Tuesday, February 28, 2012

China XLX

China XLX: DBS downgrades to Hold on limited upside, lowers TP from $0.40 to $0.34. Posted FY11 results largely in line; 4Q11 net profit fell 73% q-o-q to RMB28m as expected. Target price is lowered after adjusting for CB conversion dilution. Key risks are stretched balance sheet and persistent industry overcapacity. China XLX’s net gearing of 0.5x as of end 2011 is expected to rise to c.1x by end 2012 and 1.3x by end 2013 to fund capex of RMB1.5bn per year for the 4th plant.

CIMB maintains Outperform with TP$0.43 with results meeting forecasts. FY11 core net profit was due to higher ASPs as well as shift in sales mix to compound fertilizers. House expects strong government support for the industry in the form of welfare promotions for the agriculture sector, and high food prices to raise farmers’ purchasing power. ASPs could surprise positively in FY12 with lower coal prices as supply of coal increases in the mkt.


Jaya: Technical Buy Call by UOB Kay Hian with 19% potential return and $0.65 TP. House note that stock appears to be supported by its 50-day EMA. A break above $0.56 suggests the stock has more upside to come. The Stochastics indicator has crossed above its signal line in the oversold region, suggesting a rebound is due. Alternatively, investors may exit their longs if prices move below $0.50.


Olam: Technical Buy Call by UOB Kay Hian with 13% potential return. House note that BUY with TP of $2.59. The stock has retraced 15% from its recent high of $2.76 and prices are likely to rebound towards the area where the mid Bollinger band is.

Its Stochastics and CCI indicators suggest the stock is oversold and the CCI indicator has crossed above its signal line, suggesting there could be a follow through of the previous attempt ton rebound in the last trading session. Alternatively, investors may exit their longs if prices move below S$2.26. House institutional research has a fundamental BUY with $2.93 TP.

City Dev

City Dev: CS issues a note previewing the results on 29th Feb, maintains Outperform with TP$12.33. House expects 4Q11 net profit of $150m with FY11 net profit at $773m above street’s $700m. Estimated home sales of 500 in 4Q bringing FY11 sales to 1800 units worth $1.7b. Recent Bartley Residences sales are good, selling 170 units at $1.3k/sf

M&C operating results announced on 22 Feb were broadly in line with estimates.

House expects a final div of 8c (15% payout) and cites undemanding valuations at 24% disc to RNAV with potential risks of further property measures.

Asia Pacific Breweries

Asia Pacific Breweries (APB): says it has received a letter from China Resources Snow Breweries (the Purchaser) purporting to terminate the proposed sale of Jiangsu Dafuhao Breweries (DFH) wef from 27 Feb ’12, on the basis that the transaction cannot take place in light of the Summons.
Recall, DFH had served a summons on an APB JV (Heineken-APB China, or HAPBC), claiming that the transfer of stakes in its shares to CRSB is invalid.
DFH is a 49/51 JV btwn HAPBC and Nantong Fuhao Alcohol Industry.

In Jul ’11, APB said the combined sale of DFH and Shanghai Asia Pacific Brewery Co was valued at Rmb 870, and would allow APB to record its share of gain on disposal of ~S$23.3m.
More importantly, the sale is part of APB’s strategy to focus on the mktg and pdtn of its int’l premium brands (Tiger and Heineken) in China.

APB share price rose ~3% since 21 Feb through to yday, when it announced last wk that the proposed transaction was unconditionally approved following anti-monopoly examination by the relevant PRC authorities.

APB does not agree with CRSB’s view, and is seeking legal advice.

Genting SP

Genting SP: SG govt said it is reviewing the Casino Control Act and hopes to disclose more details in the 2H12. The review will look into the economic, security and social issues surrounding the two Integrated Resorts (IRs), as a recent survey on problem gambling showed that overall gambling rates remained stable but saw worrisome trend of low-income gamblers who bet large amounts. The govt also commented that raising casino entry levies on Singaporeans and PRs may not be effective as levy is not a deterrent.

Deutsche believe that any further amendments to the Casino Control Act will likely involve tightening of rules targeting at SG and PRs gamblers as efforts to limit social impact from two IRs. Other regulation closely watched is on junkets licensing, which CRA has yet to approve. In line with govt's move and measures to safeguards locals, house do not discount the possibility that junkets licensed (in future) will only be allowed to extend credit to foreign players. Overall, house maintains Hold with $1.49 TP.


Swiber: UOB Kay Hian maintains Buy and raises TP to $0.98 from $0.87, despite below expectation 4Q11 results, which was due to higher corporate tax. Mgt note that the high corporate tax of US$17.9m in 4Q11 (91% effective tax rate) was due to withholding tax in specific projects in India, but has guided a 15% group tax rate going forward based on projects in its orderbook. Otherwise, pre-tax profit of $69.4m for 2011 was within expectation.

Going forward, house cite of a robust outlook on shallow-water E&P activities. With strong contract wins of US$756m in 2011, Swiber’s orderbook is at all-time high at above US$1b. Mgt is guiding a bullish outlook on future jobs. House forecast total contract wins of US$900m for 2012 and US$1b each for 2013 and 2014.

On a separate note, DnB Nor maintains Buy with $0.95 TP and CIMB maintains O/p with $0.94 TP.

China Hongxing

China Hongxing: Submits resumption proposal to trade its shares to SGX. Further announcements if successful to be made.


Armstrong: FY11 results in line with consensus. Posts 4Q rev of $49.2m -12.5% yoy +12.2% qoq with net profit of $2.2m -67.3% +326.7% qoq boosted by other operating income at $7.1m offset by provisions for impairment at $6.2m. FY11 net profit approx $8.1m -67.3% yoy.

Other operating income was boosted by $1.8m of fair value gains in derivative contracts and insurance claims of $4.7m

4Q fall in revenue was attributed to the Thailand floods where 2 of 4 factories were shut down and co's customers' supply chain was disrupted resulting in reduction of sales. Thailand accounted for approx 26% of revenue. Automotive segment still registered growth of 9.9% from $17.5m to $19.2m due to higher demand from customers in China and is co's largest rev generator.

For FY11,both a stronger SGD and the Thai floods impacted revenue with all segment excluding Automotive posting declines. Higher raw material and labour costs also impacted net profit. In terms of geographical segments, China remains the top revenue contributor accounting for 32.1% of revenue, followed by Sg and Thailand which accounted for 27.3% and 24.0% respectively.

A dividend of 0.6c declared compared to previous yr's 2.0c. At FY11 EPS, co trades at steep valuations of 26.0x P/E but partly due to impact of Thai floods.

World Precision

World Precision: Wholly-owned subsi World CNC Machine Tools has been accredited as a "High/New Technology" and will stand to enjoy a preferential tax rate of 15% instead of the standard 25% from 2011 to 2013.

FY11 net profit in line with consensus although 4Q results disappoint. 4Q rev at Rmb238.2m -23.5% yoy -17.4% qoq, net profit at Rmb36.3m +35.2% yoy -14.5% qoq.

Revenue fall during the quarter was attributed to govt’s credit tightening policy and the economic slowdown. For 4Q11 sales of conventional stamping machines decreased by 55.7% and other high performance, high tonnage machines decreased by 8.1%. However co saw gross profit margin increase from 28.4% in 3Q11 to 33.6% due to higher ASP and product mix which contributed to net profit, slightly offset by increase in admin expenses.

Dividend of Rmb0.135 (approx $0.027) per share declared, higher than prev yr Rmb0.119. At FY11 EPS of Rmb0.45, co trades at P/E of 6.4x close to hist avg of 6.1x.


Elektromotive: Proposes rights issue of 7 rights for 10 existing shares at $0.003 with 3 attached warrants for every rights share. Issue price is approx 40% disc to closing price of $0.005 per share. The exercise price of the warrants will be fixed at $0.003 for a new rights warrant share. Net proceeds will be approx $5.2m and is expected to be used for expansion purposes.

Berlian Laju

Berlian Laju: Remains under suspension. Has defaulted on six U.S. dollar and local currency instruments and is in talks with its financial adviser on restructuring its debt. Co has not made debt payments on the above since a debt standstill announcement on 26 Jan.


Wilmar: is seeking to buy a 10% stake in Goodman Fielder (GFF.AX), according to the target, with UBS is trying to buy the stake on behalf of Wilmar. Newspapers said Wilmar had offered to buy shares at a 16.5% premium to Goodman last close of A$0.515.

Wilmar already has a stake of < 5% and has been in talks to buy some of Goodman Fielder’s assets, though Goodman said it has not received any proposals to be acquired from Wilmar or any other party.

Goodman is prized for its top-selling Australian brands including Meadow Lea and Praise margarines, White Wings cake mixes, and Helga's and Vogel breads.
Its Integro arm up for sale makes edible oils, breakfast cereals, sauces and cake mixes.

Buying a stake in Goodman, which has a market value of ~A$1b, would increase Wilmar’s exposure to Australia, after it paid A$1.75b for Sucrogen (Australia’s largest sugar miller) in 2010, and A$120m for Proserpine Sugar Co-op in 2011.

Separately, Deutsche says that following the sharp correction in Wilmar’s share price, it believes the recent concerns about its 4Q11 results are overdone, and sees a good opportunity to accumulate the stock. Expects palm processing margins to recover on higher downstream selling prices and improving demand. Reiterates Buy on revised TP of $5.70 (from $5.90).


GoldenAgri: Announced 4Q11 results which were below estimates. 4Q11 Rev at US$1.3b, +12% yoy and -16.7% qoq, while Core net profit at US$91m, -38% yoy and -17.3% qoq. Result brings FY11 rev to US$5.95b, +70% yoy and core net profit to US$571m, +48% yoy. Ebita Margins fell slightly at 15..8% vs 18.9% yoy.

For the qtr, decrease in palm products output and weaker CPO prices vs 4Q10 contributed to the poor results, further weighed upon by higher fertilizer costs and export tax. Positive refining margins by Indo’s export tax changes, was offset by negative export margins into China and India.

FY11 saw palm products output reached a record level at 2.64m ton, +16% yoy supported by favorable weather conditions and expansion of mature area by 27,300 ha, while Grp increased its FFB yield by 5% to 21.8ton/ha in 2011 from 20.8 ton/ha in 2010, while improvement of palm products yield was even larger at 6% to a notable 6.1 ton/ha, from 5.8 tons yoy, underpinned by higher oil extraction rate.

Going forward, grp remains confident of outlook, and continues to believe that the palm oil industry will stay resilient, underpinned by solid industry demand and supply fundamentals. Grp has budgeted ccapex of US$500 m for investments in upstream projects involving the expansion of plantation area and milling capacity, as well as investments in downstream projects to boost refining capacity and supporting facilities

We note that grp’s fundamentals remains strong, with a low gearing ratio on 9% and at current price, grp trades at 12.9x P/E. Technically, YTD high of $0.79 may act as a cap. Ratings as follow:

CIMB downgrades to neutral with $0.75 TP.
Deutsche maintains Hold with $0.75 TP
Goldman maintains Buy with $0.84 TP
Macquarie maintains Neutral with $0.83 TP
Merrill Lynch maintains Buy with $0.90 TP
UOB Kay Hian maintains Buy with $0.95 TP

Sembcorp Industries

Sembcorp Industries (SCI): strong set of FY11 results, above expectations.
Net income (excl exceptional income) was up 6.4% yoy to $809m (Street estimate $747m).
This was mainly boosted by Utilities, which saw net profit increase 32% yoy to $304m. The segment registered positive growth in all regions (Spore +24%, China +57%, Middle East & Africa +31%, UK +69%, The Americas +315%), except Rest of Asia/ Australia, which was down 24% yoy due to integration costs and purchase price allocation adjustments relating to an acquisition. UBS notes that fuel is a pass-through cost item on SCI’s key utilities contracts, so the group has been able to achieve stable profits through period s of fuel price volatility.

