Tuesday, August 31, 2010

Ascendas India Trust

Ascendas India Trust: Citi lifts target to $1.18 from $1.05 after adjusting valuation metrics. Keeps Buy call. Tips REIT as defensive play on Indian property, offering 12-month yield of 8% vs 5%-7% for Singapore peers. Says portfolio vacancy remains low, with income stream steady. Adds growth opportunities abundant with capacity to develop another 2.5m sq ft of space at its Bangalore premises.


Cosco: technicals. Prices are within the ascending channel and could rebound from the channel support. Volume is rising and Stochastic is reversing from the oversold level. 14‐day RSI is holding above the equilibrium line suggesting the strength is intact and could be poised for more upside.
Immediate support at $1.50, resistance at $1.70.


StarHub: OCBC issued a technical alert over lunch. Bullish breakout of 52-wk high of $2.43, on strong volume. MACD also initiating a bullish crossover just above the centerline, suggesting continuation of upward momentum. Notes support at $2.27, resistance at $2.64.


Olam: technicals are pretty murky. No clear direction as prices have been whipsawing around the 200MA for the past couple of months, and looks like it could continue trading in a broad $2.20-2.85 range. Having failed to pierce the $2.85 resistance, probabilities favor a near term dip below the 200MA ($2.5 .


Yangzijiang: +3.2% on strong volume, holding on to this morning’s gains. We note two more broker upgrades, in addition to those mentioned this morning. CIMB raised to Outperform from Trading Buy, with $1.68 target. DBS raised target to $2.05 from $1.80, keeps Buy.

Genting HK

Genting HK: released their 1H10 results yesterday. While the company turned a net profit of US$11m vs loss of US$35m yoy, there may have been some disappointment as revenue from the cruise businesses did not recover as strongly as expected. Also, NCL got hit by pretty large debt revaluation losses and FX losses, which resulted in a drag on Genting HK’s bottom line.


Adventus: may see trading interest, after signing Letter of Intent with Medha Int’l to acquire mining rights and assets at Boatmans’ Creek in New Zealand.

Total consideration shall be US$8.5m payable in installments if transaction goes through. Meanwhile Adventus to leave US$1m as good faith deposit to Medha, and will have an exclusive 21 day period to complete the sales & purchase negotiations.


Ezra: 1-for-5 rights issue at issue price of $1.18 to raise ~$155m.

Ezra: rights issue and recent drawdown of term loan suggest sizeable M&A could be underway, which could be a catalyst for share price movement.
Ezra is not new to fund raising. Company issued of US$100m convertible bonds and $92m share placement not long ago. Proceeds were used to expand its OSV fleet, take strategic stakes in related offshore companies, and acquire a ship-set from the Ice Maiden project.

Street mostly rates as Buy, with targets ranging $2.50 -2.81.


NOL: Goldman Sachs rates as Buy with $3 target. Notes NOL’s earnings recovery lagged behind its peers in 2010 because of relatively high exposure to Transpacific trade (50% of revenue), possibly leading to recent stock underperformance. But thinks market may be underestimating NOL’s operating leverage to higher rates, improved load factors; believes there is still room for further consensus upgrades, particularly for 2011 earnings estimates, which are apparently still too conservative.


Yangzijiang: order book update - unveils 28 orders worth US$915m from 1 Jul to date. Contracts comprise 8x 2500 TEU container vessels, 4x 34k dwt bulk, 6x 47.5k dwt bulk, 8x 70k dwt bulk, and 2x 92.5k dwt bulk carriers. Deliveries due 2011-13. Initial deposits received for 5 contracts worth US$127m, while 15 contract worth US$489 still pending receipt of deposits to be effective. Remaining 8 contracts worth US$298 are options...

Ytd new orders total US$1.35bn, exceeding initial Street forecasts of US$0.8-1bn for the entire FY10. This may lead to a wave of order book/ target price upgrades on YZJ. Deutsche leads Street, raises target to $1.90 from $1.80.
Last close at $1.55, just shy of 52-wk high of $1.57. Watch for possible breakout.

SG Market

SG Market: Spore stocks may track losses on Wall Street overnight with concerns over US economy continuing to weigh. Shares of developers likely to remain weak as investors continue to mull impact of latest govt measures to curb property speculation in Spore. Support for STI tipped at 2920.

C&O Pharm

C&O Pharm: in line with recent Buys and earnings upgrades following good FYJun10 results, Phillip lifts target to $0.65 from $0.53. Increases FY11 earnings est by 8.6% to HK$175m to assume stronger growth across all business segments, contributions from roll-out of new drugs…

Expects new drug Edaravone, used to aid neurological recovery, to be major earnings driver in coming years considering fewer than 5 manufacturers in China capable of producing it. Notes market for this drug, which C&O expects to get regulatory approval for mass production by October, was worth ~RMB1bn in 2009.


LongCheer: FYJun10 results. Revenue +51% yoy to RMB 4.3bn, driven by both growth in exports and domestic demand. Shipment volume more than doubled to 27.5m units, from 11.8m yoy, largely from increased exports of 2.5G phones to India. But tepid net profit growth of 13% yoy to RMB 200m was disappointing, as gross margins continued to decline, halving on a yoy basis...

Nevertheless, final div of S 2cts brings total div to S 4cts (+33% yoy), translates to 5.6% yield. Mgt positive on outlook, intends to continue with business expansion plans in China and emerging markets, and expects to be profitable next FY…

Separately, Company also acquired 20% in Mentech for US$6.1m. Mentech provides EMS services for mobile handsets in China, and accounted for ~30% of the PCBA produced by the Group in FY10. While financial impact is small, the acquisition allows for vertical integration, and lets LongCheer have greater control over the upstream process.

Stock trades at 8x PE. Prior to results, Street mostly rated as Buy with targets ranging $0.85-1.22.

Genting HK

Genting HK: 1H10 results provide further evidence of a turnaround. Revenue up slightly yoy, but bottom-line swung to net profit of US$11m vs net loss US$35m yoy, due to absence of impairment (US$23m), recovery in associate contribution from NCL Cruise (+US$10m yoy), and higher other income (+US$10m yoy)…

Operating performance was rather mixed. Positive that margins at Star Cruises, NCL improved, as both units continued to benefit from cost cutting efforts, and higher ticket prices; however revenue growth was slower than expected…

Nevertheless, 2H10 has traditionally been a stronger season for Genting HK, hence we could see further improvement in profitability going forward. Catalysts would be further recovery in demand for cruises, and faster than expected breakeven for Resorts World Manila, which saw start up losses of US$17m in 1H10. Stock trades at 25x FY10E PE. UOBKH rated as Buy with US$0.31 target prior to results.

Monday, August 30, 2010

SG Tourism

SG Tourism: Visitor arrivals to Spore surged past the 1m for the 1st time in a single mth in July, powered by the regional recovery, the 2 casino resorts & aggressive promotion. July arrivals hit a record 1.095m +24% yoy with avg visitor days reaching 3.9 days (+21%). Indon, China, Australia, M’sia & India were the top 5 mkts, together accounting for 53% of all arrivals.

Hotels benefited as a result, with avg room revenue +37.2% to $173m (+37.2%), revenue per available room +35.3% to $188 & hotel occupancy reaching 90% vs 79.8% yoy. The robust tourism numbers will rub positively on stocks like SIA, Tiger Airways, OUE, CDL Hospitality Trusts, Genting Sp.

SG Property

SG Property: When announcing the new property measures, MND Minister Mah Bow Tan highlighted that the Spore property market was forming a bubble if the current momentum continued & warned that there are plenty of other measures that the govt can implement including capital gains tax. This heightened policy risks would place an upside cap on property stocks.

The measures are targeted at the speculative & marginal investors & would affect the mass market segment, which could see spillover demand to the HDB DBSS public housing. The luxury segment will be least affected where the demand dynamics are different & where buyers are not as price sensitive. The high end developers that are less susceptible to the policy measure & that remain relatively attractive include Wing Tai, Capitaland, Keppel Land.


Transport/SMRT: Rail ridership continued to grow in July, rising 14% yoy boosted by the start of stage 1-2 of the Circle Line. Bus ridership also rose 5%. Still, SMRT earnings are expected to be dragged down by operating costs of CCL when stages 4 & 5 come online in 2H11 with continuing losses & increasing cost pressures. Valuations remains unattracive. DB maintains Sell with TP of $1.90, cites stock is already trading at a premium valuation of 20x P/E & offering pedestrian 3% earning growth.

Genting Spore

Genting Spore: Macquarie lifts target price to $2.10 from $1.60 after increasing FY11 EBITDA forecast by 23% to factor in stronger margin assumptions as economies of scale should help to keep margin higher than initially anticipated. Mgmt confident that the aquarium and museum (at Resorts World Sentosa) will not be negative EBITDA when they open. Keeps Outperform call, highlighting possibility of another EPS upgrade as RWS still ramping up & gaming penetration continues to increase.


Goodpack: FYJun10 results. Revenue +20% yoy, while net profit grew 30% to US$33.6m, largely due to margin recovery. Revenue growth was mainly driven by i) demand recovery in the natural rubber market, ii) increased penetration into synthetic rubber where Goodpack’s mkt share has grown from 15% to 22%...

KE maintains Buy, increases target to $2.40 from $2.18. Expects the next three-year period to be a golden age of growth for Goodpack, as it breaks into new product markets (eg auto sector), and as its IBC logistics solutions become the de facto standard in global cargo transport. Catalysts to come from new customers/ order wins.

Other Street views mixed. OCBC raises target to $2.13 from $1.77, whereas DMG cuts to Neutral from Buy.


GuocoLand: trading halt to be lifted 9am this morning. Company takes opportunity to conduct rights issue on good FYJun10 results…

GuocoL returned to the black with net profit to sh/h of $134m vs net loss of $70m last yr. Bottom-line improvement mainly aided by absence of revaluation loss on invmt properties ($81m), and net FX loss ($34m). Gross profit also doubled to $71m, on better margins and higher revenue (+43% yoy to $733m), driven by strong sales in China and Singapore. Dividend of 8cts, translates to 3.6% yield, up from 5cts last yr…

While mgt’s comments on outlook was positive, we note the following risks: i) Recall sale of Shanghai office block to a Chinese party for RMB 1bn last Nov. The buyer is now asking for deferral of payment of remaining 90% of sale price till end-2011. This is likely to weigh on GuocoL’s cash flow needs. ii) legal dispute regarding its 90% interest in the Dongzhimen project in Beijing is still pending. iii) terminated the proposed JV agreement to develop a mall in Vietnam...

Separately, GuocoL proposed 1-for-3 rights issue at $1.80/sh, to raise ~$532m. Issue price is 16% discount to last close at $2.14. Proceeds to be used to reduce debt and strengthen balance sheet, fund potential M&A / growth, and for general working capital. Gearing expected to improve to 0.6x from 1x.
Stock trades at 0.9x PB, 13.2x PE. JPM keeps as Overweight with $2.45 target.

SG Property

SG Property: The govt has unveiled new measures to cool speculative activity in the property market. With immediate effect, MND will 1) extend the holding period for sellers' stamp duty from 1 year to 3 years. 2) For owners of multiple properties, the minimum cash payment for a new property has been raised to 10% from 5% & 3) loan limit for 2nd homes has been cut to 70% from 80%.

