Friday, June 29, 2012


Hi-P: is +3.2% at $0.805, amid buoyant market sentiment, despite major customer Research In Motion (RIMM) reporting a big quarterly loss and saying its next smartphone, which it has bet its survival on, won't be ready until next year. But the market may have already anticipated any earnings hit to Hi-P. Lim & Tan Securities notes RIM's problems started more than a year ago and have already negatively impacted Hi-P's results, with 1Q12 net profit down 91%. Notes Hi-P is counting on new products from Apple and new customers such as Amazon and Nike to help mitigate the weakness from RIM and expect their diversification efforts to be more apparent in 2H12. Keeps a Buy call. The stock's week-to-date peak of $0.835 likely offers a near-term cap.

Tan Chong Int’l, TCIL 3k HK$

Tan Chong Int’l, TCIL 3k HK$: stock is +2% at $2.09, with volume back at thin levels, following yday’s significant sh/h transactions. According to the co filings, TCIL’s public float has now been restored to 28.6% (from 22.7%), above the min level required by the HK listing rules. Guoco will cease to be a significant sh/h, with its stake sold down from 19.88% to 3%. Nevertheless, we note that the “new shareholders” are a vehicle partially owned by the largest sh/h Tan Eng Soon, as well as his brother Dato Tan Heng Chew, hence the reported free float may not be accurate (in substance). While the filings did not give the transaction price, the “time sales” data reflects $2.60 as the price transacted. Should this be accurate, it provides an indication of the value that the Tan family places on this company.


OUE: A 99yr leasehold, suburban condo site near Potong Pasir MRT station was sold yday at $628 psfppr to Santarli Corp, a local construction group. The tender drew 13 bids, with the second highest bid by OUE just a shade under at 0.9% below. Santarli expects breakeven cost to be slightly above $1,000 for the project, which is likely to yield ~240 units, and have an ASP of ~$1,300psf. This Govt Land Sales tender is the third that OUE has participated in this year (first two saw OUE bidding 17% under top bid). StanChart continues to expect OUE to seek to divest its Orchard Road assets, which would require OUE to seek out new earnings drivers in the form of devt profits. Expects OUE to persist at mass market land tenders. Says OUE is currently top pick, with TP $3.22.

Tiger Airways

Tiger Airways: OCBC upgrades from Hold to Buy and raises its TP from $0.67 to $0.76. Tiger is likely to benefit from the current respite in jet fuel prices, especially with fuel cost contributing to more than 40 percent of its operating costs. Assumes that Tiger can achieve around $5m of savings in fuel costs in the 1Q2013 fiscal year, given the 7% qoq fall in average jet fuel prices. With Tiger's Australian unit flying more sectors and lowering its unit fixed cost and Tiger Singapore more focused on improving yields and load factors, the budget carrier's profitability is poised to considerably improve in 2013


Europe leaders announce plans for single financial supervisor; euro rallies

Superior Multi Packaging

Superior Multi Packaging: to lift halt at 9.45am. The co refers to the substantial price and volume increase of its shares on 27-28 Jun. Says it is currently in preliminary exploratory discussions with a party on an initiative involving the shares of the co, which may or may not lead to an offer being made for the company.


Sakari: DBSV maintains Buy but cuts TP to $1.80 from $2.40. House note that share price decline has more than priced in impact of current coal price weakness on earnings. Expect coal price to stage a mild rebound in 2H12. Maintain BUY for potential to play this rebound; downside limited by healthy dividend yield of 6%. Increasing production is not the priority, producing smartly is more important. Given finite coal reserves, producing more in a low price environment may not be ideal over the long term. Hence, mget should retain flexibility in managing production levels, especially at Jembayan, where margins will be tight at current spot prices owing to high cash costs. Production can be increased if coal prices rebound. Sebuku mine, with its higher-grade coals and low cash costs, remains very profitable even at current prices and should be the key driver for SAR’s profitability in the near term.

Kep Corp

Kep Corp: Secured contracts worth a total of about US$70m in the U.S. and Azerbaijan. One contract is from Transocean Offshore Deepwater Drilling Inc. (Transocean) to repair and upgrade the semisub (semi) rig Sedco 707 in US. The contract is expected to be completed by 1Q2013. The other contract is to build a floating dock for Baku Shipyard LLC. Expected to be completed in 4Q 2013, the floating dock will be 168m by 50m and equipped with two sets of 25 ton Jib Cranes. The work will be handled by co's shipyard in Caspian Shipyard Co which includes steelworks construction and the fabrication of the hull structure. Kep Corp trades at 8.3x trailing P/E vs avg of 13.2x


IEV: In a query by SGX on grp’s trading activity, grp note that a substantial shareholder, namely AmPrivate Equity Sdn Bhd, has a change in its shareholding interests and hence, the necessary announcement will be released via SGXNET in due course. AmPrivate Equity is owned by Malaysia’s AmBank Grp.

Keppel Land

Keppel Land: Plans to develop more residential and commercial properties in Indonesia -where a resilient economy, rising FDI and declining interest rates have helped to buoy demand for homes, and office and retail space. Notes its integrated township project, Jakarta Garden City, has sold 95% of the 1060 units launched ytd. Highlights its currently exploring a no of projects and these will probably be landed housing developments in the Greater Jakarta region or high-rise condos targeted at mid to high-end mkt at the fringe of Jakarta's CBD. Also keen to undertake more commercial projects in Indonesia, esp good quality office buildings in the CBD and decentralised office locations such as around Simatupang in South Jakarta. At end 1Q12, Indonesia accounted for 4% of KPLD's total asset distribution. We note that grp could further increase its Indonesian asset base, to diversify away from its core SG and China mkts, both of which have been plagued with high political risk and has weighed on Co’s share price. Furthermore, Indonesia’s stellar economic growth and high growing domestic consumption, has seen a slew of SG co’s ramping up their expansion phase in the largest Asean economy.

Spore market (29 Jun 12)

Spore market: looks set for a lower open, mirroring the weak US close. In the region, KOSPI and Nikkei are down 0.9% and 0.7% respectively, at 8.11am. Yet volatility will likely continue, as eyes will be on the outcome of the EU Summit. While most market watchers have low expectations for any meaningful new policies to be announced, any move towards a common solution could be a positive trigger for markets. Today also marks the last trading day of 1H12, and markets could be inclined to window dressing towards the end of day. Technically, the STI looks to continue to trade in a wide 2800-2900 range. Near term, the trend appears positive, as the index could move higher from the recent 2800 base. Indicators however are flattish.

Thursday, June 28, 2012

Genting SP / Genting HK

Genting SP / Genting HK: Dow Jones says the rivalry of GENS vs Crown (CWN.AU) may have ratcheted up a notch, people familiar with the matter say. Melco Crown (6883.HK) is getting set to enter the Philippine casino market, entering a deal to develop a casino with local property developer Belle Corp. (BEL.PH), one of just four companies with licenses to build casinos in the Manila Bay area. Genting HK is another, operating Resorts World Manila. Genting has been tip-toeing into Crown's backyard, with Genting HK and Genting SP taking a combined 9.9% stake in Echo (EGP.AU), which is 10% owned by Crown; both Genting and Crown are seeking regulator approval to increase their stakes. The market has been cool to GENS' Australian moves; the stock is down 1.4% at $1.38, touching levels last seen in Aug '10. Even as market players gravitate toward dividend-paying stocks, GENS' one-Singapore-cent annual payout likely won't offer much support compared with higher-yielding peers. Typically thinly traded GENHK is up 1.6% at $0.315.

Golden Agri (technical)

Golden Agri: expect continued share price volatility, with the stock now hovering near the pivotal level at $0.67. Nevertheless the odds favor the start of an uptrend , on the back of rising technical indicators, and the emergence of the higher lows and higher highs share price pattern. See resistance at $0.70, support at $0.62.


LionGold: To lift trading halt at 2.45pm. Co has taken a strategic stake of 11.2% in ASX listed gold production co, Citigold Corp (CTO), and becomes the single largest sh/h. The stake was acquired at A$0.08 per share for 125.0m shares for approx $12.9m. CTO owns the Charters Towers Gold Project in North Eastern Australia. The project has JORC-compliant resources of 11m oz of gold at 14g/t and reserves of 620k oz of gold. It comprises over 1.5k sq km in comprising 56 granted mineral hldgs and 2 applications. CTO also has a 36% sh/h in Gateway Mining Ltd who holds a substantial portfolio of projects incld Gidgee in Western Aus, Cowra in NSW, within the Mt Isa region of Queensland. CTO has a market capitalization of approximately A$66.8m


SMM is +2.2% at $4.67, extending Wednesday's 3.9% gain, outperforming peer KEP's 1.2% rise to $10.31. OCBC notes SMM has underperformed KEP since late Feb, with risk-off sentiment affecting higher-beta SMM more. Notes SMM's 1Q12 earnings disappointed and a recovery in property-stock sentiment (KEP has a property arm), but it expects the trend to reverse in coming months, now favoring SMM. While further market volatility may affect SMM more, it views the stock's recent selldown as unwarranted. Keeps a positive view on the premium offshore rig market, expecting SMM to catch up on orders and to see a 2H12 earnings pickup. Views SMM's "speculative builds" as better-termed opportunistic, noting they have been taken up so far and generally command higher prices on earlier delivery dates. Raises SMM's TP to $5.71 from $5.13 after rolling over to FY12-13 blended core earnings, keeping a Buy call. June 21's $4.73 peak may offer a near-term cap.

List of SG co's with exposure in Myanmar

Yoma (Property) Interra (O&G) Sin Heng (Construction/cranes) Viz-Branz (Consumer) Best World International (Consumer) Super (Consumer) Ezion (O&M) Ntegrator (Telco/Tech)


Aussino: the stock is -4% at $0.143, extending its decline for the 3rd day. Recall the Business Times carried a story on Saturday that suggested the planned $60m reverse takeover (RTO) of Aussino may not materialize as the firm planning to inject assets into Aussino is linked to a Myanmar businessman on a US blacklist, according to bankers and lawyers.

Tan Chong International

Tan Chong International, TCIL 3K HK$: this traditionally illiquid HK dual-listed stock suddenly emerged in top volume spot with 159m shares traded. The bulk of the trades (~98m shares, or ~4.9% of shares out) was crossed at HK$2.60 at about 11.24am, in a married trade. Interesting that the transaction px is way above the last done at HK$2.10. The top two shareholders in TCIL are, i) Tan family (via Tan Chong Consolidated Sdn Bhd) - 57.8% ii) Guoco Group (via Capital Intelligence Ltd) - 19.9% The rest of the sh/h hold <2% stake. according to Bloomberg. We may get more clarity on the transaction counter parties in a few days time when the shareholding changes are filed and announced on SGX.