Mgt appears optimistic on its long term prospects, with several Utilities projects in the pipeline to grow recurring earnings base --- Salalah from 2Q12 onwards, Jurong Island from 3Q12 (IWWT plant) and 4Q13 (Banyan Cogen and a multi-utilities facility), Andhra Pradesh from 1Q14 and Fujairah from 2H14 (additional 30 MiGD desalination plant).

SCI proposed 17cts DPS, unchg yoy. This translates to a yield of 3.3% based on yday’s close at $5.14. The group remains in a net cash position.
SCI trades at an implied P/B of 0.9x.

Deutsche keeps at Buy, raises TP to $6.80 from $6.65.
UBS maintains Buy, raises TP to $6.10 from $5.55.
Citi keeps at Buy, raises TP to $5.83 from $4.72.
BOA-ML maintains Neutral, raises TP to $5.64.
Goldman maintains Neutral, raises TP to $4.85 from $4.65.

SG Market

SG Market: Spore shares are expected to drift with no clear direction from Wall Street as attention turns to local corporate results in full swing. After yday’s 31-point drop, next support for the STI lies at 2910 with the 20-day moving average now acting as the overhead resistance at 2967.

Sembcorp Industries may rise following good set of FY11 and 4Q results buoyed by its utilities business and strong pipeline of projects, while Golden Agri 4Q earnings came in below consensus estimates due to an inventory build-up. OKP may also draaw interest after bagging a $75m expressway contract (vs 7 public sector projects worth $152m last year), bringing its orderbook to $324m.

Monday, February 27, 2012

FJ Benjamin

FJ Benjamin: UOBK upgrades to Buy, says it expects a "new and exciting growth phase," driven by the regional introduction of new mass-market fashion labels, continued store expansion in key growth markets in Indonesia and the ramp up of Raoul sales under a wholesale business model. Notes same-store-sales (SSS) growth remains resilient across most key operating locations. Says FJB is looking to add new brands to its portfolio this year. Expects FJB to increase its store network 10%-15% every year, focusing on Indonesia's high-growth markets, offering a proxy to Indonesian retail spending growth. Raises TP to $0.43 from $0.38 on rolling over to FY13 forecasts and after increasing FY12-13 earnings forecasts by 4.7% and 0.5% respectively. The house's technical analysis says the stock has been on a long-term downtrend since Sep '10 , with the price appearing to rebound, while the stochastic indicator is approaching the oversold region. Tips support at $0.325.
The stock climbs 3.0% to $0.34.


Olam: is +3% at $2.39.
Announced a couple of plant inaugurations on Friday.
i) President Ouattara inaugurated Olam’s two new additions to its supply chains in the Ivory Coast – an advanced mechanised cashew processing plant in Bouake and the first dairy processing plant of its kind in West Africa in Abidjan. This is part of its commitment to invest $200m in various capital projects over the next 5 yrs in Ivory Coast. Strange that this co announcement is available on Bloomberg but not SGX. See attachment on left panel.
ii) Olam also said it invested US$55m in a wheat mill in the Ghanaian port city of Tema.
Technically, if the share price closes above yday’s high, a bullish engulfing candle pattern would have formed. This, the oversold Stochastics, and the bounce of the $2.30 (mild) support level, suggest that the stock could see some positive near term price movement. If resistance at $2.50 is breached, the stock could move quickly to test $2.60 next. If the near term momentum loses strength, we see firmer support near the $2.20 levels.


Wilmar: Goldman removes Wilmar from Buy list downgrades to Neutral with TP cut from $6.45 to $5.40. House expects 1Q12 to recover on normalized trading conditions but Indo's refining margin boom is fading faster than expected. Wilmar has disappointed on weak soybean crush margins despite low expectations and intense competition and overcapacity may not abate in near term.

EPS is lowered by 15% and 3% for FY2012 and FY2013 respectively on lower margins


Hi-P CS maintains Neutral with $1.00 TP. Note that Hi-P’s FY11 results were below both consensus and estimates, with rev up 26% to $1.2 bn but earnings down 33% to S$45.0m. Gross margins in 4Q declined to 8.1% (from 8.7% in 3Q11 and 23.9% in 4Q10), given pricing pressure, weaker product mix (more high-level assembly work with higher material input costs), and increase in labour and depreciation charges.

Mgt has guided for flat revenue YoY and a net loss in 1Q12, but these to be up HoH and YoY in 2H12/FY12. House believe Hi-P’s S$180m capex initiative, against a $45m annual run-rate, reflects management’s confidence in gaining further traction with its key tablets customer. Overall, raise forecasts by 8–24% on more optimistic volume growth assumptions and peg our TP at 12x P/E, or $1.00. But with the stock up 20%+ WoW, would look for a better entry point.

Ying Li

Ying Li: FY11 results.
Revenue came in at Rmb 598m, up 5-fold yoy, above DBSV’s forecast of Rmb 461m. The bulk of revenue (Rmb 483m) was booked in 4Q11, driven by IFC office units and Sanyawan Phase 1A sales recognition and more invmt property units sold in New York New York, Bashu Cambridge and Sanyawan Phase 1.
Net profit came in at Rmb277, +22% yoy.
Core net profit (excluding fair value gains) came in at Rmb 48m, below DBSV’s forecast of Rmb 81m, but reversing from last yr’s loss of Rmb 125m. This was largely driven by the surge in revenue, and partially boosted by a Rmb 11m one-off govt grant received in relation to relocation activities of the IFC project.

Ying Li continued to gear up its balance sheet, with total liabilities rising 14.5% yoy to Rmb 3.1b. Borrowings rose 17.6% yoy to Rmb 1936m, while cash fell 44% yoy to Rmb 343m. Net debt to equity rose to 56.4% from 41.2% yoy.
No dividends, as expected.

Mgt continues to be positive of the outlook of Chongqing’s commercial real estate sector, citing CBRE’s 4Q11 report that Chongqing’s commercial property mkt grew steadily due to domestic consumption and expansion in various service industries, with office spaces recording increased rents and vacancy rates on the decline, and the prime retail mkt continuing to be robust supported by the growing middle classes. The group expects to be profitable in 2012.

Stock is unchg at $0.40. Trades at 16.4x P/E, 1.5x P/B.


Midas: has inked a agreement with Jilin Kaitong Engrg Co for a US$100m investment in building a new pdtn plant in Liaoyuan City, Jilin Province. Midas will take a 55% share, and Jilin Kaitong till own the remainder. The plant will have an annual pdtn capacity of 200k tons, and will make high precision, high spec aluminium alloy plates, sheets, strips and foils.

Separately, China Securities Journal said the Ministry of Railways (MoR) may soon relaunch the bidding for high-speed trains (ahead of previous expectations for 2H12 timeline). The industry expects the bidding to reach Rmb 30-40b, with the news likely a positive for CSR, and in turn beneficial for Midas, which counts CSR as its top 2 customers of aluminium train extrusion profiles.

Technically, the stock may have bottomed out at ~$0.31, and could be at the cusp of a new uptrend, if share price bounces off the $0.365 support (50day MA) and creates a higher low. The recent pullback now offers a better entry level, with RSI having returned to about neutral levels and with Stochastics returning to oversold levels. Initial resistance at $0.45 (near the 200day MA).

Genting SP

Genting SP: the govt is reviewing the Casino Control Act that regulated the two IRs here and hopes to disclose more details in 2H12. The review will look into the economic, security, and social issues.

Some safeguards that were being worked on, include expanding third-party casino exclusions, as well as introducing circuit breakers found in overseas casinos that imposes time limits and spending limits to help financially strapped gamblers with poor self-control. These ideas may be rolled out over the next few months.

On raising casino entry levies on Sporeans and PRs, the govt noted that may not be an adequate brake on gambling rates. Business Times reported that the two IR operators have a contractual agreement with the govt that entry levies would not be raised for 10 years, which should put to rest previous fears that this policy may be suddenly revised.


Centurion: To acquire all 6.8m issued ordinary shares in Dorm Invts held by Crest Industrial Hldgs (approx 85% stake) for $40.4m. Dorm Invts owns a dorm in Tuas which has a remaining lease of 5 yrs from BCA and has occupancy rate of 80-90%.This acquisition will add 8.6k beds to co's portfolio. This is expected to add $5.2m to net profit immediately excluding effects of goodwill impairment and amortization. The book value of the acq is approx $27.9m but the acq price also considered the reserve price of $45m set by Crest and a financial evaluation of Dorm Invts.


Kreuz: FY11, net profit at $26.6m below expectations. 4Q Rev at $39.3m +92.5% yoy +15.3% qoq with net profit at $1.1m -74.3% yoy -81.6% qoq. Increase in cost of sales was due to increases in the salaries and chartering expenses. Taxes also increases in 4Q due to deferred tax expense from tax reliefs and withholding tax from overseas projects.

Trade receivables are still on the increase from 3Q’s $79.0m to current $95.0m and receivable turnover days (avg no. of days to collect receivables) has increased from 85 days in FY2010 to 186 days, but co is of the view that they remain healthy and collectible.

Co has current order book of approx US$155m.

Kreuz is 63.2% held by Swiber. Kreuz now trades at 6.1x FY11 P/E

First Resources

First Resources: 4Q11 net profit came in at US$196m (+37% YoY). Stripping aside gains in fair value of its biological assets, core net profit was 55% higher at US$168m; inline with expectations but slightly above consensus.

Earnings were boosted mainly by higher sales volume of CPO (+10% YoY), and higher CPO ASP (+23% YoY), underpinned by higher FFB production (+19% YoY) Grp has proposed a final DPS of 2.5 cents (total DPS for 2011: 3.5 cents). Going forward, grp remains positive on prospects, tipping its young average tree profile of 8 years to drive earnings.


XinRen: Announced FY11 results which saw overall-bottom-line, in-line with estimates, helped largely by lower tax rates, despite sluggish top-line performance. 4Q11 rev at Rmb1,486.5m, -24.6% yoy and +0.4% qoq, while net profit at Rmb62.8m, -49.7% yoy and -34.3% qoq. Result brings Fy11 Rev to Rmb6,845.7m, +10.2% yoy and net profit to Rmb421.8m, +10.6% yoy. Gross margins decreased further at 9.8% vs 12.5% in FY10.

YoY rev increased was largely contributed by an increase of 60.2% in the trading of aluminum products to meet shortfalls resulting from Grp’s 59.7% higher export sales tonnage of 99,000MT in FY11. Grp also benefited from a 0.9% rise in rev from its fabrication division on both steady sales vol and ASP, which helped to offset the 5.3% decline in smelting rev which was affected mainly by a 4.3% lower ASP of Rmb15,600/MT for FY11.

Bottom-line was largely boosted by a drop in taxation of 59.7% to Rmb82m, attributed mainly to lower income tax rate applied because one of the Group’s subsidiaries obtained the status of a high-tech Co.; and (ii) the Group’s holding Co. obtained a tax incentive. Furthermore, there was a Rmb40m reversal of tax provision for Grp’s subsidiaries as a result of overprovision in prior years.

Going forward, grp note that operating conditions remain competitive and strategic investments to expand capacity and be even more cost efficient in its operations will set XinRen in a good position to ride this upturn.

As anticipated by investors, grp has proposed a div of 2c/share, representing a 5.1% yield. At current price, grp trades at 5.2x P/E, while net gearing is a tad high at 82.7%. Grp also announced that it will be exercising its call option to acquire shares in China Leading International for a consideration of Rmb1,890m, in a bid to expand its smelting capacity.