At the same time, govt will build 22k public homes next year & further increase its scheduled land supply in 1H10 if demand remains strong. The household income ceiling for DBSS scheme will be raised to $10k from $8k prev to cater to the `sandwich’ class who do not qualify for public housing but yet cannot afford private property. The biggest player in the HDB DBSS is Sim Lian, which recently won the Tampines Ave 5 plot with potential GFA of 682k sf.

Spore twice attempted to cool the property market, in Sep 09 & Feb this year w/o much success as prices continue to surge 38% in 2Q10 making it the fastest growing market in the world in a survey by Global Property Guide. In Feb this year, the govt introduced a seller’s stamp duty on all residential properties that are sold within 1 year from the date of purchase, lowered the loan limit from home financing to 80% & ramped up land supply. Last year, it barred the deferred interest payment scheme.

Friday, August 27, 2010


Guocoland: Proposing 1-for-3 rights issue at $1.80 to raise $532.5m for the group to pursue opportunites, likely to be in China where the group intends to double its investments to US$1bn in new commercial projects. The new investments wil focus on integrated projects in major cities like Beijing & Shanghai. The company is also keen to expand its landbank.


SinoTel: Signed deal to provide base station monitoring and diagnostics services to China Telecom across 8 provinces and cities in the PRC, for annual fee of RMB25.3m...

Also intends to expand business to provide telecommunication services to end users through co-operation with the Telcos operating in the PRC by establishing telecom infrastructure (including the installation of fibre optic network to end users) in commercial and residential areas. Monthly subscription fee to be shared between the Company and the Telco…

We are ambivalent about this move. While company is adding new revenue streams, it is still early days to determine the resulting financial impact. Moreover, it is also not clear how the risk/ rewards are shared btwn the company and Telco in the provision of services to end users.

Ying Li

Ying Li has been on downtrend since beginning Aug, down 7.1% mth-to-date, fails to draw interest with latest land acqn. Stock flat at $0.395, on par with book value. China-based developer bought prime site in Chongqing for Rmb697m to build office-cum-retail property, due by end-2013. Despite aggressive growth plans, investor interest remains low as earnings in coming quarters expected to remain weak until its mega IFC project, comprising office and retail space, is ready by 2011.

Ying Li booked losses of Rmb21.4m in 2Q10 & Rmb13.5m in 1Q10 on lower property sales, higher interest expenses.

Ezra (TA)

100- and 200-day EMA are attempting a crossover. Prices breached below the ascending channel. Immediate resistance 1.80 ; Support 1.63 area.


CPO: Palm oil prices must rise to RM3,000 (US$955) per ton as bad weather have curtailed prodn growth in Indon & M’sia according to a top oils analyst. Global consumption of vege oils for food & biofuels will likely grow by 6m tons during the yr to Mar 11 while growth in supply will likely be a dismal 2.3m tons due to adverse weather. Consumption in India is projected to rise by 400k tons this year, requiring 9m tons of imports but the world cannot supply the additional tonnage w/o dramatically reducing stocks. Forecast for M’sian CPO output this year will fall 2.3% to 17.2m tons due to tree stress & lowered crop yields. Indon CPO prodn will grow 500k instead of 1m tons this year due to slower expansion of plantation land. Indon produced 20.6m tons of CPO in 2009. Overall for 2010, the forecast is for zero growth in world CPO prodn.


Olam: Union Agriculture Group has withdrawn its bid for NZ Farming Systems Uruguay after it decided against matching an increased offer from Olam. This paves the way for Olam to proceed with its NZ$0.70 offer. Olam currently has a 18.5% stake in NZS.

F&N (thought of the day)

Kirin recently purchased 7% stake in F&N, hoping to use F&N as a platform to spearhead its expansion into Asia.
Asahi has responded with the 100% acquisition of P&N, Australia’s third largest soft drink company, for A$364m. Motivation from the stronger yen, and declining domestic growth is leading Japanese F&B firms to look outwards for growth.

With competition hot on its heels, would Kirin/ F&N find a way to work out a more meaningful partnership? Would they consider a corporate restructuring, such as a spin off of the F&B unit, so that they can better focus on growing in this segment? Would corporate action then be a catalyst for re-rating toward the average $6.50 target that the Street has forecast for F&N? ...

Perhaps some of you see other options for F&N, or have insight into the feasibility of such scenarios. Do feel free to share your thoughts, and perhaps a consensus view might emerge.


PEC +2.8% to $0.915 on good volume, extending yday's 4.7% gain as improved FY10 results drive interest, paving way for shares to retest iall-time high of $0.955 set last Sep. 4Q10 earnings more than doubled to $9.6m from $4.3m a year earlier on higher margins, bringing FY10 net profit to $44.8m vs $21m in FY09. PEC would continue to benefit from an expected increase in orderflow for work on Jurong Island & overseas projects esp in Mid-East & Euro markets. Current orderbook stands at $260m.

DBS Vickers has Buy call with $1.31 target.

Mapletree Logistics

Mapletree Logistics: Cimb upgrades to Outperform from Neutral, ups TP to $1.01 vs $0.89; cites improved demand for logistics space in MLT's key markets & positive rental renewals for the rest of 2010. Notes, aggressive growth plans ready to take full flight given $1bn acqn pipeline from sponsor Mapletree Investments, capability in taking on high-yield devt projects. Adds strong recovery this year in warehouse demand in Spore, HK driven by surge in mfg activity, improvement in external trade.

PT Berlian Laju

PT Berlian Laju: S&P downgrades BLT’s long term corporate credit rating to B-, places on CreditWatch negative. Senior unsecured debt ratings reduced to CCC from CCC+. Expects freight rates to soften in 2H10, leading to BLT’s breach of some debt covenants, especially the EBITDA-related ones. Also cites company’s already high leverage and weak liquidity. This contrasts with a recent update from CIMB, which rates as Buy with $0.10 target.


PEC: credible set of FYJun10 results. Revenue +6% yoy to $467m, on greater contribution from project works and maintenance services. Net profit to sh/h surged 114% to $44.8m on improved gross margins. Total div of 4cts (2cts final + 2cts special) translates to decent 4.5% yield…

Mgt expects long term prospects to remain promising, although notes FY11 could be challenging in view of increased competition and gradually increasing raw material and labor costs. To continue actively pursuing overseas expansion, particularly in in Asia, Europe, and the Middle East, where PEC already has strong entry points'. Order book stands at $260m, not including revenue from the Rotterdam project secured by PEC’s 50/50 JV, which has value of approximately EU 118m…

Stock trades at just 5x PE. CIMB rates as Outperform with $1.22 target.


Olam delivered a strong FY10 with revenues up 22% to S$10.5bn while net profit (ex-EI) grew 49% to $272m beating consensus of $246m. 4Q10 net earnings doubled to $92.3m. The strong performance in FY10 was driven by a 22.5% increase in sales tonnage & margin expansion from 2.1% to 2.6%. Net contribution was up in all 4 major divisions. Commodity financial service, which is a new category, contributed $25m to PBT.

Olam’s strategy of expanding mid-stream & upstream have paid off handsomely with investments in TimberCorp (almonds, Australia) & Nauvu (palm oil, rubber, Africa) contributing to profit growth. The group remains optimistic on prospects & highlights that some of the 17 acqns pursued since 2007 are still in gestation & yet to hit peak cycle. Olam’s upstream and midstream segments contributed to 34% of group EBITDA in FY10, up from 18% in FY09.

The impressive results have boosted confidence in the mgmt’s guidance of 15% growth till 2015. Stock is currently trading at 16x FY10 P/E dropping to 14x in FY11. Most brokers have buy calls with target range of $2.68-4.25 while KE has a TP of $3.10. Co has declared final DPS of 2.5¢ raising full yr DPS to 4.5¢.

Enzer / Vallianz (flash)

Enzer / Vallianz (flash): note that Enzer’s name will be changed to Vallianz Holdings from today.

Ying Li

Ying Li: acquired a commercial development site in China's Chongqing city for RMB 697m. The 100k sqft site will be developed into 970k sqft of grade A office space and 430k sqft of high-end retail space. The site is located in the Jiefangbei CBD and is part of the Chongqing municipal govt’s RMB 600bn plan to redevelop the city centre into a financial hub. Expected completion by end-2013. Project likely to be financed in part by recently acquired US$200 credit facility…

Mgt optimistic that demand for office space should strengthen, as more MNCs and large domestic corporations set up offices in the district, on the back of China’s “Go West” policy. News of expansion is welcome following poor recent 2Q10 results, and subsequent analyst downgrades. Street views mixed, with 2 buys, 1 sell, 1 hold. Street target prices range $0.33-0.91.


F&N: recap from yesterday, 57%-owned subsidiary F&N Holdings Berhad (FNH) is acquiring a 23% stake in Cocoaland (COLA) for RM54.6m, or RM1.38/share. The price represents a current PER of about 8x. While size of the acquisition is small and unlikely to have a major impact on F&N's profitability, we note that F&N purchase price is at 50% discount to CocoaLand last traded price of RM2.87. Market could react positively to this news…

Strategically, move is also positive for FNH, as it enables FNH to diversify away from soft drinks and dairy products and venture into the manufacturing and distribution of snacks, fruits, gummy and other food related businesses. This acquisition will be funded by cash, allowing FNH to optimize its strong balance sheet capacity…

F&N Group is clearly actively looking for M&A opportunities within Southeast Asia to expand its F&B portfolio and regional presence, which bodes well for future prospects. Deutsche rates as Buy with $6.55 target.

MCL Land/ HK Land

MCL Land/ HK Land: HKL makes cash exit offer for MCL at $2.45/sh, a 25.6% premium vs last traded at $1.95. This values MCL close to NAV/sh of US$1.80 (S$2.52). Offer will be conditional on approval by MCL sh/h, but is expected to go through given majority stake (77.4%) held by HKL. Malaysia’s Employees Provident Fund (which owns a 4.7% stake) has also undertaken to vote in favour of the delisting…

Full privatization of MCL looks likely, as only another 7.8% of share acceptances needed to trigger the 90% threshold for compulsory acquisition.
HKL cited MCL's small free float, low trading liquidity and the compliance costs of maintaining a listing as main reasons for delisitng. Says acquiring MCL will give it greater operational flexibility in managing its residential property development activities in the region…

While offer price is 10% below $2.76 target price, KE still views the exit offer as attractive, given lack of liquidity for the counter.
Tips 2 other counters likely to see spillover interest, given their possibility as take over candidates due to their P/NAV discounts and the relatively big stakes held by the major shareholders.

Wheelock ($1.82 price vs $2.12 NAV/sh),
Orchard Parade Hotel ($1.12 price vs $2.44 NAV/sh).

Thursday, August 26, 2010


SIA: Citi notes that SIA has been a laggard in the regional airlines rally over the past three months, but remains positive on SIA as a sector outperformer in any sell-off given its more defensive characteristics. Street mostly has Buy rating, with targets ranging $15.65 - 19.50…

Nevertheless, shares off 0.5% today, possibly weighed by news of ad-hoc cancellation of 11 return flights to cities including Newark, Los Angeles, London and Frankfurt during the Thanksgiving, Christmas and New Year’s eve Holidays, so that airline can “consolidate loads and ensure that capacity better matches demand”.

China Minzhong

China Minzhong: JPMorgan lifts target to $1.60 from $1.45. Increases FY11-12 earnings est by 13%-12%. Keeps Overweight call. Belives Minzhong will continue delivering ASP and volume growth with its organic/GAP (Good Agriculture Practices) certified produce favored by both export and domestic consumers, who place great importance on food safety. Notes Minzhong's plantations were not affected by recent China floods, allowing company to partly benefit from higher vegetable spot prices.

