Tuesday, May 31, 2011


NOL : Goldman Sachs reiterates Buy with $2.70 TP pegged to 1.1x EV/FV, following grp’s operating stats for April. Note that vol comparisons against last yr still appear healthy at +9% yoy, but achieved monthly rates of -4% yoy were trending slightly weaker than our expectation……

Add that rates typically pick up seasonally from Apr, but not surprisingly, oversupply has put pressure on carrier pricing. Attribute NOL’s lower rates to the weak Asia/Europe trade lane, where the industry is adding the vast majority of newbuild deliveries….

House assumes a 4% qoq decline in rev for the qtr and another uncertainty is bunker fuel prices, which have eased, down 3% since Apr1. At current price, valuations are undemanding, with stock at 0.77x 2011E EV/Fleet Value, representing an unjustified discount of 15% to its peers

China Healthcare

China Healthcare: FY11 results, revenue is up 10% to $27m, net profit is $3.8m from a loss of $5.7m the previous year. Note the previous year suffered a one-time $9.2m impairment loss on a subsidiary.
Net gearing stands at 30.4% from 80.2% the previous year. This was helped by an almost 4x increase in cash to $8.9m due to a rights issue and a reduction of $2.7m in total debt...

Moving forward the coy expects healthcare demand to grow with the aging population. They have been awarded a contract by MOH to operate a new medicare center with 88 bed capacity. They have also commenced construction of new facilities at their West Point Hospital...

Co has moved overseas with their ECON Medicare Center in Taman Perling to begin construction in FY12 with a bed capacity of 200. Consultancy projects for the construction and development of an Elderly Apartment in Tianjin Eco-City is also progressing well.
Stock currently trades at 11.5X P/E.


Ausgroup: surprise departure of CEO John Sheridan, who held the role for 3 yrs. He did not provide a reason for leaving. Move paves the way for the return to leadership for Stuart Kenny, who has been appointed Acting CEO. He was MD and CEO for 4yrs until Jan 2008, and has been a non-Executive Director since.
The co will conduct an Australia wide search for a new CEO.

Mapletree Commercial Trust

Mapletree Commercial Trust: CIMB initiates Coverage with $1.08 TP. Note that REIT offers one of the strongest organic and acquisition growth potential in house coverage. And strong Sponsor, Mapletree Investments and a ROFR to Sponsor’s office, retail and business space assets offers acquisition growth opportunities. See catalysts from higher-than-expected rental growth and accretive acquisitions.

China Environment (CENV)

China Environment (CENV): secured 8 contracts worth Rmb105.6m (S$20.1m) from clients in the mining, steel, chemical, and power generation sectors. The contract relate to the design, construction and installation of electrostatic precipitators (ESPs), baghouse, and hybrid dust collectors...

The projects are mainly located in Chongqing, Henan, Shanxi, Jiangsu, Anhui, Sichuan and Ningxia. As at end Mar '11, the grp's orderbook stood at Rmb 73.3m based on firm contracts. This compares with FY10 revenue at Rmb 547m. All the projects, including the 8 contracts, are scheduled for completion this yr.
Stock trades at 8.4x P/E.
DMG, Sias have Buy ratings with $0.28, $0.37 TP rptvly.

China Coal Prices

China Coal Prices: Coal prices continue rising further, with station coal prices at China’s Qinhuangdao port rose for a 7th wk to the highest in more than two years as the country battled with an electricity shortage, on back of a serious drought in China which has reduced the reliability of Hydro electric power. Potential benefiaciaries of higher coal prices are Straits Asia and Noble grp.

Suntec Reit

Suntec Reit: Credit Suisse downgrades to U/p and reduces TP to $1.50 from 1.69. Recommend investors take profit, as near-term headwinds from office and retail portfolios could spell downside risks. Expect office demand to shift towards higher-end offices (Prime Grade A only accounts for 36% of Suntec’s assets)…..

Note REIT was best performing REIT over last 6mths despite near-term headwinds from:1) disappointments in retail portfolio as competition weighs on rental growth;
2) potential vacancy risks (after 7 straight qtrs of occupancy growth) as major tenants IDA and Nomura vacate. Believe Suntec is fully valued at 6% FY11E and FY12E yields. House prefers CCT and KREIT which are better positioned to ride the office upcycle.


SIA: UBS maintains Buy with TP $16.00. House keeps faith in its low-cost initiative. Welcome attemptsto start a medium/long-haul lowcost carrier, given its loss of Kangaroo mkt share to the Mid-East airlines, its American load factors underperforming peers and failure to capture the Indian and Chinese outbound mkt, and loss of hub dominance to LCCs…..

House thinks there is a market for long-haul LCC in Asia and LCC will dilute SIA’s overall yield but it has a good chance of achieving higher profit, with 30% cost saving and a 6ppt increase in load factor to 84% can cover up to a 20% decline in yield.


Noble: Nomura maintains Buy with TP $2.75. House prefers Noble over Glencore on higher growth, more supply chain and agriculutral/energy exposure. Believe Glencore's valuations have been a bit of overhang on Noble lately, which is unjustified as Glencore is more of a miner and its supply chain is trading in line or at a minor discount to Noble….

Add that Glencore is metals, oil and coal while Noble is Agri and Energy and Noble would be driven by expanding midstream assets complementing marketing activities.
Commodity price volatility warrants balance sheet strength and this merits a premium.

Genting SP

Genting SP: Nomura Reduces TP to $1.71 from $1.59. Expect fine-tuning post 1Q earnings to reflect the abnormal and highly unpredictable VIP win rate in 1Q, raise FY11 earnings by 9.7% to SGD1,114m. Believe calling a spade a spade was never the Genting grp’s culture with regard to earnings guidance….

Add that with novelty factor wearing off and potential tapering off in VIP rolling vol in 2Q11, following an industry-wide investigation claims of irregularity of junket activities. Tip that unlike in Macau, the SG govt has no plans to make SG a gambling hub and expectations on mkt size must be realistic.

Ascendas Reit

Ascendas Reit: Credit Suisse downgrades to U/p and reduces TP to $2.01 from $2.33. Downgrading on back of slowing growth and higher risk profile. New TP assumes higher risk profile due to increased exposure and risk of overbidding for devt projects, JTC and overseas assets. Recommend a switch from AREIT to Mapletree Logistics Trust (MLT), as MLT is less vulnerable to SG’s GDP slowdown (50% of rev from overseas) and offers a more attractive yield of 7.1% FY11E.

China Env

China Env: Has secured eight contracts totalling Rmb105.6m. DMG maintains Buy, with TP $0.28, tipping latest wins to account for 18% of FY11 estimates. Believe CENV is able to achieve more contract wins to meet estimates of Rmb580-620m in FY11-12 on the back of Chinese government’s determination to tackle air and water pollution.

Market Strategy

Market Strategy: CS has strategy report. Expect SG population growth to slow to 1-2% and real GDP growth to slow to about 4%. Expect SG economy would start to pick up in 2H11 after slowdown in 2Q11. Remain positive on export and trade-oriented industrial names. House top picks remains KepCorp, SembMarine, NOL and CDL, while key Underperform ideas are SMRT, ST Engg, StarHub, Suntec and AREIT.

SG Property

SG Property: Mkt watchers note that while mass mkt condo prices have been racing ahead, moderation may be around the corner.The NUS SG Residential Price Index (SRPI) +14.1% in Apr yoy for the Non-Central Region, while index for the Central Region, rose at a slower pace of 5.6% over same period. Ppty industry players generally do not expect mass-mkt condo prices to keep surging at the same pace…..

Slight pullback could be due to reports this mth that the govt announced that mthly household income cap for those buying new BTO flats from HDB could go up from $8,000 to $10,000 which could siphon off some demand from the HDB resale market. Analysts also widely expect an increase in the income cap for those buying new Design, Build and Sell Scheme flats and EC’s from $10,000 currently to say, $12,000, which could further siphon off some demand from the 99-year mass-market private condo seg.


CapitaLand: Acquire65% stake in Quoc Cuong Sai Gon (QCSG) Vietnam for a cash consideration of Vnd121.225b ($7.3m). QCSG plans to develop the land into approximately 800 value homes. Acquisition not expected to have any material impact on NTA or EPS for FY11. We note however that acquisition could potentially see possible further expansion into Vietnam, as grp diversifies rev stream from SG and China, both of which faces policy risks, particularly for the residential sector……

Separately, analysts note that Chinese home prices are likely to fall by more than 10% this year, due to govt's monetary policy and other tightening measures. Home transactions could fall 7% this yr, while sales value may drop 10%.


NOL: Apr operating data. Volume +9% yoy, mainly driven by the Asia-Europe and Intra-Asia trade lanes. Macquarie however, highlights that rate recovery is behind schedule, with avg revenue per FEU -4% yoy to US$2549. Notes the usual trend is for rates to bottom in Feb and start moving higher until Jul-Aug...

Asia-Europe the main culprit, as rates have remained under pressure; this coincides with Maersk and MSC saying over the wkend that they are postponing a planned rate hike on Asia-Europe of US$500/FEU with other operators expected to follow suit...

Meanwhile, the long term competitive landscape is becoming increasingly challenging. NH Invmt warns that container lines plan to add a record amount of capacity in 2013, outpacing growth in demand for shipping services, which may drive maritime transport rates lower. This corroborates with Alphaliner data, which shows global container-shipping capacity rising by 11%, or a net 1.9m boxes in 2013, if all options and LOIs for new vessels are exercised, the fastest annual increase in 5 yrs...

Macquarie keeps NOL at Neutral with $2.25 TP, adds high bunker fuel price to provide additional headwinds.
Though Morgan Stanley, Credit Suisse remain bullish. MS keeps at Overweight, notes catalyst from improving 3Q freight rates, as seasonal demand pickup in 2H11 boosted by inventory restocking should prompt effective implementation of rate hikes and peak season surcharges. CS likes NOL for its high US contractual exposure.

Spice i2i

Spice i2i: FY11 results for a 15-month period ending 31 Mar, revenue is up 193.3% yoy to US$337m compared to the previous year. Revenue growth was driven by strong sales in mobile handsets and contributions from subsidiaries..

Net loss before tax was US$555k, however the company managed to record a net profit after tax of US$483k a decrease of 72.3% from the previous year. This is due to a US$1m positive impact from income tax due to reversal of deferred tax liabilities and recognition of deferred tax assets. Benefitting the bottom line was a US$9m forex gain on the weakening USD, compared to US$272k the year before...

Also impacting the bottom line was a near 6-fold increase in finance costs to US$2.2m due to a loan given by a Director and inclusion of finance costs of its subsidiaries. There was also a one-time US$5.6m legal and consultancy fee due to acquisitions and incorporation of new subsidiaries during the period.
The company remains in a net cash position however cash increased close to five times to US$86.7m due to proceeds from the rights issue and redemption of matured investments...

Taking the 12-month period ending 31-Mar, revenue is up 156.6% to US$295m. Net profit is down 48.7% to US$894k.


Z-Obee: Strong set of resukts, with FY11 rev at US $148.29m, +6.34% yoy and net profit at $11.4m, +119.91% yoy. Surge in net profit party attributed to a one-off gain of US$5.71m gain frm the acquisition of Yoho king, while operating profit at US$9.7m, +24.3% yoy. Rev growth was due to a 58% increase in rev of solutions and assembly segments, while other income +44.94% to US$1.34m due to FX gains and increase in interest income from time deposits.....

