Friday, September 30, 2011


DBS: Daiwa maintains Buy, but reduces TP to $16.50 from $17.70. EPS forecasts cut by 4.1-7.5% for 2011-13E on lower NIMs. Note that Mgt still confident on EPS growth, asset quality. Even after lowering EPS forecasts, DBS still trades at hefty P/E and P/B discounts to its local peers. With the share price approaching BVPS forecast of $11.61 for 2011E, believe it is a clear sign that the sell-down has been excessive.

Comfort Delgro

Comfort Delgro: IIFL reiterate Add call and $1.48 TP. Note that DTL adds to near-term cost Pressure, as 75%-owned subsidiary, SBS Transit was recently awarded a 19-year licence to operate Downtown Line, operational in late-2013.

Positive on grp’s award of the project in the long term and expect DTL to turn profitable in 2018, but believe that the payment of a fixed licence fee will contribute towards start-up operating losses. House reduce 2013 earnings estimates by 4% and expect CD’s margins to remain flat at best over 2010-13, owing to limited pricing power, cost inflation and unfavourable currency movements. However, the >4% div yield should support stock price.

SG Property

SG Property: UBS has sector report. For 2012, expect residential ASPs to decline 8-10%, Grade A and prime office rentals to dip 15% and 9%, respectively, and hotel RevPARs to drop 9.4% on a YoY basis.
For the S-REITs, Retail and industrial REITs such as Frasers Centrepoint Trust, CapitaMall Trust, Ascendas REIT and Mapletree Industrial Trust should continue to be defensive. For the developers, widen RNAV discount and rollover to 2012E RNAVs, preferred pick is UOL. House downgrade KepLand and OUE to Neutral.

SG Telecom

SG Telecom: CS prefer SingTel over StarHub and M1. Assume O/p on SingTel (TP $3.75) and Neutral on StarHub (TP $2.85) and M1 (TP 2.80).

House bullish on Singtel key regional associates — Bharti, Telkomsel, AIS and Globe. Expect FY3/11-14E associate contribution CAGR of 23% to drive earnings. The key near-term risk to forecasts is currency. Expect StarHub to benefit from the faster progress at NGNBN and to deliver strong profit growth in FY12-13, but it is already known and has been priced in.
M1 is set to be the key beneficiary from NGN in the longer term but aggressive growth strategy could put pressure on its near-term margins.

SG Banks

SG Banks: RBS has sector report. Note of impact of a slowdown in SG GDP growth on bank earnings and valuations. House see 26% potential downside to estimates and 25% downside to base-case fair values. Banks’ earnings are expected to be highly sensitive to changes in GDP and forecast provision charges of 24bp of avg earning assets for FY12F.

Balance sheets remain strong to withstand a material deterioration in global macroeconomic conditions, well capitalized with a tier-1 ratio of 14.4% and an asset to equity leverage ratio of 10.5x. Valuations impacted by earnings momentum, expect strongly negative earnings momentum for the sector, and sector fair values could decline by 25% vs positive base-case scenario.

Current view vs bear case: Buy for all banks, DBS (TP $18.00 vs 13.00); OCBC ($12.00 vs 9.00); UOB (TP $23.00 vs 18.00)

Regional Coal/Sakari

Regional Coal/Sakari: Macquarie has sector report. Note that thermal coal defying the odds and upgrades seaborne thermal forecasts by 5-15% to US$115/t (JY12) and US$130/t (JY13), due to growing confidence in China over the next 6 mths. House raise 2012/13 forecasts by 3% and 8% on the back of higher coal price assumptions, leading to the sector trading on 6-7x P/E in 2012/13E vs an historical trading range 12-13x PER.

House has preference for more liquid stocks like SAR and Harum Energy.
Note that Sakari share price correction has been overdone as it is on 4-5x P/E in 2012E and implies an US$85/t coal price in 2012 vs the coal futures curve of US $120-125. See 4Q11 results as a catalyst, as the market is underestimating the ‘triple kicker’ of higher Sebuku production, ASP and lower costs from the Northern leases, which lead house to be 18% above 2012 consensus.

Continues to like Harum given its 28% 3-year production CAGR, exploration upside and attractive valuation trading on 7x P/E 2011E, supported by a net cash position balance sheet position. Adaro: out of top picks in the past 12 mths as it struggled to achieve 80mt organically.

World Precision

World Precision: Was awarded a recent contract win of RMB 22.1 million from three major local auto part manufacturers. The three companies, located in Jiangsu Province, have placed orders that comprised largely of 10 units of high performance and high tonnage stamping machines. Co trades at 6.3x P/E but posted a 66.9% gain yoy in net profit as of last results.

Ann Aik

Ann Aik: Received compensation of $13.7m from Singapore Govt for compulsory land acquisition of co's premises at 135 Pioneer Rd. Co is in process of looking for new operating premises.


Koon: Subsidiary cos Econ Precast and Contech Precast has secured new precast projects with a contract value of S$53.73m for both HDB and private industrial dev projects. The contract period ranges from 7 to 18 mths. This brings Koon's precast order book to $103.4m. Co trades at 2.8x current P/E with indicative yield of 6.8%.

Nam Cheong

Nam Cheong: Secured 3 sales contracts worth approx US$51.5m (equivalent to approx $66.8m) for 2 PSVs and 1 AHTS vessel. The 2 PSVs will be sold to Bumi Armada and is expected to be delivered by end 2011 and mid-2012. The AHTS is sold to a UAE co, Gulf Glory Marine and is due by mid 2012. All 3 vessels are under construction in co's built-to-stock series in one of co's subcontracted yards in China. Co has current order book of approx $274m.


Kreuz: Announced fourth subsea installation contract win this year worth approximately US$6.23m from a leading offshore company in the oil and gas business located in East Asia. Co’s order wins has increased to over US$100m this year with 48% from third party customers. . The subsea installation works, which shall be performed in Southeast Asia, are scheduled to commence in 4QFY2011 with completion in 2QFY2012. Co is 63% owned by Swiber and trades at approx 4x current P/E.


Swiber: Announced that it has secured a slew of contract wins amounting to approx US$69.0m including extension options. Highlights that order book is beyond US$1b, the highest by far in its corporate history. Co has current P/E of approx 5.0x compared to CH Offshore at 6.2x and Ezra at 10.1x.


CMA: Announce that it has received approval from HKEX to list via way of introduction, and the listing is expected to take place on 18 Oct 2011. CICC and JP Morgan are the joint sponsors of the proposed secondary listing.

Rationale for the listing is to achieve longer-term strategic objectives via:
1) Creating a platform to widen investor base and enhance CMA’s attractiveness to investors in Hong Kong and China;
2) Attracting research coverage on CMA and helping to raise its profile and enhance its market visibility; and
3) Enhancing CMA’s ability to access additional sources of capital in two leading global capital markets in SG and HK.

Co. add that as this is a listing by introduction on HKEx, no equity will be raised, as such, do not expect any immediate, short-term impact on share price. However move could enable grp to tap capital from the top two financial markets in Asia in the future.

-Credit Suisse has an 'outperform' call with TP of $1.78 on grp,
-Nomura maintain Buy, TP $1.69, (CMA trading at 28.7% discount to NAV and 0.77x FY12 P/B),
-CS maintain O/p, TP $1.78, (trading at 0.8x P/B, expect its recently raised stakes in the operational Shanghai malls —Hongkou and Minhang malls, to boost its China earnings by early 2012),
-DB maintain Buy, TP $1.70, valuations attractive at 36% disc to NAV & 0.8xP/B.

Keppel Corp

Keppel Corp: has secured 3 conversion contracts worth a total of $142m.
These conversion contracts are to convert,
i) a LNG Carrier to a Floating Storage Unit (FSU) for MISC Bhd,
ii) a VLCC tanker to a Floating Storage and Offloading (FSO) unit for Dixstone Hldgs, an association btwn Perenco Group and Cameroon National Hydrocarbons Corp, iii) a tanker to a Floating Production Storage and Offloading (FPSO) unit for Bumi Armada.
Contracts deliveries range btwn end of this yr to 3Q12.
The new orders lift ytd orderbook to >$8b, a record high for KEP.

Separately, Asia Offshore Drilling, the 34% associate of Mermaid Maritime, said it would increase the water depth capacity for it 3 jackup rigs under construction with KEP, from 350 ft to 400 ft. The additional capex to extend the legs is estimated to be
However AOD will not exercise the last option for one more jacup rig at KEP. The option expires today.
No news has been heard from Dynamic Offshore, which also has an option for one rig at KEP that expires today.
KEP has 6 options outstanding worth US$1.25b, with most of them expiring end 2011.

While the contract wins and order upgrades are a slight positive, the lapsing of rig building options is an indication that the global uncertainty may be starting to impact the offshore sector. Recall, rig builders, being highly cyclical plays, were hard hit in the previous crisis, on concerns that demand for oil would drop in tandem with the decline in the world economy.
While the Street has mainly Buy calls on KEP, with TP ranging btwn $9.60 – 13.90, we highlight that many analysts have since lowered their earnings and TP forecasts. For eg, yday UOB cut KEP TP to $9.60 from $13.35, but retained its Buy rating.

3Q11 results dates for group of Keppel companies as follows

SG Market

SG Market: Spore shares have some positive leads after Wall Street ended mixed-to-higher, following better-than-expected US GDP and employment data, while news Germany approved legislation to expand the euro-zone's rescue fund may also assuage investor fears over Europe's debt crisis. Regional markets are trading mostly higher. However, Spore shares are expected to remain volatile, with downside bias despite better sentiment over Europe, as worries over earnings growth in a slowdown will remain. STI is trading within a downtrend channel with support at the 2650 area and resistance at 2750.

CapitaMalls Asia will likely be in focus after it receives approval-in-principle from the HK secondary listing. Keppel Corp may see buying interest after announcing it has secured 3 ship-conversion contracts worth a total of $142m.

Thursday, September 29, 2011


Gold: fell for a second day, paring a 12th quarterly gain, as concern European leaders may not stem the region’s debt crisis hurt stocks and commodities, forcing some investors to sell the metal to cover losses elsewhere.

Immediate-delivery gold lost as much as 1.5% to US$1,584.38/ oz.

Gold has fallen on “traders needing cash for margin calls on weak equity prices and newfound strength in the USD,” notes Commodity
Broking Services Pty. “The turmoil in Europe only seems to be getting worse.”

Cash silver lost as much as 2.5% to US$29.105/ oz, while Dec-delivery futures shed as much as 3.5% to US$29.095/ oz.
Spot platinum dropped as much as 1.4% to US$1,505.32/ oz.


F&N: CIMB has Technical Sell Call. House note that prices have remained below its key resistance trend line since hitting a peak of $6.85 back in Nov last year. With prices staying below the 200-day SMA as well, the odds favour the bears at the moment.

MACD is just above the zero line and it is also losing upward momentum. Its RSI is still below its 50-60pts mark, which could signal more downside ahead after this rebound. In view of strong headwinds ahead, aggressive traders should go short with a stop placed above $5.95. Prices could potentially swing lower to test the March low at $5.25 in the wks ahead.


OSIM: CIMB Has technical Sell Call. House note that after share price violated its long term support trend line back in Aug, prices fell sharply to a low of $1.035 before the current rebound took place. It formed a minor triangle for the past couple of wks before Monday’s breakdown.

