UOL: (S$6.42) Fairly resilient 3Q15 amid gloomy outlook
UOL’s 3Q15 net profit dipped 1.7% y/y to $100.8m, broadly in line with estimates as 9M15 earnings of $327.6m (-2%)attained 78% of full year consensus.
Revenue slipped 18.3% to $354m due to lower contributions from property development and hotel operations, partly cushioned by rental income from its property investment segment.
Property development - Revenue: $174m (-33.3%)
The revenue gap came arose from completion of The Esplanade in Tianjin, China in 3Q14. Revenue recognised for 3Q15 included Botanique at Bartley (>70% sold), Riverbanks @ Fernvale (64% sold), Seventy St Patricks, and the recently TOP-ed Katong Regency.
Property investments - Revenue: $56.4m (+15.5%)
Rental revenue from its property investments grew with additional income from its OneKM mall, which opened in 4Q14.
Hotel operations - Revenue: $10.5m (-4.3%)
Performance was affected by refurbishment works at Pan Pacific Perth, and PARKROYAL Yangon, coupled with the weaker MYR and AUD.
Gross profit margin fattened 8ppt to 39% due to a change in its revenue mix as contributions from its property development typically carry lower margins.
Bottom line was affected by:
1) Higher marketing expenses of $16.5m (+63%) on expenses related to the ongoing sales of units at its residential projects as well as consolidated expenses of its OneKM mall and Pan Pacific Tianjin.
2) Finance expenses of $12.8m (+141.8%) on higher interest rates and unrealised FX losses on its USD borrowings.
3) Contributions from associates and JVs of $44.8m (+12.5%), mainly from UIC and 50%-owned Thomson Three.
The group’s gearing ratio improved to 0.31 from 0.34 as at end 2014 following on its repayments to borrowings as well as increased equity.
Management is relatively pessimistic on the group’s outlook on a triple whammy of muted residential sales, an oversupply glut in office space, and a subdued economic outlook in Asia Pacific affecting tourism.
Despite this, the group recently launched its 663-unit Principal Garden which saw a strong response with a 20% take-up rate and an average selling price of $1,630psf. Its residential project in Shanghai, China is slated for launch in 1Q16 and could underpin performance of its property development segment in the next few quarters.
UOL is currently trading at a relatively discounted 0.66x P/B.
Latest broker ratings:
CIMB maintains Add with TP of $8.24
OCBC maintains Buy with TP of $7.43
Friday, November 13, 2015
Pacific Radiance
Pacific Radiance: 3Q15 results missed expectations as net profit tanked 87% y/y to US$1.7m, bringing 9M15 earnings to US$6.5m (-90%), which is 43% of the street's full year estimate.
For the quarter, revenue tumbled 29% to US$33.8m, due to lower utilisation of subsea and support vessels amid softer market conditions. The weak performance led to a a 2ppt slippage in gross margin to 21%.
Bottom line was also weighed by FX loss of US$2m, decline in gain on vessel sales of US$6.5m (-44%), and higher finance costs of US$3.2m (+43%).
Net gearing increased slightly to 81.7% (+1.7ppt q/q).
Market conditions are expected to stay depressed for the O&G sector over the next few quarters but management remains optimistic of its longer term prospects.
At the current price, Pacific Radiance is trading at a FY15e P/E of 23x and 0.45x P/B.
For the quarter, revenue tumbled 29% to US$33.8m, due to lower utilisation of subsea and support vessels amid softer market conditions. The weak performance led to a a 2ppt slippage in gross margin to 21%.
Bottom line was also weighed by FX loss of US$2m, decline in gain on vessel sales of US$6.5m (-44%), and higher finance costs of US$3.2m (+43%).
Net gearing increased slightly to 81.7% (+1.7ppt q/q).
Market conditions are expected to stay depressed for the O&G sector over the next few quarters but management remains optimistic of its longer term prospects.