During the yr, the Grp also trimmed down the distribution and marketing segment. Going forward, grp remains confident of business tipping the smartphone market to provide opportunities in 2011 and will strive to strengthen its R&D team in order to further build on its foundation. At current price, grp trades at 11.8x FY11 P/E. vs simple peer average of 15x.


GLP: Announced 4Q11 results which were within expectations, rev at US$124.4m, +17% yoy and flat qoq, while net profit at US$49.2m, -63% yoy and -40% qoq. Plunge in yoy net profit largely due to a US$100.2m fair value gains in FY10, vs a fair value loss of US$8.9m that was incurred this time round. Excluding revaluation gains, core net profit at US$59.8m, +13.5% yoy and -18.5% qoq....

Growth driven by completion and stabilization of GLP’s development projects in China, improved operational performance of properties in China and Japan and translation gains arising from the strengthening of Yen vs USD, while lease ratios in China and Japan remain high at 92% and 99% respectively....

Result brings FY11 rev to US$473.9m, +14.6% yoy while core net profit at US$279m, +56.3% yoy. Going forward, grp remains confident of growth in Asia’s logistic market and will ride wave of consumption growth in China, while in Japan, remain bullish on the country’s outlook as demand for high quality modern logistic facilities will surge as the country accelerates its rebuilding programs....

We note that at current price, valuation appears undemanding, with grp trading at 1.12x P/B vs peers Hang Lung properties of 1.33x and CMA at 1.1x, while net gearing at a comfortable 30.5%, giving head room for further debt acquisitions. JP Morgan remains O/w and increases TP to $3.00 from $2.90, while Nomura maintains Buy, with TP $2.57.

SG Market

SG Market: Spore shares are tipped to move within a tight consolidation range in cautious trades with no cues from Wall Street to take the market either direction. The STI appears to be bounded by a developing symmetrical triangle, which indicates that neither the bulls nor the bears are in control. Topside resistance is at 3160, followed by 3180 while the support base is at 3120 & 3110.

Investors are likely to look past GLP’s 4Q results with net profit -63% to US$49.2m, -63% yoy due to revaluation loss arising from damage caused to its Japan portfolio after the earthquake & focus on mgt’s execution for FY12. NOL may be in focus after its latest data showed container shipping volumes rose 9% yoy but freight rates fell 4% yoy for the 9 Apr - 6 May period.

In other corporate news, Z-Obee FY11 net profit more than doubled to US$11.4m as revenue rose 6.3% to US$148.3m, boosted by US$5.9m fair value gains from its equity interests in Yoho King Grp, which more than offset US$1.5m impairment losses from its asset portfolio while both Low Keng Huat ($66.3m) & China Environment (Rmb105.6m) bagged contracts.

Monday, May 30, 2011


Transcu: FY11 results. Revenue +35.1% yoy to US$11.1m. Net loss at US$16.6m exceeded revenue, but narrowed from the US$29.2m net loss last yr, on the back of a 28.8% yoy drop in operating expenses due to cost cutting and cost restructuring efforts.
Losses were mainly contributed by the Pharmaceutical segment ($5.6m).
Mgt highlights the following catalysts:

i) for the Pharma business, the co is in discussions with a major Japanese pharmaceutical coy to develop a new drug delivery device for the global market.
ii) for the Cosmetics business, the co will introduce a mass mkt range of pdt in 4QFY12. New products in the pipeline include the next generation of Ionic Passive (IP) skincare. For 4Q11, no. of shops increased from 395 to 424, which resulted in higher sales revenue despite the recent Japan earthquake.
iii) for the Green Fuel Business, the co has made significant progress in the land based applications and expects to secure its first major business of Nano-Emulsion Fuel System for land-based application in Japan. The sea trial verification test is continuing.

Stock trades at 7.8x P/B. We highlight that the co has net current liabilities of US$1.5m, net cash of US$0.6m vs 4Q11 OCF of –US$9.1m, and equity of US$15.9m.

Coal/Straits Asia

Coal/Straits Asia: Prices may climb to the highest level in almost 3 yrs as China’s worst drought in half a century depletes hydroelectricity supplies, prompting utilities to burn more fossil fuels amid a nationwide power squeeze. UBS note that Thermal coal price of Newcastle spot, the benchmark price for Asia, may rise to $150/mt in the next 3 mths from $117…..

Add that Domestic Chinese thermal coal prices are much higher than regional prices now, so much higher that they exceed all freight costs, which makes thermal coal imports very attractive. We note that potential beneficiaries of higher coal prices could include Straits Asia and Noble Grp.


Airlines/SIA: DBSV says the Iceland volcanic ash would have less of an impact this yr than last yr for regional airlines; as the heavier ash this time round means that the ash falls to the ground faster and will therefore spread less and different wind patterns this time around could also help mitigate the situation…..

Also, European airports are better prepared this time to handle the situation in terms of handling and assessing the risks involved, and in terms of coordination. For regional airlines, DBS says thus far, there have been little or no disruptions to flights for airlines under its coverage on European routes and meanwhile, activity at Grimsvotn Volcano has already slowed significantly.


Cosco: Norwegian investor Ulltveit-Moe reportedly acquired 26.5m shares or 5% stake in cash strapped Sevan Marine. The move may raise hopes of a rescue for Sevan, which has seen its share plunge on the Oslo Stock Exchange and is in urgent financial restructuring talks after a failed US$275m share issue. The company faces a liquidity crisis as it struggles to service huge debts of US$950m while facing increased upgrade costs for its trademark cylindrical FPSO vessel Sevan Voyageur.

Sevan founder Jan Erik Tveteraas has stepped down as CEO of Sevan Drilling earlier this week. Sevan Drilling has 1 rig (Sevan Brasil) under construction with Cosco & has signed a LOI for another 2 similar rigs worth US$1.05b. The emergence of a white knight may allay some concerns over Sevan Driiling’s ability to finance its yet to be awarded Cosco rigs although the risk still cannot be discounted.


Midas: CIMB has Technical Buy Call. Note that counter fell from the $0.835 high and appears to be losing steam as the candles are starting to flatten out. That has affected the MACD as it is now almost confirming its golden crossover. Both its MACD and RSI show bullish divergence on both the daily and intra-day charts, which suggests that the bears are losing momentum…..

Recommend traders go long for a short term trade. Place a stop below $0.65, the March low. House is looking for a rebound towards $0.725 and possibly even retest the $0.835 levels again.

HL Asia

HL Asia: CIMB has Technical Buy Call. Note that counter fell back to test the resistance turned support trend line at $2.35 recently but failed to close below it. Fri’s long white candle is positive for the stock. Add that the bullish divergence on both the MACD and RSI suggest that selling pressure may be easing and the sharp hook up in the RSI is also supportive…..

Recommend aggressive traders may start to buy now with a stop placed below the recent swing low of $2.32. Expect prices to rebound towards $2.93 and its 200-day SMA at $3.05 if prices can overcome the 50-day SMA at $2.70.

Sembcorp Ind

Sembcorp Ind: Daiwa maintains O/p and increase TP to $5.80 from $5.68. Tip grp to benef from improved outlook for SembMarine, while Co’s utilities business remains positive. Expect new order wins for SembMarine to drive the share price. SembCorp’s 2011 PER of 14.5x would represent a mid-cycle valuation, which is reasonable.

Mapletree Comm Trust

Mapletree Comm Trust: Citi initiates at Buy with TP $1.07. Tip REIT as Top S-REIT Pick, with VivoCity as Key Catalyst. REITs offers a 5.9% yield and is one of the highest organic growth rates with a 3-yr net distributable income CAGR of 7%. Among the highest organic growth generators, REIT likely to generate a 3yr DPU CAGR of 7%, vs +4.1% to +8.0% for retail REITs and -1.6% to +2.8% for office REITs.

MapleTree Comm Trust: Deutsche initiates at Buy with TP $0.98. Note that REIT offers unique exposure to SG's emerging Southern Corridor thru VivoCity, and a portfolio of high-quality decentralised office assets. REIT has significant embedded organic growth within its portfolio which should underpin above-average near-term DPU growth.

China Agriculture

China Agriculture: JP Morgan note that cooking oil price control may last till Sept at least. Add that China Grains Reserves Corp will release subsidized soybean and vegetable oil again, which will put crush margin remains under pressure. House generally negative for Wilmar, China Agri and China Foods.


Property: New cabinet enters into action, which could signal a start of the beg. For more policy risks ahead, with HDB announcing a huge new supply of flats. HDB said that it would roll out 4,000 new flats in 6 projects, the largest supply ever released in a single launch, which will increase supply from 22,000 to 25,000 units…..

HDB will also start to build flats in anticipation of demand, a significant shift away from its BTO system. Analysts however cautions of Overbuilding, but note that ramped-up supply will meet demand from first-time buyers who are asking for more BTO flats. We note that maintains focus on office and retail ppty segment.


Olam: launches a US$1.25b syndicated loan facility comprising of a US$625m 3-year tranche and a US$625m 5-year tranche. Proceeds will go toward refinancing existing debt, working capital, capital expenditure and expansion of its supply chain business. The loan facility is fully underwritten by the lead arrangers and bookrunners.
Stock currently trades at 15.5X P/E, latest recommendations are largely buy with TP$3.30 - $4.20.

Genting SP

Genting SP: launched the grand opening of Universal Studios Spore (USS) over the wk end. Mgt highlights that USS alone is expected to see 4m visitors vs 2m in 2010, and can pull in 4.5-5.0m visitors annually. Sets 16m visitor target for Resorts World Sentosa (RWS) vs 15m in 2010...

Adds, 2nd-phase expansion of its gaming resort is "on track", after earlier highlighting “possible delays” in its 1Q11 results announcement. Phase 2 involves the construction of the world's largest oceanarium, a 374-room hotel, a spa resort, beach villas, and a water theme park.

Q&M Dental

Q&M Dental: sets a 5 yr target to list its China business, once the JVs that it holds there achieve a combined profit of Rmb 80-90m (S$15-17m). CEO estimates that another rmb400m of investments is required to achieve the profit tgt. Says, to fund its expansion plans in China, Q&M will undertake a secondary listing in Taiwan to raise up to US$50m via TDRs...

Adds that "in Spore, a lot of funds will talk to you for a share placement at 10-20% discount to the mkt price, whereas for the TDRs, the brokerage house we've approached is talking about possibly a premium"...

Grp maintains its tgt of having 50 dental clinics and 20 dental laboratories in China by 2015. Its current 2 JVs are expected to start contributing to earnings from 3Q11 onwards.

Otto Marine

Otto Marine: the High Court has rejected Otto’s application for an injunction to restrain its customer, Mosvold from making calls and receiving monies on the Refund Guarantees.
Recall Otto’s order book includes 3 AHTS for Mosvold, but mkt watchers have been expecting the latter to cancel its orders due to delivery delays. Mosvold previously cancelled an earlier order for 1 AHTS and received US$23.2m in refund guarantee...

Any order cancellation and call on refund guarantee would exacerbate Otto’s cash flow situation and further stretch its balance sheet.
A number of analysts have been bearish on this counter due to the order cancellation overhang, lack of new order ytd, and poor earnings performance. Street has a wide range of ratings, with recent TP btwn $0.19- 0.42.


Artivision: SGX queries after shares plummeted 22% on Fri after reporting 4Q earnings, although this is a counter which had risen five-fold from a mth ago after unveiling a new application (App), which grp claims will enable online social network users to monetise their videos and pictures via ad inserts…..

Grp annouced it was not aware of any unannounced info which would have explained the trading. Grp saw FY11 net loss at $5.7m, but more worrisome was its balance sheet, which showed a negative equity of $1m - meaning accumulated losses had exceeded shareholders' funds.….

