Tuesday, March 31, 2015


Banks: The Singapore Savings Bonds (SSB) will be launched in 2H15, targeting at retail investors.

With a minimum investment amount of $500, interest rate for the new product will be linked to prevailing long-term rates of Singapore Government Securities (SGS). But unlike fixed rates of SGS, coupons for SSB will start with lower interest rates and have an annual step-up (capped at the tenth year) into the term.

Investors may also find flexibility in the new product, given the investors can redeem and cash out the bond at any time without penalty. The bonds cannot be traded on the open market.

The new government bond is likely to put upward pressure on funding costs as it competes directly with banks' fixed deposits. But that depends on the size and individual cap of the bond offering.

Notwithstanding, the street generally remains bullish on the banking sector, with the expectation that the gradual tightening in interest rates should translate to an expansion in net interest margin.

Maybank-KE prefers DBS for its low SGD loan-to-deposit ratio (DBS: 79%, OCBC 84%, UOB 97%), allowing the bank ample headroom to lend at higher rates going forward.

OCBC is the riskiest as its loan profile is geared towards later stages of the credit cycle, exposing it to asset quality deterioration in a rising interest rate environment.

UOB fits the bill in a defensive strategy, given its strong capital management (highest CET-1 ratios), limited exposure to commodities and conservative provisioning amongst the three banks, but it is also the least likely to benefit from a NIM recovery.


SG O&M: According to industry newswire Upstream, Brazil’s National Development Bank (BNDES) recently indicated that it does not intend to take the anchor role in the long-term debt financing arrangement for Brazil’s US$25b rig building programme, and has stepped backed from the role of guarantor.

BNDES instead prefers to provide financing via other lenders, rather than directly to Sete Brasil, and will leave it to banks to implement their own risk/credit measures. Yet, without BNDES guarantees, market watchers are uncertain how far lenders will be willing to support the rig building programme.

Meanwhile, shipyards are anxiously awaiting the negotiations of two state-owned banks, Banco do Brasil and Caixa Economica, over a bridging loan due to mature on 17 Apr.

The above news comes as another major setback for Singapore-listed rigbuilders, particularly with Sembcorp Marine (SMM) after one of its agents, Guilherme Esteves de Jesus, who was involved in several Brazilian rig contract awards, was arrested on bribery charges.

While both SMM and Keppel Corp has denied any involvement or wrongdoings in the corruption cases, Maybank-KE reckons that a write-down for the shipyards may be inevitable.

Currently, SMM is building seven drillships worth US$5.6b for Sete Brasil, and have invested close to US$1b in a new yard in Brazil, while Keppel Corp has six submersible orders worth US$4.9b under construction.

Maybank-KE maintain its Sell rating on SMM (TP $2.65) and Hold on Keppel Corp (TP $8.60).


Property: China related property stocks surged in today’s trading, with Yanlord up 4.7% and Ying Li up 7.1%, after Chinese regulators eased policies on China's real estate yesterday.

In a statement, the People’s Bank of China urged financial institutions to support home purchases via a mix of commercial lending and housing provident fund.

The latest policies changes will see commercial bank’s minimum down payment requirements for buyers of second homes reduced to 40% from 60%, while down payment for second home loans borrowing from the housing provident fund is now set at 30% (provided no outstanding mortgages), while first time buyers using the provident fund only need to pay a down payment of 20%.

Separately, the Ministry of Finance announced that individuals selling an ordinary house are exempted from business taxes if the house is owned for more than two years.

The latest move could signal that China still has ample measures in its arsenal to reach its 7% GDP growth target for 2015.

Tianjin Zhong Xin Pharma

Tianjin Zhong Xin Pharma: FY14 net profit grew 2% to Rmb357.8m, while revenue expanded 18% to Rmb7.1b, driven by a strengthened marketing model to boost branding and sales. Bottom line growth was mitigated by gross margin that slipped 1.5ppt to 29.7% from increased share of distribution business, and a broad increase in operational expenses.

CIMB likes this stock, saying that Its Su Xiao Jiu Xin Pill is a household name in China for the treatment of cardio-vascular ailment. IN addition, the house flags that its A share is about 3x of s-share price

The stock is currently trading at 15.2x FY15E PE, vs an average of Singapore, HK, and China peer average of 26.7x.

CIMB maintains Add with TP of US$1.45

SG Market (31 Mar 15)

Singapore shares are expected to track the positive close on Wall Street, spuured by talk of further stimulus action from China and a string of M&A deals in the US healthcare sector.

Regional bourses are all trading higher this morning in Tokyo (+0.9%), Seoul (+0.6%) and Sydney (+1.4%).

From a chart perspective, an upside break of the 3,460 resistance on the STI could pave the way for the next objective at 3,565 over the mid-term. Downside support sits at 3,400.

Stocks to watch:
*Banks: Industry observers highlight that the launch of Spore Savings Bonds in 2H15 could be a win for retail investors but loss for banks' fixed deposits. Proposed 10 year bonds offers a combination of features - redeemable at any time; coupon step up every year so that to-date average interest at any time will match a Spore Government Security bought at the start of the bond and that matures in current year. Investors are therefore incentivised to hold the bonds for as long as possible, but are not punished for early redemptions. Only individual investors may buy the non-tradable bonds, which will be sold in $500 denominations.

*Keppel Land: Parent Keppel Corp has obtained 93.9% control of its property arm. Closing date for the voluntary unconditional cash offer is today at 5.30pm.

*Sembcorp Marine: Secures exclusive Letter of Intent (LOI) with Heerema Offshore Services to engineer and construct a new semi-submersible crane vessel. The LOI is not expected to have any material impact on the net tangible assets and earnings per share of Sembcorp Marine for FY15.

*GLP: Signed three new lease agreements totalling 50,000 sqm in Greater Tokyo, being Ricoh Logistics System (23,000 sqm), Fuji Logitec (16,000 sqm), and a major food wholesaler (11,000 sqm).

*Sinarmas Land: Formally disclosed the re-launch of its proposed spin-off for 49.4%-owned Indonesian industrial property unit, PT Puradelta Lestari.

*AREIT: Acquired six-storey multi-tenanted The Kendall at Singapore Science Park with 20,190 GFA and 16,824sqm NLA for $112m from its sponsor. Estimated initial NPI yield of 6.8% is expected to be DPU-accretive by 0.063 cents per unit, based on the group’s MarFY14 financials.

*Rotary Engineering: Awarded $25m contract from an oil major to construct lubricant plant in Jurong, which is expected to be completed by Apr ‘16.

*IPC Corp: In negotiations with a party for the sale of the group’s remaining seven hotels in Japan, for ~$150m.

*Bumitama: Postpones announcement of final dividends to 10 Apr to coincide with announcement of AGM details. AGM to be held on 27 Apr.

Monday, March 30, 2015

SHC Capital

SHC Capital: Entered a one-month non-binding MOU to acquire Tong Da Medical Device (TDMD) for $120m via the issue of new shares, which will result in a reverse takeover transaction.

TDMD manufactures medical equipment and supplies used in anatomical pathology in China, with operations based in Xiaogan City, Hubei Province.

If the deal goes ahead, the vendors will take control of ~85.1% of the enlarged share capital of SHC.

Prior to the completion of the acquisition, the vendors have agreed for SHC Capital to return the bulk of its available cash reserves (~$45m) to shareholders, which translates to $0.147/share.

The purchase consideration values TDMD at a relatively appealing FY14 P/E of 10x compared to SGX-listed medical equipment manufacturer Biosensors' 33.1x.

As a backdrop, SHC disposed its insurance business to German insurance giant ERGO International in Aug '14 and became a cash company. The group has up to 12 months to seek a new business, or face delisting.

Low Keng Huat

Low Keng Huat: Low Keng Huat's (LKH) 4QFY15 net profit soared 816% to $61.4m, bringing full year earnings to $144.9m (+201%).

In the quarter, revenue skyrocketed to $779.9m from a small base of only $22m in 4QFY14, taking FY15 revenue to $1.23b (FY14: $79.7m).

Development revenue of $1.1b led the surge (FY14: nil), contributed by the sale of DBSS housing units at Parkland Residences and office units at Paya Lebar Square, which obtained TOP in Oct and Nov last year, respectively.

The construction business turned in sales of $85.2m (+187.8%), boosted by the $114.3m contract to design and build Genting Singapore's upcoming hotel at the Jurong lake district.

Operational costs ballooned, led by a surge in admin costs to $32.7m (+93%) from higher employee and directors' remuneration, and other operating expenses of $33m (FY14: $6m), arising from impairment losses for the Balestier Tower and Vung Tau towers in Vietnam.

Net gearing improved considerably to 0.1x from 0.63x a year earlier.

The Paya Lebar Square retail mall (45% owned) is now 99% leased and has contributed to bottom line beginning Dec. Meanwhile, the group announced in Feb the acquisition of a 20% stake in an entity, which will be acquiring AXA Tower for $1.17b, or $1,735 psf.

A first and final DPS of 3¢ and special 2¢ DPS has been declared, bringing the full year dividends to 5¢ (FY14: 3¢), giving a 25.5% payout ratio, shy of the historical 30-40% level Market Insight was expecting. This translates to a 6.7% yield.

Low Keng Huat is currently trading at 0.9x P/B and remains on Market Insight's Yield portfolio.

Sembcorp Marine

Sembcorp Marine: In connection to the widening corruption probe in Brazil, Sembcorp Marine (SMM) disclosed that one of its agents, Guilherme Esteves de Jesus, who was involved in several rig contract awards, has been arrested by the Brazilian authorities.

Recall in Jan '15, an ex-Petrobras executive alleged that shipyard contractors, including Keppel Corp and SMM, paid bribes to secure rigbuilding contracts from Sete Brasil, a company set up to own rigs for state-owned Petrobras.

Due to the ongoing investigations, Sete Brasil is on the brink of a technical default after Brazilian Development Bank delayed a US$3.2b loan, which left the Brazilian rig owner at least two months in arrears on its payments to contracted shipyards.

While both SMM and Keppel Corp has denied any involvement or wrongdoings in the corruption cases, citing their strict anti-bribery policy, Maybank-KE reckons that a write-down for the shipyards may be inevitable.

Currently, SMM is building seven drillships worth US$5.6b for Sete Brasil, and have invested close to US$1b in a new yard in Brazil, while Keppel Corp has six submersible orders worth US$4.9b under construction.

Maybank-KE maintain its Sell rating on SMM (TP $2.65) and Hold on Keppel Corp (TP $8.60).


Bionsensors: OCBC cautions that despite Biosensors International Group (BIG) announcing a series of positive news over the past two months, which includes expanding its endovascular product portfolio through a distribution agreement with Veryan Medical for the latter’s BioMimics 3DTM, as well as progress made with the completion of patient enrolment for its LEADERS Free Japan Trial and CREDIT II Stent Trial. However, the house do not see immediate catalysts, and in view of the group’s largely weak earnings performance, think the group’s recent share price run-up seems a tad too quick. The counter is now trading at around 20x 12-month forward P/E, more than one s.d above its two year historical P/E average. Thus the house is keeping its SELL rating with fair value estimate of $0.60 for now.