The MACD has just confirmed its dead crossover while its RSI has also trailed below the 50- pts mark. House expect lower prices ahead, where a break below $1.035 Aug low is likely. House add that prices could potentially fall towards $0.90-0.925 next. Aggressive traders should take a short positive now with a stop placed above $1.17.

Yang Zi Jiang

Yang Zi Jiang: CS maintains O/p, with TP $1.30. Note that financial investments continue to be an overhang and estimates that the total size of informal lending at Rmb4t, the most likely short-term time bomb for the Chinese economy. One remaining overhang on YZJ’s share price, could be Rmb10b investment in fixed rate instruments offered by Chinese banks and trust Co’s with a return of 10-15% p.a. Loans are backed by collateral including listed shares (37%), land titles (41%) and guarantees (22%).

House believe that the risk of writedowns is low given the coverage rate of collateral (2.71x for shares as of 30 Jun), a sudden slowdown in economic activity and some inflationary pressure could see some borrowers defaulting on their loans. A clear signal from mgt that there would be no further investment when existing products mature is needed to fully unlock the value in Co.


SGX: DMG downgrades to Neutral with TP $6.90 from $8.90. Note that 1QFY12 securities market ADT was weaker than expectations. For the period of Jul-Sep 2011, securities market ADT of S$1.60b was up from Apr-Jun 2011’s $1.45b, but still below expectations. House lowers FY12 ADT assumption to $1.66b, from $1.90b previously. FY13 ADT assumption is also cut to $1.78b, from $2.02b previously and cut FY12F & FY13F Net Profit by 12% and 11% respectively.


Hospitality: Tourist arrivals in SG seen moderating in 2012 if the weak global economic environment continues.

DBSV expects SG to see some 13.5-14m visitor arrivals in 2012, translating 4-7% increase YoY while RevPAR for the hotel industry is likely to be flat, as opposed to previous estimates of 5% growth, with average occupancy holding at 81-84%. Top picks are CDL HTrusts, Ascott Reit, UOL and Genting Spore.

China Minzhong

China Minzhong: CIMB maintains O/p. House see value emerging from MinZhong’s 31% decline since Dec 10, led by broader concerns over S-chips’ corporate governance. At 3.6x CY11 P/E and 0.8x P/BV, grp offers good value, and house believe, considering its defensive earnings in this economic climate as well as earnings momentum.

Resume coverage with new earnings forecasts, an unchanged Outperform rating and a $1.22 TP based on 4.8x CY12 P/E, or a 33 % premium to the FTSE ST China Index. Anticipate stock catalysts from continued strong quarterly results and a switch to a Big-4 auditor by FY13.

We caution however that stock’s larger peer ‘Chaoda’ whose shares were suspended on Sept. 26 after slumping 27%, is going through a HK’s Market Misconduct Tribunal Court hearing, where the panel hears civil cases involving six offenses: including price rigging, false trading, insider trading, disclosure of information about prohibited transactions, disclosure of false information inducing transactions, and stock market manipulation.

Sino Grandness

Sino Grandness: Indirect wholly owned subsi Garden Fresh to issue zero coupon rate convertible bonds due 2014 with face value RMB100m. The subscription price will be 87% of principal amt excluding costs. Co will act as guarantor and Sun Hung Kai Invtment Services will act as placement agent. In the event of full conversion after issuance, co's stake in Garden Fresh will be diluted from 100% to 80.1%. Co has a current P/E of 3.2x


Serial: TDR issue price is fixed at NT$12.25 per TDR (approx $0.1726 per share).The issue price represents a premium of 13.7% to the VWAP done on the SGX on 28 Sep 2011. 28m TDR will be issued with 1 TDR representing 3 shares. Est net proceeds of $14.5m will be raised for expansion and working capital purposes.

Marco Polo

Marco Polo: Secured a ship upgrading contract with an existing third-party customer, worth about $8.5m, for its Batam shipyard. Co also announced that it has witnessed a significant increase in the number of ship repair contracts secured from new and existing customers in the last 6 mths but did not disclose any figures. Marco Polo trades at approx 7.7x current P/E with ASL at 6.5x

LC Dev

LC Dev: To acquire 80% stake in private co CHC for $34.1m with option to purchase remaining 20%. In turn CHC owns 55% of Knight Frank which has been consistently profitable. The option is exerciseable both ways by LC Dev and the vendor shareholders but only after 3 yrs later.
Co netted an estimated gain of $90.0m on the $120.5m sale of 50% stake in Crowne Hotel which should be recognized in the 1Q Sep-end results and has explicitly stated that it is looking for possible long-term acquisitions. As of Jun-end, co reported a full year loss of $8.3m and currently trades at P/B of 0.6x.


GLP: Has completed the refinancing of JPY47b (US$612m) of debt approx 19.4% of GLP’s overall debt in Japan. The new interest cost of 1.42% (with interest rate swap) is lower than the previous interest cost of 1.94%. In addition, the maturity of the debt has been extended to March 2016 from September 2012. Co has current leverage of 22% (net debt to total assets). GLP now has a P/B of 0.88x
9:05:07 AM: Low Xu Yang:
#Lian Beng & Centurion: To launch the sale of a 141-unit freehold ramp-up industrial building at its Mandai plot in 4Q2011.

Located at Mandai Estate about 18.7k sqm (200k sf), the land parcel was acquired by the JV, Lian Beng-Centurion (Mandai) in Jan this yr (Lian Beng 55%, Centurion 45% ownership). Co has divided this land into three plots for different developments. The first two plots will be used for the development of the ramp-up industrial building and a workers’ dormitory of 4700 beds. Development of the third plot is not yet finalized.

The dev will be for companies engaged in heavy, clean and light industries with ASP expected to range between S$650-700 per sf. Construction is expected to commence in the 4Q2011 and last for 15 to 18 mths for the building and 12 to 15 mths for the dorm.

DMG has Buy call with TP$0.71 and our in-house reinitiated a Buy with TP$0.62 on Lian Beng last wk on potential spin-off. Lian Beng has a fwd P/E of 3.75x with DMG highlighting sector avg at 7x

Sembcorp Ind

Sembcorp Ind: Sembcorp Ind-led consortium Vietnam Singapore Industrial Park Joint Venture Co (VSIP JV) with partner co Becamex IDC, signed a MOU with provincial authorities to conduct a feasibility study of a 1k hectare integrated township and industrial park in central Vietnam’s Quang Ngai province.

This comprises a 500-hectare industrial park within the Dung Quat Economic Zone, where government-supported incentives are made available to manufacturers. Separately, under consideration are 520 hectares of land zoned for commercial and residential purposes near downtown Quang Ngai city.

CS maintained Outperform with a TP$4.90 yday and noted that utilities business is trading at a P/E of 6.3x close to historical low. Co at 1.48x P/E is just 7% above 08-09 low of 1.38x.


TTJ: FYJul11 results.
Net profit more than doubled to $14.4m (+112% yoy), on the back of a rise in revenue to $96.9m (+39% yoy).
The higher revenue was underpinned by both its structural steel and dormitory business. Contract works which achieved substantial completion included Tower Crowns of the Reflections @ Keppel Bay, a campus at NUS, and SuperTrees at Gardens by the Bay.
Higher rentals were achieved for the dormitory business.
Gross margins improved across both segments, and rose to 28.5% from 25.5% yoy.

Order book stands at $147m stretching till FY12-13. Ongoing projects include structural steelworks for the following: the 3rd regional campus for ITE, a synthetic rubber plant for Asahi Kasei Chemicals, the third tank and piperacks at Spore LNG Terminal, solar cells mnftg plant for Tokuyama Corp in Msia. New projects include structural steel work contracts for part of the new Halliburton Plant in Spore and the MRT Downtown Line 3.

Mgt believes it is well placed to capitalize on the numerous potential projects in Spore’s construction sector, and is also pursuing potential projects in Msia and Vietnam. Notes it has made good progress on expanding and enhancing its facilities at its Keluli Factory.
Co proposes 0.6cts first and final div, +50% yoy. This translates to 4% yield based on last close at 15cts.
Stock trades at 3.6x P/E, 0.7x P/B.

City Dev / Orchard Parade Hotel

City Dev / Orchard Parade Hotel: The proposed collective sale of Tanglin Shopping Centre has fallen through, as the sale committee managing the en bloc sale process has not been able to secure a buyer, Millennium and Copthorne Hotels (M&C) said yday. M&C, the London-listed hotel arm of City Dev has > 30% interest in the total strata title area.
This was the 2nd time that the freehold site, which is ~ 68.5k sf, was put up for en bloc sale, after a failed tender earlier this year failed to draw a buyer. With a reserve price said to be $1.25b, this translated into ~$4,000 psf of potential gfa, assuming the site is redeveloped, and if approval is given to raise the plot ratio to 4.5 from the current 4.2.

This would be a blow to those who are speculating that a successful sale of Tanglin Shopping Centre would lead to a re-valuation of the adjoining Orchard Parade Hotel, the prime asset of OPH.
Nevertheless, at 0.47x P/B, OPH valuations are by no means expensive. Peers Amara and HPL trade at 0.85x, 0.77x P/B, respectively.


CMA: Announce that it has entered into a 50:50 JV with Suzhou Industrial Park Jinji Lake Urban Development Co (SIPJUD) to jointly develop and own a shopping mall and two office towers on a prime site in Suzhou Centre, with GFA of about 310,000 sqm. Site is in the West Jinji Lake CBD, next to the renowned Jinji Lake. Transaction is however subjected to the approval of the Chinese govt.

Including land cost, the total development cost of the project is expected to be about Rmb6.7b (about S$1.3b). Based on 50% stake in the JV, CMA’s share of total development cost is about Rmb3.37b (about $637m). Including this development, CapitaMalls Asia now has 55 shopping malls in 35 cities in China, of which 40 are operational while the other 15 are under development.


Midas: Shanghai has closed 13 stations and slowed metro trains after 2 trains collided on Tue, injuring 271 people. Latest action could likely put a setback to recent reports in Aug that China will spend Rmb1.27t or US$99bn by 2015 to build 2600km of urban subways and light-rail train systems, with Rmb170bn for urban rail in Beijing and Rmb128bn in Shanghai. Technically, see immediate support at $0.375 (Yr low)

SG Market

SG Market: Spore shares are likely to track losses on Wall Street as HK Exchange is closed in Asian trading due to Hurricane Nesat. With the lack of corporate news, both sentiment and technical indicators appear to be growing increasingly bearish as the local market continue to be led by headline news from Europe. Support for STI tipped at 2600 with resistance at around 2750. Commodities and other cyclical stocks such as Noble, Golden Agri, Olam and Sembcorp Marine are again likely to be in focus today.

Wednesday, September 28, 2011

Orchard Parade

Orchard Parade: Millennium & Copthorne Hotels has advised that the sale committee managing the proposed enbloc sale of Tanglin Shopping Centre has not been able to secure a buyer and that the Collective Sale Agreement has now expired. This would be a blow to those who are speculating that a successful sale of the property would lead to a re-valuation of adjoining Orchard Parade Hotel, the prime asset of OPH.

xx Guangzhao Forest xx

Guangzhao Forest: Currently suspended to allow time for its substantial shareholders to resolve their repayment problems with creditors. The 2 substantial shareholders who collectively hold a 21.37% stake are group chairman Su Min, group CEO Song Xuemeng and their investment vehicle Hireach Assets.