Far East Grp

Far East Grp: Sias Research initiates coverage with an ‘Increase Exposure’ Call and $0.38 TP. House note that the company 1) is one of the largest distributors of refrigeration systems and products in Southeast Asia and carries a wide range of branded cooling system components, 2) has an innovative in-house “Eden” brand of products which are known for its energy efficiency and 3) exciting plans to widen its distribution channels and manufacturing facilities. The company’s head office in Lavender Street has only a book value of $4.4m but has a market value of about $18.8m, which is about 131% of its market capitalization. Far East trades at FY13F 7.1X P/E and P/B of 0.65X (the head office value remains at book).


Blumont: to lift halt at 11am. To place 250m new shares at issue px of 2.65cts/sh. This represents ~19.8% of the existing share base. The net proceeds will be used to strengthen the Group's working capital (~30% ) and the remainder to increase its ability to fund its growth and business expansion as and when opportunities arise. Subscribers are individuals Huang Phuet Mui, Ho Cheng Leong, Lim Kuan Yew, and Ronald Menon RK Menon.


DBS: +0.4% at $13.86, in line with the STI's 0.4% rise. While its Indian unit reported FY12 net profit rose 164% on-year to INR3.36 b (~$67.2m), the amount is relatively small compared with the bank's 1Q12 net profit of $933m. But the results may bode well for the long term. CIMB notes India is quite a small part of contributions to the group, but it's one of the fastest growing parts. Says the contributions aren't significant in the immediate term, but could grow in a few yrs, as India has been growing for two years now at a very rapid pace. Adds DBS is aiming for a long-term geographical revenue mix of 40% from Singapore, 30% from greater China and the rest from southeast Asia, including India. The stock likely faces near-term resistance around $14.00, marking recent peaks.

Raffles Medical

Raffles Medical: DMG hosted at its Asean Corporate Day. Notes Raffles Med has hired more staff as it prepares for operations at Thong Sia (its Specialist Medical Centre) and its hospital extension. Notes its plans for Thong Sia are progressing on track and partial operations are expected in mid ’13, while its hospital extension project is progressing well and construction is expected to be completed in 2015. The co remains interested in expanding its operations regionally, such as in China, Msia and possibly Vietnam markets, though mgt maintains it would only proceed with the right partner. The house notes that while staff cost will likely rise in line with increase in headcount, div payout is likely to remain at ~40%. Continues to like the co for its resilience and stable growth. Maintains Buy with TP $2.67.

CapitaRetail China Trust

CapitaRetail China Trust: OCBC maintains Buy with $1.44 TP. House note that the rent from the four malls that CRCT owns in Beijing contributed 69% of 2011’s revenue. According to Savills, the supply of shopping mall space in Beijing is set to increase by a significant 17% this year, or some 1.06m sqm. Despite this increase, believe that CRCT’s Beijing malls are well placed to compete. CapitaMall Xizhimen, is located at the transportation hub Xizhimen and sees a daily footfall of 85k-90k people, which gives it much bargaining power. CapitaMall Anzhen and CapitaMall Shuangjing are on long-term master lease structures, thus their rents should be fairly immune to the upcoming supply. While shopping mall supply could increase by ~21% in 2012 in the area, believe CapitaMall Wangjing has an incumbent’s advantage, being voted 'Most Influential Mall in Wangjing Area' by Beijing News in 2010.

STX OSV (technical)

STX OSV: Technical Buy Call by Trading Central. Note that the RSI is above its neutrality area at 50. The MACD is negative and above its signal line. The MACD must break above its zero level to trigger further gains. Moreover, the share stands above its 20 day MA ($1.45) but below its 50 day MA ($1.54). Alternative scenario: below $1.39, expect $1.27 and $1.19.


Midas: CIMB note that share price is hovering near its all-time low of 26c. With recent positive developments in China’s railway industry, smell new contracts in the wind. A high-speed rail contract award could free Midas from the shackles of its year-long nightmare. When orders return, expect margin expansion on higher utilisation and inventory rundown. Also expect the share price to react positively once new contracts are secured. Maintain Outperform with unchanged target price, still based on 11.7x CY13 P/E, (0.5 sd below historical five-yr average).


CNA: Awarded $9.1m contract to install local sequential controller system for 48 MRT systems which will manage the ventilation in times of congestion and control smoke flow in emergency conditions. This project is expected to be completed in Dec 2016. Co was also awarded a $2.3m contract to replace a control and monitoring system at Kranji Water Reclamation Plant. Grp's order book will rise to $71.4m.

Interra Res

Interra Res: To undertake renounceable rights issue of 1 rights share at $0.15 for every 2 existing shares. Issue price is a disc of approx 63.0% to VWAP price of $0.4056. Co expects to raise approx $12.8m to $21.7m in net proceeds to fund new work programmes in Myanmar and Indonesia in increasing proven reserves, oil production from existing producing fields and identifying new areas within these assets

K1 Ventures

K1 Ventures: Voluntary conditional offer of $0.135 per share made by offeror GKB Hldgs. GKB is partly owned by Keppel Corp (45%), partly owned by the CEO and CFO of K1 Ventures. The price offered is a 19.5% premium to last done and 22.7% prem to NTA as of 31 Mar 2012. Offeror intends to delist co and reasons cited were the low trading liquidity, no immediate need to access capital markets, and compliance costs. The offeror currently controls approx 62.4%


Hi-P: Rose 6.8% yesterday to 79c on 686,000 shares, about in line with its 6 months average traded volume, outperforming the overall market’s flattish performance. Since Co started buying back shares on 21May ’12 (around the 72-73c level) and continued doing so till 4 Jun 12 (around the 67c level) , it has helped to stabilize the stock’s performance after having declined from its high reached at $1.04 level atthe end of Mar ’12. Mkt is starting to anticipate mgt’s guidance of a strong pick up in business momentum starting in 2Q ’12 as strength from Apple, Amazon, Nike, Seagate, Colgate and P&G help to offset the weakness from its largest customer RIM.

Corporate news

Corporate news: * K1 Ventures / Keppel Corp: KEP reports on cash offer (at $0.135/sh) for K1 * Interra Resources: announces renounceable rights issue on the basis of 1 rights share for every 2 ordinary shares. Separately, the Business Times has a feature on the co’s Myanmar plans. * Singapore Land: Awarded tender for Farrer Drive for $113.2m. The site has with total area of 67.5k sf and plot ratio of 1.6 which is approx GFA of 108.0k sf. * Pteris: said it won a baggage handling upgrade contract worth ~$30m Charlotte Douglas International Airport and the project is expected to completed by 2014. * Freight Links: FY net $32.2m vs $16.3m; revenue $149.35m vs $154.13m; names Chan Choong Poh Charles as COO * Lion Asiapac: sees 4Q loss; expects FY earnings to decline accordingly * OKP: says it is acquiring 10% stake in CS Land Properties * Mermaid Maritime: names Chalermchai Mahagitsiri as executive vice chairman * CNA: Awarded $9.1m contract to install local sequential controller system for 48 MRT systems. Co was also awarded a $2.3m contract to replace a control and monitoring system at Kranji Water Reclamation Plant. Grp's order book will rise to $71.4m. * Creative Master: Sh/h Bobby Lim Chye Huat makes $0.0126/sh cash exit offer. Co is facing delistment after failing to exit from the SGX Watchlist within the 2 yr timeframe. Mr Lim currently holds a 0.39% stake.

Singapore market (28 Jun 12)

Singapore market: likely to open up, taking cue from the positive moves in the US market overnight. In the region, KOSPI and Nikkei are up 0.3% and 1.3% respectively, as at 8.22am. The STI’s momentum may continue into the HK market open, as newswires also saying that more measures to boost financial cooperation btwn HK and China may be out “soon”, making it more convenient for HK’s long term invmt in China’s capital mkts, cross-border ETFs, support for 3rd party RMB settlement through HK agents. This could provide a fillip to HK shares. Meanwhile, keep an ear out for any fresh developments that may arise from the EU Summit, to be held over today and tmrw. Technically, the STI will likely continue to trade in a wide range, amidst current volatile times. The indicators offer no clear direction on regarding near term moves. See support at 2800, resistance at 2900 (coincide with 50day MA).

Wednesday, June 27, 2012


Asiasons/LionGold/Chasewood: Similar patterns in Chart price? Note that LionGold is again approaching its year high, while Asiasons and Chaswood have seen good upward momentum in their share price recently too. Asiasons Capital which is a private equity firm has stakes in both Chaswood and Liongold, and we do not rule out any proxy play / parallel trades in these stocks.

Lian Beng (technical)

Lian Beng: technical outlook appears to be improving. The double bottom at $0.345 now provides a good base for the stock. MACD and RSI are trending up, which bodes well for near term momentum, and a close above the 200 day MA ($0.37) could mark the start of an uptrend. Further pick up in volume and price would help confirm this outlook.


FCOT: EGM scheduled for 12 Jul, with FCOT to seek unitholders’ approval for i) selling Keypoint for $360m, and ii) a unit buyback mandate of up to 3.5% of its share capital. StanChart estimates that a 3.5% unit buyback could be ~2.3% accretive for FY13e DPU. Sees hidden value in FCOT, including further unit buybacks given 8.7% DPU yield in FY13e vs funding cost of 3.3%. The house continues to like FCOT’s strategic mgr who has been pro-active in capital mgt and has shown alignment of interest with unitholders. Reiterates Outperform with TP $1.27. Additionally, KELive notes that FCOT has outstanding convertible perpetual preference units (CPPU), with conversion price of $1.1845. There is market talk that FCOT will likely (partially) redeem the CPPU’s which have a lower cost (CPPU coupon of 5.5%) vs the StanChart’s est. 7.2% div yield in FY12e. With the CPPUs trading close to par, CPPU holders who wish to maintain yield exposure may seek to invest in FCOT units directly. FCOT is +2% at $1.02, breaking above the psychological $1 resistance level, and at a multi year high.

China Taisan

China Taisan: is -7% at $0.091 on top volume. The co has been quiet on the corporate announcements. Mgt responded to SGX query on 12 Jun, saying it did not have an explanation for the trading activity. Interestingly, Sias had a note out on 12 Jun, which talks about its site visit to China and inspection of the co's new machinery, which positions the co to take on new orders should the industry recover in future. Sias also highlighted that China Taisan's net cash of Rmb 709m translates to 149% of its trading price ($0.084 at report date), which may have spurred speculation of the counter as a possible privatisation play. The initial euphoria appears to be wearing out, as there has been no further updates since then.

Silverlake Axis

DMG: BUY, TP$0.49 Mgt targets to grow Silverlake’s customer base to 150 in the next five years. One key area for growth is Asean. Currently, 50% of the Southeast Asian banks are still using their in-house legacy systems. In view of the on-going Euro crisis, mgt is confident that the group will storm through the crisis as 1) their customers are mainly Southeast Asia banks focusing on commercial banking services and 2) 45% of the group revenue is generated from mission-critical maintenance jobs.

