Friday, July 29, 2011


IndoAgri: Recent spinoff listing SIMP is currently trading at 1,400 Rupiah in the Jakarta Stock Exchage. We note that implied value of IFAR shares, using a 72% ownership of SIMP would place IFAR intrinsic value at $1.73.

KELive Screens

KELive Screens: We have a brand new look. Note that this is only available via intranet.
Pls click on this link to view:

The bi-monthly KELive Screens have been updated to reflect the latest numbers.
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)
Unfortunately, there is no perfect stock attribute. Each of these screens merely offer a shortlist of stocks that rank highly on that one particular attribute.
The screens cannot be construed as a recommendation, but are meaningful enough for idea generation.


Tiger: -2.4% to $1.205, though in muted volume, after its statement Thur saying Aus's Civil Aviation Safety Authority has issued a set of formal conditions, which it must comply with before being cleared to fly. Tiger says it's confident that it can comply with these conditions and expects to resume services in the near future, though it will refund passengers booked to fly between Aug 1-Aug 4.

UOB KayHian, which has Hold rating under review with $0.97 TP note that essentially, this means that there will be a delay in resuming operations. The stock has risen by 23% from its recent low on speculation of greater involvement by SIA. While that could be the case in the future, we see no immediate catalyst for now, add that Tiger will be releasing results on August 4, and while results would be backward looking, it will provide a reality check for the stock. The house advises caution on the stock at current levels.

Fragrance grp

Fragrance grp: Announced 2Q11 results, with a record turnover at $83.6m, +39% yoy and +61.3% qoq, while net profit at $23.8m, +41.4% yoy and -40% qoq (fall in qoq largely due to other gains derviced on disposal of property at beach report during 1Q11)

Strong show led by property sector contributing $70.3m or 84.1% of total revenue, +42.7% yoy, due to the progressive recognition of income from development projects namely,Prestige Heights, Parc Elegance and Kovan Grandeur. Other projects that made significant revenue contribution included Suites & Icon @ Changi, Suites @ Eastcoast and the landed houses at Upper Changi Road North.

Hotel sector contributed the remaining 15.9% of turnover, which saw an increase of 21.9% yoy mainly attributed to the additional rev contributed by one new hotel commenced this yr and another hotel which commenced operations last year. Increase also due to improved occupancy and room rates achieved at most of grp’s hotels as a result of the increase in visitors arrival to SG.
At current price, valuations appear steep, grp trading at 4.5x P/B vs historical average of 2.5x and peers simple average of 2.4x P/B.


Midas: announced that its JV co, Nanjing SR Puzhen Rail Transport (32.5% owned by Midas) was awarded 2 contracts by Nanjing Metro Co. worth a total of RMB 3.13b.
i) The Nanjing Metro Line 3 contract is worth RMB 2.15b for the supply of 276 train cars and delivery is expected from 2013 – 2015.
ii) The Nanjing Metro Line 10 contract is worth RMB 0.98b for the supply 126 train cars and delivery is from 2013 – 2014.
Note that these contract wins are for Metro trains (orders given at the City level), and are different from High-Speed Rail contracts (orders given at the State or Country level).
Hence concerns regarding a potential slow down in HSR contracts are still valid. Nevertheless sentiment in the stock should get a bit of a boost today in view of the size of the new order.
Midas share price has sold off significantly since the railway tragedy in China last week.
Stock currently trades at 12X P/E.
Technically, the stock closed down 5.9% yday at $0.565 on exceptionally high volume (66.7m), with RSI, Stochastics and CCI all in oversold territory. This could indicate capitulation and a technical bounce to follow.
Stock now +5.4% at $0.59, at top volume.


DMX: CIMB Has Technical Buy Call. Note that share price has formed a bullish wedge pattern, howevr believe that stock is now ready to breakout of its bullish wedge resistance. See a triple bullish divergence here on its MACD and RSI. Yesterday’s long white candle could possibly signal that the stock is on the verge of rallying.
Recommend traders should buy now to hop onto this impending breakout run. A breakout above $0.34 would mean that prices are likely to climb towards $0.375-0.38 next, where its 200-day SMA currently lie. The following resistance is at $0.405.


IndoAgri: CIMB Has Tehnical Buy Call. Recommend to follow yesterday’s long white candle on rising volume, but think that prices are more likely to rally further from here. The bullish divergence on its indicators also bode well for the stock.
Recommend stock as Buy now, targeting the $1.68 in the near term. There is a good chance that it could breakout and climb further to try to close the huge $1.96-2.04 gap. A minor resistance is seen around the $1.78 levels.


Otto: Profit warning due to the reversal of profits due to the cancellation of contract of two vessels. Co is currently evaluating either to sell or lease out the vessels. Otto Marine has been alternating between quarters of profits and losses, struggling to maintain consistency. Though co currently trades at undemanding valuations of 5.1x


Hyflux: Fire at warehouse containing equipment for Magtaa project in Algeria. Preliminary estimates put damages at approx US$50m. Project is more than 80% completed but completion will likely be delayed from Aug 2011 to May 2012. The project is covered by insurance and Hyflux will work with insurers to determine the cause and make claims accordingly. Hyflux trades at fwd P/E of 18.0x and Sound Global at 12.8x.


DBS: Recall 2Q Net Profit of $735m vs net loss of S$300m a yr ago due to a goodwill charge on its HK business, slightly above analysts forecasts of S$728m,
helped by strong loan growth. Broker ratings are as per follow.

DMG maintain N, TP $15.70 from $15.00, trading income weaker but interest income up, expect SIBOR to remain soft till mid-2012 at least, and see no
key catalyst driving DBS share price.

BNP maintain Buy, TP $17.50, no surprises, both earnings and operating trends are within expectations, positives: stronger loan growth + flattish NIM + lower NPLs, DBS HK managed to eke out a 4bp NIM expansion. Catalysts: continued strong earnings delivery that reflects recent years of structural changes made by top management, and a sharp increase in SGD SIBOR (a likely scenario in 2H12).

RBS maintain Buy, TP $18.00. DBS reported a very solid set of 2Q11 results, main positive was a very strong 6.9% qoq growth in net interest income on back of stable margins and strong 7% qoq loan growth. DBS is trading at 10.1x FY12 PE with 15.0% EPS growth and 1.2x FY12 PB with 12.2% ROE.

UBS maintain Buy, TP $16.60, good quality earnings, believe: 1) the stock is inexpensive; 2) its strong loan growth can drive earnings; and 3) it has strong upside to the eventual reinstatement of higher rates.

Daiwa maintain Buy, TP $18.40 from $18.20, quality comes thru, on track to narrow its performance and ROE gap with its local peers by 2013, with the incremental gains leading to a gradual valuation rerating by the market.

Deutsche maintain Buy, TP $18.00, Top quality 2Q11; delivering on net interest income, on the path to a higher sustainable ROE.

Morgan Stanley O/w, TP $18.30 from $17.50, continued to show progress on its strategic transformation in 2Q11, especially in the institutional banking business. Valuations still attractive at 11.5x 2011e EPS and 10.9x 2012e EPS. Remains as top pick in the Spore bank sector.

Credit Suisse maintain N, TP $16.80, focus on liquidity near term, revise down 2011-13E EPS estimates by 2% mainly driven by slightly lower NIM expectations in 2012-13E, UOB is sector top pick.

Straits Asia

Straits Asia: CS maintains neutral with $3.20 TP. Recall that SAR reported 2Q11 net profit of US$39 m, in line with estimates, albeit at the lower end.
In conference call, mgt gave assurance that cost pressure should ease somewhat with lower strip ratio at the SBK mine. 3Q ASP guidance is conservative but expect a strong recovery in 4Q, with rising spot prices and contribution from higher CV coal from the SBK mine.
House tip SAR’s earnings momentum to improve in 2H11 to meet mkt expectations. Earnings growth outlook in the medium term is strong but hinges on the successful development of the Northern Lease. Goldman meanwhile maintains Sell with $2.60TP.

Genting SP

Genting SP: CLSA and BNP Parbisa maintains Buy with $3.00 TP and $2.42TP Respectively. CLSA note that LVS reported strong 2Q11 in MBS, but it is still tough to make any meaningful judgment on Genting, as Co. did not give any guidance as to their understanding of market share for qtr, but suspect that LVS has gained some market share, especially in the VIP segment.

House believe that GENS still has larger share of the market. EBITDA Margin for MBS remains healthy and house continue to believe in the long term growth profile of SG. Believe excessive share price correction on Genting should be seen as a buying opportunity given that it is likely to generate annual free cash flow in excess of US$2 in the near future. BUY, TP $3.00.

ARA Asset Mgt

ARA Asset Mgt: Standard Chartered Initiates Coverage with O/p call and $1.84 TP.
House note that Mgt fees provides a strong base of recurring earnings with added non-recurring kickers such as acquisition and performance fees, and ARA has grown AUM at $1.6b p.a. over last 6 yrs and believe grp can sustain level of growth both organically and inorganically (through new REITs and funds) over 2011E to 2015E.

Add that ARA has enjoyed high returns without extending its balance sheet significantly and believe investment landscape has changed and ARA may now have to take 10% strategic stakes in new REITs and funds, from 0-2%, previously as investors demand a better alignment of interests. Valuations are undemanding even after house price in equity fund-raising. TP offers 20% potential upside.

HK Land

HK Land: Revaluation gain of US$3.3b. Posted 1H rev of US$754.7m -1.4% yoy with net profit of $3.9b +142% yoy. Bottom line was boosted by US$3.3b in revaluation gains, excluding which, net profit would have been $365.3m -23.4% yoy. On commercial side, office rental reversions were generally positive with vacancy at 2.5% and retail portfolio had full occupancy. Co is receiving rental income from 1/3 stake in MBFC with 3rd tower due to complete nxt yr. Two residential projects were completed causing a drop in rev yoy.

Sales in Macau project The Residence and Apartments at Mandarin Oriental progressing well with 89% of units sold. In Sg, MCL land has sold 48% of new dev Terrasse due for completion in 2014. A residential site was acq for US$200m which is expected to yield 600 high-rise apartments.

Dividend of US 6.0c per share declared. Co now trades at 0.7x P/B compared to Keppel Land at 1.4x and Capitaland at 0.9x. HSBC maintains Underweight with higher TP of US$6.50 from US$6.00 previously. Both JPM (TP US$8.32) and Macq (TP US$6.60) maintains Outperform

GMG Global

GMG Global: Announced 2Q11 results, generally in-line, however boosted partly by a one-off gain.
Rev at $288.4m, +257.3% yoy and +2% qoq while net profit at $17.9m, +89.6% yoy and +16.1% qoq. Gross margins dropped to 11.1% vs 21.5% yoy, but improved vs 10.1% qoq, large drop due to Grp’s substantial increase in tonnage from processing facilities, derived from Teck Bee Hang.

Top-line driven by an increase in sales vol at 47,409 ton sold, +149% yoy and +4.3% qoq, while ASP at $6,084/ton, +43.7% yoy and -2.2% qoq. Net profit of grp also boosted by a one-off gain of $12.4m from waiver of loan owed by Teck Bee Hang and compensation of social cost from the Cameroon for operations in Hevecam. Excluding this, core operating profit would have been $22.3m, +74.3% yoy and -22.1% qoq.

Group continues to maintain a healthy balance sheet with net gearing of abt 10%, giving headroom for further debt undertaking. Going forward, tip Natural rubber prices to be volatile in 2Q11. Barring unexpected adverse global devt, Grp expects natural rubber in coming qtrs to remain resilient. At current price, valuations appear compelling, trading at 12.8x FY11E P/E vs historical average of 30x.