Many mkt watchers expect grp to raise funds via placement or borrowings, due to high capex costs, but some analysts reckon that if the Advision product is really as hot as it is made out to be, Artivision itself could become an acquisition target.

Renewable Energy

Renewable Energy: Announced its first maiden FY11 results, with Rev at Rmb 128.9m, however grp had a net loss of Rmb39.1m, on back of lower production vol and higher per unit cost of production from its continuing operations. Grp’s manufacturing segment was the sole rev for FY11……

Qtr saw changes to production specs by a major customer, which, resulted in a fall in production vol, leading to higher unit cost of production. On the wind farm investment front, Grp has begun to reap rewards from its 49% stake in the Datang Baotou wind farm….

Going forward, grp tips renewed focus on wind energy development following Jap’s nuclear ciris and grp will pro-actively seek concessions and other opportunities to expand business in China. We note that mkt is generally weary of the stock over its unproven business models and advice investors to exercise caution when dealing with stock.

Morning Note

Traders noted that the inverse correlation of the USD to equities seems to be a prevailing trend as a weaker dollar helps increase exports, sales & profits for US MNCs. Among those shares which are expected to see active trade in Tues’ session include Lions Gate Entertainment, Optimer Pharm & Intel as the chipmaker presents at Taiwan’s Computex trade show. US mkts are closed Mon for the Memorial Day Holiday.

Other stocks in focus include Q&M Dental, which has sets a 5-yr target to list its China business, once the JVs there achieve a combined profit of Rmb80-90m. SC Global may draw some interest after it won a bid for a Rmb225m project in Fushun City in China. Topside cap for STI seen at 3180, while support lies at 3110.

Friday, May 27, 2011

CPO / Coal

CPO: Set for a 3rd weekly gain, the best winning run in six mths, as buyers in EU boosted imports to replenish stockpiles and as an increase in crude oil lifted the biofuel demand. Aug delivery contract climbed as much as 0.7% to RM3,441 per mt. Gains in crude oil also supported prices of cooking oils, while excess rains in the US have delayed plantings of soybeans and grains, pushing oilseed prices higher.

Coal: Prices may climb to the highest level in almost 3 yrs as China’s worst drought in half a century depletes hydroelectricity supplies, prompting utilities to burn more fossil fuels amid a nationwide power squeeze. UBS note that Thermal coal price of Newcastle spot, the benchmark price for Asia, may rise to $150/mt in the next 3 mths from $117…..

Add that Domestic Chinese thermal coal prices are much higher than regional prices now, so much higher that they exceed all freight costs, which makes thermal coal imports very attractive. We note that potential beneficiaries of higher coal prices could include Straits Asia and Noble Grp.

Nam Cheong

Nam Cheong: builds small to medium size OSVs mostly for Msian clients such as Petra Perdana and Bumi Armada, and prides itself as Msia’s no. 1 OSV builder. Its yard is located in Miri, Msia. It has an operating track record of 40yrs...

CIMB rates Nam Cheong's capability on par with Spore shipbuilders such as Jaya and Otto Marine. Says the business model is also almost identical, with the group engaging in build-to-order and build-to-stock as well as vessel chartering (10 vessels under the chartering arm). Notes that like the Spore yards, it also sub-contracts building of lower-end vessels or hulls to Chinese yards...

Order book stands at RM647m (S$264m) with 7 units of AHTS, 1 unit of accommodation workboat, 1 unit of accommodation work barge and 1 unit of PSV. Current order book translates to 0.85x FY10 revenue.
The group completed 5 vessels in 2010, 22 in FY09 and 10 in FY08, with avg revenue of S$380m for the past three years...

CIMB’s notes that valuation of stock is pricey, at 3x P/B vs local OSV builders’ 5yr mean of 1.7x, and 10.8x P/E vs peers 5yr mean at 8.6x.
Reiterates preference for STX OSV instead, which is now trading at 8x CY12 P/E.


Viking -15%, Artivision -22%, United Envirotech -10% since 12 May. There is no recent corporate devt that triggered the selloff but the common thread running through is that well connected fund mgr, Andy Lim holds stakes in all 3 companies, either directly or indirectly via funds managed by Tembusu Partners. Tembusu counts Yeo Cheow Tong & Tan Kim Seng among its shareholders.

In a circular dated 12 May, Tan Kim Seng disclosed that he sold off his entire stake in Tembusu Growth Fund, which owns a 11.6% stake in Artivison.


Cosco: -3.0% to $1.94 in active trade, with a trader citing uncertainty over its orders from Sevan Drilling which may be at risk due to financial troubles at its parent Norwegian oil production equipment contractor Sevan Marine which recently spun off its drilling unit…..

Traders note that now Cosco may suffer due to Sevan, the trader says after Sevan Marine Thur said it had withdrawn a $275m financing issue and announced the resignation of Sevan Drilling's CEO for personal reasons. Anticipates being in breach of its minimum liquidity requirements by May 31 under an existing financing agreement.


Artivision: -24% at $0.205 with most of the volume done over the past hour.
Such volatility should not be unexpected for concept plays which get alot of momentum flows.
Interestingly, Tembusu Partners owns 11.6% in Artivision, while Andy Lim, the founder and Chairman of Tembus owns 22.2% in Viking Offshore (-15% at $0.145).


Silverlake: technically, looks like a potential bullish breakout play after being range bound for the past year. Stock has pierced through the $0.37 resistance level on strong volume. A successful close above $0.40 would provide confirmation for the start of a new upward trend...

Stock may be seeing renewed interest after,
i) the recent strong 3Q11 results (net profit up >3x yoy),
ii) upgrade to Mainboard listing status, and
iii) new contract order from Thanachart Bank for merger integration implementation & support services as well as license upgrade under SIBS for Thanachart’s M&A with Siam City Bank’s banking operations. However deal size was disclosed.

Stamford Land

Stamford Land: FY11 results, revenue up 5.0%yoy to $250.7m, on the back of higher occupancy rates and the stronger AUD. Results were affected by both disasters in NZ and Aus in 4Q. Net profit is up 111.0%yoy to $60.1m...

This was boosted by a $50.8m fair value gain in investment properties during the yr excluding which net profit would have been $9.3m. Finance costs also jumped 79.6% to $24.5m due to a $4.9m expense on Dynon Plaza’s loans and $2.5m expense from a new loan secured by a hotel property. Net gearing stands at 90.4% up from 83.6% the prev yr, mainly due to a 6-fold increase in current bank borrowings related to Stamford Residences and Reynell Terrace project…

Expects continued rental income from Dynons Plaza worth over A$9m p.a., and contributions from Stamford Residences and Reynell Terraces to begin upon completion expected in 2Q12 and to maintain over 70% rev from Aus. Co declares a 2c final div and a 1c special div. Stock currently trades at 9.6X P/E and 1.1x P/B.

Zhongmin Baihui

Zhongmin Baihui: In response to a recent BT article alluding its gravity-defying stock price surge to a small shareholding spread & float, the company released data showing an increase in public shareholders from 264 to 398 during the period of 11 Mar to 25 May. This looks like an attempt to dispel market talk that the stock has been cornered. There was no disclosure what % of the 398 shareholders comprises its employees, suppliers, customers & related parties.

Within a span of one week, the stock has roller-coasted from $1.42 to a peak of $1.99 (+40%) before correcting a low of $1.33 (-33%) & is now soaring back up to $1.64 (+23%). Caveat emptor for those with strong hearts & weak heads (who don’t want to think too much).

Boustead SP

Boustead: FY11 results below due to exceptionals. Revenue +28% yoy to $560.6m, +8% qoq to $110.1m. Gross margins re up to 32% from 30% the previous year. This was due partially to the $67.8m sale of IBM Spore Technology Park completed in 4Q. Largest contributor to revenue is still Real Estate Solutions segment, where revenue grew 61% yoy. Its Geo-Spatial segment’s revenue was up by 27% yoy, boosted by the first full-year contribution from its subsidiary, MapData Services...

Net profit +21% yoy to $52.2m, but down 99% to $146k qoq due to provisions for doubtful receivables of $11.4m in 4Q. Boustead also took a provision of about $13.8m for its Libyan projects. It had previously guided that its financial exposure for the Libyan projects ranged between $15.5 - 39.6m. The lower provision is a silver lining, and without it, results would have been largely in line...

Coy remains in a $184.6m net cash position, lower than previous year likely due to interim dividend payments, acquisitions of $19m and other investments. Outstanding order book is in excess of $235m. Contract momentum is good across segments since Jan 2011, 6 for Real Estate, 2 in water, and $43m worth of contracts for energy segment...

Final dividend of 2cts and special dividend of 3cts per share, in addition to the 2cts interim dividend. This translates to 7% yield at $1 last close.
Stock currently trades at 9.7X P/E.
Pre-results, KE rated at Buy with PT $1.33, DBSV rated at Hold with TP $1.10.

Thursday, May 26, 2011


Cosco: Sevan Drilling -8% on Oslo Stock Exchange after shock anncmt that CEO Jan Erik Tveteraas has resigned, just a mth after listing. Jan has also relinguished his position as CEO & board member of parent Sevan Marine, which is facing a breach of minimum liquidity req under one of its financing arrangements by end May after failing to proceed with a proposed rights issue.

Recall that Cosco has signed a LOI with Sevan Drilling to build 2 rigs worth US$1.05b, which may now be at risk of award postponement in the light the latest developments. Still, Cosco is up 206% on latest award of 2 rigs by KS Energy. Resistance at $2.00, followed by $2.11, support at $1.90.

Separately, billionaire John Fredriksen, owner of Seadrill, the world’s 2nd largest fleet of deepwater rigs, has indicated his interest in acquiring companies & has prev commented that consolidation is important for the industry. Seadrill, which lost a bidding contest for Pride Int’l to Ensco earlier this year, bought Scorpion Offshore in Jun & acquired 2 Seadragon rigs in Jan.

Rising oil prices, cheaper financing & greater demand for modern rigs has spurred an order boom for ultra deepwater rigs in the past year & Seadrill expects interesting opportunities for takeovers & JVs. Would cash strapped Sevan Marine make a good target? Watch this space for more developments ahead.

China Essence

China Essence: FY11 results. Revenue +20% yoy to Rmb 999m, net profit +22% to Rmb167m. Gross margins improved slightly to 37.7% from 34.5% on the back of higher ASP for all products. In particular, ASP for potato starch increased by 39.7% from the previous year, negating the 16% decrease in sales volume for the item. Animal feed ASP was up 286% with a 54.6% surge in volume...

Co is now in a net cash position following a 35% increase in cash to Rmb 583m and repayment of Rmb 80m of short term bank borrowings. Co recommends HK$0.02 final dividend per share...

Mgt positive on outlook, with China’s levy on imported starch products to benefit local producers such as China Essence. Debt restructuring which is to conclude by Sept 2011 will strengthen their balance sheet as well.
Stock currently trades at 3.6X P/E.

Think Env

Think Env: FY11 results, revenue is up 21.5% to $87m, attributed to increased demand for office equipment products. However margins dropped to 12.3% from 13.9% due to the increase in raw material prices. Other income was down 3% despite its disposal in Flagship Ecosystems for $1.4m and Sing-yu Energy for $1.6m boosting results....

Overall Net profit at $478k, -79.8% yoy. Co. remains in a net cash position, however long-term bank loans increased to $13.6m vs $614k yoy resulting in finance costs increasing to $1.6m vs $45k, while cash holdings increased slightly to $16.2m. Grp’s AFS assets increased to $15.7m due to increased investment in Think Greenenergy….

