Keppel Corp

Keppel Corp: a key customer, Standard Drilling, recently sold one of its rigs (being built at KepFELs yard) to Msia’s UMW Oil & Gas, with a 2nd rig option to be sold at a total gross combined px of US$426m. Standard expects to make a profit of US$8.5m on the first rig, and another US$7.8m if the option is exercised. Standard still has another 4 similar KFELS B Class drilling rigs under construction at KepFELS yard. Nomura notes the sale has strengthened Standard’s balance sht and reduced its capital commitments by US$298m to US$605m, and Standard expects net funding for the remaining 4 rigs to be “comfortable”. Nomura views the secondary transaction as positive as it lightens KEP’s exposure to a single customer, and also indicates that demand for their high spec KFELS B class jack up rig remains robust. The house notes KEP trades at FY12/13e P/E of 12-13x, vs historical P/E band of 8-22x. Believes the stock’s dividend yield of 4.4% and avg ROE of 20% are attractive relative to peers. Reiterates Buy rating with TP $13.80.

Europe

Europe: positive surprise from the EU Summit, “defying defeatists” according to HSBC. Contrary to gloomy expectations, the EU Summit looks set to deliver a series of steps to ease the Eurozone crisis, fostering a bounce in the EUR and “risk on” currencies. Comments from EU leaders suggest: i) a supervisory body for Eurozone banks will be set up ii) ESM will be able to lend directly to the banks rather than through the sovereign iii) ESM loans to Spanish banks will not have seniority iv) Rescue funds can be used to stabilise bond markets HSBC notes, together, these steps will help break the vicious feed-back loop that has developed between the banking sector and the sovereign. They will also ensure that existing bond holders are not threatened with subordination as a price for banking sector recapitalisations. The supervisory body for banks will justifiably be viewed as a first step towards banking union.

Tat Hong

Tat Hong: Maybank Kim Eng initiates with Buy and $1.41 TP. House note that as Tat Hong’s rental business, which enjoys more stable demand, begins to make up a bigger chunk of its total gross profit, earnings volatility should ease in tandem. Tat Hong stands to benefit from regional infrastructure boom in the medium term. Over the past four qtrs, Tat Hong’s key operating statistics have shown significant improvement. The trend looks set to continue for the next 2-3 years, buoyed by high demand in the region. TP of $1.41, pegged at 14x FY3/13F PE.

STX OSV

STX OSV: Strong order momentum continues, in-line with grp’s guidance of a strong pipeline of orders going forward. Grp announced contracts for 2 platform supply vessels (PSVs) for Island Offshore, amounting to approximately NOK500m in total. Vessels delivery are scheduled for 4Q13 and 2Q14 respectively. We note that latest orderwins brings’ grp’s Ytd order win to approximately, Nok 7.3b and current orderbook to approximately Nok 19-20b, which bodes well vs FY11 Orderwins of Nok 11.1b and yr end orderbook of Nok16.7b. Going forward, grp has maintained margins to remain stable, with an expected Ebitda Margin of 11-13% going forward. Majority of street remains positive on stock with 13 Buy Calls and 2 Hold and a Mean TP of $1.89.

SG Market (02 Jul 12)

SG Market: S’pore shares are set to extend last week’s rally following the strong gains on Wall Street amid some progress on the eurozone debt problems with the STI likely to surge past the 2900 resistance and test the next barrier at around 2920, as represented by the 50-day moving average. The usual high-beta stocks are expected to be in play, icluding the commodity and oil-related stocks after crude saw its biggest gain since 2009,. Among stocks likely in focus, CMA set up a US$1b private-equity fund to invest in China retail property development and tapped CMT CEO Simon Ho for deputy CEO position; CMT promoted deputy CEO Wilson Tan to CEO.

Hi-P

Hi-P: is +3.2% at $0.805, amid buoyant market sentiment, despite major customer Research In Motion (RIMM) reporting a big quarterly loss and saying its next smartphone, which it has bet its survival on, won't be ready until next year. But the market may have already anticipated any earnings hit to Hi-P. Lim & Tan Securities notes RIM's problems started more than a year ago and have already negatively impacted Hi-P's results, with 1Q12 net profit down 91%. Notes Hi-P is counting on new products from Apple and new customers such as Amazon and Nike to help mitigate the weakness from RIM and expect their diversification efforts to be more apparent in 2H12. Keeps a Buy call. The stock's week-to-date peak of $0.835 likely offers a near-term cap.

Tan Chong Int’l, TCIL 3k HK$

Tan Chong Int’l, TCIL 3k HK$: stock is +2% at $2.09, with volume back at thin levels, following yday’s significant sh/h transactions. According to the co filings, TCIL’s public float has now been restored to 28.6% (from 22.7%), above the min level required by the HK listing rules. Guoco will cease to be a significant sh/h, with its stake sold down from 19.88% to 3%. Nevertheless, we note that the “new shareholders” are a vehicle partially owned by the largest sh/h Tan Eng Soon, as well as his brother Dato Tan Heng Chew, hence the reported free float may not be accurate (in substance). While the filings did not give the transaction price, the “time sales” data reflects $2.60 as the price transacted. Should this be accurate, it provides an indication of the value that the Tan family places on this company.