SG Market (30 Mar 15)

Key US economic data due out this week is expected to keep Singapore stocks on a tight leash this Good Friday shortened week, despite the slightly positive close on Wall Street, which rebounded from a four-session losing streak.

Asian stocks are trading lower this morning, in Tokyo (-0.5%), Seoul (-0.1%) and Sydney (-1.4%), following softer-than-estimated factory output data just released from Japan, dampening trading sentiment, while investor’s mood in Australia was spooked by news that Chevron has sold its entire stake in Caltex Australia.

From a chart perspective, topside resistance for the STI resistance is tipped at the recent 3,460 peak, with support at 3,400.

Stocks to watch:
*Low Keng Huat: 4QFY15 net profit soared 816% to $61.4m, while revenue skyrocketed to $779.9m from a small base (4QFY15: $22m) due to revenue recognition from Paya Lebar Square which obtained TOP on 3 Nov ’14. The construction business also aided top line from increased activity at Genting Hotel at Jurong Town Hall Road. Bottom line growth was partially weighed by increased expenses and a $3.8m share of JVs’ losses (4QFY15: $7.9m). First and final DPS of 3¢ and special 2¢ declared, bringing full year DPS to 5¢ (FY14: 3¢). NAV/share at $0.82.

*Jardine Cycle & Carriage: To spend US$615m for a 24.9% stake in Siam City Cement Public Company (SCC), the second largest cement manufacturer in Thailand. SCC owns three cement plants with a total production capacity of 14.5m tonnes per annum. Proforma FY14 NTA is expected to drop from US$12.00 to US$10.70, while EPS is expected to improve 4.1% to US$2.40.

*Sembcorp Marine: In relation to corruption issues in Brazil, Sembcorp Marine disclosed that one of its agents, Guilherme Esteves de Jesus, has been arrested by the Brazilian authorities. Guilherme was involved in the award of drill rig construction contracts by Petrobras to SembCorp Marine.

*IEV: Proposed renounceable rights issue of 94.6 new shares at $0.07 apiece, on the basis of one rights share for every two ordinary shares held. The rights issue is expected to raise net proceeds of $6.5m and is expected to be used for the development of the Paburan KSO E&P Program (68.1%), construction of the biomass plant in Vietnam (23.2%), expansion of the CNG supply chain in Malaysia (7.7%) and general working capital (0.9%).

*Koh Brothers Eco Engineering: Proposing a capital reduction exercise, reducing its fully paid up share capital from $30m to $16.5m. The $13.5m cancellation of shares will aid to write off the accumulated losses of the company as at 31 Dec ’14.

*MTQ: Expecting to incur goodwill impairment for the Engine Systems and Binder Engineering operations in Australia, which will result in a loss making quarter for 4QFY15. Nonetheless, the group still expects to remain profitable for FY15.

*SHC Capital: Entered non-binding MOU to acquire Tong Da Medical Device for $120m, via the issuance of shares, which will result in a reverse takeover transaction. The offer prices Tong Da at 10x FY14 P/E. The allotment of consideration shares and issue price will be finalized at a later date.

*Chip Eng Seng: Sold a vacant development site at 170 Victoria Street, Melbourne for $64.8m. The settle date is on 26th Mar ’16. The contract is not expected to have any material impact on the net tangible assets and earnings per share for Chip Eng Seng for DecFY15.

*Loyz Energy: Inks two MOUs with India’s Sun Petrochemicals, one of which is a significant JV between the two, to jointly bid for upstream E&P projects. In the second MOU, Loyz Energy will transfer and assign two production sharing contracts held by its 51.8%-owned subsidiary in India to Sun, which will work towards production.

*Changjiang Fertilizer: Entered into placement agreement for 18.0m new ordinary shares at $0.02 per share, and an interest free convertible loan agreement for principal amount of $0.36m convertible into 18m shares at a conversion price of $0.02.

Friday, March 27, 2015


SGX: MAS is introducing three broad initiatives to widen the range of simple and low-cost investment options for individual investors to achieve their retirement objectives.

These are:
1) Improve the availability of corporate bonds
2) Enhance retail access to Exchange Traded Funds (ETFs)
3) Introduce a new Singapore Savings Bond (SSB)

To make plain vanilla corporate bonds more readily available to Singapore retail investors, the MAS and SGX will ease the financial and administrative costs for issuers seeking to tap the retail market.

Under a proposed bond seasoning framework, eligible corporate issuers which meet certain criteria such as size, listing track record and credit profile will be able to re-size wholesale bonds into smaller sizes after a six-month seasoning period and offer to retail investors on SGX.

MAS will also allow issuers which satisfy more stringent criteria to offer bonds directly to retail investors without need for a prospectus and seasoning period.

The second initiative will reclassify less complex ETFs which make limited use of derivatives, into EIPs from the current SIP status, to expand retail participation. This will take effect from Apr ‘15.

Thirdly, MAS will launch a new type of Singapore Government Securities for individual investors - Singapore Savings Bonds (SSB). SSBs will be principal guaranteed and will offer stepped-up coupons linked to SGS interest rates with no penalty for early redemption. It will thus combine the features of higher returns of a long-term bond, flexibility of a short-term deposit, and safety of a sovereign instrument.

With more equity products to attract retail investors, SGX is likely to see increased trading activity, particularly in corporate bonds and ETFs, in 2H15.

First Resources

First Resources: CLSA has a Buy report with TP of $2.36 for the counter yesterday, citing that First Resources is poised for growth, after new plantings in recent years put the group in a solid position, with 50% of its trees are either immature or young.

In addition, the end of its capex phase should translate into stronger free-cashflow generation, and the house estimates that First Resources will turn into net cash position by 2017.

Current forward P/E of 11.1x is slightly below Indo peers of 11.8x.


KREIT: Morgan Stanley initiated with Underweight, based on expectations for dividends to decline in 2015-17E.

Office supply fundamentals in Singapore are weakening and current stock price is pricing in sustained growth in spot rents, which is unsustainable and unrealistic. Office rents are expected to decline sequentially in six months’ time in view of oncoming supply, as such weighing on office REITs as a whole.

TP $1.10


M1: Deutsche hosted M1 NDR, issues talked about:

1) Fourth operator – Management expects investment to be more significant than the $200-250 signaled by interested entrants
2) Data will remain key revenue drivers. Data usage stands at 3GB/sub/month compared to 2.1GB a year ago. Internet data is growing at 28 p.a. Recent upgrade of network to LTE-A should further drive data growth
3) Corporate segment – Many corporates are undergoing the tender process for their telecom needs, than renewing contracts automatically. M1 has gained customers through this, though it avoided NPV negative deals.

Deutsche has a Buy on M1 with TP of $4.50

SG Market (27 Mar 15)

Expect a lacklustre opening from Singapore shares, after Wall Street ended lower in a volatile trading session spurred by new military operations by the Saudis and its gulf allies in Yemen.

Regional bourses are trading flattish this morning in Tokyo and Seoul, while Sydney is up 0.7%.

From a chart perspective, the STI resistance is tipped at the recent 3,460 peak, with support at 3,400.

Stocks to watch:
*Property: Colliers highlights 10 properties sold year-to-date for $34.3m in Spore's property auction market, double 4Q14's $13.7m and almost 2x the $17.9m in 1Q14. Of the 10 properties sold, only 1 was an owner sale: a row of 5 adjoining shop houses that was sold for $14.6m. The other 9 properties were put up by mortgagees (or lenders) comprised 1 factory unit and 8 residential homes. 187 properties (56 by lenders, 131 by owners) were put up for sale by auction in 1Q15.

*DBS: Has lost out it its bid to acquire the Royal Bank of Scotland’s (RBS) private banking unit, Coutts International, after Bloomberg reported that RBS has agreed to sell the unit to Union Bancaire Privee for US$600m-$800m.

*Keppel Land: Parent Keppel Corp has extended the offer deadline to 31 Mar, 5.30pm, and does not intend to extend the offer beyond that. Keppel Corp has obtained 93.2% control of Keppel Land. Should Keppel Corp fail to attain 95.5% threshold level by the close of the offer, the base offer price of $4.38 will apply.

SGX: Spore Savings Bonds (SSB), a new type of govt bond, will be launched soon to retail investors. SSB, which is principal guaranteed by government, will not penalise early redemption and pays bonus interest when held to maturity. It offers higher returns of a long-term bond, while retaining flexibility of a shorter-term deposit, and safety of an instrument guaranteed by govt. To make plain vanilla corp bonds more readily available to retail investors, MAS and SGX will ease the financial and admin costs for corp issuers seeking to tap the retail mkt. 2 new frameworks as well as a tax deduction have been proposed, and MAS and SGX targets to implement them in 2Q15.

*Noble: The Maritime and Port Authority (MPA) has refuted some of Iceberg Research’s claims, highlighting that the MPA’s investigation of Noble Resources in 2013 did not find any malpractices, and that Iceberg’s assertion that the high profile bankruptcy of OW Bunker could have certainly been avoided had MPA acted on the information sent to them, was untrue.

*Cosco Corp: Secured contract with Maersk Line to build seven 3,600 TEU container vessels, scheduled for delivery between Apr 2017 and Nov 2017. Maersk has also an option for an additional two container vessels, to be exercised within eight months.

Thursday, March 26, 2015

Sheng Siong

Sheng Siong: Share price continues making new all-time highs, which is hardly surprising, given the unanimous Buy ratings on the counter, which placed the supermarket chain as amongst one of the top consumer picks listed on SGX.

The bullish outlook on Sheng Siong is premised on effective cost savings, partly from lower oil price, and the delay in increase of foreign workers levy, which should provide some reprieve to manpower costs.

Additionally, increased hand-outs for the poor as announced in the recent SG50 budget may also benefit retailers like Sheng Siong, which caters to basic needs.

The group’s Block 506 Tampines will also start to derive property income this year, but its impact on 2015 bottom line will not be significant. The store will however be repositioned when most of the tenancies expire in FY16.

Meanwhile, application for licenses and registration are being made for Sheng Siong’s 60% JV to operate supermarkets in Kunming, China, with operations expected to begin in 2H15, although this should not materially impact bottom line yet.

Sheng Siong currently trades at 21.9x forward P/E. Overall, the street has 8 straight Buy calls with a consensus TP of $0.83.


Oil: Brent crude oil prices rose by more than a dollar in early Asian trading on Thursday after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen, although Asian importers said they were not immediately worried about supply disruptions.

Property developers

Property developers: Maybank-KE resumes coverage and Overweights the sector, citing privatizations and the fine tuning of cooling measures as key catalysts.

The house suggests that privatizations offer deep value for properties, highlighting that Keppel Land’s independent financial adviser’s view that Keppel Corp’s privatization offer is not a fair offer. Meanwhile, QC penalties may also persuade some developers to de-list.

Meanwhile, Maybank-KE expects home prices to come down 15% by 2016, and with key concerns – home prices, speculation, interest rates and foreign buying, moving towards its desired directions, there could be room for a review of cooling measures.