Lian Beng

Lian Beng: Announced strong set of FY10 results, which was in-line, albeit at the higher end of estimates.
Rev at $507m, +46.7% yoy, while net profit at $48.6m, +100.7% yoy. Strong rev performance driven by larger contracts during the yr under review, while gross margins improved at 14.7% vs 13.1% yoy, due to efficient production and tight control over project mgt. Grp has recommend a first and final div of 1c/share and special dividend of 0.6c/share (div yield of 4.2% and payout ratio of 17.6%).

Grp’s Orderbook stood atb solid $839m, underpinning earnings till 2013, while balance sheet healthy with grp in a net cash position. Going forward, mgt remains confident of prospects, tipping a consistent level of interest in the private residential property mkt and the influx of public housing projects into the mkt to boost orderbook. We note that at current price, valuations are compelling, with grp trading at 4.5x FY10 P/E vs peers historical average of 10x.

Tiger Air

Tiger Air: will be in focus after it says its Australian unit will refund passengers booked to fly between 1-4 Aug, a move that indicates the carrier may not be able to resume flights before then. Regulators had earlier grounded Tiger's Australia fleet till 1 Aug due to safety concerns.

Thursday, Tiger received formal conditions from Australia's Civil Aviation Safety Authority (CASA) that must be met before it can restart domestic flights. Tiger says it is confident that it can comply with these conditions and expects to “resume services in the near future”.
Adds, “a further announcement, concerning flights scheduled to operate from 5 Aug 2011 and the re-commencement of sales, will be made at the appropriate time”.

Shares initially dropped 16% on the suspension, but have since recovered and closed Thursday +0.8% at $1.235.


SIA: very poor 1QFYMar12 results, missed forecasts by a wide margin.
Net profit of $45m was down 82% yoy, and only 4% of consensus full year forecast. In fact, net profit would have been closer to zero, were it not for a $40m profit on asset sales.
The main driver of the yoy decline was the 48% rise in spot jet fuel prices, which was not fully compensated for by the rise in yields. Qoq, fuel costs were up by >$300m.

Passenger load factors fell (-3 ppts yoy), while cargo continues to suffer with yield decline of 8% yoy. The parent co and SIA Cargo turned in a loss, while SIA Engrg and SilkAir’s profit prevented the group from registering red numbers.

Mgt’s guidance suggests a weak outlook, corroborating with the drop-off in trade and global PMIs which are leading indicators for premium travel.
Post-results, we see large cuts in earnings forecasts and target prices from the Street.

HSBC downgrades to Underweight from neutral, cuts TP to $12.70 from $15. believes the share price drivers for SIA are negative.
Deutsche downgrades to Hold from buy, cuts TP to $13.20 from $16.90.
Morgan Stanley however, keeps Overweight rating and TP $16.80 (post div), says the special and final DPS of $1.20, which goes ex on 2 Aug, may provide near term support.

SG Market

SG Market: Spore shares are likely to open mixed as investors remain in a skittish mood following Wall Street’s nervous close & Nikkei’s slightly softer opening. Blue chips may be in for some volatility as funds work towards a 2Q close. While the STI appears to have broken out of its 10-month triangle, momentum indicators are overbought, pointing to a possible near term pullback. SIA is likely to run into turbulence after reporting a sharp decline in 1Q net profit to $45m, well below the $178m due to higher fuel costs while Tiger Airways may resume its Australian flights as early as Aug 5. Lian Beng may also be in focus after doubling FY11 earnings to $48m, in line with expectations & declares final DPS of 1¢ & special DPS of 0.6¢. Midas also expected to regain some ground with the surprises anncmt that Nanjing Metro Co has awarded 2 contracts worth a combined Rmb3.13b to its 33.5% JV, Nanjing SR Puzhen Rail Transport, to supply of train sets for the Nanjing Metro Lines. GMG Global 2Q net profit lumped 90% to $18m while revenue more than tripled to $288.4m on higher rubber prices & one-off gains from compensation costs & a loan waiver. Hyflux warns completion of its Algerian seawater desalination plant will be delayed till May 12 due to a fire which broke out on the site yday with early est of damages coming up to US$50m.

Thursday, July 28, 2011


Guthrie: +3% at $0.505.
Business Times today reported that a 50/50 Guthrie / Sun Venture Property JV has sold 7 strata shop units at The Adelphi near City Hall MRT Station, at prices ranging from $1900-4040 psf in the past few wks. The shops are btwn 398 – 915 sf.
Since mid-Mar, the duo have also sold 28 strata office units at The Adelphi, fetching $1675 – 2231 psf.
The combined sale of strata office and shop units have a total strata area of 51.4k sf and have fetched a total of $105.4m. This compares with the $218.1m that Guthrie/SunVenture paid in Dec last yr, for 163 strata units with a combined 178k sf.
A back of envelop calculation suggests that Guthrie stands to book ~$21.2m profit (~2cts/sh) from the sale of the property.
Co to report 2Q results due 12 Aug, according to Bloomberg estimates.

Oakwell Engineering

Oakwell Engineering: Co. has been trying to get investor’s attentions, by holding Co. and plant visits together with IRs to entice investor’s awareness.

Currently engaging in the distribution of engineering products and design & fabrication of engineering systems, grp’s next catalyst appears to come from its recent venture into ‘shipbuilding and repair’, with mgt optimistically guiding for rev contribution from this segment to overtake core distribution business in the near future. Ex-cash, Oakwell trades at 8.5x FY10 P/E and 0.6x FY10 P/B which compares favourably with its 5-year historical average of 36x P/E and 0.97x P/B.

http://keliveweb/stocks/Oakwell Engineering/Oakwell - Plant Visit.pdf

Genting Spore

Genting Spore: Citigroup upgrades to Buy from Hold but keeps $2.30 target price. Judging results from Las Vegas Sands, house reckons Marina Bay Sands has again taken mass market share from Resorts World Sentosa, & also likely won back some VIP share as well; but it adds that the possible market share loss to MBS has been largely priced in. Believes the worst is now behind Genting Spore & expects to see solid EBITDA improvement from 2Q11 onwards. Assuming a normalized hold rate, Citi expects Genting to generate 2Q revenue of $727m (-20% qoq) & EBITDA of $373m (-30% qoq). Notes that the $538m EBITDA generated in 1Q was largely due to an estimated 3.8% VIP hold rate. Citi raises its Spore gaming market size forecast to US$5.9b from US$5.4b & is now forecasting a 50/50 split in market share by 2012. Stock pulling back to its 50-day MA at $1.91 after yday’s scintillating run-up with underlying support at $1.86.


SabanaREIT: DPU of 2.18c declared, 1.3% higher than forecasted. 2Q Rev at $17.4m with net income at $12.3m. NPI of $16.5m was in line with IPO forecast. Co has approx debt headroom of $119.5m based on current 34% gearing and weighted avg lease term to expiry of 3.2 yrs. At current price of $0.945, annualized DPU is approx 9.2%. Co is positive on industrial sector as a whole. Recall most recent industrial rents grew 4.5% in 2Q, 7th consecutive qoq increase though growth is slowing (8.3% in 1Q11).

Genting SP

Genting SP: Citi upgrades to Buy from Hold, keeps TP $2.30. After results from rival MBS, the house suspects Marina Bay Sands has again taken mass market share from Resorts World Sentosa, and has also likely won back some VIP share as well; but believes the possible market share loss to MBS has been largely priced in. Says the worst is now behind Genting SP. Expects to see solid EBITDA improvement from 2Q11 onwards.

Assuming a normalized hold rate, Citi expects Genting to generate 2Q revenue of $727m (-20% on quarter) and EBITDA of $373m (-30% on quarter); points out that the $538m EBITDA generated in 1Q was largely due to an estimated 3.8% VIP hold rate.

House raises its Singapore gaming market size forecast to US$5.9b from US$5.4b, and is now forecasting a 50/50 split in market share by 2012.

GENS stock is down 0.5% at $1.91.

City Dev

City Dev: its China unit has acquired a 296k sm prime site located in the heart of the Suzhou Industrial Park, where it intends to construct 750 high-end residential apartments, an office tower, retail mall and luxury hotel on the site.

The land was acquired through gov tender for RMB 886m ($167m), which represents a psm ppr of RMB 3k. CDL is in discussions with local developer Genway Housing Development Group to participate in the project.

This comes 7 months after CDL’s first foray into the China market where the co clinched a residential development site to build luxury villas in Chongqing for RMB 232m. CDL has set aside $300m for its entry into China. Land cost, combined with devt and other costs for these projects should already take up a substantial slice of this amount.

Stock currently trades at 1.5X P/B. Credit Suisse yday maintained Outperform with TP $15.74.


SMRT: 1Q12 results below expectations as net profit fell 8.9% yoy to $34.8m despite a 7.5% revenue increase yoy to $253m. The lowered margin was attributed to a sharp increase in electricity and staff costs, up 32.7% and 10.9% yoy respectively.

Circle Line daily ridership remained stagnant at 181k, still below the estimated 200k breakeven point. Increased costs are also expected as SMRT ramps up train runs and recruitment for the opening of Circle Line stages 4 & 5. While mgt is optimistic that ridership will increase with the new stages, estimated breakeven traffic would also rise to 500k.

In addition, advertising margins contracted to a long-term low of 55%, indicating that the shift towards digital advertisements has negatively impacted profitability for this segment.

Taxi revenues +15% to $21m as fleet size increased to 2,990 (from 2,600). Rental segment reported +11% revenue as monthly rental rates were +8% yoy to $18.9psf. Coupled with steady occupancy rates of 98%, and margins, profit was also up 11% to $15m.

Going ahead, SMRT has plans for a $600m capex on 17 new trains and 355 taxis and will probably tap the medium term note for funds. This should push gearing to 50% from ~30% currently.
Given SMRT’s poor execution with the Circle Line so far, the Street remains cautious should the co be awarded the tender in future.

Stock currently trades at 18.3X P/E. Street is mostly neutral or negative, with TP ranging $1.59 - $1.90. Macquarie recommends a switch into Comfort DelGro, which is at a 60% discount to SMRT.


AscottREIT: URA has granted provisional Permission for the redev of Somerset Grand Cairnhill Singapore, into an integrated hotel and residential development. Maximum allowable GFA of about 43.3k sqm comprising min 40% hotel and hotel related uses and 60% residential use. Existing lease of property expires in 2082 and co is looking into the possibility of an extension. Co is restricted to developing less than 10% of its asset base, which is a current $2.8b. All factors will be considered before deciding to proceed with the redev of the property.

StanChart has view that co will not be able to develop residential project due to restriction and will possibly sell the asset and reacquire or team up in a JV likely with sponsor Capitaland to redev. StanChart maintains In-line with TP$1.20 and awaits more details before adjustment.


MapleCommTrust: 1st set of results higher than forecasted. Co posted $32.7m in rev +0.9% higher than forecast with net profit at $16.3m +12.7% over proforma statements. DPU at 0.96c was 8.7% higher than forecasted.Initial portfolio consists of VivoCity, Merrill Lynch Harbourfront office and PSA Building (with 3-storey Alexandra Retail Centre) undergoing AEI works.

Higher than expected rev was due to Vivocity's turnover and rental revenue but was offset by lower rental from PSAB from AEI works. Co expects Sg economy to remain stable and current portfolio mix of office and retail to provide sustainable earnings.

At annualized 2Q DPU and current share price of $0.88, yield is approx 6.1%. CIMB maintains Outperform with TP$1.01 citing potential lease-renewal upside (43% of leases) in VivoCity yet to kick in and possible mid-term acq for co from Mapletree Business City.


StraitsAsiaRes: Generally as expected 2Q results. 2Q rev at $225.8m +17.9% yoy +5.7%qoq with net profit at $38.9m +67.5% yoy -5.9% qoq. ASP for 2Q was up at $94.6/ton +31.1% yoy +15.2% qoq but was offset by higher cash costs at $60.2/ton +26.7% yoy +30.5% qoq.