Swiber: Announced 4Q11 results which were below estimates. Rev at US$185.5m, +19% yoy and +35% qoq, while net profit at US$1.5m, -82.7% yoy and -9% qoq. Net profit at US$32.1m, -82.7% yoy and -89% qoq. Result brings FY11 Rev to US$654.5m, +41% yoy and net profit to US$32m, -14% yoy. EBitda Margin remained flat at 17.2% vs 17.5% yoy.

Overall, rev driven by progressive rev recognition from various contracts that are concentrated in Asean and South Asia, awarded to Grp in last two yrs. Weak bottom-line for qtr, was however attributed to a surge in income tax expenses to US$17.9m, which brought FY11 tax expenses to US$27.2m, +302.9% yoy. Other operating income also dropped to US$35.7m, -12.3% yoy due to gains in disposals recorded in FY10 and changes in FV of convertible bonds.

Going forward, grp expects growth in the O&G capex as oil prices remain solid. Tip earnings visibility of 2 yrs, with an order book of over US$1.0b. Grp will continues to strengthen its position as an experienced and reputable offshore service provider within the market and will continue bidding for major contracts


Venture: In-line with consensus and dividend as expected. 4Q Rev at $632.5m -10.3% yoy +8.4% qoq, net profit at $38.0 -29.8% yoy +6.8% qoq. FY11 rev was $2.4b, -9.1% yoy attributed to USD/SGD depreciation of approx 8.0%.

Co expects improved traction with key customers in 2012 and a no. of new products are at the threshold of release although co recognises the uncertainty of the global economy.

Declared 55c div per share. Co now trades at a fwd yield of 7.0%.


UOL: FY11 results in line to slightly above expectations.
Core net profit came in at $535.1m, +22% yoy, with increased contribution from all divisions. The bulk of earnings growth was driven from the residential devt business with progressive recognition of pre-sold projects.
Co announced 15cts div, implying 3.1% yield.

Property devt remained the key contributor to earnings (66% of group), delivering EBIT of $404.8m (+1576% yoy). In 2011, UOL sold 164 units with sales value of $311m (Spore).
Invmt properties saw steady earnings growth, with EBIT up 10% yoy driven by higher rentals from its retail properties which offset the decline in rentals from its office portfolio.
UOL’s hotels also delivered EBIT growth of 16% yoy with strong RevPAR growth in Spore (+13%). UOL is expected to see additional income boost from its Upper Pickering Street devt (100% leased office & 363 room hotel), which is slated to be completed by end 2012.

BOA-ML maintains Buy rating, raise TP from $4.80 to $5.20 which translates to 40% discount to RNAV and 11x FY12E P/E. Likes the developer’s resilient earnings stream and compelling valuations.

SG Market

SG Market: Spore shares lack firm cues for the opening, with Wall Street’s rather mixed closed and regional markets largely focused on local issues. The STI is likely to find immediate support at the 20-day moving average at 2968 followed by firmer ground at 2910 with the psychological 3000 level acting as overhead resistance.

First Resources may rise as its earnings came in above forecasts but Venture 4Q results net profit was slightly below expectations.

Friday, February 24, 2012


Gallant: 4Q rev at $62.9m +44.3% yoy, net profit at $11.7m compared to 962k prev yr same quarter. 4Q results included the $19m sale of land announced on 30 Dec 2011 which boosted revenue offset by lower industrial parks rev. FY11 results were boosted by 4Q profits, with FY11 net profit at $8.3m recovering from a 9M loss.

Land inventories increased to $569.7m mainly on capitalization of development in Lagoi Bay.

Co now trades at P/B 0.6x


Capitaland: Technical Sell Call by CIMB. House note that rally from the $2.19 Dec low has been sharp without any significant pullback. Believe that the run is running out of steam and a correction could be on the cards.

The technical landscape also suggests that buying momentum is waning. The RSI sports a bearish divergence while its MACD is flattening out. Recommends taking money off the table now would likely be a good idea. As long as prices stay below $3.19, the correction is likely to send prices down towards the $2.80-2.90 support first. The moving averages are around the $2.70 levels, which could be potential support as well


Hyflux: Technical Sell Call by CIMB. House note that prices appears to have hit a short term top at $1.585, which is close to its 200-day SMA. Yesterday’s drop has taken prices below a support trend line on rising volume. This is likely to lead to further weakness in the near term.

MACD and RSI just issued their respective sell signals, which in turn also confirmed the bearish divergence signals. Aggressive traders should attempt to go short on this stock. The stock is a sell now with a stop placed above $1.585. This correction could see prices fall back towards $1.30, where its 50- day SMA and also its 50% Fibonacci retracement level currently lie.


UOB: 4Q11 results slightly below to in line, but earnings quality is a positive.
Net profit came in at $558m, +7% qoq, despite a higher than expected loan loss charge resulting from a $68m charge on its 'Rest of World' loan book, and a $53m charge mainly related to contingent liabilities. UOB further took care of potential problem exposures in Europe by paring its EU debt portfolio to $1.6b (of which bank debt $0.6b) and providing for legacy problem loans.

At the same time, and in contrast to other Spore banks, the NPA ratio fell 14bps to 1.79%, a result of lower Singapore NPLs.

Underlying operations showed positives.
Strong NIM rebound stood out, with 4Q11 NIM +6bps qoq and +4bps yoy to 1.95%, beating peers’ stable qoq NIM, and reflecting greater focus on loan margins rather than market share . This was partially a result of higher yields on some of its longer-duration USD loans, and a 7% QoQ fall in the USD book as lower yield loans ran off.

Loan growth (+2.5% qoq; +25.0% yoy) was largely driven by its regional operations, particularly Malaysia (+8.3%; +35.6%) and Indonesia (+5.4%; +45.0%).

The bank declared $0.40 final div, but no scrip was offered.

UOB guides for low-teens loan growth, highlighting that weak US$/trade finance loans were due to repayments, and demand has since picked up.

Goldman says results were mixed, and expects UOB shares to trade sideways. Keeps at In-line,
Citi keeps at Sell, but raises TP to $17.70 from $15.30.
Deutsche keeps Hold rating and TP $19.
JPM keeps at Neutral, raises TP to $18.10 from $17.40.
Nomura remains Neutral, keeps TP at $18.40.
HSBC keeps Overweight and TP $22.90.
BNP keeps Buy and TP $19.60.


Wilmar: BNP Paribas downgrades to Hold from Buy with $5.10 TP. House note that give poor dd picture and weak refining and crushing margins, believe investors may adopt a wait and watch attiude in the next 2 qtrs to spot any improvement in these key operating variables. Until then, recommend exposure to upstream plantation players.

House top liquid pick is GoldenAgr (Buy TP $1.03), as it offers a direct play on the increase in CPO price which house expect in coming mths.

Noble / Mewah

Noble / Mewah: CIMB previews the outcome for the 2 commodity traders, following Wilmar’s poor results. Note that Wilmar’s results create a sense of foreboding over results of Mewah and Noble, due 28 Feb and suspect Mewah’s margins may suffer as Malaysian refiners lost ground to their Indonesian peers in 4Q11, while Noble’s oilseed-crushing margins may remain under pressure.

Recall that Wilmar disappointed in 4Q11 with its: 1) lower palm & laurics margins due in part to weak refining margins in Malaysia; and 2) weak oilseed earnings owing to stiff competition in China. These raise fears over Mewah’s results, a pure Malaysian CPO refiner, and Noble, which has oilseed-crushing operations in China.

Between the two, Mewah could have harder hit than Noble as Noble has diversified businesses with oilseeds forming less than 20% of its profits. Channel checks suggest that some Msian refiners lost money in 4Q11 as the introduction of Indo’s new export taxes eroded their competitiveness.

Overall, house is inclined to shy away from both stocks until 4Q11 results shed further clarity. Mewah is house conviction Underperform.

Keppel Land

Keppel Land: Signed a conditional agreement with Takashimaya Singapore Ltd, a subsidiary of Takashimaya Co, to pre-commit approx 15k sqm of retail space across 5 floors of Saigon Centre Phase 2. With Takashimaya coming onboard as anchor tenant, about 30% of the total retail area is pre-leased ahead of the expected completion in 2015.

Toshin Development Co., Ltd, the real estate subsidiary of Takashimaya Co., has also entered into a share-purchase agreement with Keppel Land to hold 22.7% stake in Saigon Centre Phase 2. Co will sell 33.4% stake (8.2m share)s in Saigon Centre Invt which holds a 68% interest in Saigon Centre to Toshin for approx US$23m

Keppel Land will also jointly establish a 50:50 retail management co with Toshin's subsidiary to provide retail management services for co’s projects in Vietnam. Toshin’s expertise and skills in retail mall development will ensure that we continue to adopt best-in-class approach that will ensure operational excellence at Saigon Centre.

Saigon Centre is located at the heart of Ho Chi Minh City's CBD, upon completion in 2015, will be 45 storeys with 7 lvls of retail and dining (50k sqm), with 40k sqm of Grade A office space and over 200 units of serviced apts. KepLand trades at 0.9x P/B.


Hi-P: Net profit below Bloomberg consensus though revenue was in line. 4Q Rev at $422.1m +22.8% yoy +36.8% qoq, net profit at $9.4m -73.7% yoy+45.8% qoq. 4Q Gross margins remained depressed at 8.1% with prev quarter at 8.7%. This was attributed to pricing pressure, cost increases in both labor and material costs, higher depreciation to accounting estimates. Higher rev was due to ramp up of high lvl assembly projects for 4Q

Div of 2.4c declared. With FY11 EPS at 5.28c, co is currently trading at 17.6x P/E


CWT: Annouced stellar FY11 results which was above expectations. Mgt has also guided for a 2.5c dividend, (2.2% yield) Overall, Kim Eng maintains Buy with $1.68 TP. With contributions from its newly-acquired commodity trading arm MRI kicking in; recurring net profit went beyond the $50m level for the first time, after hovering around the $25-30m level for the past four yrs.

While there was also structural growth in its other businesses, profits were dragged down by business development costs during the yr, as Grp embarked on new business ventures such as coal trading to put its war chest to good use after the CACHE REIT spin-off.

Excluding MRI, 4Q11 operating performance was strong, with warehouse occupancies at an all-time high and contribution from the Pandan Logistics Hub, which was commissioned in 3Q2011. Construction of the $135m warehouse for AIMS REIT was also started, which boosted profitability.

While CWT appears to have plunged itself into a net debt position, $181m, 38% net gearing, it is worth noting that these debts are mostly at the MRI subsidiary level with no recourse to Grp. Going forward, Kim Eng expect a full-year contribution from MRI, as well as the realisation of business] synergies in 2012, to bring profitability even higher. Other catalysts include possible warehouse divestment gains in 2012, and expansion its logistics business presence in EU.

Sheng Siong

Sheng Siong: Reported FY11 results which were slightly below average estimates. Rev at $578.4m, -8% yoy and net profit at $27.3m, -36.1% yoy. Gross margins improved slightly at 22.1% vs 21.8% yoy. Co. has recommended a cash div of 1.77c/share, representing a payout ratio of 90% and a yield of 3.6%.

Drop in YoY Rev due to closure of Ten Mile Junction (25,000 sqf) in Nov10 and Tanjong Katong (16,949 sqf) in Sept11 as both buildings were sold for re-development. Grp added four new outlets – Elias Mall in Jan11, Teck Whye in May11 and Woodlands Industrial Park and Thomson Imperial Court in Nov11 and ended yr with 25 outlets, an increase of two outlets over previous yr and expanding retail area by 3.3% YoY to ard 348,000 sqft.

