Tuesday, July 31, 2012

Dyanamc (technical)

Dyanamc's indicators pointing to further upside, with Stochastics and RSI heading upwards from OverSold territory, while ADX DI+ is above DI-, which could suggest further strength in the uptrend. Recent high of $0.455 could act as near-term resistance

Genting HK

Genting HK: 50% JV NCL Corp posted a 2Q12 net profit of US$36m (+23% yoy), within expectations, boosted by business improvement initiatives and timing (lower) maintenance and repair costs. NCL’s 1H12 revenue rose by a modest 3% yoy amid a 2% yoy increase in yield, stemming from an increase in pax ticket pricing amid flattish capacity days. Occupancy rates remained solid at 107.6%. UOBK expects GENHK to deliver a core net profit of more than US$70m in 1H12 (>+13% yoy), driven by decent growth at its 50%owned RWM (est 2Q12 EBITDA of more than US$60m vs 1Q12’s US$37m). The house maintains Buy with TP US$0.38, which values the stock at 15.2x fully diluted FY12e P/E, and 8.9x notional FY12e EV/EBITDA. Technically, UOBK notes the stock is undergoing a price consolidation and a break above US$0.34 could lead to a test of US$0.38. Key support remains at SU$0.30. Notes the MACD remains flat but its Stochastics indicator has formed a bullish crossover. Says the stock could potentially attract some interest due to the spillover interest from Genting SP during the last trading session.

Pacific Healthcare

Pacific Healthcare: resume trading at 10.30am. Announced that it and its subsidiary, PHS, have been served with a Writ of Summons. The claim against the co and PHS, is for general and special damages for alleged breaches of fiduciary duties and/or duty of care owed to the Paintiff and /or vicarious liability, arising from alleged acts of sexual harassment allegedly carried out in the course of a non-independent non-executive director (Mr Kwan Benny Ahadi) carrying out his duties as a director of the co and while overseeing the business and affairs of PHS. The co has since appointed legal council.


OUE: some emails circulating with snapshot of OUE's independent valuation of Mandarin Orchard Hotel. The stock is +3.2% today at $2.57, pulling back from the earlier high of $2.61. The share price moves could be reflecting StanChart's hypothesis that OUE is close to selling the Mandarin Orchard asset, which could pave the way for the co to report a significant divestment gain and pay a special div.

Keppel Corp (technical)

Keppel Corp: BlackRock has raised its stake in KepCorp via open market purchase of 602,000 shares at $10.95 on 26 Jul. It now holds 90m shares representing 5.02% of Keppel. The stock has bounced off strongly from its 20-day moving average and is now exhibiting a bullish engulfing pattern with immediate topside target of $12.25.

Neo Group

Neo Group: CIMB initiates at Buy with TP $0.39, saying Singapore's No.1 events caterer, with a 9% market-share, has room for growth. Expects the co to focus on its plan for a consolidated kitchen to improve efficiency and allow it to take on additional business, possibly in institutional catering; says revenue and net profit will post double-digit growth in FY14 as the benefits from the consolidated central kitchen kick in. CIMB also doesn't rule out the possibility of M&A to grow the business faster. Believes Neo has room to increase selling prices, given its established brand name and quality focus. The co’s plan for a 60% dividend payout ratio for FY13-15 should soothe investment concerns as it translates into FY13-15 dividend yields of 6.7%-11.3%. The stock is up 1.6% at $0.325.


OUE: Channel NewsAsia says OUE will be developing a 5-storey, 170k sf retail mall at the existing DBS Building at Shenton Way. OUE had acquired the property in 2010 for ~$871m and is expected to spend over $100m on the redevelopment, which is likely to see the two existing office towers remain, while the podium level is converted to a retail mall. Property consultant HSR expects rents to average $13-16 psfpm, supported by the new residential and hotel devts in the vicinity. OUE is also looking to refurbish the mall at One Raffles Place, and renovation is expected to cost over $40m. StanChart continues to believe OUE is close to selling its Mandarin Orchard hotel for ~$1.2b (OUE has $2.3b market cap), which could see the co book divestment gains of $1.20/sh. OUE paid out 100% of its net profit ex-revaluationss to shareholders in FY11 by way of a $0.13/sh dividend. StanChart believes they could potentially pay out a portion of such a divestment gain as dividend this year. The house reiterates its High Conviction call on OUE (Outperform, TP $3.22), premised on its view that developers could Re-rate on asset sales.


SingTel is up 1.7% to $3.61, its highest level since Sep 08, turning positive after a pre-open block trade of 13m shares priced at $3.50. The block trade suggests solid institutional interest in the stock although the buying party is unknown at this stage. Another possible reason for the stock's gains is attributed to AUD strength, which will lead to currency translation gains for Optus. The stock may also be getting a boost from its plan to pay out a 9¢ dividend (going ex 6 Aug) amid the current trend towards defensive stocks. CEO Chua Sock Koong has also been making open market purchases in the past few days at price range of $3.44-3.46. The company is expected to release its 1QFY13 results on 10 Aug.


Fastube: another co to request for suspension from trading after free float drops ot 6.35%, below the min listing requirement. Recall yday shares of Luye Pharma were suspended for the same reason. Incidentally, Fastube also reports 1H12 results, which saw net loss grow by 54% to Rmb 19.0m.

Cache Logistics Trust (technical)

Cache Logistics Trust: UOB Kay Hian recommends take profit from Technical Buy. The stock was featured as a technical BUY on 3 Jul 12, when it opened at $1.055. Prices have achieved house previous TP of $1.14 with an intraday-high of one tick more in the last couple of trading sessions. The stock has since returned 8.1% on closing prices. Some profits could be taken off the table as its Stochastics indicator could be forming a bearish crossover in the overbought region. House institutional research has a fundamental BUY with TP of $1.25.

Noble Grp (technical)

Noble Grp: Technical Sell by UOB Kay Hian with 6.5% potential return and $.00 TP. House note that Prices have rebounded after breaking below the support of S$1.05 and have formed a lower low. The stock could potentially be resisted near $1.095 which is also near its mid Bollinger band. Earlier on its MACD indicator formed a bearish crossover below its centreline and has since trended down. Stops could be placed at above $1.105. House institutional research has a fundamental BUY with TP of $1.46.


Sakari: Credit Suisse note that results were broadly in-line with its house forecasts, although add that its forecasts were below consensus. 2Q12 ASP was $94.50/ton vs Credit Suisse's $87.00/ton forecast. OCBC add that Sakari did some some improvements as ASPs held up pretty well. The topline was in-line with house expectations, while the bottom-line was a bit above house estimates, but add that it's a very cyclical stock and performance) and will have to depend on the overall market. If the direction is not too hot, the high beta could work against them.OCBC rates Sakari Hold with a $1.45 fair value. Credit Suisse rates it Neutral with a $1.45 TP.


SGX: In order to better match members' obligations with their risk profile, CDP wants to require each clearing member to deposit a margin that is pegged to the member's contribution to market risk, according to a consultation paper by SGX yesterday. The proposed margin - which will be imposed by CDP on members, not end-users - will be calculated based on market volatility, the size of a member's net positions, and the market value of the member's portfolio. The new margin will be the first line of defence if that member defaults. That will add one layer of protection before CDP taps the existing central clearing fund, which pools contributions from SGX and members. The clearing fund has never had to be used. To help reduce the burden on members, CDP will reduce to $500k from $1m the minimum amount that each member has to contribute to the clearing fund. CDP will also remove the requirement for Large Exposure Collateral, which is the current mechanism for getting members who have unusually large positions to post additional collateral. Some brokers expressed concern that the move could result in higher trading costs, as besides having to put money aside for the margin, the logistics of compliance could also increase. Others noted that one way to pass on the costs to customers would be for members to ask clients to post margin for their trades, which could then signal the end of contra.

Tiger Airways

Tiger Airways: Citi maintains Sell with $0.46 TP. House note that weak competitive position outside SG may more than offset the recovering profitability of its SG operations. Expect Australia to remain unprofitable as the doubling of capacity in 2HFY13 may outpace demand build-up. Indonesia and Philippines operations lack scale and may require further equity injection, burdening Tiger's weak balance sheet.