F&N (breaking news)

F&N (breaking news): may see spillover interest, on news that listed Msian unit, F&N Bhd to buy 23% stake in listed confectionery maker Cocoaland for RM 54.6m. Acquisition of Cocoaland at RM1.38/sh “a bargain” vs last traded at RM2.87, with earnings to be accretive for both companies in the medium term. Company may consider larger stake in Cocoaland if opportunity arises


Oceanus has fixed its 150m TDR price at NT$11.25 or S$0.477, which is 38% above current price of $0.345. However, the shares in SG & TDRs are not direct fungible. Note Oceanus TDRs are already traded in Taiwan (NT$11.40) after it issued 200m TDRs in Dec 09. This is the 2nd tranche & involves only vendor shares, so the company does not benefit from additional funds. Oceanus may come up with 3rd TDR tranche (new shares) end of yr which may lead to earnings dilution.

Most brokers have a Hold rating on the stock. Stock trading at fwd P/E of 12x, stochastics pulling back from overbought levels.

Tiong Seng

Tiong Seng: DBS Vickers initiates Buy with $0.36 TP based on 30% discount to SOTP valuation, citing civil engineering contractor has $1bn orderbook, which provides earnings visibility for next few years. Projects at hand range from office, residential to public infrastructure jobs. Hence, the company is not over-reliant on any single project category. Tiong Seng also stands out for its use of advanced construction methods which reduce time, manpower needs by up to 50%.

Adds company has niche presence in 2nd, 3rd-tier Chinese cities. Shares +6.3% at $0.255.

Sim Lian (mid day updates)

Sim Lian: Thinly traded property/constructn group gapped up 32% to 3-year high of $0.685 on above-average volume after proposing 1-for-2 bonus issue plus 3.7¢ div payout, representing 5.4% yield. This follows release of FY10 results with net profit more than doubling to $104.4m from $38.7m boosted by higher property sales & $17.8m writebacks/FV gains. Stock now trading at 1.24x P/B & 3.7x FY10 P/E.


Construction: After 2 years of delay due to financing woes, the Spore Sports Council has finally inked the contract with Spore Sports Hub Consortium (SSHC) to design, build, finance & operate the Singapore Sports Hub for the next 25 years. Demolition of the National Stadium will start in Oct 10 & the new sports complex will be ready by Apr 14. The construction cost is $1.33bn, revised down from the original $1.87bn & the govt will foot the bill in annual payments.

The consortium partners comprise Dragages (part of French construction giant, Bouygues Construction) Global Spectrum Asia (JV betw Pico & Comcast Corp), UGL Premas (facility mgmt) & HSBC Infrastructure Fund Mgmt. While Dragages will be the maincon for this project, we expect sub-contracts to be farmed out in the areas of foundation works, structural steelworks, crane svcs, etc. The potential beneficiaries include construction plays Yongman, CSC, Tat Hong, Hock Lian Seng, OKP.

Keppel Land

Keppel Land: “technical chart looks pretty. Stock is trading almost parallel to the upward trending 200day MA. Indicators are currently at oversold levels, which suggests a possible entry point as a bounce could play out in the near term. Support at $3.80, resistance at $4”…

The bounce has played out, and intra-day prices have pierced above $4. If it can close above this, next resistance becomes $4.22.


Olam: update on NZFSU offer. The NZ Overseas Investment Office has granted Olam consent for the takeover offer. To date Olam has received total acceptances of 37%, including the 7% of shares received from Accident Compensation Corporation, the third largest sh/h after Olam and PGG Wrightson.
For offer to be unconditional, Olam now needs additional acceptances in respect of 13% of the shares in NZFSU +0.8% in morning trade. All eyes will be on the FYJun10 results, to be released after mkt close today.

SG Banks

SG Banks: DB sees limited near term upside for Spore banks despite undemanding valuations, citing recent 2Q results as not compelling while net interest margins remain under pressure. Notes interest rates in Asia generally rising, but Sibor likely to remain low for longer than prev expected as rates in Spore are linked to Fed policy; While NIMs should stabilise in 2011, the near term is challenging and risks are to the downside.

Highlights average 2Q10 NIM for all 3 banks at 1.98% vs 2.32% peak in 4Q08. Loan growth for 2H10 likely to remain positive given robust SG economy but loan expansion may slow in 2011 de to global economic conditions. In order of preference, likes DBS (Buy, TP: $17.20) best performer in 2Q with further earnings upside from loan loss normalisation, OCBC (Buy, TO: $10.40) & UOB (Hold; TP: $21.00).

Bund Center

Bund Center: +2% in morning trade. The Widjaja family (both majority sh/h and manager) just increased their stake from 70.4% to 74% via open market purchases. They owned just 65.6% stake in July, shortly after BCI was spun off from Asia Food & Property.

We find the timing of the share purchases curious. Could this be an indicator of any significant corporate activity in the near term?


Noble: Morgan Stanley starts at Equalweight with $1.89 target. Positive on Noble's long-term prospects, given the role the company plays connecting suppliers and buyers of key commodities, and expertise in developing Asia, but sees limited immediate catalysts to drive the stock…

Notes soybean crushing margin recovering slowly as demand improving, while Noble's ramp-up of operations in oil & gas business could contribute to earnings from next year. But flags potential double-dip recession, any slowdown in China's economy as key risks since commodity prices, demand will weaken. Says at 2.5X P/B, 19X P/E, stock trades at premium to its 5-year averages.

Uni Fiber

Uni Fiber: lifts two-day trading halt.
Company disputes creditor, CMEC’s right to serve demand for payment of US$20m. Gets interim injunction to restrain CMEC from commencing any winding up proceedings until court hearing on 23 Sep.


Noble: Morgan Stanley starts at Equalweight with $1.89 target. Positive on Noble's long-term prospects, given the role the company plays connecting suppliers and buyers of key commodities, and expertise in developing Asia, but sees limited immediate catalysts to drive the stock…

Notes soybean crushing margin recovering slowly as demand improving, while Noble's ramp-up of operations in oil & gas business could contribute to earnings from next year. But flags potential double-dip recession, any slowdown in China's economy as key risks since commodity prices, demand will weaken. Says at 2.5X P/B, 19X P/E, stock trades at premium to its 5-year averages.

Sembcorp Inds

Sembcorp Inds not expected to get immediate boost despite securing 20-yr utilities contract from anchor customer Jurong Aromatics Corp to supply of steam & other water and wastewater treatment services in a new multi-utilities facility on a new zone in Jurong Island. Costing $800m, the new multi-utilities facility & cogen plant will have a capacity of 400MW & 350 tph of steam when completed by 3Q13.

This capacity addition is significant - currently, SCI's cogen plant in the Sakra district of Jurong Island produces about 815MW. Singapore utilities already contribute ~$130m or 62% of utilities earnings (18% of group earnings) and this new investment is expected to add $30-60m annually to future earnings, which may mitigate the dependence on O&M earnings.

DB reiterates it Buy call with TP of $5.56, citing that continued rerating of its utilities business. The group's UK ops should also bottom out this year & Cascal should contribute from 2H10. Potential demand for utilities services remain healthy across the region with China performing well. In Vietnam, SCI is keen to buy over BP's 1/3 stake in Phu My 3 power plant (SCI already has a 1/3 stake), which has been profitable since operations began in 2004 & is a steady earnings contributor.

In the UK, it may invest in a 35MW WTE plant while in Spore, it is well positioned to benefit from PUB's water-related projects. UBS also has Buy call with $4.81 TP while KE is putting a Hold with TP of $4.38.

LC Dev

LC Dev: proposed 1-for-5 rights issue of up to 171.6m new sh at issue price of $0.08 per rights share (56% discount to $0.18 price at last close). Subject to sh/h approval at EGM. From expected proceeds of up to $13.2m, $6m is earmarked for repayment of a revolving credit facility related to the previously announced Xuzhou joint venture project, with remainder to be used for working capital…

Recall that LC Dev bid successfully for a RMB300m land parcel in Xuzhou, to embark on a mixed development project expected to consist of residential, commercial and hotel components….

LC Dev FYJun10 results were a non-event. Revenue was flat, while core profitability was relatively unchanged after adjusting for lack of one-off impairment charges on PPE and lower finance expenses. Reported net profit was thin at just $1.1m, but better vs loss of $6.3m last yr. Stock trades at 38% discount to NAV/sh of $0.29 and 142x PE (due to low earnings base).

Chip Eng Seng

Chip Eng Seng: could see trading interest after getting letter of intent from Punggol Field EC for a $142m building works contract for a proposed executive condominium. Work scope involves erecting 10 blocks of 17 storey apartments comprising 680 residential units with landscaped deck, common basement carparks and communal facilities at Punggol Field/ Punggol Road. Stock trades at 2.5x PE.

Sim Lian

Sim Lian: good FYJun10 results. Revenue +32% yoy to $760m, largely due to higher revenue recognition from more projects, ie Clover by the Park, Parc Lumiere, Linncoln Residences and Rochelle at Newton. Net profit +173% to $108m, boosted mainly by high operating leverage. Company doubled dividend to 3.7cts, giving a decent 7.1% yield. Also proposed 1-for-2 bonus issue...

Outlook positive, underpinned pipeline of Construction and Development projects secured. In FY10, the Construction division bagged two new HDB project worth $180m, while the Development division won two tenders for land parcels for a condo and a DBSS development, both located in Tampines. Stock trades at 2.8x PE, at par to NAV/sh. Prior to results, BNP rated as Hold with $0.51 target.


Midas: KE maintains Buy with $1.20 target, following analyst plant visit to associate, Nanjing Puzhen Rail Transport (NPRT). Notes that plant activities have increased btwn two-to-three fold since the last visit. Current capacity is 600 cars per annum, and is slated to increase to 800 next yr. Positive that NPRT has been moving up the value/ technology chain to become sole project mgrs now, vs having to JV with foreign companies previously…

Believes that increasing urbanization should continue to drive demand for train transport - more than 25 cities are planning to build their metro systems. Going forward, associate contribution should be underpinned by NPRT’s orderbook of RMB 6bn. Catalysts to come from new project order wins, particularly from Ningbo and Wuxi where NPRT is tipped as a front-runner.

SG Market

SG Market: SG shares may edge higher, supported by modest gains on Wall Street though participation could remain low as investors await more data, including US weekly jobless claims due Thurs & 2Q GDP on Fri. Resistance for STI seen at 2950 while support remains at 2900 with technical indicators in oversold territory. Olam likely to attract interest as commodities trader due to report FY10 results during midday break.

Wednesday, August 25, 2010


Sinotel: both long term and short term trends appear negative. Recent failure to break out of the descending channel suggests further downside possible. Could test support at $0.30. Resistance at $0.425.

BH Global Marine

BH Global Marine: Clinches two contracts valued at $20m (sizeable compared to $100m revenue in FY09). The first order involves providing EPCM services to an FPSO vessel, while the second order involves the handling of supply chain mgt for offshore cables for an FPSO conversion project.

30% of the order book will be executed in FY10, with the remaining to be completed in FY11.


NOL: CIMB has Outperform call with $2.25 target. Expects freight markets to hold up at relatively high levels even into the winter lull, as carrier discipline remains high. Stock price action weak of late, on concerns that industry could be seeing near-term peak in box freight rates, as global economic growth moderates in the second half.