Net profit down due to a reduction in other income of $12.7m, one-off IPO expenses of $1.8m and higher income tax of S$0.9m. The decline in other income was attributable to several one-off income including a S$9.6m gain from the divestment of listed equities in 2010 prior to the Group’s listing and the loss of retail rental of $1.5m from the Ten Mile Junction outlet.

Going forward, grp expect the retail market in Singapore to remain challenging, in view of the uncertain global economic outlook, limited population growth and continuing competition. However, expect FY2012 performance to be boosted by contribution from new outlets and a one-off gain of $10.4m from the sale of grp’s Marsiling warehouse.

Sino Grandness

Sino Grandness: Announced FY11 results, which was below estimates, largely due to ‘one-off’ admin and distribution expenses which grp experienced in 4Q. 4Q11 rev at Rmb285.2m, +36.2% yoy and +4.4% qoq, while net profit at Rmb21.0m, -45.9% yoy and -54.6% qoq. Result brings FY11 rev to Rmb1.02b, +58.1% yoy and net profit to Rmb150.9m, +29% yoy.

Weak qoq bottom-line was largely attributed to higher distribution and selling expenses in relation to advertising and promotional costs which mgt had guided a portion to be one-off lumpy expenses and also higher transportation costs. Expenses in grp’s recent issue cost of convertible bonds also weighed on bottom line via admin expenses.

Strong top-line driven by beverage segment, with sales +123.7% to Rmb401.7m in FY11 vs Rmb179.6m in FY10 due, to rapid expansion of grp’s distribution network in China and positive response to new range of loquat juices. For 4Q11, sales of beverage segment recorded a new high, +88% yoy to Rmb125.1m, bringing beverage segment as the largest contributor to grp’s rev for the first time, comprising 39.4% of FY11 rev.

Grp also saw higher sales across all product segments for FY11, as core export products such as asparagus, long beans and mushrooms recorded positive growth due to increased production capacities and higher orders secured from existing major customers, although worthy to note that exports were very weak on a qoq basis, due to slowdown in exports.

Going ahead, grp positive on outlook and see potential growth area as grp leverage on growing distributor and retail base in China , while for beverage segment, grp will focus on 4 main areas to drive growth, namely intensified A&P activities to grow brand value, expansion of distribution network, ongoing R&D to expand product range and expansion of production capacity.

Of special interest, grp said that it does not rule out a potential spin-off/listing of its beverage segment in a bigger mkt, notable HK or Taiwan, once rev streams frm the segment fulfils grp’s/convertible bond holders internal targets for the division. At current price, grp trades at 3.9xP/E.

Ratings as follow:
DMG downgrades to Sell and slashes TP to $0.37 fron $0.52, as house expect 1) non-beverage net profit to contract 50% y-o-y due to a deteriorating export outlook and 2) beverage profit to grow by only 10% y-o-y, constrained by a funding gap of some RMB100m for its intended expansion plan.

ST Engg

ST Engg: FY11 results slightly below Bloomberg consensus, but ahead of UBS, JPM, DB estimates.
Revenue was flat yoy at $5.9b, impacted by a weaker USD, as well as reversal of revenue already recognised on the cancelled ropax shipbuilding contract.
Net profit increase 7.4% yoy to $528m, with higher electronics and aerospace earnings offsetting declines in land systems and marine.

The co ended 4Q11 with a record high $12.3bn order book, due to strong contract wins in the quarter.
STE expects S$3.9b of the book to be delivered in the next 4 quarters –high compared with previous years . Mgt guided that the group expects to achieve Y/Y higher revenue and pretax profit in FY12, led mainly by Aerospace and Electronic. UBS interprets STE’s guidance as a growth target of ~10%.

The co declared final div of 4cts and special div of 8.5cts. Total div for the year amounts to 15.5cts, and translates to a payout ratio of 90%, and yield of 5%.
Valuations largely undemanding, at 16.6x fwd P/E (close to -1 std dev of 15.9x), and 5.1x fwd P/B inline with long term historical average. ROE is high, at 30%.

UBS keeps at Buy, raises TP to $3.40 from $3.21.
JPM keeps at Neutral, raises TP to $2.80 from $2.60.
Deutsche keeps at Buy with TP $3.35.
Nomura keeps at Buy with TP $3.90


Cosco: Results on low end of expectations but in-line. FY11 rev at $4.2b +7.8% yoy with net profit $139.7m -43.8% yoy. This included a expected construction loss of $150.4m. Single margins remained in the single-digits with costs up due to the learning curve, 1st time jobs and overall reassessment of costs of orders.

Increase in rev was due to higher contributions from ship building and marine engrg projects and lower net profit was attributed to lower profitability of dry bulk shipping and higher costs in shipyard ops. Shipyard operations increased 10.1% to $4.1b in FY2011 with 34 bulk carriers delivered. Rev from dry bulk fell 52.9% to $66.8m due to lower charter rates.

Co's orderbook stands at US$6.1b with deliveries up to 1H2014. Co maintains a cautious outlook due to demand concerns and in light that IMF has lowered forecast for global growth from 4.0% to 3.3%. Appreciation of Yuan, China's interest rates, rising wages and raw material cost may affect co's operating margins. Cosco is also targeting 60% of new orders from the offshore segment in 2012.

3c dividend declared. Cosco is trading at 19.7x trailing P/E

Deutsche maintains Hold with TP$1.10

Nomura maintains Reduce with TP$0.69

JP Morgan maintains Neutral with TP$1.10


SMM: 4Q11 results generally inline.
Net profit of $229m (-4% yoy, +3% qoq) was boosted by a $54m tax write back (allowed deduction on FX losses for prior yrs following amicable settlement of disputed transaction).
Operating margin remained robust at 20.2% and was ~4 ppt higher qoq due to, i) seasonally higher repair contributions, and ii) settlement of variation orders.

The co proposed a final div of 6cts and special div of 14cts. This brings total div for FY11 to 25cts (vs 31cts in FY10 on lower special div), and translates to a yield of 4.8%.

SMM ended 4Q11 with an order backlog of $6.3b, while contract flow has been decent ytd with order wins of $1.3b. Mgt guidance remains upbeat, says customer inquiries have increased a lot in the past three months. Sees strong improvement in enquiry levels, across all asset classes incl across jackups, semisub, drillships and offshore production units. HSBC notes Petrobras order momentum flow now has a high likelihood of continuing, as rigs are typically ordered in a series from builders in order to achieve construction and cost efficiency.
Separately, mgt also highlights strong repair jobs potential (from ballast water installation and approved gas cleaning system installation), as IMO's regulatory rules become mandatory for ships.

Citi estimates capex in FY12-13E to be $700-800m (largely for new Tuas facility and Brazilian yard), to be partially debt funded. When operational in 2013, the new Spore yard will double SMM’s pdtn capacity from 1.9m dvt currently.

Citi, Deutsche, Nomura keep at Buy with TP btwn $5.80 – 6.08.
HSBC maintains Overweight, raises TP to $6.35 from $6.05, affirms stock as an Asia HSBC Super Ten portfolio constituent.
JPM keeps at Overweight, raises TP to $6 from $5.40.
Goldman has a Neutral rating with TP $5.10.

SG Market

SG Market: Spores shares may extend recent falls, despite a positive lead from Wall Street, as traders are likely to focus on a slew of earnings results just released. There are growing concerns that Sore's industrial prodn data, due around midday, will show a contraction for Jan and rising oil prices and China's downgrade of its growth expectations may put a damper on overall market sentiment.

If the STI breaches the 20—day moving average at 2960, look to 2950 as the near term support followed by firmer ground at around 2910 level. 3000 is likely to remain a bright-line resistance. Among stocks set to be in focus after earnings results, UOB reported 4Q11 net profit below expectations (due to higher provisions but core internals are improving), while SembMarine 4Q11 results came in above expectations. ST Engrg 4Q results generally in line to above estimates. Cosco 4Q was on the low end of estimates, while Sino Grandness completely missed estimates.

Thursday, February 23, 2012


Rotary: 4Q rev at $129.8m -18.7% yoy -10.6% qoq with net profit at $8.3m -69.2% yoy -15.4% qoq. For FY11, net profit at $31.1m -50.9% yoy.

Rev for 4Q fell due to delay of commencement for certain projects and the SATORP project in Saudi Arabia underwent a phase change to the construction phase which yields lower rev. For the year, while margins remained generally stable, fewer projects were executed resulting in an impact to net profit.

Co foresees continued pressure on margins and profitability due to economic environment. Orderbook currently stands at $690m with 80% of which is attributed to overseas projects.

Co has declared a 2c dividend. At FY11 EPS of 5.5c, co trades at approx 13.8x P/E


SIA: its 100% owned unit SIA Cargo has cut freighter capacity by 20%. Mgt noted that the air cargo mkt has shown weakness for the past 9mths, and the depressed demand across all markets give little reason to be optimistic about the near term outlook. Said it expected no improvement in 1HCY12 (traditional low season for the air cargo market) and stubbornly high fuel prices to continue pushing up costs.

JPM estimates this implies a ~10% reduction in SIA’s overall cargo capacity, as the bellyhold cargo capacity will remain. Says this is positive and will boost its load factors and mitigate losses. Recall SIA Cargo’s loss widened to $40m in 4QCY11 vs $17m in 3QCY11.
Still, the house believes SIA is better off than Cathay Pacific which has a more aggressive planned capacity expansion of ~10% this yr, after trimming it down from ~17%. Adds potential upside surprises could come from the tech sector’s restocking and the new iPad 3 shipments, as airlines have the flexibility to adjust their freighter capacity very quickly (within 1-2days vs ~1mth for the passenger business), should there be a pick up in cargo demand.
JPM has an Overweight rating on SIA.

Genting SP

Genting SP: 4Q11 results slightly below consensus, despite the boost by luck factor.
RWS adjusted EBITDA came in at $406m, +8% qoq, and RWS EBITDA margin was 52% vs 48% in 3Q. This was boosted by a record high VIP win rate of 3.9% (vs 3Q11's 3.2% and normalized expectation of 2.85%), otherwise normalized EBITDA would have been only ~$300m.
The headline EBITDA numbers masked sequentially weaker volumes (VIP: -26% qoq, mass: -7% qoq), which confirms the first sequential drop in VIP volumes for Spore’s gaming market.
The silver lining was that RWS recovered share, 49% of Spore gross gaming revenue (GGR) in 4Q, vs 48% in 3Q, and 47% of the VIP rolling chip volume vs 44$ in 3Q.
Investors may also cheer the maiden 1ct div.

While mgt guided for a slightly more positive outlook for 2H12, key risks are possible rise in bad debt provisions and high operating expense relating to the 2nd phase opening of hotels and new facilities.
GENS also said it is planning to issue perpetual capital securities and has received a rating of Baa1 from Moody’s and A- from Fitch, the highest for any gaming co in the world, as mgt said it was looking to invest in new projects.

Plenty of downgrades from the Street.
Citi maintains Sell with TP $1.47 (from $1.50)
Nomura reiterates Reduce with TP $1.41.
HSBC downgrades to Neutral with TP 1.74 (from $1.99)
JPM keeps at Neutral but lowers TP to $1.90 from $1.95.
Goldman keeps at Buy, but lowers TP to $2.16 from $2.22.


CAO: 4Q rev at US$2.1b +31.3% yoy -11.2% qoq with net profit at US$5.7m -43.0% yoy -66.5% qoq. Fall in net profit was attributed to provision of doubtful debt due from MF Global, higher fees and IT expenses. Net profit was also impacted by a fall in associate contributions. Excluding the provision for MF Global losses, net profit would have been US$10.0m relatively unchanged from 4Q2010.