CMA: CMA announced 2 acquisition deals: a greenfield project in Qingdao, China, and Olinas Mall in Tokyo, Japan. Recycling of these assets could lift future RNAV. Operationally, upside in NPI yields appears more muted. Meanwhile, capex continues to build up. House lift FY12-14 core EPS estimates for income from Olinas Mall. TP (still at 25% discount to RNAV) remains unchanged as we view impact of this event on share price as net neutral. House maintain Underperform on valuations and recommends switching to CapLand

China XLX

China XLX: CIMB ceases coverage of China XLX given its poor stock liquidity. Its share price has not had any spectacular movements since its dual listing in HK in late 2009. 2Q/1H12 core profit forms 52% and 74% of house FY12 forecast, considered in line with our numbers though ahead of consensus. Overall, house expecting a tougher 2H12 in view of various earnings constraints. Last TP was $0.43 (5.5x CY13 P/E, 50% discount to larger peers) with an Outperform rating.


F&N: Bid to privatize its HK listed subsidiary Frasers Property (China) failed yesterday after independent shareholders rejected the deal at a court meeting in HK. The plan was for the co to be taken private by FCL (China), an indirect wholly-owned subsidiary of F&N, and Riverbook Group, wholly owned by Ascendas Land International. The proposal document noted that the HK$0.28 offer price was 47.4% above the coy's last closing price of HK$0.19/share before the deal was announced. It was also 68.7% over the average closing price for the last 180 days. The joint offer document also said the company's ability to raise funds from equity markets had been limited and the costs associated with its listing may no longer be warranted.

Tuan Sing

Tuan Sing: Reported strong set of results which was above estimates. Rev at $104.5m, +76% yoy and +45% qoq, while net profit at $11.61m, +167% yoy and +38% qoq. YTD, grp reported an 86% increase in profit to $18.42m. Strong results was mainly attributable to higher sales from development property projects in SG, while share of profit from GHG and GulTech was up 132% to $10.4m on account of better operating performance in Grand Hyatt Melbourne and Hyatt Regency Perth, due to strong mkt demand and better market image. Looking ahead, the group said it will focus on its core property mkts in SG and China and remains confident in the long term prospects of those markets

Cambridge Industrial Trust

Cambridge Industrial Trust: decent set of 2Q12 results. DPU at 1.18cts, +13.9% yoy, marking the 5th consecutive qtrly growth in DPU. This was on the back of a 10.4% yoy increase in gross revenue to $21.5m and a 8.8% rise in net property income to $18.4m, which lifted distributable amount by 14.8% to $14.1m. Operating performance for the Reit remained strong. Occupancy remained at 99.1% spread across 165 tenants and 47 properties, with a wt avg lease expiry (WALE) of 3.1yrs. Gearing was at 35.8%, within the target range of 30-40%. In relation to the compulsory land acq by the Spore Land Authority affecting Cambridge’s property at 1 Tuas Ave 3, the trust has been awarded $29.2m as compensation and an ex-gratia payment of $2m by the SLA. The compensation is expected to be received by Jan ’13. The trust has yet to receive notification of the compensation value to be awarded for the remaining 30 Tuas Road property that has been affected. Cambridge trades at annualized 2Q12 yield of 8.3%, 0.93x P/B.

Sing Post

Sing Post: 1QFYMar13 results, with bottom line weaker yoy, but still above Bloomberg consensus. Revenue grew 6.5% to $151.6m, driven by improved performances by the business segments. Mail revenue increased 3.7% to $100.9m, as growth in int’l mail and first time consolidation of Novation Solutions offset the decline in domestic mail contributions. Logistics revenue was up 11.5% to $57.1m, with increased contributions from e-fulfillment activities in Quantium Solutions and Speedpost. In Retail, revenue increased 12.4% to $18.6m with continued growth in fiancnial services and online store Clout Shoppe. Rental and property-related income declined by 3.1% to $10.3m with lower rental income. Net profit was $38.1m, -2.9% yoy, as total expenses increased at a faster rate than revenue growth, as the Group continued to invest, while continuing to face pressure from the declining high margin domestic mail business. Mgt says it will continue to invest into ppl, technology and operations, as it scales the business in Spore and in the region. Notes overseas contribution is growing and now accounts for >15% of revenue, up from 12% last yr. Notes while outlook remains challenging, its transformation program is gaining good traction. The co maintained its interim quarterly div of 1.25cts. Together with an expected 2.5cts final div, this translates to a yield of 6%. The stock trades at 14.7x P/E.


Sakari: Announced 2Q12 results which were below estimates, despite grp registering better QoQ performance vs its dismal 1Q12 results. Rev at $238m was flat YOY and +26% QOQ, while Net Profit at $23.9m, -39% YOY and +66% QoQ. Gross margins remained weak at 23% vs 29% YOY and 20% QOQ. Sales vol increased slightly at 2,693 kt, +8.7% YOY and +33.69% QOQ, while ASP remained flat QOQ at US$94.5/ton. Muted rev due to global coal prices which fell 15% from $114/t in 1Q12 to $96/t in 2Q12. During the qtr, Sakari concluded a number of fixed-price contracts for both Sebuku and Jembayan in line with Jap fiscal year benchmark prices and has concluded pricing on approximately 80% of its target 2012 production and is maintaining its guidance ASP of $85-90/t for 2012 despite weak international coal prices. Sebuku continues to ramp its production, with an increase of 30% in production over the previous qtr at 672Kt, +138% YOY and +39.7% QOQ. Sakari has upgraded its target production for Sebuku in 2012 to at least 2.5Mt as the production profile continues to increase. Add that further progress has been made in the Northern Leases’ with new mining fleet arriving on schedule and Sebuku’s Steady states production rate is expected to be at 4-4.5mtpa over the next 18-24 mths. In Jembayan, production at 2.1MT, -12% YOY but increased 46% QOQ as stripping ratios improved QOQ, with a cash cost reduction of $57.6/ton, less $10/t vs 1Q12. Savings of this magnitude, which are spread across the entire production volume, substantially outweigh the rewards that would have been achieved by following Jembayan’s original 2012 plan that envisaged higher production volumes but also at higher costs. At current price, grp trades at an annualized 14.5x FY12E P/E and an interim div of US 2c has been declared. Technically, near-term support on stock could be found at $1.16 TP (Year low) Ratings as follow: CIMB maintains Underperform with $1.00 TP DMG maintains Buy with $2.00 TP

SG Market (31 Jul 12)

SG Market: Spore shares may gain a bit as investors await the much anticipated Fed and ECB meeting this week where most expect significant steps to bolster the eurozone economies. The STI may make another test of the 3040 resistance with the 3000 level providing psychological support. Among stocks in focus, Sakari is set for a soft opening after reporting below par 2Q results with net profit -39% yoy to US$23.9m. SingPost 2Q earnings slipped 2.9% to $38.1m was was slightly above expectations. Cambridhe Ind reported 14.8 growth in distributable income and propose DPU of 1.18¢. Tuan Sing reported strong set of results which was above estimates.

Monday, July 30, 2012

52 wk highs / lows

52 wk highs: High yield - MCT, SingTel, SATS, Ascott Residence Trust, SPH Others - Civmec, Asiasons Capital, Kingsmen, Boardroom, Inno Pacific 3:20:55 PM: :: Bernard Ngan Yew Thong left the chat. :: 52 wk lows: Ecowise, Jadason, Surface Mount Tech, A-Sonic, M Devt

Genting SP

Genting SP: note that some funds have taken the opportunity to accumulate GENS on the way down. For instance, Bloomberg data shows that Blackrock Fund Advisors raised its holdings by 1.135m shares to 86.4m on 26 Jul 2012.

Keppel Land (technical)

Keppel Land, technicals suggesting that there is further upside to go, with RSI and Stochastics all hooking upwards. Near-term resistance would be at the recent high of $3..48, followed by the year high of $3.60. Support could be found at the recent week low of $3.26

DBS (technical)

DBS: Trading Central technicals prefers to go Long above $14.20, with targets at $15.00 and $15.70 in extensino. Says the RSI is bullish and calls for further upside. Support at $14.20, which if broken, could lead to further downside to $13.80 and $13.40.