At the current price, Pacific Radiance is trading at a FY15e P/E of 23x and 0.45x P/B.
Singtel
Singtel: 2QFY16 results met expectations as net profit dipped 0.8% y/y to $1.03b. Excluding one-off items, underlying profit would have been almost flat at $974m (-0.5%) as adverse currency impact offset growing usage of mobile data across its markets.
Revenue and EBITDA receded 3% to $4.18b and $1.29b respectively, due to a weaker AUD (-13%) and IDR (-6%) but grew 5% in constant currency terms, driven by growth in mobile data, ICT and digital services and strong customer growth momentum in Australia.
Singapore consumer revenue was stable at $597m (-0.2%) as mobile and fixed broadband gained 2.5% and 0.7%, but IDD dropped 15%. Within mobile, while postpaid ARPU fell 3% to $73 due to lower roaming, but is still the highest in the industry, while fixed broadband benefited from more customers taking higher-speed plans. EBITDA rose 10% on continuing good performance in mobile, an improved broadband showing and better cost management.
In Australia, both revenue and EBITDA grew 9% mainly on better 4G coverage now covering 90% of the population, and increasing adoption of Optus' popular My Plan postpaid offer.
Its enterprise business saw a decline in revenue (-3.8%) and EBITDA (-6.4%) but in constant currenct terms and adjusting for the fibre rollout business (transferred to NetLink Trust in Oct '14), revenue would have increased 2.3% with strong growth in ICT across Singapore and Australia, while EBITDA would have improved 3.8%.
Digital Life registered a smaller EBITDA loss of $34m (-15%) as business gained traction across the board. Marketing arm Amobee rose strongly on contribution from acquisitions and increased social and video advertising services, while big analytics arm DataSpark is supported by strong order books from the public sector.
Associates did well, particularly Indonesia's Telkomsel where share of pretax profits rose 21% in SGD terms. Globe in the Philippines benefited from a 5% appreciation of PHP and contributed a 1% rise in pretax profits.
Singtel maintained its interim DPS of 6.8¢ and guidance for FY16:
- Group revenue to rise by mid-single digit
- EBITDA to rise by low single digit
- Capex of $3b, mainly for Australia ($1.9b)
- Digital Life negative EBITDA of $150-180m
Maybank-KE believes the operating trends in 2QFY16 remains intact on continued good performance and maintains its Buy call with TP of $4.50.
Latest broker ratings:
Maybank-KE maintains Buy with TP of $4.50
OCBC maintains Buy but cuts TP to $4.17 from $4.38
Revenue and EBITDA receded 3% to $4.18b and $1.29b respectively, due to a weaker AUD (-13%) and IDR (-6%) but grew 5% in constant currency terms, driven by growth in mobile data, ICT and digital services and strong customer growth momentum in Australia.
Singapore consumer revenue was stable at $597m (-0.2%) as mobile and fixed broadband gained 2.5% and 0.7%, but IDD dropped 15%. Within mobile, while postpaid ARPU fell 3% to $73 due to lower roaming, but is still the highest in the industry, while fixed broadband benefited from more customers taking higher-speed plans. EBITDA rose 10% on continuing good performance in mobile, an improved broadband showing and better cost management.
In Australia, both revenue and EBITDA grew 9% mainly on better 4G coverage now covering 90% of the population, and increasing adoption of Optus' popular My Plan postpaid offer.
Its enterprise business saw a decline in revenue (-3.8%) and EBITDA (-6.4%) but in constant currenct terms and adjusting for the fibre rollout business (transferred to NetLink Trust in Oct '14), revenue would have increased 2.3% with strong growth in ICT across Singapore and Australia, while EBITDA would have improved 3.8%.
Digital Life registered a smaller EBITDA loss of $34m (-15%) as business gained traction across the board. Marketing arm Amobee rose strongly on contribution from acquisitions and increased social and video advertising services, while big analytics arm DataSpark is supported by strong order books from the public sector.