There is risk of affecting the co because a 6.0% stake has been pledged to 2 unnamed creditors which have not agreed to settle on revised terms and have explicitly stated they would enforce the share pledge if outstanding sums were not paid.

If the substantial sh/hs stake falls below 19%, this would trigger a default clause (constituting change of control of co) on the co’s notes worth US$3.7m held by Liberty Harbour. Co currently does not have the ability to make full repayment if Liberty Harbour demands redemption


Olam: CIMB has Technical Sell Call. Note that stock appears to have confirmed that a head & shoulders pattern is in place following the breakdown of its neckline support in early August. The recent rebound ‘tested’ the neckline again but failed to clear it.

With the MACD and RSI now turning down again, there is a good chance that prices could resume on its downtrend in the near future. Traders should take a short position now with a stop placed above $2.57. Falling below $2.06 would confirm that prices are heading towards the $1.65-1.70 levels in the medium to long term.

Golden Agri

Golden Agri: CIMB has Technical Sell Call. Note that Prices rebounded to retest the resistance band of $0.685-0.715 following its breakdown in early Aug. The moving averages also proved to be a hindrance to the bulls in the near term.

At the moment, the indicators have turned down again following its test of their respective resistances. Believe that prices are more likely to head lower from here soon. As the long term trend has changed for the negative, would prefer to unload on any rebounds towards the resistance levels. Prices are likely to test the support levels at $0.61 and $0.565.


Goodpack: CIMB downgrade to Underperform from Neutral. House note that Goodpack’s trading history shows that weak market sentiment could send its valuations down to a trough of 5x P/E, as in 2008, despite its intact fundamentals. It is now trading at 12.6x CY12 P/E. In view of overall market weakness, house lowers P/E target from 14.4x to 10.3x CY12 P/E, one SD below its 4-yr historical forward average, while maintaining our earnings forecasts.

TP accordingly falls from $1.75 to $1.30. In spite of its recent underperformance, downgrade Goodpack to Underperform on valuations, recognising valuation-compression risks.


ComfortDelgro: DMG maintains Buy, but reduces TP to $1.70 from $1.81. Though positive on grp’s award of the DTL in the long run, believe it will incur initial start up losses. Expect DTL to be loss making up to 2019, before turning profitable. Reduce FY13 earnings f/cast by 5%, and TP but continue to favour grp over SMRT for its more attractive valuation with FY12 P/E of 11.3x, as well as its overseas growth potential.


Biosensor: Nomura maintain BUY, but reduces TP to $1.65 from $1.76. Note that Co. has shareholder approval on 28 Sep 2011 to acquire a 50% stake in JWMS from Shangdong Weigao, a win-win for both parties, as with full control, Biosensors will be able to pursue a more aggressive strategy in China, while Weigao will emerge as a major shareholder, benefitting from Biosensors’ intellectual property and global footprint.

With the restructuring of JWMS and rev contribution from Jap in FY12F, Biosensors is well positioned for the next stage of its growth. it may expand into adjacent products via acquisitions. Expect further gains in Japan, CE Mark for BioFreedom, although cut estimates for FY13/14 by 4-5% to factor in the weaker outlook in the EU and price pressures in China. Believe current P/E valuations of 15.3x and 11.1x for FY12F and FY13F, respectively, are undemanding given the company’s strong growth prospects and enhanced balance sheet.


SG REITs: Daiwa has sector report. Note that retail resiliency is no secret. Positive industry fundamentals reaffirmed, with minor downward revisions to DPU forecasts.

CMT downgraded to Hold from O/p, (TP $1.90 from $2.03), as valuations less attractive against office and hospitality S-REITs. Starhill Global, upgrade to Buy from O/p, (TP $0.73), citing REIT as the only true deep value left in the segment. House prefer office, hospitality, such as CCT, Suntec REIT, CDL HTrusts, Ascott Reit.

SG Strategy

SG Strategy: CS has strategy report. Note that Sembcorp Industries’ P/B now close to 2008-09 lows, having dropped to 1.48x vs a low of 1.38x during 2008-09 lows. With SCI P/B just 7% above 2008-09 lows, SCI joins ComfortDelgro, SMRT, Olam, SingTel and Capitaland as stocks with a P/B close to 2008-09 lows.

Strategy is to buy stocks with a P/B close to 2008-09 lows, 2 are now cyclicals (Olam, SCI), 1 real estate (Capitaland) and 3 are defensives (SingTel, ComfortDelgro and SMRT). House maintain O/p for SCI, TP $4.90, noting that SCI’s Utilities stub is trading at a P/E of 6.3x, close to its historical low.

Asian Exchanges

Asian Exchanges: JP Morgan has sector report. Recommend Long HKEx with trailing stop, good for 10%. (Strictly a trade) Note that HKEx has reached 26.8x dynamic PE and vol also appear to be stabilizing, with 30 DMA turnover at HK$71b. Recommend investors to enter the trade with tight stop-loss as macro outlook is unclear and broader market volatility may lead to continuation of last 8 wks’weakness in the stock.

Note that SGX may be one of the bidders for LME and such an event will remain an overhang, also, vol trends are subdued and stock is at 28x dynamic PE. Bursa appears at value levels amongst the exchanges, stock trading 1SD below mean at 21.3x, most attractive from medium term view as the structural changes can lead to significantly higher velocity and vol.

Shipping / STX PO

Shipping / STX PO: Deutsche highlights from the Marine Money conference in Singapore.
i) Shipping companies are expected to find it tougher to raise financing in an environment of weak freight rates and soft second hand prices.
ii) Smaller ship owners will find it tougher as banks generally see them as riskier.
iii) Shipping banks are generally cautious as they do not want to end up owning vessels. The ship financing market is unlikely to return to the pre‐2008 global financial crisis level in terms of rates and size.
iv) Shipping companies will likely have to turn to capital markets (including equity markets) to supplement bank financing, especially when they are looking to fund their current orderbook.
v) Chinese RMB bank lending for shipping has decelerated due to the higher reserve requirements imposed on lenders.

Deutsche reiterates that it does not expect a strong uptrend in dry bulk, tanker and container shipping rates over coming months. Highlights, Hanjin Shipping surprised by announcing a rights issue last Friday, which resulted in negative share price reaction. Notes companies expected to end 2011E with net gearing of > 100% are STX PO (122%), and Hanjin Shipping (328%, before any equity issue) and Yang Ming Marine (158%).

Sunpower Grp

Sunpower Grp: Subsi Nanjing Shengnuo Heat Pipe Co has clinched a US$8.5m (approx $10.9m) contract with JSW Steel, the 3rd largest steel manufacturer in India and a unit of the Jindal Group, a conglomerate valued at US$12b. Co will supply three waste heat recovery units which include the manufacture of one of the largest units in China. These will be used to recover waste heat found in sintering process to reduce energy consumption for JSW. This is expected to impact co's earnings positively nxt yr. The heat transfer and recovery tech co has approx mkt cap of $70m and trades at 3.8x P/E.

Ryobi Kiso

Ryobi Kiso: Announces investment in an industrial dev project in Vietnam through its subsi Ryobi Developement. Subsi has entered into an in-principle agreement with Ascendas-Protrade Co to lease the land use rights for a 35.7k sqm site in Ascendas-Protrade Singapore Tech Park in Binh Duong Province, Vietnam. The tenure will be till 28 Oct 2057, and the amount payable is US$1.64m ($2.1m). Co is trading at 14.2x P/E, higher than construction and materials sector avg of 10.2x

KSH Hldgs

KSH Hldgs: Secures contract from Mount Alvernia hospital worth $49.9m for additions and alterations to car park blk, front lobby & side entrance extension. With this new project co's order book is boosted to over $385.0m and its duration will be for 23 mths. As of current date, 76.9% of our order book are from private residential projects, 13.0% from private non-residential and the remaining coming from the public sector. KSH is trading at approx 4.0x current P/E. Co’s mkt cap is small at $70m but has been paying out dividends at 1c semi-annually with current price at $0.21.

Airlines / SIA

Airlines / SIA: Cathay Pacific, the world's largest international air cargo carrier, is 'very worried' about the fourth quarter because of a freight slowdown. Says, the industry is unlikely to see a traditional end-of-year traffic jump as demand cools, particularly in Europe.
The International Air Transport Association (IATA) last week cut its forecast for expansion in global cargo volumes this year to 1.4% as waning growth in the US and Europe damps demand for shipments of electronics and fresh foods. Cautioned that the slowdown may contribute to Asia-Pacific airlines' profits falling 69% this year to US$2.5b.
SIA, which accounts for 12% of segment profit from cargo, is likely to be similarly affected as well. This, coupled with rising competition from the budget carriers for its passengers, means outlook for SIA is likely to be challenging.
The Street has mixed ratings on SIA, with wide range of recent TP btwn $10-18.25.

Otto Marine

Otto Marine: The buyer of AHTS Vessel “Deep Sea 1” is negotiating a 2nd extension to pay the deposit of US$9m. The first extension of 2 wks was sought on the 13 Sep 2011 to pay the deposit, which should have been due yesterday. Otto is currently considering whether to extend the date for the payment of the deposit. This contract is worth US$90m and was first announced on the 12 of Aug.

The repeated delays might either indicate a problem on financing on the buyer’s side or a view that the vessel might not be commercially viable. Either alternative is not positive for Otto Marine.

Otto is trading at 14.5x current P/E after reporting losses in latest Jun results. Comparatively, peers ASL Marine trade at 6.4x with Marco Polo at 8.0x


Olam: CEO highlights that despite the short-term volatility, the long-term outlook for most agricultural commodities is still bright, on back of growing demand for food and shrinking supply. Add that cyclically we will see probably a correction, but over the medium and long term see commodity prices remaining firm and see growing imbalances between supply and demand for food.

Reiterate that Co is unlikely to raise any equities to support medium-term growth and aims to achieve a target US$1b profit by FY16. Co is bullish on coffee, but sees a shaky outlook for cocoa due to a global supply surplus in the 2010/11 crop yr.

We note that valuations are compelling, with grp trading at 14x Forward P/E vs historical average of 23x, while majority of street has Buy Call and $2.94 Mean TP on counter.

SG Market

SG Market: Spore shares are likely to take cue from positive overseas lead following higher Wall Street close but gains will be capped as US stocks ended well off their intraday highs on disagreements over Greece’s 2nd bailout plan. The STI's sharp 2.7% spike on Tue may also prompt some profit taking, following the recent experience of market rebounds being met with selling.

Continuing the pattern of heavier volumes during market declines compared to rebounds, it is hard to envisage market strength going beyond the 2800 resistance. In corporate news, Sembcorp Industries is seeking to expand its Liaoning utilities projects, while Tiger Airways meets no Australian regulatory opposition to its proposed right issue.

Tuesday, September 27, 2011


Yanlord: Shanghai Securities News reports that Gemdale Corp has cut prices for one of its apartment projects in Shanghai by 15% to Rmb16,500 psm. Paper also reported that Yanlord Land and Greentown China are among other homebuilders that have lowered prices for apartments in Shanghai.

Yanlord has collapsed 74% since hitting a peak of $2.84 in Aug 09 and is now hovering at a 2 ½ year low. Stock is currently trading at 48% discount to its NAV of $1.39.

Lion Global

Lion Global: Market Talk is that UOB Kay Hian has placed LionGold under watchlist as the counter is considered overvalued, and trading online is suspended for the time being. We caution however that we are not able to confirm the validity of the above statement/rumours.