Luya Pharma

Luya Pharma: the otherwise illiquid counter is in top volume today. Parcels of 17m, 35m, 18m and 5m (total 75m shares, or 15% of shares out) were crossed at $1.30 pre-market open. The shares were last traded at $1.12 on Friday. The stock has been suspended "due to the public float falling below 10%"

Jardine Cycle & Carriage

Jardine Cycle & Carriage (JCC): 1H12 results, below expectations. Net profit was US$511m (+5% yoy), 44% of Bloomberg consensus FY12 estimates. Key takeaways: (1) Despite Astra’s in-line 1H12 results (Astra contributes 94% of JCC’s total profits), JCC’s 1H12 Astra profits of US$518m (+6% yoy) missed expectations due to the translation impact from the weaker than expected rupiah (JCC reports in US$ and Astra reports in Rp). JCC expects Astra’s 2H12 auto sales outlook to be more challenging given the weaker rupiah and new auto loan down-payment rules introduced in Jun. Goldman estimates Indonesia 2H12 industry-wide 4W/2W (4 wheel / 2 wheel) sales volume to decline 5%/10% yoy. (2) Non-Astra auto net profit of US$31mn (+12% yoy) was also slightly below expectations as broader auto market conditions continue to weaken, especially for Vietnam. Goldman remains Neutral, but reduces 2012-14e EPS by 2-9%, primarily to factor in new rupiah assumptions. The house’s 12-month SOTP-based TP for JCC falls to $44.50 (from $48.50 previously). This is despite JCC being expected to report a one-off gain of US$56m in 3Q12 for the sale of investments on 25 July.


F&N/APB: UOB Kay Hian has strategy report titled ‘M&A Fever’. Note that M&A continues to excite in Singapore. House highlight several scenarios that could play out for F&N Limited (NON-RATED). House note that FNN’s RNAV is $9.54/share, based on the valuation of its stake in APB at $50/share, and FNN may trade closer or even at a premium to its RNAV should a bidding war erupt for its APB stake. Based on the latest closing share price of FNN, the stock is trading at a 12% discount to its estimated RNAV. Based on estimates, every 10% change in APB’s share price would change F&N RNAV by 2%. F&N will have until 3Aug to decide on Heineken’s offer. In house view, F&N could possibly decline the deal as its existing shareholders such as Kirin Holdings and Thai Beverage may not agree to Heineken’s offer given the strategic nature of APB to these two Co’s. Other than the obvious synergy of APB to Kirin and Thai Bev, the divestment of APB will leave F&N’s assets primarily in ppty and this could be viewed as non-complementary to Kirin and Thai Beverage. At $50, APB would be trading at an annualised 2012 P/E of 26.2x. Given the strategic nature of APB to Kirin, Heineken and Thai Beverage, would not discount the potential for a counter-bid to Heineken’s offer. However, APB’s premium valuations could deter a counter- bid as valuations of peers, including Thai Beverage, is estimated at a range of 13-18x. Against this background, believe any further strength in F&N’s share price closer towards RNAV estimate of $9.54/share could be an opportunity for investors to lock in gains.


Wilmar: CIMB Note that Wilmar’s consumer products unit in China may see a margin squeeze following the Chinese government’s “advice” to edible oil producers to refrain from raising cooking oil prices. House estimates that this could drain 3% from the group’s FY12 earnings if edible oil prices trend higher. Believe that the 5% drop in today’s share price has more than accounted for this negative news. However, house retain a Neutral stance and target price basis of 12x CY13 P/E due to the lack of near-term upward rerating catalysts.

Genting SP

Genting SP: Deutsche maintains Hold with $1.36 TP. House note that Genting SP is due to release 2Q results on Aug 10. Forecast VIP rolling down 8% yoy / -2% qoq; mass revenue up 3-4% yoy and qoq. Assuming normal hold, expect 2Q EBITDA of $354m (+3.9% yoy / -4% qoq). RWS was unlucky in 2QFY11 with 2.66% hold. Bad debt provision should stay high Expect bad debt provision to remain high, and do not expect a big spike in 2Q as GENS hiked bad debt provision in 1Q and has set aside higher reserve at end 2011 relative to MBS. At end June, MBS provided 23% of its receivables (US$822m). Street forecast is too high, as house highlighted in recent note (“No fresh catalysts; cutting earnings estimates and target price,” 25 July 2012), see significant downside risk to Street forecasts. FY2012-14 EBITDA forecasts are 13.4%, 12.7% and 11.4% below Street.

Keppel Land

Keppel Land: Deutsche hosted investor’s meeting with mgt post 2Q results. Key Pts as follows: 1) Key question raised during meeting revolved around capital allocation. Co. stated that they will remain selective in their land bank acquisitions, with a focus on mixed development sites. In China, twill focus on mixed-use development sites given their already sizeable residential land bank. Believes that in SG, residential prices are likely to remain stable; hence, they did appear to be compelled to build up their domestic landbank. 2) Company add that they will resist residential unit prices cutting given their strong balance sheet position. With construction starting for the showflat at Keppel Bay Plot 3, mgt stated that the site is close to launch-ready, but will depend on market conditions, and unlikely to launch in 2H12. Grp has further decreased its planned launches from 3,041 to 5,171 units as it believes that there is firm untapped pent up demand. 3) Approximately 70% of MBFC is now leased, with demand primarily from the financial sector. However, mgt shared that while demand has waned from the financial sector; they have seen a rise in interest from trade industries looking to expand in Asia, most notably from the commodities, legal and services businesses.


CMA: announces that it is developing its first shopping mall in the New Urban Centre (NUC) in Qingdao, China. CMA will acq the site from a unit of Vanke, and Qingdao Shuangshan, a local enterprise mainly engaged in commodity trading, small scale warehousing and agri mart mgt. CMA plans to develop a 6-storey shopping mall with total gfa of 89.7k sm (excl a carpark with 900 car park spaces). The mall is expected to be completed in 2015, and will the first mall in the NUC, to serve a population catchment of 550k residents within a 5km radius. Qingdao’s first subway line M3, will be operational in 2014, and run through NUC and be linked to the mall’s basement. Total devt cost is estimated at Rmb 1.46b, or Rmb 16,235 psm of gfa. Separately, CMA also announces that it has acquired Olinas Mall in Tokyo for ¥22.8b (S$367.3m), or S$964 psf NLA, from Invesco Global Real Estate. Completed in 2006, Olinas Mall is one of the biggest and newest malls in Kinshicho, one of the biggest commercial areas in eastern Tokyo. Olinas Mall is part of a large integrated devt and is connected to a residential tower and an office tower. It has total gfa of ~583k sf, with total car parking capacity of 853 spaces. It is multi tenanted and currently at 100% occupancy. Mgt believes the current net property income yield of the mall is in excess of 6% and has the potential to be further enhanced through tenancy remix and pro-active mall mgt. CMA trades at 1x P/B.

Ascott REIT

Ascott REIT: 2Q12 results was in-line. Rev at $78.9m, +8% YOY and +10.3% qoq, helped by higher rev from new acquisitions in Tokyo and Kyoto and better performing serviced residences in the UK, Philippines and China. DPU at 2.4c, +1.9% YOY and +11.2% QOQ. With higher rentals from the rebranded Citadines Prestige Trafalgar Square London and higher demand for its Philippines serviced residences from the business process outsourcing, oil and gas and aircraft engineering sectors, 2Q rev per available unit rose 6$ to $156 per day from $147 per day YoY. Going forward, REIT aims to continue focusing on yield-accretive acquisitions and explore opportunities in Asia as well as London, Paris and key cities in Germany.At current price, grp trades at an annualized 7.4% yield and 0.85x P/B. Ratings as follow: CIMB maintains Neutral with $1.21 TP. UOB Kay Hian maintains Buy with $1.42 TP.

