China Minzhong: Following CIMB and DBSV recent Buy Calls, Macquarie maintains O/p call with TP $2.35. House reiterate view that Minzhong is a high quality Co. that has significantly better corporate governance and more transparent operations than many of its China agriculture peers.
For value hunters, pick is MINZ, stock now in deep value with a P/B of 0.9x vs and ROE of 22%. 12mth forward PER is 3.2x. With no debt on the balance sheet, expect EBIT to grow 40% this year and confident that MINZ remains a quality Co. with strong earnings growth prospects.
Monday, October 3, 2011
SGX
SGX: Facing a delay in dual listings and IPO due to mkt conditions. Fitness First has postponed its US$500m IPO scheduled in 4Q this year to nxt year due to mkt sentiment. Fitness First had already met with cornerstone investors in both HK and Sg. Other notable companies which have reportedly delayed their listing plans include Manchester United (worth US$1b) and Fortis Healthcare India (worth US$400m)
BW Offshore has also delayed a secondary listing indefinitely. It was initially targeting 1H2011 and delayed it once to 2H2011 but prospects looks dismal now. Its CEO has stated that there has been a lack of liquidity for dual listings in Sg as well as current mkt conditions which contributed to its decision. BW Offshore has currently no urgent need for capital but has not ruled out listing in Sg at a later date. Since an agreement with Oslo Bors and SGX to facilitate dual listings 2 yrs ago, only 1 company Golden Ocean has been carried out.
In other news, London Stock Exchange and SGX have held talks for a joint bid for London Metal Exchange (LME) which could be worth GBP1.0b. LME has a market share of approx 80% of global trade in metal futures and is the target for a buyout with at least 10 interested parties approaching the exchange. The tie-up might lend more clout and credence that could smooth over issues which scuttled SGX’s first deal with ASX. Some of LME’s shareholders are financial institutions, Goldman Sachs, UBS, JP Morgan and MF Global.
BW Offshore has also delayed a secondary listing indefinitely. It was initially targeting 1H2011 and delayed it once to 2H2011 but prospects looks dismal now. Its CEO has stated that there has been a lack of liquidity for dual listings in Sg as well as current mkt conditions which contributed to its decision. BW Offshore has currently no urgent need for capital but has not ruled out listing in Sg at a later date. Since an agreement with Oslo Bors and SGX to facilitate dual listings 2 yrs ago, only 1 company Golden Ocean has been carried out.
In other news, London Stock Exchange and SGX have held talks for a joint bid for London Metal Exchange (LME) which could be worth GBP1.0b. LME has a market share of approx 80% of global trade in metal futures and is the target for a buyout with at least 10 interested parties approaching the exchange. The tie-up might lend more clout and credence that could smooth over issues which scuttled SGX’s first deal with ASX. Some of LME’s shareholders are financial institutions, Goldman Sachs, UBS, JP Morgan and MF Global.
SG Banks
SG Banks: CIMB note that Aug's system DBU loans grew 29.7% yoy (+3% mom), vs house expectations of a moderation in 2H11, in view of financial instability in Europe. While house believe the loan growth will not be sustainable, see potential upward pressure on interest rates from tightening liquidity as LDR ratios are now at a 6-yr high of 83.7%. This could provide some NIM uplift for local banks.
The bane will come from shrinking non-interest income and higher provisions as asset quality deteriorates, especially from overseas ventures. House still maintains neutral rating and top pick of the sector remains UOB (Neutral, TP: $18.02), which has the least downside to trough valuations, and have Underperform ratings for DBS (TP: $11.90) and OCBC (TP: $8.20).
The bane will come from shrinking non-interest income and higher provisions as asset quality deteriorates, especially from overseas ventures. House still maintains neutral rating and top pick of the sector remains UOB (Neutral, TP: $18.02), which has the least downside to trough valuations, and have Underperform ratings for DBS (TP: $11.90) and OCBC (TP: $8.20).
Midas
Midas/China Railway: China has currently delayed the building of more than 80% of its railway projects, and the completion of the projects have been postponed by a yr, as industry players await more clarity on govt's policies on high-speed rail, while almost all banks have temporarily stopped lending for railway construction
China Railway Group and China Railway Construction, the country's two largest railway contractors, have been forced to suspend projects after the Ministry of Railways delayed payments. We note that above news could put a temporary cap on any upside on Midas. Technically see support at $0.325 (2009 lows).
China Railway Group and China Railway Construction, the country's two largest railway contractors, have been forced to suspend projects after the Ministry of Railways delayed payments. We note that above news could put a temporary cap on any upside on Midas. Technically see support at $0.325 (2009 lows).
SATS
SATS: Announced that it is in talks over the potential sale of Daniels Grp, the owner of British food brands including New Covent Garden Food. Note however that discussions are presently at a stage where there is no certainty that a definitive agreement may be arrived at and no transaction may materialise from these discussions. HSBC has been appointed to run the auction for about 150m pounds ($234m).
Meanwhile, Citi maintains Sell with TP $1.95 vs 2.15 previously. House lower earnings estimates by 3% to reflect lower top-line growth expectations for FY12, as the uncertainty posed by the possible debt restructuring and recession in Europe is likely to have a negative impact on aviation traffic, particularly premium (business) travel.
Meanwhile, Citi maintains Sell with TP $1.95 vs 2.15 previously. House lower earnings estimates by 3% to reflect lower top-line growth expectations for FY12, as the uncertainty posed by the possible debt restructuring and recession in Europe is likely to have a negative impact on aviation traffic, particularly premium (business) travel.
SG Market
SG Market: Spore shares are likely to open lower tracking the slump on Wall Street last Fri, as concerns over Europe''s debt crisis continue to weigh the global economic outlook. The STI is tipped to find support at 2620 with resistance at 2720 with banks underperforming. Tiger Airways will be in focus after warning of a larger net loss in 2Q, citing its Australian flight suspension, lower load factors and higher fuel costs as factors; the carrier also announces it has received a complaint from the Philippines aviation regulator against its Singapore unit, in relation to the Australia ban.
Tiger Airways
Tiger Airways: Expect Co. to see selling pressure as trouble Woes continues to hit Co, with Co announcing this morning that it has received a letter of complaint by the Civil Aeronautics Board of the Philippines (CAB), which cited similar issues as its earlier Australian Operations suspension.
CAB had issued a case number for the complaint and asked Tiger to file its response. Tiger however is of the opinion that the above complaint is without merit. Co will make further announcements, as appropriate.
Separately, Co. also announced that it expects 2Q loss to be 'markedly larger' than 1Q vs a net profit of $14.1m yoy. On a sequential basis, losses are expected to be 'markedly larger' than the $20.6m net loss for the April-June first qtr. In the mths of Jul and Aug, Tiger's passenger numbers plunged 32% and 22% respectively to 358,000 and 344,000. Street has a mean TP of $0.74.
CAB had issued a case number for the complaint and asked Tiger to file its response. Tiger however is of the opinion that the above complaint is without merit. Co will make further announcements, as appropriate.
Separately, Co. also announced that it expects 2Q loss to be 'markedly larger' than 1Q vs a net profit of $14.1m yoy. On a sequential basis, losses are expected to be 'markedly larger' than the $20.6m net loss for the April-June first qtr. In the mths of Jul and Aug, Tiger's passenger numbers plunged 32% and 22% respectively to 358,000 and 344,000. Street has a mean TP of $0.74.
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