Overall Net profit at $478k, -79.8% yoy. Co. remains in a net cash position, however long-term bank loans increased to $13.6m vs $614k yoy resulting in finance costs increasing to $1.6m vs $45k, while cash holdings increased slightly to $16.2m. Grp’s AFS assets increased to $15.7m due to increased investment in Think Greenenergy….

Going forward, grp has announced their intention to raise funds through issue of new shares or bank financing to fund its current and new (gold mining) operations, and aims to divest off their green business segments.

Hiap Seng

Hiap Seng: FY11 results way below expectations.
Revenue -25.3% yoy to $188m, due to lower revenue recognition. Gross margins fell sharply to 13.6% from 22% a year ago, on cost overruns for certain projects. Net profit -74.3% to $8m, on further negative impact from the $2.7m forex loss due to the weakening USD.
The co proposed a 1ct final dividend in addition to an earlier 1 ct interim div. Total div of 2cts (4.1% yield on $0.49 last close) came in below expectations of 3cts...

Order book stands at $195m. Singapore remains its main contributor of revenue at over 67%. Its most recent contract was with Vietnam’s Dung Quat Refinery for maintenance, overhaul and repair services worth $8.4m.
Stock trades at 18.8x trailing P/E.
CIMB downgrades to Underperform from Trading Buy, slashes TP to $0.43 from $0.67, in view of Hiap Seng’s patchy track record and mounting margin pressure.


Olam: IIFL maintains Buy and increases TP to $3.87 from 3.77, citing visible and consistent growth. Add that with 43% core earnings growth yoy in its 3QFY11, Olam has delivered +20% growth in all of its 11 normal qtrs and expect 30% core earnings CAGR with fair visibility in the nx 3yrs. Upgrades FY11 forecast by 17% to $372m on strong 9-mth results.

Hutchinson Port Holdings

Hutchinson Port Holdings: UBS maintains Buy, but reduces TP to $1.10 from $1.17. Note that Trust has stable business with high div payouts and has maintained good growth in 4M11 as Yantian delivered 6% yoy growth in 4M11. Major advantages over its peers are:
1) stronger cash flow control, as evidenced by its high payouts and few minority investments;
2) its tariff leadership in the PRD, with the ability to charge a premium;
3) having the best waterway conditions in the region.

Genting HK

Genting HK: Macquarie reiterates O/p with US$0.56 TP. Note that Resorts World Manila is on track to achieve FY estimate of US$223m Ebitda and US$178m in Profit after tax. Given 50% stake in RWM, GENHK at 9.8x 2011E adjusted EV/EBITDA provides cheapest entry into the booming Philippine gaming mkt. GENHK could also become a pure land-casino player in a few yrs post its stake sale in Norwegian Cruise Line.


Kepland: Nomura maintains Buy with $5.19 TP, after takeaways from visit to grp’s Chengdu and Tianjin Eco City projects. Mgt expects sentiment to remain soft in the near term and is looking for a window of opportunity to launch a combined 2,366 units in these two markets later this yr…..

Add that EVGP’s land bank in Tianjin Eco City looks a hidden gem, but house have ascribed a discount of 45% (vs. no discount previously) to grp’s ppty devt business in China to reflect the challenging near-term outlook. A potential catalyst for the stock could be the entry of a major developer for a commercial project in the eco city’s CBD.


CPO: Daiwa forecast rising demand to temper supply concerns. Note that Msia's palm-oil exports for the 1-25 May11 rose by 23% vs prior month, and excessive soy inventory in China is clearing gradually. Add that feed demand has been low on slow since late last year and trend is reversing and increased replacements should lead to rising feed demand, which could be catalyst by end of yr for soy crushing margins and indirectly benefit CPO prices…..

House positive on CPO related stocks from a six-month perspective. Ratings for CPO players under Coverage are: Wilmar (Hold); Golden Agri (O/p); Indofood Agri (Hold); First Resources (O/p); Mewah (O/p); Sime Darby (Hold); IOI Corp (Buy)

Regional Coal

Regional Coal: Macquarie note of seasonally weaker price period due to stronger production from Aus and Indo and lower demand due to Northern Hemisphere summer season seasonal weakness, but offset by re-emergence of China import arbitrage and increasing Indian interest…..

Reiterate view that we could see global thermal coal price remaining range-bound in the short term, and therefore prefer names that offer production growth such as SARs, PTBA and Shenhua. In medium term, continue to prefer Asean names given relatively low oil price exposure, high open-price exposure going into 2012, and attractive valuations (trading at 10x 2012E P/E vs Chinese at 11x).


CMA/CapitaLand/CMT: Jointly submitted top bid of $969m ($1,012psf GFA) for white site at Boon Lay Way, 6% above 2nd bid from United Engineers and SPH. As a comparison, Lend Lease acquired adjoining parcel in Jun last yr at $650psf GFA. Site is located next to Jurong East MRT with GFA of 957k sf. 40% of GFA is stipulated for office use and remaining used for retail, hotel or residential uses…..

Deutsche estimates breakeven cost of $1,430psf NLA for office on 80% efficiency implying NPI yield of 4-4.5% based on S$6.50-7.00psf gross rents. Assuming avg retail rents of $14psf, implied yield for retail based on est. breakeven of $2,420psf is 4.9%. Given the relatively tight margins, expect minimal near-term NAV accretion…..

CS maintains Neutral for CMA with $2.59 TP, while JP Morgan do not expect the project to affect mkt’s view of all three entities meaningfully.


CapitaLand: Deutsche hosted grp in its Access Conference and highlight key updates. Residential sales slowed in 1Q11, with 167 units sold in SG ($306m) and 437 in China (Rmb0.95bn), -45% yoy. However expects underlying demand to remain firm. In China, grp plans to release 4,000 new units subjected to regulatory approval, while ASPs have crept up 3-5% vs last qtr……

Mgt believes policy risk in China remains a significant overhang but expect govt to focus on mass and social housing segments. Add that grp’s balance sheet remains strong, with cash position of $7.2b and net gearing of 0.18x and would be comfortable with gearing of 0.4x-0.5x. Grp has outlined aggressive plans for 2011, with target to recycle $6b.….

In SG, mgt has set target of becoming top-three developer, with mkt share of 15%, and plans to replenish land banks in strategic locations near MRTs and city fringes. Also set target of growing China into 35-45% of its business and plans to secure pipeline of 15,000 affordable housing units via CapitaValue Homes. Deutsche maintains Buy Call with $4.22 TP.

Wednesday, May 25, 2011

SG Strategy

SG Strategy: Citi has strategy report. House forecasts STI target at 3558, and while earnings revisions count has turned negative, note that inflation is moderating and expect CPI to average 4% YoY for 2011 as a stronger S$ helps dampen imported inflation……

House key stock picks include KepCorp as a proxy for rising demand for replacement rigs; DBS as a proxy of banks in Spore that have a strong equity base and have enjoyed rising loan growth momentum, Wilmar on the turnaround of its oilseeds unit in 1Q11. Also see value in specific developers such as WingTai - which is near the bottom end of its trading range. Also like A-Reit and Singtel due to their attractive div yields.


OUE: Chairman Mr Riady reiterated his stance in a CIMB Roadshow in Europe, that there will not be any more placements of vendor shares for refinancing purposes, and that OUE will remain as a Singapore pure-play. Add that a hotel REIT is an option for OUE but only when its asset base matures and reaches a critical mass. The focus now is to deliver results, enhance asset value and remain vigilant on potential accretive acquisitions. CIMB maintains O/p with $4.16 TP.'


Kepcorp: Daiwa maintains O/p and increases TP to $13.58 from $13.42. Believe the stock remains a good proxy to ride the rig-building upcycle.

Kepcorp: DnB NOR reiterate Hold with $10.50 TP. House expect firm jack-up orders to be priced in and reiterate view that order momentum is expected to ease slightly as Kep’s delivery slots up to 2013 continue to fill up from Co’s exercising their outstanding options.


Kreuz: DnB NOR reiterate Buy with $0.50 TP. Tip that new order gaining momentum and outlook on subsea tenders remains positive and is expected to improve for the rest of the yr. Potential order channels include Swiber's interest to tender for installation and IRM contracts located off Brunei and independent tenders made by Kreuz.

Q&M Dental

Q&M Dental: Co. has proposed to issue TDRs of up to US$50m on the Taiwan Stock Exchange. The TDR will enable Q&M to diversify its shareholder base, provide additional fund raising and create a new listing platform for the company. While lacking further details on the proposed TDR….

The TDR Issue is conditional upon, the granting of the necessary approvals by the TSE, the CBC, the SFB and the SGX-ST. As the Proposed TDR Issue is subject to, approvals from the relevant govt and regulatory authorities and the then prevailing market and economic conditions, the Proposed TDR Issue may or may not proceed and investors are advised to exercise caution when dealing in Co. shares.

CapitaMalls Asia

CapitaMalls Asia: converting CapitaRetail China Development Fund (CRCDF) into an income fund. Investors can thus expect to receive distribution income from the fund’s portfolio of 24 malls in 24 different cities, at the end of this year. The fund is also being upsized by 50% to US$900m...

CRCDF will be renamed CapitaMalls China Income Fund (CMCIF) and will mature in 2017. The conversion reflects the majority of the portfolio’s malls becoming operational compared to previously being under development. CMA will commit another US$135m corresponding to its 45% stake in CMCIF. CRCT will have the right of first refusal over any malls that may be divested from CMCIF...

CMCIF will include Hongkou Plaza in Shanghai slated to open at the end of this year and CapitaMall Jinniu and Fucheng are expected to be completed in 2013, representing future upside potential for the fund.
CMA current trades at 1.08X P/B. Recommendations in the past week largely have a Buy on the stock with TP ranging from $2.15 - $2.51.

Industrial Reits

Industrial Reits: Ascendas Reit (A-Reit), Mapletree Industrial Trust (MINT), Soilbuild have been shortlisted to take part in the final round of bidding for JTC Corp's flatted factories and amenity centres (>300k sm in total), earlier tipped to be worth $600-650m. Shares of the two industrial Reits may see interest as the final submissions for both tranches of properties draws to a close next wk. Tender results are due Sep/ Oct.


HourGlass: FY11 results. Revenue is up 7% yoy to $517m, driven by expansion of the group’s retail network. Net Profit is up 29% yoy to $43.2m. Gross margins have improved to 22.4% from 20.1%, attributed to more positive trading conditions and marketing programs. The company remains in a net cash position. The company has recommended a 5cts final dividend per ordinary share...

Company expects sustained demand from Asia ex Japan, but is aware of inflationary pressures driving up costs in the future.
Stock currently trades at 5.6X P/E.


Valuetronics: the ODM and OEM electronics mnftr reported a strong set of results with record high full year revenue and net profit of HK$310m and HK$121m rptvly.
For 4QFYMar11, net profit rose 28% yoy, but fell 11% yoy mainly due to upfront cost incurred for its new licensing business segment.
Turnover was up 73% yoy to HK$531.8m, as a result of a jump in sales orders from major customers, and the launch of new products…

Valuetronics' licensing business, which started in Apr 2010, achieved sales of HK$17.7m in the quarter, mainly from its portable air purifier products. In Sep 2010, the group further secured the rights to mnft, design and distribute 2 additional home comfort appliances, electric fan and heaters. Mgt expects the enlarged portfolio to improve the marginal returns of its licensing business in financial year 2012…

Mgt sees challenges in inflation, rising min wage in PRC and FX fluctuations, but expects to remain profitable goitn forward.
Co declared a first and final div of HK 14cts, double last yr’s. This translates to a yield of 9.2%, one of the highest among SGX stocks…

Stock trades at 1.1x P/B, on 29% ROE. Its P/E of 4.5x is lower than than peers, CEI Contract Manufacturing (8x), Hi-P (9.7x) Venture (12.5x).
CIMB maintains Buy with $0.52 TP

United Environment Tech

United Environment Tech: Reported FY11 results which were in-line, with rev at $78m, +12.8% yoy, while net profit at $16m, +7.8% yoy. Rev growth was mainly from increase in engineering segment at $68.2m, +9.2% yoy, while Grp’s recurring income from treatment business at $16m, +30.1% yoy. Other income at $5.8m, +204.9% due to negative goodwill arising from acquisition of Linhai during the yr…..