Tiger Airways

Tiger Airways: 1Q13 results in-line, with Co. reporting a substantially lower net loss of $13.7m for th1Q13 vs a loss of $20.6m YOY, as its SG unit remained profitable and its Aus unit started showing sequential improvement. The budget carrier group recorded revenue of $181.3m for the qtr, which was up 1.4% YoY. The 8% improvement in yield was partially negated by a 5% decrease in capacity (measured in available seat kilometres) and a two percentage-point drop in load factor. The average load factor of the group for the qtr was 83% as Tiger SG filled 85.1% of its seats, while in Aus the load factor was 77.4%. Grp expenses for the qtr went up slightly to $193.1m due to fleet expansion, but this was mitigated by lower fuel cost and airport and handling cost. Average fuel price declined one per cent year on year. Overall, the group reported a 19% fall in passenger carriage vs a capacity increase of 34%. CEO add that Tiger Aus has also made good progress since the hiatus in services a yr ago and have been rebuilding the business with a strong focus on safety, operational excellence, customer service and profitability.Turning to its new ventures closer to home, add that Mandala Airlines was expanding its presence in the region and would be launching its fourth route, Jakarta-Bangkok, next mth. Ratings as follow: CIMB maintains OutPerform with $0.90 TP.


SMRT: 1QFYMar13 results broadly inline. Net profit at $36.5m, +5% yoy, flattered to some extent by $8m in rail insurance compensation. Operating revenues were $275m, +9% yoy, supported by steady ridership growth. Avg daily rail ridership grew 9% yoy, and this drove a fairly robust 11% (or $15m) rail revenue gain. Bus revenue growth was more muted at 3% yoy , on 3% ridership increase. Taxi revenues were +14% yoy on a larger hired out fleet, rental revenues +12% yoy, while ad revenues were up 13% yoy. Deutsche estimates underlying operating profit was $39m, -7% yoy, as margin compressed to a low of 14.3% on higher staff and energy costs. Believes energy costs will be mitigated by SMRT’s recent hedges, but expects sustained staff cost pressures on higher headcount. Deutsche keeps at Hold with TP $1.60. CIMB reiterates Underperform and TP $1.50. UOBK maintains Sell with TP $1.30, sees no turnaround in sight. Citi maintains Sell with TP $1.30, notes the following challenges that may curtail div payout and de-rate the stock; i) potential $900m rail upgrade costs, ii) subscale bus operation seeing mounting losses, iii) govt policy such as the Transport Masterplan, favoring public service quality over sh/h returns, iv) Circle Line ridership remains below breakeven, v) bids for further MRT line tenders in coming years.


SGX: 4QFYJun12 results largely in line, excluding a one-off write down of $11m on an investment in the Bombay Stock Exchange. Core net profit at $72.1m, -7% qoq, -9% yoy, marking the second consecutive year of EPS decline for SGX. Total revenue was $157.8m, -4% qoq, -2% yoy. Securities revenues were weak as expected, at $54.0m, -17% qoq, -14% yoy. But derivatives were strong, at $44.3m, +4% qoq, +26% yoy. Mgt says SGX is now the biggest offshore venue for derivatives in Asia, with 25% mkt share. Expenses overall, were down slightly, at -1% qoq, -3% yoy. CIMB maintains Neutral but raises TP to $7.26 from $6.98. Deutsche keeps at Hold with TP $6.90. Says 4Q12 represents a decent performance in tough market conditions, but notes the lack of a sustained bull mkt recovery means lack of catalysts for rerating. Citi maintains Sell with TP $5.81, based on 19.3x FY13e P/E, avg daily turnover of $1.45b/day. Notes medium risk of P/E derating if pricing structure or ROE comes under pressure, or SGX enters into an acquisition which is earnings dilutive or curtails div payout.

SG Market (30 Jul 12)

SG Market: The STI appears set to retake levels above the key 3000 resistance following the rally on Wall Street amid hopes of further stimulus from the ECB and Fed. Players are also likely to focus on corporate earnings with some key results due this week from DBS, OCBC, Sembcorp Marine, CapitaLand and Cosco. The year-to-date high around 3040 will likely offer near-term resistance, while 2980 will provide support. Among stocks likely in focus, SGX, SMRT and Tiger Aiways all posted results that were roughly in line with forecasts. CapitalMalls Asia bought Olinas Mall in Tokyo's Kinshicho district for Y22.8b and plans to develop its first shopping mall in Qingdao, China. Elsewhere, Jardine Strategic reported 1H12 net profit fell 66% on year to US$860m.

Friday, July 27, 2012

Dairy Farm

Dairy Farm: CIMB highlights Dairy Farm’s 1H12 results show unabated growth as core earnings met expectations at 45% of its full-year forecasts with 1H contributing ~45% of full-year earnings for the past 4 years. 1H12 core earnings jumped 13% yoy to US$243m on an 8% rise in revenue, while the interim DPS of US6.5¢ was also up 8%. Adds that the strong network expansion in 1H was also a nice surprise with performance driven by HK and Indonesia while health and beauty continued to be the star. It notes Dairy Farm added 149 stores in 1H12, compared to 2 stores in 1H11 and CIMB's forecast of 163 for FY12, with the network now at 5,555. It keeps an Outperform call with US$12.00 target.

SC Global

SC Global: The property developer warns that it expects to trport a net loss for the 2Q after a profit guidance by its 50.03%-owned Australian unit, AVJennings that it would have to write down the value of its assets by A$31-37m. As a result, AVJ expects to post a net loss of A$27-32m for FY12. Excluding this writedown, AVJ will make a net operating profit of A$5.1m. The provisioning is the result of a review of the carrying values of all AVJ's assets and investments and represents a 9.4-11.1% reduction in the book value of its residential inventory. SC Global’s 2Q results is due to be released in mid-Aug. The stock currently trades at a P/B of 0.63x with most street ratings in the Hold or Sell categories.

UPP (technical)

UPP: technical break down. Stock is -8.2% at $0.28, falling below the key $0.30 support level. The indicators are weak, with RSI and MACD trending down. Next support is at $0.25. The rest of the previously top volume Myanmar plays, Yoma, Sin Heng, Interra , Aussino, Asia Medic, Ntegrator, are showing weakness as well.


SIA: UOBKayHian finds little reason to cheer following a post 1QFY13 results briefing. Here are some of the briefing highlights: 1) On pax yields – Management indicated that it has to be "realistic" and was prepared to cut ticket prices to grow revenue. This is departure from previous stance in protecting yields. SIA is now a price taker, rather than setter. The airline attribute the 3.4% yoy decline in yields to promo fares across both back and front end seats, which may become the new normal. SIA also indicated that corporates have been tightening their travel policy and are now more price sensitive. 2) SilkAir's pax yields - Overall profitability had declined by 14% despite a 24% yoy increase in traffic. This was again due to promo fares. Actual average fares actually rose 2.3% but the longer distances chalked up by SilkAir, yields fell 5.6%, implying declining marginal revenue from the addition of new routes. 3) Cargo traffic and yields - SIA pointed to a tough market, going ahead and that it will focus on capacity management by parking up to 2 freighters. This should provide a reality check as market has generally been optimistic of a recovery in cargo traffic in 2H12. The decline in yields was also broad based. 4) Fuel- Slightly more than 25% was hedged ~US$120+ per barrel. In 1QFY13, SIA's fuel cost amounted to US$132bbl, which was higher than the simple average for the period. The difference was due to hedging margin and earlier hedge. SIA as such did not benefit from the decline in jet fuel. 5) Scoot - Loads were 80% for Jun, which were lower than expected given that SIA's own loads for the period was 83%. 6) Capital management - SIA has $5b in cash but management but as it had already paid out $1.4b, it may want to preserve cash given the economic uncertainty. 7) On Qantas plans to tie with Emirates – So far nothing has been firmed up yet but the kangaroo route between UK and Australia is one of the highest yielding routes and if Qantas successfully ties up with Emirates, just as Virgin Australia has partnered Etihad, then SIA's positioning as a transit hub would be weakened considerably. The house reiterates its Sell recommendation with a target price of $9.10.