Hi-P / Technology: based on indications from several supply chain vendors, Apple over the past 2 wks, cut back 4Q iPad orders by 25%, the first such cut known to the Street.
Reduced orders from Apple to iPad suppliers could reflect both weakening demand in Europe due to economic conditions there as well as a strategy by Apple to operate with reduced inventory. RBS notes, “It’s back to reality. Now it seems even for Apple, due to the market situation, we need to be conservative.” This means, other tech products could face an even tougher time.
For a vendor such as Hon Hai, the cut could mean a drop to 13m units in 4Q from 17m units in 3Q, according to JPM estimates.

DBSV reiterates view for “more downside ahead" for the tech sector, urges investors to stay out bcs earnings risks and higher than market valuations will prompt further de-rating on the sector.
The house has downgraded Apple component supplier, Hi-P (15-20% of sales from Apple) to Fully Valued. Believes the stock will remain plagued by sluggish RIM sales and now, lowered iPad shipments.

While near term sentiment may be weak for Hi-P, value hunters may want to keep this counter on the watchlist. After the 46% ytd decline, Hi-P valuations now appear more reasonable at 4.9x P/E, 0.8x P/B, and 6.5% yield. At the trough in 2008, Hi-P traded to a low of 0.44x P/B.


NOL: Trading Central (Bloomberg) has a technical Buy Call. Tip of a short term rebound towards $1.26, however a downside breakout of $0.97 would call for $0.87 and
$0.82. Note that MACD is above its signal line and negative.

Lizhong Wheel

Lizhong Wheel: Received its maiden order of aluminum alloy wheels from Shanghai General Motors, China’s largest auto manufacturer with 1.04m automobiles sold in 2010. This marks co’s qualification as supplier to Shanghai GM and expects to become a key supplier of aluminum alloy wheels to Shanghai GM within the nxt 2 to 3 yrs. Contract amount was not disclosed. Co is has also passed a quality system evaluation by Changan Ford Mazda Automobile, and Changan PSA Automobile and expects to be a potential supplier as well. Lizhong trades at 7.4x current P/E, with hist avg at 6.6x


UOL: CIMB upgrade to O/p with $5.05 TP. Note that grp has been de-rated to levels which house finds compelling again, with stock trading now at 0.6x P/B, pricing in excessive devaluations to below 2009 levels.

House believe this valuation attributes little or no value to its stakes in the Marina Centre Holdings hotels and that even a repeat of 2009 will not hurt UOL as much in this cycle. TP pegged at a 25% discount to RNAV.


Broadway: To offer a US$1m convertible loan to a U.S. medical technology company, Insituvue at an annual rate of 5.0%. The loan will be disbursed in three tranches over a period of 12 mths. Insituvue was set up in Feb 2010 to commercialize a new medical device, trademarked as the "Sonic Flashlight", to give medical professionals a better view during interventional procedures, such as inserting catheters and intravenous drips. This is one of co’s first foray into the medical mkt. Broadway trades at 5.3x fwd P/E with hist avg at 4.5x


Centurion: Tipped to soon emerge as the region's premier builder and operator of workers' dormitories, housing some 100,000 beds in SG, Msia and China. Co. note that given pace at which manufacturing industries are growing around the region, demand for labour will continue to grow strongly.

Grp currently undertaking a book-building exercise to place out another 100m new shares, priced at between 20c and 24c each, to maintain a 25% free float. The proceeds will be used to develop the Mandai property as well as finance future expansion and development needs.

Conclude that this is a stable business with resilient cashflow, and even during the 2008 financial crisis, dormitories in SG were still full, noting that as long as there is a shortage of workers, the issue is how to provide decent, secure and cost effective housing for them.

Golden Agri

Golden Agri: HSBC Global Natural Resources Conference takeaway.
2H11 output risks remain on the upside, continuing the trend set in 1H11. Mgt expects overall volumes to be higher HoH due to favourable weather conditions.
Nestle’s recent return as a customer is a positive following environmental issues last year and mgt claims its new sustainability practices are at an advanced stage. The Group has received membership in the industry sustainability watchdog – RSPO – and has been issued green certificates for 15k ha of plantations. This will rapidly expand, according to mgt, while the Group will also pick up pace in expanding acreage. GGR has sufficient landbank to expand for three years.
With a maturity profile biased towards the younger end, HSBC expects GGR to see earnings expansion going in to FY12e despite lower palm oil prices. Maintains Overweight with TP $0.82.


Olam: HSBC Global Natural Resources Conference takeaway.
Mgt continues to have a positive outlook for FY12 despite global volatility given its food staples biased product mix. While crop harvests visibility is limited at this point given seasonality, working capital intensity should come off only marginally as volume growth will partially offset lower commodity prices.

To update on recent investments,
i) the Gabon fertiliser project is targeted to achieve financial closure by 3QFY12 and start production mid-2014,
ii) the Ivory Coast mechanical cashew processing plant is set for an end-Dec 2011 launch,
iii) the plant in Nigeria has entered the trial phase,
iv) the Ghana wheat mill is set to begin production by end-Nov 2011.

In balance sheet terms, the Group has seen no pullback in trade finance facilities or bilateral credit despite the global environment. Mgt is looking to term out its debt profile to the longer end to match the higher fixed assets mix. HSBC believes Olam is set to deliver secular growth from its M&A and Greenfield project driven strategy. Keeps Overweight with peer based TP of $2.99.


SGX: is among 3 potential suitors for London Metal Exchange (LME). Acquisition of LME, the world's largest metals trading exchange, wld give the buyer a strong foothold in the global metals trade. LME deals with ~80% of global trade in metal futures. The potential bidders are SGX, CME Group and IntercontinentalExchange (ICE), and all 3 have declined comment on the report. Estimates place LME’s worth at ~£1.0bn or $2.0b.
SGX is also said to be interested to team up with 1 of the bidders for LCH.Clearnet, London's biggest clearing house. London Stock Exchange and Markit are reported to be the 2 remaining bidders for LCH.Clearnet.

Tiger Air

Tiger Air: is adding another 2 aircraft, bringing its total fleet to 20 aircraft. The low-cost carrier will increase flights to Bangkok, Ho Chi Minh City, Tiruchirapalli, Guangzhou and Taipei. The expanded fleet will also allow Tiger to fly to new routes including Bangalore, Cebu and Davao.
The airline maintains its target to grow its total fleet to 68 aircraft by Dec 2015. Nevertheless, following the curtailment of its flights in Australia, and delays in expanding to other regional bases (in Thailand, Philippines), there have been concerns whether Tiger can effectively deploy the new deliveries going forward.
The majority of the Street has Sell ratings, with recent TP btwn $0.54 – 0.90.

Hsu Fu Chi

Hsu Fu Chi: Lifts trading halt. May be in focus on resuming trade after saying shareholders representing approximately 93.6% of a scheme of arrangement, had voted in favour of the scheme which relates to a proposed JV with Nestlé.

SG Market

SG Market: Spore shares are likely open higher following the rally on Wall Street amid hopes of concerted action by European policymakers to stem the region’s debt crisis as well as higher opening on regional bourses. Financials and energy sectors expected to perform well, taking their lead from the US market, which had financials leading the way with the sector finishing +4.5%. Resources stocks--among the hardest hit yday might benefit from the positive mood. In corporate news, Chinese confectionary maker Hsu Fu Chi may be in focus on resuming trade after shareholders voted in favour of the scheme which relates to a proposed JV with NestlĂ©. Analysts tip the STI to remain volatile, within a broad 2600-2900 range near term.

Monday, September 26, 2011


OPH: Awarded a tender by URA for a land parcel at Robinson Rd/Cecil Str jointly with priv co Boo Han Hldgs (BHH). The total tender price for the land is approx $311.8m. Co will have a 20% stake in the JV and BHH with 80%. The land will be developed for commercial purposes.


Olam: NZ Farming is considering raising US$120m from existing sh/h through a pro rate non-renounceable rights issue. Olam owns approx 85.9% of NZ Farming and consent by Olam's sh/h is needed for Olam to participate. NZ Farming has indicated that if shareholder approval is not obtained it will seek an alternative approval to increase an existing short-term loan from $85m to $110m from Olam and an extension from the repayment date of 31 Dec 2011. NZ Farming most recently posted a full yr loss of US$1.6m up from US$11.3m in 2010. Olam is valued at approx 14.0x compared to Noble at 10.2x

Kep T&T

Kep T&T: Increases capital in Sinotrans and also forms a JV with Sinotrans to construct and operate a general, container and bulk terminal in Anhui, China along the lower reaches of Yangtze River. This is co’s first river port project along Yangtze River. Co will invest RMB140m for a 50% stake in the JV in equal contribution and proportion as Sinotrans. Co owns numerous logistics facilities in Sg, Msia, Vietnam and China. This is co’s 2nd project with Sinotrans, with the first being Lanshi Port a river port in Pearl River, Foshan. Co trades at a fwd P/E of 9.0x with other logistic play GLP at 19.3x

Tiger Airways

Tiger Airways: Signing of a term sheet for the acq of a 33% stake in PT Mandala Airlines of Indonesia for 22.6m for approx $14.6m in kind through services. Mandala is a loss making airline which has undergone a debt restructuring plan where its unsecured creditors were coverted to 15% of its share bapital base. Mandala will operate low fare travel from Indonesia and also domestic destinations within Indo. As of 30 Jun 2011, Mandala has a net loss of $5.5m and is 51% owned by Saratoga, an Indo invt firm. Forward estimates by analysts expect co to post a loss in 2012.

CIMB maintains Underperform with TP$0.54 with expectation of losses from Mandala in initial yrs and to contribute only significantly 3 yrs from now.

Genting SP

Genting SP: Goldman Sachs Upgrade to Buy with $2.22 TP. House believe that recent pullback (-25% YTD vs +40% for Macau) offers a good entry point. The stock now trades at 11.0x/8.8x FY11E/12E EV/EBITDA vs Macau at 12.8x/10.1x. The year 2012 looks promising for the firm, yet calculate the stock is pricing in a 5% yoy decline (vs +17% yoy forecast) in SG Gaming Rev to $7.5bn and correspondingly, declining cash returns.

Add that investors should be less influenced by quarterly swings and more focused on underlying trends:
(1) new VIP Suites/Villas (Dec 11/Feb 12) and additional gaming salons;
(2) improving ops leverage - GENS is fully staffed, thus the cost base is unlikely to grow much as revenues roll in;
(3) strong FCF generation of S$1.3bn/1.5bn in 2011E/12E; GENS is already net cash – potential for dividend surprise;
(4) phased rollout of Junket licenses, not before 1H2012.


Sinopipe/HanKore: (The Edge) Former Sinomem CFO has been accumulating stake in both Sinopipe and Hankore. Tip that Sinopipe stands to benefit from boom in new water infrastructure investment in China, while Hankore’s wastewater treatment plants, which are located mostly in major urban centres e.g Beijing, SuZhou and Nanjing, will benefit from higher tariffs going forward, as the population is relatively wealthy.


YangziJiang/SembMar: (The Edge) Morgan Stanley note that industry grp’s that are most exposed to EU in terms of rev are tech, hardware, commercial and professional services and Semi Con.

Under house coverage,YangZiJiang and SembMar feature as one of the top 20 stocks under coverage that are most exposted to EU, with Co’s deriving 75.3% and 45.5% of their rev from the region. Interestingly, SG does not feature among countries with especially high exposure to EU.