We reiterate our technical call last week. NOL chart looks supportive of a positive long term outlook. Prices have been trending upward, and appear well-supported by the rising 200day MA. The flat RSI and oversold stochastics suggest that a bounce could take place in the near term. Support at $1.88 (200 MA), resistance at $2.20.


F&N: DB reiterates Buy call & raises TP to $6.55 based on 10% discount to SOTP valuation. Highlights Central Park launch, potential restructuring play & value unlocking by Kirin as key catalysts. Central Park has been soft launched at higher-than-expected prices of A$1,000psf with a 16% take up. With a margin of 50%, this integrated devt comprising 1900 homes & 1m sf of commercial space could reap $1bn profits for the group.

Expect the launch of more residential projects in SG/Australia could lead to re-rating of stock. Recent entry of Kirin at $6.50/share as a strategic shareholder could lead to stronger cooperation/ alliances. F&N is also a potential restructuring play as it could unlock value in its consumer businesses, divesting non-core assets and spinning off its property assets.


Ellipsiz: very good FYJun10 results. Major turnaround, as net profit came in at $20.3m, vs net loss of $40.5m in FY09, largely due to lower operating costs as effects of rationalization kicked in, and one-off gains of $22.3m from insurance claims. 4Q10 contributed bulk of core earnings, at $4.5m vs $4.3m for the full year, as qtrly revenue jumped 36% yoy, vs nil revenue growth for the full year, reflecting strong recovery in the global semicon industry...

Financial performance reflective of company’s high leverage to semicon sector. Mgt declared final div of 0.15cts + special div of 1.1cts, translating to 8.9% yield. Mgt cautiously optimistic on outlook; recognizes risk that macro factors such as concerns about govt debts, declining consumer confidence and pressure on govt spending could undermine performance of the industry in 1HFYJun11.
Stock trades at 25% discount to $0.18 NAV/sh, and 16.5x core PE.

Super Group

Super Group: update on TDR. Recall 40m TDRs to be issued, with 2 TDRs = 1 share. Proposed issue price est at NT$11-14/ TDR, which translates to $0.94-1.18 /sh.
Stock could see trading interest, as company showing that it is making headway in TDR listing process. Traders may be inclined to use the proposed issue price as a frame of reference, but we note that the implied liquidity premium of 5-30% for the TDRs is not unusual based on past listings.


Qingmei: FYJun10 results. Revenue +42% yoy to RMB 1.2bn, buoyed by economic recovery and strong domestic consumption in the PRC, which boosted sales volume. Although gross margins improved 2.2% pts to 30.5% due to better product mix and scale effects, higher operating costs related to increased wages, and one-off expenses related to IPO, were a drag on net profit, +37% yoy to RMB 250m. Dividend of RMB 11.72cts, which translates to yield of 9%, one of the highest amongst SGX counters...

Mgt positive on outlook, but notes slight delay in construction of new pdtn facility which would take up to 1.5 yrs to complete. Targets to increase max annual pdtn capacity from 45.6m pairs of sports shoes currently, to 65m pairs in 9mths, and to 84m pairs another 6mths later. Stock trades at 3.3x PE.

China Minzhong

China Minzhong: FY10 results, slightly below mkt expectations, but still decent. Revenue +35% yoy to RMB 1.4bn, on higher sales volumes of both processed and fresh vegetables produce. Gross margins improved due to shift toward higher margin product mix. Net profit +28% to RMB 368m…

Mgt remains positive on outlook, expects population growth, increasing urbanization and rising affluence to drive global consumption demand for both fresh and processed vegetables. Hints at making use of RMB 1bn cash war chest to grow via M&A. Stock trades at ~9.4x PE, vs peer avg of ~12x PE. DMG had Buy call with $1.68 target, just prior to results.

Raffles Education

Raffles Education: FY10 results below market and our expectations. Revenue fell 6.9% yoy to $188.1m, in tandem with the decline in total student numbers (-3.3% yoy to 66,649). While headline earnings grew 2.8% yoy to $52.6m, the bulk of it was due to one-off contribution from a $36.7m government grant related to Oriental Century University. Otherwise core earnings would have declined due to high start up costs of setting up new colleges (FY10: 8 colleges - $3.1m; FY09: 5 colleges - $0.5m)…

Momentum has turned negative for the counter, as the Street slashes EPS estimates by up to 25% to factor in concerns about the persistently weak student enrolment in China, and higher cost pressure. Note string of analyst downgrades - KE to Hold from Buy, target $0.30 from $0.48. BNP target cut to $0.34 from $0.49. CS target cut to $0.24 from $0.55.

Tiong Woon

Tiong Woon is likely to come under pressure as weak 4QFY10 results reinforce expectations that demand for its heavy lift & haulage svcs could remain soft. 4Q10 net profit came in at $2.8m vs $12.2m year earlier & $9.6m in 3Q10. Full yr FY10 performance just as dismal, with earnings down 43% at $23.9m on weaker revenue (-27%) due to lower utilization & rental rates. FY10 gross margin narrowed to 29.3% from 37.3% in FY09.

No respite in near term as capital-intensive projects may be put on hold given uncertainty of global economic recovery in coming quarters. Shares closed down 1.2% at $0.40 yesterday, representing 34% discount to book. Support at 52-week low of $0.36.

SG Market 25 Aug

SG Market: SG shares likely to slide as record drop in US July existing home sales aggravate already-jittery investor sentiment. If STI breaks the 50-day MA at 2920 & fails to hold above 2900, next support tipped at 2875 (lower end of breakup gap formed on July 7). Stocks like Raffles Edu, Tiong Woon, China Minzhong may be in focus after reporting June-quarter results.

US Market

US Market: US stocks slumped to one-month lows after the yen hit a 15-yr high and a dismal housing data added to fears the global economic recovery may stall. The DJIA lost 134 pts to 10,040 while the broader S&P 500 shed 15 pts or 1.5% to 1,052, both extending a fourth session in the red. The tech-rich Nasdaq composite slipped 36 pts or 1.7% to 2,124.

Pessimism about global growth has grown infectious after ugly US job & consumer numbers last week. The bearish tone deepened after the US housing report showed July sales of existing homes plummet a record 27.2% vs forecast of 12% fall in the absence of govt tax credits. New government data on unemployment & GDP later this week are widely expected to further point to a downward economic trend.

Tuesday, August 24, 2010

STX Pan Ocean

STX Pan Ocean has clinched a US$120m contract to transport thermal coal to Korea South East Power Co from Australia over a 15-year period wef Mar 2013. This will provide a stable source of profit over the long term. Stock is trading at 13.3x FY10 earnings & 1.0x P/B.


Support 1 : 1.74
Support 2: 1.63
Resistance 1: 1.95
Resistance 2: 2.05


Ausgroup: Disappointing FY10 results as per profit warning. Revenue -23% yoy to A$367m, due to lower activity and client delays on certain projects. Gross margins fell, due to lower margins on projects post the global financial crisis and provision for loss on a W Australian construction project, causing net profit to collapse 89% yoy to A$2.4m. Cactus business remained dismal and was fully written off on A$4.7m impairment charge. Div of S0.64cts unchg from last yr…

Mgt guides for outlook to remain challenging into 1H11, while the Group’s fabrication and manufacturing business also expected to see headwinds due to intense competition. Pick up in tender activity only expected in 2H11 mainly from W Australia, according to project development schedules. Current order book at A$362m, provides less than one year’s visibility…

Results were way below consensus estimates. Street ratings are already negative, but target prices could be further revised downwards. Probably wise to avoid in the near term.


Ausgroup: Disappointing FY10 results as per profit warning. Revenue -23% yoy to A$367m, due to lower activity and client delays on certain projects. Gross margins fell, due to lower margins on projects post the global financial crisis and provision for loss on a W Australian construction project, causing net profit to collapse 89% yoy to A$2.4m. Cactus business remained dismal and was fully written off on A$4.7m impairment charge. Div of S0.64cts unchg from last yr…

Mgt guides for outlook to remain challenging into 1H11, while the Group’s fabrication and manufacturing business also expected to see headwinds due to intense competition. Pick up in tender activity only expected in 2H11 mainly from W Australia, according to project development schedules. Current order book at A$362m, provides less than one year’s visibility…

Results were way below consensus estimates. Street ratings are already negative, but target prices could be further revised downwards. Probably wise to avoid in the near term.

AUD Impact

AUD Impact: Analysts highlight SingTel may suffer fallout from AUD jitters as its Australian unit Optus accounts for >60% of group revenue. While currency weakness has no direct impact on Optus' ops as its earnings and costs are predominantly in AUD, there would be a currency translation impact when its earnings are converted to SGD. However, SingTel spokesperson noted that this was unlikely to have a major impact on the yoy comparison as its 2QFY09 results also coincided with a weak AUD.

Other listed companies with Australia exposure include Ezion, Ausgroup, Australand, SP Ausnet, AV Jennings, Tat Hong, Tiger Airways.

FJ Benjamin

FJ Benjamin: KE but reduces target to $0.60 from $0.66 previously. FY10 results not great, although earnings turnaround of $3m in 4Q10 was a consolation. But maintains Buy as dividends improved to 2cts/sh, translating to decent yield of 5.9%. Likes company’s strong balance sheet with nil net gearing, healthy operating cashflows. Notes mgt’s confidence in growth and margin prospects...

Expects 3 new boutiques at MBS to benefit from the rising tourist arrivals into Singapore, while key markets like Indonesia, Msia seeing recovery.


YZJ to acquire 147k sqm land with 500m coastline, and a 374m long wharf currently under construction from the Jiangsu govt for RMB 108m. YZJ received 32% discount on the transaction price as govt incentive. The wharf is expected to be completed in Sep 10, and able to accommodate construction and mooring of ships up to 150k dwt…

We view the yard expansion positively, as it signals mgt’s positive outlook. Acquisition is in line with YZJ’s aim to increase capacity of JNYS by an additional 1m dwt by 2012. Also, the land is strategically located next to subsidiary, Jiangsu New Yangzi Shipbuilding (JNYS), hence allowing for more efficient use of space and possible cost savings. Street mostly rates as Buy, with targets ranging from $1.54 to $1.96.

Wing Tai

Wing Tai 4QFY10 net profit rebounded strongly to $68.9m due to completion of high margin projects. Excluding revaluation gains of $20.7m, core FY10 net profit rose 29% to $140.1m, in line with consensus estimates. Earnings was underpinned by Belle Vue & Riverine by the Park (both obtained TOP in 4Q) while rental income was steady. Company declared a DPS of 5¢ for FY10 vs 4¢ in FY09.

WT will continue to recognize profits from Ascentia Sky, Floridian, L’VIV, Helios & Belle Vue. Mgmt plans to launch the remaining units in Belle Vue and Helios in 2H10 and may launch Anderson 18 (156 units) over the next 12 months. WT has recently submitted 2 bids to redevelop the historic Capitol Building & Stamford House.

WT currently has 900k sf of saleable GFA, 50% in high end & 50% in mid-tier. Mgmt remains positive on the mid to high end segments but warns the upgrader market is approaching saturation with the release of more GLS sites, which enable it to replenish its depleting landbank.

DB has a Hold rating on the stock with a TP of $1.88, pegged at 25% discount to RNAV. Citigroup keeps its Buy rating with $1.81 TP while KE has a Buy call with $2.50 TP.