52 wk highs / lows

52 wk highs: REITs and high yields leading the charge again - MINT, Cache, SIA Engg, iShares Asia Local Currency Bond ETF M&A - FNN Others - IHH, Asiasons Capital, Lee Kim Tah, CIMB FTSE Asean 40 52 wk lows: S-chips - Changjiang Fertilizer, Ziwo, Others - Wilmar, KS Energy, Pollux, M Devt


MTQ: is +0.6% at $0.855, extending yday's +10.3% surge. The co on Thursday morning reported 1QFY13 net profit that surged more than 20 fold (albeit from a low base) to $4.7m. Revenue jumped 57% yoy to 438.4m, primary due to contribution from the Premier Group, which was acquired subsequent to 1QFY12. The Premier Group contributed ~30% of revenue in 1Q13. The incumbent businesses in Oilfield Engg and Engine Systems also did well. Gross margins also improved to 35.6% from 34.1% yoy, with the Bahrain operations seeing encouraging sales growth and profitability. On outlook, mgt says prospects are encouraging, as despite the dip in oil prices, drilling activity remains robust in the offshore sector. But says will remain cautious in its execution, considering the overall mkt uncertainties. The stock trades at 5.3x P/E.

Lian Beng

Lian Beng: 4QFY12 results. Revenue fell 13% yoy to $111.4m. Net profit however remained flat at $11.5m, on a combination of one-off gains from 4Q11 and one-off losses in 4Q12. On a positive note, operating margin climbed an impressive 3.6 ppt to 14%, due to better project mgt. Mgt recommended total div of 2cts (final 1ct + special 1ct). For the full yr, Lian Beng’s construction segment remains its biggest revenue contributor at 75%. Its ready mixed concrete and property devt segments contributed 17% and 7% to total rev respectively. Revenue growth in ready mixed concrete was particularly strong, +83% in FY12, due to capacity expansion and strong demand from the construction sector. Order book contracted to $653m from $742m qoq, but is still double of FY12 construction revenue. Nevertheless, mgt remains cautiously optimistic about the sector over the next 12 mths, and said it will remain active in tendering for new projects. Added that construction demand is expected to remain strong, especially from public housing devts, institutional buildings and civil engg projects. OCBC maintains Buy with TP $0.47.

FCOT (technical)

FCOT: OCBC sees more upside ahead after the stock broke above the $1.02 key resistance recently; this was followed by a successful retest and rebound off this level on increasing volume over the past two sessions. Notes MACD is converging bullishly towards its signal line now; this suggests that the upside momentum is resuming. Tips the counter could potentially trend towards the next key obstacle at $1.32 (key support-turned-resistance) in the weeks ahead. Advocates a stop-loss exit around $0.98, which is slightly below the newly established resistance-turned-support of $1.02. The house currently has a fundamental Buy rating on FCOT with TP $1.16.


MLT: CEO Richard Lai has left MLT due to personal reasons. Ms Ng Kiat has been appointed as MLT’s new CEO. Ms Ng was the Chief Investment Officer, SE Asia at Mapletree Investments Pte Ltd (MLT’s sponsor). She started her career in ST Aerospace before moving to CapitaLand and Temasek Holdings. While StanChart is disappointed at Mr Lai’s departure (he was well-respected by the market), the house notes MLT offers a 6.6% FY12E yield. Believes that high-yield liquid SREITs like MLT will continue to outperform as investors seek out high-yielding securities. If MLT re-rates further, it could have more room to surprise the market inorganically via acquisitions as funding costs improve. The house reiterates Outperform with TP $1.13.


MCT: StanChart notes, at 5.8% DPU yield and 2% cost of debt, MCT enjoys the lowest cost of capital (of ~4%) amongst commercial REITs under coverage. Expects the manager to leverage this within the next 6-12 months to make acquisitions. Believes the potential acquisition of Mapletree Business City could be a win-win situation for MCT and its sponsor. Even if the asset is bought at a 10% premium to its $1.2b valuation, StanChart estimates the acquisition could be ~7% accretive to DPU if funded 50:50 debt:equity. Recall, MCT reported 1QFY13 results on 25 July, with DPU of 1.54 cts in line with consensus. NPI was up 11% y/y while portfolio occupancy rose 1.5ppt q/q to 96.1%. VivoCity currently accounts for 75% of MCT’s portfolio revenue. The new leases committed in 1QFY13 have showed rental uplift of ~37% over leases signed in 2009, which is expected to drive DPU growth in FY13. MCT remains among StanChart's top SREIT picks. The house reiterates Outperform with TP $1.14.

Ezion (technical)

Ezion, Technicals looking good for further upside, with RSI and Stochastics all hooking upwards. Near-term resistance would be at the recent high of $0.985, while support could be at the weak low of $0.94.

China Fishery

China Fishery: UOB Kay Hian downgrades to Sell with TP $0.62, citing that financing costs weighs on profitability. Separately DMG cuts TP to $1.00 from $1.20. Note that with regard to the fourth Long-term supply agreements, grp is negotiating for a prepayment option as opposed to the current daily payment per vessel of US$12,000. The upfront payment should result in a lower overall cost incurred. House estimate the prepayment option should range between US$200m and US$250m. The bulk of the cost should be financed by the new US$300m worth of senior notes issued. The US$300m senior notes at 9.75% compares against its previous issue of US$225m at 9.25% in 2006. The issue is expected to add US$29.3m interest expense per year, against previous FY12 and FY13 net profit estimates of US$126m and US$139m respectively. Net gearing will increase from 0.2x in 2013 previously to 0.5x after the issue. UOB Kay Hian note that the new supply arrangement diminishes grp’s position as an upstream player. Operational control and margin enhancement from operational efficiency will no longer be accrued to CFG. However, note that grp’s vessel operating costs for its North Pacific operations over the past five years have ranged between 40.7% and 45.9% of revenue, above the 40% stipulated in the LSA.


Wilmar: stock is -0.3% vs the STI’s +0.6%, extending its underperformance for at least the second day. Govt officials in China, the largest user of cooking oils, reportedly told suppliers to avoid raising wholesale prices for packaged products “unless it is absolutely necessary”, to avoid stoking inflation. Meanwhile, soybean futures traded in Chicago reached a record US$16.915/ bushel on Jul 23 as the U.S. endured its worst drought in a half century. China is the world’s largest soybean importer and second-biggest for palm oil. Shanghai JC Intelligence Co notes, containing cooking-oil prices may hurt crush margins for producers including Wilmar. and Cofco and limit imports of soybeans and palm oil. Says this will add pressure to crushing and refining businesses already suffering from negative margins. Believes “it’ll probably be bearish” for the global oilseed market.

CDLH Trust

CDLH Trust: 2Q12 results. Gross revenue at $36.6m, +6% yoy, driven by a 5.9% growth in RevPAR for the Spore Hotels and recognition of a full quarter’s revenue contribution from Studio M Hotel (91 days in 2Q12, vs 59 days in 2Q11). Occupancy generally stayed robust, on the back of strong growth in Spore visitor arrivals of 12.3% yoy for 5M12. Net property income at $34.1m, -4.2% yoy, due to a one-off property tax refund of $3.3m in 2Q11. DPU at 2.92cts, -1.4% yoy. Translates to 5.7% annualized yield. Gearing maintained at a healthy 25.2%, which positions CDLH for further expansion in the hospitality sector over the next 12 mths. In terms of AEI, CDLH also undertook renovations at Novotel Spore Clarke Quay Level 5 function and meeting rooms during the quarter. At Copthorne King’s Hotel, existing retail space on level 2 was converted in 323 sm of pre-function and function/meeting space. The trust trades at 1.3x P/B. As CDLH Trust pays distributions semi annually, 1H12 distribution to be paid is 5.17 cts, +4.2% yoy.


SGX: Due to report 4Q and FY 2012 earnings after market tonight. According to Bloomberg’s poll of 12 analysts, the street is looking at a consensus of $362.92m for SGX’s earnings before interest and tax, a 1.4% increase over the FY11 numbers. SGX’s stock price is currently on a seven week winning streak. Since the start of the second half of this yr, the stock has gained 6.9%, although that still lags the benchmark STI’s 8.4% increase over the same period. The stock had recently been in the spotlight following its announcement of a new partnership with the London Stock Exchange. Apart from greater market access, the key benefit to investors from this partnership is to enable them to better manage their risk trade positions across different time zones, therefore, investors are able to trade for extended hours. SGX expects the SGX securities to be quoted on LSE's international Board by early third qtr this yr while selected LSE securities will be quoted on SGX's GlobalQuote by the first half of 2013. Macquarie has an Outperform rating on the SGX with f $7.56 TP.