Spore market

Spore market: Spore shares have a positive lead from U.S. markets which finished marginally higher and could see a mild bounce. However, any gains are expected to be mild as caution over the European debt situation will be high this week ahead of a key parliament vote in Germany over a new version of the EU stability fund come Thursday.
The STI ended down 0.8% at 2699 Friday, falling 3.2% last week. Analysts tip 2650 as near-term support which coincides with its 2010 low, and resistance around 2890-2910, the higher end of the recent trading band.
Tiger Air could be in focus after signing an agreement to buy 33% of Indonesia's Mandala Airlines, though no financial details were disclosed and the deal has been proposed since May.

Regional indices mixed.
At 8.52am, Nikkei 225 is -1.6% at 8425, ASX 200 is +0.6% at 3926.
At 8.33am, Kospi (delayed) is +0.2% at 1701.

Friday, September 23, 2011

First Resources

First Resources: CIMB has Technical Sell Call. Note that prices broke below its medium term support trend line in August. Although the bulls tried to make a comeback, sellers at the support-turned-resistance trend line proved a tad too strong.

Advocate traders to stay on the sideline as the candles are trading below its key moving averages. Although MACD signal line is rising, house are perturbed by the dwindling RSI indicator. The mixed technical reading suggests that trading are likely to be choppy in the near term, with downward biased.

The next downleg, when it set in, will derail prices towards $1.22 and $1.17 next. Therefore, any rebound towards $1.335-1.36 is a good opportunity to take profit. Buy stop at $1.40

Sakari Resources

Sakari Resources: CIMB has Technical Sell Call. Note that prices broke below the flag channel as well as its previous low yesterday. This could be seen as a prelude to more downside ahead. If house right, prices should drop towards $2.28 soon. The following support levels are $2.17 and S$2.00.

MACD signal line has staged a negative crossover while RSI has also hooked downward. Hence, think follow through momentum will likely be weak in the near term. As the candles are trading below all the key moving averages, strategy here is to unload into strength, especially near $2.44-2.48 levels. Aggressive traders, however, may start to unload now. Buy stop at $2.51.

Venture Corp

Venture Corp: Citi maintains Buy, but decreases TP to $8.00 from $9.30. House expect muted 2H11 recovery; but Yield Stays Intact.

Lowers FY11-13E ests by 12-19% on expectations of a slower-than-expected rebound in vol sales amid prevailing macro headwinds; 2H11 rebound may not materialize, mgt suggests a cautionary outlook across most of its business divisions.
At current stock price levels (11x FY12E P/E), however, believe most of this bad news has already been discounted; VMS continue to stand out for its resilient margins (6-8%), higher industrial/corporate exposure and attractive div yield (>7%).


Singpost: UBS maintains Neutral with TP $1.07, citing potential loss from equity-linked notes.S$34.5m investment in ELNs is a cause for concern, given the sharp correction in equity markets, and the amount of loss could vary widely depending on the underlying equities and exact structure of these financial instruments.

Scenario analysis suggests these losses could range anywhere between $0.9m to $10.3m, which is 0.6%-7.0% of 2012E net profits.


Olam: CS maintains O/p, with TP $3.85. Note that valuation at current levels is still 1 SD below historical average multiples. Near-term catalysts include financial closure and award of turnkey contract for its US$1.3b Gabon fertiliser project, and announcement of more
earnings-accretive deals.
Olam remains a sound way to play the structural agri-commodity theme, while current valuation at 13x P/E on 21% EPS CAGR is an attractive entry point.

Privatisation candidates

Privatisation candidates: DMG screens for buyout candidates:

1) Pac Pacific Hotels, 82%-owned by UOL and together with the 7% held by UOB AM, Co. is just a whisker away from the 90% shareholding level. Very high probability (90%) of the company being delisted, barring the timeline uncertainty,
2) Great Eastern Holdings, 87%-owned listed life assurance arm of OCBC, GE has grown in value and continues to be well-entrenched as the market leader in the life assurance space in Spore and Malaysia,
3) Lee Kim Tah, 82%-held by the founding Lee family with very little free float in the mkt. Stock has consistently seen insider purchases. Key assets include a 50% in Jurong Point shopping mall, the Marco Polo Hotel Xiamen as well as land in Chennai, India.
4) Other picks are Wheelock Properties (Singapore), GuocoLeisure and Singapore Land.

SG Banks

SG Banks: UBS note that SG bank share prices are just 10% shy of a recessionary level. If financial dislocation occurs, f/cast 40% downside to share prices, view current valuations as attractive, as do not expect a recession. House positive on DBS as it is inexpensive (1x 2011E P/BV) and like OCBC for its franchise power.

While SG banks cannot avoid global market volatility, believe investors will be reassured by their robust capital position, strong funding base and as they operate in Asia where economies are relatively healthy.

Over all rating are:
UOB: maintain N, TP $19.20 from $19.70, (strong loan growth, conversative bank.)

OCBC: maintain Buy, TP $10.70, (Premium franchise, strategy of building up the wealth management business will ensure higher profitability over time.)

DBS: maintain Buy, TP $15.90 from $16.60, (Strong capital position, and shares are inexpensive, and strong loan growth should drive earnings; and robust capital will likely be reassuring in uncertain times.)


CPO: DBSV has sector report. Recommend investors vested in the sector to take Cover in Malaysia plantation stocks. If the 2008 global financial crisis were to be repeated, planters would still have 20-80% downside from current levels – based on trough PE and PBV valuations then.

A trade freeze can distort otherwise resilient palm oil demand; as piling inventories in producing countries send a bearish signal. But bear in mind that buyers’ current inventories are already low and restocking demand would not take long to reappear.

Some planters are riskier than others and house stress-test planters under coverage for an unlikely event where CY12F palm oil prices drop to a flat average of Rm1,400/MT (previous trough). In this scenario, Sampoerna Agro, IndoAgri, Kencana Agri and TSH Resources would have to scale down their capex and/or add leverage to cover short term cash deficit.

Recommend investors reduce exposure in Indonesia, as Indonesian upstream planters have historically been the most exposed to foreign investors’ flight to safety during economic downcycles; while Malaysian planters have tended to be least affected. Focus on diversified/high-yield CPO stocks. Stocks with yoy earnings growth and/or decent div yields should outperform peers. House continue to recommend Sime Darby and First Resources. Cut Wilmar, IndoAgri and KLK to Hold on limited upside.

Golden Agri

Golden Agri (GAR): Citi maintains Buy with $1.08 TP. Note that recent news flow suggests 3 key positive developments for GAR’, following Greenpeace allegations of unsustainable environmental practices. The developments are:

1) Nestle has resumed CPO purchase from SMART:
2) RSPO certification achieved for 15k ha of plantations and 1m in North Sumatra. This brings GAR closer to its overall target of achieving RSPO certification for the rest of its existing 433,200 ha of palm oil plantations and 42 mills by Dec 2015
3) Unilever may resume buying of SMART’s CPO following an 18-mth halt after the palm oil producer made improvements to abide by Unilever’s guidelines.

Add that with mkt cap of US$6.6b and ADT of US$46m, GAR is Indonesia’s biggest CPO Co. and most liquid stock in house Asean CPO space. Tip grp as a beneficiary of weakening rupiah and relatively stable CPO prices at US$1,000/t should help mitigate risks of higher costs.


SGX: The Asean link which is to connect 4 regional stock exchanges is expected to go live in 1Q2012. The initial exchanges to be included are SGX, Bursa Msia, Philippine Stock Exchange and Stock Exchange of Thailand. The link will feature a cross-border trading platform and order routing services although clearing fees will still be paid to the respective exchanges. US tech firm Sungard has been appointed as the technology provider for this platform.

The details have not been revealed but brokerages might face more competition or require possible tie-ups after the link is set up. Potentially, markets which do not have advanced systems and multi-market connectivity such as Philippines compared to SGX could benefit from more liquidity flows as other markets are accessible to the local populace.


Swiber: Lifts trading halt.Secured contract worth approx US$155.0m for an EPIC pipeline project in South Asia. The latest EPIC pipeline project is scheduled to commence in 4QFY2012 and targeted to complete in 2QFY2013. Co's current order book is close to $1b.

CIMB maintains Outperform but raises TP from $0.65 to $0.71. Earnings forecasts for FY11-13 are raised by 8-11% factoring in stronger orders for 2011, expecting another US$177m in orders over nxt 2 mths. Order backlog for co is currently abt US$930m with additional 2 potential contracts worth US$177m. Target order wins for 2012 cut to US$300m to factor possibility of stalling orders in a recessionary environment. Notes that sh/h approval for perp pref shares will be sought and if approved could reduce net gearing from 1x to 0.8x.

KS Energy

KS Energy: Signed a contract with BP Pakistan Exploration & Production Inc. to lease and operate its land rig – KS Discoverer 3. Work is expected to commence in 2H2011 in Oct. The rig will operate in Pakistan for a period of 1 yr plus a 1 yr renewal option. The total value for the contract (including the one year renewal option) would be about US$14m. In co’s most recent results, a net loss of $5.5m was posted, its 5th consecutive quarterly loss.

Hai Leck

Hai Leck: Grp’s order book swells to $73m vs FY11 rev of $82.3m with recent contract wins, underpinning earnings till FY12. Contracts won included an engineering, procurement and construction contract, which it announced yesterday, for a chemical plant on Jurong Island.

Marco Polo

Marco Polo: Announced that it has secured a shipbuilding contract worth $10.5m to construct five deck cargo barges for PT Pelayaran Nasional (BBR), an associated Co of the group. Construction of the five deck cargo barges is expected to begin next mth at the grp's shipyard in Batam with delivery scheduled for July next year. Contract will contribute to profitability of Grp’s shipbuilding activities for FY12.

Comfort Delgro

Comfort Delgro: the 51/49 ComfortDelgro Cabcharge (CDC) JV in Australia, has reportedly indicated interest in Grenda Corp’s bus business, and has apparently suggested a potential purchase price range of A$300-500m. The idea was mooted by Cabcharge, and Comfort has not made any related announcement.

As background, Grenda operates route-bus services predominantly in the Southeastern regions of Melbourne and accounts for ~25% of Melbourne's public transport system. The co has a fleet of > 650 buses which operate under contract from the State govt and are focused within the metropolitan areas (vs mix of metropolitan and regional contracts operated by CDC's existing Melbourne bus operations). Notably, Grenda's contracts operate on a similar cost-plus model to CDC's existing bus business.

Deutsche notes, the potential Grenda acquisition could almost triple CDC's existing bus fleet in Melbourne with positive scale and efficiency implications. Views Comfort’s interest in developing the Australia bus operations positively, given the potential synergies.

The Australia bus business currently accounts for 13% of Comfort's revenues and 18% of Group operating profits. 1H11 revenues from this segment grew 19% YoY (or 13% YoY excluding FX impact).

The stock trade at 12x FY11E P/E, offers 4.3% FY11E yield.
Deutsche has a Buy rating with TP $1.70.