Associates did well, particularly Indonesia's Telkomsel where share of pretax profits rose 21% in SGD terms. Globe in the Philippines benefited from a 5% appreciation of PHP and contributed a 1% rise in pretax profits.
Singtel maintained its interim DPS of 6.8¢ and guidance for FY16:
- Group revenue to rise by mid-single digit
- EBITDA to rise by low single digit
- Capex of $3b, mainly for Australia ($1.9b)
- Digital Life negative EBITDA of $150-180m
Maybank-KE believes the operating trends in 2QFY16 remains intact on continued good performance and maintains its Buy call with TP of $4.50.
Latest broker ratings:
Maybank-KE maintains Buy with TP of $4.50
OCBC maintains Buy but cuts TP to $4.17 from $4.38
Wilmar
Wilmar (S$3.01) : 3Q15 results missed on commodity prices and FX headwinds
Wilmar’s 3Q15 net profit plunged 35% y/y to US$276m, hurt by losses from investment securities and unfavourable FX movements. Excluding one-off items, core net profit tumbled 16.5% y/y to US$359m. This brought 9M15 core earnings to US$815.9m or 70% of full-year consensus estimate.
Revenue fell 7.6% to US$10.65b, dragged by tropical oils (-22%) and sugar (-1%) segments, which suffered from lower crude palm oil (CPO) and sugar prices respectively.
EBITDA margin expanded by 0.7ppt to 5.4%, underpinned by wider margins from soybean crushing and consumer products in the stronger oilseeds and grains segment.
Segment analysis:
Tropical oils – Revenue fell 22% to US$4.15b on weaker CPO prices and sales volume (-2%). This, coupled with thinner refining margins led to a 46% slump in pretax profits to US$105.1m.
Oilseeds and grains – Top line grew 5% to US$4.85b, driven by a 25% growth in sales volume to 8.01m mt. Pretax profits surged 39% to US$243.6m on improved margins for soybean crushing and consumer products in China.
Sugar – Revenue dipped 1% to US$1.38b despite a strong sales volume of 4.67m mt (+34%) amid poor sugar prices. Pretax profits dived 31% to US$108.7m, undermined by a 22% depreciation in AUD, as well as weaker performance of merchandising and manufacturing business.
Bottom line was further hit by mark-to-market losses on investment securities (US$61.8m) and FX (US$47.1m) and losses from sugar associates in India.
Moving forward, management remains optimistic for FY15 as they view the satisfactory performance of the oilseeds and grains segment as sustainable, and expects the tropical oil business to improve on the group’s biodiesel mandate in Indonesia and firmer CPO prices. The sugar segment is also expected to recover given the recent surge in sugar prices.
Wilmar is currently trading at 11.7x FY15e P/E and 0.9x P/B.
Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $3.60
CLSA maintains Buy with TP of $3.53
CIMB maintains Hold, cuts TP to $3.36 from $3.40
Wilmar’s 3Q15 net profit plunged 35% y/y to US$276m, hurt by losses from investment securities and unfavourable FX movements. Excluding one-off items, core net profit tumbled 16.5% y/y to US$359m. This brought 9M15 core earnings to US$815.9m or 70% of full-year consensus estimate.
Revenue fell 7.6% to US$10.65b, dragged by tropical oils (-22%) and sugar (-1%) segments, which suffered from lower crude palm oil (CPO) and sugar prices respectively.
EBITDA margin expanded by 0.7ppt to 5.4%, underpinned by wider margins from soybean crushing and consumer products in the stronger oilseeds and grains segment.
Segment analysis:
Tropical oils – Revenue fell 22% to US$4.15b on weaker CPO prices and sales volume (-2%). This, coupled with thinner refining margins led to a 46% slump in pretax profits to US$105.1m.