Measures that could be relaxed is the ABSD to provide support for a now artificially-suppressed high-end market, relative to a delayed of ABSD easing for citizens and PRs, given still elevated mass-market prices. Cognizant of inventory build-up and large supply from government land sales, the government may try to pre-empt a sharp collapse in prices, and this could make way for ABSD for second-home purchasers to ease.

Valuation-wise, Maybank-KE’s developer coverage universe at 0.7x P/B and 39% discount to RNAV. This compares to recent privatization offers of 1.06x P/B and 19% discounts to RNAV.

The house likes Wing Tai (TP $2.37) and Ho Bee (TP $2.75) for exposure to high-end rebound, and CDL for new platforms that could unlock value (TP $11.40)

Investment theses of developers under coverage (by preference):

Wing Tai – Best proxy for lifting of cooling measures for foreigners, and/ or privatization to avoid QC penalties. Attractively priced at 52% discount to RNAV. Maybank-KE’s TP values Wing Tai at 35% discount to RNAV.

Ho Bee Land – Low risk exposure to high end, given unsold units could be leased out given QC exemptions, in a scenario where high-end sentiment does not rebound. Income-producing offices more than 60% of asset value, rendering its 52% discount to RNAV unwarranted. Maybank-KE’s TP values Ho Bee at 35% discount to RNAV.

City Developments – New platforms for sourcing funds may unlock portfolio value, providing NAV upside. Ample inventory to capitalize high-end sentiment upturn. Maybank-KE’s TP values CDL at 15% discount to RNAV, 0.5x SD below 10 year historical average.

CapitaLand – Offers diversity with asset spread across Singapore/ China. 75% assets produce recurring income. Nevertheless, there are no current catalysts and Maybank-KE opines achieving ROE target of 8-12% might be challenging. Maybank-KE rates CapitaLand a Hold with TP of $3.85, based on 15% discount to RNAV.

OUE – Good value at 44% discount to RNAV and 0.52x P/B. 84% unsold Twin Peaks may benefit from turn in high-end sentiment, but not a privatization due to Indonesian parentage. Risks cumulative QC penalties of $251m in three years after deadline. Maybank-KE rates a Hold with TP of $2.32, based on 40% discount to RNAV, steeper than Ho Bee and Wing Tai due to a riskier profile

Keppel DC Reit

Keppel DC Reit: Unrated report by Daiwa, citing that industry research suggests a rising need for data centres.

Keppel DC Reit is the first data centre REIT in Asia. Data centres are high-specification specialised facilities designed to house mission critical networking and computer equipment. Its closest competitors are other global data centre operators such as Digital Realty Trust, Equinix Inc and Global Switch.

Management noted high entry barriers to the data centre industry, with substantial upfront costs for building and fitting out data centres. It also highlighted the high level of technical expertise and experience needed for data centre operations to ensure no downtime for customers, who prefer providers with proven track records given the missioncritical nature of data centre usage.

Keppel DC Reit offers 6.4% and 6.7% DPU yield for 2015 and 2016, per prospectus.


Civmec: CEO told a media briefing held that the firm will be shifting its focus to public infrastructure projects as it reduces its reliance on the mining, oil and gas sectors. Its biggest infrastructure project so far is a A$73m contract to erect steelworks for a new stadium in Perth, Australia.

The group estimated that there could be at least A$125b of public and private sector infrastructure investment across Australia over the next seven years, and expects the firm to clinch some contracts within the next 12 mths.


Swiber: Swiber clinched US$405.6m new contracts, which includes US$333m for engineering, procurement, installation and construction services in India from an existing customer, scheduled for completion by 2Q17.

The latest awards boost group's order book to US$1.8b.

Despite having revenue visibility over the next two years, Swiber's FY14 results suggested that the group may have dived in its bids in order to secure contracts, with a loss at the gross profit level.

In addition, we are extremely concerned on Swiber's rising costs and burgeoning debt, with net gearing of 1.75x and interest expense alone exceeding gross profit by 3.7x in FY14.

We opine that an epic turnaround is gravely required for Swiber to see any profits in FY15.

At the current price, Swiber is valued at 0.16x P/B.

Keppel Land

Keppel Land: Parent Keppel Corp has obtained 90.9% control of its property arm, Keppel Land, and intends to delist the counter at the close of the offer- 5.30pm today.

As the compulsory acquisition threshold (95.5%) has not been reached, the offer price still remains at the base offer of $4.38/share.

Shareholders who want certainty may consider selling their shares in the open market today, to hedge their risks in the event Keppel Corp fails to clear the 95.5% higher price hurdle.

SG Market (26 Mar 15)

Singapore shares are expected to open lower, following the sell-off in Wall Street with investors dumping technology and biotech stocks, on concerns of excessive valuation.

Regional bourses are trading lower this morning in Tokyo (-0.7%), Seoul (-0.6%) and Sydney (-1.4%).

From a chart perspective, the STI resistance is tipped at the recent 3,460 peak, with support at 3,400.

Stocks to watch:
*Economy: The ANZ-Roy Morgan Singapore consumer confidence index for the March rose 3.8 pts from the previous month to hit an eight-month high of 124.5.

*Keppel Land: Parent Keppel Corp has obtained 90.9% control of Keppel Land and intends to proceed with delisting. The offer closes at 5.30 p.m. today, subject to an extension of the offer closing data by Keppel Corp. Should Keppel Corp fail to attain 95.5% of outstanding shares by the close of the offer, the base offer price of $4.38 will remain.

*Swiber: Clinched US$405.6m new contracts, which include a US$333m, contract for EPIC services in India from an existing customer, and also a few other smaller contracts for mooring, jack-up installation and offshore pipeline and subsea work in the Asia Pacific region. Projects are expected to commence immediately and scheduled to complete by 2Q17. The latest awards boost group's order book to US$1.8b.

*Civmec: Intends to reduce its reliance on mining, oil and gas sectors, and diversify to public infrastructure projects. CEO estimates public and private sector infrastructure investments to be in the range of at least A$125b over the next seven years.

*Dairy Farm: Acquired Macau-based supermarket operator, San Miu Supermarket. The chain operates 15 mass-markets with an average gross store size of ~9,500 sf.

*Ocean Sky: Proposed acquisition of Link (THM) Holdings via the allotment and issue of 642.8m new shares at issue price of 35.2¢ per share, which will result in a reverse takeover. Link is a developer of luxury residential, commercial and industrial properties with exposure in Singapore and Malaysia.

*Boustead: Received eligibility to list from SGX for the proposed spinoff of up to 49% stake in Boustead Projects.

*Asia Fashion: Proposed placement of 58m new shares (8.3% enlarged share capital) at $0.06/share to placement agent, UOB Kay Hian. Net proceeds of $3.2m intended for investment (75%) and working capital (25%).

Wednesday, March 25, 2015


Q&M: CIMB is bullish on Q&M, saying earnings from China will underpin an EPS CAGR projection of 20% over FY15-17. This has already been cut to adjust for share dilution from a rights issue, but raises TP to $0.78 (based on a slightly higher 41x CY16 PE)

The optimism is thanks to Aidite, which despite only operating for five months in FY14, had already contributed 15% of total earnings, driven by the addition of one operation line (at end FY14, Aidite operates two lines).

For Aidite, stronger performance is expected going forward, given: 1) they’re planning to build a new plant, doubling the capacity by end of 2015 and 2) strong distribution channel.

The only qualm is that Q&M has a 51% stake, and there will be down time when shifting to new facility.

At the same time, Q&M had issued a $60m MTN at 4.4% last week, which CIMB views could be used for further M&A.


HPHT: Barclays lowers EPS for 2015/16E, lowered TP to $.78 (from $0.80) while maintaining Neutral on the counter.

HPHT is set to benefit from container volume growth from continued economic recovery in US and Europe. Interest rates risk exposure is lower after having refined US$1b floating rate debt with 3- and 5-year fixed rate notes at 100bps below expectations.

However, volume growth is likely to be mostly from lower-tariff trans-shipment volumes, and with higher tax rate expected, EPS is lowered by 10% to imply annual growth rate of 6% in FY15/16E.

Upside catalysts include: increased economic activity in Europe and larger tariff growth in Yantian and Hong Kong ports. Downside risks include: high gearing and high sensitivity to interest rate changes, slowdown and stagnate in developed market consumption.


NOL: Goldman Sachs upgrades NOL to Buy from Neutral and lifted TP to $1.30.

Echoing other houses, the house favors container over dry bulk and in particular Transpacific routes to outperform in 2015E, citing favourable supply-demand outlook and industry structure. NOL derives ~50% of revenues from Transpacific container segment. As such, 2015 could be turning point for the company after four consecutive years of losses.

Post disposal of APL Logistics for US$1.2b, gearing is pared down significantly to about 100%. NOL is trading at 0.7x P/B, lowest in industry while having higher-than-peers ROE sensitivity to margin, and substantial margin improvement is expected in 1Q15 and 3Q15.

Separately, riding on stronger transpacific trade volumes is also a smaller player Samudera Shipping, listed on SGX, significantly undervalued at 0.3x P/B.


SIIC: (S$0.15) Proposed Rmb1.5b acquisition of water treatment business
SIIC Environment has proposed to make a Rmb1.5b ($348.3m) acquisition acquire a water treatment business with operations in four provinces in China, with a planned capacity of over 1m tons/day.

The purchase price comprises Rmb1.1b ($240.5m) for Global Environment Investment (HK), which owns 92.2% stake in Fudan Water Engineering and Technology (FWET), as well as an outstanding debt amounting to Rmb479.2m ($107.8m) held by the former.

Consideration will be done via cash (Rmb151.7m) and an issue of 1,560m new shares (14% enlarged share capital) at an issue price of $0.132/share.

FWET is currently working on 10 water treatment projects located in Shanghai, Jiangsu, Zhejiang and Guangdong provinces, with a planned water treatment capacity of over 1m tons/day.

At the current price, SIIC is valued at a proforma 1.7x P/B and 20.5x trailing P/E. Bloomberg consensus has 5 Buys and 1 Sell rating on the counter, with an average 12-month TP of $0.22.

SG Market (25 Mar 15)

From a chart perspective, the STI resistance is tipped at the recent 3,460 peak, with support now tipped at 3,400. Technical indicators are grossly oversold, with MACD exhibiting a bullish crossover.

Stocks to watch:
*SIIC Environment: Proposed to buy Global Environment Investment (HK), which owns a 92.2% stake in Fudan Water (FW), for Rmb1,548m ($348.3m), or 2.9x P/NAV. FW is a water treatment business with operations in Shanghai, Jiangsu, Zhejiang and Guangdong provinces, with a planned water treatment capacity of over 1m tons/day. Consideration will be done via cash (Rmb151.7m) and an issue of 1,560m new shares (14% enlarged share capital) at an issue price of $0.132/share.

*Metro: Divests 50% stake in ECM Property Tianjin, which owns a 6-storey 4-basement Mall in Beijing for US$179.5m and payment of shareholder loan for US$123.2m. The asset was co-developed by Metro in 2009 and having achieved stable occupancy of 99.5%, is considered a matured asset ready for divestment. The divestment is expected to result into a net gain of $37.2m for Metro.