Cosco: TL Offshore, an offshoot of SapuraCrest, says it has signed on for “pipelay-cum-heavylift" units at Cosco's Nantong Shipyard (50% owned by Cosco Singapore). There is no official announcement from Cosco yet.
The first, hull number 448, is set to cost US$110.25m with delivery between 3Q-4Q13. Hull number 449 costing US$116.75m will be delivered either at the end ‘13 or beginning ‘14. This puts the total purchase price at US$227m.
SapuraCrest did not mention any optional contracts.
Nor did the co did not specify if the units have been ordered against firm charter contracts, though SapuraCrest said they would "be slotted to perform marine construction contracts for major oil companies".
The Msian engineering and construction giant said it will finance the orders through a combination of cash and existing bank facilities.

While news is a positive following the recent dry spell in orders, Cosco still faces key challenges, including i) inability to capitalize profitably on its record offshore orderbook, with further provision risks and lower margins on lower priced contracts, ii) lackluster BDI suggests volume of new build contracts and ASP will remain depressed, and iii) speculative customers (eg Sevan Drilling) may face difficulty securing sufficient funds upon delivery.
Recall, Citi yday reiterated its Sell rating, with a significantly lower TP of $0.90 (from $1.50).

SG Market

SG Market: Spore shares are likely to see further bloodshed following the global rout yday on flight from risk. Interestingly, of the 24 developed markets tracked by the MSCI, only the US, UK, Canada, Spore and NZ are not yet in bear territory, so there mat be some catch-up to do. The Aug low of 2680 on the STI is likely to be broken with next supports at 2650 and 2600. Among corporate news, Swiber announces it received a pipeline order worth US$155m, its single biggest order to date.

Thursday, September 22, 2011


STX OSV: DBSV maintains Buy, but reduces TP to $1.54 vs $1.90 previously. Cite Counter as ‘Down but not out’. Note that longer term fundamentals intact and despite the recent sell down, STX OSV remains well positioned to benefit from a recovery in the newbuild cycle.

In house view, the drivers supporting a recovery in demand for newbuild OSVs remain intact, with latest background checks indicating that enquiry levels remain healthy, with a stable pipeline of potential orders. Order momentum hit by macro uncertainties. However, in the near term, the ongoing economic uncertainty and skittish capital markets continue to cloud visibility on the timing of orders.

Industry checks reveal a generally more protracted process in finalizing an order. With 3 months of 2011 left and only NOK5bn of orders in the bag, our view for a stronger 2H 2011 for order wins seem increasingly unlikely. House trims FY11-13 order wins assumptions by 17-19% on possible order deferments, leading to a 4%/10% cut in FY12/13F. Highlight that 48% of revised FY11 order wins assumption is backed by secured orders, rising to 80% once the Transpetro and Island Offshore orders are made effective

Heeton, TEE Intl, KSH and Oxley

Heeton, TEE Intl, KSH and Oxley: Heeton (35%) , KSH (35%), TEE Intl (20%) and private co Zap Piling (10%) have formed a consortium. The consortium has acquired a 35% stake in Oxley Viva with remaining 65% owned by Oxley Holdings.

Oxley Viva also won a tender for all the units in a collective sale for Hong Leong Garden Shopping Centre at price $171.1m. The property has leasehold tenure of 956 yrs from 27 May 1928 with site area of 150.8k sf. It currently comprises 72 residential units and 66 commercial units. The site has the potential to be redeveloped to a max GFA of 262.8k sf assuming the state land beside is consolidated.

Freight Links

Freight Links: has acquired a 100% stake in San Lu Logistics, for Rmb 14.1m (S$2.7m). Unaudited NAV of San Lu is Rmb 14.7m (S$2.8m). In addition, it will assume San Lu debts of Rmb 18.9m (S$3.6m).
San Lu is engaged in warehouse construction and devt, real estate mgt, consultancy services and the provision of warehousing operations, storage and transportation services.
San Lu owns a 24.8k sm industrial land located within the bonded logistics park in Jiangyin. It has a newly completed bonded warehouse with remaining tenure of 47 yrs (up to 15 May 2058). Jiangyin Bonded Logistics Centre has signed a 3 + 3 years lease contract upon successful completion of acquisition of San Lu.
The acquisition is part of Freight Link’s strategic expansion plans for its logistics business in China.
The stock trades at 7.3x P/E, 0.8x P/B, offers 7.1% historical div yield.


OCBC: HSBC lowers TP to $9.30 from $10.90, keeps Neutral rating. Cuts EPS forecasts for 2011-13 (now 7-16% below consensus), in view of a more stagnant macro outlook and depressed interest rate climte. Expects lower NIM and non-interest income, and higher collective provisioning charges.
Says valuation at 1.3x FY12E P/B and 12x P/E looks attractive, but sees better value in UOB (Overweight, TP $23.15). Notes, the latter trades at similar P/B multiples but has a more profitable franchise. The house also like DBS given its more attractive headline valuation multiples at 1x PB, 10x P/E, which should limit relative downside vs OCBC.

ARA Asset Mgt

ARA Asset Mgt: IIFL: reiterate Add but decreases TP to $1.67 from $1.90. Note that Steady income; remains a growth play.

ARA expects recurrent income to be stable, and growth to come from:
1) listing of RMB denominated REIT in HK;
2) potential listing of Malaysian retail / China commercial REIT;
3) acquisitions by existing REITs;
4) divestment of Asia Dragon Fund 1 private fund and successful raising and
deployment of US$1bn of committed capital for ADF 2; and
5) M&A opportunities.

House like ARA's scalable business model, which offers 30%+ ROEs and yields of >4%. Lowers 2011-12 earnings estimates by 2-3.5% and increased 2013 earnings estimate by 30% to account for lower management fees from private funds and performance fees from divestment of ADF 1.


Riverstone: CIMB initiates coverage with Buy Call and $0.45 TP. Note that investors remain concerned on overcapacity in the glove industry and good news is that some of the key players are moderating their capacity growth. For Riverstone, Co. is not too worried as its capacity remains manageable and expansion into medical gloves is via its ability and willingness to customise to customers’ requirements.

Going forward, Riverstone is targeting a healthier balance of 50% clean room gloves and 50% healthcare gloves. On the cost side, raw materials costs (mainly nitrile-related) should decrease as more suppliers enter the market. Increase in fuel cost remains manageable and Grp is counteracting some of the cost increase with its own heat generation capability. House projecting 6% div yield over FY11-FY13.


Cosco: Citi maintains Sell and slashes TP to $0.90 from $1.50. House expect challenging environment to persist and cut earnings forecast by 31-32% over 2012-13E to factor in weaker orderbook prospects and heightened margin erosion in both ship and rig building.

Revised assumptions reduce orderbook forecast by 23-40% to $2b in 2012-13 and further lower margin forecast by another 80-90 bps to 9-11% for 2012-13E. Think it is too early to turn positive given lack of visibility and likelihood of more downward revision.

Key challenges include:
i) Inability to capitalize profitably on its recordoffshore orderbook.
ii) Lackluster BDI suggest volume of new build contracts and ASP will remain depressed.
iii) Significantly YoY gross margin increase for shipbuilding in 1H11 isunlikely to be sustained since 2012 E will begin to recognize a larger portion of lower priced contracts.
iv) Speculative customers (e.g. Sevan Drilling) may face difficulty securing sufficient funds upon delivery.


Mermaid: CIMB downgrade to Neutral from O/p. House view the cessation of CEO, Mr Denis Welch negatively, although tip no adverse impact on business operations or radical change to general course of the Co. is expected, a perceived lack of direction for Co. is damaging.

In addition, while valuations are compelling (0.4x P/BV), believe that Mermaid would at best, perform in line with market amid negative sentiment. TP based on 0.5x CY11 P/BV, bottom end of its trading range. Recommend investors to re-visit the stock only upon better clarity on the strategic direction of Co, better-than-expected qtrly performances or favourable contracts for its newbuild jack-ups.

Sakari Resources

Sakari Resources: CIMB downgrade to U/p from Neutral with $2.47 TP. Note that SAR has outperformed peers by 10% in the past mth, prompting house to turn cautious on stock. Recent checks suggest that buyers are starting to adopt caution on pricing for fear of deteriorating economic conditions.

While valuations are not lofty at 9.7x CY12 P/E against peers, house fear that macro headwinds may drag down its valuations. During the last downturn, SAR touched a low of 3.6x P/E. House keeps estimates and $2.47 TP, but downgrade rating to U/p in view of its recent share-price appreciation. Derating catalysts include thermal coal-price declines and intensifying risks of a double-dip recession.

SG Retail REITs

SG Retail REITs: CS has sector report. Note that retail REITs have demonstrated resilience through crises, with sector occupancies rarely falling below 90%, and rents (especially suburban malls) behaving fairly ‘sticky’, with a low-single digit yearly growth on average.

Believe that retail REITs are better positioned to weather the ‘storm’ in the event of another global financial crisis, with a stronger balance sheet post the subprime crisis. In house view, retail REITs will continue to be resilient in this volatile mkt environment and expect them to continue delivering strong organic growth, despite global uncertainty, driven by AEI completions and strong rental reversions.

Top picks are:
(1) CMT—largest, most liquid proxy to the retail sector with the most resilient portfolio (occupancy sustained >98% through past crises);
(2) MCT—a retail play with a kicker from strong Sentosa arrivals, with earnings underpinned by strong reversions at VivoCity; and
(3) FCT—pure proxy to the more defensive suburban malls, where rents are more resilient.


SPH: Deutsche maintains Hold with $3.80 TP. House note that according to the latest data, total advertising expenditure (adex) in Aug surged 16% YoY to S$205m, representing the strongest Aug in many years. Notably, the Aug adex growth was significantly ahead of the average 4% YoY increase recorded YTD and marked the fastest growth since Apr 2010.

Incremental gains were driven largely by TV adex which increased 26% YoY and was a remarkable $15m higher YoY. Newspaper adex was also robust, growing 11% (or $8m) YoY. Elsewhere, Magazine, Poster and Internet adex all registered firm increases while only Bus/Taxi and Cinema adex contracted YoY. Overall, Aug's print adex (Newspaper and Magazine) jumped 12% YoY to S$90m (fastest rate of increase YTD).

Based on current run-rates, house estimate SPH booked approximately $196m 4Q11e advertising rev, along with the $584m 9M11a advertising rev already reported, this would take SPH's FY11e advertising rev to approximately $780m (broadly in-line with house forecasts). But despite Aug's strong adex performance, do not think growth will be sustained at such levels and expectation is for moderation in advertising growth in subsequent months.

While house like SPH for its stable media business and sustainable div yield, have a Hold rating on stock given the modest growth outlook and lack of positive catalysts.

HK Land

HK Land: Deutsche downgrades to Sell from Hold with US$4.40 TP. House cites expectation of weakening HK Office market ahead, with corporate hiring expectations turning cautious in light of a deteriorating macro environment, believe rents in the HK office market have peaked and are now heading into a downturn phase.

While house expect the imminent impact on passing rents to be relatively mild in 2012, see NAV coming under pressure on cap rate decompression. House lower NAV estimate to US$6.77/share and target price to US$4.4, pegging TP at a 30% discount to NAV.

SG Market

SG Market: Spore shares are expected to fall following Wall Street's tumble which came after US investors were left cold by the Fed's post-meeting announcement, in which it detailed a much-anticipated plan to suppress long-term borrowing costs, dubbed ''Operation Twist.'' But nothing more The central bank also cast a downbeat view of the world''s largest economy, mentioning "significant downside risks." The local market is going to take our cue from the US, so it is definitely going to be a down day, followed by Europe likely falling as well. Initial support for the STI is tipped at 2720 with upside resistance at 2820.