Civmec vs Ausgroup

Civmec vs Ausgroup: Civmec continues to ascend higher, +3.5% today. Note that grp is rumoured to be organizing an analyst meeting/trip to view its operations in Australia. At Current price, grp trades at a whooping 50x P/E. Contrast this to Ausgrp, who trades at approx. 7x P/E. Ausgrp’s share price has been tracking Civmec considerably well, and at current valuations could potentially be a safer bet. Recall in its latest earnings, grp reported a strong turnard following previous yrs disappointment, with net profit rising 133.1% to A$6.79m ($8.55 million) vs YOY. Revenue rose 17.6% to A$182.25m yoy, due to higher activity levels in the integrated services segment and the manufacturing and fabrication segments.


SingTel: says it will continue making acquisitions in the digital market and continue looking for new data pricing models. Singtel purchased mobile advertising firm Amobee for US$321m in Mar, and the acq had been followed in quick succession by a buyout of 3D mobile ad firm AdJitsu through Amobee and a $12 m acquisition of restaurant review website HungryGoWhere. Even as SingTel embraces the digital, it will likely spend an equal amount of time dealing with the toll that the digital explosion is taking on bandwidth. Notes, revenue for mobile data services significantly lags the growth in data usage as well as related costs, and is thus actively seeking new pricing models without causing unnecessary pain to customers. From next month, SingTel's mobile plans will do away with a 12-GB data cap across the board. Instead, tiered pricing and data allowances will be introduced. The telco will also make "significant investments" in its networks, from buying more spectrum to using more efficient data-handling technologies.

Genting SP

Genting SP: Deutsche maintains Hold with $1.65 TP. House note that the NSW Independent Liquor & Gaming Authority said that it has received an application from Genting to acquire more than 10% of Echo Entertainment. The regulator has said that they will consider the application, but there is no visibility on the requried time frame for it to determine the application. At this stage, Genting's investment intention in Echo remains unclear. The latest move, allows the Genting group to play catch up with Crown, and possibly remove any regulatory disadvantage that may jeopardize its investments. By end FY12E, Deutsche forecast Genting SP to have $5.3bn (A$4.2bn) gross cash or marginally net cash. While the jury is still out on Genting's game plan, one may have to take the view that there will be significant operational improvements in existing Echo properties and/or there is opportunity to add gaming capacity in Sydney to justify premium valuation. Echo holds a 99-year license to operate in NSW (Star City, Sydney) with exclusivity until 2019 and three other smaller casinos in Queensland (Jupiters Gold Coast, Treasury Brisbane and Jupiter Townsville). In FY11, its Sydney and Queensland casinos generated EBITDA of A$286.4m and A $159.6m, respectively. DB forecasts EBITDA contribution of A$280m and A$144m respectively for June FY13E.


Coal / Sakari: Coal for power stations is headed for its worst qtr in more than three yrs as China’s slowing economy tempers demand for electricity amid brimming stockpiles and increased shipments into Asia. Thermal coal at the Australian port of Newcastle, cost $83.10 / mt as of June 22, down 20% this qtr, according to IHS McCloskey, a coal-data provider. That would be the biggest slump since the first three months of 2009. The fuel may average $103 a ton this yr, according to median estimates. It Citi note that the house dot see a significant recovery in prices occurring until probably the end of the year or into 2013. With the macro-economic outlook being relatively weak, particularly in China, it’s really hard to see the Chinese work down those inventories quick enough to see prices respond over the next three months at a minimum.

Q&M Dental

Q&M Dental: Key takeaways from investor meeting. 1) Growing revenue: Q&M Dental has consistently grown its revenue -- from $26.4m in 2007 to $47.8m last year. From 51 now, the target is to have 60 outlets in SG by 2015. In Msia, the target is to grow from 3 currently to 15 by 2015. The main growth driver is China, where Q&M plans to invest RMB 400m to have 50 dental clinics and 20 laboratories by 2015 through JV’s mainly and, partly, its own Q&M dental clinics in Shanghai. 2) Vertical integration: A little-known aspect of Q&M is its vertical integration: It owns dental laboratories and two distributors of dental supplies and equipment, this translates into cost savings and economies of scale. 3) Market dominance: Q&M has 8-9% of clinics and 10% of dentists in SG, but it is the dental practice to go to for 17% of the population who visit dentists at least once a yr. And it offers the full range of dental services, including specialist services. 4) Profit margin: Margin eased to 9.6% in 2011 from 10.4% in 2010 and 12.6% in 2009. Key reasons: a) Expenses in maintaining a team (legal, accounting and management) in China and professional fees for due diligence of prospective joint ventures; b) Professional fees as a listed company since IPO in Nov 2009. 5) China contribution: Existing 2 PRC JV’s in Beijing and Nanjing will provide strong incremental earnings from this yr. Q&M is working on several JVs and targeting to achieve an aggregate profit of RMB 80m from China, and to seek an IPO for the PRC business either in China or Hong Kong in 3-5 yrs. 6) Why pursue China business? It offers too big a growth potential to ignore. Take for example a proposed joint venture with Shanxi Meiyuan Medical Technology, which owns 2 dental hospitals, 6 clinics and 20 dental laboratories. It employs about 130 dentists. Compare that to Q&M's 150 dentists in Singapore. If the JV materialises, Q&M would double in size. The business potential in China is reflected in the fact that only 8% of the population in coastal cities visit dentists at least once a year. The percentage has lots of room to grow -- consider that in SG, the figure is 46%. 7) Fund raising: Q&M, though it has grown from 38 to 51 clinics since IPO in 2009, still had (as of end-2011) $12m of the $20m IPO money raised. It needs more money to acquire stakes in China and for M&A activities in Singapore. No timeline has been announced. 8 ) Stock valuation: While some readers opined that the Q&M historical PE (of 45X recently) is on the high side, the Q&M management pointed out that dental and medical peers trade in roughly the same PE range on various stock exchanges. Q&M's future profit growth suggests that the prospective PE is certainly lower.

Tuan Sing

Tuan Sing: CEO William Liem interviews with The Business Times. Says Tuan Sing is looking to expand in the hotel sector in Australia. In addition, it is open to acq of existing hotels as well as developing new ones in Singapore, China and possibly Indonesia. Intends to transform itself into "a real property developer". In addition to its property projects in Singapore and China, it also eyeing real estate devt and invmt opportunities in the residential, retail and office sectors in these two countries, and in Indonesia as well. The group's hotel interest in Australia is held through its half stake in Grand Hotel Group (GHG), which owns Grand Hyatt Melbourne and Hyatt Regency Perth. The two hotels have undergone refurbishment in the past few years. Meanwhile, the Perth property has significant redevelopment opportunity with potential for > 500k sf of additional gfa that can be built. In Spore, BT estimates that the group’s property projects should create a nice income stream. BT's back-of-the-envelope calculation suggests that Seletar Park Residence could generate a pretax profit of ~$56m (assuming breakeven cost of ~$900 psf, cost of land at $468 psf ppr, ASP of $1,100 psf and saleable area of ~280k sf). For The Sennett, pretax profit could be ~$66m based on an average launch price of $1,300 psf, saleable area of ~330k sf and a breakeven cost of ~$1,100 psf. Tuan Sing paid $567 psf ppr for the site. Assuming the proposed condo on the Cluny Park Road site commands an ASP of $3,000 psf, it could yield a profit of ~$67.5m, using a breakeven cost of ~$2,100 psf and saleable area of ~75k sf. In the CBD, Tuan Sing plans to redevelop Robinson Towers, its Annexe building and International Factors Building into a 23-storey office project with 257k sf GFA including ~12.5k sf of retail space. However, the group has yet to decide when to begin work. The annexe is on a plot with 99-year leasehold tenure (starting 1981) while the two other buildings have 999-year tenure. Market watchers reckon it would make sense for Tuan Sing to seek a lease upgrade for the annexe site to 999 years before commencing construction. Mr Liem estimated that it would cost Tuan Sing ~$165m to build the new project. Adds its valuation of the land is $230m or ~$900 psf ppr, is competitive vs the $872 psf ppr at which the govt last year sold the 99-year Paya Lebar Square site.


Cosco: Bloomberg notes Cosco’s strategy of seeking orders to build oil rigs and offshore accommodation units to offset slumping ship demand hasn’t convinced investors. The company, which operates 7 shipyards in China, has dropped 49% in the past year. The shipbuilder has set aside $164m for cost overruns since the beginning of last year, or more than its 2011 annual profit, as building drilling units and oil-rig support vessels takes longer and costs more than expected. The company has also offered lower prices and more generous payment terms than Spore-based market leaders KEP and SMM as orders for dry-bulk ships wane. Cosco recently agreed to build a semi-sub accommodation vessel for Cotemar SA at a price at least 30% cheaper than KEP and SMM charged for larger units. Analysts are skeptical whether Cosco will make a profit from the building contract. Cosco is also increasing its financing costs by letting customers pay for work later. Sevan Drilling pay for 90% of an on-order rig on completion, vs an original agreement for 80%. Shipyards are usually paid in installments as work progresses. Meanwhile, the slowdown in the shipbuilding market has also prompted other Chinese shipbuilders to target the offshore market. China Rongsheng intends to win 40% of its orders from the sector by 2015, vs zero such orders on its books at the end of Dec last year. Yangzijiang aims to win its first order for a jack-up rig this year after the formation of a venture with Qatar Investment Corp. Cosco has the lowest analyst ratings among major Asian stocks, with 21 sell ratings, 2 holds and no buys. Consensus TP is $0.80.


Artivision:Strategic partner One Hand Edit Media (OHEM)has entered into agreements with PPTV and LETV to bring AdVision, its video advertising technology onto their platforms. This follows agreements that OHEM has earlier signed with Baomihua and Xunlei Kankan in 2011. Co had earlier in Oct 2010 signed an exclusive agreement with One Hand Edit Media. Advision was the software that co was marketing as a revenue generator on Facebook but quietly faded into the background after an initial announcement.