Gross margins also increased to 63.3% vs 56.9% yoy. Going forward, grp remains confident on prospects and tip increases in treatment capacity, to positively contribute to rev and continue its uptrend going forward. Expect PRC remain as the major contributor for Grp’s rev due to the greater mkt and demand for advanced membrane tech ….

We note that at current price, valuations appear undemanding, with grp trading at 10.5x FY11 P/E vs historical average of 14.2x and peers average of 17.7x.

SG Market

SG Market: Spore shares may open lower following softer Wall Street close on Tue. The market will likely trade sideways in the absence of leads; the recent corporate results have not been particularly inspiring & global concerns continue to weigh on stocks. The STI is currently sitting atop its 50-day MA at 3113 and with momentum indicators – stochastics, ADX, MACD all pointing downwards, expect the index to test the next support at 3080 in the near term.

Should the 50-day MA hold, topside resistance is tipped at 3250.

Tuesday, May 24, 2011

Hankore (Bio-Treat)

Hankore (previously Bio-Treat): announces big change to senior mgt positions and reconstitution of Board.
The interim acting CEO has been re-designated as non-exec director, while 2 executive directors and 1 independent director have resigned of their own accord...

David Chen, the President and major sh/h will takeover as new executive Chariman and CEO. The other director positions will see new replacements.
Move could be part of the co’s aim to improve its mgt team, but the timing still comes as a surprise, as the previous mgt team was apparently mid-way in restructuring the Group’s operations after a series of mgt missteps.

Raffles Education

Raffles Education: to form a JV with Al Rushaid Petroleum Investment Co. The JV will provide education services to certain countries in the Middle East including establishing and operating universities, primary, secondary and tertiary educational institutes and education related consultancy services…

Plans in the pipeline include a vocational training center for hospitality & tourism and retail management for the Saudi government and colleges for Design& Business in Jeddah and Riyadh.
The JV coy will have a share capital of $660k of which their new subsidiary will contribute 50%.
Stock currently trades at 14.5X P/E. Street has a range of ratings on stock with wide TP ranging btwn $0.45 - $0.90...

Technical outlook however does not look too good, as stock has been on a long term downtrend. Stock now trading at 5 yr lows (chart adjusted for 3-into-1 consolidation).


SIA: may track overnight weakness in European airlines, as the threat of volcanic ash from an Icelandic volcano shut European airspace.
Shares in German airline Lufthansa plunged by 4.6%, while Air France-KLM fell >4% at the opening of trading, the biggest loser on the Paris stock market. Intl Airline Group (IAG), the owner of British Airways and Iberia, plunged 3.6% in early trading, and Scandinavian airline SAS dropped 3%, both falling more than their rptve

The Grimsvoetn volcano began erupting late on Saturday, with the first ash expected to begin hitting Europe on Tuesday. Denmark has already closed some airspace over Greenland and Norway said it will cancel flights on Monday to the country's Arctic archipelago of Svalbard. Concerns that the ash could damage aircraft engines led authorities to cancel flights as a precaution...

Recall, in Apr ‘10 Iceland's Eyjafjoell volcano erupted, spewing a massive cloud of ash that caused the planet's biggest airspace shutdown since World War II with more than 100k flights cancelled and 8m passengers stranded. When news of the flight cancellations were first announced, SIA gapped down 2% at the market open and closed 3.6% down.
The majority of Street has Hold ratings on the stock, following the lackluster 4Q operating performance. Recent TP range btwn $12.35 – 19.00.

Mun Siong Engineering

Mun Siong Engineering: proposed an acquisition of 80% of Wing Wah Industrial services for $2m. The net tangible assets of Wing Wah is $1.62m, hence the net tangible assets of the acq. target is $1.3m. The coy will fund the acquisition with proceeds from its IPO. The company has highlighted Wing Wah’s expertise in servicing and overhauling rotating equipment as a possible synergistic advantage from the acquisition.
Stock currently trades at 4.7X P/E. DMG has buy on stock with TP $0.25


Nordic: seeks sh/h approval for the acquisition of 100% of Multiheight Group for up to $47m. The target is a leading provider of scaffolding systems for onshore O&G and petrochem & marine industries. Its most recent completed project is for a scaffolding system in Dynamac’s BP Angola Project in 2010. Current projects include contracts with SMM and Keppel O&M...

Co will fund the acq. through its IPO proceeds, bank borrowings and through internally generated funds.
Nordic seeks more stable income streams from Multiheight as 35% of Multiheight’s revenue is from recurrent maintenance contracts. They also look to mitigate concentration risk in China and the cyclical risk of the O&M industry...

The acquisition should be completed by 1 Jul 2011 following the EGM on 7 Jun 2011.
Stock currently trades at 7.6X P/E. There is no coverage on the stock.

Combine Will

Combine Will. Note that despite 1Q11 results coming below due to shipment scheduling. KOASDAQ listing could be an immediate catalyst if executed well. Grp wildcard for 2H11 outlook will be the product launch of an exiting significant customer. House maintains Buy but reduces TP to $4.51 from $5.20 previously.

Bukit Sembawang

Bukit Sembawang: 4Q11 core net profit of $14.4m came in below expectations due to higher-than-expected cost of sales. Positives however came from higher final div of 12c (3% yield), reduction in net gearing and management’s guidance of launches of Luxus Hills Phase 5 and Fairways in FY12. CIMB maintains O/p and $5.86 TP.

Keppel Land

Keppel Land: RBS maintains Buy with $5.90 TP. Tip grp as a sound strategy in China. Positive on grp’s China operations given its focus on less volatile township projects and expect real demand for homes to stay strong, with cooling measures likely temporary. Also like grp for its 52% RNAV exposure to the SG office segment.


Wilmar: IIFL maintains Sell with $4.57 TP. Tip that share price’s post-results rally was misguided, as over 1/3 of its reported 1QFY11 earnings (US$387m) was a forex gain. Also have doubts over its reality-defying 1Q China crushing margin of US$55 per ton, which was the 2nd highest in its history, 4x China’s average, and higher than its western peers who sell to freer markets……

Add that the hostile environment – stubbornly high soybean prices combined with continuing price intervention of the inflation-obsessed Chinese govt, will likely persist in 2011. House maintains FY11 core earnings forecast of US$1.3b.

Tiger Airways

Tiger Airways: Citi downgrade to Sell and reduces TP to $1.30 from $1.85. Expect growth turbulence to intensify as regional expansion plans may face increasing turbulence due to
1) its foray into Indonesia may be fraught with risks and may not yield attractive returns;
2) suspension of sales of Philippine domestic flights and lack of progress on Thai Tiger JV suggest regulatory risk is higher than expected;….
3) simultaneously venturing into the Philippines, Indonesia and Thailand
while attempting to reverse its losses in Australia raises execution risks.
Over-ambitious expansion may also jeopardize execution, and expect Tiger’s earnings
growth to slow.


NOL: Deutsche maintains Sell with $1.66 TP. Note of cautious view on container shipping industry and expect a material decline in earnings this yr. Tip 2Q results are likely to be worse than 1Q because of soft rates and higher costs. At 1.1x 2011E P/B, valuations look unattractive.


Property: DB has sector outlook from its Access Asia Conference 2011. Maintain positive office outlook on increasing cost-competitive option for global financial institutions given availability of Grade A office space. Expect grade A supply to rise from current 3m sf to 9.3m by 2013, and Rents +7% in 1Q11 to $15psf by 2014, while capital values tip to rise to $2,800psf from current $2,500psf……

Tip Residential undersupplied until 2013, where more measures in the HDB market are expected coupled with the provision of more land supply. Industrial demand well supported; although retail outlook mixed.

Property: CS believes privatisation of Allgreen by Brookvale could trigger a re-rating for the property stocks, which have been underperforming recently due to policy overhang and interest rate concerns. Expect stocks trading at significant discounts to book values and RNAVs to potentially narrow the valuation gaps…..
Continue to prefer the office and hospitality sector, like OUE and CDL, which are trading at 0.95x and 1.54x P/Bs due to accounting treatments, but are trading at attractive 37% and 30% discount to RNAVs, respectively.


Reits: DMG recommends sector, tipping it a safer bet in uncertain times. Note that rising inflation, low interest rate, and economic uncertainties are boon to S-REITs .
Currently offers attractive distribution yield of 6.9% and inflation-protection features. House O/w on sector and favour retail REIT with prime suburban exposure due to strong positive rental reversion as well as its defensive nature…

Top pick is Frasers Centrepoint Trust (BUY; TP: $1.77). On the hospitality front, favour CDL HTrusts (BUY; TP: $2.46) to benefit most from SG’s tourism boom.

SG Banks

SG Banks: Credit Suisse expect better loan growth to drive FY11E earnings momentum, with SG govt raising 2011E GDP growth to 5-7% from 4-6% previously.
Combined with higher inflation, loan growth across Asia has been surprising
on the upside. House revise 2011 loan growth assumption for UOB to 18% from 16%, DBS to 14% from 13% and OCBC to 15% from 13%...

Add that 1Q11 qoq loan growth in SG vs overseas was 4.3%/2.7% in DBS, 6.1%/7.9% in UOB and 2.7%/6.1% in OCBC. Tip stronger loan growth means better fee income (especially loan related fee) and importantly, faster overseas growth brings with it wider NIMs (expected to bottom in 2Q11). House upgrade UOB to O/P from Neutral and is house top pick in the sector.


Cosco: Announced that neither the Co. nor any of its subsidiaries has been cited as having committed any irregularities and disciplinary violations in the recent NAO report, where Audits found irregularities in financial statements of 17 Chinese SOEs. Technically, see near term support at $1.78 (2011 low) and resistance at $2.00 (200 Day MA)


Kreuz: secured contracts worth US$44m for various subsea works to be performed in Indonesia and Thailand. US$32m is attributed to parent, Swiber, with the remainder from a third-party customer. The latest orders come less than a month after co announced US$24.8m contract wins and suggests continued momentum in the offshore services space.
Stock currently trades at 11.2X P/E. DnBNOR has a Buy rating with TP $0.50.


Swiber: secured contracts worth US$109m from oil majors for projects in Thailand, Indonesia and Malaysia. They comprise various construction, chartering and subsea related projects. The contracts are scheduled to be completed by 3Q12. This brings total contracts secured YTD to US$295m, vs FY10 revenue of $466m.
Stock currently trades at 7.8X P/E and the Street largely has Buy ratings on the stock. TP range btwn $0.88 - $1.30.

Keppel Corp

Keppel Corp: secures another jackup contract, this time with Dynamic Offshore to build its first KFELS B Class jackup drilling rig for US$180m. The rig is slated for delivery in 1Q13, and will be able to operate in water depths of 350 ft with a drilling depth of 30k ft and accommodate 120 men. Dynamic also has an option to build an additional rig to be exercised before 3Q11...

