with the Credo Group to develop an integrated development in Central Jakarta, comprising a Grade A office tower, mid-to-high end residential units, serviced residences and retail space spanning a total gfa of more than 40k sqm. Construction is expected to commence in 2015 with estimated completion in 2018. The total development cost is ~$220m. *Centurion: Awarded an open tender to design, build and operate a 12,000-bed purpose-built workers village in Penang (2 phases of 6,000 beds each). The group will pay RM20.8m for the 99-year 12.6acre land plot. *Mermaid Maritime: Its Indonesia business unit has chartered in a 5-year old DP2 dive support vessel, for 5 years at a cost of ~US$15m per year, with options to extend for another 5 years. Vessel delivery is scheduled in Dec ’14. The Indonesia flagged vessel will undertake inspection, repair and maintenance contracts we well as perform saturation diving for construction support, ongoing field maintenance and call out repair. *Boustead: 88.2%-owned Esri Australia has been award a landmark A$16.5m ($18.6m) contract from the Australian Government Department of Defence (AGDD). The three-year contract includes the provision of Esri ArcGIS software, professional services, training and after-sales software services to AGDD, and is expected to positively impact FY16-17 group earnings. *CSE Global: Clinched two contracts worth US$17m ($22m) from a US energy company for a deepwater project in the Gulf of Mexico. Work will be executed over 4Q14 - 4Q15. *Midas: Subsidiary Jilin Midas Aluminium Industries secured Rmb151.7m worth of contracts to supply high-speed train car body components to CNR Changchun Railway Vehicle, bringing the group’s year-to-date orders to Rmb615.7m. The new contracts are expected to positively impact FY14-15 earnings. *TIH: Signed a MOU with non-performing loans servicing specialist, Sheng Yuan Investment Management, and a leading Chinese online finance marketplace, to establish a peer-to-peer online platform to provide financing secured by high quality collateral (including properties) in China. *RH Petrogas: Commenced drilling the first of its 1,008 development wells approved in Fuyu 1 Block in Jilin, China. Up to 15 wells will be drilled and completed before end of 2014 and production is expected to start in 2015 spring. *Trans-Cab IPO: Cancelled on eve of offer closing, after being informed of unexpected additional insurance premium billings.

Monday, November 17, 2014

ST Engineering (technical)

ST Engineering prices are in downtrend with little sign of abating. Downward momentum is strong as MACD line is in negative territory but continues to lead signal line down, OBV shows traders more ready to sell then buy. However, the downward spiral may be checked by RSI showing oversold signal for the first time since the downtrend started on 05 Nov. Reasonable support should be found at $3.40


Spackman: Swung into a 3Q14 net loss of US$5.0m, from a net profit of US$4.3m a year ago. Revenue shrank 66% y/y to US$3.6m, mainly due to the absence of production revenue and share of profit from the film production Cold Eyes. Meanwhile, cost of sales remained unchanged, and bottom line was dragged by IPO expenses and increased headcount. Nevertheless, management expects the current long winter holiday for students in Korea to be a strong season for film admissions. As a catalyst, its subsidiary, Opus Pictures, is scheduled to release the film, Big Match on 27 Nov. Separately, the group proposed to acquire 51% or more of Novus Mediacorp - an investor, presenter and ancillary distributor for 54 Korean theatrical films since 2009. Novus' wholly-owned subsidiary, Novus Entertainment, is currently producing three major films for release in 2015- Life Risking Love, Chong Hee - The Emperor's Love and Korean Gangster. At $0.25, Spackman trades at a trailing 24.7x P/E and 4.1x P/B.


Midas: 3Q14 bottom line disappoints again as it plunged 91% to a dismal Rmb1.5m, mainly the result of unchecked costs. 3Q14 and 9M14 earnings respectively made up only 1.4% and 25.4% of Bloomberg’s full year FY14 profits. Gross profit rose 39.9% y/y to Rmb87.7m as cost of sales was Rmb1.9m lower despite sales being 7.7% or Rmb23.1m higher at Rmb324.2m. The higher GPM was mainly market driven, as ASP of the LME 3-month aluminium alloy in 3Q14 (US$2048/mt) is 13.5% higher than 3Q13 (US$1805/mt), lifting ASP of aluminium alloy extruded products (AAEP) as well. Hence, although undisclosed, we suspect sales volume of its core AAEP is at flat to down. Operating efficiency is a concern, increase in Opex due to start-up costs at the two new plants should have started to stabilize by 3Q14. However, we saw Opex continued to rise 1.5% q/q on the back of 3.6% lower revenue. Y/y, opex rose 36.8% to Rmb53.2m, driven by higher packaging expenses and staff costs as well as higher depreciation and higher start-up costs for new plants. Profit from its 32.5%-owned associate decimated from Rmb10.8m a year ago to Rmb0.3m, mainly the result of higher operating expenses as well. In 3Q14, Midas won two new metro contracts in Changchun and Nanchang worth Rmb52.2b and several awards but failed to win investors’ interest. A cause for concern is its trade and other receivables, which rose Rmb149m from Jun14 despite revenue being Rmb12.1m lower. Also, net gearing soared from 0.62x at Jun14 to 0.86x at Sep14. Management is hopeful that Midas can continue to benefit from the planned acceleration in infrastructure investments in China. We remain circumspect on the short-term earnings prospects of Midas, until and unless it can check its opex, secure enough contracts to boost utilisation at the two new plants in Luoyang and Jilin, and improve its receivables turnover. In the long-term, however, we believe Midas can stand to benefit from the continued railway expansion efforts in China, as well as its proving track record in overseas projects. At $0.295, the stock trades at 0.57x P/BV and is close to it 52-week low of $0.285