Higher ASPs were due to use of index-linked pricing coupled with a favourable coal price environment but costs grew from higher fuel costs attributed to rise in diesel prices and longer waste dumping distances. As of Jun 2011, co has committed 87% of planned production for 2011 for sale and approx half of remaining shipments for the yr are priced on an index linked basis. Other dev include further exploration at Sebuku and full results from drilling programme can be expected in 2H2012.

A dividend of US 4.24c (S 5.09c approx) has been declared in line with co’s 60% dividend payout policy. Nomura maintains Neutral with TP$2.75. CIMB maintains Underperform with TP$3.29


DBS: 2Q11 results generally in line.
Net profit at $735m, +2.4% yoy, compares with Dow Jones consensus of $718m.
Sequentially, net profit falls 8.9%, hurt by a 15% yoy and 19% qoq decline in non interest income to $639m, though with sluggish capital markets over the last few months a decline in market-related trading income and investment banking revenue was largely expected.
Net interest margin declines to 1.80% from 1.84% last year but is flat qoq, showing signs that it may be bottoming out.
The bank's core business remains robust with net interest income +12% yoy, +6.9% qoq at $1.2b, supported by a 15% increase in lending volume.
One encouraging spot from the results is HK’s 2Q earnings, which more than doubled yoy to $143m.
Total expenses rose 11% yoy, largely driven by higher staff cost. This translated to a higher cost-income ratio at 43.4%, from 40.5% qoq, and 39.5% yoy.
Provisioning charges at $137m was down 33% yoy, as well as NPL ratio at 1.5%, down from 2.3% yoy.
Interim div of 28cts, unchg yoy.
BVPS rose marginally qoq to $11.69, translating to a valuation of 1.31x P/B, vs historical avg at 1.45x P/B.


Biosensors: 1QFY12 results above consensus expectations.
Net profit up 6-fold yoy to US$22.6m, while pre-exceptional net profit was up 2.4x to US$24.1m. This was driven by increased market penetration and the launch of the Nobori stent in Japan during May.
Total revenue grew 73% yoy to US$57m, in particular with licensing and royalties revenue jumping by 4x to US$15.6m, reflecting Terumo’s success in gaining mkt share (est 16% now) with the launch of the Nobori stent in Japan.
The strong results suggest that the group continues to gain traction with its Biomatrix products across the board.

Biosensors reaffirmed its positive outlook for the group’s revenue and maintained its guidance of 50-60% revenue growth. This assumes that it is able to consolidate the remaining 50% equity of JWMS from partner, Shandong Weigao by 2QFY12. In turn, Weigao may assume a 16% stake in Biosensors and will hold 21% after conversion of its convertible bonds. Also, Weigao indicated previously it would use HK$1b in proceeds to purchase more Biosensors shares. A 30% ownership would trigger a general offer.

With regards to BioFreedom’s CE mark approval status, the company indicates that it has filed for approval but is unable to predict when approval will be obtained. In terms of the ASP outlook in China, it expects some degree of price erosion to occur, given that high-end consumables such as stents are likely to be included in regional centralized procurement. Mgt indicated that a national tender in China is likely to happen by end-2011.

Nomura keeps Buy rating and PT $1.59, expects stock price to react favourably post results. Remains bullish on the group’s long term prospects, believes Biosensors could garner increased market share following the withdrawal of Johnson & Johnson from the DES market globally, with Japan to be the key driver in FY12.

Wednesday, July 27, 2011


AIMS REIT and CWT: AIMS REIT’s 1Q2012 results in line with rev out at 21.0m +30.8% yoy +0.9% qoq and net profit at 10.3m +85.8% yoy -0.4% qoq. DPU at 0.53c. Increase yoy was due to acquisition of 2 properties Penjuru Lane and NorthTech.

Co has also announced to redevelop 20 Gul Way into a 5 storey ramp up warehouse facility with GFA of approx 1.2m sqft. This project will be undertaken by Indeco Engineers (subsi of CWT) and afterward leased to CWT. Currently, property is a large-scale industrial facility with 10 single storey buildings relating to production, warehousing and ancillary office with total GFA of 378.1k sqft.

Project will cost $155.0m with current book value of property at $41.8m, but appraised gross value of completed project is $214.0m with NPI yield of 8.1%. Co expects to fund this using 100% debt with DPU impact at +0.293c per annum and will raise gearing to 41.5%. CWT will also be required to subscribe for a private placement of at least $2.5m in amt. AIMS expects a loss in net property income for this property of $1.9m in Mar 2012. Macq maintains Outperform at TP$0.27 citing stable 10% yield with 18% disc to book value.


Midas: CIMB has technical Buy call. Note that Prices are now sitting just above its downtrend channel support and with rising volume; prices have yet to break below this support. Believe that there is a strong hand accumulating this stock.

The MACD is about to reconfirm its golden crossover for the third time and when it does, it could also confirm a triple bullish divergence on both the MACD and RSI. On its intra-day charts, see a completed 5-wave down, supported by bullish divergence signals. Yesterday’s bullish harami cross pattern could also be a reversal that house is looking for. Think that this is a good level to get in long NOW. Place a low risk stop below $0.59, the channel support and see rebound towards $0.815, its 200-day SMA for the medium term. A break above $0.64 would likely see prices kick upwards towards $0.695 in the short term.


Sunvic: CIMB has Technical Buy Call. Note that prices may have fallen below its 200-day SMA recently but see signs of a revival here as well. Yesterday positive close on rising volume is also a positive sign. Both the MACD and RSI sport bullish divergence signals, suggesting that there could be a possible rebound on the cards.

Think that at current levels, risk of sell-down is low. Recommend one can go long here with a tight stop placed below $0.65. One can also place their stop below the recent low of $0.62 but prefer to be more cautious. Push past its 50- day SMA at $0.73 would mean that prices have the potential to reach $0.78-0.79 in short to medium term.

Genting SP

Genting SP: Read through from LVS/MBS 2Q11, which reported EBITDA of US$405m, +43% QoQ, significantly higher than consensus driven by +21% QoQ increase in VIP rolling chip, higher win rate (2.99% vs 2.56% last qtr), 12% higher mass revenue, 19% higher slot revenue.

Macquarie retains U/p with TP $1.62 and expect 2Q to have been seasonally higher, driven by June (May/April were largely flat qoq) which benefitted by the school holidays regionally and greater visitation in to Singapore. However, add that for 2H11 to deliver +50% growth in order to achieve market growth of 30% is aggressive and hence the multiples the market is applying to GENS are expensive.

Morgan Stanley retain E/w, and expect GENS to report weaker EBITDA than MBS, yet believe for long-term investors GENS could provide an attractive entry point post 2Q results. Tip GENs to report 2Q11 net revenue of S$814m, -12% qoq and EBITDA of $414 m, -23% qoq.


STX OSV: Co. just completed investor’s roadshow. Sees a faster-than-expected recovery in the North Sea and recent Farstad’s two AHTS orders with STX OSV have broken an 18-mth dry spell when no large AHTS orders had been placed. With Farstad deemed as an early mover, there could be comparable AHTS orders as owners seek to capitalise on future demand.

Going by project negotiations, order pipeline should be diversified and we could hear of a variety of orders including AHTSs, OSCVs and other specialised vessels (icebreakers, coast-guard and fishing vessels) vs the series of PSV orders announced over the last 18 months. CIMB maintains Buy and lifts T to $1.88 on back of margin improvements and a strong orderbook.


Yongnam: Citi Initiates coverage at Buy with $0.36 TP based on 8x FY12E P/E, a slight premium to grp’s historical and peer average of 7x. Investment thesis is based on higher-than-expected earnings growth (11% > FY12E consensus, strong mkt positioning amid a positive industry trend and compelling valuations at current 6x FY12E P/E.

Add of downside protection from replacement value of grp’s strutting assets (>70% of mkt cap). The share price has been range-bound at $0.20-0.30 since mid-09, but improving fundamentals could enable a sustained breakout to the upside. Potential near-term catalysts include contract wins from DTL3 ($100mn; est announced by end-Sep 11) and the Zhuhai-Macau-HK bridge project (S$100mn; by year-end)


OUE: announced that its OUE Bayfront office has signed new tenants, with committed leases of over 77% of NLA. It offers about 500k sf of prime Grade A office space.
The developer also completed the refurbishment of the adjoining OUE Tower and OUE Link (previously Change Alley Aerial Plaza and Link Bridge). The total 14.5k sf of NLA has been fully leased to retail and F&B tenants.
Stock currently trades at 0.94X P/B.
The majority of Street has Buy ratings with recent TP ranging btwn $3.24-3.76.

ST Engg

ST Engg: orderbook update.
Its aerospace unit secured over $260m worth of new maintenance contracts in 2Q, for terms ranging btwn 3-12 mths each to be carried out in the Americas, Asia-Pac and Europe. This does not include a recently announced 20-yr logistics support contract for 12 M346 aircraft worth ~$50m.
In 2Q, STE redelivered 114 aircraft for maintenance and modification work, as well as 62 engines and 14k components for other customers. The co also launched line maintenance services for TransAsia Airways at Changi Airport.
Stock currently trades at 18X P/E.
The majority of Street has Buy ratings with recent TP ranging btwn $3.28-3.90.

Sembcorp Marine

Sembcorp Marine: Has started lawsuit against PPL Hldgs over a dispute from Baker Tech's move to sell PPLH to Yangzijiang for US$155m. YZJ wld have gained a 15% stake in PPL Shipyard from the sale, but SMM which owns the bal 85% argued that it had 1st right of refusal to the 15% stake.

Following YZJ's offer, SMM has made an offer to buy the 15% stake at $59.4m. Both parties are also disputing the split of power where the yard is concerned, given that there were 6 SembMar directors on the yard's board vs 3 from PPLH before the lawsuit was filed. Since lawsuit was filed early last yr, YZJ's offer has fallen to US$116m. SMM is asking the High Court to make PPLH transfer the remaining 3m shares in the shipyard to SMM against its offer of $59.4m


Sino-Env: Co expected to resume trading on the last wk of Sep 2011. Though losses expected to be lower yoy. Co attributed loss to intense competition, continued weak market demand for tubular goods and welded oil and gas products as well as lower profit contribution from the co’s automotive products.

Treasury China Trust

Treasury China Trust (TCT): decent 2Q11 results. Note there are no comparative statements for 2Q10 as TCT was only constituted on 19 May 2010.

Net property income +13.9% qoq to Rmb 73m, supported contributions from the newly acquired Central Avenue Mall Qingdao (55% stake) and Huai Hai Mall Shanghai (100% owned) on 1 Apr, and 10 May rptvly.

Committed occupancy for the core Shanghai portfolio comprising City Center, Central Plaza and Treasury Building came in at 95.9%, well ahead of earlier guidance of 87.9%.
The properties also saw positive rental reversion of 10.7% in 2Q, maintaining 1Q’s momentum of 12.8% uplift.

Mgt notes the continuing improvement in market sentiment for office and retail properties in Shanghai, evidenced by declining vacant office space (11.5% at end ’09, 8.5% at end ’10, 7.3% at end Jun ’11), as well as higher avg mkt rents (+4.6% yoy for 2Q11 to Rmb 8.3 sm/day).

Trust to distribute 5cts for 1H11. Mgt reiterates guidance for 10cts distribution for the entire FY11, which translates to a forecast yield of 5%.

Co remains well within debt covenant guidelines, i) Gearing, actual 35.4% vs max 45%, ii) devt assets to total assets, actual 17.3% vs max 30%, iii) payout of distributable income, actual 100% vs min 80%.
TCT’s avg interest rate for 1H11 is 3.97% for the Core Portfolio, vs PRC interest rates of 6.56% pa.