Overall, FY11 rev was up 65.3% at US$9.0b with net profit at $63.4m +15.9% yoy. For FY2011, co recorded a 1.2m ton increase in volume of both supply and trading of jet fuel, with total of 8.4m tons traded.

Dividend of $0.02 declared. Co currently trades at trailing 11.9x P/E for FY11.


Hyflux: Low side of estimates. FY11 rev at $482.0m -15.4% yoy, net profit at $55.7m -37.3% yoy. Low revenue was due to near completion of projects in Middle East North Africa (MENA) and the impact of the Arab Spring but partially offset by contributions from the Tuaspring desalination plant project.

Geographically, Sg and other regions contributed approx 47% of rev, China with 29% share and MENA with 24% share.

Co has guided that the outlook is challenging with higher costs for foreign labour locally and economic problems in Europe and US to affect Asia and China. Net EPC orderbook stands at $931m largely due to the Tuaspring project. Included in the orderbook are expansion of 5 plants of which co is building for its 50/50 JV with Mitsui, under Galaxy NewSpring. Mgmt is expecting an additional 5 plants reaching 80-90% utilization lvls to be selected for expansion this yr which will further add to EPC orderbook.

A dividend of 2.1c has been declared, a drop from prev yr’s 3.5c.

Nomura maintains Reduce at TP$1.00 JPM maintains Neutral with TP$1.60


Wilmar: At its 4Q11 results briefing, Wilmar guided that oilseed & grain margins will remain suboptimal as it expects operating conditions in China to remain tough in 2012 from overcapacity.

Grp is more upbeat on its palm & laurics division as it Indonesian refineries to book higher profit margins following recent changes in the country’s export tax for palm products. Refining margins outside Indonesia have also improved in 1Q12 against 4Q11. The group will be raising its Indonesian refining capacity by 50% in 2Q-3Q12, to help boost refining margins. Current refining capacity in Indonesia is around 7m ton, or 30% of the group’s global refining capacity.

Overall, there a growing negative feeling after the briefing as Wilmar flagged that oilseeds & grains may only break even in FY12 if operating conditions do not improve or it is unable to purchase feedstock better than its peers. This division made up 20% of FY11 pretax profit.

The compensating factor could be qoq improvements in refining margins, and grp expect consumer products to fare better with the aid of higher selling prices for cooking oils in China. Sugar earnings should, moreover, improve from higher production.

Ratings as follow:
CIMB downgrade Stock to Neutral from Buy and slashes TP to $5.03 from $6.20
Citi maintains Buy with $6.10 TP.
Deutsche maintains Buy with $5.90 TP
Nomura maintains Reduce Rating and slashes TP to $5.60 from $6.10

Hock Lian Seng

Hock Lian Seng: Announced FY11 results which saw a strong bottom-line, despite top-line coming in weaker. FY11 Rev at $163.7m, -28.6% yoy, while net profit at $31.1m, +15.1% yoy. Gross Margins surged to 24.9% vs 13.1% yoy. Grp has proposed a 2c dividend.

Rev decrease was largely from the civil engineering on lower progress billing recognised due to completion of the Marina Bay Station project. Reve from building material segment declined $3.9m to $3.0m due to the absence of new orders since its completion of the existing contract since June 2011. The Group’s other revenue segment which refers to rental revenue from the workers’ dormitory, has increased by $7.7m yoy to $8.3m.

Strong gross margin was largely due to the revision of cost estimates from its near completion civil engineering project. Going forward, grp note that despite the challenging mkt conditions, business has remained profitable and grp will continue to tender for more infrastructure projects while keeping a look out for opportunities in the area of ppty dev.

We note that overall, grp fundamentals remain strong with an orderbook of $227m, underpinning earnings visibility till 2013, while Grp has a whopping net cash position of $177.5m, or 0.34c/share, representing a 139% premium of share price/cash. In simple terms, any investor in this Co. would technically be getting more then what their share price is worth based purely on Co’s cash position. Div payout of 2c/share brings FY11 yield to 8% yield.


Ezion: As expected, Co. has announced plans to raise net proceeds of $94.6m from a new share sale placement, priced at 88c/share, with 110m shares priced at 88c/share, representing a 6.6% discount to the Vwap of $0.9422 on previous close.

Shares represent approximately 15.4% of the existing issued and paid-up share capital and represent approximately 13.4% of the enlarged share capital after the subscription. When completed, the Subscription will increase the existing Share Capital from 713,658,000 Shares to 823,658,000 Shares. Proceeds will be used for acquisition of offshore and marine assets.

Overall, we note that effects could be positive, with grp also announcing a contract win yesterday at US$118m, to charter a rig in Mynmmar.

Ratings as follow:
OCBC maintains Buy with $1.18 TP.
Kim Eng maintains Buy with $1.35 TP.
UOB Kay Hian maintains Buy and raises TP to $1.26


NOL: big negative surprise in 4Q11 results.
NOL reported a net loss of US$320m, 145% higher than consensus loss forecast, in the weakest quarter in at least a decade.
The key driver was higher unit operating costs, +4.5% yoy but flat qoq, given higher industry avg bunker fuel prices in 4Q11 (+3% qoq, +39% yoy).
While NOL is targeting US$500m cost reduction for 2012, of which bunker savings will contribute 20%, analysts believe the amount is ambitious.

On operating metrics, 4Q11 container volumes were down 1% yoy, as trade on the major Transpacific and Asia-Europe routes fell 11% and 4% yoy, rptvly. Utilization rate at 92% was flat vs 91% yoy.
Freight rates declined 15% yoy and 8% qoq, with rate deterioration prevalent across all trade routes. In particular, Asia-Europe saw the largest correction (-21% yoy and -6% qoq).

Following the strong rally in NOL’s share price, +29% ytd vs STI’s +14%, Morgan Stanley says the bigger than expected 4Q11 loss may give investors reason to take profit, as the market remains skeptical of a sustainable rate recovery and the overhang of a weaker spot rate post CNY remains.

HSBC, Nomura also note that while carriers have rationalized capacity, idle capacity could return as soon as freight rates move higher. Believe that the proposed rate increases by several major carriers (to be effective 1 Mar) may not be 100% successful, given current overcapacity and weak demand from Europe.

HSBC reiterates Underweight with TP $1.1.
Nomura maintains at Reduce with TP $1. Says stock is expensive at 1.4x FY12E P/B vs the mid-cycle avg of 1x.
Macquarie keeps at Neutral with TP $1.08.

SG Market

SG Market: Spore shares are set to fall, hurt both by key earnings disappointments from Genting Spore, NOL, Hyflux, CAO, Otto Marine. Having broken below the 3000 psychological support, the risk for the STI is on the downside with the 20-day moving average around 2962 acting as the immediate support. Index members Genting Spore and NOL are likely to face ratings downgrades after both reported below par results while Ezion is proposing a 110m share placement. @ $0.88.

Wednesday, February 22, 2012

Tiger Air

Tiger Air: DBSV upgrades to Buy with $1.01 TP, on back of recent announcement that Indonesian regulators has reactivated Mandala Airlines' Air Operator's Certificate (AOC). The reactivation will give Tiger more flexibility in aircraft deployment in FY13.

Note that it is also easier for SG operations to digest the excess capacity added in FY12. House expects turnaround in 3Q-FY13. Technically, observe that recent turnaround plays tended to rise comfortably above their respective 200-day EMA. Believe that Tiger shares should be
no exception especially since the moving average currently tracks a low base after the major correction over the past 1.5 yrs. The 200-day EMA for Tiger is currently at $0.87. Thus, house expect Tiger shares to rise above $0.87, heading towards $1.00 Immediate support is around $0.80.

Sino Grandness

Sino Grandness: UOB Kay Hian says Buy BUY Sino Grandness Food for its expected strong earnings for FY11. Grp reports earnings this Thursday, and house expects a boost in top-line rev, improvement in gross margins and 50% yoy growth in net profit. TP of $0.70 translates into 4.0x 2012F PE, pegged at a 65% discount to Singapore-listed peers’ average. SGF is trading at 4.9x 2010 PE and 3.5x 2011F PE vs consensus earnings CAGR of 34.2% between FY10-12E (PEG of 0.10).

Going forward, house believe grp will ride on the beverage sales momentum to drive earnings in 2012. Grp has secured a new supplier to produce its own Garden Fresh bottled juices in China and this would double its capacity from 70,000 tonnes to 140,000 tonnes per year. To increase brand awareness for its beverage products, grp has been advertising aggressively through commercials on China’s national CCTV channels since Oct11. The new production facilities in Sichuan and Hubei provinces will also alleviate any supply pressure.

Technically, stock appears to be resisted at $0.47 and support could be at $0.43. A break above $0.47 points to a target of $0.52. The stock is still hovering above its 20 & 50 days EMA which is on the uptrend currently.


Ezion: Reported 4Q11 results, which slightly missed expectations, although FY11 rev was in-line. Rev at US$27.3, -22.9% yoy and 14.2% qoq, while net profit at $10.5m, -23.7% yoy and -18.6% qoq. Result brings FY11 rev to US$107m, -8.7% yoy and net profit to US$58.1m, +44.6% qoq. Gross margins for 4Q however improved at 48% vs 32.9% yoy.

Slightly weaker 4Q rev was due to the corresponding quarter as the contribution from the nonrecurring and non-chartering income was lower, while one of Grp's Liftboat underwent a modification work before she went for a 3 yrs charter in Java Sea in Dec11.

Going forward, Group will continue to pursue business opportunities to support LNG related projects in Australia and its vicinities and continue to focus on the investment in Service Rigs to strong demand from its customers. Barring any unforeseen circumstances, mgt expects to perform better in FY12 vs FY11.

We note that overall, grp’s balance sheet remains strong with a net gearing of 35.2x, while at current price, grp trades at 9.7x P/E. Grp has declared a div of 0.1c/share. Overall, market still tips stock as one the top picks in the small-mid cap sector and given grp’s strong orderwins and capex plans, mgt has repeatedly stressed a potential cash call to raise capital.

Seperately, grp’s order momentum continues with the announcement that it has secured a charter contract with a value of up to US$118m over a 3yr period to provide a service rig to be used by a European based MNC to support its O&G activities in offshore Myanmar. The contract is not expected to have a material impact on NTA or EPS for FY12.

Asia Pacific Breweries (APB):

Asia Pacific Breweries (APB): said yday that plans to sell Heineken-APB (China) to China Resources Snow Breweries (CRSB) have been unconditionally approved following an anti-monopoly examination by the relevant Chinese authorities.
However, completion of the proposed transaction is expected to be delayed after a summons from the Intermediate People's Court of Nantong City in Jiangsu province was served on Heineken-APB (China) by Jiangsu Dafuhao Breweries.
Jiangsu Dafuhao, 49% owned by Heineken-APB (China), has claimed that the transfer of Heineken-APB (China)'s stake in Jiangsu Dafuhao to CRSB is invalid.
APB said the claim is groundless and without merit, and has sought legal advice.

APB closed up 3.2% yday at a record high of $32, but trading volume remains anaemic as usual.
Parent F&N was unchg at $6.49.


STX OSV: CIMB hosted Co’ in a one day roadshow and overall, house maintains O/p with $1.84 TP. House note that Common topics raised by investors were its exceptional 4Q11 margins; 2012 revenue; order outlook; the operating environment in Brazil; a potential sale stake by Korean parent, STX Group; and dividend policy.