Oilseeds and grains – Top line grew 5% to US$4.85b, driven by a 25% growth in sales volume to 8.01m mt. Pretax profits surged 39% to US$243.6m on improved margins for soybean crushing and consumer products in China.
Sugar – Revenue dipped 1% to US$1.38b despite a strong sales volume of 4.67m mt (+34%) amid poor sugar prices. Pretax profits dived 31% to US$108.7m, undermined by a 22% depreciation in AUD, as well as weaker performance of merchandising and manufacturing business.
Bottom line was further hit by mark-to-market losses on investment securities (US$61.8m) and FX (US$47.1m) and losses from sugar associates in India.
Moving forward, management remains optimistic for FY15 as they view the satisfactory performance of the oilseeds and grains segment as sustainable, and expects the tropical oil business to improve on the group’s biodiesel mandate in Indonesia and firmer CPO prices. The sugar segment is also expected to recover given the recent surge in sugar prices.
Wilmar is currently trading at 11.7x FY15e P/E and 0.9x P/B.
Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $3.60
CLSA maintains Buy with TP of $3.53
CIMB maintains Hold, cuts TP to $3.36 from $3.40
Thursday, November 12, 2015
Ezion
Ezion: (S$0.68) Weak 3Q15 weighed by service rigs & Australian project delay
Ezion’s 3Q15 results missed expectations as net profit sank 38.7% y/y to US$30.3m, bringing 9M15 earnings to US$100.3m (-28.4%), attaining just 66.1% of full year street forecast.
For the quarter, revenue slipped 9.1% to US$86.2m mainly due to the continued absence of contribution from its Australian marine and offshore logistic support services division as projects in Queensland have been delayed since the start of the year.
Gross margin shrank to 29% from 51.1% in 3Q14 as the group incurred additional expenses for the deployment of additional service rigs. This led to a 48.4% plummet in gross profit to US$25m.
Bottom line was affected by:
1) FX gain of US$7.5m (+211.9%) on the stronger USD
2) Higher contributions from associates and JVs of US$9m (+58.2%)
3. Net finance costs of US$5.9m (+58.7%) arising from lower interest income and higher finance costs associated with funding newly delivered service rigs.
Net gearing jumped to 1.08x (2Q15: 0.93x) as the group issued $120m worth of corporate notes in Aug ‘15 and drew down on more bank borrowings to finance construction, conversion, and refurbishment of its service rigs. Interest coverage ratio was stable at 4.7x (2Q15: 4.5x).
Management notes that while oil majors are cutting capex on exploration and development activities, they have also cut opex on extraction and production related activities prompting increased demand for a higher standard of equipment and services.
This has in turn crimped its margins from service rigs as the group have to swap units and put rigs through additional modifications and upgrades to meet those requirements.
The counter is currently trading at a trailing P/E of 4.1x and 0.6x P/B.
Ezion’s 3Q15 results missed expectations as net profit sank 38.7% y/y to US$30.3m, bringing 9M15 earnings to US$100.3m (-28.4%), attaining just 66.1% of full year street forecast.
For the quarter, revenue slipped 9.1% to US$86.2m mainly due to the continued absence of contribution from its Australian marine and offshore logistic support services division as projects in Queensland have been delayed since the start of the year.
Gross margin shrank to 29% from 51.1% in 3Q14 as the group incurred additional expenses for the deployment of additional service rigs. This led to a 48.4% plummet in gross profit to US$25m.
Bottom line was affected by:
1) FX gain of US$7.5m (+211.9%) on the stronger USD
2) Higher contributions from associates and JVs of US$9m (+58.2%)
3. Net finance costs of US$5.9m (+58.7%) arising from lower interest income and higher finance costs associated with funding newly delivered service rigs.
Net gearing jumped to 1.08x (2Q15: 0.93x) as the group issued $120m worth of corporate notes in Aug ‘15 and drew down on more bank borrowings to finance construction, conversion, and refurbishment of its service rigs. Interest coverage ratio was stable at 4.7x (2Q15: 4.5x).