DTZ values the current property portfolio at Rmb 11.7b, +9.3% for the half yr.
NAV rises 13.6% to $4.17 (or $3.90 if the convertible bonds due Sep ’14 are converted), which translates to valuation of 0.5x P/B.

Mgt guides for 18.7% increase in gross revenues for 2H11 vs 1H11. Draws attention to the recently approved Unit Buyback Program, says the Board is committed to proactively consider all measures at its disposal to close the gap btwn unit trading price and NAV, as it views this disparity as unacceptable.

In view of corporate governance concerns relating to China companies, we note that the significant shareholders, Chairman and CEO are Caucasians. The trust was also recently awarded the “Best Asian Real Estate Fund” of 2011 by Asian Investor and “Outstanding China Property Trust” for 2011 by Capital Magazine. We note that its quarterly financial disclosure is one of the most extensive amongst the SGX-listed counters, not just among the S-chips.

Pre-results, all 3 brokers had Overweight ratings on the trust, with TP ranging btwn $2.15-2.30.


SATS: Reported 1Q12 results which saw bottom-line below expectations.
Rev at $382.1m, +22% yoy but -8% qoq, while net profit at $44.3m, -4% yoy and -16% qoq. Top line was supported by TFK consolidation. Excluding TFK, rev +7% yoy led gateway services (+9% yoy), inflight catering (+12% yoy) and non-aviation food solutions (+5% yoy).

Poor bottom-line partly affected by one-off write-back at TFK, excluding this underlying net profit fell 17% yoy to $37m as margins contracted to a long-term low. Going forward, mgt expects pressure on wages and food costs to persist but indicated scope for subsequent margin recovery. Tip UK rev to strengthen with seasonality and (gradual) aviation recovery in Japan should support TFK contributions. No further details regarding the CEO succession were provided.

At current price, valuations insufficiently attractive, with Co. trading at 14.4x FY12E P/E, slightly below its 15x 2-yr average while its near-term growth profile and operational outlook (with lack of positive catalysts) suggest upside from current share price may be limited, although share price could be supported by an attractive 5.2% div yield. Deutsche maintains Hold with $2.75 TP and BNP maintains Hold with $2.63TP.

SIA Engineering

SIA Engineering: Announced 1Q11 rev which was in line.
Rev at $277.6m, -3.7% yoy and +2.1% qoq, while net profit at $68.1m, -3.8% yoy and +11.8% qoq. Profits from associated Co’s at $37.2m, -5.1% yoy and +11% qoq, while operating Margins improved at 13.4% vs 12.6% yoy.

Lower yoy rev due to benefit of jobs credit and higher non-operating income in 1Q10. Excluding these items, core net profit would have been $0.5m or 0.7% lower. Expenditure, at $242.9m was 3.6% lower due to lower material costs from reduced usage, but short term problems that will continue, include rising operating overheads like manpower and higher subcontracting costs related to Mid-east expansion. Weakening US$ is expected to affect associates/JVs, although the associates/JVs should benefit from increasing demand, as almost all of its rev is in US$.

Going forward, grp tips prevailing global economic uncertainties and oil price volatility to impact aviation industry, but expect demand for MRO services to be sustained. At current price, valuation appears fairly high, trading at annualized 16.7x FY11E P/E vs historical average of 14x, while balance sheet remains strong, with Net Cash of $645m. Kim Eng maintains Sell with $3.66 TP and BNP Maintaints Hold with $4.59TP.


OSIM: Strong results with better than expected profit. 2Q rev at $138.6m +6.0% yoy -6.9% qoq and net profit at $18.8m +55.3% yoy -6.8% qoq. Strong profit growth attributed to higher profit margins from better product mix and higher productivity possibly due to co moving production of high-end chairs from Japan to China. EBITDA margins appear stable at approx 20% lvls from prev yr 15% lvls.

The increase in rev yoy was due to launch of new products. Growth in sales came from South Asia improving 23.3% yoy forming 38% of rev, co is in a net cash position of $59m excluding $120m bond issue in July North Asia remained flat but still contributed a 57% share of the rev. Co has incorporated OSIM-TWG (North Asia) and intends to build a tea salon and launch the brand in HK within the yr. TDR approval has been extended by 3 mths to 28 Oct so some update on status should be expected by end Oct.

Co has declared a 2nd interim div for the period with EPS of 2.57c. At 1H11 EPS of 5.55c annualized P/E is approx 14.0x. Macq maintains Outperform with TP$2.06 on higher expected earnings but overhang of possible acquisitions given cash position.


FCT: Worse than expected revenue due to AEI works at Causeway Point, 3Q rev at 24.2m was -10.0% yoy -1.9% qoq. Net profit at 10.7m -23.4% yoy -18.9% qoq. 3Q DPU of 1.95c was -5.8% yoy -5.9% qoq.

The AEI works at Causeway Point are expected to complete in Dec 2012 but occupancy rates should rise from current 78% to above 90% in Sep. Overall portfolio occupancy rates remain strong at 88% with rental reversion positive at +4% Acquisition of Bedok Point is expected which mgmt has signaled a possible equity raising for partial funding (likely to cause short-term overhang).

Annualized YTD DPU of 5.97c is approx 5.1% and FCT is trading at current 1.2x P/B. Credit Suisse maintains Outperform with TP$1.90, StanChart maintains Outperform with TP$1.69 and Daiwa maintains Hold with TP$1.53.

CDLH Trust

CDLH Trust: 2Q11 results generally in line.
Revenue at $34.6m, +12.6% yoy, +7.1% qoq, driven by improved hospitality performance across the portfolio and contribution from the recently acq Studio M Hotel on 3 May ‘11. RevPAR for CDLH’s Spore hotels grew 4.8% to $205, as the higher avg room rate ($232, +5.5% yoy) offset a slightly lower avg occupancy rate (88.1%, -0.4 ppt yoy).

Net property income of $35.6m, +24% yoy, +18.3% qoq.
DPU is 2.96 cts, +15.2% yoy, despite having issued more units in exchange for the acq of Studio M Hotel. This translates to an annualised yield of 5.65% on yday's $2.10 closing price.
Distributions are semi-annually, hence the Trust will distribute 5.34ct for 1H11.
Gearing stands at 26.3%, with still plenty of debt headroom for acquisitions with target gearing at 40%.
On the tourism sector's outlook, the Trust notes Spore's monthly visitor arrivals have surged to record highs since Dec ‘09, and current year arrivals are outpacing STB's forecast of 12-13 m for 2011.
NAV flat at $1.53, which translates to a valuation of 1.4x P/B.

Mapletree Industrial Trust (MINT)

Mapletree Industrial Trust (MINT): Good set of 1QFYMar12 results.
Revenue +13.3% yoy, driving a 13.6% yoy / 2.7% qoq increase in NPI, surpassing mgt’s forecast by 6.6%. Underlying organic growth was intact, with retention rate and portfolio occupancy rising, even as rents increased.
Portfolio occupancy improved from 93.2% to 94.3%, with strong upward rental reversions resulting in +2% qoq increase in avg passing rents to $1.52 psf.
DPU came in at 1.98cts, +2.5% qoq, and +8.8% ahead of mgt forecast. This translates to an annualized yield of 6.9%.

Catalysts to come from
i) positive rent reversion for remaining FY12 as the rental caps on 80% of its properties (flatted factories) expire on 30 Jun ’11, given that portfolio rents are below spot rents, and
ii) acquisition of tranche 2 of JTC’s 2nd phase divestment portfolio for $400m. This will boost MINT’s portfolio value and NLA by ~18% to $2.6b and 1.3m sm rptvly. An equity fund raising appears likely, as funding the acq entirely with debt would result in gearing rising from the current 36% to 45.5%. Mgt expects the acq to be CPU accretive. The transaction is on track for completion by end Aug ’11.

Mgt remains positive on the medium term outlook for industrial property.
MINT trades at 1.2x P/B, on par with A-Reit.
Deutsche maintains Buy with TP $1.30, for attractive valuation at 7.2% FY12E yield.
Macquarie, CIMB keeps at Outperform with TP $1.26, and $1.27 rptvly.

SG Market

SG Market: Spore shares have a weak lead from Wall Street, where stocks fell amid continued nervousness as US debt talks drag on in Washington as the deadline for a deal creeps closer. The raising of the US debt ceiling continues to remain as the forefront issue in many investors' minds & the failure to do so by Aug 2 would have drastic consequences. Thus, until this political deadlock is settled, we should see limited gains in equities in the short-term despite the release of decent earning reports. CDL Hospitality Trusts may be in focus after its 2Q results, also Tiger Airways after it reiterates it plans to increase its fleet to 20 aircraft. Genting Spore could see some visibility from earnings results at rival casino Marina Bay Sands, where EBITDA rose 42.5% on quarter to US$405.5m. Analysts tip support for the STI at 3160 with resistance at 3200.

Tuesday, July 26, 2011


Hyflux: Trading central (Bloomberg) has Technical Sell Call. Note that the downside prevails as long as $2.08 is resistance. Alternative scenario is for the upside breakout of $2.08 which would call for $2.14 and $2.17. Note that the RSI is below 50. The MACD is negative and below its signal line. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (standing respectively at $2.04 and $2.03). See next levels at $1.95 and $1.91.


F&N: Trading Central (Bloomberg) Has Technical Buy Call. Note that the upside prevails as long as $5.80 is support. A downside breakout of $5.8 would call for $5.52 and $5.35. Note that the RSI is above 50 and MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (standing respectively at $5.88 and $5.85).
Next level resistance at $6.02, $6.37 and $6.53


Anwell: wholly owned subsidiary Dongguan Anwell Digital Machinery (DADM) has secured a Rmb700m capital injection from the Dongguan Municipal Govt for the development of its 2nd thin film solar panel manufacturing base in the city.

In turn, the Dongguan Govt will take a 19.5% stake in DADM, with an option to sell its shares to Anwell at cost plus interest after 5 years. While this translates to a value of Rmb 3.6b (S$680m) for DADM, we must be mindful that construction of the 2nd plant has not even been completed yet. Hence such value cannot be realized yet. Alternatively, one can view the govt’s capital injection as a form of subsidy.

In total Anwell has secured Rmb1.2b in long-term funding for the Dongguan Plant, as well as the expansion of the Anyang plant from the govts of the respective cities. Anwell aims to achieve 1.5 GW of annual pdtn capacity in 5 years.

Co was loss making in the last quarter.

Recall, last wk we mentioned that investors are starting to question profit estimates of China’s soalr markets after Moody’s highlighted accounting risks at 5 Chinese companies, incl LDK the world’s2nd biggest solar panel maker. Moreover the industry is struggling with falling demand and prices following subsidy cuts in Germany and Italy, while the supply glut continues to grow with players still embarking on output increases.


Singpost: UBS downgrade to Neutral from Buy and cut TP to $1.14 from $1.27. Forecast operating margins to structurally decline from 34.6% in FY11 to 31.7% by FY16 and to 25% in the long term due to: 1) near-term wage inflation pressure; 2) declining mail business margins; and 3) greater contribution from the lower-margin logistics business.
Expect further logistics-focused acquisitions over the next 12-18 mths. Add that defensive stock nature and 5.7% div yield should help support share price.


Armada: Profit warning for 1H11. Directors expect that group will remain loss making and will report a loss for 1H11. This is attributed to continued low sales.
Co to announce results around mid-Aug 2011.


Bonvests: Profit warning for 2Q11. Directors expect that profit will be significantly lower than the previous year due to lower revaluation gains on investment properties, the political situation in Tunisia and initial operating costs for the new hotel in Zanzibar.
No indication of the date of release of results.
Stock currently trades at 6.6X P/E.