Silverlake: trading halt to be lifted at 9am this morning.
Selected to be one of four key technology partners to implement CIMB’s 1Platform, a regional core banking platform costing RM 1.1bn in total. The platform will be rolled out across Malaysia, Indonesia, Singapore and Thailand over the next 5 yrs. 1Platform is the largest component of CIMB’s regional operations transformation blueprint expected to cost RM 2.1bn…

Silverlake will provide the core banking system for the platform. Contract value was not disclosed, but is likely sizeable. The contract win signals a vote of confidence in Silverlake’s capability as one of the world’s leading technology providers. It also paves the way for Silverlake to bid for the rest of CIMB’s blueprint components involving systems for financial reporting and mgt, integrated HR mgt, front-end sales mgt and regional transaction banking…

Last week, we highlighted Silverlake as a possible turnaround play following its FYJun10 results. Mgt was upbeat on outlook, and highlighted that banks and financial institutions could be resuming investment in systems again, after deferring capital spending last year. Stock has been underappreciated for some time, and further catalysts (ie. New orders) could result in a significant rerating…

Stock trades at 25x PE, but valuations likely to narrow to just 12.6x fwd PE on high growth prospects, according to Bloomberg est.


Olam Int’l has sweetened its cash offer for the remaining 81.5% stake in NZ Farming Systems Uruguay to NZ$0.70 per share, up from a previous offer of NZ$0.55. This will cost Olam an additional US$21.4m from its earlier US$79m bid. The revised offer came after NZS advised shareholders not to accept the takeover offer at NZ$0.55 per share as it was below its valuation of NZ$0.65-0.79.

It remains to be seen if Uruguay's Union Agriculture Group, will increase its NZ$0.60 offer as market awaits more details about a 3rd bidder which is purportedly keen on taking a minority stake. . Closing date of new offer is 24 Sep. NZS opened this morning +11% to NZ$0.70. its highest level since May 09.

Monday, August 23, 2010

C&O Pharm

C&O Pharm: +3.2% to new 52-wk high of $0.485, after reporting strong FY10 results over lunch. Record year with revenue +19% yoy to HK$651m, net profit +44% yoy to HK$156m. Gross and operating margins improved due to shift toward higher margin pdt mix, and scale effects arising from higher sales volumes. Mgt declared final div of S1.35cts vs S1.05cts a year earlier, bringing full yr div to S8.15cts, which translates to hefty 17% yield…

Mgt sanguine about industry outlook, cites firm demand for healthcare services, and China’s increased spending to build up domestic drug sector. Although there remain uncertainties over Beijing’s recent proposal to reform drug pricing policy which could result in risk of lower selling prices, and lower profitability for industry.
Catalysts to come from new C&O Branded pdts to be launched in 1Q/2QFYJun11, and expansion of C&O’s Exclusive product portfolio which involves distribution of foreign drugs in the PRC.
Stock is one of cheapest in pharma sector, at 11.6x PE. This compares with 19-22x PE for HK-listed peers like Shineway, Guangzhou Pharma, and 19-26x fwd PE for ADR-listed peers like Simcere, Wuxi Pharma. Consider Buying on dips, given technical indicators now looking significantly overbought. Fibo-based support at $0.435, resistance at $0.52.

Ying Li

Ying Li: DBS Vickers cuts target price to $0.52 from $0.67, based on 40% discount to reduced RNAV estimate, to account for lower rental assumptions. Notes Chongqing developer's retail rentals could take up to 3 years to ramp up before tenant mix optimized. Projects Rmb55m loss for FY10 vs Rmb62m profit previously, tips FY11 profit of Rmb299m vs Rmb705m forecast, to reflect delay in launch of Daping project by 6-9 months as it redesigns devt plan to fetch higher prices.

Still keeps Buy call on significant upside potential.


Healthway: DMG cuts target to $0.23 from $0.30 after slashing FY10 earnings est to $4.7m from $16m to reflect weak 2Q10 results (net profit down 97% to $121k), on higher-than-expected start-up costs and lower patient load factors.
Still, keeps Buy call as healthcare group actively expanding in China, with plans to operate 20 medical centers there by year end after recently securing contracts to manage 12.

Expects revenue to pick up strongly in FY11, with full-year contribution from its new medical centers in China.


Goodpack shows a steady uptrend on healthy volume.
Momentum is rising with candlesticks well above the moving averages.
Minor support holds at 1.83



Olam has lost previous strength and at this point seems more bearish than bullish.
Prices are below 200-day EMA. Support 2.40 ; Resistance 2.53


Golden Agri

Golden Agri has broken down below the ascending channel and 100-day EMA. Immediate support level near 0.53 area may be tested.


Golden Agri

Golden Agri: OSK downgrades to Neutral from Trading Buy, citing uncertainty stemming from Greenpeace's allegations of plantation group engaging in environmentally harmful practices, giving false info to investors. Cuts target price to $0.50 from $0.68, based on 11X FY11 earnings vs 15X previously. Stock broken 50 & 100-day MA suuports, currently sitting just above 200-day MA.


SingTel: may see some overhang, as Australia's hung parliament could cloud broadband prospects for telco's Optus unit. Australian opposition leader Tony Abbott has proposed substantially scaling down PM Gillard's proposed network, which could cost up to A$43bn. If the eventual ruling party uses a smaller-scale network and reduces govt funding, mkt watchers are concerned that Optus might have to stump up with a lot more money to build their own infrastructure...

The majority of Street has a neutral view, although range of Street target prices is rather wide at $2.82 - $3.75.


Shipping/NOL: Maersk Line sees container freight rates & volumes remaining unchanged for the rest of the yr. This is welcome news for box shippers like NOL, where expectations are for shipping rates to peak during 3Q before softening in 4Q as more capacity is added. Stock has lost 20¢ from recent high of $2.15 on 6 Aug; 200-MA support lies at $1.88.

Fortune Reit

Fortune Reit: 1H10 results. Net property income, distributable income both up 27% yoy to HK$392m / $205m, due to contribution from 3 new properties acquired in Oct 09, as well as overall increase in occupancy (96.2% vs 92.1% yoy) and rental rates for its 11 existing properties. Although DPU -37% yoy to HK12.27cts, due to enlarged unit base following rights issue in Oct 09 to finance the new properties...

Stock looks attractive on a longer term horizon. Offers 6.9% annualized yield, and trades at 38% discount to NAV/unit of HK$5.70. Value of invmt properties remain robust, +7% yoy. Strong balance sheet with HK$515m cash + HK$255m available credit facility, gives it firepower to take advantage of future acquisition opportunities that may arise. Continued AEI should further boost returns on existing properties. While strong retail sales growth provides positive backdrop for portfolio of suburban retail properties.


Commodities: Indonesia may double the tax on CPO exports to 6% next month as prices continue to advance. Exports may ease in Sep as exporters boost shipments this month to avoid paying higher tax. Indon reviews the duty every month to ensure local supply & to reduce swings in cooking oil prices. M’sian palm oil futures in M’sia, rose to RM2,730, +20% from near its 8-mth low in July. Indon will impose a 1.5% duty if the avg price is at least US$700/ton, 3% tax between US$751-800 & a max 25% if CPO climbs to US$1,250. Palm oil averaged US$872 in mth to Aug 19. The decision comes at the time when demand is high due to festivals in China, India & Muslim countries. Higher duties will curtail exports & cap the profit margins of the CPO players.


Olam: confirms it will invest US$12m in a 60/40 strategic partnership agreement with the Gabon govt to develop a Special Economic Zone at Nkok for timber processing. Olam currently owns 400k ha of forestry concession for tropical hardwoods in Gabon, and as a govt partner, is eligible for additional concessions allowing it to further expand its timber processing activities there…

While deal is small, news is still positive, as this indicates that Olam is making progress in Gabon. We look forward to subsequent updates regarding Olam’s oil palm development projects in Gabon as well. We expect Gabon to contribute positively to Olam’s revenue base in future. Street mostly rates as Buy, with targets ranging from $2.17 to $3.29. Note upcoming FYJun10 results due 26 Aug after market close.


Wilmar: to acquire entire equity stake in PT Jawamanis Rafinasi (JMR), one of the leading sugar refineries in Indonesia. JMR’s refinery currently operates at throughput of 1000 tpd, and is licensed for max throughput of 1600 tpd. Transaction expected to be completed in 4Q10, subject to certain regulatory approvals. Acquisition to be funded by mix of internal sources and bank borrowings…

This deal follows closely behind Wilmar’s recent purchase of Sucrogen. While it is not expected to have significant impact on the company’s financials, it is in line with Wilmar’s strategy to expand its sugar businesses across the value chain, and could lead to synergies and improved operational efficiencies. The Street mostly has Buy ratings, with targets ranging from $6.33 to $8.20.

Mapletree Logistics Trust

Mapletree Logistics Trust may inch up on yield-accretive acqn of 2nd property in South Korea for $32m, comprising 2 blocks of warehouses with total GFA of 309k sf & offering initial 9% net property yield vs 7.2% for MLT's existing portfolio. The property is located in a well established logistics cluster where 70% of S Korea's warehouses, distribution centers are situated. MLT will lease property back to vendor Multi-Q Logistics for 5 yrs with annual rental escalation.

Purchase expected to be completed by Sep, will bring MPT's gearing to 44.2%, assuming fully debt funded. This is MPT’s 7th acqn since Dec 09, bringing total puch cost to $460m DB, which has Buy call with $0.95 target price, estimates minor 0.5% boost to FY11-12 DPU, expects MLT to undertake equity fund raising for future acqns as gearing near 45% optimial level. Reit is well diversified with properties spanning SG (47%)< Japan (23%), HK (17%), China (6%).

Valuations attractive at 7.4% FY11 DPU yield & 1x P/B.

SG Market

SG Market may pull back in early trade on DJIA's 58-pt fall last Friday. Support for STI styas at 2900 with any upside likely capped at 2969 (20-day MA). Shares of companies with significant exposure to Australia, such as SingTel , AusGroup, Ezion may retreat on political uncertainty stemming from country's hung parliament.

Friday, August 20, 2010


NOL: Morgan Stanley rates Buy with $2.35 target. Recommends to accumulate on weakness. Likes NOL’s strong balance sheet; notes company well-positioned to capitalize on low ship prices to order ships at values 25% below 2007-08 highs, yielding a long-term competitive advantage to peers. Believes industry fundamentals strong, and capacity discipline, particularly amidst demand uncertainty, will mean rates resuming an upward trajectory from 2Q11, following expected seasonal weakness in 4Q10...

Technically, chart also looks supportive of a positive long term outlook. Prices have been trending upward, and appear well-supported by the rising 200day MA. The flat RSI and oversold stochastics suggest that a bounce could take place in the near term. Support at $1.87 (200 MA), resistance at $2.20.


Cosco: Sevan Marine & Teekay have been shortlisted to build a FPSO for BG Group. Sevan teamed up with Cosco Spore while Teekay joined Samsung in the bids. Earlier, Cosco has won 2 rig contracts from Sevan worth >US$500m, of which 1 has been delivered in Nov 09 and the other sem-sub will be in 2012. FPSO coversions can range from $80-200m depending on size of tanker & complexity of job vs current orderbook of >$8bn.

Billionaire Peter Lim

Billionaire Peter Lim is now active among 4 penny stocks in Spore viz:
1. UPP
2. Rowsley
3. Informatics
4. Healthway Medical

Peter Lim'd latest vehicle is TMC in KL..read about it from link below

*** Thought of the day ***

Informatics has seen heavy volumes in volatile trades on news that Peter Lim has amassed a 19.1% stake over the past weeks, behind Vincent Tan’s 30.8%. Peter Lim has also recently bought a 29.6% stake in TMC Life Sciences, a listed M’sian healthcare coy offering fertility treatment services. This makes him the 2nd largest s/holder behind Vincent Tan, who owns a 31% stake. Will these 2 bedfellows sleeping in together in 2 listed beds remain just strangers?