Parkson Retail

Parkson Retail: Announced that it plans to enter Sri Lanka via the acquisition of a 41.8% stake in Odel, a leading fashion retailer with 17 stores targeting middle and upper-middle consumers. PRA will acquire its stake from the founding Gunewardene family for $13.6m. The Gunewardene family will retain a 41.8% stake and continue to run the operations. Odel generated $36.5m in rev and $1.9m in net profit in FY11, which would make up 3% and 2% respectively of PRA’s estimated FY12 rev and net profit given the partial ownership. However, the deal does mark PRA’s first foray into the Indian subcontinent, with long-term potential to enter new markets such as Bangladesh or even India (if the retail rules are relaxed there). Near term, Vietnam (10% of sales) continues to see macro-driven, weak retail sales, but Msia (78% of sales) and Indonesia (12%) should be strong enough for company to stay on track to meet its 25-30% profit growth guidance for FY12. CIMB maintains OutPerform with $1.80 TP.


F&N: SGX filings showed that ThaiBev has risen its F&N stakes by 1.9% to 23.9% from 22% through a subsidiary. (Purchase makes direct sense, since the price grp bought at approx. $8.08 was at a 9% discount to its initial purchase from OCBC at $8.88) Separately, Heineken has given F&N one more week to consider the Dutch beverage group's $5.1b offer to buy its stake in their JV, APB. Heineken accepted a request from Fraser & Neave to extend the deadline for accepting its offer from Friday to Aug 3. In a separate statement confirming the deadline extension, F&N said it hasn't received any other bid for its stake in APB apart from the offer from Heineken. Meanwhile, Japan’s Kirin which owns a 15% stake in F&N is considering a bid for F&N’s Malaysian unit and its soft drink and dairy assets.

Sheng Siong

Sheng Siong: 2Q12 results which was in-line. Rev at $146.9m, +5.2% yoy and -7.6% qoq and net profit at $7m, -2% yoy and -58.5% QOQ (Note that there was a $10.5m one off gain from sale in 1Q12.) Rev was led by improvements in comparable same store sales and the net increase of 4 stores, namely the opening of Teck Whye, Thomson Imperial Court, Woodlands Industrial Park, Toa Payoh and New World Centre (Jalan Besar) outlets and the closure of Tanjong Katong supermarket. Gross profit margin declined 1 percentage point ppt yoy to 21.9%, due to the carry over effect of the 4QFY11 price war among supermarket operators. Competitive price pressure is less intense, with qoq gross profit margin increasing 1.1 ppt from 20.8% for 1Q12. Going forward, grp will continue to actively look for suitable shop spaces, particularly in housing estates where they do not have a presence. The Group has secured 2 additional outlets in Bukit Batok and Bedok North# of around 4,200 sqft. and 3,100 sqft respectively, and has began operating the first 24-hour outlet in Geylang of around 11,000 sqft in early Jul Add that based on current pipeline of new stores, grp will boost retail area by around 38,000 sqft and will have 30 outlets with a total retail area of approximately 386,000 sq. ft, and these new stores are expected to contribute to top-line. Grp has declared an interim cash dividend of 1c per share and remains committed to distribute up to 90% of FY12 net profit. Ratings as follow: CIMB maintains OutPerform with $0.49 TP. DBSV maintains Hold with $0.47 TP


Osim: Good set of 2Q12 results which was in-line with expectations. Rev at $155m, +12% YOY and +3% qoq, while net profit at $22.3m, +20% yoy and +10.9% qoq, while EBITDA Margins gained slightly to 20.6% vs 19.6%. Grp has declared divs of 2c/share (1 interim & 1 special) Strong rev momentum was on back of a better product mix of massage chairs, massage sofas, foot massagers, head massagers, neck and shoulder massagers and nutritional supplements. uDivine, uPhoria, uPapa Music Sync, Taut, Zhi, Liver Protector and other key products continue to sell well. North Asia continues to make up the bulk of grp’s rev at 57%, South Asia at 38% and others at 5%. Going forward, grp aims to target an increase of 30 OSIM outlets this yr and with more new products being introduced, grp expect the core business to remain strong. Grp’s 199 GNC outlets are doing well and grp have rationalised the number of RichLife outlets to 52 by reducing from 19 cities to 8 cities for better focus, control and efficiency. We intend to open more outlets in these key cities. We note that grp’s fundamentals remains strong, with a net cash position of $54m.

HK Land

HK Land: kicked off the 1H12 reporting season for the HK property sector with better than expected results. Underlying net profit came in at US$318m, 7% higher than Nomura’s forecast US$299m. Interim DPS was unchanged at US$0.06/sh. Although underlying earnings fell 13% y-y, this was largely expected, given the absence of residential completions in 1H. More important, the key metrics for HK Land’s commercial portfolio were all positive. Net rental income rose 4.6% y-y to HK$358.1m. Vacancy of its Central office portfolio improved from 3.6% as of 1Q12 to 3.1% at 2Q12. Rental reversions remain positive with average office rents at HK$89.3psf in the 1H12 vs HK$85.6psf in 1H11. Revaluations of its commercial portfolio also remained positive at ~ 1.1%. This helped to boost HK Land’s BVPS by 1.8% to US$10.77. HK Land’s retail portfolio remained fully let with average retail rents rising to HK$165.3psf from 2011’s average of HK$148.3psf. Nomura believes the stock will react positively to the results. Notes HKL’s current 0.55x P/B is lower than its long run avg of 0.73x. Reiterates Buy with TP US$6.70.


GMG: Announced lack lustre set of 2Q12 results which was in-line with bearish estimates. Rev at $273.8m, -5.1% YOY and -3.1% QoQ, while net profit at $11.5m, -36.2% YOY and -1.8% QoQ. On a brighter note Gross margins increased to 13.1% vs 11.1% YoY on back of Teck Bee Hang’s recovery. Drop in rev was largely attributed to lower rubber ASP during the qtr, which saw ASP -23.8% YOY and +2.8% QoQ to $4636/ton, in line with weaker prevailing natural rubber selling prices for 3 mths ended 30 June 2012 which persisted until early Jul, averaging at US$2,900 a wk prior to 26 Jul 2012. Grp managed to sustain sales vol, with 59,065 tons sold, +25% yoy and -5.8% qoq in increased tonnage from Teck Bee Hang. Going forward, grp note that it has completed its 35% acquisition into Siat on 17 Jul12. As such, profit from Siat will be consolidated as an associate from 3Q12 onwards. Siat recorded net profit of $60.3m) for FY11 Add however that demand for natural rubber from EU and USA continues to remain weak while demand from China is stable. Mgt is aware of the several macroeconomic factors which may affect Grp’s performance and will continue to remain focused on its fundamentals and core strengths. We note that grp’s fundamentals remains strong, with a net-cash position of $289m.

HPH Trust

HPH Trust: good set of 1H12 results, largely in line with consensus. Net profit at HK$1.04b, flat yoy. Importantly, an interim dividend of HK$0.2405 was declared. Mgt reiterated full year target of HK$0.51 despite a weaker outlook. Deutsche notes the risk of missing its 8%+ payout in 2012 is extremely low, given HPHT’s satisfactory throughput growth of 5% ytd, and its flexibility to defer capex to ensure its div commitment to sh/h. HPHT throughput has risen 5% ytd with HK Int’l Terminal (HIT) up 8% mainly driven by transshipment cargo. Yantian’s ytd throughput growth is at 2% inline with Shenzhen’s ytd 2% growth. Ytd ASP has risen 1.5%. The co maintains throughput guidance of 5% and ASP growth of 1-2% for 2012. Nevertheless, mgt cites a challenging 2H12 operating environment, with the US showing signs of improvement but still fragile, and Europe to remain weak. Deutsche reiterates Buy with TP US$0.87, recommends to investors looking for a low risk, high-yield equity in times of uncertainty like today. HSBC however downgrades to Neutral, says the stock has rallied 25% ytd and is one of the best performing marine stocks. Keeps TP at US$0.76.