Corporate news is thin, but selling could be concentrated in cyclical plays, such as offshore and marine, especially after benchmark oil prices dropped 1.2% to US$85.92/bbl. Banks may also be pressured after US financial stocks fell sharply

Wednesday, September 21, 2011


Ezra: ‘Speculation on dual listing in London’. According to press reports, Ezra’s Managing Director Lionel Lee was quoted as saying that London is an attractive place to do a dual listing but no decision has been made given current market conditions.

DMG do not rule out a possible dual listing but believe such a move is premature at this stage given that its subsea earnings have yet to show the desired results, as a move to do a 2nd primary listing on depressed earnings may not be viewed positively.

On a more positive event, the recent takeover of Global Industries by Technip has set a pricing benchmark for the sector: the deal is valued at 20x FY12F P/E and 1.33x FY11F P/B on consensus estimates. At similar valuations, house estimate that Ezra will be valued at $1.70-2.50/share. DMG maintains BUY with an unchanged TP of $1.44 on 12x FD FY12F EPS.

Sound Global

Sound Global: CIMB has Technical Sell Call. Note that prices is still trapped in a downtrend channel. Recent correction dragged prices below its previous low of $0.555 and this could induce greater selling pressure in days ahead. Any rebound would likely be weak as the candles are trading below all the key moving averages.

MACD is still hovering in the negative territory while RSI is below the 30-level. The negative technical readings further reinforce our bearish stance on the stock. The next downleg is likely to drag prices towards $0.51, $0.46 and $0.425. Unless prices swing back above the $0.595 level, house rather stick with the bear’s camp. Any rebound is an opportunity to take profits.


M1: CIMB has Technical Sell Call. House note that prices was holding steadily above its 200-day SMA for mths before prices started to show weaknesses in Au. Yesterday, the stock plunged below the 200-day MA again, suggesting that the $2.70 high could likely be its near term peak.

Technical landscape is deteriorating. MACD signal line has staged a negative crossover while RSI is also dwindling towards the oversold zone. Hence, think that there is still room to the downside. Use any rebound to sell into strength as near term gains are likely capped at $2.60-2.70. The key MAs at $2.45-2.54 will also keep the bulls at bay. On the downside, support is at $2.32 and $2.20.


Ezion: CIMB maintains O/p, but reduces Tp to $0.85 from $0.92. Note that Industry publication, Upstream, reported that a consortium led by Aberdeen-based Asco Holdings will build, own and operate a marine supply base in Darwin, in Aus’s Northern Territory. Mgt concedes that increased competition is a worry, and as pending further clarity on grp’s supply bases, house conservatively remove marine bases’ contributions and cut earnings estimates
for FY12-13 by 8-12%.

TP still based on 8x CY12 P/E, one SD below the 5-yr small-mid-cap industrial average, reflecting weak sentiment for small-maps. Nonetheless, the cut in earnings estimates still leaves us with a visible 3-year core earnings CAGR of 35%. Maintain OUTPEFORM as we see multiple catalysts


DBS: CIMB downgrades to U/p(from O/p), after cutting CY11-13 estimates by 7% and TP to $11.90 (1.0x CY11 P/B; GGM, ROE 10.3%, COE 10%, growth 4.3%) from $16.56 (1.38x P/B). House wary of the new credit cycle and DBS’s exposure to China’s export sector.

Reckon that DBS has most room for top-line slippages, as capital-markets activity slow and i/r stay low. Comparing 1998 crisis with 2008 crisis, note that the banks’ ASEAN books looked well-behaved this time round and should likely to remain so in 2012. DBS, however, had potential China NPLs that were quickly nipped in the bud by China’s credit over-drive; this may come back to haunt it in 2012.

Also, DBS has benefitted from US$ trade finance activity and the RMB trade; such revstreams might also taper off ahead. While its 1.0x P/BV valuations might not sound expensive, experience with recessions show that valuation multiples can over-shoot on the downside. DBS has the most downside to trough valuations.

First Resources

First Resources: HSBC initiate Coverage with O/w Call and $1.64 TP. House note that Young maturity profile and large landbank will underpin earnings momentum despite softer CPO prices, while downstream exposure provides cyclical protection while also leveraging emerging market demand.


Wilmar: Citi maintains Buy with $6.30 TP. House note that China’s NDRC decision to put through an allowance for a 5% rise in prices of bottled edible oil last mth has helped; with Aug data indicating a 30% YoY increase in import vol of edible oils (or 8% YoY increase based on 3m average). Soybean imports though remain muted as Aug data indicate a 5% YoY contraction (or 11% YoY decline based on 3m average).

House is looking for vol to be a stronger driver through for Wilmar in 2H11, as China is a major importer of soybeans and edible oils. Wilmar’s oilseeds division had only processed 8.1m MT of oilseeds in 1H11, a decline of 6% YoY, as Cap on prices (and tight credit conditions) across 1H11 have meant reduced margins that have stifled imports as traders shy away. Believe raising price caps may help stimulate some vol growth across 2H11, helping Wilmar to get to 18.5m MT, +1% YoY in oilseeds processed for FY11.

Add that currently strong sugar price levels if sustained imply potential upside in contribution rate from Wilmar’s sugar unit (from house current estimate of 5% of overall profits in FY11). Recent news that other large agri-groups are also considering plans for sugar plantations in Irian Jaya (Papua) is a positive in that some of the required infrastructure may now see govt involvement. Wilmar has plans for a 200k ha sugar cane plantation in Irian Jaya to fit into the Indo govt’s plans to become sugar-sufficient (from a current deficit of 2m MT pa).


Macro: the IMF says the global economy is much weaker than believed just months ago, and growth will pick up only slightly next year. Lowers its growth forecasts for the global economy to 4.0% for 2011 and 2012, as activity had "weakened significantly," and warned of a return to recession if Western leaders fail to get their economies back on track.
Forecasts China to continue to lead the world's growth but at a modestly slower pace (9.0% next year), while India was projected at a 7.5% rate, though growth downgrades were nearly universal, from Russia, Latin America and Sub-Saharan Africa to the MENA.
Adds, “markets have clearly become more sceptical about the ability of many countries to stabilize their public debt."

Warns the US economy could remain weak for years to come, describing a recovery stalled amid unrelenting headwinds and in dire need of a push from govt.
Cuts US growth forecasts for this year by a full % pt to a paltry 1.5%, a slower rate than projected for the crisis-wracked eurozone. Adds, "growth will be modest relative to historical averages for years to come”, citing crushed US consumer confidence and battered business sentiment -- as well as ongoing crises in the housing and financial markets.

Also warns of the dangers of inflation in much of Asia, where some central banks are having to tighten monetary policy or hinting at rate rises to come. Sees a modest slowdown in China, and for Japan to contract this year but bounce back in 2012 as reconstruction from its Mar ‘11 disasters begins to trickle through and sentiment picks up.
"Growth is expected to remain strong, with weaker external demand offset by still-solid domestic demand.
Forecasts Singapore to grow 5.3% this year and 4.3% next year, down sharply from its rapid-fire 14.5% in 2010.


CNA: Awarded a total of approx $18.6m worth of contracts in Sg, China and Vietnam. Out of which, 2 contracts secured just this mth were from Hanoi Park City in Vietnam and LTA, bringing CNA’s total outstanding order book to $64.9m with 37% of projects in Sg. Co most recently posted 1H rev of $43.0m with EPS of 0.4c which translates to annualized P/E of 20.9x

Advanced Hldgs

Advanced Hldgs: Secured $16.8m worth of contracts. These include Process equipment and analyser systems to three refineries totaling some $9.4m. These end-customers include major petrochem and chemical players such as Shanghai Coking and Chemical Corporation, Hengli Petrochemical (Dalian) Co., Ltd and Sinopec. Another $7.4m are for provision of equipment to world-class engineering companies such as Larsen & Toubro Limited, Worley Parsons Ltd and JGC Corporation. Advanced trades at 18.4x current P/E.

GK Goh

GK Goh: To sell property at 21 Tanjong Pagar Rd for $32.8m to private co Region Dev. The book value of the Property and its fair value was $26.0m as at 31 Dec 2010, based on a market valuation. Co acquired the property in 2007 for capital appreciation and rental yield. Co will record a net increase of $21.8m in cash. No mention of purchase or price of land in 2007. Co now trades at approx 6.2x current P/E


Serial: To offer 28m TDRs representing 3 ordinary shares per TDR for a total of 84m shares. The indicative price range is from NT$10.98 to NT$12.75 (approx $0.155 to $0.18) per share but the issue price cannot be at a 10% disc to the weighted avg price done on SGX the preceding mkt day . The book-building and public subscription exercise in Taiwan will be handled by Fubon Securities and is expected to commence on 22 Sep till 27 Sep. A total of $13.0m to $15.1m will be raised and co intends to use part of proceeds for business needs in China, Taiwan and South Korea.

Serial trades at current P/E of 7.7x at last done $0.17. Peer UMS trades at approx 7.7x with bigger co Venture at 10.5x.


Man U IPO: Official supporters' trust of Manchester United has hit out again at the club's proposed IPO, criticising SGX for reportedly allowing the listing on terms that seem unfair to minority investors. Recall that the club is planning to raise up to 2/3 of a planned US$1b IPO in SG through non-voting preference shares. According to the report, the move would keep as much as 88%of voting rights in the hands of the Glazer family.

While sources confirmed that Man U has obtained the Eligibility to List from the SGX, Man U will wait for markets to improve before launching anything. Given current market conditions, the launch might spill over into Nov, or even next year, according to sources.

Starhub / M1

Starhub / M1: Starhub will become Vodafone’s new exclusive local partner from Jan ’12, once the latter’s long standing tie-up with M1 expires at the end of this year.
StarHub and Vodafone will join hands in areas such as cellular and data roaming, a move which could potentially allow StarHub customers to enjoy standardised rates when they use their mobile phones in countries where Vodafone and its affiliates are present.
Similarly, StarHub is set to become the cellular port of call for subscribers (incl MNCs) of Vodafone and its partners when they are in Spore.
London-based Vodafone has ~382m customers globally and could provide a significant boost for StarHub's inbound roaming revenue.

While Deutsche does not believe the Vodafone partnership will significantly alter Starhub’s growth outlook, it sees the agreement as strategically positive. Cites opportunities for Starhub to strengthen its enterprise mobile service offerings and positioning by leveraging Vodafone's expertise and corporate relationships. Also expects the partnership to enhance Starhub’s roaming services given Vodafone's global footprint.
The Street has mixed ratings on Starhub with recent TP ranging btwn $2.75 – 3.27.
The stock offers 7.1% FY11E yield.

Deutsche and CIMB however, are less sanguine on M1.
CIMB estimates the end of the Vodafone alliance could shave M1's core net profit by no more than 5-10%. Believes the partnership helped drive int’l call services revenues for M1 (~13% of revenue now), while Vodafone's global branding and strong corporate positioning also enhanced M1's brand equity and strengthened its enterprise proposition. Nevertheless, the house keeps its Neutral rating with TP $2.63, on the back of the stock’s fairly attractive 6-7% div yield.
Deutsche notes that while M1 will remain a member of the Asia Mobility Initiative, which includes several regional operators, believes none of these operators offers a global network of similar scale to Vodafone's. And while mgt suggested the overall impact of the partnership annulment could be marginal (especially given the associated costs of the Vodafone partnership), believes this could still represent an additional challenge in reversing M1's recent subdued int’l revenue trends. Keeps at Sell with TP $1.90.
The stock closed at $2.43 yday, just below the $2.44-2.45 support level (bottom of the long term uptrend channel; 200 day MA). Watch for accelerating selling pressure, if share price does not return back into trend channel within the next few days. Investors who wish to time an entry may want to wait for the uptick and more clarity on the technicals, before accumulating positions.