DBS: RBS note that 2Q11 results on 28 Jul. Expect Net Profit of $775m, -4.0% QoQ and +7.9% YoY after adjusting for goodwill charges in 2Q10. Like DBS for its restructuring potential, high gearing to eventually higher rates and attractive valuation. Stock looks attractive, trading at 10x FY12E P/E with 15% EPS growth and 1.2x FY12E P/B and 12.2% ROE.


SG O&M: CS has sector report. Note that Petrobras approves 5yr investment plan of US$225b and believe KepCorp and SembMarine remain well positioned to win significant orders from Petrobras’ re-launched tender for 28 deepwater rigs. Expect both yards to be awarded contracts worth US$7b combined, providing further upside to order forecasts.

With new yards under construction in Brazil, Kepcorp and STX OSV are likely to benefit from increased tendering activity for offshore support vessels built locally. Maintain O/p on Kepcorp (TP $14.60), SMM (TP $6.60) and STX OSV (TP $1.80).

Sembcorp industries

Sembcorp industries: Announced that it has been awarded a $121m refuse collection and recycling contract in SG to provide refuse collection and recycling services to the Bedok sector in SG. With the contract, Sembcorp now serves 5 out of 9 geographical sectors in the country. Transaction is not expected to have a material impact on the EPS and NTA of grp for FY11.
We note that majority of street remains bullish on Co. with 13 Buy ratings, 3 Holds and 2 Sell with a mean TP of $5.99.


MalaccaTrust: IPO on Catalist with 85m shares at $0.22, 1.32x over-subscribed, of which 83m were placement shares. Co raised approx net proceeds of $16.7m and intends to use $16.0m for repayment of borrowings. Co is a Indonesia based financial services grp with net profit of IDR40.5b ($5.7m)


Ecowise: Lifts trading halt. Invests GBP2.0m for 20% of JV venture capital co, China-UK Low Carbon Enterprise Co (CULCEC). Other 51% is held by a Chinese state-owned enterprise and remaining 29% by Carbon Trust Intl. Co also signs a collaboration agreement on the dev of a Cleantech Incubation and Venture Capital Mgmt System & Process in Southeast Asia which will select and develop cleantech cos in SEA. This collaboration and investment is co’s first foray into venture capitalist space although still within core environmental business.


NOL: June operating data weaker than expected.
Volume slowed to +5% growth yoy, from the ytd avg of +8% growth. The higher volumes were boosted by Intra-Asia trades, which helped offset lower volumes into the US in June, demonstrating the impact of the soft patch in the US economy. Volume growth has been on a decline from 12% in Feb-Mar, 9% in Apr, and 7% in May.

Avg revenue per FEU dropped 13% yoy to US$2513, reflecting continued rate pressures in the Asia-Europe and Transpacific routes.

The difficult trading environment was echoed by peer OOIL (316 HK) in their 2Q trading update last wk.

The silver lining is that NOL announced last wk that it would be putting through a $400/FEU peak season surcharge on cargo from Asia and Middle East to the US starting 1 Aug. This is 2 wks earlier than a no. of competitors, so it remains to be seen if it will be implemented.

Street expects NOL to report a net loss (wider than 1Q’s US$10m loss) when it reports 2Q results on 12 Aug.

Deutsche keeps at Sell with TP $1.34, says not surprised if the industry ends the yr in a loss, and given book value erosion, current P/B valuations at 1.3x are not attractive enough to warrant an upgrade.

Macquarie is Neutral with TP $2.25.


Rickmers: 2Q11 results generally in line.
Revenue at US$37.6m, +3% yoy, +5% qoq, as one vessel contracted a higher net charter rate of US$23.9k/day that took effect on 25 Mar ’11, compared to the net charter rate of US$8.3k/day in 2Q10.

Net profit at US$8.6m, vs US$0.6m yoy, due to write back of vessel impairment, and lower finance expenses (absent one-off loan restructuring fee) which more than offset goodwill impairment, and higher vessel operating expenses. Qoq, net profit -8.4%.

Cash flow from operating activities at US$27.8m, -1% yoy, due to movements in working capital and dry-dock reserved required to meet future dry-dock obligations.
The trust continued to deleverage its balance sheet by paring down its outstanding bank loans of US$671m at end 2010 to US$647m currently.
DPU at US 0.6cts, +5% yoy, flat qoq. Translates to annualized yield of 7%.
NAV/unit rises to US$0.87 from US$0.83 in FY10, trust trades at 0.4x P/B.

The Group owns 16 containerships, of which 15 are on long term time charters and 1 on a 1-yr time charter. Vessel utilization is 99.9%, with avg daily time charter rate at US$25.8k/ vessel.

Starhill Global

Starhill Global: Announced strong 2Q11 results, which were broadly in line with expectations. Property Income at $35.6m, +18.9% yoy and flat qoq, while DPU at 1.04c, +14.3% yoy and flat qoq. Strong yoy increase primarily attributed to contributions from Starhill Gallery and Lot 10 in Msia, which were acquired in Jun10.

Grp continue to see positive momentum for retail spending in Asia, driven by healthy economic and job prospects. For SG, note that occupancy for Wisma office rose to 92% while that of Ngee Ann office maintained above 95%, though negative office rental reversions continue to set in with transacted rents below 2007 peak levels. Retail space at Wisma and Ngee Ann remained healthy at 98% and 100% occupancy. For Overseas property, Grp’s portfolio in China and Aus saw full occupancy, while its Jap portfolio saw Overall committed occupancy at 78.9.

We note that at current price, valuations are compelling, trading at 0.70x P/B, yield 6.4% and gearing at 30.2% vs (SGX REITs average of 1.02x P/B, yield 5.2% and gearing at 38%). Interest coverage stood at a strong 4.4x. Going forward, grp remains positive on outlook, tipping growing consumer spending and rising tourism numbers to support demand for prime retail space and cited SG and China’s 2nd tier cities as possible avenues for acquisitions. Macquarie maintains neutral with $0.65 TP, Daiwa maintains O/p with $0.85 TP and CIMB maintains O/p with $0.74 TP.


OKP: Higher than expected profit figures. 2Q rev at $28.3m is -28.8% yoy -13.8% qoq but gross profit at $11.2m +69.6% yoy +27.3% qoq. Net profit was up 60.7% yoy +31.6% qoq at $6.9m due to a higher gross margin. Co attributes higher gross margins to cost savings from non-recurrent design-and-build construction projects and does not expect this going forward.

Construction rev formed 85.2% of total rev a decline of 30.6% yoy attributed to completion of existing projects and lower recognition of rev from newer projects. Of note, OKP has a net cash position of $97m approx 49% of current mkt cap of $197.9m Co's order book is approx $381.6m to be completed by 2014 and has secured 5 public sector projects totaling $100.3m YTD

Expects a positive though competitive outlook with a govt pipeline for committed large public infrastructure projects such as MRT line extension including the Downtown Line and major road works such as the North South Highway. 2Q11 EPS at 2.43c with annualized 1H2011 P/E at approx 7.6x. An interim div of $0.01 per share has been declared for 1H2011. Peer Hock Lian Seng trades at 5.9x trailing P/E. CIMB maintains Buy at TP$0.98

SG Market

SG Market: Spore shares have a weak lead from the US, where stocks fell as investors remain risk averse as they wait for lawmakers to strike a deal on the US debt ceiling. The STI manage to bounce off its 3150 support yday. While analysts expect the benchmark index to remain on an upward path to year-end, they expect near-term volatility until more clarity emerges on headwinds. To that end, all eyes will be on US President Obama's address at 0100 GMT for more cues.

Stocks in focus today include NOL after releasing its latest operating data, Starhill Global & OKP posting solid 2Q results, Sembcorp Industries securing a $121m refuse collection contract & Malacca Trust making its debuts today on the Catalist board.

Monday, July 25, 2011


SembMarine: Upstream reports that Songa Offshore has secured a contract for the ultra-deepwater semi-sub rig Songa Eclipse newbuild that is set to roll out of SMM's Jurong Shipyard in Aug. Highlights the US$268m 1 yr contract for the rig is believed to have laid the groundwork for potential fleet expansion at Songa.

Upstream understands that Songa had enquired about both the mid-water Moss Maritime CS40 design semi-sub and CS50 deep-water version. SMM is currently building 2 Moss Maritime CS50 ultra-deepwater semi-sub for SeaDrill. While JPM recently highlighted Jurong Shipyard is still in running for Songa's 2 semi-sub orders with a potential order size of US$2-2.5b.

SMM’s YTD order wins of $2.2b pales in comparison to Keppel’s $7.4b, but the former could soon play catch up if its order momentum picks up. Recall, SMM recently secured a $600m contract from PTTEP for a processing platform.

The majority of the Street has Buy ratings on SMM, with recent TP btwn $6.30-6.80.

AIMS AMP Capital Industrial Reit

AIMS AMP Capital Industrial Reit (AAReit): obtained provisional permission in Jun to redevelop 20 Gul Way to 107.8k sm GFA (1.16m sf GFA). The property is currently one of AAREIT's larger properties at 35.1k sm GFA (valued at $42m), with significant underutilised plot ratio.

Assuming $150-200psf cost, StanChart estimates this project to cost $174 - 232m. But under the Property Fund Guidelines, REITs can only develop up to 10% of their deposited property, which implies that AAREIT can only undertake up to ~$84m of development.

Assuming AAREIT develops the project in phases, the trust could build 50% of the approved GFA for $84m as Phase 1. Expect some loss of income in FY11-13E during the re-development period, which may cause DPU to fall by 5-6%. However, upon completion, the asset could prove ~4% accretive to FY13/14E DPU if 6.5% yield on cost is achieved.

Such redevelopment could cause AAREIT's gearing to rise from 32% to 37%.
The REIT be releasing its 1Q11 results tmrw evening, and potentially more details could be available then.
StanChart reiterates Outperform rating, TP $0.23/unit.
AAREIT provides 9% 2011E DPU yield and is trading at 20% below NAV.


OKP: SIAS issued a bullish technical call on OKP, long at $0.635 with potential break at $0.655 to $0.685 and $0.700. Highlights double bottom is one of strongest reversal signals, coupled with bullish signals from other indicators


UOL: Trading Central (Bloomberg) has a Technical Buy Call. Note that the upside prevails as long as $4.93 is support. Add that RSI is above its neutrality area at 50. The MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (standing respectively at 4.94 and 4.93). UOL is currently trading near its 52 week high reached at $5.04 on Friday. Next level resistance tipped at $5.15 and $5.21.

Tuan Sing

Tuan Sing: CIMB has Technical Buy Call. Note that share price is consolidating in a triangle pattern with prices holding above its 30-day SMA. If the candles can swing past its previous swing high of $0.385, and expect the stock to edge towards $0.405 and $0.42 next. Indicators are showing signs of improvement. MACD has swung back into positive territory while RSI has also bounced off lows. These could be seen as early signals for stronger rebound ahead.
Stock is a buy now with a stop placed below its recent swing low of $0.345. In the immediate term, a triangle breakout should instill greater positives into the stock and push prices towards the stipulated resistance levels.


Cosco: CIMB has Technical Buy Call. Note that despite recent pullback, Cosco still holding steady in bullish flag pattern. Selling pressure appears to be well-contained and think stock is bound for one more upleg. Prices need to swing past its 30-day and 50-day SMAs to reaffirm bullish stance.
Bullish divergence on the MACD indicator suggests that selling pressure is tapering off while RSI has also hooked upward. Once the 50-day SMA (now at $1.88) is taken out, expect prices to charge towards $1.97. The 200-day SMA at $2.05 is also a magnet for prices. As long as prices remain above its recent swing low of $1.71, think the odds still favour the bulls. Stop loss levels are $1.60 and $1.52.