*UOB: Obtained approval from the respective board of directors for the voluntary conditional cash offer of subsidiary Far Eastern Bank at $3.51 per share. UOB currently holds 78.9% of Far Eastern Bank outstanding shares.

*ValueMax: Expands its business to include unsecured moneylending. The new business will be conducted through VM Credit.

*MM2: Entered into non-binding MOU with Grand Olympus Films and JTeam to co-produce new film "Game Kids" in China, aimed for release in 4Q17

*Teho: Paid $37k for options to purchase two leasehold properties at 33 Ubi Avenue 3 with a combined area of 6092sf and 60 years lease commenced 2007, worth $3.7m.

*LifeBrandz: To draw down $1.98m from fixed deposit held with Maybank to obtain bankers guarantee demanded by Clarke Quay landlord CapitaMall Trust on its outstanding leases after ceasing operations of five night spots earlier this month.

*Kris Energy: Successfully drills Rossukon-2 well in G6/48 Gulf of Thailand after drilling total depth of 5,460 feet measured depth.

*Green Build: Auditors raised concerns of net operating cash outflow of Rmb671k and net equity deficit of Rmb11m.

*DMX Technologies: Requested to convert its trading halt into a suspension, after it received a report from the HK authorities, citing irregular accounting practices at two of its subsidiaries in 2008 and 2009.

*Sino Construction: 4Q14 earnings from continued operations deteriorated further to $1.1m loss (vs $0.3m losses in 4Q13) as thin gross profit margin (6.7%) and large administrative expenses weighed on bottom-line.

*Jacks Int'l: Undertakes 5-into-1 share consolidation

Tuesday, March 24, 2015

IHH Healthcare

IHH Healthcare: Newswires reported that IHH Healthcare has acquired a 51% stake in Hyderabad-based Continental Hospitals, a 750-bed super specialty facility, for RM167m.

The deal marks IHH’s first direct acquisition in India, despite the group owning a 10.5% stake in Apollo hospitals and having stakes in two 50:50 JV facilities in Kolkata and Hyderabad, as it attempts to capitalize on the nation’s growing healthcare industry, while diversifying its revenue streams from its key markets of Singapore, Malaysia and Turkey.

Analysts highlighted that Continental Hospital generated about US$13m revenue in 2014, and was broke-even on EBITDA level.

Separately, a foreign broker has upgraded the stock to Outperform from Underperform this morning, with a TP of RM6.20 (S$2.31), citing of sustained earnings momentum across its three home markets, with valuation premium justified by a relatively inelastic demand, upper-income niche and possible M&As.

Technically, share price is hovering around its new all-time high of $2.17, with near-term support tipped at the resistance turned support level at $2.08.

At the current price, IHH trades at 49.2x forward P/E. Overall, the street has 9 Buy, 7 Hold and 8 Sell ratings with a consensus TP of RM5.27 (S$1.97).

Fu Yu

Fu Yu: Market Insight highlights the compelling stub valuation of the precision parts manufacturer, with special attention paid on its cash pile.

Based on its latest FY14 financials, Fu Yu is currently in a net cash position of $82.0m, representing 10.9¢ per share. This means that at its last traded price of 11¢, almost 100% of the group’s market cap consists of cash.

A look at its financials, reveal that Fu Yu was loss-making for several years before turning profitable in 2012. In its recent 4Q14 results, net profit came in at $5.4m (+34.5%), taking FY14 earnings to $10m (+49.9%).

Despite a 10.2% drop in FY14 revenue to $254.4m, gross margin improved 5ppt to 12.2%, due to its focus on high margin projects. Meanwhile, its new Chongqing subsidiary started production in 2Q13, which has enhanced its operational efficiency.

While more conservative investors may prefer to wait for another year before confirming the group’s turnaround story, Market Insight believes that given the group’s cash hoard, an investor will be getting almost all its manufacturing and sub-assembly businesses for free.

Ascribing a very conservative 3x FY14 P/E multiple to the group’s current earnings base, and adding on its cash hoard, could give Fu Yu a fair value of at least 15¢, implying a 36% upside from current prices.

As such, Market Insight is adding the stock to its value portfolio with an entry price of $0.11.


Valuetronics: Feedback on an ongoing non-deal roadshow by RHB has been generally positive and key concerns remain on whether the growth in the Industrial and Commercial Electronics (ICE) segment can exceed or make up for the slowdown from its Consumer Electronic (CE) segment, especially its LED business portion. Management has highlighted that they are expecting double digit growth YoY from its ICE segment in FY16 just from existing customers with new products/models.

For the past 2 years, Valuetronics have gained at least 1 new customer each year that contributes to at least 3% of its revenue. House understands that they are constantly actively trying to get new customers on board and believes that there might be one or two in the pipeline ahead, which will add on to their ICE growth. Overall, RHB expects ICE to grow at least 20% in FY16, which should cover up for any decline in its CE Segment and result in a better gross margin and NPAT for FY16, just like its current FY.

House reckons that dividend for FY15 will be comparable to last year’s payout of HK$0.20 and expects better dividends if they perform better, which should be highly likely from its robust production activities. RHB continues to think that Valuetronics, which is just trading at around 2.5x FY16 ex cash P/E, coupled with a potential 8-9% dividend yield is a undervalued gem. Maintain BUY with TP of $0.64.


Ezion: Maybank-KE reiterates its Buy call with TP of $1.83, highlighting that European-based liftboat operator, Gulf Marine Services (GMS), has returned 25% YTD while Ezion is down 7%. As a guide, GMS focuses on the Middle East and North Asia (MENA), while Ezion leads in the Asia Pacific.

Yet, despite having similar operational metrics, GMS trades at a higher 6.4x FY15E P/E versus Ezion’s 4.8x, while in terms of P/B, Ezion’s 0.8x FY15E is about half of GMS’s. This disparity is puzzling in the house opinion, as Ezion is not inferior to GMS in any way.

Maybank-KE believes that the market should not associate Ezion’s resilient liftboat business with offshore drilling. While there have been spurts of contract terminations and charter-rate declines for offshore drilling rigs, enquiries on liftboats for maintenance remain high in Asia and the Middle East.

The house added that some 90%/82% of Ezion’s FY15E/16E liftboat revenue of US$480m/626m is backed by firm contracts, and believes that the market is mispricing Ezion.

At 3.5x FY16E P/E, it even ignores the group’s 28% FY16E EPS growth. Steady earnings deliveries over the next few quarters will help to catalyse the stock.

First REIT

First REIT: Daiwa has a non-rated report on the healthcare REIT. Highlights:
1) Receives SGD rents for its Indonesian assets. The structure is fixed-based rent with annual escalation up to 2%.
2) Master lessee (sponsor) bears all the currency risk. Master lessee has considerable funding capacity to meet master-lease rental commitments. Sponsor owns about 33% of First REIT.
3) WALE of 11.2 years. Management understands growth must come from acquisitions.
4) Managmenet expecting 1-2 acquisitions for 1H and 2H respectively.
5) The REIT has right of first refusal (ROFR) for the sponsor’s healthcare properties. The sponsor has 30 hospitals in the pipeline.
6) Management guided for 3 AEIs of existing properties
7) Government’s is targeting 100% healthcare coverage vs the current 50%, boding well for the Indonesian healthcare industry

Currently trading at 6.2% FY15 consensus yield.


Yangzijiang (YZJ): Counter's recent outperformance against O&G peers was likely driven by the already-low expectations on its core shipbuilding segment, as well as the group's small exposure to the O&G sector.

YZJ had an order book comprising 118 vessels worth a total of US$4.75b as at 27 Feb 2015. For FY15, the group is hoping to secure new orders worth about US$2b vs. US$1.8b that was clinched last year.

OCBC believes that YZJ’s good execution track record and significant cash pile (including the held-to-maturity assets) instill confidence in customers to place orders with them.

Meanwhile, the SGD has depreciated about 10% against the RMB since Jul 2014, which translates into a higher TP of $1.42 (from $1.33). OCBC maintains its BUY rating with 16% upside (includes a dividend yield of ~4%).


GLP: Singapore's sovereign fund, GIC, has partnered with US industrial real estate specialist, Exeter Property Group, to invest €300m ($448m) in logistics properties in key European distribution hubs, in a bid to ride along with the growing need for space due to the booming trend of e-commerce.

Separately, GIC also acquired a landmark site in Brookefields, Whitefield in Bangalore in a joint venture with Indian property developer, Brigade Group, to develop the site into an IT special economic zone.

Meanwhile, SGX-listed logistics developer and property manager, GLP, has been underperforming for the past three quarters on downward earnings revision, due to group's lacklustre development starts and earnings dilution impact from its China stake.

Still, we continue to like GLP as a key beneficiary of the structural uptrend in China logistics, backed by an e-commerce boom. The counter remains a key constituent in Market Insight’s Growth portfolio.

Overall, the street generally remains bullish on the counter with 17 Buys, 3 Holds and 1 Sell, with an average TP of $3.09.

Keppel Land

Keppel Land: Parent Keppel Corp has garnered 88.3% control of its property arm, nearing the compulsory acquisition threshold (95.5% level), which will trigger the higher offer price of $4.60.

Meanwhile, Keppel Corp is closing in on the 90% level, whereby the group is able to opt for delisting as free float falls under 10%.

Shareholders should note that at the current level of shareholding up to the compulsory acquisition threshold level, the offer price will be based on the base offer price of $4.38.

We opine that shareholders who want certainty may consider selling their shares in the open market at the current price of $4.56, to hedge their risks in the event Keppel Corp fails to clear the 95.5% higher price hurdle.

The deadline for the extended voluntary unconditional cash offer is in two days, on 26 Mar (Thurs), at 5.30pm.

SG Market (24 Mar 15)

From a chart perspective, the resistance is tipped at the recent 3,460 peak, with support now tipped at 3,400. Technical indicators are grossly oversold, with MACD appearing poised for a bullish crossover.

Stocks to watch:
*Economy: Headline inflation rate in Feb ‘15 fell further by 0.3% y/y (Jan ‘15: -0.4% y/y), mainly on lower costs of housing & fuel-and-energy-related items such as petrol pump prices and electricity tariffs. This is the fourth consecutive month of deflation.

*IHH Healthcare: Newswires reported that IHH Healthcare has acquired a 51% stake in Hyderabad-based Continental Hospitals, a 750-bed super specialty facility, for ~RM167m. The deal marks IHH’s first direct acquisition in India, despite the group owning a 10.5% stake in Apollo hospitals and having stakes in two JV facilities in Kolkata and Hyderabad.

*Keppel Land: Parent Keppel Corp has garnered 88.3% control of its property arm, nearing the compulsory acquisition threshold (95.5% level), which will trigger the higher offer price of $4.60. Deadline for the extended voluntary unconditional cash offer is on Thurs (26 Mar) at 5.30pm.

*Rex: JV Lime Petroleum Norway receives enlarged financing facility of NOK700m (from NOK300m) for funding of its offshore exploration drilling programme in 2015. On top of the facility, shareholders of Lime Petroleum have also made capital injections totalling US$35m in Nov ’13, Jan ’14 and Mar ’15.