Overall, grp remain optimistic of another good showing in 2012, forecasting 14% EBITDA margins. Taking a leaf from 2004, expect its order momentum to accelerate in 2H as robust sector dynamics pips credit concerns. House maintain Nok9b new order forecast for 2012, up 30%. Also see catalysts from stronger-than-expected orders and margins.


CCT: To purchase office building known as Twenty Anson. Co will acquire 100% of Firstoffice which owns the building from vendors Homerun and LCBC which increase co’s asset portfolio from $6.7b to $6.9b. Twenty Anson is an approx 2-yr old, 20-storey prime office building n Tanjong Pagar. It has a NLA of approx 202.5k sf and a committed occupancy of 100% as at 21 Feb 2012. It is situated on a site with a 99-year leasehold title
that commenced from 23 Nov 2007. The amt of consideration at $446.6m was determined based on the property price of $430.

This purchase will come with CCT setting a yield stabilization fund for approx 5.5% p.a for nxt 3.5 yrs. CCT currently trades at an expected fwd yield of 6.5%


ARA: FY11 results slightly below consensus, due to mark-to-market (MTM) losses, otherwise in line.
Net profit was $68.2m, +8% yoy, driven by higher recurring mgt fees and one-off performance fees (divestment of equity interest in ARA Harmony Fund), but dragged down by MTM losses of $6.1m on Suntec Reit units.
ARA’s AUM stands at US$20.3b (+19% yoy), well ahead of its original 2012 target. The group expects to continue to grow its AUM by ~S$2b pa. BOA-ML notes for 2012, this target can be met easily with the launch of ADF II and a Reit listing. ARA has raised a total of US$400m for its ADF II and will start investing from Mar ’12 onwards. Mgt remains confident it will reach the US$1b target at its final closing in 2H12.
ARA declared a final div of 2.7cts, bringing full yr div to 5cts. This translates to 3.5% yield on the counter’s last close at $1.41. Mgt is keen to maintain the 5cts payout, supplemented by bonus issues.
The majority of houses continue to like ARA for its scalable, asset-light business model which generates a steady and defensive stream of income from mgt fees and offers a high ROE of >30%.
Citi keeps at Buy, with slightly lower TP of $1.87 (from $1.90).
BOA-ML reiterates Buy with TP $1.85.
StanChart maintains Outperform with slightly higher TP of $1.58 (from $1.57).


OUE: FY11 results slightly below Deutsche’s estimates, but special dividend a positive surprise.
Reported net profit was $335.7m, -57% yoy.
However, core net profit was $93m, +20% yoy, adjusting for revaluation and one-off gains.
The co. declared an 8cts special div, bringing total div to 11cts, implying 4.4% yield.
Net gearing rose from 55.5% to 57.9% after share buybacks (~7% of total shares repurchased at >$150m).

Revenue grew 54% yoy to $332.4m, driven by the hospitality and invmt property divisions.
All hotels, incl the recently acq Crowne Plaza Changi enjoyed improved performance which supported a 25% yoy increase in hospitality revenue (65% of FY11 revenue).
Invmt property income surged 178% due to full contribution from DBS Building and OUE Bayfront. Nevertheless, office leasing activity has slowed, and occupancy of OUE Bayfront rose marginally from 80.7% to 82.3%, while DBS Building was unchg at 91%.
For residential, sales at Twin Peaks have come to a standstill, with only one unit sold in 4Q11 (50 out of 462 units sold to date), below mgt’s initial target.
Deutsche keeps at Sell with TP $1.96.
Analyst briefing to be held later today.


HPHT: Results slightly above consensus. FY11 DPU at HK37.7c (IPO forecast was HK37.4c). Net profit was approx HK$2.0b on cost savings and higher contribution from JV.

Throughput growth at 4% was lower than IPO target of 7-8% mainly due to weaker trade flows with US and Europe, though HPHT ports gained mkt share most notably in HK.

Co has guided that DPU target of HK$0.51 will be maintained for FY12 (approx 11% yield at last done price). Though demand from Western world is expected to remain soft, transshipment, emerging mkts and intra-Asia trades could offset weakness.

Deutsche maintains Buy with TP$0.83. JP Morgan maintains Buy with TP$0.80. HSBC downgrades to Neutral with unchanged TP$0.76.


GMG: Could see positive sentiment, after Co announced a proposed acquisition and subscription of 35% of shares in Siat SA for Eur$192.6m or $319.1m. Siat is a Belgium Co. and has investments in Africa namely Cote d’Ivoire, Ghana, Nigeria and Gabon, focusing on upstream planting and production of natural rubber and oil palm.

Siat has total natural rubber concession of approximately 51,500 ha. To date, approximately 15,000ha have been planted and contributes to Siat's production and financial performance. (vs GMG approx. 20,000ha planted) The remaining unutilized concessions present potential opportunities for Siat to increase their production of natural rubber.

Grp is of the view that transaction is in line with strategy, citing recent new investments to existing operations in Cameroon and Cote d'Ivoire. Proposed Transaction will add to portfolio with inclusion of Siat's businesses in Nigeria, Ghana and Gabon and crate an enlarged African platform and further complement Grp's mgt expertise for its African businesses.

We note that transaction could be positive for GMG, whose recent expansions has been focused towards’ lower margin’ downstream processing, leading to a plunge in gross margins for FY11, with plantations contributing a mere 10% to total tonnage sold. Move also brings grp a step closer of being a fully integrated rubber player, while expansion in Africa could result in higher synergy among its African operations, where rubber operations in the continent command much higher gross margin at 20%+ vs Asean at 6-10%.

Overall, financial effects of the acquisition appears positive, which will see grp’s NTA flat at $854.8m, while EPS will increase to 1.89c, +42%, with grp still remaining in a net cash position.


Wilmar: Announced 4Q11 results which were below expectations on a qoq basis, although FY11 results came in-line with expectations. Rev at US$11.5b, +26.7% yoy and -12.2% qoq, while net profit at US$500m, +56.9% yoy and +55.8% qoq, however Core net profit at US$264.5m, +216.8% yoy but -40.2% qoq. Result brings FY11 results to US$44.7b, +47.2% yoy and core net profit to US$1.5b, +44% yoy.

Improvement in YOY net profit was largely due to better performances in grp’s Oilseeds & Grains segment and also contributions from grp’s new Sugar segment as well as a sharp improvement from associates.

Palm & Laurics recorded an 8% decline in sales vol to 5.3m MT due to weaker demand from EU and India, while Consumer Products +14% increase in sales vol to 1.2m due to improved sales of consumer pack oils, flour and rice in China, but margins were lower vs 4Q10 as price increase lower than the increase in cost of edible oils feedstock. Others segments saw a decline of 59% in pretax profit to US$24.7m due to decrease in gains from investments, lower fertiliser profit as well as lower shipping profits.

Going forward, grp tip its healthy balance sheet, improved range of downstream product offerings, strong infrastructure in Asian countries and further expansion in Africa, leaving it well positioned to capture emerging markets growth as well as other agri-related expansion opportunities which might arise.

Separately, grp also announced the signing of a MOU with Commodities giant Archer Daniels, indicating their intent to work together in a strategic partnership in global fertilizer purchasing and distribution, global ocean freight operations, and tropical oils refining in Europe. Collaborations between ADM and Wilmar began in the mid-1990s, when they jointly built a network of soybean processing operations in China. Today, ADM owns a 16% equity stake in Wilmar.

Grp has declared an interim div of $0.031/share, bringing FY11 results to $0.061/share or 1.04% yield.

SG Market

SG Market: Spore shares are likely to continue consolidating recent gains, tracking Wall Street's flat lead and declines in regional markets as Greece's "final" deal got an underwhelming response with markets already pricing in the deal. Traders are likely to focus on specific stocks after a slew of earnings results. The key 3000 level is likely to remain support, while the 3030-3050 zone is likely to be pose resistance. Stocks likely in focus after releasing 4Q earnings include Wilmar, HPHT, ARA and OUE.

Tuesday, February 21, 2012

Haw Par

Haw Par: FY11 results, in line if not for one-off impairment.
Revenue at $132.7m, +2.2% yoy, as growth across the healthcare, leisure and property segments was largely flat.
However, net profit was $76.2m, -32.3% yoy, due to i) one off impairment loss of $12.6m of Chengdu Oceanarium, ii) lack of one-off gains on dilution in associates, iii) lack of fair value gains on invmt properties (FY11 nil vs FY10 $15.4m).
Nevertheless, operating cash flow remained healthy, and improved to $58m, +51.4% yoy, thanks to higher invmt income.

The group expanded its invmt portfolio in 2H11 with $30.5m purchases of available-for-sale (AFS) financial assets, vs nil purchases in 2010 and 1H11.
NAV/sh fell to $8.95 from $9.81 in FY10, due to dividends distributed ($0.20/sh) as well as mark-to-market valuation of its AFS portfolio.

The group declared 14cts final div, and together with 6cts interim div, brings the full yr div to 20cts. This translates to 3.4% yield on the counter’s last traded at $5.95.

The stock trades at 15.5x P/E, 0.66x P/B.

SIA / Scoot

SIA / Scoot: SIA’s new long haul budget carrier unit, Scoot, plans to fly at least 5 cities by the end of the year. Scoot intends to announce destinations in China and Japan; it is due to commence flights in Jun or Jul, and has already said it will fly to Sydney and the Gold Coast in Australia.

Scoot will fly services as long as 9 hrs and offer fares as much as 40% cheaper than full service carriers. Scoot will start operations with 4 Boeing 777-200s purchased from SIA, with the fleet size to increase to 14 by 2015. It will complement SIA by either tapping new customers on existing routes or by adding new destinations that are predominantly leisure markets. This comes as 26% of travelers to Spore are now flying on budget, contributing to waning load factors and declining earnings for SIA.

SIA last traded flat at $10.97, which translates to 1x P/B.

China Essence

China Essence: Trading halt to be converted to suspension. Defaults on HK$30m principal and accrued interest of zero-coupon convertible bonds due on 15 Feb 2012. This was due to CNY holidays which took the local govt an unexpectedly long period of time to process the fund transfer application which resulted in co not being able to make the due payments. HSBC, serving as the trustee, has issued a letter which does not amt to a default notice, requesting immediate payment of the above. Co is looking to expedite the fund transfer process and is in talks with HSBC and bondholders to postpone the payment.


Broadway: CIMB upgrades to Trading Buy from Underperform. Note that recent resilient share price suggests that investors may be counting on an earnings recovery in 3Q12, underpinned by a turnaround of its component business. Positive news flow from the HDD sector should drive trading interest in the coming quarters.

FY11 core earnings ($10m) were below consensus and forecast of $14.9m due to lower-than-expected sales. House cut FY12-13 forecast, but raise TP to $0.55 as the mkt appears to have priced-in a weak 1H12.

Genting SP

Genting SP: HSBC has results preview. House forecast RWS operations will generate $375m in EBITDA, flat with 3Q11 EBITDA of $375m. The 3Q11 result was assisted by a high win rate on VIP, which came in at 3.2% vs theoretical of 2.85%, although this was also impaired by higher provisions for bad debts.

Add that even if GENS’s 4Q is weaker than forecast, don’t believe this necessarily undermines investment thesis on GENS or 2012 forecasts. The 3Q and 4Q periods in 2011 were marked by significant global economic uncertainty, which caused many Asian casinos, including Genting, to become more cautious in granting credit to VIP players.

Believe the 2012 period provides a more certain regional economic outlook and, as such, an improved environment to issue new credit lines to VIP players. Overall, house reiterate Overweight rating with $1.99 TP and continue to apply a 10% premium to SOTP valuation. Globally, govts are facing fiscal pressure, and casinos remain an efficient policy tool for raising taxation rev.


