Capitaland

Capitaland: To divest serviced residence property known as "Citadines Ashley Hongkong" in Tsim Sha Tsui, Hongkong for HK$311m (approx $50m). This will be sold to Jasen Industries Ltd. Co's carrying value (book value) was $35m for this invt. Capitaland currently trades at 0.71x P/B and its low during 09 was approx 0.58x. P/B chart below

KepCorp

KepCorp: Deutsche note that recent contract win from Maersk Drilling for a Gusto MSC CJ70 jackup worth US$560m is positive, as not only is the rig price up 12% vs previous signing of same unit in Feb 11, it also demonstrates that industry spending continues despite the recent oil price volatility. Recent share price movement is largely due to high correlation with oil price (R-sqr: 0.84), which has been weak. However, fundamentals within industry remain firm with capex continuing due to (1) global reserve depletion, (2) increased focus on safety, (3) the need for enhanced drilling capabilities, and (4) a rapidly ageing rig fleet. Current Brent price is at a comfortable level for industry spending to continue. Apart from Brazil, Angola appears promising with drilling successes there leading to hope that the region could potentially rival Brazil's Santos Basin. If Angola proves to be as prolific as Brazil, believe this could result in extended long-term demand for deepwater/ultra-deepwater rigs and FPSOs. In Gulf of Mexico, the continued recovery in drilling activities is encouraging and may lead to greater demand for high-spec assets. Other promising regions include the North Sea, Mexico, French Guiana, Liberia Sierra Leone, Cote d'Ivoire Ghana, Gabon, Mozambique/Tanzania, Israel, Black Sea/Turkey, India, China, the Philippines, Indonesia, and Australia. Prospects for shallowwater rigs also remain healthy with active customer enquiries for high-spec jackup rigs as drilling conditions become more challenging and safety requirements rise.

SMM / Swiber

SMM / Swiber: SMM’s Indonesian subsidiary, PT SMOE Indonesia, in consortium with Swiber’s JV PT Rajawali, has secured a contract worth US$175m from Premier Oil Natuna Sea, for the engineering and construction of 2 Wellhead Platforms, 2 infield sub-sea pipelines and modification works on an existing facility for the Naga and Pelikan Project, offshore Indonesia. Construction is expected to commence Jul ’12 with offshore completion by Sep ’13. SMM’s scope of work, worth US$63m, entails engineering design and construction of the 2 platforms and modification work on the existing Central Processing Platform. This is the second contract award that SMM has secured from Premier. PT Rajawali is responsible for the laying of the 2 sub-sea pipelines and transportation of the 2 platforms. While positive, the contract is small vs SMM’s current net orderbook of $7.4b, and Swiber’s orderbook of ~US$1.2b. SMM trades at 12.8x P/E. Swiber trades at 6.9x P/E.

SG Market (04 Jun 12)

SG Market: S’pore shares are set for a sharp, broad-based selloff, following slumps in Europe and Wall Street following dismal US jobs data. This latest disappointment hammers home that the strong payroll numbers we saw in the 1Q could be a false dawn. Already Asian bourses are down more than 2% in early trading. With the STI already below the key 2760 support, the next floor at 2700 may be shaky. Usual risk-off victims, such as commodity plays and shippers, are likely to bear the brunt of falls. Banks may also be in the firing line, tracking regional counterparts, with UOB, which has the largest European exposure, likely the worst performer after ratings firm Egan-Jones downgraded Italy. Swiber and SembMarine are in the news after their JV landed a US$175m Indonesian contract, while both CapitaLand and A-Reit divested assets. Yoma has also completed the acquisition of a 70% stake in its Star City project in Yangon for $91m.

Olam

Olam: - 2.7% at $1.62, it’s lowest since Apr09, tracking declines in most regional commodity plays as the usual victims of risk-off market sentiment. But the stock's de-rating, with shares down around 24% year-to-date, may be overdone, HSBC note that Olam is not immune from global macro headwinds but it's building a portfolio that will be less impacted by volatility while increasing earnings visibility; this will keep the medium term earnings delivery story intact, in view. House cuts TP to $2.84 from $3.12 to reflect near-term earnings pressure, but keeps an Overweight call. The stock may find near-term psychological support around $1.50

SIA

SIA: armed with aviation’s largest cash pile, spent more on its own shares than on spare parts in FYMar12, helping make it Asia’s best-performing airline stock in the past six months. SIA has risen 1.4% since the end of Nov, the only gain among the 16 airline stocks tracked by Bloomberg. SIA has bought 25.2m of its own shares since Aug ’11 following a 29% four-week stock slump. The purchases, which exceed the amount the carrier bought in the previous 10 fiscal years, helped the shares withstand a quarterly loss that surprised analysts and concerns about the global economy. The airline had US$3.4b of net cash at the end Dec. It spent ~S$272m on buybacks in the year ended Mar, compared with the S$219m maintenance arm SIA Engg spent on parts and materials. The unit does most of the airline’s maintenance and accounts for the vast majority of its spending on parts. SIA says it buys its own stock “when appropriate” to fund share-based pay and performance plans for staff. Temasek Holdings, SIA’s biggest investor, also added 5.6m shares to its direct shareholding last month.

F1

F1: Formula One is still getting ready for an IPO although the timing is in question. The company was expected to issue a prospectus within nxt wk before a June IPO of approx US$3b. However, mgmt stressed that no fixed date was set though the decision to list within the year had not changed. Formula One obtains 1/3 of its revenue from race promotion fees with another 1/3 from broadcasting rightts and the remainder from advertising sales and other peripheral businesses. Goldman Sachs, MS, UBS have been hired to manage the IPO.