Ryobi Kiso

Ryobi Kiso: Co secured new contracts worth $28.7m which include - Medical Technology Hub at Jalan Tukang - Condominium at St. Thomas Walk - Bartley Residences at Bartley Road - 6-storey Ramp Up Warehouse at Tanjong Kling Road - Temasek Polytechnic West Wing Co currently trades at 30.24x P/E


Dyna-Mac: Secures 4 new fabrication orders for a provisional sum of $43.0m. 3 orders were signed with SBM Offshore, a leading operator of FPSOs for electrical facilities, a turrent equipment room and 5 topside modules. Another was signed with a new client Siemens for a gas turbine generator module. Co currently trades at 11.7x P/E compared to peer Technics O&G at approx 9.3x


CWT: Established a $500m Multicurrency Medium Term Note (MTN) Programme to raise funds for the general corporate funding purposes of the company. Under the MTN programme the notes may be issued in series or tranches in SGD or any other currency, in various amounts and tenors, and may bear interest at a fixed, floating, variable or hybrid rate or may not bear interest. DBS and SCB have been appointed to act as the arrangers and dealers. We note that if successful, MTN would raise grp’s cash hoard to approx. $750m, which bodes well for grp, in light of grp’s recent acquisition of MRI trading, and its evolvement into a fully integrated commodities/logistics supply chain player. Recall last week UOB Kay Hian had an update on the Co. with a Buy Call and $2.09 TP. Key pts noted were: 1) New growth driver from commodity trading. 2) Grp does physical hedging rather than pure hedging with a net exposure Leverage for its commodity trading arm is “ring-fenced” at the subsidiary as it uses non-recourse financing, with no ultimate liability to CWT. 3) Consolidation phase. After its M&A phase over the past two years, mgt’s current focus would be to integrate its new investments and focus on organic growth for its existing businesses in freight and logistics.

SG Market (27 Jun 12)

SG Market: S’pore shares not likely to see any major moves despite 4 cosecutive days of declines. Until the eurozone debt situation clears, the local market is expected to muddle along and the upcoming EU summit starting tomorrow is unlikely to provide the silver bullet to ease the pain. The STI is expected to hug a 2800-2850 range, with any breaks of 2800 likely considered key. Among stocks likely in focus, Genting Singapore and Genting HK may be watched for further Echo developments. Swiber issued a $75m 7.0% fixed-rate notes due 2016. CWT set up a $500m multicurrency medium-term note program, while Dyna-Mac secured $43m worth of fabrication orders.

Tuesday, June 26, 2012

Tee Intl

Interesting company

Renewable Energy Asia

Renewable Energy Asia: Co will issue 1 right for every 4 existing shares. The right share will be a price of $0.05 each. The right share will also come with an attached warrant of exercise price of $0.05. Ignoring the warrant, if your rights share is trading more than the actual share, you are better off buying the share. However, in this case, the 3 year American-expiry warrant with exercise price $0.05 will have some value so there may be some basis for subscription. If the share price rises above $0.05 in the 3 years, the warrant will have some value. In this case, co is making a loss and the share price is more expensive, to consider subscribing for the rights you may wish to consider a few points 1) Future earnings of co/Potential growth 2) What co will do with the cash injection 3) Possibility of share price rising above $0.05 in 3 years The rights affect the fundamentals of the stock through the injection of new cash and dilution of existing earnings. Note that this will drive relative valuations P/E up since EPS drops. The rights share can be said to be able to partake in the existing earnings pool cheaper (if below the share price). So for any profitable company, fundamentally, you may wish to subscribe for additional rights share beyond your allotment IF the share price is cheaper. Like to emphasise that co has been making losses for 4 consecutive yrs.

Mewah (technical)

Mewah: stock is +3.8% at $0.415, on gd volume. The stock appears to have made a bottom in early Jun at $0.38, and has bounced nicely off the support. Share price is now just beneath the pivotal $0.42 resistance (coincides with the 50day MA). The stock is a potential bullish break out play on a successful close above this level, supported by the above neutral and rising RSI, as well as recent positive cross over of the MACD. Recent news flow in early Jun, that the Minister of Plantation Industries & Commodities Bernard Dompok will soon present a plan to the govt that will include changes in tax structure on palm oil. Recall Msian palm oil refiners have been hit increased competition from Indonesia after the latter reduced taxes in October to boost exports of processed oil.

Genting HK

Genting HK : is down 1.6% at US$0.315, with the typically thinly traded stock not reacting much despite a source telling Dow Jones it applied to Australian regulators for permission to increase its Echo (EGP.AU) stake above the 10% limit. It may spur speculation GENHK will be Genting's vehicle for any run at Echo, rather than sister company Genting SP . All the players have been tight-lipped on intentions, with speculation ranging from a possible bidding war with Crown (CWN.AU), to a joint bid, possible asset cherry-picking or just an investment. Based on Echo's 719.84 m shares outstanding, a 10% stake would cost around A$304.5 m at the current share price; GENHK already holds ~5.1%, while GENS has ~4.8%. As for financing a deal, GENHK's 2011 annual report indicates it has US$568.2 m in cash and cash equivalents. GENS is +0.4% at $1.42, hovering around recent support levels. GENHK's Hong Kong-listed shares (0678.HK) are untraded.


Cosco: OCBC downgrades to Sell with TP $0.84. Says it fears a similar deterioration of Cosco’s orderbook, following Yangzijiang’s first reported order cancellations a few wks back. Notes the Baltic Dry Index is at a 25 yr low, and Cosco’s orderbook of 47 bulk carriers may be at risk should the operating conditions worsen. Adds many of Cosco’s customers are based in Europe and may rely on Eurozone banks for financing, making Cosco more vulnerable to macro risks. Highlights high concentration risk arising from Sevan Drilling’s order of two rigs worth ~US$1b, particularly with Sevan said to have changed payment terms to a more back ended schedule (balance 90% on delivery in 2Q12, vs 80% previously).

Gallant Venture (technical)

Gallant Venture: Counter looks to have some positive momentum breaking $0.285 resistance. Both oscillators, RSI and Stochs are rising and MACD is also positive as well. Nxt resistance appears to be at $0.315. Key support at $0.27

GoldenAgri (technical)

GoldenAgri technical appears to be on a Downward Trend still, with Stochastic trending down, although RSI is a tad neutral, with a slight hook up recently. Note however that ADX DI- has gone above DI+ recently, which is a sign of further downside. Fundamentally, however do note that CPO prices have recovered from their recent slump, on back of a widening discount with Soybean Oil prices in the US, and the upcoming Ramadan Period, which market watchers are tipping to provide stronger support/demand for CPO prices. Near-term, YTD low of $0.59 will provide support to prices, while resistance it at the 20 day EMA of $0.645

Sembcorp Industries

Sembcorp Industries: DBSV maintains BUY with $6.00 TP (up from $5.80). House note that a planned maintenance shutdown of grp’s cogeneration plant this year is widely expected to curb Utilities growth. Estimate shutdown could result in $10-11m in lost income. However, believe the impact of this should be offset mostly by: 1) the full year impact of the SembGas expansion (+S$6m); 2) new waste collection sector (+S$0.8m); 3) sustained high power spreads and 4) better margins for some S$1.6b of new and renewed contracts secured in 2011. If without maintenance shutdown, Singapore Utilities should post 11% growth. Overseas projects growing and starting to pay back: Salalah started up full commercial operations end May. Conservatively, expect profits of $5m profit in 2012, rising to over $16m in 2013. China should also see stronger quarters ahead as the Shanghai Caojing power plant resumes operations and when the AES deal completes in 2H12. In the UK, power spreads in Teeside have moved up recently, suggesting a slightly better 2Q12 and beyond. Elsewhere, expectb 10% organic growth, underpinned by improving capacity utilization as demand for water and utilities grow. Overall, house note that SCI’s Utilities division is growing faster, yet remains cheaper than its peers. SCI’s Utilities trades at 6-7x FY12/13 PE, below its 8x historical mean. It deserves a re-rating closer to its regional peer average of 12x considering that 2010-2013 earnings CAGR (2010-2013) of 16% is ahead of the 13% expected by its peers.

Fraser Comemrcial Trust

Fraser Comemrcial Trust: CIMB maintains O/p with $1.14 TP. Note that FCOT has announced that it has entered into agreements for a $320m three-year loan and a $185m five-year loan to refinance its $500m SGD term loan facility. Interest rates for the loans are at SOR plus margins of 1.55% and 1.83% respectively from the date of first drawdown. The loans are secured over China Square Central, 55 Market Street and Alexandra Technopark. Loans are secured at an overall margin of 165bps over SOR, a 100bps saving from the previous borrowing spread of 265bps. This is fairly in-line with expectations. While FCOT has entered into agreements for a collective $505m in borrowings for refinancing, house expect a partial repayment eventually when unit holders approve the sale of KeyPoint during the EGM on 12 Jul 2012. Overall, house keep DPUs and DDM-based target price unchanged with refinancing rates fairly in-line with expectations. Maintain Outperform on catalysts from more accretive capital deployment


Hyflux: Gulf reports highlight co is still in running to develop a $350-400m independent water project (IWP) at Ghubrah in Oman, while SembCorp Utilities is out. Hyflux is 1 of 7 prequalified grps to bid for the desalination project, which has a 9 Jul deadline for bid submission.


DBS/Indo Banks: Bank Indonesia will allow foreign and local banks to purchase more than 40% of Indo lenders if they can meet certain requirements under a new bank ownership rule which will likely enact by the end of nxt mth. Under the new requirements, buying banks must be publicly listed and agree to buy contingent convertible bonds from the lender they will acquire. The buyers must also agree not to sell the newly acquired stakes for a certain period and must be committed to help develop the Indonesian economy. Add also that buyers must agree to make the bank it has acquired a public entity within 5 yrs. (DBS could relist Danamon in 5 years if an acquisition is successful)

ArmStrong / Broadway

HDD Sector: Sector continues to thrive, with more good news coming in, which bodes well for our HDD players. Accorcding to channel checks, market leader Seagate and WD expect the HDD industry to ship 155m-160m drives in the seasonally-weak June quarter, and guided revenue growth of 12% and 32-38% qoq, respectively. The current build plan translates to higher volumes in the September and December quarters for both Seagate and WD. Recall last mth, iSuppli released an industry report, citing that the HDD industry is set to register record revs in the qtrs ahead, thanks to higher ASP that compensated for the wreckage and loss shipments left by the Oct floods in Thailand last yr. Expect ASP to stay at elevated levels throughout 2012 and 2013. Overall, we note that key beneficiaries in the HDD sector includes ArmStrong and Broadway.

Raffles Medical Grp

Raffles Medical Grp: Positive interests continues to flow into grp/sector, with the upcoming potential IPO of IHH holdings. Recall last wk that DMG had upgraded the counter, on back of defensive and valuation grounds. Maybank Kim Eng becomes the latest to join in the healthcare bandwagon. House note that recent dip in share price has resulted in grp emerging as the cheapest hospital stock in the region. Believe that the defensive nature of its hospital earnings is a strong attribute in an uncertain market. Despite the recent sell-off in equity markets, hospital stocks have managed to hold on to their premium valuations, trading at above-market average P/E of about 26x. Aside from defensive earnings, anticipation of renewed interest in the healthcare sector could have provided stock support, in the hope of a positive re-rating in valuations for the sector. Conclude that Raffles Medical Grp has the strongest balance sheet among its peers, being the only one in a net cash position. Even after accounting for capex for its expansion plans, expect it to remain in a net cash position, helped by its strong operating cash flow generating capability.