SG Market

SG Market: Spore shares will see cautious trading today as investors await the conclusion of the FOMC meeting tonight, to see if the Fed has any fresh ideas to stimulate the economy. Given the dearth of corporate news, the STI is tipped to trade within the 2720-2820 range.

Tuesday, September 20, 2011

Golden Agri

Golden Agri: IIFL initiate with Add and TP $0.79. House add that Co. on the path to produce sustainable oil expect Co. to deliver a modest 5-6% production CAGR over FY11-20. GGR is the most liquid proxy to CPO prices, with a correlation of 0.9 since 2008.
If CPO prices appreciate by 5% annually in the long term and yield profile of the palm plantation improves, discounted cash flow model suggests a fair value of $0.79 (12.2x FY12 P/E).


CMA: Nomura reiterate Buy Call but reduces TP to $1.69 from $2.23. Add that more transaction benchmarks could start to narrow discount to book. Believe the 17.3% discount to FY12F book at which the stock is trading may be overly conservative.

Expect potential near-term catalysts to narrow discount to book include:
1) more transaction benchmarks as developers deploy capital for acquisitions in
China; and
2) higher-than-expected dividend payout for the full year.

House cut earnings forecast by an average 20.7% to chiefly reflect the latest completion schedule of CMA’s malls in China and SG; higher pre-op expenses and the acquisition of additional stakes in the Shanghai malls; and revised earnings for CMT.


SG O&M: CS has sector report. Note that valuations more attractive, but downside risks remain. While valuations have come down from recent peaks, believe that they are not sufficiently attractive to be positive on the entire sector given macron uncertainty and a tightening of credit. believe earnings are increasingly at risk with a potential slowdown in orders.

Believe most stocks are pricing in a mild-2001 type US recession on a P/B basis. House has downgraded Sembcorp Marine and STX OSV to NEUTRAL and believe they have the largest risks to orders and earnings expectations. Remain comfortable on stocks close to meeting order expectations or are close to trough valuations, including O/p-rated Keppel (top pick), Sembcorp Industries and Yangzijiang. Cosco Corp (U/p) remains as least preferred.


Fortis: Fortis Healthcare India has announced that is will acquire Fortis Healthcare Intl headquartered in Singapore also may consider a listing on SGX. With the recent acquisition, Fortis India will form a network of over 74 hospitals with over 12k beds and 23k employees with a rev of over US$1b.


BakerTech: Accounting treatment of 15% indirect stake in PPL Shipyard now in focus. The point of contention is whether a JV agreement signed in 2001 is still in force. This affects the expected cash payout to co’s sh/h after the sale of its PPL stake for $116.3m to a consortium which includes Yangzijiang. As of yet, the issue has not been resolved.

Both SembMarine and former shareholder PPLH enjoyed equal board representation and voting rights but SembMarine has argued that the 50-50 voting split was moot after it increased its stake to 85% in 2003. On BakerTech’s books, the accounting treatment of PPL Shipyard changed from an “available-for-sale” asset to a JV in 2010 after legal proceedings commenced which affect the way BakerTech views PPL Shipyard in terms of ownership


GLP: To establish a JV partnership where GLP will own a 60% stake in Zhejiang Transfar Logistics Base. The JV will own 3 assets that are masterleased to the operator of Transfar Road-Ports. Going forward, GLP will develop and operate logistics parks adjacent to future road port projects providing a total solution platform for customers.

Transfar Road-Port currently owns the three operational road ports projects in Hangzhou, Suzhou and 75% of a Chengdu project with a total NLA of 951.3k sqm. Co is of view that it has the option to convert these assets to warehouse facilities if necessary. Roads remain the main medium of freight transportation with 77% mkt share.

What are road ports? Apparently a port for trucks with logistics facilities. (

Lian Beng

Lian Beng: Proposed to spin off 90% owned subsi Sinmix and wholly-owned subsi Lian Beng Engrg & Machinery (engrg & concrete business) on a primary listing on Taiwan Stock Exchange. Approval sought by EGM and SGX. If Lian Beng does successfully list on TSE and depending on the valuations, other construction counters such as KSH, BBR, Chip Eng Seng, Lum Chang and others may get a boost and consider secondary listings on TSE. The industry generally trades at an historical avg of 6.0x.

DMG notes that co trades at 3.4x fwd P/E and may have capacity to trade up to the sector avg of 7x, maintains Buy for TP$0.71. Taiwanese concrete peers trade at an current avg P/E of 12.9x and construction/engineering at 7.8x. Positive include strong orderbook as of May 11 of $839m and track record of project wins.

Listing is expected to provide greater clarity for financial institutions to lend to engrg and concrete business.


Mencast: Co. announced that it has issued and allotted 2.22m first tranche consideration shares at the issue price of 54.5Sc for the acquisition of Unidive Marine Services. CIMB continues to rate Mencast a BUY with target price of S$0.70.

Rotary Engineering

Rotary Engineering: Co. announced that it has amassed $110m of jobs in 3Q11, however for confidentiality and competitive reasons, Grp is unable to provide a breakdown of the transactions that involve work across different disciplines, including engineering.

CIMB however recommends investors to sell the stock as valuations are seeminly rich in such a negative climate. The counter is trading7.5x CY12 P/E and see de-rating catalysts from weaker-than-expected orders and results.


STX OSV: Co. has secured contracts for three diesel electric twin screw trawler vessels (essentially fishing vessels) worth Nok750m from Aker Seafoods, one of Norway's leading producers and exporters of white fish products. Vessels are scheduled for delivery between 2Q13-1Q14.

We note that contract (excluding contracts worth abt Nok 3,000 million for 8 LPG carriers to become effective by abt Nov11) brings Ytd Orderwins to Nok5,031 million, with Orderbook standing at approximately Nok 15,000 million vs 1H11 Rev at 5,936 million, underpinnings earnings visibility till 2014. CIMB maintains O/p Rating with $1.85 TP and DMG maintains Buy but cuts TP to $1.56 from $2.00, while CS has neutral rating with $1.60 TP.


NOL: Aug operating data weak.
Headline freight rate fell 20% YoY and was flat MoM. This is weaker than China Containerised Freight Index (CCFI), which fell 18% YoY but rose 0.8% MoM in Aug. NOL’s volumes grew 8% YoY but were flat MoM. On an absolute basis, NOL’s volume was hovering at record-high levels.
Mgt noted there is no significant increase in its forward cargo booking for the next one month.

Meanwhile, peer AP Moeller-Maersk says it is struggling to raise peak season rates on the Asia-Europe shipping route, as an influx of new vessels leads to a glut in capacity. Notes, its current fleet utilisation at >90% on Asia-Europe routes, matching the global avg, means shipping lines have little incentive to slash capacity. This could spell further downside risk in rates, especially with new vessels arriving later this yr.

BNP also sees a gloomy container shipping outlook, particularly on the Asia-Europe route. Believes liners will find it difficult to raise freight rates in the last month of the peak season as load factor remains low, and sees possibility of another rate cut in the Nov weak season.

The Street has a mix of Buy, Hold and Sell ratings. Recent TP ranges btwn $0,77 – 1.65.


Singapore: likely to open lower in line with regional markets, after US stocks lost ground Monday, and the S&P cut Italy’s debt rating, raising fears of the global impact of continued financial turmoil and economic weakness in the euro zone.

The Nikkei is down 1.5%, and the KOSPI down 1.3% at 8.30am
The ASX 200 is down 0.4% at 8.50am.

NOL may be in focus after posting weaker freight rates in Aug.
STX OSV may see a bounce after reporting shipbuilding contracts worth ~US$132.5m in total.

For the STI, volatility is likely ahead in the recent 2680-2900 trading range.

Monday, September 19, 2011

Upcoming Events in the Eurozone

Date Event
14 September 2011 EU/IMF returns to Athens for the completion of the fifth review
14 September 2011 Greek Prime Minister to hold a conference call with German
Chancellor Merkel and the President of the French Republic
14-15 September 2011 The Finnish government discusses 2012 Budget
15 September 2011 EUR 14.5bn government bond redemption in Italy
16-17 September 2011 EU Finance Ministers & Central Bankers meet in Poland
17 September 2011 Moody’s eview period on Italy’s rating ends
18 September 2011 German state election in Berlin
20 September 2011 Netherlands to present 2012 Budget
20 September 2011 EUR 0.8bn coupon payment due in Greece
23 September 2011 EUR 2.0bn T-Bill redemption in Greece
23-25 September 2011 Annual meeting of the World Bank Group and the IMF
30 September 2011 EUR 13.5bn government bond redemption in Italy
29 September 2011 German lawmakers vote on the changes to the EFSF
End-September The fifth review of the Greek programme to be completed
3 October 2011 Eurozone finance ministers’ meeting
4 October 2011 EU finance ministers’ meeting
6 October 2011 ECB rate decision
14 October 2011 EUR 2bn T-Bill redemption in Greece
14-15 October 2011 G20 Finance Ministers’ meeting in Paris
Mid-October PSI deal expected to be completed
17-18 October 2011 EU leaders hold Summit in Brussels
21 October 2011 EUR 1.6bn T-Bill redemption in Greece
22 October 2011 EUR 1.0bn coupon payment due in Greece
31 October 2011 ECB President Mr. Trichet’s term ends
31 October 2011 EUR 14.1bn government bond redemption in Spain
1 November 2011 EUR 15.5bn government bond redemption in Italy
3 November 2011 ECB rate decision
7 November 2011 Eurozone finance ministers’ meeting
8 November 2011 EU finance ministers’ meeting
11 November 2011 EUR 4.5bn government bond redemption in Ireland
11 November 2011 EUR 2.0bn T-Bill redemption in Greece
18 November 2011 EUR 1.3bn T-Bill redemption in Greece
20 November 2011 General elections in Spain
29 November 2011 Eurozone finance ministers’ meeting
30 November 2011 EU finance ministers’ meeting
30 November 2011 Sixth review of the EU/IMF program for Greece
8 December 2011 ECB rate decision
9 December 2011 EU leaders hold Summit in Brussels
15 December 2011 Fourth review of the EU/IMF program for Ireland
15 December 2011 Second review of the EU/IMF program for Portugal
16 December 2011 EUR 2.0bn T-Bill redemption in Greece
12 January 2012 ECB rate decision
22 January 2012 Presidential elections in Finland
1 February 2012 EUR 26bn government bond redemption in Italy
9 February 2012 ECB rate decision
28 February 2012 EUR 1.3bn government bond redemption in Spain
28 February 2012 Seventh review of the EU/IMF program for Greece
1 March 2012 EUR 15bn government bond redemption in Italy
1-2 March 2012 EU leaders hold Summit in Brussels
5 March 2012 EUR 5.6bn government bond redemption in Ireland
8 March 2012 ECB rate decision
15 March 2012 Fifth review of the EU/IMF program for Ireland
15 March 2012 Third review of the EU/IMF program for Portugal