Management notes that while oil majors are cutting capex on exploration and development activities, they have also cut opex on extraction and production related activities prompting increased demand for a higher standard of equipment and services.
This has in turn crimped its margins from service rigs as the group have to swap units and put rigs through additional modifications and upgrades to meet those requirements.
The counter is currently trading at a trailing P/E of 4.1x and 0.6x P/B.
Palm oil
Palm oil: Malaysian palm oil inventories rose to an all-time high of 2.83m MT (+7% m/m, +31% y/y) in Oct.
This was led by strong production of 2.04m MT (+4% m/m, +8% y/y), offset partially by higher exports of 1.71m MT (+2% m/m, +6% y/y). Domestic consumption was flattish at 0.21m MT (-28% y/y).
Maybank-KE guides that it is still early to suggest that palm oil stockpile has peaked in Malaysia for the year, as Oct’s relatively low refinery utilization rate at 67% is a possible red flag. The low utilization rate amidst high crop month suggest that Malaysian refiners are losing competitiveness vis-à-vis Indonesian refiners as the latter benefits from the US$20-30/t export tax differentials introduced in Jul.
The onset of Northeast monsoon recently has brought the much needed rain relief. The hotspots and haze in the region are largely gone by now. Yet, tree stress was evident in areas affected by the
recent drought, namely Central and South Kalimantan, and South Sumatra. And this will be manifested in 2016’s production.
Going forward, Maybank-KE is of the view that the Oct’s high stockpile will likely cap the upside of CPO price in the short term. Still, a situational play is building up in the plantation sector as the
present strong El Nino condition has a lag impact on FFB output and is typically positive for CPO price. The house believes that CPO price will start trending higher towards end-Dec ‘15 and into early 2016. CPO price could potentially peak in Mar - May ‘16 with the possibility of hitting RM2,700/t.
In the meantime, the upcoming 3Q15 results may see poor earnings on 1) low CPO ASP, compounded by the punitive US$50/t CPO; 2) export levy imposed in Indonesia since 15 Jul ’15; and iii) forex translation losses on US debt exposure.
The house is Neutral on the sector for now, although investors could position for an El Nino trade in 1H16.
The house ratings on SGX listed CPO stocks are as follows:
- Wilmar (Buy: TP $4.14)
- First Resources (Hold: TP $1.60)
- Bumitama (Hold: TP $0.85)
This was led by strong production of 2.04m MT (+4% m/m, +8% y/y), offset partially by higher exports of 1.71m MT (+2% m/m, +6% y/y). Domestic consumption was flattish at 0.21m MT (-28% y/y).
Maybank-KE guides that it is still early to suggest that palm oil stockpile has peaked in Malaysia for the year, as Oct’s relatively low refinery utilization rate at 67% is a possible red flag. The low utilization rate amidst high crop month suggest that Malaysian refiners are losing competitiveness vis-à-vis Indonesian refiners as the latter benefits from the US$20-30/t export tax differentials introduced in Jul.
The onset of Northeast monsoon recently has brought the much needed rain relief. The hotspots and haze in the region are largely gone by now. Yet, tree stress was evident in areas affected by the
recent drought, namely Central and South Kalimantan, and South Sumatra. And this will be manifested in 2016’s production.
Going forward, Maybank-KE is of the view that the Oct’s high stockpile will likely cap the upside of CPO price in the short term. Still, a situational play is building up in the plantation sector as the
present strong El Nino condition has a lag impact on FFB output and is typically positive for CPO price. The house believes that CPO price will start trending higher towards end-Dec ‘15 and into early 2016. CPO price could potentially peak in Mar - May ‘16 with the possibility of hitting RM2,700/t.
In the meantime, the upcoming 3Q15 results may see poor earnings on 1) low CPO ASP, compounded by the punitive US$50/t CPO; 2) export levy imposed in Indonesia since 15 Jul ’15; and iii) forex translation losses on US debt exposure.