*Singapore Windsor: Proposed to dispose its under-performing printed circuit board punching moulds manufacturing and trading business for HK$55m ($9.8m), or 1.2x P/NAV. Sale proceeds is expected to pare down the group’s gearing ratio fully from 1.2x to 0. Proforma FY14 NTA/share is expected to improve from HK61.45¢ to HK81.97¢, while loss per share should narrow from HK60.80¢ to HK23.04¢.

*Roxy Pacific: Alongside JV partner Hostplus, the duo is acquiring a 4.4ha Land in Western Australia for A$59m. The total industrial land area of ~45,456 sqm will be rezoned for commercial and residential use. The land is located adjacent to the Leighton beach and the train station in North Fremantle, with direct access to Perth’s CBD. Roxy Pacific’s stake in the JV is 40%, with Hostplus holding the remaining balance.

*Hu An Cable: Profit warning for FY14 due to a decline in gross profit, as a result of lower sales and decreased selling prices, attributed to tighter credit in the industry, as well as a fall in copper prices. Separately, group proposed a 20-into-1 share consolidation to meet the minimum trading price requirement for Mainboard-listed stocks.

Monday, March 23, 2015


Ezion: Ezion’s shares are currently trading below the psychological $1.00 level, with renewed selling pressure taking its stock loss over the last one month to –23% vs. STI’s –1% drop.

Given the lack of any negative company-specific news in relation to this sell-off, Daiwa views this as an opportune time for long-term investors to invest in a fundamentally strong company.

In addition, the CEO purchased 200k shares on 19 Mar 2015 at an average cost of $0.96/share.

Ezion’s net gearing currently stands at 0.9x and house expects this ratio to improve to 0.38x by end-2017 as the company pares back on new business (less capex requirement) with a renewed focus on capital conservation.

House reduced its TP to $1.49 (from $1.71), but maintains its Buy rating.


Q&M: Issued a $60m MTN, at a 4.4% interest due Mar 2018. Maybank-KE opines that this is timely, as interest rates are rising. It was understood that Q&M managed to secure an attractive rate due to the overwhelming demand of the MTN.

Q&M has net cash of $3.5m. Including proceeds of $14.1m from its property sale in Jurong and netting off $10m for its remaining payment for Aoxin and Qinghuangdao, its net cash should increase to $7.6m.

Maybank-KE opines that there could be a major acquisition with the proceeds. At the moment, Q&M has only one proposed acquisition worth $6m, with a first-year profit guarantee of $0.6m.

Although MTN interest could cut FY15-17E EPS by 9-15%, the house maintains forecasts, assuming contributions from future acquisitions will cushion its financing costs.

The house maintains Buy on Q&M with TP of $0.71.


Cordlife: Last Friday, 10%-owned US-listed China Cord Blood Corp (CCBC) spiked 11% to its 3-year high, after one of its major shareholders, Jayhawk Capital, sent an open letter urging it to pay a special dividend out of its ample cash reserves.

Jayhawk has also asked CCBC to initiate regular share repurchases and dividends from its rich cash flow.

Maybank-KE estimates that if CCBC does pay out the special dividend, this will add $5.5m, or 61%, to Cordlife’s FY15E earnings of $9m and provide a recurring lift to future earnings.

Jayhawk, a private equity firm and an employee owned investment manager based in US, valued CCBC at US$16.80/share, almost 3x higher than the US$6.00 valuation that the house appended to it, and argued that the company is deeply undervalued against global peers.

Maybank-KE has rolled forward its base year to FY16 and subsequently raised its TP for Cordlife to $1.35 (from $1.30).

SG Market (23 Mar 15)

From a chart perspective, the STI may head higher towards the recent 3,460 peak having broken above its downtrend channel, with support now tipped at 3,400. Technical indicators are grossly oversold the MACD appears poised for a bullish crossover.

Stocks to watch:
*Noble: Iceberg Research has released its third and final report, questioning its corporate governance and alleging the group understated its debt, which should be 64% higher than reported, labelling it as a repeat of Enron. Noble has rejected all of Iceberg’s allegations as inaccurate, unreliable and misleading. In response, Noble intends to start legal proceedings against Arnaud Vagner, a HK resident, Enlighten Ace, a Seychelles company and any associates, at the HK High Court.

*Centurion: SGX has advised that the proposed REIT listing would be deemed as a chain listing if the assets and operations of the subsidiary are the same as those of the issuer. Accordingly, Centurion has decided to defer and reconsider its proposed REIT plans to a later stage.

*OUE: In preliminary discussions with Eunsan Industrial Developments & Construction on a possible investment in Ho Chi Minh city.

*Straits Trading: Enters binding MOU to dispose Atbara, which owns 14 units at The Holland Collection, to Haiyi Holdings for ~$31.7m. The proposed disposal is not expected to have a material impact on the EPS and NTA of the company for FY15.

*Frasers Centrepoint: Unveils 147-suites $89.6m five star luxury all-suites hotel in central Hamburg, Germany. Scheduled to open in 2018, it is the group’s third property in Germany (after Fraser Frankfurt and Berlin to open in 2015 and 2016) and targets business travellers on short and extended stays,

*Raffles Education: Increased the size of its bond program to $500m from $300m.

*GSS Energy: Qualified personnel report for the Trembul Field released, with an estimate of 32.8m barrels of stock tank oil initially-in-place. 2P (Net Proved, Probable and Possible) reserves of 3m barrels came higher than street estimate of 1.7m and raises group's 2P reserves by 29%.

*Asia Fashion: Clinched a major Rmb381m contract with one of China's largest private petrochemical group, Ningxia Baota (NB), to supply construction materials for a chemical refinery and NB's chain of petrol kiosks.

Monday, March 16, 2015

I will be away for a week. Sharing will resume on 23 Mar 15.

Trade with caution

Ho Bee Land

Ho Bee Land (S$2.02): Chairman and CEO Chua Thian Poh purchased a total of 1.4m shares at average price of $2.016 per share on 3-13 Mar, post 5¢ final dividend, prompting speculation of potential corporate action.

Ho Bee is now 73% controlled by Chua and viewed as an easy privitisation target as this only 17% short of the 90% level that will trigger delisting of the stock.

We wish to highlight, however, that Chua has a history of reinvesting part of his dividends back into the stock.

For instance, Chua bought 1.1m shares between 20 Mar and 4 Apr ‘14 after the final and special dividend of 8¢ was declared. He again accumulated 1.06m shares on 19 May-1 Jul following the payment of dividends.

Based on the total dividends of 8¢/share paid out in 2014, Chua reinvested ~12% of his dividend proceeds back into Ho Bee.

As his 2015 reinvestment amounts to 11.53% of dividends declared, it is premature to raise the privitisation alarm.

Nonetheless, we do not discredit the incentive for Chua to take the property group private for the following reasons:
1) steep 48% discount to book value
2) low free float, making it easier to achieve the 90% delisting hurdle
3) unsold Sentosa Cove units at risk of being penalized by qualifying certificate rules for listed developers with foreign shareholders

Meanwhile, the street is unanimously bullish on the counter with 4 Buy ratings and consensus TP of $2.55

CapitaCommercial Trust

CapitaCommercial Trust: DBSV visited CapitaGreen, which received TOP in Dec 2014. Formerly Market Street Carpark, the asset was redeveloped into a 40-storey Grade A office tower with NLA of 700k sqft and average floor plate of 20-25k sqft.

CCT currently owns 40% of the asset, and has a call option to acquire the remaining 60% within 3 years of its completion, subject to minimum development cost compounded at 6.3% p.a.. The remaining stakes are currently held by CapitaLand (50%) and Mitsubishi Estate Asia (10%).

As of Dec 2014, CapitaGreen has achieved commitment level of 69%. Most tenants have opted for long term leases; 91% of leases expire after 2019, offering long term income visibility. According to media reports, Apple has recently signed a lease for 35k sqft of space, reportedly at $11-12 psf pm, but still below the its target rental of $12.40.

Contribution to DPU from CapitaGreen is likely to commence only in 2016. With decent earnings growth in 2015, driven by positive rental reversions from the GIC lease in Capital Tower, DBSV estimates that DPU will grow at 9% CAGR from 2014-2016.

While house likes the stock for its strong earnings momentum, this has been largely priced in.

DBSV maintain its HOLD call, with TP of $1.81. CCT offers dividend yield of 5.3%.


Yanlord: Deutsche maintains its Sell rating on Yanlord (TP: $0.80) following a weak FY14, in particular the bigger-than-expected deterioration in profitability. House expects Yanlord to register below-industry-average growth ahead on the lack of turnaround signs.

While upgrading demand improved following the relaxation in mortgage restrictions in 4Q14, Yanlord’s ability to grow is capped by its slow acquisition pace in recent years.

Specifically, Yanlord needs to grow its business scale more aggressively to achieve better cost efficiency and a stronger sales pipeline. Moreover, the valuation is not attractive, with the stock trading at 14x/13x 2015/16 PER versus the industry average of 7x.

First REIT

First REIT: CIMB initiates with Add and TP of $1.48. Indonesia healthcare needs are underserved. Indonesia healthcare expenditure is predicted to grow at CAGR of 14.9% over 2012-2018, driven by a combination of rising affluence, changing lifestyles, urbanisation and pent-up demand.

FIRT offers direct exposure to the growth of healthcare infrastructure in Indonesia, without foreign exchange and operating risks. Operating risks are limited, as Indonesian hospitals (95% of total assets) are master leased for 15+15 years, with the leases consisting of mainly base rental (annual escalation of 0 2%). Foreign exchange risk is mitigated by S$-denominated rental revenue from its Indonesian and Singapore assets.

Lippo Karawaci (LK), FIRT’s sponsor, and its subsidiary Siloam Hospitals plan to double bed capacity by 2017. As a result, FIRT has nine completed hospitals as potential acquisition targets and another 30 in the pipeline under development. CIMB expects S$150m of acquisitions at 10% gross yield to increase DPU and target price by 4-6%, and lift gearing to 34.7% (with 50% debt funding). Thereafter, every S$50m acquisition will result in ~1% upside to our DPU assuming 25% debt funding. There is also hidden

value within the portfolio in the form of untapped GFA. These have not been factored into CIMB’s model.


Straco: Share price jumps to an all-time high at $0.90, taking its one-week return to ~15%. The latest outperformance comes after two local brokers cited last week that the counter remains undervalued and placed a Buy rating on the counter.

The investment theme for Straco lies largely on a potential turnaround of the Singapore flyer, which analysts highlighted that subtracting off once-off items, the flyer actually turned positive in 4Q14, registering a profit before tax of $1.4m.

As such, analysts are largely expecting the flyer to be profitable for FY15, further aided by Straco’s efforts to improve yields at the flyer, via lowering discounts to tour groups, attracting more walk-in visitors and implementing cost efficiencies.

Another catalyst for Straco would be a potential hike in ticket prices at its Shanghai Ocean Aquarium, where market watchers highlighted that Straco typically raises its ticket prices every two to three years, and the last revision was done in Nov ’11. A rise in ticket price is expected to contribute positively to both the group’s top and bottom-line.