Is there a possibility of of TMC Life (mkt cap: RM309m) being injected into Informatics (mkt cap: $228m) or vice versa? Would Healthway Medical (mkt cap: $335m) where Peter Lim holds a 7.2% stake, be brought into the equation? I welcome all to ponder on this…

Ho Bee

Ho Bee: to sell two investment properties for a total consideration of S$144.4m. TG Building, a four-storey warehouse located at 222 Tagore Lane, was sold for S$33m, or ~$254 psf of gfa. While the 2nd deal involves four floors of office space with a total floor area of 52k sqft at Samsung Hub, for $S111.4m, or S$2125 psf. Sales expected to yield a gain of about S$31m, which will be reflected in the 4Q10 results.

Freight Links

Freight Links: News could spur interest in the counter, given the recent activity in penny stocks. Freight Links is exploring a potential sale of certain of its properties to SIP to kick start the initial portfolio of the proposed Reit. This could enable Freight Links to monetize a significant part of its balance sheet - stated asset value of its combined investment properties and leasehold properties are worth $0.076/sh, This compares with the $0.06 share price at last close...

A successful listing of the proposed reit would be another catalyst for Freight Links. Freight Links currently trades at 9.2x PE, and 10% discount to its net assets.


ART plans to raise $560.6m via issue of 487.5m new units to fund its acqn. The acqn will almost double ART's assets to $2.85bn comprising 65 properties with 6681 units & transform it from a pan-Asian to a global Reit, making it the 6th largest S-Reit by asset size. ART will also have right of 1st refusal to parent’s 97 properties spanning Europe, Spore, Vietnam & China. While ART will book $106m gain from the sale of Ascott Beijing, the massive 79% increase in units could dilute DPU at a time when Europe is facing a slowdown. ART currently offers FY10 DOU yields of ~6%. Immediate support at $1.20.

CapitaLand/Ascott Reit

CapitaLand/Ascott Reit: CapLand is selling 28 of its services residences to ART for $970m & in turn purchase ART’s Ascott Beijing for $2.14m. The divestment incl 26 properties in Europe & 1 each in Spore & Vietnam and will yield a net gain of $52.1m. Positive move is in line with CapLand’s capital recycling strategy, which enables group to re-invest proceeds in other projects. With its 47.7% stake in ART, CapLand will still enjoy income from these assets even after the sale.

Shares will be halted this morning, no mention yet of when trading will resume. Near term upside target at $4.15.

C&O Pharm

C&O Pharm: CIMB yesterday started at Buy with $0.60 target, based on 12X FY11 P/E. Says China-based drug maker's strong R&D capability provides springboard to launch new products, paving way for expansion in local, even international markets; cites C&O as an attractive partner to foreign drug companies looking to enter the China market. Says prospects backed by China's increasing healthcare spending. Forecasts FY10 div of S$0.073/sh, translating to prospective 17% yield.

Straits Asia

Straits Asia: confirms significant upgrade in the coal Resources and Reserves at its Jembayan Operation. Reserves and resources both +21% over half yr to 127 MT, 610 MT respectively. Measured and indicated resources combined recorded a much higher increase of 50%, and now represent 84% of total resources (from 67% previously)…

Expect market to react positively, as the increase in coal reserves and resources would translate to higher valuation of the mine. Also the upgrade in JORC classification provides greater confidence in the quality of coal resources. Although we note that the majority of the Street currently rates SAR as Hold, with targets ranging from $1.95-2.20, on the back of slightly disappointing 2Q10 results, and uncertainty regarding the Sebuku permits.

Sound Global

Sound Global: Stock likely to see renewed trading interest as company proposes to issue RMB 680m USD convertible bonds due 2015 with 6% interest rate pa, with upsize option for additional RMB 205m CBs. Conversion price set at $0.924/sh, 20% premium to last traded price at $0.77. Maximum possible dilution is 12%, assuming full share conversion…

The CB issue provides Sound Global an alternative means of raising capital, after a previous failed attempt to list new shares (at up to $1/sh) in the proposed HK dual listing. Proceeds likely to be used to support the company’s expansion plans in the capital intensive BOT project segment. However, we note the slightly higher cost of funds that Sound Global is now incurring, compared to its original proposal.


Jaya: good FY10 results. Revenue +36% yoy to $357m, boosted by Shipbuilding Division which completed and delivered 11 vessels, more than offsetting the 29% drop in Offshore Shipping Division revenues which saw lower fleet utilization and a reduced fleet size. Net profit rebounded strongly to $104m vs just $1.2m yoy, as there was no repeat of the $99m impairment charges and provisions that occurred in FY09…

Mgt unexcited about outlook. Expects lower vessel sale/disposal going forward, as intends to focus on growing charter fleet in anticipation of eventual mkt recovery. Believes charter rates are soft, and will take time to recover to previous levels, due to incoming supply glut. Still, stock not expensive at 4.5x PE. DnBNOR has a Buy rating with $1 target.

CapitaMall Trust

CapitaMall Trust: KE maintains Buy with $2.23 target. Views recent data on consumer spending as positive for CMT’s retail tenants. Eg. The recently concluded Great Singapore Sale drew a total spend of $1.2b (+28% yoy), while the Retail Sales Index for June grew 5% yoy, excluding vehicle sales…

Expects growth to be underpinned by proactive lease mgt and asset enhancement initiatives, with catalyst to come from possible co-acquisitions with sponsor CMA, which is looking to invest btwn $800m to $1b in assets in 2H10…

The stability of distributions (decent 4.9% FY10E yield), backed by a predominantly suburban mall portfolio with 99% occupancy over the past 10 yrs, makes CMT a good candidate as a long term invmt. Chart looks pretty and supports a long term view. Uptrend appears intact, with both the 50 and 200 MA sloping upward. Support 1 at $1.90, support 2 at $1.84 (200 MA). Resistance at $2.02, and a breakout above that could see the stock move rapidly toward $2.20.

Thursday, August 19, 2010


Olam: results out 26 Aug after mkt close.
JPM expects Olam’s results to beat consensus and their own estimates by 3-5% on the back of first-time contribution from Almond orchards in Australia, better performance from Queensland cotton franchise, earnings from wheat milling facilities in Nigeria, and improved earnings from tomato processing business. Rates Buy with target of $3.70…

We note that JPM was spot on, in anticipating Noble’s weaker-than-expected earnings, and cited the right reasons for that, ie. lower iron ore, logistic margins, and average soy crushing margins.


Venture: trades at 12.8x consensus FY10E PE. Stock is well-covered. Street gives mostly Buy calls, with targets ranging from $8.88-11.80.
Technically, stock appears to be trading in a broad range. Support at 8.50, resistance at 9.25. Difficult to predict direction now, as stock is currently hovering around its (virtually flat) 200day MA.

Venture's recent 2Q10 results were within expectations, with improved earnings quality (ie higher margins) shining through. Mgt positive on outlook, based on indications from its customers. Should see further improvement in 2H10, which is traditionally a stronger period.

SMRT/ Comfort Delgro

SMRT/ Comfort Delgro: RBS downgrades SMRT to Sell from Hold, cuts target to $1.80 vs $2.25 after reducing FY11-13 earnings estimates by 10-19%. Says Singapore govt’s changes to rail operating system will reduce profitability of future rail concessions, resulting in loss of key driver for SMRT's long-term profit growth. Adds SMRT's new Circle Line expected to operate at loss for extended period…

Stock currently out of favor, with half the Street rating as Sell, and other half recommending Hold. Consider switch to Comfort Delgro which has more diversified operations. KE has Buy call with $1.87 target.

Stock is trading at 0.86x P/B & 28x FY10 P/E, which is not exactly cheap.

China Minzhong

China Minzhong: could benefit from China’s central govt plans to expand vegetable pdtn, citing an “increasingly serious” food supply situation in some major cities. The govt has pledged more funds and preferential policies to support the construction of major vegetable pdtn bases across the country, and banks have been advised to step up lending to vegetable producers. Special railway lines would also be set up to improve the distribution channel…

Separately, news that Potash Corp, the world’s largest listed fertilizer producer, has rejected a US$39b takeover offer from BHP Billiton, suggests that positive sentiment in the agri sector is strong, and demand will continue to be underpinned by increasing global consumption and increasing developing countries’ affluence...

All this is positive for China Minzhong, which sells fresh vegetables as well as processed vegetables domestically as well as for export (35/65 split). The company recently acquired two organic bases, and expects to start commercial production of organic products in the next three years. Stock not expensive at 8.7x PE. DMG has Buy call with $1.68 target.

United Envirotech

United Envirotech: following UE’s previous failed attempts to acquire the entire equity interest in Tongji Environment, Tongji has:
i) granted UE a call option over 50% equity interest in Tongji, and
ii) agreed to convert the RMB 30m refundable earnest money (previously advanced by UE) to a loan. The loan will be secured by a charge over the entire equity interest in Tongji…

The agreement gives UE more time to access whether to proceed with the invmt in Tongji, while being compensated via the 3% pa interest payments on the loan (not great in our view). Barring credit risk, we think impact on UE is likely limited, but would prefer if the company had used the cash instead for projects with more certainty in delivering higher returns. Still stock not expensive at 9x PE. DMG, OCBC have recent Buy calls with $0.52/0.53 targets.


KepCorp has won a $50m contract for the modification of the FPSO vessel OSX-1. Work is expected to start in 3Q and vessel is scheduled to be delivered in 2Q11. This brings its total orders bagged this yr to $2.24bn, of which $1.66bn was secured in the 1Q10. All eyes are still awaiting the results of the 28-rig Petrobras tender for which KepCorp is participating in bids for 7 drillships & 2 semisubs (under package 1) & 4 drillships & 2 semisubs (under package 2).

Stock is attempting to break above 50-day MA with overhead resistance at $9 level.

SG Office property

SG Office property: Demand for office space in Singapore has recovered from a negative net take-up of ~236k sq ft last year to positive net demand of ~635k sq ft in 1H10. Sectors underpinning this demand are mainly banking and finance, professional services and consultancy practices…

Leasing interest from banks and MNCs, which are seeking to expand operations and move into new Grade A office buildings, is spurring positive sentiment. Eg.
i) Citigroup is considering taking more than 200k sq ft at Asia Square Tower 1.
ii) BOA is apparently in talks to lease 120k sqft at 50 Collyer Quay.
iii) Julius Baer may also be considering taking space at a new location, possibly OFC…
iv) Russian O&G group Gazprom, is believed to be negotiating to rent one of the top few floors at OFC.
We highlight Keppel Land, OUE, CCT as key beneficiaries of the office thematic play.

ASL Marine

ASL Marine: FY10 results uneventful. ASL ended its financial year with another soft quarter, with margins persistently weak since 3Q10. Net profit fell by 47.5% to S$37.3m. ASL expects margin pressure to continue as competition remains tough…

Despite lower forward earnings forecast, KE rates ASL as Buy on cheap valuations, with PBR at just 0.8x. Target price of $1.53 (vs $0.895 last close) based on estimated break-up value of the yard.