Singtel: Optus, announced that it has entered into a conditional agreement to acquire Vividwireless Group from Seven Group for a cash consideration of A$230m (up to A$280m with spectrum re-issuance fee).

Vividwireless operates several businesses including wireless broadband businesses trading under the brands vividwireless and unwired and focuses on metro areas which allow it greater subscriber density. Completion of the deal is still contingent on various conditions including the re-issuance of the 2.3Ghz spectrum licenses.

Overall, Citi remains Neutral and we find the acquisition to be sensible given the needs for spectrum for mobile data. The acquisition price appears consistent with previous frequency auctions. Believe the deal itself will not have any material impact for Singtel both from a profitability and value (SOTP) standpoint. keep stock at Neutral with $3.33 TP.


YZJ: Announce that the co has secured shipbuilding contracts of 7 vessels with value of US$206.2m YTD. Contracts secured comprise 4 units of 82k dwt bulk carriers, 2 units of 95k DWT bulk carriers and 1 unit of 47.5k dwt bulk carriers, and are scheduled for deliveries in the period from 2013 to 2015 and will not significantly impact earnings for FY2012.

Co secured US$1.2b in contracts as of 2011 and existing orderbook was approx US$5.3b as at 30 Sep 2011.YZJ trades at 6.8x fwd P/E.

ML maintains Buy with TP$2.08. House expects the shipbreaking business which co acquired remaining 80% and its JV with Qatar Invt Corp to penetrate the rig-building business from 2012 to be positive. Shipbreaking activities are expected to pick up after the collapse in BDI and that 17% of the global fleet is 20 yrs or older. House est 55% of YZJ US$3.5b orderbook is backed by high-margin order secured before 2009 which will be fully depleted by mid 2013E.

CIMB maintains Underperform but raises TP to $1.43 citing risks from its financial investments.

Tiger Air

Tiger Air: its 33%-owned Mandala Airlines will resume flights in Apr, after Indonesian authorities reactivated Mandala's air operator's certificate.
Mandala will operate Airbus A320 aircraft and adopt Tiger's business model to offer low-fare travel to int’l and domestic Indonesian destinations within a 5-hr flying radius. Details on initial routes will be announced soon.

News is positive for Tiger, as it effectively expands the no. of bases the budget carrier has across the region. In addition, Tiger now has the opportunity to deploy its excess aircraft by leasing them to Mandala.

Separately, CIMB notes that the voluntary administration of budget carrier, Air Australia (AA) last Friday is a big boon for Tiger.
AA’s grounding could lead to an estimated 100k pre-bookings not being honored. Also AA operates 7 aircraft out of Brisbane Airport, with ~40k seats weekly on the Brisbane-Melbourne route, or ~5% of total route capacity, similar to Tiger. CIMB notes that AA’s exit could lead to stronger load factors and higher yields for Tiger, though Tiger’s ability to profit from the situation could be limited by its flight restrictions. AA’s demise could also expedite Tiger’s quest for a second base in Brisbane.
The house keeps its Trading Buy rating with TP $0.87, based on 20x CY13 P/E.


CMA: acquired the remaining 73.7% stake in 3 retail assets in Japan (La Park Mizue, Izumiya Hirakata, Coop Kobe) for a total of ¥9.7b ($160m) from its Japan fund. The acquisition price reflects a 16.9% discount to Dec ’11 valuations, with combined NPI yield of ~7.6%, comparable with the 7-8% range for suburban shopping centres, and the 6.5% cap rates for Japan retail Reits.
Mgt indicated the acq will contribute an additional $8m to net profit on an annualized basis, or 4% of FY12 recurring net profit. The transaction will be funded by borrowings, which would raise FY12E gearing from 28.4% to 30.9%, by Deutsche estimates.
Mgt believes that pricing for the assets are reasonable at current mkt conditions and believes in potential upside for capital value whilst having stable cash yield in the near term.

Given the size of the transaction (2% of total asset on balance sheet), JPM does not see significant share price impact.
Deutsche keeps at Buy with TP $1.62.


Hi-P: Co. has cleared the air regarding DMG and a Business Times bullish article on grp, titled ‘Hi-P shares hit 6 mth high on IPhone Talk.
Co. note that statement made by DMG and BT was not accurate, and grp has developed new customers and secrured orders from exisiting and new customers for projects with different processes.

In regards to grp’s $100m capex, the capex will be intended to take place in phases and is not for the acquisition of CNC machines alone, but for acquisition of different machinery and equipment and expansion of grp’s production facilities.


GMG: Announced 4Q11 results, which was above expectations on a YOY basis. 4Q11 Rev at $310.8m, +114.6% yoy and -0.5% qoq, while net profit at $16.7m, +29.4% yoy and -31.8% qoq. Result brings FY11 rev to $1.2b, +185.3% yoy and net profit to $74.6m, +65.6% yoy.

4Q11 saw a continued increase to tonnage sold, at 58,678tons, +91.6% yoy and +5.9% qoq, while ASP for 4Q11 at $5,296/ton, +12% yoy and -6% qoq. Overall strong FY11 results was largely due to the increase in tonnage and ASP from $4,292/ton in FY10 to $5,771/ ton in FY11 (+34.5% yoy), while Grp’s Tonnage sold increased to 206,948 tons +112.1% yoy.

Strong sales vol was largely attributed to Teck Bee Hang, Grp’s 55% owned subsidiary in Thailand with a current 200,000mtpa capacity, which contributed about 50% of GMG’s tonnage output for FY11. As expected, Gross profit margin ended at 14.3% for FY11 vs 25.0% in FY10 due to larger processing tonnage contributions from TBH, as grp diversifies downstream.

Operating expenses for the yr registered a total increment of 106% to $81.3m for FY2011 from $39.4m in FY10, largely due to the first time inclusion of Teck Bee Hang’s expenditure. The increase in operating expenses is in line with the overall increase in rev.

Going forward, grp note that rubber prices has been averaging about US$3,750/ton this yr. Barring unexpected adverse global development, grp expects prices to remain at current levels for 1H12. Grp will remain focused on its fundamentals and core strengths while actively seeking both upstream and midstream opportunities.
We note that grp’s fundamentals remain strong with grp in a strong net cash position of $342.5m, or 4.5c/share. At current price, grp trades at 11.3x P/E, and 7.9x Ex cash P/E.

SG Market

SG Market: Sentiment may turn cautious as the market awaits the outcome of the EU finance ministers meeting on Greece. Following the announcement of a reserve requirement ratio cut by China’s central bank and with Greece almost out of the way, the market is in need of fresh catalysts to drive stock prices higher. We see immediate resistance for the STI at the 3030 level, which represents the lowest point of the large breakaway gap set in Aug 11 but 3100 could provide a much sterner test.

On the corporate results front, rubber trader GMG Global reported a 29.4% jump in 4Q net profit on increased sales tonnage and average selling prices; while Broadway posted a 4Q loss of $10.2m vs a $10.2m profit the prev year. In other news, Yangzijiang secures US$206m of orders for 7 vessels to be delivered in 2013-15 and CMA buys the remaining 73.7% stakes in 3 Japanese malls for $194m. Marco Polo withdraws from its proposed Taiwan listing, while Ziwo issues a profit warning for its 4Q results.

Monday, February 20, 2012


PSL: Signed a MOU with JPN Industrial Trading with definitive agreements targeted within 6 mths. Both co will work to establish a JV (80% owned by PSL) to own and lease heavy equipment for coal mining and related businesses in Indonesiawith initial invt of up to $50m in the way of pro-rata equity contributions. The day to day business mgmt will be handled by JPN Industrial.

IEV Hldgs

IEV Hldgs: To directly enter into O&G exploration. Subsi PT IEV Gas has been awarded its very first onshore oil and gas agreement by Pertamina EP, an upstream sector subsi of PT. Pertamina (Persero) under the KSO agreement. Finalisation of the KSO agreement by state-owned BPMIGAS and PT Pertamina is expected to be completed in 2Q2012. IEV Gas is appointed to commercialise Pertamina EP’s operation area and obtains compensationthrough a ‘split’ in oil and natural gas production. IEV Gas is to recover all costs incurred in the project before the remaining balance is shared between BPMIGAS, Pertamina EP and IEV Gas. IEV Gas will undertake the exploration and production activities during the 15 yr concession period. Experts will be engaged to determine the reserves and certify them. First production only to begin in 2H2013.

The block to be explored is 89km east of Jakarta and is a total of 77.0 sq km. The KSO agreement is to optimise exploration, development and production assets within Pertamina EP’s operating areas.


Fragrance: Spinning off hotel mgmt arm. Global Hotel, the investment holding company for the hotel ownership and mgmt division of the Group has obtained a letter of eligibility to-list from SGX. Global Hotel expects to offer new shares in its IPO. Sh/h approvals are still necessary for the IPO to go through as well as submission of internal audit and control matters and other documents.


Chemoil: CIMB note that looking at Bloomberg data, Chemoil’s historical valuations appear to be in line with peers. But the gain in the share price suggests that the market believes Glencore is pining to take Chemoil private.

Technically, the stock broke out above its key resistance zone of $0.31-0.365 last wek. Strong rising vol suggests that the breakout is genuine and is likely to take prices higher. However, the breakout has taken its indicators into overbought levels, which might prompt some investors to take profits. Nevertheless, the trend is still up, targeting $0.515 and possibly even $0.585.


Chemoil: CIMB note that looking at Bloomberg data, Chemoil’s historical valuations appear to be in line with peers. But the gain in the share price suggests that the market believes Glencore is pining to take Chemoil private.

Technically, the stock broke out above its key resistance zone of $0.31-0.365 last wek. Strong
rising vol suggests that the breakout is genuine and is likely to take prices higher. However, the breakout has taken its indicators into overbought levels, which might prompt some investors to take profits. Nevertheless, the trend is still up, targeting $0.515 and possibly even $0.585.


Olam: JP Morgan downgrades to Neutral with $2.80 TP. House note of slowing earnings growth on back of:

i) weaker than expected 2Q12 results (Feb. 14th),
(ii) muted outlook for industrials segment (cotton, timber) and
(iii) limited sizeable “new” assets to provide earnings lift in near term, estimate Olam is likely to experience “sub-20% earnings growth over the next 2 years.

Overall, house cutting FY12E/13E earnings estimates by 13% /17% and downgrade recommendation to “Neutral” with a revised DCF based Jun-2013 PT of $2.80. At current levels, prefer Noble Group (within the sector) given, (i)kely positive surprise on 4Q11 earnings (in our view) and (ii) its cheaper valuations (on 2012E, NOBL trades at 10x P/E, 1.5x P/B)


Hi-P: Shares hit 6-month high on iPhone talk. Analysts up 2012 earnings estimate 28% and price target 54% after firm's $100m capex in guidance

DMG note that the Co. could be a key supplier for the next-generation iPhone. Add that channel checks show that the gup has already secured a large order for its new metal-casing business, which house believe to be Apple. Reiterating their 'buy' call, house raised the earnings estimate for FY12 27.9% to $86.3m, and their TP by 54% to $1.22.

DMG drew attention to Hi-P's surprising 'massive $100m capex expansion' in its 2Q guidance to increase production capabilities to keep up with an increasing use of metal in smart-phones, tablets and other consumer electronic devices. Given Hi-P's record of low capex spending and the mgt's conservative nature in running the business, house doubt that Hi-P would proceed without securing any orders.