Straco currently trades at 15.3x FY15E P/E versus its peer average of 22.4x. Overall, the street has 1 official Buy call with a TP of $1.01.


Lifebrandz: The lifestyle-related and entertainment company has shut doors to its entertainment outlets in Clarke Quay, comprising Hopdog, Mulligan's Irish Pub, Aquanova, Fenix Room and Playhouse.

Hit by the trend of lesser crowd spending and dragged further by the restriction on liquor licensing hours, Lifebrandz' management concluded that operation of the outlets are no longer commercially viable and not sustainable.

In addition, Lifebrandz disclosed that Manpower Ministry was investigating salary claims lodged by more than 70 staff, with some reportedly unpaid since 7 Feb.

In its recent 1HFY15 results, the group's net loss widened from $0.8m to $1.8m y/y, as revenue declined 28% to $9m, weighed by stiff competition in a weak industry climate.

At this point, the group looks almost certain to bleed in FY15, which will make it the fourth loss In the past five years.


Vard: Vard has terminated shipbuilding contracts for two PSVs after customer E.R. Offshore filed for bankruptcy. The vessels are being constructed in Vietnam and are due for delivery in 3Q15 and 2Q16.

Maybank-KE estimates the PSVs to be valued at NOK300m (US$37m) each, with 10% prepayment made for one of the vessels. Management however expects to recover the remaining construction costs by selling both vessels.

Separately, Upstream had earlier reported that Island offshore has requested Vard to postpone deliveries of three PSVs and a OSCV, worth about NOK2.2-2.4b (US$268-292m), by six months. These vessels were due to be delivered in 2015 and 2016

The above developments reaffirm demand weakness in the offshore sector and the vulnerability of small players like E.R. Offshore, while bigger players like Island Offshore have the balance-sheet depth to delay deliveries.

It is also not surprising that most affected vessels are PSVs given oversupply of this asset class even before the recent oil rout. Vard’s net orderbook of NOK17.7b at end-2014 comprised 39 vessels, of which 13 are PSVs. Maybank-KE do not rule out more cancellations ahead.

Overall, Maybank-KE maintains Hold with a TP of $0.58 (previous $0.60).

Sino Grandness

Sino Grandness: In a company feature by The Business Times, Sino Grandness guided that it plans to start selling its Garden Fresh brand of fruit juices in Thailand by 2H15, and eventually to other parts of South-east Asia.

The group’s expansion into Thailand comes after Thai conglomerates Thoresen Thai Agencies (TTA) and PM Group took respective 9% and 3.8% stakes in the food processor via a private placement of new shares.

As a background, the chairman of PM Group, Prayudh Mahagitsiri, is dubbed the “coffee king” of Thailand, and Sino Grandness aims to leverage on its new partners distribution network in Thailand and the region.

Overall, Sino Grandness remains bullish on its prospects in China, citing its first-mover advantage in the loquat juice business, and stronger growth from its three in-house brands, namely Garden Fresh Juices, Grandness canned fruit/vegetables and its Hao Tian Yuan snack foods, in 2015.

On its proposed spin-off/listing of its beverage business, plans are still progressing, and the group is targeting to complete and submit its necessary paperwork before Jul ’15.

Following Maybank-KE’s portfolio rebalancing, the house has ceased coverage of the counter, and its last Hold rating and TP of $0.45 are no longer valid. This follows a 39% ytd plunge in its share price and 61% collapse over a 12-month period.

Overseas Education

Overseas Education (OEL): UOB Kay Hian upgraded to BUY and raised TP to $0.94.

OEL is expected to see a more prominent earnings growth of 25% in 2016, partly due to lower base in 2015 and as the school ramps up enrolment for the new term.

Given the market uncertainties and limited earnings visibility, house believes investors would appreciate OEL’s sustainable business, strong cash flow generation and inelastic client demand.


Oil: The International Energy Agency has not seen any improvement in the supply-demand situation of crude oil, nor any signs of production easing, despite the slump in oil prices.

Based on the production forecasts, Nomura estimates that the supply-demand situation could begin to improve in 2H15. However, the delay in production cutbacks by oil majors would be a risk to a further decline in oil prices.


SPH: (S$4.09) Invests into data analytics firm, Handshakes
Singapore Press Holdings (SPH) has invested $2m for a 20% stake in DC Frontiers, a company that owns and operates Handshakes, a data analytics platform currently used in the capital markets for relational information about companies and the people who run or own them.

The platform works on both a subscription basis and pay-per-use model, with the former priced at $1,200/mth, with an estimated "few hundred" accounts. The fee is expected to increase as Handshakes adds more countries to its list.

Assuming a current subscription of 200 accounts, SPH paid 3.5x earnings for the company, which intends to use the cash injection to expand to the rest of Asia.

Users for the data miner include issue managers, corporate lawyers, regulatory and enforcement agencies, or simply anybody with a need to suss out a person or entity for due diligence purposes.

The street is generally not positive on SPH due to the structural shift away from its core newspaper printing business, resulting in lower advertising and circulation revenue.

There are 7 Hold and 7 Sell ratings with an average 12-month TP of $3.90.

SG Market (16 Mar 15)

Singapore stocks are expected to open on the downside following the negative close on Wall Street last Fri, dragged by a weak economic data, dollar strength and lower oil prices.

Traders are also likely to be more cautious ahead of the Fed’s FOMC meeting this week with many investors anticipating any shift in the Fed’s guidance that would send clearer signals when the first rate hike would occur – in Jun or later.

Other key economic data-points due this week include Singapore’s Feb non-oil domestic exports, to gauge if there is a looming 1Q contraction and BoJ monetary statement.

Regional bourses are mostly trading lower this morning in Tokyo (-0.1%) and Sydney (-0.6%), with Seoul relatively flat (+0.1%).

From a chart perspective, the STI is likely to test its doenside support at 3,355 with immediate resistance at 3,388. Below 3,355, the next line f defence lies at 3,320, which is represented by its 200-dma.

Stocks to watch:
*Vard: Terminated contracts of two PSVs after customer E.R. Offshore filed for bankruptcy. The vessels are being constructed in Vietnam and are due for delivery in 3Q15 and 2Q16. Vard will not be repaying the prepayments received, and expects to sell the vessels at prices that can cover the construction costs.

*Sino Grandness: Plans to start selling its Garden Fresh fruit juices in Thailand by 2H15 and hopes to leverage on its Thai partners, Thoresen Thai Agencies and PM Group’s distribution network in Thailand and the region. The group remains bullish on growth potential in China, citing the country’s huge population, higher spending power and rising health awareness.

*Serial Systems: Proposed purchase of Swift Value, which is in the distribution of printer accessories such as ink cartridges and toners, for $13m, based on Swift Value’s NTA plus a premium of $10m. The acquisition will be funded by internal resources and/or bank borrowings.

*Sarine Technologies: Launched Sarine Profile in US, its customizable solution for wholesale and retail trade players in the polished diamonds industry. Clients are able to use the tool to present diamond characteristics on their trade platforms and websites.

*SPH: Invests $2m for a 20% stake in DC Frontiers, which owns and operates Handshakes, a data analysis platform that mines and searches for relational information about companies and its shareholders.

*Lifebrandz: Shut doors to its entertainment outlets in Clarke Quay, comprising Hopdog, Mulligan's Irish Pub, Aquanova, Fenix Room and Playhouse. Group is being investigated by Manpower Ministry for salary claims of more than 70 staff at its outlets.

*Genting Hong Kong: Reassigning all its rights and obligations for the hotel management arrangement for Genting Grand Hotel in Hebei Province to Guangzhou Liyunhui Consulting and Management Services (GZL), from Star Cruises China (SCC). Both GZL and SCC are wholly-owned subsidiaries.

*Ipco: 3QFY15 net profit crashed, down 96.5% y/y to $1.5m, mostly due to absence of one-off income. Revenue climbed 24.5% to $10.4m, the result of 48.2% increase in turnover by ESA Electronics, additional contribution from Asian Plan and 11.7% higher turnover to $6.0m in Excellent Empire. However, operating margin halved from 34.6% to 15.7%. NAV/share at $0.02.

*Vibrant: 3QFY15 net profit decreased 14.8% y/y to $7.8m, against 1.1% increase in revenue to $51.8m, as higher financing lease income was partially offset by weaker demand for logistics services. Bottom line weighed by fair value losses on marketable securities and higher operating expenses from property development. NAV/share at $0.14.

Friday, March 13, 2015


mm2: The movie producing company is up ~6.7% today, after announcing that its latest co-production, "Ah Boys to Men 3: Frogmen" is the top grossing movie for three consecutive weeks in Singapore since its 19th Feb release, surpassing the "Ah Boys to Men 1" record of $6.2m.

Movie director, Jack Neo is hopeful that the movie will hit the $7m mark by the end of the week and eventually reach the $8m mark.

Separately, the group recently entered into a term sheet to acquire 51% of a Vividthree, a leading multi-award winning player in Singapore's 3D animation field.

If successful, the acquisition will expand MM2's film production value chain and strengthen its competitive advantage as a movie producer to capture new markets, customers and business opportunities.

Valuations wise, compared to peer Spackman Entertainment, its Korean counterpart also listed on SGX, MM2 appears to be a better play for movie sector exposure.

Both media companies are trading at 3.0-3.6x P/B, but while Spackman is loss-making (FY14: US$8m loss), MM2 is operationally profitable in FY3/14 with net profit of $2.7m.

Keppel Land

Keppel Land: Parent Keppel Corp has extended the closing date of its voluntary unconditional cash offer to 26 March ’15.

As of yesterday, Keppel Corp has garnered 85.1% control of the total issued shares of its property arm, 4.9% below the 90% delisting level, and 10.4% from the 95.5% mark that will trigger compulsory acquisition and the higher offer price of $4.60.

The majority of the street has been confused by the compulsory acquisition threshold level, which is defined as 90% of the 45.4% shareholdings not owned by Keppel Corp at the despatch date of offer document (12 Feb). Adding this to the 54.6% owned by Keppel Corp then works out to 95.5% of the total issued shares.

Shareholders should note that at the current level of shareholding, the offer price will be based on the base offer price of $4.38, while the higher offer price of $4.60 will only be triggered only if the compulsory acquisition threshold (95.5% level) is reached.

Shareholders who want certainty may consider selling their shares in the open market at the current price of $4.56 to hedge their risks in the event Keppel Corp fails to clear the 95.5% higher price hurdle.

Lippo Malls Indonesia Retail Trust

Lippo Malls Indonesia Retail Trust (LMIRT): Post 4Q14 results, CIMB consider LMIRT to be inexpensive as it is currently trading at 9.0% FY15 dividend yield and 0.8x P/BV vs. 6.9% FY15 dividend yields and 1.0x P/BV for other SGX-listed REITs with large overseas exposure.

In the quarter, portfolio remained strong, with occupancy at 94.7%, while achieving a positive rental reversion of 10.8%.

House reckons LMIRT has room for further growth, both organically and inorganically.


DBS: Prime beneficiary of rise in interest rates. The implied Swap Offer Rate (SOR) spiked up by 32bp to 0.74% in Dec 14 and by 17bp to 0.86% in Feb 15. The 3-month Singapore Interbank Offered Rate (SIBOR) moved up in tandem by 21bp in January and 10bp in February to 0.77%.