CSC Hldgs

CSC Hldgs unit has been served a writ of summons and faces a $10.3m claim from main con Penta-Ocean Construction relating to certain piling works for Exxon-Mobil's S'pore Parallel Train Project at Jurong Island. The piling portion of the project started in 2008 and was completed late 2009. Penta-Ocean's claim includes recovery of monies paid to CSC under an earlier adjudication determination.

It is premature to predict the outcome of this case but if it is ruled in favour of Pan-Ocean, it will have a material impact on CSC’s earnings. For 1QFY11, CSC reported a 45% drop in net profit to $3.3m on a 4.5% dip in revenue. Intense competition has placed contracts prices under downward pressure and resulted in many projects being carried out at lower profit margins. As a result, gross margin declined to 12.0% vs 18.6% a yr ago but higher than s an improvement from 10.6% in 4QFY10.

CSC has recently secured orders worth $50m & it is also undertaking several projects for MRT’s Bt Timah stations. Current orderbook stands at $180m but group is unlikely to match FY10’s $24.8m earnings this FY.

Falcon Energy

Falcon Energy: We recently met up with the mgtm following its 2Q10 results which were released last wk. Key takeaways are
1) Further delay in the fleet explansion plans (6-8 vessels) to 1H FY11 in view of the soft charter mkt,
2) Expect earnings growth from its marine divsion to remain soft as 2 vessels that were dry-docked in 1H only resume operations this mth and
3) Looking to secure few oilfield projects in order to offset some of the weakness seem in other biz segments.

The stock currently trades at about 8x FY10 and 6.5x FY11 PER. KE still have a BUY rating with TP of $0.85, representating more than 50% upside from last price of $0.53.


Healthway: proposing to diversify business to include the development, invmt and mgt of real estate which comprise medical facilities in the region (ie Medical Development), via 25% owned JV with 4 members of mgt/ major shareholders. Geographic focus is on China, where Medical Development will include
i) hospitals and medical centres,
ii) retirement communities,
iii) medical and wellness resorts,...
iv) mixed developments comprising medical facilities with retail, office and commercial units, and hotel or service apartment. Projects to be funded through mix of equity and bank borrowings. Company may also provide medical, healthcare and related support services to the JV...

We think that plan is still in early stages, and it is premature to determine whether move is positive. Mgt needs to get sh/h approval, and execution risks remain. The recent purchase of shares by Peter Lim (now a significant sh/h) may be a catalyst for the stock in the short term.


Oceanus: update on TDR. Fixed TDR issue price at NT$11.25 (S$0.477 vs last traded at S$0.30). Expected list date is 27 Aug. Successful listing of this 2nd TDR programme could be a catalyst for further share price movement.

Tiger Air

Tiger Air: likely to see near term pressure on share price, following the divestment of shares by substantial sh/h, and news reports on flight cancellations due to pilot shortages. Tiger’s share price has fallen from a high of $2.24, after a disappointing set of 1QFYMar11 results and analyst downgrades. Price momentum is weak. Support at $1.90, resistance at $2.00…

Two substantial sh/h, Indigo Parners (a PE firm), and Ryanasia (unit of Ryan Air) have sold part of their equity interests in Tiger. Placement of 65.8m shares, or 12.3% of shares out, represents half of the combined stake of Indigo and Ryanasia prior to the sale, and was completed at $1.90/sh. The transaction is not unexpected, given both sh/h are pre-IPO investors, and likely to realize some gains after expiry of lock up...

Move could be positive in the longer term, as free float is increased, allowing for better trading liquidity. But negative in near term, due to concerns about share overhang…

Also, Tiger has canceled at least 10 flights over the last 4 days, after losing more than 20 pilots in a wave of resignations in June, amidst an industry wide shortage of pilots. As a budget airline, Tiger is likely to feel the heat more than network carriers like SIA, as it would find it harder to hire, and wage costs as % of expenses are high as well. Expect higher wage costs (Tiger’s pilots earned 30% more in their new jobs) to hit bottom line.

SG Market

SG Market: Steady US stocks overnight unlikely to give SG shares any significant boost in early trade. With investors generally still reluctant to commit amid uncertainty over global economic prospects, most stocks likely to continue trading in tight ranges. STI increasingly at risk of slipping below psychologically important 2900 mark but this could still hold as market is oversold. Immediate resistance at 2948.

Wednesday, August 18, 2010

Ascendas REIT

Ascendas REIT: DBSV downgrades to Hold from Buy on view valuations lofty. Says REIT's diversified exposure, stable yields attractive, but notes limited upside to its $2.11 target price.

Expects leasing activities to firm further on positive rental reversions. Catalysts to come from portfolio expansion via additional acquisitions, progress on its development projects, as AReit plans to take on $300m worth of projects annually.


SingTel: Not well-loved by analysts given recent Hold calls from the Street. Deutsche, Macquarie with $3.26, $3.16 targets respectively. Market watchers see little reason for SingTel to break out of recent trading range, given bland June-quarter results, cautious guidance reported last week...

Key risks include associates continuing to be key overhang given rising competitive pressure, and erosion of SingTel’s market share in the corporate data space once Singapore's upcoming high-speed national broadband network is complete.


Z-Obee: announced a good set of 1QFYMar11 results last wk. Revenue jumped 84% to US$30.9m, and net profit surged 236% to US$2.0m. Yesterday, a HK broker gave a Buy call with target of HK$2.76 (~S$0.4 , citing strong expected shipment growth of its own-brand VIM handsets and netbooks. The company is also tipped as a beneficiary of the “Three Network Convergence” project, and is expected to win more orders from China Telecom to supply IPTV set-top boxes…

Polaris Securities recently said that Z-Obee’s TDR listing could be completed by 4Q10. Approval is still pending from the relevant authorities. If successful, this could provide a positive catalyst for the stock price, given that Z-Obee would become the first company in the greater China area to be listed in Singapore, Hong Kong and Taiwan at the same time.

Genting Singapore (Danger)

Genting Singapore: UBS has Buy call, raises target to $2.02 vs $1.52 previously, after increasing EBITDA est for Resorts World Sentosa by 30%, post the group’s return to profitability in 2Q10. But cautions that upside due to the market underestimating the earnings power is now largely captured in the recent surge in share price rise. Notes that near-term risk on the stock is over-inflation of expectations.


Wilmar: +2.1% at S$6.26 on prospect of increased fund flows into stock as plantation group's weighting in MSCI Singapore Index raised to 5.33% from 3.62% under latest MSCI equity indexes review. Change effective from Aug 31 market close. We view news as positive for shares. UBS expects expects capital inflows of up to $300m, equivalent to 4.8 days trading value.

Golden Agri

Golden Agri’s private equity unit has received govt approval a 20-yr concession to develop 202k ha palm oil plantations in Liberia. Financing of this US$1.6bn investment will not be an issue for GGR as the Liberian project will be spread over 10-20 yrs with initial phase of 15k ha. With a low net gearing of 13%, GGR can easily finance the projected annual capex of ~US$80-160m.

Moreover, GGR is also seeking other investors into the equity fund, which means the venture will not be fully financed by GGR. We see this as a good opportunity for GGR to expand beyond Indon given recent remarks by Wilmar that acquiring sizeable land for CPO plantations will be difficult in the future. Stock trades at 13.8x FY10 & 11.6x FY11 P/E, below industry peers. Support is at $0.55.


SPH: Latest SG adex data shows growth moderating to 9% yoy in July, its slowest pace this year but newspaper adex remained robust, surging 17% to $78m, boosted by strong GDP growth in 1H10. For 9M10, SPH has reported advertising revenues of $553m vs $648m for full year FY09. Based on the current run rate, SPH is expected to book total ad revenues of $730m or +12.7% & comfortably meet consensus estimates of $504m net earnings (9M10: $423m).

Stock trading at 11.3x FY10 and 12.5x FY11 P/Es, well below historical trends. DB has buy call with $4.60 TP. Stock holding at $3.94 50-day MA support with near term resistance at $4.04.


DBS: RBS lowers target to $11.50 from $12.00, keeps Sell rating on expected continued pressure on its net interest income. Notes bank has embarked on an admirable restructuring of its operations in SG, HK, SE Asia, with mgt changes at HK operations. But low Sibor, increasing costs likely to weigh on earnings growth. Cuts FY11-12 earnings forecasts by 5.6%, 1.3% respectively, based on 20bp and 5bp cuts in Sibor assumptions over both yrs. Adds gross loan growth expected to moderate to "more sustainable" rates.

Kim Eng

Kim Eng Hldgs (KEH): may become a strategic investor in Berjaya Corp unit, Inter-Pacific Securities (IPS). Earlier reports stated that KEH was set to acquire a 70% stake in IPS, which has a "one plus one" licence therefore allows it to open as many branches as it likes in Msia.

Keppel Land/Capitaland

Keppel Land/Capitaland: Vietnam devalued its currency by 2.1% y’day in a bid to control its trade deficit, which tripled to US$6.7bn in 1H10. The latest devaluation is the 3rd since late last year after a 3.4% adjustment in Feb 10 and a 5.4% reduction in Nov 09. Companies with significant exposure to Vietnam include Keppel Land (~$390m or 10% of assets, 6% of net profit, 5m sf landbank spanning 8 property projects with potential 22k units for sale),

CapitaLand (~$400m or 1.4% of total assets, 4 JV projects comprising 4k units), Koda (thinly traded furniture maker with prodn facilities) & Ezra (fabrication yard).

KepLand/CapLand: During the previous devaluation of the dong in Feb 10, KepLand fell 10% and CapLand declined 7% in over a week.


Biosensors: received approval from the Department of Health in Taiwan for sale of its BioMatrix drug-eluting stent system in Taiwan. CEO, Jeffrey B Jump commented that Taiwan is “an important regional market with a high rate of coronary stent usage”. Stock trades at 20.2x historical PE. Nomura rated Buy with $1.20 target last month.


Yingli: analyst downgrades continue. KE reduced rating to Hold with $0.43 target, vs $0.62 previously. Similar to what we highlighted yesterday, there was concern over the poor 2Q10 results, delays in sale of its residential (ie Da Ping) and commercial (San Ya Wan) projects, and tepid rental uptake at the IFC.


Olam: to invest US$43.5m in a greenfield coca processing facility, primary processing and warehousing facility in Cote D’Ivoire. Invmt to be funded by mix of internal accruals and borrowings. The cocoa processing plant is expected to be commissioned by 1Q12. By end 2nd yr of pdtn (end-FY14), it is expected to contribute a turnover of ~US$175m and EBITDA margin of 10-12%...

The cocoa processing plant will process ~60k mt of cocoa beans into 48k mt of cocoa products, namely liquor, butter and cake.
Cote d’Ivoire is the world’s largest cocoa producer accounting for 1.3m mt or 40% of global production. Investment into cocoa processing is part of Olam’s global cocoa strategy to integrate its value chain to enhance margins and competitive position in cocoa globally.

FY10 results due Aug. 26

Tuesday, August 17, 2010


NOL: Nomura has Neutral call with $2.30 target. Believes freight rates could be peaking as shipping carriers are struggling to implement further peak season surcharges, while containership supply is increasing, especially on Asia-Europe routes. Shares in steady decline since NOL reported return to profitability in 2Q10 with US$99.7m earnings, as investors unload on prior strength, mull prospect of slower global trade, lower freight rates given uncertain global economic prospects.

Concerns backed by NOL's latest operating data showing volume shipped during 4-week period ended July 23 down 0.8% sequentially.