Hi-P is known to be a supplier for Apple; it has a track record of supplying electro-mechanical parts and carries out assembly work for the Apple iPad 2 tablet. But metal casing offers better margins. Leading metal casing maker Catcher Technology Co of Taiwan has gross profit margins of about 25% compared with Hi-P's 19%. Metal casing makers are also trading at higher valuations, with share prices trading at an average of 13.6x FY12 estimates, DMG said. Hi-P is only trading at about 8x Fy12 estimates.

Fraser Commercial Trust

Fraser Commercial Trust: FCOT will acquire the remaining 50% interest in Caroline Chisholm Centre (CTL), which it does not already own for AU$83.0m or S$106m. The price is 12.6% below the valuation. Including stamp fees and other professional fees, the acquisition cost AU$89.6m or $114m.

Grade 'A' property in Aus will enhance portfolio quality. Completed in 2007, the property is a five-storey Grade ‘A’ office building in Canberra. This acquisition will increase FCOT exposure to Australia from 25% to 30% of total asset value. It is also in line with management’s strategy to increase its exposure in SG and Aus as well as divest its Jap asset when opportunities arise.

Trust is expected to finance this acquisition by debt and internal funds. The trust has a current cash balance of $87m. Assuming fully debt-funded, the acquisition will raise its gearing ratio to 40%.

Overall, DBSV maintains BUY at a higher TP of $1.14. Add that acquisition is yield accretive with NPI yield of 9.5% vs interest cost of 6%. Like FCOT for taking proactive steps to enhance their portfolio. More asset enhancement and capital management exercises are expected to enhance DPU.


Hi-P: Shares hit 6-month high on iPhone talk. Analysts up 2012 earnings estimate 28% and price target 54% after firm's $100m capex in guidance
DMG note that the Co. could be a key supplier for the next-generation iPhone. Add that channel checks show that the gup has already secured a large order for its new metal-casing business, which house believe to be Apple. Reiterating their 'buy' call, house raised the earnings estimate for FY12 27.9% to $86.3m, and their TP by 54% to $1.22.

DMG drew attention to Hi-P's surprising 'massive $100m capex expansion' in its 2Q guidance to increase production capabilities to keep up with an increasing use of metal in smart-phones, tablets and other consumer electronic devices. Given Hi-P's record of low capex spending and the mgt's conservative nature in running the business, house doubt that Hi-P would proceed without securing any orders.


UIC: Reported drop in earnings, as FY11 net profit at $214m, -71% yoy as operating profit at $200.2m, -28% yoy and net fair value gain $13.9m, -97% yoy. FY11 rev $805.5m, -33% yoy due mainly to lower sales of trading properties and lower rental income, partially offset by higher revenue from info tech and hotel ops.

Grp warns that the increase in supply of office space amid the global economic uncertainties and the expected slower growth in Spore will likely impact mkt rentals for office space, and highlighted the additional buyer's stamp duties introduced last Dec have already affected the purchase sentiment in the residential property mkt. Expects retail rental mkt to remain resilient.


Singland: Announced FY11 results, which was in-line. Revenue at $615.3m, +17% yoy, while net profit at $330.7m, -51% yoy. Lower yoy profits was largely due to a fall in fall value gains to $115.9m, -75% yoy. Notwithstanding fair value gains, core net profit at $214.7m, +5% yoy.

Higher rev was due to improved sales recognition of trading property and higher rev from Pan Pacific Singapore hotel, partially offset by lower rental income. Sales of The Trizon residential project at $250.7m was higher by $84.6 million due to additional units sold and higher % of completion. Although office occupancy rates improved, gross rental income from investment properties dropped by $8.6m (4%) to $237.0m as new office leasing rates were still lower than the expired lease rates.

Share of associates' operating results decreased by $13.0m (24%) to $41.1m due mainly to the absence of $20.6m contribution from One Amber (fully sold and completed in Apr10), partially offset by higher contributions from Mandarin Oriental and Marina Mandarin.

Going forward, grp note that the increase in supply of office space amid the global economic uncertainty and expected slower growth in SG will likely impact market rentals for office space. The imposition of additional buyer’s stamp duties in Dec11 has also affected the purchase sentiment in the residential ppty mkt and retail rental market is expected to remain resilient with strong demand from international retailers and in those suburban malls. We note that at current price, grp trades at 0.56x P/B.

Kim Eng maintains Sell with $4.86 TP.


OCBC: 4Q11 results slightly above Bloomberg consensus estimates.
Net profit rise 18% yoy to $594m, mainly due to higher net-interest income arising from strong loan growth.
Net interest income climbed 20% yoy and 6% qoq, to $925m, driven by robust loan growth (+27% yoy) which offset lower net interest margin (1.85% stable qoq, down from 1.96% yoy).
Non-interest income rose 2% to $572m on higher trading income and gains from sale of invmt securities.
Operating expenses were flat at $620m, while cost to income ratio improved to 41.4% from 46.6% in both 3Q11 and 4Q10.
Asset quality remained healthy, though NPL ratio increased from 0.7% to 0.9% qoq in 4Q11, after a comprehensive portfolio review conducted in anticipation of an economic slowdown in 2012.
Tier 1 CAR improved from 12.5% in FY10 to 14.4%, and remained well above the regulatory min of 6%.
On outlook, mgt said it is mindful of the current economic slowdown driven by concerns over sovereign debt in Europe and sluggish recovery in the U.S., but will continue to invest in its regional network, and to leverage synergies across the Group.
OCBC declared a final div of 15cts, bringing total FY11 div to 30cts, in line with the div policy targeting a min payout of 45% of core earnings. This translates to a yield of 3.4% on the counter’s last close at $8.85.
OCBC trades at 1.26x P/B on FY11 ROE of 11.1%.

SG Market

SG Market: Spore shares are likely to cement its climb above the 3000 mark following a confluence of positive factors – Wall Street’s firmer finish last Fri, China's reserve requirement ratio cut and a possible Greel deal are all likely to boost risk appetite. The STI appears set to rise towards the key 3030 resistance zone before trying to close the breadown gap at 3100.

Commodity plays, among the usual beneficiaries of risk-on sentiment with oil touching a 9-month high, with KepCorp and SembMarine among likely gainers. OCBC is likely to draw interest after reporting 4Q11 net profit of $594m, which is slightly above expectations. Bigger budget allocations from recent Budget 2012 is expected to benefit the healthcare and land transport sectors, but labour intensive industries such as construction and shipyards may be hit by cuts in the foreign worker dependency ratios.

Friday, February 17, 2012

ST Engrg

ST Engrg: Announced its land systems arm ST Kinetics has bagged a US$46m defence export order to supply its patented 120mm Super Raid Advanced Mortar System (SRAMS) to an unidentified overseas customer. The 120mm SRAMS is the first mortar system in the world with a recoil force of less than 20 tonnes when firing at maximum charge. Weighing only 1,200kg, it can be mounted on a variety of platforms. Delivery is expected to be completed by 2014. In Feb 08, ST Kinetics was also awarded a $45m contract to supply the SRAMS to a Mid-East customer.

The share currently trades at forward P/E of 17x, which lies in the mid-range of its 12-24x historical valuation range and offers an attractive dividend yield of 5.2%. The street has 9 Buys, 5 Holds and 2 Sell calls on this stock with a consensus price target of $3.13.

Sembcorp Marine

Sembcorp Marine: CIMB maintains O/p with $6.28 TP. Note that Weaker-than-peers’ order pace in 2011 could have been a blessing in disguise as SMM’s yard now welcomes fast-track projects with high
margins and contract values for 2012/13 deliveries. 2012 is set to be a blockbuster year as yard orders top S1.2bn YTD.


Mewah: CIMB has Technical Sell Call. Note that prices have hit 38% Fibonacci target of $0.63 after breaking out of the triangle pattern. However, the technical landscape does not look so appealing anymore at current levels. There is bearish divergence on its RSI and its MACD is losing momentum. Furthermore, price tested the upper channel and reversed, forming a graveyard doji pattern.

Think it is time to take profits now. Aggressive sellers may even choose to sell now with a stop placed above S$0.66. Believe the upside is likely limited to the S$0.695-0.73 gap while expect prices to fall towards $0.57 at the minimum but it is more likely to fall back to $0.51, its 50-day SMA.

Combine Will

Combine Will: CIMB features Combine Will for the day. Note that If we could be looking at a DPS of S$0.10 for FY11. At $0.80, that would equate to a 12.5% yield. BVPS at 9M11 was $2.88 or a historical P/BV of 0.27x. If assume that Co. breaks even in 4Q11, the Company will be trading at a historical 4.2x P/E.

On the charts, prices have fallen to a key support level from the December 2010 higher and appears to be forming a base right at the support band of S$0.64-0.80. With its weekly technical indicators now in an up mode, there could possibly be a rebound on the cards. The oversold RSI may also prompt a quick upward correction in prices.


Roxy-Pac: 4Q rev at $42.1m -11.4% yoy -5.2% qoq. Net profit at $11.4m -5.0% yoy -14.6% qoq. Fall in rev due to lack of contributions from completed projects The Ambrosia and The Florentine. Co continues to recognise rev from 7 dev projects in 4Q2011 and property dev made up approx 70% of all rev. Rev from hotel ownership increased 7% yoy to $12.3m with occupancy rate at 96.1% (9M2011, 94.1%) and RevPar of $180.9 (9M2011, $155.9). Property Invt segment saw a dip of 1% due to redev of Kovan Centre

Kovan Centre will be demolished and re-constructed as Space@Kovan which has been fully sold with value of approx $160m

Co has declared a div of 2.0c compared to 1.5c previously


SATS: Has signed a new JV agreement with Eastern Air Catering Invt, China Southern Airlines Co and Capital Airports Holding Co for Beijing Airport ground services (BGS) and inflight kitchen (BAIK). Both JVs, BGS and BAIK have a 20 yr operating term which expires in 2014 and 2013 respectively with SATS currently having a 40% ownershipe and Capital Airports with the remaining 60%. The new agreement will include new JV partners (Eastern Air 30% stake, China Southern 30%) and dilute SATS' stake to 28% with remaining 12% held by Capital Airports.

This renewal agreement essentially also dilutes SATS earnings from Beijing but at least ensures income continuity. The Chinese govt has a majority stake in China Eastern (subsi of Eastern Air Catering). SATS is trading at expected yield of 4.5% with fwd P/E 16.2x

Lippo Malls Indo REIT

Lippo Malls Indo REIT: Reported $24.6m of NPI for 4Q11, +16.8% jump over the corresponding qtr in 4Q10. As the two new assets came into the Trust from Dec11, the full financial impact of these new assets will only flow through from 1Q2012 onwards.

On the back of a strong 4Q2011 performance, Trust recorded $92.0m in gross rev and NPI for FY11. Correspondingly, DPU (post-rights) for FY2011 was 3.85c. On an annualised basis, the latest distribution represents an adjusted average DPU yield of approximately 7.5% for FY11.

Sembcorp Marine

Sembcorp Marine: Could see positive sentiment, after Co. announced this morning that it has announced a new order worth US$213m for a jack-up rig for customer Safin Gulf. The rig is due for delivery in Nov12, which is a relatively short time of less than a yr, (typically jack-up built from scratch takes around two years)

Kim Eng suspect that the rig may have been pre-built by SMM, hence the faster lead time and a significant premium pricing. Previously, the same class of rig sold for US$192m. While waiting further updates from Co, contract win itself is positive for SMM, and news could propel share price higher.

Ytd grp has already secured contracts of $1.26b vs $3.9b for FY11, and if momentum continues, we do not rule out that FY12 could be the yr for SMM, which a few houses have already been tipping since the start of the yr.

Kim Eng maintains Buy recommendation with $5.58 TP.