The house is Neutral on the sector for now, although investors could position for an El Nino trade in 1H16.
The house ratings on SGX listed CPO stocks are as follows:
- Wilmar (Buy: TP $4.14)
- First Resources (Hold: TP $1.60)
- Bumitama (Hold: TP $0.85)
Bumitama
Bumitama: BAL's 3Q15 results came in below expectations, with a headline net profit of Rp199.8m (-30% y/y, -8% q/q). Stripping out FX loss of Rp19.5b, its core net profit was Rp214b (-27% y/y, -2% q/q). This took its 9M15 core earnings only met 61% of full year consensus estimate.
Revenue fell 13.7% y/y to Rp1.18t due to lower CPO average selling price of Rp6,746/kg (-17%), which was mitigated by higher sales volume of CPO (+2.6% to 156,601 MT) and PK (+11.9% to 29,832 MT).
Operationally, FFB yield inched up 0.1ppt to 4.4 MT/ha, while CPO extraction rate was flat at 23.2%. Average tree profile remains young at 6.9 years, providing scope for higher production growth.
Gross margin narrowed 10ppt to 34.7% due to the decrease in selling prices and higher purchases of external FFB and higher production volume.
Bottom-line was partly shored by a 136% surge in interest income to Rp37.7b mainly from advances given to the plasma farmers. Further cost savings were seen through a reduction of general and admin expenses (-23.2%) and other expenses (-48.0%), partially offset by FX loss of Rp19.5b (+40%) as a result of the depreciation of Rp versus the USD.
Going forward, management guides that 4Q15 will continue to be challenging for the group mainly due to the prevailing low CPO prices and demand. As such, BAL is revising its 2015’s FFB growth to 15% (previously 20%).
Both the Indonesian and Malaysian governments have biodiesel mandate to increase the blending ratio of palm oil to 15% and 7%, respectively, which could lend some support to the demand for palm oil.
BAL traditionally enjoys peak production in 4Q. This coupled with the recent recovery in CPO ASP could help boost the group’s 4Q15 earnings.
At the current price, Bumitama trades at 17.2x annualized 9MFY15 P/E. Maybank-KE maintains its Hold rating with an unchanged TP of $0.85 based on 13x 2016 P/E.
Revenue fell 13.7% y/y to Rp1.18t due to lower CPO average selling price of Rp6,746/kg (-17%), which was mitigated by higher sales volume of CPO (+2.6% to 156,601 MT) and PK (+11.9% to 29,832 MT).
Operationally, FFB yield inched up 0.1ppt to 4.4 MT/ha, while CPO extraction rate was flat at 23.2%. Average tree profile remains young at 6.9 years, providing scope for higher production growth.
Gross margin narrowed 10ppt to 34.7% due to the decrease in selling prices and higher purchases of external FFB and higher production volume.
Bottom-line was partly shored by a 136% surge in interest income to Rp37.7b mainly from advances given to the plasma farmers. Further cost savings were seen through a reduction of general and admin expenses (-23.2%) and other expenses (-48.0%), partially offset by FX loss of Rp19.5b (+40%) as a result of the depreciation of Rp versus the USD.
Going forward, management guides that 4Q15 will continue to be challenging for the group mainly due to the prevailing low CPO prices and demand. As such, BAL is revising its 2015’s FFB growth to 15% (previously 20%).
Both the Indonesian and Malaysian governments have biodiesel mandate to increase the blending ratio of palm oil to 15% and 7%, respectively, which could lend some support to the demand for palm oil.
BAL traditionally enjoys peak production in 4Q. This coupled with the recent recovery in CPO ASP could help boost the group’s 4Q15 earnings.
At the current price, Bumitama trades at 17.2x annualized 9MFY15 P/E. Maybank-KE maintains its Hold rating with an unchanged TP of $0.85 based on 13x 2016 P/E.
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