OCBC: Bank sets aside $500m for 4th share buyback program. Grp intends to hold the shares re-purchased as treasury shares to meet delivery obligations under its employee share schemes. New share repurchases under the fourth program will commence when the third program is completed. We note that OCBC recent award of its status as the ‘World’s Safest Bank’ by Bloomberg Markets Magazine could also place it on the investment radars of global investors, seeking safer havens, on back of a slew of recent bank downgrades in EU and US.


SIA: SIA Cargo and its 16% owned associate China Cargo Airlines will operate joint freighter services between Singapore and Shanghai from today. The services are part of wide-ranging initiatives between the two airlines, which include enhanced system integration and more integrated ground handling at the carriers' respective hubs at Pudong Int’l Airport in Shanghai and Spore Changi Airport to improve transhipment times. It would also allow more direct access to destinations in domestic China on China Cargo's network and access to the Middle East, Africa, Australia and Latin America via SIA Cargo's network SIA Cargo has been going through a rough patch over the past year at a time of depressed global airfreight demand. The SIA unit slumped back into the red to the tune of $119m in FYMar12 despite slashing capacity.

Interra Res

Interra Res: JV Goldpetrol has commenced drilling of Chauk deep well in Myanmar. This is the deepest well and may ad new untapped reserves to its Myanmar assets


GLP: Signed new leasing agreements totalling 44k sqm in Guangdong. 30k sqm was leased in Guangzhou to a leading domestic e-commerce retailer for 5 years. 14k sqm was leased in Shenzhen to Feili Logistics for 3 yrs and is the first collaboration btwn co and Feili. Feili is a leading 3rd party logistics providers operating in North Asia, Taiwan and Sg. Co is currently trading at a P/B of 0.8x.


K-REIT: Entered into a conditional purchase for a 12.4% interest in Ocean Properties which holds Ocean Financial Centre (OFC) for $228.4m after netting off liabilities from Avan Invts. This increases K-REIT's stake of OFC to 99.9%. The valuation of the 12.4% stake is approx $291.0m. K-REIT will fund the acquisition through borrowings and issuing 60m units at $1.17 to Ong Hldgs, and aggregate lvg is expected to be 43.9%. The issue price is approx a 15% premium to last done at $1.02. Ong Hldgs is a shareholder of Avan Invts. One reason for accepting the shares at a premium could be the tax advantage enjoyed as a holder of K-REIT rather than holding the asset itself. The acquisition is expected to be yield accretive with pro-forma DPU for 31 Dec 2011 increasing from 4.46c to 4.68c. The vendor will also provide rental support to K-REIT for up to $24.1m till 2017. OFC is a 43 storey Grade A office development located on a 999 yr site nxt to Raffles Place MRT. 93% of K-REIT Sg assets will be located in prime CBD. Deutsche maintains Hold on the acquisition. The acquisition could be viewed positively in light of the accretion as well as possible tax advantages. K-REIT currently trades at yield of 5.73% based on trailing 12 mths.


Macro: seeing more negative news flow again. 1) In Europe, Moody’s downgraded 28 Spanish banks, citing the country’s sovereign debt and rising losses on real estate loans. The ratio of bad loans to total lending at Spain’s banks surged to 8.72% in Apr, the highest since 1994, from < 1% in 2007. Moody’s cuts the lenders’ long-term debt and deposit ratings by 1 - 4 levels. This follows Moody’s downgrade of 16 Spanish banks on May 17, as well as Moody’s downgrade of 15 global banks last week, saying their capital-markets businesses suffered from volatility and the potential for “outsized losses”. 2) Commodities saw the biggest outflows (US$8.2b) in 8 mths in May amid mounting global-growth concerns, while total commodity assets under mgt fell by US$35b to US$394b, the lowest since Jan ’11, according to Barclays, which likened the retreat to “something approaching a stampede”. The S&P’s GSCI Spot Index of 24 commodities has tumbled 18% since 30 Mar 30, heading for the biggest quarterly decline since 2008, as Europe’s fiscal crisis escalates. 3) Credit swaps in US jump most this month before the Europe summit this wk. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, increased 4.3 bps to a mid-price of 119.7 bps. Fitch notes the funding environment for the weakest companies in the high-yield universe remains challenging; notes the trailing 12-mth US default rate on high-yield bonds rose to 2.2% in May, passing 2% for the first time since Oct ’10, with defaults in May affecting a combined US$3.9b of bonds. 4) Paul Krugman and Noriel Roubini amongst a growing chorus of economists citing similarities of the present environment to the economic catastrophe of 1931.

SG Market (26 Jun 12)

SG Market: S’pore shares are set to open lower for a 4th straight session, tracking overseas cues as investors turn jittery over developments in the European soap opera, including increased expectations the upcoming EU summit would not provide any resolution. For broader risk trends, it appears a case of 'once bitten, twice shy' across markets ahead of this week's EU summit, given the risk of disappointment European leaders will once again fail to produce a crisis-fighting 'blueprint,. Initial support for STI is likely at around 2800, followed by 2750. Among stocks likely in focus, OCBC is setting aside an additional $500m for share buybacks, while K-Reit raised its stake in Ocean Financial Center to 99.9% from 87.5% for about $228.4m, which will be partially funded via a 60m share placement at $1.17 or 15% above the last close. GLP may be in good light after signing 2 leasing agreements in southern China.

Monday, June 25, 2012


SMM: is down 2.2% at $4.44, with an analyst saying it's likely extending declines as Nymex August oil futures slip below the key US$80/bbl level where oil companies often begin to scale back E&P spending. Peer Keppel , which is a somewhat more-diversified conglomerate, is down 1.2% at $9.98. The pair's near-term fortunes may turn on the weather, as oil prices are currently getting a fillip from a tropical storm in the Gulf of Mexico causing some concerns of supply disruptions. Among other stocks which are taking a hit from lower oil prices, Golden Agri is down 1.6% at $0.63 and Wilmar is down 1.7% at $3.56.

HK Land

HK Land: stock is -1.6% at US$5.50. Not much in the way of overnight news flow. HKL's movement likely affected by the broader market . Noticing that the other Jardine group companies, JC&C and JMH are also down -1% and -1.6% rptvly. In mid Jun, UBS tipped HKL among its least preferred HK stocks in its strategy report. Says the rental and occupancy of Central offices will continue to be the weakest among the key districts in HK, dampened by the weak finance sector. Notes HKL's Central commercial exposure accounts for 72% of gross NAV. Sees limited upside on HKL due to the challenging macro conditions. Rates the stock at Sell with TP US$5.48.


Facebook: plenty of bad press accompanied by heavy selling, immediately after the IPO debut. At one stage, European financial institutions were even touting put warrants with strikes as low as US$22. FB share price however, appears to have made a bottom at US$25.52, and a bowl shaped recovery pattern could be emerging (see chart below). It has been a month since the IPO, and the investment banks are now rolling out their initiation reports. Nomura starts coverage at Buy with TP US$40.


DBS: Macquarie downgrades to Neutral from Outperform. Despite positive operational trends, house views the overwhelming issue is the overpriced acquisition of Danamon and reckons that while the group has persistently delivered very strong earnings, it does matter much any more for short-term stock performance. Adds that 1Q12 $933m net profit is unlikely to repeat, given NIM pressure and an expected slowdown in trade finance/transaction banking growth. It forecasts 2Q12 earnings of $771m, -17% qoq but +5% yoy. Cuts its target to $14.50 from $16.61 despite raising 2012-14 earnings forecasts by 5-6% as the Danamon deal erodes its previous optimism. House is still impressed by the operational turnaround that management has put into place. However, in a world of uncertainty, the upside for DBS is likely to remain capped for the next few months pending some sort of clarity on the acquisition.


Elektromotive proposed rights issues are non-renounceable, which also means that investors are not given any option to trade/sell the rights, following which, if the rights are not taken up investors risks further dilution. Details of the proposed rights are as follows, 7 right shares for every 10 ordinary shares in Co and 3 warrants are attached to every rights share subscribed, carrying the right to subscribe for 1 new share in the Co. at a strike price of $0.03. Regarding the fundamentals of the Co, do note that Co. has failed time and again to deliver on its promise. Grp had previously done some investor's presentations in a few local houses, where they had promised Sky-High Scenarios with their then entry into the Electric Cars Industry, only to be disappointed by the sacking of Prince Hakeem as the grp Chairman and CEO, on the basis of accounting fraud regarding the sale of his Co. to the grp, via an RTO. We would advice caution to any investors looking to invest further into this co. Furthermore, issuing non-renounceable rights and forcing all current shareholders to subscribe for the Co. rights does not paint a rosy picture regarding the grp's own outlook and confidence in its future prospects.


OCBC: falls 1.0% to $8.62, underperforming UOB's and DBS's 0.3% rises, likely as both CIMB and Macquarie downgrade it to Neutral. Macquarie says momentum from 1Q12's standout earnings is unlikely to continue amid loan volumes' moderate slowdown, mild NIM pressure and a likely reduction in investment income, insurance profit. Notes the stock tends to outperform during sustained periods of capital market strength due to the earnings impact of its insurance business and the sentiment impact of its private bank subsidiary, but observes the reverse is also true. Adds, while macro headwinds aren't a reason to panic, they are likely to limit upside. Notes the stock has lagged peers, partly on unfamiliarity with new mgt, but also on its valuation premium. Views UOB's 1.3X 2012 P/BV offers better relative value vs OCBC's 1.4X despite similar 11%-12% forward ROE outlook and OCBC's greater earnings volatility. Cuts OCBC's TP by 6% to $9.02.

Profit warnings

Profit warnings: The Business Times note several listed companies have sounded profit warnings over the past week, as June draws to a close, citing weak business conditions, higher costs and stalled deals. Loyz Energy is the latest to caution that it would be going into the red for FYJun12. Previously named Sim Siang Choon, the co warned that it is expecting higher operating expenses arising from the addition of oil and gas business and a one-time specific provision for doubtful receivables. The provision is for a refundable deposit due from Empire Holdings Ltd. Avi-Tech Electronics too issued a profit warning for its FYJun12, saying it expects to report a "significant loss". Says it will be adversely affected by poor performance of the group's US subsidiaries. This is largely due to higher expenses as a result of the substantial requirements for R&D, and time taken for the devt of new products to replace older models, and limited upside in sales due to the current range of product lines becoming less marketable. Separately, Novo Group warned that it expects to record a loss for FYApr12, bcs of the unpredictable economic situation, growing fears of the sovereign debt crisis spreading in Europe, concerns over a hard landing in China, and a weak US economy. The company expects to announce its annual results today. C&G Environmental Protection Holdings warned that it expects an est loss of HK$11.9m for the June quarter, following the termination of a Build-Operate-Transfer (BOT) agreement. C&G had previously acquired the entire share capital of CUGU Environmental Protection International Ltd (CUGU EPIL), including the BOT agreement on the proposed Waste-to-Energy project in Yingkou, China, that had been signed between CUGU EPIL and the Administration of Environmental Hygiene of Yingkou Economic and Technological Development Zone. C&G also announced that it has commenced negotiation with the Yingkou Administration to seek compensation for the termination of the BOT agreement. United Food warned of a loss in its 2Q, with the expected loss attributed to lower selling prices of the products of the soybean processing division. Other factors impacting the China-based food firm include sustained high prices of raw material, a slowdown in the China economy, and a downturn in the livestock industry.