Management guided loan growth of 8% for 2015. Although loan growth has moderated, DBS is in a unique position to benefit from the rise in interest rates due to its overwhelming advantage in having a low cost of funds in Singapore dollars.

UOB Kay Hian maintains BUY with TP of $23.55.

Raffles Medical

Raffles Medical: Group has been looking to grow its operations beyond Singapore. It has been actively pursuing plans to build hospitals in China, a country where it only operates a medical centre in Shanghai. RHB believes the recent
acquisition of stake in RSM will enable the Group to enhance the service offering at its Japanese clinics in Singapore as well help build a small business presence in Japan.

While meaningful contribution from overseas operations is still a few years away, RHB see the Group taking the right steps in expanding its overseas presence.

House maintains Neutral with TP of $4.00.


Vard: Vard has been hit by a rather significant delivery delay request, withfour out of five vessels under construction for Island Offshore at VardBrevik delayed for an average of six months. These four are worth NOK2b, making up 11.3% of the outstanding orderbook. This is the first delivery delay request and RHB does not expect it to be the last.

RHB maintains NEUTRAL and $0.52 TP.


OUEHT: CIMB hosted NDR in KL. Attention was focused on the Crowne Plaza Changi and the Crowne Plaza Extension acquisitions, which will be done at an initial 4.5% yield, and will be earnings accretive.

Income support of $7.5m to be drawn down over three years will provide further stability to the REIT. CIMB thinks the acquisition is positive and will capture demand when Terminal 4 and 5 are completed.

Given its current aggregate leverage level at 41%, equity fund raising can be expected for the acquisition for Crown Plaza extension, though both the acquisitions will be yield accretive.

On tourism landscape, Mandarin Orchard and Mandarin Gallery is expected to deliver stable earnings this year.

CIMB maintains Add with TP of $1.01

SG Market (13 Mar 15)

Singapore shares are expected to open firmer, led by the technical rebound on Wall Street, with the S&P500 rebounding off its 100-day moving average.

Regional bourses are trading higher this morning in Tokyo (+0.4%) and Seoul (+0.8%) but weaker in Sydney (-0.5%).

From a chart perspective, the STI is likely to be bounded by upper resistance at 3,388 and downside support at around 3,355.

Stocks to watch:
*United Envirotech: 3QFY15 results above estimates. Net profit jumped 37% y/y to $12.8m on the back of a 81% jump in revenue to $116.1m, as treatment business added $7.6m (+38%) to $27.8m, engineering business added $32.8m (+74%) to $44.1m and the contributions of new membrane sales amounting to $11.4m to outside parties during the acquisition period. Bottom-line was weighed by a more than 2x rise in materials, consumables and subcontractor fees at $72.4m. NAV/share at $0.729.

*Keppel Land: Offeror Keppel Corp is extending its offer to 26 Mar. As of yesterday, Keppel Corp has garnered 85.1% control of the total number of shares, below the 95.5% threshold level, which will trigger the higher offer price of $4.60.

*Soilbuid REIT/Technics O&G: Buys 72 Loyang Way, an integrated facility from subsidiary Technics O&G, comprising two blocks of 3-storey and 4-storey ancillary office, two high ceiling single-storey production facilities, a blasting and spray painting chamber, a 200-worker dormitory and a jetty with 142m of sea frontage for $97.0m, on par with independent valuation. TOG will leaseback the facility for 15 years, first year rent at $7.87m with yearly rental escalation of up to 2.25% from year three onwards.

*Keppel REIT: Together with joint owner Mirvac Group celebrated the topping out of the Old Treasury Building Office Tower in Perth. The office tower is expected to be completed in mid-2015, and is currently 100% pre-committed with a 25 year lease, with options for another 25 years from the Government from Western Australia.

*mm2 Asia: Latest co-production, "Ah Boys to Men 3: Frogmen" is the top grossing movie for three consecutive weeks in Singapore since its 19th Feb release, surpassing the "Ah Boys to Men 1" record of $6.2m.

*Interra Resources: Entered into an agreement for the proposed acquisition of 21.4% equity interest in PT Benakat Oil, at a purchase price of US$7.4m. The acquisition will be funded by US$1.2m cash and the remainder via the issuance of 57.1m new shares at an issue price of $0.1492 per share.

*Nordic Group: Non-binding MOU to purchase Austin Energy, a construction services provider that specializes in thermal insulation in the petrochemical, pharmaceutical and offshore industries, for $26m (2.1x P/B). The acquisition is intended to expand group's service offering.

*Sinotel Technologies: SGX-listed Advance Technology has made a mandatory conditional general cash offer for Sinotel Technologies, after acquiring an additional 9.27% stake in the company, bringing its total to 39.25%. Offer price of $0.098/share, subject to obtaining >50% total issued shares.

*Raffles Education: To acquire the remaining 41.8% stake in Educomp-Raffles Higher Education for INR986.4m ($21.6m), which operates the Raffles-Educomp brand of green field campuses and learning centres or institutions in India.

*Edition: Proposed to undertake a renounceable non-underwritten 8-for-1 rights issue at an issue price of $0.01, to strengthen its balance and working capital.

Thursday, March 12, 2015


NOL: After a few weeks of relative stability, market participants are feeling jittery on oil again, as US crude stockpiles broke another high, fuelling the global glut. At the latest, WTI crude fell another 0.2% to US$48.06 a barrel, after yesterday’s decline.

In tandem, transportation stocks have risen on oil’s latest weakness. SIA (+1.81%), ComfortDelgro (+0.3%) and SMRT (+0.3%) were beneficiaries this morning.

This sentiment could also trickle to NOL, which had been punished 12.1% since 16 Feb. NOL’s sell down has been steep, and the current price is hovering slightly above the 200-daily moving average level.

Despite the current bearish sentiment on NOL, not all news are bad. In the first week of March, the counter received a TP upgrade from a foreign broker, after it adjusted estimates reflecting the sale of APL Logistics.

Separately, management has guided in its latest 4Q14 results that it could benefit from lower bunker prices in 2015, if oil prices remain depressed.

NOL is trading at 11.7x forward P/E.


Memtech: Old kid getting new attention: impressive turnaround in FY14
The electronics component maker has been gathering higher trading volumes since its FY14 results release end Feb, but has yet to receive any broker coverage.

Memtech is principally a customized components manufacturer for the consumer electronics and automotive sectors.

In FY12, it disposed of its loss-making keypad business in Huzhou and in FY13, it made the strategic move to diversify its product range into precision and decorative rubber and plastic parts for automotive, highly decorative parts for consumer digital products, and modular components for niche industrial and medical sectors.

Following the transformation, the group has turned profitable since 3Q13. In FY14, it raked in US$17.2m profits, reversing from US$4.4m loss in FY13, on revenue of US$137.6m (+18). Gross margin improved 1.9ppt to 17.5% despite the reclassification of packaging cost to cost of sales.

Operations have stabilized post-transition and plant fire in Feb '13. Core profit excluding liquidation and disposal gains and impairments turned around to US$6.2m in FY14 from loss of US$3.5m in previous year.

Memtech is not a new kid on the block. It has solid long-standing relationships with major international names such as Huawei, Lenovo, Samsung and Netgear in the consumer electronics space.

In its newer automotive segment, it supplies to global automotive parts suppliers such as Germany’s Hella and KOSTAL, Canada’s Magna, America’s Lear and Japan’s Denso. Most recently, it is also working directly with car manufacturers Volkswagen, General Motors and Tesla.

The group has three manufacturing sites in Dongguan in Guangdong Province, Kunshan and Nantong in Jiangsu Province, in China

Memtech has strong financials, with net cash position of US$29.1m, inventory turnover of 9.9x, and ROE way above peers at 15.3%

Valuations appear undemanding, with core trailing P/E of 8.8x, which is a big discount to its bigger peers trading at around 15x.

Black Gold Natural Resources

Black Gold Natural Resources (former NH Ceramics): Debut trading for BlackGold Natural Resources, formerly known as NH Ceramics, after the successful RTO where the latter acquired the former via new shares at $0.295/share.
BlackGold Natural Resources is an Indonesian-led group of companies which are principally engaged in coal exploration and mining in Riau province, Indonesia.

Super Group

Super Group: In the recent NDR, the key takeaway was that Super has made its transition to a stronger growth platform.

In its transition, the instant-coffee maker has completed its rebranding efforts, tightened product range, launched more premium products with strong differentiation to boost margins, fixed distribution and logistics problems and identified new growth markets.

On growth, management is cautiously optimistic that 2015 will be a year of revenue and profitability recovery, albeit gradual. Meanwhile, normal seasonality can still be expected, with 2H15 to be stronger than 1H15.

Marketing activities will be stepped up in 2H15, where there will be a concerted push for new premium, differentiated products in all markets. Margins are also expected to improve, assuming input prices stay tame.

While there is a risk that growth forecasts are not spot-on, Maybank-KE reminds investors to focus on the bigger picture, i.e. a strong and continual recovery trend.

Maybank-KE maintains Buy on Super with TP of $1.60, based on 23x FY15e P/E, or 0.8x above its 5-year mean. The house opines its expectations are not too aggressive, notwithstanding possible weakness in Malaysia due to GST implementation and weakening MYR.


Straco: CIMB upgrading to Buy with TP hiked to $1.01 from $0.78. Basically it hinks that Singapore Flyer’s potential was previously underestimated as their forecasts only factored in bottom line contribution in FY17, but the Flyer had already booked in $1.4m PBT in latest 4Q14 results.

The Flyer’s contribution was done by 1) lowering discounts to tour groups, 2) channeling more walk-in visitors, and 3) streamlining costs.

Aside the house also sees a potential ticket price hike at the Shanghai Ocean Aquarium.

Tiger Airways

Tiger Airways: DBSV maintains BUY with TP of $0.39, as load factor continues on an uptrend in Feb.

Tigerair load factors and yields are recovering due to tightening capacity. With the rise in yields and lower fuel cost, breakeven load factor has come down significantly. Going forward, DBSV expects net profit of $44m and $61m in FY16 and FY17 respectively, compared to a loss of $250m in FY15.

House expects the stock to re-rate on sustained earnings recovery.

Moya Holdings Asia

Moya Holdings Asia: In response to a trading query by SGX yesterday, Moya Holdings Asia (MHA) disclosed that Indonesia's Salim Group was the majority party (85%) in its recent proposed placement of new shares at $0.08/share.

Recall, the first (152.6m shares) and second (214.9m shares) tranches of the placement is expected to take place before 17 Mar and 15 Apr, respectively, or two business days after receipt of SGX’s approval-in-principal.

Post-completion of both tranches, Salim Group will hold 29% stake in MHA, which they intend to add value by improving its project execution capabilities, as well as to assist in securing new projects.

Salim Group is the biggest conglomerate in Indonesia, which operations in F&B, telecom, retail, property and banking units, and best known for Indofood, the world's largest manufacturer of instant noodles.

SG Market (12 Mar 15)

Singapore shares may open flat following the softer close on Wall Street amid interest rate and dollar fears.