Cosco: CIMB has Technical Buy Call. Note that despite recent pullback, Cosco still holding steady in bullish flag pattern. Selling pressure appears to be well-contained and think stock is bound for one more upleg. Prices need to swing past its 30-day and 50-day SMAs to reaffirm bullish stance.
Bullish divergence on the MACD indicator suggests that selling pressure is tapering off while RSI has also hooked upward. Once the 50-day SMA (now at $1.88) is taken out, expect prices to charge towards $1.97. The 200-day SMA at $2.05 is also a magnet for prices. As long as prices remain above its recent swing low of $1.71, think the odds still favour the bulls. Stop loss levels are $1.60 and $1.52.


Rotary: Amassed total of 13 contracts worth $40m from Apr to Jul which involves EPC, maintenance, electrical and instrumentation works. One project is related to Taiwan-based Chang Chun Group’s $500m invt to build a petrochemical plant on Jurong Island. Co is continuing on with its 2 major projects in Middle East, its Saudi Aramco project in Saudi Arabia and Fujairah Oil Terminal project in UAE. As of last reported, 4 May 2011, co had order book of $823.9m, to be completed by end 2012. Rotary trades at 6.9x fwd P/E with all 4 houses calling a Buy on stock.

Golden Agri

Golden Agri: Trading Central has a Technical Buy Call. Note that the RSI is above 50. and MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (standing respectively at $0.69 and $0.69). Finally, Golden Agri-Resources has crossed above its upper daily Bollinger band $0.72. See next level resistance at $0.73, $0.763 and $0.779.


SMRT: Trading Central (Bloomberg) has Technical Sell Call. Note that the downside prevails as long as $1.91 is resistance. Note that RSI is trading below 30 and this could mean that either the stock is in a lasting downtrend or just oversold therefore a rebound could shape (recommend to look for bullish divergence in this case).

MACD is negative and below its signal line, while the configuration is negative. Moreover, the share stands below its 20 and 50 day MA (standing respectively at $1.91 and 1.9). SMRT Corp is currently trading near its 52 wk low at $1.85, next levels would be $1.79 and $1.77.

Kyodo-Allied Industries

Kyodo-Allied Industries: receives sh/h approval to acq Chinese property developer Weiye Group for $600m in a reverse takeover deal (RTO). Weiye has an est mkt cap of $716m. Its shares are scheduled to begin trading on Aug 16.
The proposed acquisition, announced Mar 10, will see Kyodo-Allied issue 1.64b new consolidated shares at $0.365 apiece to the owners of Great Spirit Mgt, the holdco of Weiye. To comply with SGX's requirement for a min issue price of $0.20, Kyodo-Allied will consolidate every 3.5 existing shares into 1 consolidated share.
Under the deal, Weiye will emerge with 83.8% of the enlarged share capital. Kyodo-Allied will be renamed Weiye Holdings, and a change of board of directors will also take place.

Post-RTO, mgt says the group will have ~$40m which will be used to meet expansion needs and plans. The Kyodo-Allied's existing business will not be disposed of, and will continue to be operated and maintained by its existing mgt team.
Weiye is based mainly in the Chinese provinces of Henan and Hainan. The co, which has posted a profit for the last 3 FYs, made a net profit of Rmb75.9m (S$14.2m) last year. Mgt says Weiye has more than 1.2m sm of gfa in its devt pipeline, and is confident of the group's prospects as the property cooling measures in China are targeted at large cities and not the Tier-3 and Tier-4 cities where Weiye is active.

Yang zi Jiang

Yang zi Jiang: Barclays Maintain O/w with TP $2.20. Note that investors have overly focused on the potential downside in a worse-case scenario involving widespread defaults and spiralling asset value declines in China.
Potential catalysts for YZJ are 1) increased disclosure on the absolute size of collateral relative to loan value; and 2) potential unwinding in 2H11 of these investments (equal to 36% of market cap), due to increased bank regulator scrutiny.


UOB: Deutsche maintains Hold with TP $21.00. Forecast Net Profit of $620m, +1% QoQ and +3% YoY and expect strong loan growth trends to continue, resulting in rising net interest income, albeit total revenue growth will likely be impacted by weaker trading revenue.


SIA: Citi maintains Sell with $13.90 TP. 1Q12 result due 28 July and houseforecast $160m, (-6% qoq, -37% yoy). Add that SIA has guided for a challenging near term operating performance (weighed upon by high jet fuel prices, flattish yields and soft
near term forward bookings). Despite the near term price support of a $0.80/share special dividend, which goes ex-div 2 Aug11).

RBS maintains Hold on stock with TP $15.50. House forecast normalised EPS of $0.15 vs 1QFY11 EPS of S$0.21. Think the results briefing on 31 Jul will see discussion of recent developments, such as SIA's long-haul low-cost subsidiary and its stake in Tiger.

Genting SP

Genting SP: CS maintains O/p, with TP $2.65. Note that sentiment remains weak and investor concerns include regulatory risk and growth potential. 2Q11 results in mid-Aug likely to be a negative catalyst, combination of weak fin mkts and poor results and could potentially hamper short-term share price performance, but view any dips as a potential buying opportunity.

Expect GENS to benefit from: (1) rising tourist arrivals to Spore; (2) positive GDP growth in SG and neighbouring Asian economies from 2011-12; (3) ) a high proportion of local millionaires bodes well for long-term VIP casino revenues; (4) mainland Chinese have become the top foreign purchasers of residential properties in Spore; and (5) robust commodity prices in Msia.


Ezra: RBS maintain Buy with TP $2.00. Note that share price has over-corrected on its 3Q earnings miss and will recover on the back of future contract wins and subsequent earnings recovery. Subsea (AMC) profits to improve, with at least US$600m worth of new contracts.

Tip core offshore support earnings to grow at a steady 9-10% on vessel adds
Earnings lowered to reflect 9M11 and management guidance. Stock appears undervalued at CY12F PE of 8x, given its FY12F 91% yoy and FY13F 21% yoy earnings growth.


HanKore: Signed agreement with municipal govt of Shanxi for projects of total waste water treatment capacity of 60k tons per day and 50k tons of treated water for recycling use per day. Projects include BOT water treatment project and a renewable recourses industrial park BOT water treatment project The total amount of investment of the first phase of the both projects is around RMB 100 million. The two projects are expected to start construction in mid Sep 2011 and to be completed in June 2012. Co currently trades at $0.04 and changed its name from Bio-treat in May effectively.


Boustead: Contract to design, build and lease an integrated distribution and manufacturing facility to Continental Alloys & Services in Sg. Facility will have GFA of 5.5k sqm and 2 flr office. Co will focus on growing leasehold portfolio to enhance recurring income stream. As latest contract is not a design-and-build arrangement, contract will not be added to co's orderbook at current $255m. Co now trades at forward P/E of 11.8x Our in-house has a Buy call and DBS has a Hold on Boustead.


Mermaid: Subsi MTR‐2 Ltd. has secured a contract of potential $26.5m with an international upstream oil and gas company ("Client") to provide drilling and related services. Work under the contract has already commenced and is for approx 9 mths. Mermaid most recently posted a loss of THB218.0m ($8.8m) but the results from recently listed associate AOD could provide a possible catalyst.

Jasper Investments

Jasper Investments: A key feature in The Edge this week. Co. has been pushing towards direction as SG’s first and only deepwater driller. Despite owning only one single drillship, grp will soon have a larger and more diversified fleet when 2 jack ups are delivered over next 2 yrs. Aims to focus attention on securing long-term contract of at least a yr for the jack-ups.


Yongnam: Co. was among the key features in The Edge over the weekend. Co. eyes tunnling contracts ard region and more projects in SG. Sees immense opportunity in HK and has been tendering for work on a new-line. (In total tendering for some $350m projects in HK, of which half is related to ZuHai project)

Also targeting Indo, where Jakarta is planning a metro, with money borrowed frm Japan. Grp’s current orderbook stands at $410m vs FY10 rev at $350m, under pinning earnings visibility till 2013, with 70% for strutting contracts. Grp tips HK to account for half of its rev in near future. At current price, valuations are compelling at 5.7x FY11E P/E vs peers average of 15x.


GLP: Has been let away scot-free, after being just chided by MAS for not disclosing in its listing prospectus that it had a non-compete arrangement with ProLogis, saying Co shold have acted more prudently. However, GLP did not breach the Securities and Futures Act, and MAS will therefore not take any regulatory action.

Tiger Airways

Tiger Airways: Annouced that it has plans to grow its ‘still strong’ business across Asean, and is making good progress in getting the suspension on its Australian operations lifted. Add that the business is still strong and the growth story intact.

Separately, court hearing for Tiger’s application by CASA, which was initially to have taken place on 22 Jul11 has now been adjourned to 28 Jul11, following a joint application from Tiger and CASA to court for an adjournment, which raises concerns if a compromise/negotiation can be reached before 1st Aug.


SembMarine: its wholly owned subsidiary, Jurong Shipyard (JSPL) has filed a Notice of Arbitration against its former auditor, Ernst & Young, in respect of the disputed unauthorized FX transactions. Although JSPL has settled with the banks, it believes it has a valid claim against E&Y.


SATS: CEO Clement Woon resigns to pursue other interests but will stay on in an advisory capacity till 31 Dec 2011. Meanwhile, Tan Chuan Lye, EVP of Food Solutions has been appointed as interim CEO. SATS intends to embark on a global search for a new CEO.

Recall last wk, Deutsche and CIMB downgraded the stock, as the co faces margin pressures amidst rising food costs, and delay in positive impact from the recent TFK acquisition due to uncertainties in Japan. While they like the long term fundamentals, they expect near term headwinds to dampen sentiment on the stock.
Deutsche cut to Hold from buy, slashed TP to $2.75 from $3.80.
CIMB resumed coverage with Underperform and $2.60 TP.


SingTel: plans to inject $1.89b worth of infrastructure assets into NetLink Trust, a business trust it solely owns.
The assets include exchange buildings, ducts and manholes used by OpenNet (30% owned by SingTel), the operating co in charge of laying optical fibre cables for Spore's Next Generation Nationwide Broadband Network (NGNBN).

The trustee-mgr for NetLink Trust is CityNet Infrastructure Mgt, a subsidiary of CitySpring Infrastructure Trust. The sale is part of the Govt's requirement for the telco to divest NGNBN-related assets to an independent firm by mid-2011 and sell its stake by 2014. Therefore, SingTel will own 100% of NetLink Trust until Apr 2014, when its interest will be diluted to <25%, likely by way of a public listing of NetLink Trust.

NetLink Trust's revenue will come directly from SingTel and indirectly OpenNet. Its income will mainly be fees and charges from the use and access to the ducts, manholes and exchange buildings by SingTel and OpenNet, as their copper and fibre cables are routed through these assets.
Under the relevant revenue model, OpenNet will pay fixed and variable fees to SingTel for usage, access rights and maintenance of its fibre cables that are situated within the NetLink ducts, part of which will be passed on by SingTel to NetLink Trust. In addition, SingTel will pay fees to NetLink as well for the same rights for its own copper and fibre cables as well as the lease of space within the exchange buildings.

The announcement should not come as a surprise to the market given that it is part of an agreement with the IDA made more than 2 years ago.

First REIT

First REIT: DPU at 1.6c -21.5% yoy compared with prev yr 1.9c Reported results on Friday with gross rev at $13.2m +75.3% yoy -9.3% qoq with net profit at $8.7m +84.0% yoy -34.2% qoq. NPI was $13.1m +75.7% yoy -9.5% qoq. The increase in figures were due to 2 new hospitals acquired, the Mochtar Riady Cancer Centre and Siloam Hospitals.

Results were lower than in 1Q due to a gain in divestment of Adam Road property in 1Q which is expected to be distributed in a special distribution in coming quarters when IRAS responds on the tax treatment.