This order reinforces the buoyancy of the offshore market. Ytd, KEP has won contracts for 20 jackups worth ~$6.5b. Including options for another 15 jackups worth ~$4b, total orders secured in FY11 may exceed ~$10b. This compares with current Street forecasts for $7-8b of orders in FY11E.
Stock trades at 11.9x P/E. The majority of the Street has Buy ratings with recent TP ranging btwn $12.12 – 14.

AllGreen Properties

AllGreen Properties: Announced it has received a cash offer of $1.60/share by Brookvale Invts to privatize Co. Offer represents 39% premium over last traded price and is conditional on Brookvale receiving more than 75% of issued shares of Allgreen, who currently has already secured about 55.6% of share capital…

Privatization price represents a 4% discount to last reported Book Value per Share (BVPS) of $1.67, while offer is 13.4% higher then streets average TP of $1.41 and 20.3% above its last 3 yr high of $1.33. Grp currently trades at 0.69x PB and has not traded above 1x P/B since FY07 …

As a result of transaction, Goldman Sachs believe there may be renewed interest in small-mid cap developers trading below BVPS. Small-mid cap Developer stocks with market cap between $1-4bn, would include UOL group (0.78x P/B), Singapore Land (0.69x P/B), Wheelock Properties (0.76x P/B), Wing Tai (0.68x P/B), and Ho Bee (0.68x P/B).

SG Market

SG Market: Spore shares are tipped to gap down at the open after US shares tumbled Monday, as fears of spreading eurodebt troubles spark a flight to safer assets after Greece, Italy, Belgium, Spain, UK & Japan all came under credit downgrade or watch & China revealed accounting irregularities at 17 SOEs. The outlook & sentiment has decidedly turned negative for now with the STI likely to break key support of 3110 & head lower to 3080.

The only positive news is from Allgreen Properties after Robert Kuok’s $1.60 takeover offer to take the property group private & Swiber’s US$109m contract wins.

Monday, May 23, 2011


Cosco -3% to $1.97 after Sevan Marine revealed that it was hit by setbacks with 2 of its trademark cylindrical FPSO vessels, which might delay the award of 2 floaters worth US$525m each. Cosco signed a LOI with Sevan Drilling for 2 semi-submersibles in Mar this yr.

Sevan is facing rising cost of upgrading Sevan Voyageur, which has escalated from US$90m to US$135m while Sevan Piranema is plagued by commercial uptime due to continued problems with the vessel’s compressor systems & may require improvements costing US$25m. Both of these FPSOs were built at Yantai Raffles (hull) & Keppel Verolme (topside integration).

Adding to the bad financial tidings, Sevan incurred a US$48m loss in 1Q & has some liquidity issues with debts of US$900m & is looking to carry out a rights issue to stabilize its balance sheet. This follows the recent spin-off of Sevan Drilling at the low end of its targeted offer price due to lacklustre investor interest. Nevertheless, there is still a lot of exploration & drilling activity, which could support the rig business.

Separately, Xinhua news agency reports that audits have found irregularities in financial statements of 17 Chinese SOEs including CNOOC, Chalco, Cosco & China Unicom for FY09. By Mar this yr, 735 cases of irregularities have been corrected & 65 people responsible for the irregularities or violations have been punished.

Hutchinson Port Holdings

Hutchinson Port Holdings: HSBC Initiates at U/W with $0.81 TP, calling Port an OverPriced CashCow. Note that Trust ports’ which operate in the Pearl River Delta (PRD), saw 1Q11 throughput growth +11% yoy, a notable slowdown from 18% for FY10, vs rival ports in Bohai Rim and Yangtze River Delta ports which grew strongly……

Believe rising labour and other operating costs will pose a challenge to the PRD’s near-term growth. In addition, the movement of low-end manufacturing further inland could threaten the region’s long-term growth.

Ascendas Reit

Ascendas Reit: emerged top bidder for a business park site at Fusionopolis at $110m ($409 psf GFA) out of 7 bidders comprising a mix of developers and REITS. A-Reit’s bid is 29% higher than 2nd place Mapletree Industrial Trust. The 60-year lease site is to have 40% office space and the remainder as Business Park Space. The focus will be on attracting Infocomm Tech & Media industries and R&D activities in Physical Science and Engineering. Gearing is expected to increase to 33.2% from 31.1%...

Deutsche notes that using $5psf rent (from neighbouring Solaris Biz Park), and assuming total development cost of $180m, implies yield of 5.7%. A 20% rise in gross rentals could boost yields to 7%. But believes deal is still not particularly attractive vs A-Reit’s 8.5% yields in past build-to-suit projects. DB estimates slight dilution (0.2 – 0.7%) in FY12/13 DPU due to increased financing and time-lag, with a 2-2.5% increase in FY14 DPU...

Stock currently trades at 6.5% FY12E yield and 1.15X P/B. DB has Buy on stock with TP $2.26.

Tiger Air

Tiger Air: Thai Airways has approved in principle a plan to set up a new mid-tier airline, provisionally called Thai Wing, expected to start operations within the region and on some domestic routes in Mar/ Apr 2012.
The wholly owned mid-tier carrier will operate with 7 planes (all leased) -- 5 Boeing 737s and 2 other aircraft -- in the 1st yr and aims to have a fleet of 11 within 3 yrs...

Its schedule will cover journeys with an avg flight time of 2.5 - 3.0 hrs, while the target load factors are in the 70-80% range.
In 2010, Thai Airways formed an alliance with Tiger Air to form a budget carrier Thai Tiger Airways (TTA), but the launch has been delayed for another 2-3 mths from May, pending approval for a THB 99m invmt from the Transport Ministry and the National Economic and Social Devt Board...

While Thai mgt said the new mid-tier airline was not a budget carrier and its operations should not overlap with those of TTA, this devt still means that Thai Airways may now have less incentive to push through the TTA JV with Tiger Air.
Tiger has been actively seeking overseas partnerships to drive growth, particularly as it faces headwinds in Australia, and a slew of aircraft slated for delivery till 2015. 9 more aircraft are expected to be added to the fleet of 26 for this fiscal year...

Post the recent FYMar11 results brief, Street has mixed ratings with wide TP range btwn $1.32 – 1.90.

SG Banks

SG Banks: UBS note that 1Q11 was best qtr ever for pre-tax earnings, underpinned by strong growth in fees, commissions as well as robust loan expansion. Believe trends are sustainable, but banks’ valuations suggest they are not priced in. Think mkt is fixated on an interest rate hike being the only catalyst, but 1Q11 earnings have shown that banks can deliver quality growth without a rate hike…..

House reiterate Buy ratings on OCBC and DBS, tipping
1) strong wealth management fees;
2) robust loan growth;
3) strong current and savings account (CASA) deposits;
4) reasonable cost-to-income ratios;
5) relatively stable NIMs as key catalysts and expect a repeat of most of these trends in the coming qtrs, which augurs well for earnings.

SG Strategy

SG Strategy: UOB Kay Hian has Strategy Report. Note that recent overhaul of the cabinet line-up could signal change in style of governance to appease demand for greater accountability and believe residential ppty could see more potential cooling measures, particularly since release of latest data point, indicate developer sales increased 29% mom to 1,788 units in Apr11…..

House cautious against backdrop of uncertainties and key concerns include inflation and impact on global prospects, slowing global growth and Eurozone debt overhang. Recommend investors seek shield in yield, with preference for telecoms and office REITs, while still favor Shipyards and oil services. Remains selective in banks, although general view is that SG banks cheap….

House Top Picks are Ascendas REIT (TP $2.40), CDL H Trust (TP $2.50), Ezion (TP $0.90), KepCorp (TP $13.50), M1 (TP $2.65), OCBC (TP$ 12.05) OUE (TP $4.30) and Starhub (TP $2.96)


XinRen/HongQiao: BNP Paribas initiates on China HongQiao with Initiate with Buy Call and HKD11 TP. Believe that grp will be a capacity story rather than a price story, given the limited hope of a strong rally and the sharp decline in the domestic aluminium price. Tip grp to deliver 40.1% earnings CAGR in 2010-13, helped partly by moderately improved aluminium prices…..

We note that at current price, Hong Qiao trades at 4.6x FY12E P/E vs much smaller peer XinRen’s 5.5x FY12E P/E and vs global peers average of 12.6x, which is unwarranted in our view.


Singtel: Indonesia’s PT Telkom confirmed it will enter into talks with intention of buying-back Singtel’s 35% stake in Telkomsel. While no details have been confirmed, sources note that PT Telkom appears confident that sale will go through. Singtel’s stake in Telkomsel is worth $8.6b, +18% CAGR since initial purchase, and has received $2.9b in cum div from Telkomsel, (48% of all associate div received by Singtel) and contributes to 16% of Singtel's operating profit……

Deutsche note that sale would add uncertainty to grp’s future and strategy and raises significant questions over relationship with other associates and its sustainability. House note that whether Singtel would keep or return any potential proceeds would be dependent on long-term strategy / intentions. Deutsche maintains Hold with $3.36 TP, given the stub valuation and HSBC maintains Hold with $3.48 TP.

Indofood Agri

Indofood Agri: will go ahead with the spin-off/ IPO of main subsidiary, PT SIMP at an offer price of Rp 1100/sh, at the lower end of the earlier indicative pricing range of Rp 1060 – 1700 / sh.
Market may be disappointed with this outcome, particularly as the CEO had earlier indicated the pricing was low, and was considering whether to continue with the listing...

Goldman notes that based on Rp1100/share, the implied NAV for IFAR works out to ~$1.40/sh, vs last close at $2.04. Says the IPO could pose downside risks to IFAR’s earnings estimates through potential EPS dilution, as well as possible holding company discount. Points out that a similar holding co, JC&C, which owns Astra Intl, has a NAV discount that has historically averaged at 13%...

CIMB downgrades to Underperform from outperform, slashes TP to $1.94 from $2.73.
RBS has a Sell rating with TP $1.50.

SG Market

SG Market: Spore shares are likely to be to remain range-bound with a downward bias Following Wall Street slippage on concerns over the Eurozone debt situation as well as softer opening in Japan & Korea. With little catalysts to move market, we do not expect STI to break out of the 3120-3200 trading band.

IndoAgri is likely to face further ratings downgrade after PT SIMP priced its Indon IPO at the lower end of its indicative price range at Rp1,100 per share, which will lead to earnings dilution.

Friday, May 20, 2011

Important Ratios

KELive Screens have been updated to reflect the latest numbers. Recall, the screens now include explanations on the relevance of the screens.
As usual, we have screens for the following
i) dividends (yield)
ii) beta (for higher exposure to market risk)
iii) price/ earnings (valuation)
iv) price/ book (valuation)
v) year to date return (momentum)

Pls copy and paste the link into a new browser to view. http://kimenglive.yolasite.com/screen.php


Property: DBSV says Spore commercial property deals are back in the market again with possible sales of 2 prime commercial properties in Somerset/Orchard Road worth > $2b in the next few months. Notes TripleOne Somerset has been put up for sale with a $1.2b indicative price, while there is talk Lend Lease could sell completely or a stake in its 313@Somerset mall...

Says the 2 properties, especially 313@Somerset (if for sale), should attract keen competition given limited supply in that area. Also, if the transactions materialize, it would indicate investors' optimism towards these sectors and further reinforce the view that the capital values will continue their upward trend this year, and lift nearby properties' valuation...