Regional bourses are firmer in early morning trades in Tokyo (+0.6%), Seoul (unch) and Sydney (+0.8%).

From a chart perspective, the STI is likely to be bounded by upper resistance at 3,388 and downside support at around 3,355.

Stocks to watch:
*UOB: Makes voluntary conditional cash offer of $3.51/share, or $74.2m (1.8x P/B), for the remaining 21% stake it does not own in unlisted commercial banking and financial services unit, Far East Bank.

*Keppel Land: Parent Keppel Corp has obtained 80.8% control (up from 76.7% yesterday) of its property arm. Closing date for the voluntary unconditional cash offer is today (12 Mar).

*TTJ: 2QFY15 net profit fell 27% to $3.9m, as revenue tumbled 33% to $27.4m, dragged by lower sales in its structural steel business, partially offset by higher rental income from the dormitory business on positive rate reversion. Gross margin rose 2ppt to 24.1% from higher margin projects. NAV/share of $0.3468.

*GLP: Secured new agreements totalling 63,000 sqm (678k sf) with four customers in China, which include leaders in e-commerce, packaged foods and pharmaceutical industries.

*Hiap Hoe: Obtained approval for a revision to the existing planning permit for its 380 Lonsdale Street mixed-use development in Melbourne, to include more residential units and a hotel component. Separately, the Group updated that ~83% of residential development, Marina Tower in Melbourne, has been sold with sales of ~A$222.8m achieved.

*Intraco: Awarded $6.6m from arbitration proceedings against Timor Global, which group previously made a provision for in FY14.

*Yoma: Received approval from Myanmar Investment Commission to extend the lease for the Landmark Development site, after protracted delays.

*Noble Group: CEO continues to acquire shares over the market; Richard Samuel Elman purchased 2m shares at $0.925 each on 11 Mar, raising his shareholding from 20.93% to 20.96%.

*Oxley Holdings: Spent JPY655m ($7.5m) for a 11-storey residential property, located in Akasaka 2-chome, Minato-ku, in Tokyo, Japan. The 651.1 sqm gfa property sits on a freehold land site of 165.3 sqm.

*Biosensors: Completed patient enrolment in CREDIT II, a randomized controlled trial involving Biosensors' EXCEL II coronary stent, the group's latest generation biodegradable polymer drug-eluting stent.

*United Fiber: Negative qualified opinion and emphasis of matter from its auditor, Ernst & Young, citing that the group did not provide for a US$58.6m potential interest charge and the existence of a material uncertainty, which may cast significant doubt on the group as a going concern.

*Moya Holdings Asia: In response to a trading query, group disclosed that the Salim group was the majority party (85%) in its recent proposed placement of new shares at $0.08/share. The first (152.6m shares) and second (214.9m shares) tranche of the placement is expected to take place before 17 Mar and 15 Apr, respectively, or two business days after receipt of SGX’s approval-in-principal for the tranches. Post-completion of both tranches, the new subscriber will hold 29% of Moya Holdings Asia, which they intend to add value to by improving its project execution and to assist in securing new projects.

*A-Sonic Aerospace: Received SGX's approval-in-principle for its 4-into-1 share consolidation.

Wednesday, March 11, 2015

Darco Water

Darco Water: Alan Wang became a substantial shareholder of the group, buying 39m shares 2.1¢ apiece, bringing stakeholdings to 0.0769 to 5.9%.


Triyards: Triyards recently announcednew orders worth over US$100m, comprising two ice-class Multi-PurposeSupport Vessels (MPSVs) for OceanEnergy Ventures, and a FPSO turret fabrication job for London MarineConsultants. This brings its FY15
contract wins to about US$228m,representing 65% of UOB Kay Hian's FY15 assumption.

House maintains BUY with a higher TP of $1.10 (from $1.04), pegged at 1.0x FY16F P/B.


Noble: Noble’s return to an asset-light strategy over the past two years has given it one of the strongest balance sheets in a decade.

In Feb 2015, a little-known outfit alleged Noble’s accounting practices were misleading, particularly in its accounting for Yancoal as well as the recognition of fair-value gains. Noble completely rejects the accusations: it has provided significant clarification on these issues and its auditor, Ernst & Young, has signed off on its 2014 accounts since the allegations were raised.

Given CLSA's expectation of ROE recovering to the mid-teens and positive EVA and operating cashflow, the stock looks undervalued. BUY with $1.51 TP.

United Envirotech

United Envirotech: Regarding the formalization of KKR and CITIC’s offer to buy UENV at $1.65, Maybank-KE reiterates its view that CITIC’s involvement could be a long-term game changer for UENV, in two possible ways:

1) JVs with other SOEs:
As an engineering service provider, UENV still relies heavily on third-party contracts. As competition heats up in China, UENV would likely need new ways to thrive.
Concurrently, as China’s water-discharge standards become more stringent, and membrane-based technologies gain traction, there are tremendous opportunities for UENV from water treatment plants needing upgrading.
Maybank-KE thinks that the SOE JV model could address circumstances above. Already, the JV with Chengdu Xingrong is a good trial for this model. The JV is meant to provide membrane-based engineering services for expanding and upgrading Chengdu Xingrong’s plants, and will bid for future contracts too. This model is replicable and could yield more contracts from other SOEs via profit-sharing.
CITIC, with its connections and subsidiaries in energy, resources and manufacturing could also provide more jobs to UENV via this model.

2) Recurring income from M&As, asset injection.

Moreover, CITIC may not be contented with UENV’s portfolio size, which could spark corporate actions. Most Chinese water SOEs prefer to be asset-heavy, as owning recurring-income assets is a must to survive in the industry.

Capital injections by CITIC can strengthen UENV’s balance sheet and lower its source of funding, while its own water assets, albeit very small, can be injected into UENV at some point.

In sum, the $1.65 offer price, at 32x P/E and 16x EV/EBITDA is too good to reject from a short term point of view, especially considering 3QFY3/15 results could be weak.

Nevertheless, long term investors betting on a successful transformation might want to stay the course. On that front, Maybank-KE maintains Buy on UENV with TP of $1.93, based on 27x FY3/16E P/E, or a 10% discount to peers due to a smaller recurring income base.


Ezra: The weak oil price environment is creating challenges for the subsea industry, with the likes of subdued activity for tendering activity of new awards, as oil companies delay final investment decisions and the timing of potential projects to be awarded in 2015 remains highly uncertain.

Industry participants Saipem and Technip highlighted that the sharp slowdown in upstream investments announced by oil companies is likely to impact the negotiations on new contracts, both in terms of timing and rates, as well as increasing pressure on supply chains to suggest a prolonged, harsh slowdown in many parts of the industry.

On the challenging conditions, Deutsche cited that Ezra is expected to come under pressure on subsea new orders for FY15, below its US$1b in FY14, in light of aggressive capital discipline from oil companies.

A risk for Ezra is its high gearing (>1x) which may call in question the group’s funding needs. However, as construction has completed for its major vessel The Lewek Constellation (now undergoing commissioning), capex requirements should subsequently decline and management expects gearing to trend lower.

In its Offshore Support business, Ezra is seeing weakness in shallow water Platform Support Vessels and Deutsche believes it should see downside pressure on charter rates.

House maintains its Hold rating with TP of $0.52.

Low Keng Huat

Low Keng Huat: The construction and property group climbed 20% from its low in Oct '14 and is nearing its all-time high of $0.78 set in May 2013.

We hypothesize that investors may be anticipating a special dividend payout in its upcoming FY14 results due end of this month.

9M14 earnings already doubled to $83.5m (8.81¢ eps), while revenue soared almost 8-fold to $459m, mainly boosted by full revenue recognition of Parkland Residences, a DBSS project, upon its TOP in Oct '14.

4Q14 results are expected to be boosted by the full recognition of sales proceeds from commercial development, Paya Lebar Square (office), upon obtaining its TOP. As at 1 Dec '14, only eight of the 556 office units at the premium-grade property remain unsold.

Market Insight estimate LKH would book at least $394m at the top line for its effective 44% stake. This should translate into ~$98.5m at the bottom line; more than its 9M14 earnings.

Assuming a historical dividend payout rate of 30-40%, LKH could reward shareholders with bumper DPS of 7.4¢ for FY14 (FY13: 3¢), giving an effective 9.7% yield.

At $0.765, LKH is valued at 1.03x P/B. There is currently no coverage on the counter but an expected blowout FY14 results and dividends could precipitate a share price re-rating.

As such, Market Insight is adding the stock to its Yield portfolio with an entry price of $0.765.

SG Market (11 Mar 15)

Singapore shares are likely to follow Wall Street southwards on heightened expectations of a faster-than-expected interest rate hikes.

Regional bourses opened weaker this morning in Tokyo (-0.1%), Seoul (-0.7%) and Sydney (-0.9%).

From a chart perspective, the STI is poised to breach its 50-dma at 3,388 and break below its two-month consolidation pattern towards the next support level at around 3,355.

Stocks to watch:
*Del Monte: 3QFY15 losses narrowed 66% y/y to US$2.2m, dragged by higher interest expenses (US$28.0m vs US$1.2m) incurred from acquisition of Del Monte Foods Inc (DMFI) in Feb '14, as well as acquisition-related expenses. Meanwhile, revenue rose to US$637.6m, with US$511.0m contributed by DMFI. Excluding that, revenue improved 2.3% to US$126.6m, driven by increased sales in Philippines. Group turned operationally profitable on 3.7% margin. NAV/share of US$0.1688.

*Tigerair: Feb ‘15 saw a 3.2% decline in traffic, while capacity fell 8.5%. Consequently, passenger load factor increased 4.3ppt to 78.9%.

*Keppel Land: Parent Keppel Corp has obtained 76.7% control (from 73.7%) of its property arm. Closing date for the voluntary unconditional cash offer is on Thu (12 Mar).

*Nam Cheong: Secured two orders worth US$58m ($80.3m) from Marco Polo Marine and Topaz Energy and Marine, for an accommodation work vessel and a anchor handling towing supply vessel. The new orders bring order book to RM1.7b, and are expected for delivery in FY15 and FY16.

*Frasers Centrepoint: Opened doors to its third property in Kuala Lumpur, Frasers Residence Kuala Lumpur. The 445-unit serviced residence brings the group's hospitality portfolio in KL to 1,000 apartment units.

*SGX: Adding new Asian currency futures contracts- TWD/USD, SGD/CNH, CNY/SGD and EUR/CNH, to expand its current suite of FX futures in 3Q15, subject to regulatory approval.

*WE Holdings: Proposed to acquire Hua Kai for $25m, to gain entry into the land reclamation business. The acquisition will be funded in cash ($8m) and shares ($2m), with the remaining $15m to be paid over a three-year earn-out period, subject to a profit guarantee of $6m earnings per year. In conjunction, group entered into a non-binding MOU with NRA Capital, to issue new three-year 8% convertible non-redeemable bonds.

*Neo Group: Emerged top events caterer with 10% market share for 2013, according to market research firm, Euromonitor.

*UE E&C: Counter will be delisted with effect from 16 Mar, after the compulsory acquisition by Universal EC Investments has been complete.