First REIT has first right of refusal for properties owned by sponsor PT Lippo Karawaci which has plans to develop 25 hospitals in Indonesia. Co is also currently in talks to acquire 2 hospitals from its sponsor. Annualized 1H2011 DPU of 6.4c is approx 7.6% yield at last done price of $0.835

Raffles Medical

Raffles Medical: Announced good set of 2Q11 results, broadly in-line.
Rev at $67m, +14.3% yoy and +3.9% qoq, while Net profit at $11.6m, +10.2% yoy and +11% qoq. Strong showing led by broadbase growth across its two divisions with rev from Healthcare and Hospital Services growing by 12.2% and 14.5% respectively.

Grp has declared an interim div of 1c/share, while Balance Sheet remains strong, with a Net Cash position of $3.2m. Co. will have results briefing at 11 a.m to comment on results and future prospects. We note that at current price, valuation appears fair, with grp trading at a simple annualized 28.3x FY11E P/E vs historical average of 21x.

Fortune Reit

Fortune Reit: 2Q11 results largely in line.
Revenue +11.4% yoy to HK$228m and NPI +8.2% to HK$158m.
DPU improved 3.1% yoy to HK ct 6.07/unit, for a total of HK ct 12.80/unit for 1H11. This represents an annualized distribution yield of 6.7%.

Net gearing improved to 18.4% from 21% the last quarter as cash balances increased by ~HK$230m. The trust booked a HK$ 2.4b revaluation gain this quarter, compared to a HK$ 900m gain previous year. Effective borrowing rate was 4.44% for this quarter.
Occupancy and rental rates improved across the portfolio, underpinned by growth in the HK retail sector. Occupancy rates stand at 98.1% (97.8% last quarter) while rental reversions for renewals were at 13.8%.

Portfolio passing rent increased 10.2% to HK$30.3 psf. AEIs at City One Plaza will commence in 3Q and should be completed by 4Q12. The project is targeting a 15% ROI on the HK$100m cost. The Ma On Shan Plaza will be reconfigured with works to start in Aug ‘11 and be completed by the end of the year. This will provide more diversified offerings and >50% of the space has already been pre-committed.

Mgmt expects organic growth to be strong as 22.1% of gross rental income is due to expire in 2H11, representing opportunities for further rental reversions. More AEIs will also be in the pipeline to drive revenue growth. Although co has significant debt headroom up to 35% (~HK$4.3b), earnings accretive acquisitions might be rare due to the tight market yields.

StanChart notes possibility of opportunities in other areas, potentially through M&A.
Stock currently trades at 0.6X P/B. Recent recommendations are positive with TP HK$4.37 – 5.15.

Ascott Residence Trust

Ascott Residence Trust: strong 2Q11 results, with DPU of 2.33cts, +25% yoy, and +16% higher than mgt forecast made in Nov ’10.
RevPAY grew 17% to $140, on the back of double-digit RevPAU growth in Spore, Indonesia, Australia as well as from the UK properties acq in Oct ’10. The weaker mkts were Vietnam and Japan.
Gross margins rose from 46.5% in 1H10 to 55.1% in 1H11, on the back of higher RevPAU and good cost mgt.
Revaluation gains of $83m lift ART book value per share by 4% to $1.33.
ART now trades at 0.9x P/B, 7% yield.

Mgt is keen to acq assets in its sponsor’s China fund (~2k units in Tier 2 and 3 cities) and Ascott Raffles Place in Spore. But pricing and accretion will be key, as the risks of China expansion are high given the existing China portfolio has delivered a mixed performance, and gearing at 40.1% means ART would likely need to raise both debt and equity to make any substantial acqs.

Macquarie keeps at Neutral, raises TP marginally to $1.27 from $1.24.
StanChart keeps Neutral rating and TP $1.20.

SG Market

SG Market: Spore shares are likely to open cautious, consolidating its strong gains last week ahead of the US debt deadline. The benchmark STI chalked a weekly gain of 3.2% at 3182, marking 4 straight sessions of gains. The climb was significant as the index has broken out of the huge triangle formed since Nov last year, suggesting further upside. However, some caution can be expected with US stock index futures still significantly down at the moment (DJIA futures 114 points lower), which would dampen sentiment. Correction is unlikely to be steep with 3150 now providing support. SingTel may be in focus after it injects infrastructure assets worth $1.89b into NetLink Trust, which will be run by a unit of CitySpring Infrastructure Trust.

Friday, July 22, 2011


Dyna-mac: Results briefing update. Margins are expected to normalize to 23-24% in absence of exceptionals. Future plans for co involve expansion of yard to Bintan and exploring setting up facilities in Indonesia to bid for local projects. Major clients remain as SBM and Modec but have recently seen potential for another, Bumi Armada which have earlier awarded them a FPSO project. For orderbook guidance, co is in process of tendering $700m worth of projects and has 3 major tender results due for nxt quarter .

Hutchinson Port

Hutchinson Port: Credit Suisse highlighted that Asian ports are seeing softening volume growth & mixed leading indicators noting Shenzhen only achieved 2% yoy volume growth in 1H11, while Shanghai & Ningbo also saw May & Jun container volume growth slowed to 7-8% & low single-digit. China PMI new export orders further slowed to 50.5 in Jun while US ISM improved, suggesting a possible stronger 3Q11 demand, heading into traditional high season. House rates Cosco Pacific (1199 HK) as its top pick in the port sector for its resilient volume & earnings growth. HPHT is expected to release its 2Q results on 12 Aug. The port trust offers a FY11 yield of 6.2% & trades at 0.8x P/B.


DBS: Deutsche raises TP to $18 from $17.20, reiterates Buy for the structural upside to fee income and a free option on the cyclical.
Says DBS’ long term fee performance relative to peers has been poor, but reflects a historical lack of mgt discipline with the bank’s capital. Believes the new CEO brings a greater focus on execution and the fee shortfall could be easily addressed, delivering ROE upside of 110-150 bps, leading to 20% valuation upside.
Adds, in a blue-sky scenario of interest rate normalization, a repeat of the last tightening cycle would see DBS with an ROE >16% in 3 yrs time, which suggests a P/B valuation multiple of 2x, which implies a price of >$30/sh by end 2014.

Stock could be a potential break out candidate, having gapped up this morning to open above the $15 resistance. RSI is above neutral, and rising positively along with MACD and Stochastics.


Broadway: 2Q11 results slightly below consensus.
Revenue +1.5% yoy to $143.8m, gross profit -22.4% to $18.3m on the back of higher manufacturing costs. Gross margins fell to 12.7% from 16.7% yoy. Net profit -63.9% to $3.7m on rising labor costs.

However qoq, revenue is +4% with gross profit +2.2% and net profit -59.3%, as 1Q11 results was boosted by a $2.5m forex gain, with no similar gains this quarter.

Net gearing stands at 21.7%, up significantly from 16.7% the previous year due to financing purchases in PPE and decline in cash balances due to capex.
Co recommends a 1cts interim DPS, similar to previous year, placing annualized yield at 4.8%.

3Q11 margins to remain weak as co incurs additional expenses from the commencement of operations in Chongqing, however 4Q11 to see cost savings as they transfer their mass production programmes there.

Sales from HDD business to continue seeing higher volumes as they take on the new disk separator related products. Already 2Q11 volumes were higher than 1Q, despite 2Q being typically weaker. However margins for the new products are lower and coupled with inflationary pressures and forex translations, will contribute to weaker performance. Segment sales dropped 7.7% to $91m (up 5% before forex translation) while profit before tax fell 65% to $3.5m

Its foam plastics division benefitted from the cessation of a loss-making subsidiary, resulting in a 31.6% increase in revenue and 29.9% increase in profit before tax yoy to $39.3m and $2.9m respectively. Outlook remains positive for this segment.

Stock currently trades at 4.9X P/E and 0.74X P/B.
CIMB keeps Neutral rating with $0.47 TP.

Pan Hong

Pan Hong: has priced the 300m offer shares in its Jiangxi-based unit Sino Harbour's IPO at HK$1.10/sh, at the bottom end of its indicative price range of HK$1.10-1.68. Trading to debut on the HKEx today.
Based on the IPO price, Pan Hong’s stake in Sino Harbour is worth S$154m vs its current mkt cap of $226m.


MapletreeLogTrust: Slightly better than expected result, 2Q DPU at 1.6c, 2Q rev at $65.8m up 26.6% yoy +5.8% qoq and net profit at $38.8m +25.9% yoy +3.5%qoq. 2Q DPU is up 6.6% yoy 3.2% qoq compared to prev yr 1.5c and prev quarter 1.55c. Rev due to newly acquired 4 new properties acquired but was offset by FX impact of strong S$. Mgmt has also divested 2 properties in this quarter and expects to distribute net gain of approx 9c per unit over nxt 3 quarters.

Current asset leverage is at 41% below targeted 40-50% with room for debt. Co continues to look for overseas properties and is in midst of seeking approval to redev a local property with underutilized plot ratios.

CIMB maintains Outperform on results with TP$1.05. Current annualized 1H DPU of 3.2c translates to approx 6.7% yield. Peer Cache Log Trust trades at expected yield of 7.7%.


Dyna-Mac: 4Q Rev at $44.8m -3.2%yoy +13.7%qoq. Net profit 7.6m +28.4%yoy +5.3%qoq. Gross profit margin fell qoq from 39.7% to 31.1%. Full yr rev at $167.8m down 23.2% yoy, net profit at $24.8m -2.5% yoy, attributed to moratorium imposed due to oil spill disaster in Gulf of Mexico in Apr last yr.

Full yr margins were boosted by a write-back of impairment of trade receivables and contingent costs of prev projects ($10.3m) offset by slightly higher admin costs due to IPO. A 0.02c div declared for the year. Co has current order book of $117m with $18m from KepCorp and is optimistic on higher oil prices with increased drilling activities.

At FY2011 EPS of 3.24c, co is trading at 16.7x trailing P/E. Counter is covered by one house, AmFraser, a Sell with TP$0.42

Suntec Reit

Suntec Reit: good 2Q11 results, slightly ahead of expectations.
DPU at 2.53cts surpassed mgt’s and the Street’s forecast, driven by lower interest cost and a higher MBFC contribution.

Net property income of $47m, -1.1% yoy, to lower contributions from both its office and retail components. Nevertheless, NPI was up 0.5% qoq, and mgt is optimistic that negative rental reversion at Suntec City Office Tower would bottom this yr, with avg signing rents rising marginally from $9.22psf to $9.28psf. Suntec Office occupancy remains full at 99.5%.

Suntec City Mall however, is still under pressure with occupancy falling from 97.9% to 97.1% and avg rents sliding 1.1% qoq to $10.16 psf. Mgt is studying potential asset enhancement plans for the mall, with possible updates to come over the next 3-6mths.

StanChart believes the mgt could seek planning approval to add >300k sf of net lettable retail space, as the 2 new MRT stations could justify up to 10% additional GFA. But notes with Suntec’s current aggregate leverage ratio of 40.5% already at mgt’s target gearing of 40%, an equity raising would be needed to fund any significant capex. Believes the AEI could be accretive if ROI exceeds 6%.

StanChart, Deutsche maintain Hold with TP $1.51, $1.62 rptvly.
Macquarie upgrades to Outperform from neutral, raises TP to $1.76 from $1.64.

Keppel Corp

Keppel Corp: 2Q11 results ahead of expectations.
Net profit of $385m, +9% yoy, +24% qoq, and came in 12% higher than consensus estimates.
O&M profits at $609m (+7% yoy, +10% qoq) and stronger infrastructure contribution at $81m (3-fold increase yoy, +12% qoq), helped to negate the decline in property profit of $225m (-34% yoy, -55% qoq).