CMA: 2Q12 results. Headline earnings at $232m, +41% yoy, +247% qoq, exceeded forecasts on revaluation and divestment gains. Excluding revaluation gains of $105m, and divestment gains of $89m, net profit was $38m, slightly below estimates, due to higher than expected finance costs. Notably, new malls in China have ramped up well, with new Shanghai malls achieving >5% yields on cost in the first year, and its Taiyanggong mall is expected to achieve a 6% yield on cost in 2013. operating trends in China remain positive with 12% growth in tenant sales, 11% growth in shopper traffic. Core earnings in China have risen 77% qoq to $16m. meanwhile, same store NPI continued to grow, rising 20% in china, and 4-5% in Spore and Msia. Nomura expects a strong, back-loaded 2H12, on the back of the opening of Star Vista in Spore and 6 other malls in China during the period. Mgt declared an interim div of 1.625 cts/sh. Also outlined a div policy of at least 20% net profit payout, with additional div possible from divestment gains. Nomura reiterates Buy, raises TP to $1.89 from $1.82, to reflect the higher valuation of CMA’s stakes in listed entities. Deutsche reiterates Buy with TP $1.89. says valuations look attractive at 1x P/B. StanChart maintains Outperform with TP $1.79.

SG Market (27 Jul 12)

SG Market: S’pore shares appears set to extend rebound after a bold statement from the ECB saw markets rally on Wall Street and Europe last night and sets up a strong foundation for Asian equities today. With ECB and Fed meetings next week, the QE3 light refuses to be blown out, which could result in quantitative easing measures in both US and eurozone. Support for the STI is now reinstated at 3000 with tiple top at 3030 now acting as the resistance. Among stocks in focus, Heineken gave F&N another week to consider its $50 APB bid and ThaiBev raises F&N stake by another 1.9% to 23.9%. CapitaMalls Asia turned in better-than-expected 2Q12 results with net profit +40.7% to $232m and proposes 1.625¢ DPS. Ascendas Hospitality Trust debuts at 2pm.


UOB had a technical sell call on IEV with a $0.415 TP. Note that Prices broke and close below $0.51, which now could be a support-turnedresistancelevel. The inverted hammer candlestick pattern has failed to follow through in the last trading session. Its MACD has formed a bearish crossover and trended down. Stops could be placed at above $0.53.

Thursday, July 26, 2012

Tee International

Tee International released its FY12 results 2 days ago on 24 July12. FY12 earnings came in at $19.1m, slightly above estimate. Rev was however lower mainly due to the completion of larger projects at the end of FY11. Currently, grp has an outstanding order book ofS$213.5m, which is set to grow, as real estate sales continue to gain momentum despite the Additional Buyer Stamp Duty (ABSD). TEE also announced a final dividend of 1.25c and special div of 0.5c, bringing its full year payout to 2.35c (or 10.4% yield). Sias Research maintained its increase exposure with an intrinsic value of $0.45.

Genting SP

Genting SP: DBSV downgrades to Hold from Buy and slashes TP to $1.17 from $2.05. Note of weak quarter, as MBS’ 2Q12 EBITDA contracted 19% yoy, 30% qoq to US$330m ($534m) as net rev -6% yoy, 18% qoq given declines in VIP rolling chip (-6% yoy, -10% qoq) and win rate (2.4% vs 2Q11’s 3.0%, 1Q12’s 3.6%). Look forward to a stronger 2H12. GENS’ 2Q12 results will likely be unexciting, but 2H12 should be stronger with the completion of Western Zone by 4Q12. House cut 2012-14F earnings by 9-12% to factor in 8% contraction in rolling chip (from +5%; 1Q12: -13% yoy), lower net win/slot (US$480 from US$550) and higher receivables provision. Overall, downgrade GENS to Hold from Buy, with revised TP of $1.17 (pegged to Macau sector average of 8x 2013F EV/EBITDA vs 12x previously given slower growth and multiples contraction). While partly in the price, there could be further negative knee-jerk reaction from: 1) Policy risk - public consultation on proposed amendments to Casino Control Act will end on 6 Aug & tabled in Parliament by year-end; and 2) ) Potential full-blown tussle against Crown for Echo which would require US$1.5-3.5b to bring Genting Group’s 10% stake to 50%-100% (vs GENS net cash of US$2b + US$1.3b operating cashflows p.a.).

Jardine Matheson

Jardine Matheson: + 4.0% at US$53.24, with the STI heavyweight likely bolstering the index's gains. Analysts note that the move is ahead of the co reporting results Fri, with some of its subsidiaries already releasing results. United Tractor's results showed improvement. If Dairy Farm's earnings are positive, this will also boost the stock. Last week, Nomura initiated JM at Buy with a US$65 TP, noting its NAV discount is more compelling than its listed units; it said it preferred JM to Jardine Strategic on better stock liquidity and higher dividend yield. It estimated JM's FY12 dividend yield at 2.5% vs JS's 0.7%. July's US$54.50 peak may act as a near-term cap.


IHH: CLSA initiates coverage with Buy Call and TP RM3.55. Note that IHH is set on a stellar 4yr Ebitda Cagr of 19% through strong growth in healthcare spending and medical tourism in its key markets of SG, Turkey and Msia. House value the company on a 28% premium to its peer EV/Ebitda based on Parkway’s historical premium over peers. Believe Co. is sitting on a sweet spot as healthcare in Asia and Central Europe is growing by leaps and bounds owing to the rise of middle class, population growth and a scarcity of healthcare services, which will fuel a move from overcrowded public hospitals into private hospitals where IHH will benefit given its market leading position in all its markets. House believe the company will command a premium over its peers given its larger size, superior geographical reach and growth potential. Value Co. on an 18.6X 13CL EV/Ebitda, a 28% premium over its peers, consistent with its previously listed Singaporean entity, Parkway.

First Reit

First Reit: posted healthy 2Q12 results with revenue rising 6.1% yoy to $14m, while net profit inched up 1.1% yoy to $8.8m Sias notes the Reit is currently evaluating the right of first refusal properties from Lippo Karawaci, speculates the Reit may acq some assets over the next 2-3 mths. Estimates the new assets, valued at ~$100m, will generate ~$3m distributable profit annually and boost DPU from 1.59cts and 1.71cts over the 3Q12 to 4Q12 period. Notes First Reit may need to tap the equity mkt if the value of the targeted assets is more than $150m. Says First Reit has generated a solid performance over the past 1yr (outperformed FTSE REITS Index by 14.8% and the STI by 23.1%). Maintains Buy with TP $1.02, for the attractive FY13e yield of >7%, and >1.3% yield spread over Parkway Life Reit.


Contel: in the latest news flow announced last wk, Contel proposed to acq Update Electronic, which is a HK firm engaged in the trading of LED related electronic pdts. The Vendor, Mr Li Yuda, has represented that he has been in the business for 12 yrs and has the agency to distribute LED in the southern part of China for one of the largest LED makers in the world, Everlight Electronics. Update Electronics posted HK17.8m revenue for FY11, but was strangely only set up Consideration will be $60k cash, and new shares to be determined subject to meeting certain profit targets. Mgt says the acq will provide the group with an additional rev stream. Though given that Update Electronics was set up only on 18 Jan ’10, the lack of track record and small size of the target firm may draw questions on the effectiveness of this acquisition. As for the big swings / decline in share price, we note that this is likely due to speculation. Sentiment likely got deflated after the proposed RTO and acquisition of Solar Silicon Resources fell through. For a micro cap, this co seems to be engaging in rather frequent and random corporate activity. It is involved in a corporate restructuring, has issued new shares to buy over Midland Silicon, a silicon trading group, been queried a couple of times by SGX for unusual trading activity, has disclosed that lawsuits having been filed against some its disposed subsidiaries in China, and has requested for delay in holding its AGM citing financial difficulties, staff turnover, inability to find a replacement for the Finance Manager on maternity leave, etc. Value investors generally view such complexity as a red flag.

TT International

TT International: (The Edge) Sources note that Lucrum’s exit was due to a question of exit, with SG Govt’s approval for the TT international deal coming with a number of conditions that would have made an eventual exit onerous, which resulted in a last min pullout by the fund. Property watchers note that SG govt might not have been prepared to tolerate an investor coming in with a short-term view, and that co’s in the Big Box project were expected to contribute to the economy. HSR international recommend that TT international should not give up as there are probably as many more potential investors that it hasn’t tried to tap yet, but that grp should focus on suitors who undertand the business and who can help it with its branding. Sources note that TT international is already in discusussions with the Jurong Town Corporation and EBD in the hope of getting a time extension to find another partner, and that while the SG govt could give the grp more time to source for a financier, grp is running against a tight govt timeline.