BioSensors (technical)

BioSensors: Technical Buy Call by UOB Kay Hian with 14.5% potential return and $1.30 TP. House note that prices may have found support at around S$1.10 and close higher vis-à-vis the previous closing price. A break above $1.18, which is close to its mid Bollinger band, is likely to see the stock edge higher. Its Stochastics indicator has formed a bullish crossover in the oversold region and may trend up. Stops could be placed at below $1.085.

Sakari (technical)

Sakari: UOB Kay Hian has Technical Buy Call, with $1.52 TP. Note that prices rebounded near $1.25, which was an immediate support level mentioned last Friday in house weekly SaRW section. Believe the stock may have further upside as it has crossed its mid Bollinger band and potentially test its upper band. Its RSI indicator has hooked up, along with the MACD indicator trending up. Stops could be placed at below $1.24.


AusGroup: +4.5%, with good volume. Note that there has been market talk/investment ideas recently that AusGroup could be a proxy to peer Civmec's strong run recently. Civmec trades at a whooping 48.5x Trailing P/E vs AusGrp of just 7x.


Hanwell: Co's request to waive requirement for a sh/h approval for its disposal of a 29.9% stake in Intraco was not approved by SGX. Co will seek approval accordingly

IPC Corp

IPC Corp: Oei Hong Leong increase stake from 21.75% to 23.10%


Equation: Subsi had commence arbitration proceedings against an Indonesia co, KDH. Co is claiming against KDH for contractual damages for not delivering granite as contracted. Co is seeking the return of $10.9m and all lost profit from KDH and has obtained an interim injunction against KDH from the High Court of Singapore.


Dynamac: OCBC initiates with Hold and $0.34 TP. House note that having delivered more than 154 topside modules, the group has established itself as a specialist its field. DMH’s main yard has a waterfront shoreline and is integrated with a load-out bay. This enables completed topside modules to be easily transported to nearby shipyards for installation onto an FPSO. Value grp at 10x blended FY12-13F earnings estimate and obtain a fair value estimate of S$0.34. Initiate with HOLD.

Orchard Parade Hotel

Orchard Parade Hotel: CEO note that grp is getting into the healthcare sector at a particularly opportunist time, with the injection of Novena Medical Centre and 48 medical suites at Novena Specialist Centre. Grp add that its very interested in the healthcare space in SG and do not rule out the possibility that they may partner somebody very strong in the space.


STX OSV: Small announcement, likely to be non-material to grp. Announced that it has strengthened its technology and engineering competence via a 70% purchase in Brevik Partners AS, at a consideration of NOK3.75m. Brevik Partners AS is is an engineering co, specializing in offshore technology and equipment. Separately, STX OSV Brevik Holding AS has also acquired 34% shareholding interest in Brevik Technology AS at a consideration of NOK0.8 m. Brevik Technology AS is a co with special technical knowledge in tank and tank designs. Both transactions were funded by internal resources and did not have any material impact on the earnings per share and net tangible assets per share of the Company.


Yangzijiang: (The Edge) Fights to avoid order cancellation while venturing further into micro-finance. House trying to help FreeSeas sort out its financing difficulties to avoid having the orders cancelled. Note that FreeSeas still wants the vessels and they can afford to buy one. YangZijiang has offered FreeSeas a leasing arrangement for the cessels that will cost them 15% more. YangZiJiang add that as these are standard Handymax Vessels, the house do not foresee any difficulty to dispose of the vessels upon completion, with the benefit of the 20% from deposit collected. Add that in an environment of tighter ship financing, grp would be the least affected among Chinese yards because of its broader customer base and net cash position. Grp also setting up its own micro-financing arm, and will inject Rmb 300m into it, and enable the business to apply for a banking license when the banking industry opens up. Analysts note however that these investments are small vs grp’s mkt cap and it needs to get a lot bigger before investors are forced to come up with a stronger view. We note that markets have diverse views on counter, with 12 Buy calls, 4 Holds and 6 Sells, with a mean TP of $1.43.


Aussino: Reuters says the planned $60m reverse takeover (RTO) of the Spore bed linen maker may not materialise as the firm planning to inject assets into Aussino is linked to a Myanmar businessman on a US blacklist. The bankers and lawyers Reuters spoke to said, while Singapore does not impose sanctions on Myanmar, the authorities would be cautious about letting a firm list if there are question marks about the owners and managers. Aussino shares closed 8.4% higher at $0.167 Friday with almost 41m shares changing hands. The stock has risen 76% since Aussino announced on Monday the Max Myanmar group planned to take control by injecting assets. Under the terms of a non- binding memorandum of understanding, Aussino will issue new shares to buy a firm called Max Strategic Investments which will operate petrol kiosks in Myanmar. Max Myanmar, which is headed by Myanmar businessman Zaw Zaw, will gain majority control of Aussino as a result of the transaction. Mr Zaw Zaw is on a US government list of "Specially Designated Nationals" because of his business ties with former Myanmar strongman Than Shwe. People who appear on the list will have their assets blocked and "US persons are generally prohibited from dealing with them", the Treasury Department said on its website. Aussino has been on the SGX Watchlist since Sep 6 last year, which means the loss-making company will be delisted unless it meets certain requirements including achieving a certain level of profit within 24 months. Max Myanmar, which makes annual revenues of US$500m, has businesses ranging from timber, gems, and rubber plantations to construction and luxury resorts. Aussino stock is -8.4% at $0.153.

HPH Trust

HPH Trust: To increase investment in JV with Shenzhen Yantian Port Hldgs and maintain 65% shareholding. The increase in total investment amt will be raised from Rmb1b to Rmb4.9b. Co will contribute an additional Rmb873.1m in equity with remainder to be in the form of shareholder loans and the JV itself raising debt. Co currently has net gearing of approx 34.0% with HK$67.5m in net assets.


CapitaLand: Liew Mun Leong announced Friday that he would not extend his term as CEO when it expires next yr, setting his retirement on 28 Jun ’13. Mr Liew, aged 66, would have served 17 yrs as Group President & CEO when his term ends. No successor has been named. StanChart expects the new CEO to be sourced internally, potentially either Lim Ming Yan, COO, or Olivier Lim, CIO. Believes the market sees both candidates to be of equal competence to the current CEO, with a preference for Ming Yan due to his strong property experience and knowledge of China. Olivier Lim, previously the CFO, is seen as stronger in capital mgt and financial engineering. Nomura says Liew’s retirement is not entirely unanticipated, given he had already served 2 extensions of his appt (a 3-yr extension from Jun ’08, and a further 2-yr extension from Jun ’11). Believes a yr’s notice would allow sufficient lead time for a smooth transition process, and does not expect a major reaction in stock price. Maintains Buy with TP $4.05. StanChart says impact to the stock is neutral to positive as the transition will be smooth and believes the market has had a poor perception of CAPL's mgt style in the last 5 yrs and would welcome a change. Believes this could also arouse hopes of restructuring that could reduce the conglomerate discount for the stock. The house maintains an Outperform rating with TP $3.40 set at 15% discount to RNAV. On the other hand, the departure of industry stalwarts like Liew, could signal deeper industry uncertainties down the road. We note that in early Jun, Wing Tai’s chairman commented on the potential housing oversupply in the horizon. In the case of SIA, when industry leader Chew Choon Seng announced his plans to leave in Jul ’10, the stock was traded at ~$15, and was range bound till the end of the year. Today, premium airlines face intense competition from their low cost competitors and high oil prices, and SIA’s share price trended down to the ~$10 level now.

SG Market (25 Jun 12)

SG Market: S’pore shares unlikely to make much headway amid the unconvincing recovery on Wall Street following the steep plunge on Thur. Stochastics indicators appear overbought and may be heading south following a robust 150-point run-up since early Jun. The STI is likely to remain stuck in a 2800-2850 range Corporate news is very dry with only the resignation of CapitaLand’s CEO taking the market by surprise last Fri evening. With Keepel Land also seeing a recent changing of guard, we wonder if these reshuffling is part of Temasek’s grand plan to re-align the business interests of the GLCs, namely the Keppel, Sembcorp and Capitaland group of companies. In other news, bankers highlighted Aussino’s $60m Myanmar RTO deal may hit a snag as RTO vehicle Max Myanmar group is linked to a Myanmar businessman on a US blacklist. Ntegrator clarified role about contract from Huawei was a limited one and not a managed service contract to manage SingTel's copper-based voice and data network infrastructure. Olam and Noble may face fresh cotton concerns as ICE futures limit down on Fri for a 3rd session. Star Cruises owner Genting HK may face pressure from peer Carnival's sharp profit drop.

Friday, June 22, 2012


Sakari: DMG says the slump in share price presents buying opportunity. SAR’s share price has declined 51% from its end Feb 12 peak due to (1) declining coal prices, (2) poor results, (3) negative regulatory news from Indo, and (4) weak economic sentiment. The house believes most of the negatives have been priced in, with coal prices possibly seeing limited downside from current levels (Newcastle at US$84/mt). Lowers FY12 coal ASP to US$102/mt from US$113/mt previously, and cuts FY12 net profit by 33% to US$119m, but believes catalysts for share price upside may come from rising coal prices as well as stronger results in 2H12. Maintains Buy with lower TP of $2.00 (from $2.50 previously) on 15.5x FY12 P/E, in line with its 3 yrs avg. Sees the stock supported by 6% div yield. The stock is +3.8% at $1.355, recovering strongly from its intraday low at $1.265.

Genting SP (technical)

Genting SP: UOBK technicals says the stock price remains on a downtrend as investors digest Genting Group's recent acquisition of a stake in Echo . But adds, the stock is appearing to buck the trend by finding a bottom, even though it is still trending below its short-term moving average. A break below its Oct. 4 low of $1.42 could lead the stock to test support at $1.30. Tips initial resistance at $1.48, followed by $1.56. The stock is up 0.7% at $1.43.

Europe Data

Data from Europe includes German business climate figures and Italy's consumer confidence numbers out at 4pm Sg time. The meeting in Luxembourg ended with no fireworks. The 27 countries in the EU will be meeting on nxt Thurs and Fri to discuss on how to save the Euro. Timeline of key meetings in Europe nxt wk


Felda: The first setback for Felda's IPO is news that Louis Dreyfus, which was supposed to take a 2.5% stake, did not do so by a mid-June deadline. Talks were continuing which could see Dreyfus take a smaller stake or possibly none. While the reduction/no-show of the investment stake will not derail the IPO, Louis Dreyfus is a prominent investor enough to warrant some worry, particularly since its expertise is in commodities.