DBSV continues to like stocks with diversified exposure; its top picks include UOL (Buy, TP $5.49), Keppel Land (Buy, TP $5.10), Capitaland (Buy, TP $4.61). Adds, Starhill Global Reit could also be a beneficiary

Midday Summary

Midday summary: STI down 0.4% at 3161, weighed by losses in Genting SP, down 3.4% on heavy volume, at $2.00 which was last hit in late March, continuing its poor run since its 1Q results. Mkt watchers may have viewed Genting's buy of 69% in Goldnature Investments negatively, due to its non-core nature, while some funds are selling out of Genting to apply for MGM China's upcoming IPO in HK...

Overall market volume is at 743m shares worth $744m, boosted by Genting's large chunk; decliners outweigh gainers 1.8 to one. Analysts tip STI support at 3150, with resistance at 3180, a level most see as a key directional indicator.

SM Summit

SM Summit +9.4% in heavy trading . Summit is the subject of a RTO by Centurion Properties. Centurion is 100% owned by David Loh & Han Seng Juan (ex top dealers of UOK Kay Hian), who are also controlling shareholders holding a combined 32.1% stake in Summit.

Genting Spore

Genting Spore exhibiting a bearish head-and-shoulder pattern as well as uptrend channel breakdown at $1.06. Near term objective is at the psychological $2.00 level with firm support at $1.87. A reversal above $2.06 would negative the bearish technical readings.


Singtel: Up 1.3% at S$3.23, outperforming after Indonesia's Telkom says it's mulling buying back shares of unit Telkomsel from SingTel, which owns 35% of the mobile network operator. CIMB says a sale would be positive for SingTel's shareholders as proceeds from the sale are likely to be returned to them. Assuming a price of US$8.5b (or $10.1bi), note that sale would raise a hefty $0.70/SingTel share…..

However, house reiterates its Underperform call on SingTel and urges investors to sell into expected strength on any sale news. Note that any acquisition may take time and SingTel's share price could be de-rated after the initial euphoria. Lastly, even if Telkom acquires Telkomsel at a 30% premium, house SOP valuation for SingTel would only rise by $0.15/share or 5%. SingTel continues to face competitive headwinds in Australia, margin pressure in SG and earnings drags in India, in house view

Tiger Airways

Tiger Airways -1.9% to $1.52 after its 4Q net profit plunges 94% yoy to $1.3m, hurt by higher fuel costs. Cimb, which has an U/P rating, notes that excluding a $1.3m forex gain on borrowing, Tiger would have barely broken even. Adds FY11 core net profit forms 49% of consensus forecast, citing high fuel costs & aggressive pricing ate into margins.

House keeps its FY12/13 estimates & $1.39 target, based on 8X CY12 P/E, pegged to the industry's historical mid-cycle forward average but expects de-rating catalysts from:
1) lower-than-expected demand in Australia;
2) delays to the Thai-Tiger launch;
3) disappointing demand in Asia.

Malaysia Smelting Corporation (MSC)

Malaysia Smelting Corporation (MSC): is currently looking to acquire concessions for 3-4 tin mines in Msia and Indonesia to tap into strong demand from China's booming electronics industry. The co may invest up to RM200m (US$65.7m) to increase its mining assets in the near term...

The co has earmarked RM80m of the RM104m raised from the recent Spore listing (25m shares @ $1.75/ sh), and intends to borrow the rest, to finance devt of new mines.
MSC currently operates 2 mines in the Msian state of Perak and Indonesia's Bangka Island. It also processes tin at its 2 smelting plants in Penang and Bangka, which have total capacity of 60k tons...

Last year, MSC together with its Indonesian subsidiary PT Koba Tin had total refined tin output of 45.4k tons, making it the 2nd-largest producer in the world behind China's Yunnan Tin.
MSC is adding a mining unit to raise its production by 20% cent, or ~360 tpa at its Rahman Hydraulic mine in Perak from 2H11...

On the industry, mgt noted that the lowest tin price level at which the industry can remain roughly profitable is US$15,000-20,000 a tonne. 3mth tin on the LME closed at US$28,250/ mt yday, off from a record high of US$33,600 hit in Apr but up around 5% so far this year.
Sias notes global tin consumption exceeded production for the past 3 out of 4 years, and may result in global tin shortage and hence help to support the commodity's price...

Co swung to net profit of RM 28m in the latest 1Q11, reversing 2 consecutive quarters of losses of nearly the same magnitude. Annualizing the latest qtr numbers, stock trades at 4.3x P/E.

Sino Techfibre

Sino Techfibre: announced the conclusion of the police investigation into the fire outbreak in their office premises which destroyed their financial records. An electrical short-circuit was cited as the probable cause and the case is now closed.
Stock has been suspended from trading since 19 Apr 2011 pending further investigation into certain discrepancies with their accounts.

KSH Holdings

KSH Holdings: wins Ardmore Three project, an ultra-niche 36-storey 84-unit development in Ardmore Park. This is the first residential project awarded to them by Wheelock Properties. Construction will run for 27 mths from Jun 2011.
Order book now stands at $245m and unfulfilled contract value is expected to be completed by August 2013.
Stock currently trades at 4.1X P/E.


Yongnam: secured a $50m sub-contract for the future National Art Gallery. They will support the main contractor, Takenaka-Singapore Piling Joint Venture by providing ~10k tons of structural steelworks and various other construction activities. The contract is expected to be completed in 2014.
Stock currently trades at 5.7X P/E. The street largely has a Buy on the stock with TP ranging from $0.38 - 0.44.


STX-OSV: secured contracts for the design and construction of two Platform Supply Vehicles (PSVs) for Farstad Shipping worth about NOK600m (~US$110m). Deliveries are scheduled for 1H13 from STX OSV Langsten in Norway and STX OSV Vung Tau in Vietnam. Including these contracts, STX OSV has 52 vessels in its order book. Ytd, it has secured ~US$323m in orders, vs US$578m revenue booked in 1Q11...

Stock currently trades at 7X P/E. The street largely has a Buy on the stock with TP ranging from $1.68 – 1.89.


SIA: UBS: maintains Buy, but reduces TP to $16.00 from $17.90. Note that Co. earnings missed expectorations with weaker load guidance having triggered street downgrades. Add that shock from Jap is temporary and not unexpected, while US operations underperformed peers due to weaker route mix and source mkts…..

House is more concerned about challenges in Europe, which appears structural, with SIA losing mkt share in EU to Emirates. Lowers FY12/FY13 EPS estimates from $1.23/1.22 to $0.84/1.03. SIA however still has a strong balance sheet, stable returns and div payout.


Midas: IIFL retains Buy, but decreases price to $0.87 from 0.94. Note that share price -26% ytd on policy risk overhang following the removal of China’s minister of railways and delays in order inflow. Note however that Co. has rmb166m of orders YTD (-60% YoY) and China’s Ministry of Railway’s recent announcement of Rmb2.8t of investment over 2011-15 should help to alleviate concerns on poor order intake…..

House expect large highspeed train orders to be received in 3QFY11 and estimate FY11 order book at Rmb1.1b. Recent weakness in stock price present a buying opportunity.

SG Strategy

SG Strategy: Deutsche has strategy report following 1Q earnings. Note that earnings momentum slows and yield supportive. House cuts market EPS f/casts by 2.6% on the back of rising costs and accounting changes. Expect a less supportive macro environment; slower 2Q and near-term policy uncertainty, while market valuations are still modest…..

Recommend investors to focus on O&M Secor, tipping a return to value as headwinds turn and continuing upside surprises on order wins. Investors should start positioning in stocks that are trading at sizeable discounts to valuations with medium-term re-rating catalysts and upside potential for div yields, which includes banks (benefit from reversal in nterest rate cycle), SIA and property. House top picks are SCI, Keppel Land and GENS, while top sells are NOL and M1.

Straits Asia/Indonesian Coal

Straits Asia/Indonesian Coal: Citi raises its thermal coal forecasts to average US$123/t and US$109/t from US$108/t and US$93/t, respectively, for 2012-13E on back of expected rise in thermal coal’s share of electricity generating capacity in Japan and significant import demand from China. House are raising estimates across its coverage to factor in the revised price forecasts…..

Add that the Indonesia coal sector trades at a mean 12mth forward P/E and EV/EBITDA multiple despite the current coal price up-cycle. In comparison, in previous up-cycles the sector’s valuations overshot to 2 standard deviations above mean. House believe the sector’s earnings recovery, after 3Q of earnings disappointment in FY10, will lead to the sector’s re-rating.


Wilmar: Has plans to invest Rmb300m ($46m) in grain processing facilities in China's southern province of Yunnan, according to a state-backed Chinese grain agency. The expansion is planned despite pressure on profitability from price controls the government has been relying on to contain inflation. Facilities will include logistics and distribution sites, and processing facilities for grain, potato and walnut products…..

Going forward, Wilmar remains positive on prospects, despite a challenging operating environment in China. Grain processing in China has traditionally been dominated by local companies such as Cofco Ltd. Wilmar’s foray into the wheat-processing sector is only about five yrs old. We note that street has a mix of Buy and Hold calls on counter with a mean TP of $5.85.

Yellow Pages

Yellow Pages: Announced FY11 results, with rev at $41.5m, -18.1% yoy and net profit at $11.5m, -29.5% yoy. Drop in rev due to drop in sales of print directories, and timing differences in revenue recognition of certain print directories, while total expenditure at $30.3m, -11.9% yoy on reduced finance expenses, printing and material costs…..

Going forward, grp has launched Solutions - a suite of services customised by bringing together specialist partners such as StarHub and Microsoft – and expects to benefit from its new rev streams. Grp is also looking to expand within the region while maintaining its focus on data harvesting and management. Grp has proposed a final div of 0.5c (3% yield)….

We note that at current price, grp trades at 7x FY11 P/E, vs historical average of 9x and global peers of 12x. Counter is currently not rated by any house.

Tiger Air

Tiger Air: 4QFYMar11 results largely in line with consensus at the pre-tax level, at $10.2m, -20% yoy. The decline was due mainly to higher fuel prices.
However bottom line at $1.3m, -94% yoy, was adversely impacted by the partial reversion of deferred tax assets (DTA) due to losses from the Australian. Nevertheless, DTA is non-cash, and utilizable for offset against future profits...

Group revenue grew 16.1% to $163m, in line with growth in capacity (+16.8%) and pax volume (+15.7%), and higher ancillary revenues. Load factor was at 84.2%.
For FY12, Tiger plans to grow its fleet by 9 aircraft to 35, but will keep Australia’s seat capacity unchanged...

Of key interest will be Tiger’s signing of a term sheet for the acquisition of 33% stake in PT Mandala Airlines of Indonesia. Mandala, which is currently undergoing a financial restructuring process, plans to adopt the Tiger’s low cost business model. The largest shareholder in the restructured Mandala will be the Saratoga group (51%), with the remaining 16% to be held by previous shareholders and creditors. Move may be seen positively as Tiger gains a foothold in Indonesia, a mkt with 44m passengers and 7.6% LCC penetration rate.

Credit Suisse maintains Neutral with TP $1.65. Says valuations not compelling at 13x CY2011E P/E, vs (profitable) peers at 10x P/E. Prefers AirAsia at 10x FY11E P/E and other plays on Spore tourism theme such as SIA, Genting SP.

SG Market

SG Market: Spore shares have a positive lead after Wall Street ended in positive territory overnight, though weaker commodity prices may weigh on selected stocks, while the broader market is expected to be muted. Resistance on the STI remains at 3180 with support at 3110. Tiger Airways will be in play after 4Q results missed estimates & announced acqn of stake in Indonesia's Mandala Airlines; STX OSV may gain after securing contracts worth about US$107m while SingTel could see interest in Telkom’s Telkomsel share buyback plan.