Grand Banks

Grand Banks: As per its profit warning two weeks back, Grand Banks widened its 1QFY15 net loss to $1.3m, from a loss of $0.6m a year ago. Revenue dropped 32% y/y to $6.5m, due to delays in the sale of yachts in its inventory. Gross margin contracted 9.1 ppts to 9.5%, due to amortization of tooling and intangible assets arising from the acquisition of Palm Beach Motor Yacht and restructuring expenses from streamlining of operations. Grand Banks’ order book depleted to $17.5m (4QFY14: $19.8m), which will be recognized over FY15. Amid the uncertainties in the global macro landscape, sales of yachts are expected to be lumpy going forward. The counter remains untraded today. At the last close of $0.215, the stock trades at 0.77x P/B.


Straco: Straco 3Q14 net profit grew 28% y/y to $19.5m, keeping pace with the 26% revenue growth to $38.6m. Top line was driven by higher visitor numbers (+31%) to its Shanghai Ocean Aquarium and Underwater World Xiamen. For 9M14, the group recorded net profit of $33.3m (+17%) and revenue of $72.9m (+25%). The strong growth is set to continue, as domestic travel in China is expected to grow, underpinned by a series of new measures and spending by the Chinese government to boost the local tourism industry. At $0.725, Straco trades at 15.4x forward P/E and 3.4x P/B. There is currently only one broker that covers the counter; it rates the stock at Buy with TP of $0.78.

PACC Offshore

PACC Offshore: 3Q14 results were below expectations, as net profit slumped 30% y/y to US$14.6m, due to a US$5m loss in its Mexican JV, GOSH, where seven vessels remained idle. Revenue crept up to US$67m, boosted by the offshore supply vessels segment (+8.1%), but offset by weaker contribution from the transportation & installation (-10.5%) and offshore accommodation (-3.1%) segments. Gross margins were weaker at 25.9% (2Q14: 30.1%, 3Q13: 41.1%), due to lower utilisation as some vessels underwent repair or were off-hired. Bottom line would have been worse, if not for a vessel sale gain of US$11.6m. For 9M14, net profit of US$63.2m (-9%) and revenue of US$178.2m (-2%) accounted for 76% and 71% of the street's full year estimates. Management notes that following the downtrend in crude oil price, oil majors may shift capex from exploration towards production and maintenance- leading to increased demand for its vessels. Nevertheless, Maybank-KE lowers FY14-16e EPS by 7%-11% to account for more conservative day rates and utilisation. While the house maintains its Buy rating, TP is lowered to $1.12 (from $1.26), and could be revised further pending sector review. At $0.665, PACC trades at 11.1x forward earnings and 0.76x P/B.

Pacific Radiance

Pacific Radiance: Pacific Radiance has secured a long term charter contract worth US$140m, including extension options, for one vessel- ahead of its expected delivery in 2016/17. The vessel will be chartered to a new client for offshore support services in a key emerging market. Just a week ago, the group posted a week set of 3Q14 results, although net profit grew 24% y/y to US$13.1m, on a 9% drop in revenue to US$44.4m, weighed by its subsea business (-22%) due to lower vessel utilisation and vessel dry-docking. The bottom line was boosted by disposal gains of US$11.5m, which offset weaker gross margin of 21.1% (-20.1 ppt). Post-results, majority of the street lowered its TP for the counter, on the back of the weak sentiment for oil and gas players due to the falling oil price environment. Bloomberg consensus has 7 Buys and 1 Hold rating for the counter, with 12-month TP of $1.43.


Olam: 1QFY15 results review by UOB Kay Hian; Olam’s core net profit of $32.2m fell below expectations on lower contribution from the hazelnuts and dairy operation. The sharp decline in prices is not a good business environment for the supply chain operation as volume and prices are usually committed months ahead before delivery, which may lead to another volatile quarter for Olam before margins stabilise. The underperforming results were due to: a) Losses incurred for the early committed short position in hazelnuts as hazelnut prices jumped more than 50% within 6 months as frost cuts the total production from Turkey (produces 75% global hazelnuts) by about 35%. b) Poor performance from the dairy upstream operation in Uruguay and Russia. The dairy business was negatively impacted by: a) a sharp price decline due to high supply as Russia stopped buying dairy products from Europe, forcing European supplies to be redirected to other global markets, and b) inefficient operation in Uruguay. House maintains HOLD with TP of $2.35 and expects volume to pick up to compensate the weaker margins and the loss of volume from discontinued operations over FY15.