The weakness in property was due to a change in accounting rules, where revenue recognition for its overseas and local deferred payment scheme projects are now delayed till “completion of construction” rather than on “percentage of completion”. Keppel also restated its 1Q11 property earnings downward by ~$38m, although this sum will now be recognized in subsequent yrs, ie. on completion.

The Street remains bullish on the O&M industry, supported by the level of current and planned E&P, and replacement of ageing offshore rig fleet and existing eqpt infrastructure. Expect 2011 to be a banner yr of O&M orders for Keppel, as its YTD wins of $7.4b have already reached the previous peak set in 2007.
Co. declares better-than-expected interim div of 17cts/ sh, up from last yr’s split adjusted div of 14.5cts.

Deutsche maintains at Buy, raises TP to $13.80 from $13.60.
Daiwa, HSBC, CIMB maintain Outperform, with TP btwn $13.45 – 14.10.

SG Market

SG Market: Spore shares are likely to rise after solid gains on Wall Street as investors cheered news of a Greece bailout deal & reports of progress on stalled US debt-ceiling negotiations. Stocks are likely to open strongly as 2 of the biggest issues that have been holding back the market appear to be clearing up. He adds the STI is likely to test key resistance at 3150 (downtrend line from peaks in Nov, Jan & Apr) & a breakup above this level would provide a very good signal for the medium term & for a push towards 3200. Keppel Corp will be in focus after the world's biggest offshore rig builder posts better-than-expected 2Q results.

Thursday, July 21, 2011

Perennial China Retail Trust

Perennial China Retail Trust: is a business trust focused predominantly on retail devt projects in China, with assets comprising 4 retail malls and 2 office towers valued at ~$1.1b by CBRE.

StanChart initiates at Outperform with TP $0.81, pegged at 35% discount to RNAV of $1.25, translating to ~5% FY11E yield. Likes PCRT’s portfolio assets, which are located near major transport nodes, and acquired at an attractive Rmb 8900/sm, giving prospective 8.3% FY11E NPI yield.

Notes PCRT has options to purchase a 50% stake in high-speed railway (HSR) devts at Chengdu, Xi-an and Changsha at agreed prices of Rmb 8000-10000/ sm, which if acquired would grow the portfolio 4-fold by 2014E.
Notes PCRT’s unit price has fallen 10% since IPO and is now trading 6% below NAV. Believes the market has largely priced in devt and execution risks.

Tiger Airways

Tiger Airways: The Federal Court of Australia has suspended a Fri hearing concerning the extension of a flight ban on Tiger Airways. The Civil Aviation Safety Authority said that the ban on Tiger is still in force until the court makes an order or it lifts the order. CASA is still aiming to finalize the matter with Tiger on or before Aug 1.

Genting SP

Genting SP: CIMB says Genting SP is ‘A Screaming Buy.’ It says for sure, normalization at RWS is expected in the coming qtrs, but SG's gaming market could grow at 44% to reach S$7b in 2011 and RWS was still the gross gaming revenue market share leader with over 60% of the gaming pie.

Add that RWS can optimize utilization of gaming space to drive gaming revenue by reshuffling tables (current VIP/mass market table mix of 30/70) if the VIP segment continues to outpace the mass market. Beyond gaming rev, ouse says RWS's four hotels have continued to perform well with climbing occupancy rates and management is upbeat on the attractiveness of Universal Studios to draw in more visitors, which could translate into higher casino patronage and gaming rev, something that house should see reflected in 2Q11 numbers. The house reiterates its O/p call and $2.79 TP.

ST Engineering

ST Engineering: Trading Central (Bloomberg) has a Technical Buy Alert. Note that the upside prevails as long as $2.92 is support. Note that RSI is above its neutrality area at 50. The MACD is positive and above its signal line. The configuration is positive.

Moreover, the stock is above its 20 and 50 day MA (standing respectively at 2.97 and 2.97). Stop loss at $2.92, following a break would see next support at $2.83 and $2.77.


Singtel: Trading Central (Bloomberg) has a Technical Buy Alert. Note that the upside prevails as long as $3.16 is support.
RSI is trading above 70. This could mean that either the stock is in a lasting uptrend or just overbought and that therefore a correction could shape (look for bearish divergence in this case). The MACD is above its signal line and positive and configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (At 3.17 and 3.15). SingTel is currently trading near its 52 week high reached at $3.33. A breakdown of $3.16 would call for $3.08 and $3.04.

Note that Singtel will be giving out its dividends which goes Ex on 5th Aug. Grp will be giving out a final div of 9c/share and a special div of 10c/share (Total 19c/share or yield of 5.8%)


OttoMarine: Entered into vessel operating contracts for 3 vessels worth total US$15m. The vessels will be deployed in Cameroon, South Africa and Iraq. Co now trades at current P/E of 5.13x and has adopted shift of strategy to grow chartering and leasing businesss after being negatively impacted by poor shipbuilding revenues.


ScorpioEast: Currently suspended. Loses renewal bid for video rental distribution from TVB. To have material impact on results. FY2009 and FY2010, rev from the rental distribution of TVB serial programmes accounted for 32.5% and 32.5% of total rev and gross profit accounted for 44.2% and 105.7% of co's total gross profit.

HG Metal

HG Metal: NRA Capital initiates at Buy with $0.095 TP. Note that risk reward ratio for counter attractive given stock trading at historical lows, at 5.5x FY11 P/E and 5.4x FY12 P/E and 30% discount to book.
Add that HG staged a slower recovery then its peers partly due to internal restructuring and the fact that it was over leverage, but reported a remarkable set of results in 1H11 with gross margins jumping 12-13%.

HPH Trust

HPH Trust: DBSV maintains Buy with $1.15 TP. Note that HPH Trust is on track to meet projections in FY11/12. Its current FY11/12 yields look very ttractive at 7.4%/8.2%; expect DPU CAGR of 10% up to 2013.

Yang Zi Jiang

Yang Zi Jiang: UBS initiate Buy at TP $1.67. Note of impressively proactive in tackling the challenges faced by shipbuilders, recognizes that high margins from orders secured prior to the 2008 financial crisis will inevitably be squeezed, due to lower-margin incoming contracts.

Add that YZJ is executing plans to ensure net profits are maintained, and critically, the Co. emerges from the soft patch a stronger industry player. Quicker turnaround time lowers per-vessel costs, and allows the company to deliver more vessels per year, increase market share and help fend off cost headwinds. House think YZJ’s interest income is sustainable 2011-13E. Cash flow is healthy, interest rates have risen, and reinvestment opportunities exist on funds maturing this year.

Deutsche reiterate Buy at TP $2.30. Note that current valuations may prompt share buyback. Drop in share price excessive after it drop 27% on the weak drybulk market and investor concerns over the company’s financial asset investments.

At current valuations, YZJ is trading 24-36% below its P/E and P/B averages (since listing) and feel this share price drop is excessive. Think any further declines may prompt the group to buy back shares based on its actions in 2008. YZJ remains attractively valued versus other Chinese shipbuilders and has a good long-term execution track record.


OCBC: Deutsche maintains Buy, with TP $10.40. Note that solid underlying trends to be maintained in 2Q11 result (4 Aug). Forecast net profit of $606m, down 4% QoQ but 20% ahead of the prior corresponding period.

Given strong system trends, expect robust loan growth to continue which should result in solid net interest income growth despite ongoing NIM pressures. See potential for OCBC to rally further on the back of a good 2Q11 result. Continue to view OCBC as the quality play in the sector, with superior credit quality and CASA deposit growth trends as well as the best wealth mgt strategy among peers.


Hyflux: Citi initiates at Buy with TP $2.74. Cite of rapid earnings expansion (CAGR of 31% in the past decade), riding on growth in demand for clean water across Asia and the Middle East & Africa.
1) Expect strong growth to continue given its record high order book;
2) revenue exposure becoming more Asia skewed, hence risk levels reduced;
3) improved funding structure will lead to more project wins. Catalysts would be mega-sized project wins as a key rerating driver.


F&N: Nomura reiterate Buy with TP $7.60. Note that at a 27% discount to valuation, believe the shares have more than priced in these concerns, especially given the group's low-cost land bank and relatively small inventory in SG. Div yield of 3% is an additional source of returns.

Note that pullback in commodity prices should help margins while market share gains drive volume growth. Presold development projects in SG should sustain development earnings, supplemented by chunky gains from divestments including Bedok Point and Changi City. Downside risk to SG property exposure is limited given its small inventory of 1,250 units. Could also see capital mgt through higher or special div.

SG Property

SG Property: JP Morgan do not expect policy measures to be introduced in foreseeable future that will destabilize either listed property stocks or physical housing mkt. Increased supply is key to attaining equilibrium, with planned annual completions of public and private sector housing averaging 31,000 units for next decade to 2020.

Detailed housing demand-supply suggests mkt should move towards balance from 2015 onwards. House factor in either a 25% physical price correction, another round of major policy measures to be introduced in the short-term, or both. Expect stocks to trade within a range bounded at the low-end by 1 S.D below the average historical discount to RNAV. Preferred traditional SG property developer is City Developments.


Wilmar: may see renewed interest, as its subsidiary Yihai Kerry, and peer COFCO, are both seeking approval from the NDRC to raise prices for their Xilinmen and Jinlongyu brand cooking oils by ~5%. This adds credence to news earlier in the week, that the NDRC has lifted price caps on domestic vegetable cooking oil, despite Wilmar yday saying it was not aware of any price cap removal.

Recall, this wk, JPM upgraded Wilmar to Overweight from Neutral and raised TP to $6.50 from $5.40, on potential price hikes of its pdts. UOBK also raised TP to $6.25 from $5.70.

Deutsche today upgrades to Buy from Hold, ups TP to $6.40 from $5.20, expects Wilmar to benefit from the decline in commodities prices and the easing of inflationary pressure in China.

Sees higher processing margins due to
i) lower feedstock cost with CPO price down 20% since Mar,
ii) increased demand for its refined palm oil pdts given the widening of palm oil price discount to soy oil,
iii) increase demand for its feedmeal as the sharp increase in China’s pork prices should elad to expansion of the domestic hog industry,
iv) easing of price control in China, as inflation has likely peaks and expectations for the current policy tightening cycle to end soon.

Tiger Air

Tiger Air: the budget carrier said last night it wasn't aware of any reasons for a sharp spike in the price of its shares. But said it continually reviews proposals, including financing, to strengthen its performance or strategic position, though it has made no decision on pursuing any such proposal.

Yday, the SGX queried Tiger on its "substantial increase" in share price, after the counter surged 13.5% to close at $1.135, rebounding from a recent slump that followed the Jul 2 decision by Australia's aviation safety regulators to ground the airline till Aug 1.

Market watchers have mooted various reasons to explain the share price rise, which include
i) CIMB’s technical Buy call issued that morning,
ii) possible agreement by Australian authorities to lift Tiger’s flight ban (unconfirmed),
iii) possible stake increase by SIA. Meanwhile SIA said no decision has been made about a change in its sh/h in Tiger.

As of this morning, CIMB has new Trading Sell this morning. Says it is obvious that a fund bought into Tiger, though the identities of parties involved are not known yet. Reiterates it has advocated a wait-and-see approach and will only be comfortable getting into the stock once a revival is clear.

Recommends to stay away from Tiger for now. Maintains its cautious stance and reiterates Trading Sell recommendation with TP $0.71 (6x CY12 P/E) but adds it could re-rate Tiger on
i) Thai-Tiger’s approval;
ii) oil price weakness
iii) signs of turnaround in Australia.

Stock -4% at $1.09, on strong volume.

Technically yday’s long green candle provides a positive signal, and has led to a reversal of key indicators out of oversold levels. Failure to significantly break the $1 support level suggests that prices may have bottomed out. Expect volatile trading in the near term. Support at $1.04, resistance at $1.19.