DBS: Bernstein reiterates Outperform with TP $17. Says investors too bearish on regional value as well as current team’s track record as shown by lower P/B multiple vs peers. Says, DBS will start to convert doubters into believers as it delivers “solid results” in next 12 months even if Bank Danamon deal unsuccessful. Sees DBS “ripe for re-rating” for P/B to increase to 1.3x by end-2012 vs current 1.1x.


Maxi-Cash: Dow Jones says the stock may fail to rise from its $0.30 IPO price on debut despite its offering of 56m new shares receiving solid interest; it was 4.3X subscribed. Says, the Catalist stock is likely to take its cue from expected market weakness, although the pawnshop operator's somewhat counter-cyclical business may provide some support. Maxi-Cash, which has 24 retail locations in Singapore, raised an estimated $15.1m in net proceeds, with the funds earmarked to expand its operations and for general working capital. It reported FY11 net profit of $3.11m. Although it didn't set a fixed dividend policy, Maxi-Cash plans a 60.0% payout rate for FY12.


Sakari: BNY Mellon increases stake in 4.91% to 5.1%


Oceanus: Substantial shareholder Ng Cher Yew and Bestglobal Enterprises have agreed to transfer 22.1% of total sh/h in co to a individual Yu De Hua for a property which co is using as one of its farms in China. A definitive agr will be prepared once co decides to exercise the right to acquire the property. The shares and land exchange were part of a settlement agreement in connection with the reverse takeover exercise involving the acq of Oceanus Bio-Tech Hldgs. Cher Yew Ng holds abt 10.75% and BestGlobal holds abt 22.1% before this. Interestingly, from the announcement, the substantial sh/hs do not appear to own the land after the transaction with ownership of the land seeminingly resting with Oceanus instead.

Super Group

Super Group: Co has received a letter from the Taiwan Stock Exchange that the number of units of its STDRs outstanding has been less than 10m units for 3 consecutive months since 14 Mar 2012. This was due to STDR holders exercising their right to convert their STDRs into underlying shares with these being cancelled as a consequence. Co is required to either issue additional TDRs or it may be delisted from Taiwan.

Singapore market (22 Jun 12)

Singapore market: likely to take cue from the big drop in the US overnight, and to open lower. Moody’s downgrade of several global banks after the US market close likely to result in overhang in Asian markets today. Regionally, KOSPI and Nikkei are down 1.5% and 0.9% respectively. Expect continued pressure on the local commodities traders, Olam, Noble, Wilmar, as commodities tumbled into a bear mkt, with the S&P’s GSCI Spot Index of 24 raw materials fell to 559, down 22% from this yr’s highest close of 716 on 24 Feb. Technically, the STI is likely to break down below the ascending trend channel. This would coincide with a dip below the 200day MA, potentially indicating the start of a new downtrend. Initial support is at 2800, followed by 2700.

Thursday, June 21, 2012


Equation: Co is proposing a rights issue of 1 rights share for every 2 existing rights at $0.012. The issue price was approx a disc of 45.5% to closing price $0.022 on 15 May. Book closure date for this rights issue is on 28 June 2012 so ex-date shld be on the 26th June if I'm not wrong . Co will obtain net proceeds of approx btwn $9.6m to $12.9m Due to co having both convertible loans and bonds and employee stock options, its maximum base of shares may increase to 3.0b shares if all convertibles are exercised and allotted rights. Its minimum base may increase to 2.5b shares if none of the convertibles are exercised and allotted rights shares. Co intends to use proceeds to pay off a director loan amounting to $5.0m and increase working capital.

Fortune Reit

Fortune Reit: Beautiful chart. One of the rare counters that continue to climb to new multi year highs in today’s session, with its shares +0.7% at HK$4.49. The stock has been hugging the upward sloping 20day MA over the past 6mths, and appears well supported by the 50day MA. May be interesting to keep on the watch list, as it is likely one of the beneficiaries amid continued inflows into defensive sectors. The Street has 9 Buys and 2 Holds with TP ranging btwn HK$4.65 – 5.40. 12mth trailing yield is 5.9%. The co is also listed in HK (code: 778 HK) where trading is more liquid.

UPP (technical)

UPP: the stock has fallen >25% since announcing its share placement (15% of shares post placement) at issue price of $0.375. Possible technical rebound play. A base has formed at the $0.30 and stock price has crept back above the 20day MA. The key indicators are also rising, in particular with Stochastics reversing back up above oversold levels. MACD has also just crossed back into positive territory. This provides an opportunity for those looking to establish an early position in the counter. The stock is a potential breakout play on a successful break above the $0.34 resistance (coincides with 200day MA). Cut loss if stock dips below the $0.30 key support level.

Ezra (technical)

Ezra: OCBC technicals sees more upside ahead after the stock broke through the upper boundary of its 4-month downtrend channel; this was followed by a bullish break above the $1 resistance on increasing volume. Notes MACD is now on the verge of climbing above the centerline; this suggests that the downside momentum could have waned. Tips a potential recovery towards the next key obstacle at $1.18 (key support-turned-resistance) in the weeks ahead. Sees immediate support at $1, but advocates a stop-loss exit slightly below that at ~ $0.95. The houses currently has a fundamental Buy rating with TP $1.35.

Property developers

Property developers: UOBK raises sector to Overweight vs market weight. - CapitaLand: TP raised to $3.65 from $3.40. - City Dev: upgraded to Hold from sell, TP raised to $11.10 from $9.20 - GuocoLand: upgraded to Buy from hold, TP cut to $1.95 from $2.10 - Keppel Land: TP raised to $3.80 from $3.60 - OUE: TP raised to $3.10 from $2.90 - Wheelock: upgraded to Buy from hold - Wing Tai: TP raised to $1.60 from $1.50.

Nam Cheong

Nam Cheong: Awarded LOI to build 4 multi-purpose PSV from Bumi Armada. The contract value is approx US$130m ($165m) The PSVs will be built as part of the grp's built-to-order series in a subcontracted yard in China. All 4 will be 88.8m in length with 4.5 DWT. The sale will contribute positively from FY12 to FY15 As of Mar 2012, co’s order book stands at approx RM628m and co has a build to stock programme to anticipate rising demand for OSV. Co trades at 4.56x trailing P/E. Peers STX OSV trades at 5.41x, Swiber at 7.76x AmFrasers highlights that co is one of their top picks and will benefit from Msia’s RM300b 5 yr capex plan. Co is the dominant OSV builder with a 50% to 75% of local market share there. Reiterates Buy with TP$0.28

High dividend yield picks

OCBC: High dividend yield picks. The win of the pro-bailout parties in Greece has been overshadowed by concerns about Spain and Italy. Believe that high yield stocks like REITs and Telcos will continue to outperform as they have so far this quarter. High dividend yield plays are Cache, CDLHT, CMT, M1 and SingPost. Maybank Kim Eng: Recommends going for defensive plays, with top SG Picks as Venture, Starhub & SCI DBSV: Under this risk environment. Longer-term investors should pick co’s with Asian dominance while avoiding companies with global exposure. Top SG Picks are SIAE, KepCorp and HPH Trust CIMB: Recommends investors go for Co’s trading at attractive P/B valuations. Top SG Picks are Genting SP, Biosensors, Olam, Singapore Land, OUE, Raffles Medical Grp, Noble, Cache Logistics Trust, STE and Mapletree Industrial Trust.

Keppel Corp

Keppel Corp: Ukraine firm, Naftogaz says it plans to order a semi-submersible rig from Keppel Fels. The semi-sub would be capable of operating in water depths of up to 1,000m, which would help develop hitherto unexplored offshore gas fields and edge the gas-rich country closer to its 2020 goal of energy independence. Ukraine has 1.2 tr cubic metres of proven natural gas reserves. However, it relies on Russia for two-thirds of its gas supply, ~32b cubic metres a year. Naftogaz comments were made during the delivery of its second KFELS B Class jack-up rig, which will probably be deployed in the Black Sea by the end of the yr. While there is no financial impact yet, this underscores the strong demand for rigs still, which bodes well for Spore rig builders’ order books.


Olam: long time CFO Ravi Krishnan resigns to pursue a career outside the agri sector after 20 yrs with the co. Olam has moved Shekhar Anantharaman into a new and enhanced role as Executive Director – Finance & Business Devt. Shekhar is also another long serving employee, and has been with the Group since 1992.


Myanmmar: Govt has signed a raft of oil exploration deals with foreign co’s, state media reported on Wed, as the reformist govt seeks overseas investment to spur economic development. State-owned MOGE has inked nine agreements since early March to allow firms from Asia and Europe to explore for oil and natural gas. It was the first time in the history of MOGE to sign nine agreements within such a short period, a report said, without giving financial details. The firms are EPI Holdings of Hong Kong, Geopetro International Holding of Switzerland, Petronas of Malaysia, Jubilant Energy of India, PTTEP of Thailand, Istech Energy of Indonesia and CIS Nobel Oil of Russia. The report said the energy ministry had decided in principle to grant licences to foreign companies to invest in Myanmar only if they cooperate with domestically owned firms. It said 10 foreign companies were exploring for oil at 24 offshore energy fields, while eight overseas firms - as well as seven joint ventures with local companies - were exploring 20 inland fields. We note that news could be positive for Interra, who is banking/counting on increased capex by foreign O&G firms to tap on their facilities/transport systems, to drill certain wells, which the grp has capped, due to a lack of capital/investments.

Healthcare Sector / Raffles Medical Grp

Healthcare Sector / Raffles Medical Grp: IHH could be valued at 35x P/E. Note also that Healthway Holdings currently trades at approx. 40.5x FY12E P/E. Raffles Medical Grp trades at just 22.9x P/E. Most of Raffles Medical’s shareholders are institutions, with stakes less than 5%. Given Raffles Medical’s consistent and stable growth, unlikely that these shareholders would reduce stakes just to free up funds to invest in another healthcare group. We do not rule out a potential play up of Raffles Medical prior to IHH’s listing next mth.

SG Market (21 Jun 12)

SG Market: S’pore shares are likely to see some profit-taking on disappointment over the Fed's widely expected decision to extend Operation Twist. Following 4 straight days of gains, the STI is poised to take a breather and reverse direction, heading towards underlying support at 2810 level. Overhead resistance remains at 2870. Among stocks likely in focus, units of Genting including Genting Singapore have taken a combined 9.9% in Australia's casino operator Echo; Olam's CFO Krishnan Ravi Kumar resigned to pursue a career outside the agricultural commodities sector; Nam Cheong landed a letter-of-intent to build 4 MPSVs for Bumi Armada Navigation worth US$130m, with an option for another 4 units.