Centurion: 3Q14 revenue rose 46% to $20.9m, and net profit surged 49% to $7.9m, driven by the increase in bed capacity at Toh Guan, increased occupancy rate of +90% in Msia as well as maiden revenue from RMIT Village, and two weeks of income from its UK student accomodation assets. Gross margin improved to 69% from 58% due ot higher rental rates from both its Singapore and MSia dormitories. The results show that recent oversupply fears have been overhyped. DMG notes that while 100k new beds will be streaming into the market in the next two years, channel checks and market research show that this will be offset by a total of 74k short term dormitory beds would be deemed as expired or unusable in the next three years. DMB maintains its Buy rating with TP $0.89, noting that Centurion's expansion plans in Spore and Msia are on track.

Global shipbuilding

Global shipbuilding: UBS advices to be selective on shipbuilding stops in weak oil price environment, reiterates Buy on Keppel Corp (TP $11.02), Neutral on Yangzijiang (TP $1.21) and Sell on Sembcorp Marine (TP $3.56). In the environment of weak commodity prices, lower trading volume and uncertain emission standards regulatory outlook, UBS revises down 2014E/15E ship order estimates by 27%/33% respectively. Global utilisation for 2015E is pegged at 58%, and ship prices are to come under pressure. The LNG space is a bright spot but is also clouded by outlook uncertainty. A wider adoption of LNG bunkering could leave current operators with an obsolete fleet. However, acquiring LNG/dual fuel engine ships now could expose owners to risk from the uncertainty of timing for LNG infrastructure investment. Keppel has been performing up to expectations and keeps a sustainable dividend payout policy. Keppel’s current main/flagship products (jackups/FLNGVs), customer diversity as well as close government links should help its order book through challenging times. Yangzijiang’s gross order book stands at US$4.6b comprising of 114 vessels, which should keep utilisation at its four shipbuilding yards fairly high. Almost a third of its pre-tax earnings is derived from non-shipbuilding activities – returns from its HTM financial products and profit from its microfinancing divisions. Although Sembcorp Marine enjoys similar customer diversity and close government links, stock has priced in rich valuations and upside is limited. Singapore and Korea shipbuilder stocks display high correlation (93% and 80%) to oil prices but that for Japan (0%) and China (39%) are low.


Oxley’s 1QFY15 results missed expectations by a wide margin, forming only 7% of full year FY15 Bloomberg estimates. Profits crashed 96% y/y to $10.1m as revenue plunged 82% to $120.3m and GPM dropped 14.4ppt to 33.5%. Of the 11 projects (all Singapore) that contributed to revenue and gross profit, 7 are fully sold, three are mostly sold (84%/96%/99%) but FloraV, a freehold development, is only 32% sold. Operating expenses ballooned 42% to $14.5m mainly due to more aggressive advertising amidst the soft residential property market and higher finance costs due to increases in interest on MTN and bank loans. Otherwise, absence of $15.8m provision for CEO’s incentive bonus is partially offset by offset by $10.2m increase in FX adjustment losses. A one-off $6.7m unrealized fair value adjustment gain helped to lift bottom line. Oxley’s main disadvantage lies in its high dependence on Singapore property market. Of the 30 projects launched in 2014 and contributing to revenue, 28 are in Singapore. Management expects the cumulative impact of various property cooling measures in Singapore as well as the general health of Singapore’s economy to significantly impact Oxley’s results in FY15. Lastly, we again want to highlight that the high net gearing of 3.9x as of Sep14, despite a slight improvement from 4.1x in Jun14, is still a nagging concern. The saving grace is that the company is consistently capable of generating positive operating cashflow. Oxley trades at 3.6x P/BV and 38.12x annualized 1QFY15 P/E.

Sino Grandness

Sino Grandness: 3Q14 net profit rose 29.8% y/y to Rmb218.3m bringing 9M14 net profit to Rmb447.8m. Meanwhile, 3Q14 revenue of Rmb1b (+37.3%) brought 9M14 revenue to Rmb2.3b (+35.3%) thanks to increased sales across all product segments, Notably, its beverage sales swelled 43% to RMb622.5m from increased production capacity and demand, and sales of its domestic canned products more than doubled to Rmb140.3m (+128%) from the expansion of distribution network in PRC. Gross profit margin improved 1.1ppt to 39.2%. Bottom line grew at a slower clip due to increased distribution and selling expenses. Sino Grandness has commenced production in its new juice facility in Hubei, China, which has a maximum production capacity of ~240k tpa. This is expected to gradually reduce the group's outsourcing costs, as well as to better manage its own production volume. No updates provided regarding the IPO of Garden Fresh. That said, Sino Grandness crossed its October liquidity hurdle as bondholders representing 80.5% of the principal amount of the first tranche of convertible bonds (CBs) intend to extend the maturity date from 19 Oct’14 to 30 Jun’15. That said, should the IPO not occur by Jun’15, a higher liquidity risk looms as Rmb 700m needs to be forked out to to redeem its CBs: 80.5% of the first tranche and second tranche CBs plus penalties for failure to list Garden Fresh. Sino Grandness is trading at annualized 9M14 P/E of 2.2x