CSC Holdings

CSC Holdings: recently won contracts for foundation works for 4 out of 12 stations along the Bukit Timah MRT Line, indicating its competitiveness in this area. Mgt continues to be sanguine on industry outlook, supported by $10-16bn worth of contracts to be awarded in 2H10, according to the BCA…

These include key projects such as Stage 3 of the MRT Downtown Line, public residential projects, the widening of the Keppel Viaduct and conversion of the former Supreme Court and City Hall to the National Art Gallery, as well as various private residential developments.


YingLi: Chongqing’s plans to introduce a citywide property tax on a trial basis has been approved by China’s central government. No details on the quantam & Structure of the property tax but is expected to be implemented soon. This spells bad news for Ying Li, whose property portfolio lies entirely in Chongqing...

Yingli also reported disappointing 2Q10 results. Revenue slumped 60% yoy to RMB 13.7m, and turned a net loss to sh/h of RMB 21.4m vs just breakeven last yr, as company decided to keep all remaining units for rent until prices head above valuation.

Analyst downgrades could keep stock price in check in near term. DMG cuts Yingli to sell from neutral this morning.

DMG sets Yingli target price at $0.33 vs $0.42 previously

Sound Global

Sound Global: Revived plans for double listing in HK but this time via introduction instead of issuing new shares, which is deemed more favourable as there is no dilution. But proposal still at evaluation stage so unlikely to impact share price just yet. Meanwhile business outlook remain positive after it recently bagged its largest BOT wastewater treatment plant project worth Rmb1.38bn, which will generate income stream over 30 years.

Co has also disclosed that exec chairman, Wen Yibo & his wife have pledged 40m shares to Morgan Stanley. Technical indicators reversing from oversold positions, may head for $0.79 resistance level.

Golden Agri

Golden Agri: may invest in private equity fund, Verdant Fund LLP, the sole shareholder of Golden Veroleum (Liberia), which is in process of being granted a concession by the Govt of Liberia (GoL) to develop ~220k ha of land for oil palm cultivation over next 20 yrs. Initial development will commence with 15k ha. This is inline with company’s strategy to expand its businesses, both upstream and downstream…

Separately, Malaysia's IOI Corp was reported to have stopped buying palm oil from PT SMART (main subsidiary of Golden Agri) 3-4 weeks ago, after an environmental audit last week gave a mixed evaluation. Given that IOI supplies the bulk of its crude palm oil to Europe, there is a lot of pressure to ensure that their supply chain is clean, and IOI is still undecided on whether to resume purchases...

Based on shipping records, IOI buys about 20-40k tonnes of CPO from SMART monthly. This compares with the 777k tons of CPO produced by Golden Agri in 1H10.

ST Engineering

ST Engineering
In the big picture, It appears that prices are going sideway 3.34 - 3.05
Candlesticks are within the descending triangle. Support level at 3.12 (200-day EMA)



Prices dipped abt 6% since 3-Aug. Its trading below the key moving average.
Immediate support holds at 2.90

NOL Group

NOL Group: For the period 26 June to 23 July 2010, container shipping volumes increased 18% yoy, mainly due to higher volumes carried from all major trade lanes, particularly the Transpacific and Asia Europe trade lanes. Average revenue per FEU (Forty-foot Equivalent Unit) was 39% above the same period last year, due to improved core freight rates in the major trade lanes. Separately, NOL yesterday finalized an order to build two new 10,700-TEU container ships for delivery in 2012.

These two vessels are part of a 12-ship order valued at US$1.2 billion to be built by Daewoo Shipbuilding & Marine Engineering Co., as announced on 21 July by NOL. According to mgtm, NOL is investing in new vessels in order to meet future growth needs and to replace vessels with charter agreements that will expire in the next few years.

Peoples Food/ Pine Agri

Peoples Food/ Pine Agri: Halt to be lifted at 9am this morning. General offer for Pine Agri shares + 2Q10 results…
Link Crest makes mandatory conditional offer for all Pine Agri shares at either the cash offer price is $0.2/sh, or one new share of $0.20 in the capital of unlisted State Crest Ltd (subsidiary of Link Crest). PFH, majority sh/h of Pine Agri with 36.8% stake, has undertaken either not to accept the offer, or to take the Share Alternative…

If privatization of Pine Agri goes through, PFH will take 40% stake in State Crest, while Pine Agri’s convertible bond holders will own the remaining 60% stake. In our view, there is no mat’l financial impact on PFH, since there is no monetization of the invmt. But news still positive. PFH earnings have been dragged down in recent quarters due to share of loss from Pine Agri, and this could be a signal that there is still value in Pine Agri, and a turnaround could be underway….

PFH 2Q10 results, better yoy, but weaker qoq.
Revenue +27% yoy to RMB 3.0bn, due to both higher sales volumes (particularly for processed meat pdts) and higher ASP. Gross profit +121% yoy to RMB 272m, net profit +105% yoy to RMB 92.9m, but both were down qoq, due to combination of seasonality and higher selling and distribution costs. Declared interim dividend of RMB 0.055 (~S 1.1cts), more than double last yr…

Growths catalysts to come from: i) continued penetration of rural areas, as mgt continues to focus marketing efforts on this front, ii) continued to make progress in commercial pig farming project, with pdtn to commence next FY, iii) PFH as a sponsor of the Asian Games in Guangzhou in Nov ’10, and will be the exclusive supplier of pork pdts to the event. Stock trades at 9.6x annualized 1H10 PE, vs direct peer, China Yurun at 24.9x PE.

SG Transport

SG Transport: The govt will amend the Rapid Transit Systems (RTS) Act to implement a new rail financing framework and inject greater contestability in the industry. Changes include:
i) LTA will collect from operators a licence charge payable for the right to run and generate returns from the revenue service,
ii) shorter licence period of about 15 yrs - down from the current 30-40 yrs, iii) LTA will take over ownership of the operating assets and lease them to the operators...

We see the following implications:
i) Positive for construction companies that perform civil engineering works, as LTA will be able to undertake integrated and holistic long-term planning of the train network, and proceed with faster roll out of new stations and lines. Tip OKP, Lum Chang, and Hock Lian Seng (HLS) as beneficiaries. In particular, HLS has a number of contracts for the Downtown Line 3 project under its belt.
ii) Negative for SMRT, SBS Transit, which could see higher costs arising from the licence charges, and may end up competing more aggressively with each other for the operating rights. A silver lining is that tenders are currently limited to the two incumbent operators, however competition could heat up in future should the govt open up the playing field to other parties in future.

ASL Marine

ASL Marine announced it has secured new shipbuilding contracts worth about S$55m for 30 vessels, comprising 2 units Azimuth Stern Drive Tugs, 1 unit pipe-lay barge and 27 units cargo barges. The 2 units of Azimuth Stern Drive Tugs are scheduled for completion by the 1Q12 while the barges are scheduled for progressive deliveries by the 1Q11.

We understand that revenue from these new shipbuilding contracts will be recognised progressively over the contract period, which is based on the % of completion method.
These latest order wins are expected to boast its FY11 (Jun YE) earnings. The stock currently trades at less than 6x forward PER, based on Bloomberg estimates.


SIA maintained its strong load factor numbers into July 2010, with particular strength on the cargo side. Overall load factors came in at 70.8%, while passenger load factors remained in the low 80s at 82.4%, while cargo hovered at 64%. Driven by a general improvement in the economic environment, cargo traffic rose 8.2% in July, which was partially matched by the additional deployment of capacity by 7.6%.

Meanwhile, passenger traffic was up 3.6% to 7,502m passenger-kilometres, the highest monthly number since Oct 2008, excluding the December peak holiday seasons. Most of the strength continued to come from East Asia and the Americas, with load factors up by 4.6pts and 5.6pts respectively. We expect SIA to accelerate its profitability over the remaining quarters through higher loads and yields, and also see a boost from seasonal factors. KE maintain BUY rating with TP of $18.90.

Monday, August 16, 2010

HL Asia

HL Asia: CIMB downgrades to Underperform from Outperform, cuts target to $3.21 from $4.86, valuing China consumer electronics unit Xinfei at 10X FY11 P/E vs 16X FY10 P/E previously, to account for slower growth. Notes 2Q10 earnings of Xinfei down despite June quarter being its seasonally strongest quarter, hurt by weaker margins stemming from higher raw material costs, trade discounts offered to counter competition…

Says 2Q10 performance of diesel engines unit Yuchai hurt by higher selling & distribution costs. Shares off 4.0% at $3.56 with support at $3.50.


Healthway: 2Q10 results. Revenue -12% yoy to $21.4m, due to absence of flu pandemic this yr, and lower patient load for new specialists. Net profit slumped -97% yoy to $0.1m, due to higher staff costs and other operating expenses. Still, mgt remains positive in outlook; sees m-o-m improvement in new Specialist division, which is currently ramping up from scratch. Also expects China expansion plans to take off…

Mgt announced agreements with several third parties to invest ~RMB38m over 3mths, to operate and manage 12 medical and dental centers in China (Shanghai and Hangzhou). This is in line with strategy to increase total no. of medical/dental centers to over 20 by end of 2010. Invmts to be financed via mix of internal funds and/or borrowings.

Otto Marine

Otto Marine: subsidiary Reflect Geophysical entered into a contract (valued at a minimum of ~US$2.7 million) with Octanex NZ Ltd, for a 270 sq km 3D Seismic Data Acquisition in the Taranaki Basin area of New Zealand. While news is mildly positive, order is small compared current order book of US$180m. KE has a Buy with $0.58 target, following recent 2Q10 results that were inline with expectations.

Sarin Tech

Sarin Tech: delivers a Galaxy 1000 automated internal diamond mapping pdt to Blue Star Group, for use in Blue Star’s mnftrg process of rough diamonds and in its online tenders of rough diamonds. Blue Star is based in India, and deals in the supply of both rough and polished diamonds in India and Belgium…

News is positive, and reflects customers’ keen interest in Galaxy. Up until 2Q10, Sarin intentionally made limited shipments to customers. With the system refinements and IP protection now in place, mgt expects an acceleration of shipments in 2H10. Additionally, a new pdt, Quazar II was introduced in 1Q10, with deliveries also expected to ramp up as the co. moves into 2011. Stock is currently unrated by KE and S&P.

Kencana Agri

Kencana Agri: DBS Vickers downgrades to Hold from Buy, cuts TP to $0.35 from $0.39 after revising down earnings forecast as citing share placement to Wilmar unlikely to affect Kencana's medium-term profitability. 2Q net profit of US$1.2m was significantly below expectations. Wilmar is buying 20% stake in the company for $80.4m. Stock last traded at $0.385.


Olam: NZ Farming Systems Uruguay advises sh/h to hold off on deciding whether to sell shares to Olam or Union Agriculture Group (UAG) until they receive a target company statement, including independent appraisal reports. NZFSU’s share price is now at NZ$0.63, above either of the takeover offers...

Mkt watchers expect Olam to come back with a better price. Alternatively, Olam stands to make ~ NZ$12.5m capital gains if it chooses to sell its current 18.5% stake to UAG, which it bought in Sep and May this year.
Separately, Olam is also one of three Asian companies, involved in Gabon’s new economic plan to build infrastructure and develop palm-oil and lumber projects that are expected to generate at least $4.5bn invmt and create 50k jobs...

Olam will help develop a special economic zone costing at least US$100m, that will have the capacity to process 1m cubic m of timber annually, and will also help develop a 300k ha palm-oil plantation, palm-oil refinery and port, costing US$1.8bn in total. This will support Gabon’s ambition to become Africa’s biggest producer of the edible oil.