US FOMC policy statement

US FOMC policy statement: the Fed will extend its maturity extension program (Operation Twist) for another 6mths. The Fed will purchase longer term Treasury securities (6 – 30 yr maturities) at the pace as in the original Twist program, roughly US$45b/mth, while simultaneously selling an equivalent amt of short term securities (<3yr maturity). The total purchases will amount to US$267b. When the program is finished at the end of the yr, the Fed will be holding almost no securities maturing inside of Jan ’16. There will be no QE3 for this round, but the Fed left the door open to doing more in the form of balance sheet expansion if economic prospects were to deteriorate significantly further. "We are prepared, in case things get worse, to protect the U.S. economy," in the words of Ben Bernanke. The Fed also sounded significantly less upbeat in its description of economic developments and prospects and more concerned about downside risks, especially related to Europe. Their forecasts for growth and the labor market were revised down commensurately, while their view of inflation prospects remains little changed (beyond recent commodity-driven declines).

Wednesday, June 20, 2012

Healthcare sector/Raffles Medical Grp

Healthcare sector/Raffles Medical Grp: DMG has sector report and Overweights sector. House note possible boost for the sector. The upcoming IPO could result in greater interest in SG’s Healthcare sector, and could possibly lend a slight boost to the share prices of the other SGX-listed healthcare providers. Assuming IHH raises RM6.4b, this works out to be RM2.86 / share. At an exchange rate of S$1=RM2.430, this translates to a price of $1.18 / share or a P/E of 35x based on FY12 annualized EPS. Other regional healthcare peers (excluding Fortis Healthcare) are trading at an average P/E of 23.8x. Raffles Medical (BUY\TP: $2.67) (its closest SGX-listed peer) is trading at 22.9x P/E. Nonetheless, note that IHH is a large healthcare provider with about 4,900 beds, and significant global operations that span across Singapore, Malaysia, India and Turkey and would be in a good position to benefit from Asia’s growing medical tourism. Regional peers’ do not have significant overseas operations. Most of Raffles Medical’s shareholders are institutions, with stakes less than 5%. Given Raffles Medical’s consistent and stable growth, unlikely that these shareholders would reduce stakes just to free up funds to invest in another healthcare group. Even if that happens, house do not think there would be significant impact on Raffles Medical’s share price. In fact, with spotlight on SG’s private hospitals, IHH’s IPO might help raise Raffles Medical’s brand awareness overseas.

52 wk lows

52 wk lows: Renewable Resources, Miyoshi Precision, Macarthurcook Property Securities

52 wk highs

52 wk highs: Asiasons Capital, Chaswood Resources, Civmec, Fortune Reit, Aussino, Jackspeed, Shanghai Turbo

SIA / Scoot

SIA / Scoot: DMG says demand for Scoot's Singapore-Sydney daily route has been encouraging, with the load factor hitting 80%; adds as the low-cost carrier kicked off with only 4 aircraft this year, it doesn't expect cannibalization of SIA's traffic. Notes SIA has not reduced fares on its Sydney route despite the entry of Scoot, which suggests that demand for premium travel remains fairly encouraging. DMG expects Scoot to capture its own market share, rather than taking SIA's. Adds SIA's May passenger numbers were slightly above expectations, while the cargo segment was slightly short. Sees the numbers picking up for both the passenger and cargo segments moving forward as confidence in the recovery of the global economies grows, buoyed by monetary easing by the central banks across the world. Nonetheless, the outlook continues to be challenging among the full service carriers as competition continues to heat up. It keeps SIA at Buy with a S$12.13 target. The stock is +0.8% at S$10.25.

Super Grp

Super Grp: DMG downgrades from Buy to Neutral lowering TP from $2.18 to $2.12 on a recent spike in prices of coffee beans. FY2012 earnings have been cut by 4% to $68m due to headwinds from higher prices which avg US$2125 per ton. Any upside potential will come from better margins from improved product mix and higher dividend payout ratios with downside risks on higher material costs

HK Land

HK Land: Barclays expects Hong Kong's Central office rents to lag any overall market recovery due to the continued decentralization trend, the financial-service sector employment concentration and concentration of vacant and 'excess' space in Central Hong Kong. Notes Central Grade-A office vacancy was 4.3% at end-May vs 3.5% for the overall market. Says, the diminishing availability of low-cost Central options should translate into pressure for HK Land's portfolio, but near-term low supply and prime spaces' high pre-commitment rate remains supportive of office rents and should prevent any dramatic decline in rentals. Also sees further downside risk to HKL's increasing exposure to China residential development, currently at 13% of NAV. Raises HKL's TP to US$6.04 from US$4.40 after removing assumptions of a hard-landing for Hong Kong's economy, but keeps an Equalweight rating. The stock is down 0.5% at US$5.77.


Wilmar: +4.5% at S$3.71 on strong volume, the best-performing STI component despite lacking fresh news, outperforming commodity plays' regional risk-on rally. DBSV note that it's just been oversold. On a fundamental basis, don't see the share price going as low as it did a few weeks back, primarily because house expect some uplift in earnings in 4Q this year, mainly due to the expansion of refining capacity in Indonesia. Add that in context of second-half results, they should be much better. The fiscal-2Q results' disappointment "makes the share-price appreciation a bit harder, given whatever upside there is would be capped by people wanting to get out of the stock. So the catalysts are still a few months away. House has TP of $4.25.

Cosco / Yangzijiang

Cosco / Yangzijiang: Recall recent newsflow that Nasdaq-listed FreeSeas, a Greek shipowner, has defaulted on payments for two newbuild bulk carriers being built by Yangzijiang, after its financier ABN Amro terminated the financing agreement for the newbuild vessels. DBSV says while the financial impact of the cancellation of the two vessels is small, accounting for only 1% of YZJ's order book of US$4.5b (96 vessels), the cancellation will still be negative on sentiment as this is YZJ's first contract cancellation on default (even during the 2008-09 crisis, none of YZJ's contracts was cancelled). Notes, among the SGX-listed yards, Cosco has the highest exposure to Greece and Europe at > 60% of orderbook while Yangijizang would be the least affected among Chinese yards. Adds, avoid Cosco shares, as they are likely to underperform the market on concerns about their European exposure.


UOL/MCT: UOL will be included in the FTSE EPRA/NAREIT Global Developed Index (and Pure Asia Index) from Monday, with an index weightage higher than CMA and Keppel Land. In the days following the announcement of its inclusion, the stock jumped 16.6%, and vol on Friday clocked in at their highest levels since March 2005. UBS expect that this index inclusion would bring increased institutional investor interest and recap the key investment thesis for UOL Group. To recap, house estimate 90% of UOL’s assets are in SG. 16% of its RNAV is in SG residential, but its asset-turn strategy has meant 75% of this has been pre-sold. Its directly-held investment properties are in fringe office (15% of RNAV) and fringe retail (12% of RNAV), which gives its assets a more defensive tenant profile. Gearing of 33% gives it sufficient financial strength to replenish its landbank. House maintains Buy and increases TP to $5.73 based on SOTP, with a 15% discount to RNAV and 10% discount to listed entities. Similarly, MCT will also be added to the index.


Telco: Credit Suisse sees positive indications for Next gen Nationwide Broadband Network (NBN) progress to accelerate. Says coverage is increasing, pricing is more competitive, while the “ecosystem” for fibre broadband services is also growing. Expects NBN penetration to reach 29% by end 2013e and 47% by end 2015e. The house views M1 as the key beneficiary, given an opportunity to penetrate the fixed line segment where it has limited exposure. Upgrades M1 to Outperform with TP $3, as it offers good medium term growth from mobile data and NBN, with attractive 6% div yield. Says Starhub may face higher pressure in residential, but this could be offset by opportunities in the corporate segment. Keeps at Neutral with TP $3.25, with solid yield to provide support. Expects SingTel to face pressure on both sides, as it needs to focus on developing new services / VAS to differentiate and maintain its revenue. Says SingTel’s significant regional diversification means the NBN impact to the group is not expected to be very material and its key growth driver remains its regional associates. Sees downside risks to consensus from foreign exchange headwinds; maintains Neutral with TP $3.19.


CWT: UOB Kay Hian maintains Buy and increases TP to $2.09 from $1.80 after meet up with mgt. Key pts as follow: 1) New growth driver from commodity trading: See this area as a potential new area for CWT’s future growth. This is a natural progression given its presence and experience in commodity logistics, which provide CWT with natural advantages such as trading information flow and strong existing relationships with upstream and downstream Co’s. 2) Managing the risk. Although investors are likely to be sceptical of CWT’s venture into commodity trading, believe mgt has taken adequate steps to safeguard its exposure. In addition, grp does physical hedging rather than pure hedging with a net exposure Leverage for its commodity trading arm is “ring-fenced” at the subsidiary as it uses non-recourse financing, with no ultimate liability to CWT. 3) Warehousing update. Grp recently undertook a sales and leaseback transaction on its Pandan Logistics Hub, which will result in a deferred gain of S$11.8m. This is expected to be recognised over the next 3-4 years. In terms of capacity, the group has recently started construction of Cold Hub 2, which is targeted for wine storage. 4) Consolidation phase. After its M&A phase over the past two years, understand that mgt’s current focus would be to integrate its new investments and focus on organic growth for its existing businesses in freight and logistics. Overall, conclude that CWT remains attractive for its global exposure to trade, dominance in logistics niches and strong financials. Although investors could be concerned about its venture into commodity trading, believe this is reflected in its undemanding valuations.

Asia Medic

Asia Medic: Has signed two agreements to set up a post-natal confinement centre and a medical centre respectively in Shanghai, PRC. Co is currently loss making with FY11 losses of $800k. Co current trades at 0.7x P/B Another co with similar developments in China, Q&M currently trades at over 40x P/E with P/B of 6.88x


Genting: The Australian Saga continues. Msian gambling and resorts operator raises Echo stake to near 10%. According to news reports from Australia, Genting Group has increased its stake in Echo Entertainment to almost 10%, putting the Msian gambling and resorts operator on par with Australian billionaire James Packer and seeking to gain control of the casino company. James Packer, who already owns 10% of Echo through Crown, wants to use Echo's licence to build a new casino complex in Sydney to attract more Asian high-rollers. Analysts note that there may have been an agreement between Genting's KT Lim (chairman Lim Kok Thay) and Crown's James Packer that each group would hold a 10% blocking interest for now and wait to see what develops. The pact could fend off potential hostile takeover bids. Genting bought 2% of Echo, or 13.8m shares worth around A$60m (S$77.1m), in a single trade yesterday morning, according to sources and brokers in Sydney. That follows a block trade by Genting's HK unit on Mon for 19.26m Echo shares, or about 2.8% of the co, worth A$82.6m, according to a stock market filing by Genting Hong Kong. The latest deals would take Genting's stake through various group firms to 9.7%. Under Echo's constitution, no single party can hold more than 10 per cent and will need a regulatory nod to go further. Reuters