Thursday, May 19, 2011


NOL: Announced JV to operate 2-berth container terminal at Qingdao Port. The terminal will be open in 2H11 and is NOL’s first in China. NOL will contribute approx US$25.8m to the JV which has a 30 yr concession…

Co together with partners SITC Intl (a PRC shipping logistics co) and Qingdao Qianwan United will jointly operate the Qingdao terminal which will add 1.5m TEUs of annual capacity at Qingdao. The terminal will primarily serve SITC and NOL’s liner shipping co APL.


Commodity: JP Morgan forecasts crude oil & gold to lead a rally in commodities as prodn fails to keep pace with demand. House believes that oil supply will trail consumption in 2H11 as Opec & other producers would not increase output fast enough. Ultimately, the long-term fundamental supply & demand of commodities is still pointing to higher prices. Rabobank expects shortages in corn & cotton this year while Barclays Capital is predicting deficits in copper, nickel, tin, lead & platinum.

BlackRock also remains positive on the sector, noting that the fundamentals of commodities are supportive. Views the trends of more M&A activity are firmly in place & we anticipate still more to come. This can only present more opportunities for Noble & Olam


Wilmar: Appears to have rebounded off the btm in mid-Mar. Since then, counter has made higher lows and is on a current higher high, likely the end of its downtrend. Stochastics are in overbought region and Wilmar is currently trading at top of channel with resistance at $5.56. MACD is positive with ADX signifying start of possible uptrend. Counter shld either consolidate or breakout from $5.56. Support at $5.28 and btm of channel $5.00

Tiger Air

Tiger Air: Morgan Stanley rates at Overweight, says accumulate up to $1.88, with upside to $2.23 on a 2-yr invmt horizon based on 15x FYMar12 P/E. Believes the recent price correction on concerns of sell-downs by its strategic sh/h and a “show-cause” letter by the Australian Civil Aviation Safety Authority has created an opportunity to buy. Expects Tiger to play catch up with Air Asia, which has outperformed Tiger by over 100% since May ‘10...

Sees catalyst in Thai Tiger JV, Tiger’s 3rd airline cub. Expects more clarity on the JV status post Thailand’s general election widely believed to be scheduled for Jun ’11.


SIA: Morgan Stanley rates at Overweight with TP $18.80. Notes potential dividend surprise, with cash building up to $7-9bn in the next 2 years, allowing the carrier to pay an annual DPS of $1 for the next 2 years. Likes SIA for its defensive qualities – a high quality brand franchise and well-capitalized balance sheet. Notes EV/Ebitda of 5x, FY11E P/B of 1.6x, means SIA is trading at compelling mid-cycle valuation.


Airlines: Morgan Stanley says in sector note, that operating profit (OP) for Asia Pac airlines has peaked in 2010. Expects OP to fall in 2011 but to diverge sharply between airlines, hence prefers defensive plays.
Notes the exceptional air cargo growth in 9M10 has slowed in 4Q10 and 2011, and higher oil prices could lead to a 25-30% decline in OP for this year...

Tips best ideas to own: SIA, Tiger, Qantas, Thai and Air Asia.
Says avoid: China Airlines, EVA, Cathay Pacific, Air China, China South, and China Eastern.


Shipping: CS has issued a bullish report on the sector specific to Asia Pac. They note that long-haul trades report healthy growth in 1Q11 and high load factors, limited idle fleet and rebounding charter rates do not suggest excess capacity on supply side…

The China outbound freight rate index is now 9% from bottom in mid-March and both container trade demand and load factors have recovered. House expects carrier earnings to trough in 1H11 and recover in 2H11 but is of view trough is priced in but not recovery. NOL is cited as a preferred stock due to its high US contractual exposure and will benefit from growth in Trans-Pac backhaul (return) routes.

Plantations & Commodities

Plantations & Commodities: CIMB note that supply chain managers’ earnings met expectations in 1Q11, while higher commodity prices and volume expansion boosted revenues of Noble and Olam by 75.6% and 74.7% yoy, while core earnings grew 19.2% and 23.3% respectively. House remain O/w on sector, with Noble (TP: $2.70) as house preferred supply chain manager…..

Add that while Noble shares have come under pressure amid fears of a slump in commodity prices, highlight that earnings are hedged against price volatility and house continue to see re-rating catalysts from vol growth and earnings contribution from recent investments.

Parliament / SG Strategy

Parliament / SG Strategy: CIMB note that new cabinet changes point to PAP’s commitment to change and possible drags on corporate profitability ahead. Add that while these changes are good for the people, it does mean that corporate profits willface further drags. Anticipating policies ahead, stocks that one should be wary on include
1) mass-market developers like City Developments and Allgreen;
2) land transport players ComfortDelgro and SMRT;
3) to a smaller extent, shipyards and construction companies.

SG Property

SG Property: Deutsche expect the worst of the intervention to be over in 2H11 and a pick-up in office rental growth and NAV discounts to narrow. Recommend investors start positioning in the laggard developers as much of the policy uncertainty is reflected and they are less vulnerable to housing market risk than perceived…..

House Upgrades Allgreen to Buy, CDL to Hold, downgrade Suntec REIT to Hold. Add that ample liquidity will drive new home sales and competition for assets, while rental growth on track, with upside potential for office and industrial sectors. Note that developer valuations undemanding with catalysts for re-rating towards yr end…..

REITs offer attractive spreads; asset values understated. House Top Picks in sector are Keppel Land, CapitaLand, Allgreen; AREIT, CCT

SG Strategy

SG Strategy: Credit Suisse raises FY11 earnings estimates for 14 Co’s and reduced f/casts for 23 following 1Q results. Expect earnings growth (MSCI names) of 6% in FY11 and 11% in FY12. Note that upward revisions for capital goods, consumer discretionaries and banks in Spore were offset by estimate cuts for transport, diversified financials and consumer staples…..

House is O/W on capital goods, transport and property, but U/W on telecoms & consumer discretionary. Market Weight on banks, consumer staples and financials. Top picks are SMM, NOL, CDL, Keppel and Olam, while top UnderPerform ideas are SMRT and STE.


Mencast: Announced a proposed acquisition of Top Great for $24.0m to diversify its range of products. Top Great is principally engaged in the business of engineering design, procurement, fabrication and installation of structural and precision engineering systems and plants…..

Acquisition will be funded by a combination of cash and allotment and issuance of new shares. (9.6m cash and 14.4m by new ordinary shares) Top Great Group serves a customers in the environmental, marine and oil & gas sectors, with key exposure in SG, M’sia, Indo and MENA. Unaudited profit before tax of Top Great was at $4.70m for FY10 and NAV at $10.64m…..

Vendors have jointly warranted to Mencast that Top Great shall achieve net profit of not less than $8m within 2-yr period. In event Top Great fails to achieve the profit warranty, Vendors shall pay Mencast shortfall in cash. CIMB note that taking into consideration of new shares dilutions, FY11-13 EPS are adjusted down, but TP however, got lifted to $0.70 vs $0.66, pegged at 9x CY12 vs 8x previously, as house deem fit to review multiple with such accretive M&A.


Jasper: Announced that it has finalised a contract with AGR Petroleum for its drillship, the Jasper Explorer. The contract with AGR also provides for the option to deploy the Jasper Explorer for another five option wells in West African waters on mutually agreeable terms. The project for the first well, including mobilisation, is worth about US$15m. Technically, see support at $0.075 and resistance at $0.09.

Genting SP

Genting SP: was fined a total of $530k for 4 breaches of regulations. 3 of the breaches involved failures of surveillance cameras and lapses in footages, which occurred just after the casino opened, and mgt has since rectified these issues. The other breach involved senior mgt paying cash to media representatives who were Sporeans and PRs, for their entry levy into the casino...

Nevertheless, the bottom line impact on GENS should be negligible, compared to the $1.8b EBITDA (consensus estimates) it is expected to make this yr.
Stock currently trades at 21X FY11E P/E. The Street largely has a Buy on the stock with TP ranging from $2.30 - $2.90.

Sg Economy

Sg Economy: 1Q GDP up 8.3% yoy in line with forecasted 8.3% growth. 2011 GDP forecast raised to 5-7% from 4-6% with view of modest recovery in US and Europe economies and Asian growth. 1Q growth was broad based, led by manufacturing which grew 13.1% yoy, with higher production in biomed, precision engineering and electronics…

Financials also grew strongly at 11.3% yoy, and hotels & restaurants sector up 7.0% yoy supported by strong visitor flows. Govt expects further growth in manufacturing sector by new plant ops in the chemicals cluster and financial industry to be grow in light of the continued recovery in both domestic and regional economies.

SG Market

SG Market: Spore shares are likely to trade with upside bias today following Wall Street rebound on dovish Fed signals although gains are not expected to be significant. News of MTI latest revision of 2011 GDP growth forecast to between 5-7% from 4-6% will also likely add to the positive mood. With the current lack of corporate newsflow, the STI is set to continue trading within the 3100-3200 band.

Wednesday, May 18, 2011


Anchun: Co posted -89.2%yoy -87.9%qoq drop in net profit which was attributable to 64.1%yoy drop in sales for 1Q2011 results on 13 May. Rising coal prices and severe drought have adversely affected customers’ fertilizer manufacturing businesses which in turn affected co. Note that co has been on steady decline since end Apr. Strong downward trend shows no sign of abating in the near term.


Politics: Big Cabinet refshuffle - Wong Kan Seng, Mah Bow Tan & Raymond Lim dropped from Cabinet

Tharman to be DPM, Minister of Finance & Manpower
Shanmugan to be Minister of Foreign Affairs
Vivian Balakishnam: Minister of Environment & Water Resources
Ng Eng Hean: Minister of Defence
Teo Chee Hean: Minister of Home Affairs
Liu Tuck Yew: Minister of Transport
Heng Swee Kiat: Minister of Education
Yacoob Ibrahim: Minister of Infocomms & the Arts
Chan Chun Sing: Acting Minister of Community Devt, Youth & Sports
Tan Chuan Jin: Minister of State for Nat’l Devt & Manpower
Khaw Boon Wan: Minister of Nat'l Devt
Gan Kim Yong: Minister of Health


CapitaLand: +1.3% at $3.19.
Co announced 2 divestments in the past 2 days, i) sold a residential site in Shanghai for $181m, booking a 82% gain of $82m, and ii) sold Hilton Double Tree Hotel in Kunshan to the same party for $49, booking a 58% gain of $18m. Both assets were bought as part of the OODL transaction last yr. CapL said if both transactions were effected on 1 Jan 2011, the EPS for 1Q11 would have been 96% higher at 4.7c instead of the 2.4c reported...

StanChart views transactions positively, says it shows CapL to be pro-actively managing its earnings to improve ROE. Notes co has targeted to invest $6b over the next 12 months in earnings-generative projects such as Spore residential, China Residential, China retail and Ascott svc residences, but points out if co fails to substantially meet this target, mgt could consider some form of capital management via CB redemption or share buybacks...

Reiterates Outperform rating with TP $4.25/sh, based on 15% discount to 2011E RNAV of $5/sh.

Technics O&G

Technics O&G: repeat orders worth $5.6m from a Chinese customer involving Contract Engineering for the manufacture and supply of Well Testing Eqpt.
Ytd, the co has won 6 contracts totaling $92.3m, signaling continued order momentum. Of note were two Russian contracts, the first coming from that country. These were for the contract engineering of O&G Process Equipment and provision of equipment for the modification of a Jack-Up Rig...

Stock trades at 7.7X P/E. SIAS has a Buy on stock with TP $1.30.