Ascendas Hospitality Trust

Ascendas Hospitality Trust: has allotted an additional 73.4m stapled securities to the placement tranche of its Spore IPO as part of its overallotment process. The trust has raised $384.8m in the IPO and is due to debut tmrw at 2pm. The public offer was ~6.9x subscribed


Wilmar: DBSV maintains Hold but Cuts TP to $3.90 from $4.25. House expect Wilmar to book 2Q12 earnings of US$280-320m (+36-56% qoq) premised on a M&P pretax recovery; but softer contributions from Consumer/Sugar due to seasonally-lower volumes. House expect Indonesian Palm & Lauric processing margins to remain robust (2Q12 average refining margins had stood at US$87/MT vs US$67/MT in 1Q12); potentially offsetting weaker margins elsewhere. Oilseeds & Grains pretax is also anticipated to turn slightly positive – judging by the average daily China crush margins data. Compared yoy however, 2Q12 earnings should remain 21-31% below, given crushing overcapacity in China and the drop in CPO prices.

SC Global

SC Global: is said to be selling another two units at its luxurious Seven Palms Sentosa Cove condo project for a total of ~$57.2m, further cementing its reputation as a luxury property developer. The buyer is understood to be a co linked to Australian mining tycoon Gina Rinehart's Hancock Prospecting. Mrs Rinehart, 58, is the world's richest woman with a fortune est at ~A$30b. Seven Palms Sentosa Cove - a four-storey 103yr leasehold project with only 41 residential units - is next to Tanjong Beach and is at an advanced stage of completion. The project is being designed by Kerry Hill Architects, which has designed many of the Aman resorts. The Hancock Prospecting-linked unit is said to be paying ~$23.3m for a Seven Palms unit on the third floor and close to $33.9m for a fourth floor unit. Sources could not ascertain the sizes of the two units; as information like size of units and floor plans is tightly held and SC Global markets the high-end project in a very exclusive manner. However, an industry player est that the two units are likely to have crossed $4,000 psf, setting a new benchmark for Sentosa Cove. This compares with SC Global’s estimated land cost of ~ $1,800 psf ppr. Before the latest transaction, SC Global had sold 10 units in the project as at end-Jun ‘12 since it began selling the project in Sep ’09. Caveats lodged for nine units reflect prices ranging from $3,091 psf (for a unit sold in Oct ‘09) to $3,605 psf for a deal done in Jul ‘11. The stock is +0.5% at $0.975.

LionGold (technical)

LionGold: Appears to Have made a new all-time high at $1.295. a close above $1.30 could see higher highs.

Sino Grandness (technical)

Sino Grandness: Counter appears to have broken out of its one year high at $0.48. A close above those levels could potentially see higher highs. Recall in May, the grp sold Rmb 270m Zero Coupon covertible bonds due 2015 to Goldman Sachs and a Co investor, with its CEO citing Goldman Sachs’ investment as an endorsement of the management of the Group as well as the growth prospects of its beverage business which have grown at a phenomenal pace over the past two yrs. Grp add that in addition to funding support, it could leverage on Goldman Sachs’ global network and extensive knowledge in the capital markets which will add value to its future development, Especially on the Potential Listing of its beverage business in HK.

Genting SP / Las Vegas Sands

Genting SP / Las Vegas Sands: LVS last night reported earnings that fell 34% and missed estimates. In particular, MBS delivered US$330.4m in adjusted EBITDA, -18.5% yoy. EBITDA margins fell to 47.6% from 55.0% yoy. This came on the back of lower rolling volume, low hold on rolling table games play and higher provisions for accounts receivable. Investors will likely be concerned if GENS would experience the same trend this quarter. GENS reports 2Q12 results after market on 10 Aug. Also, Nomura reiterates its Reduce call, with TP $1.42. Says there is too much unknown in the upcoming 2Q earnings. Cautions on the sizable amount of bad debts to be written off on top of the weaker VIP and mass market segments. Adds, regulatory risks will likely persist till 2015 elections, as the govt is mindful of the ill effects of casino gambling on the public (voters). Believes over the longer-term, a complete overhaul of the low gaming tax structure could not be discounted. Hypothesises the potential abolishment of the $2000 annual pass to discourage addiction/ frequent visitors. Its sensitivity analysis suggests that a 50% decline in the mass market business (non-rolling chip and slots) could slash 2013’s earnings by 53% and its TP by 40% to $0.85/sh. GENS continues to slide to new 52 wk lows, at $1.27, -1.2%.


Aussino: Announced its plans to buy Max Strategic Investments for $70m, payable in shares. Aussino is planning a 4-into-1 share consolidation and will issue 218.75m new consolidated shares to Max at an issue price of $0.32 each. Max Myanmar operates 21 petrol kiosks across key cities in Myanmar and plans to increase its number of petrol kiosks. Its energy business unit also has a strong retail presence and supplies to corporate clients in Myanmar. For FY12, Max Strategic recorded consolidated revenue of $93.2 m and a consolidated net profit of $5.2m. Aussino has also entered into a separate sale and purchase agreement with Samcorp Capital Corporation to sell all its stake in its wholly-owned subsidiary, Amici International Trade Inc, for $9.4m. Aussino will also allot and issue 4.38m new consolidated shares at the Issue Price to Mileage Communications for introducing the relevant parties and facilitating the proposed acquisition. After the various transactions, the sellers will hold 72.9% of the enlarged number of issued shares of Aussino. Aussino intends to seek shareholders' approval at an extraordinary general meeting to be convened.

Cache Logistics Trust

Cache Logistics Trust: 2Q12 results were in-line with expectations. NPI grew 8.1% yoy, led by acquisitions and rental step-ups. DPU at 2m, -5% yoy due to enlarged share base from the private placement in March. Rents are likely back-end loaded with newly acquired Pandan Logistics Hub and Pan Asia Logistics Centre to fully contribute in 2H12. Organic growth continues to stem from the 1.5-2.5% step-up rental escalation structured into master leases. Mgt has already begun renewal of master leases due in FY15/16 at similar step-up rates. Mgt remains committed to acquisition-led growth. Following the acquisition of a pipeline asset from CWT, ROFR to a Malaysian warehouse was secured in 2Q12, bringing assets in the pipeline back to 13 properties with c.3.5m sf GFA. Cache continues to explore the Msian market to gain familiarity, and stated preference for larger assets, albeit harder to come by. At current price, grp trades at 1.2x P/B, with a yield of 7.7% and leverage ratio at 30.5%. Ratings as follow: CIMB maintains OutPerform with $1.19 TP.

Mapletree Commercial Trust

Mapletree Commercial Trust: Announced 1Q13 results which was in-line. 1Q13 DPU of 1.537c was in line with street’s expectations but beat prospectus forecast by 21% due to lower interest cost, stronger rent reversion at VivoCity and earlier-than expected opening of ARC. Mgt signed 109 leases, bulk of which were at VivoCity (213 expiring this year, mostly specialty) which saw 40% reversion for offices and 37% reversion for retail. Portfolio occupancy was up 1.5ppt QoQ to 96.1% led by ARC and PSAB. Going forward, MCT could be looking to buy Mapletree Business City this year as pre-leasing has hit 91%. If this happens, there could be 20% equity issuance (less, if there is PERPs), which historically provides a good entry opportunity. At current price, grp trades at 1.1x P/B and an estimated 6% yield. Ratings as follow: CIMB Maintains Out perform with $1.14 TP Credit Suisse maintains OutPerform with $1.20 TP Deutsche maintains Buy with $1.04 TP

Frasers Commercial Trust

Frasers Commercial Trust: Announced strong 3Q12 results which was above estimates. DPU at 1.70c, +23.2% YOY, while NPI at $26.6m, +7% yoy. Key drivers for this robust performance were the acquisition of the other 50% interest in Caroline Chisholm Centre, and full qtr rev contribution from China Square Central after expiry of the master lease. Additionally, FCOT saw a reduction in interest expense following the refinancing and partial prepayment of the A$105.0m loan facility. Operationally, average occupancy rates for the portfolio remain robust at 96.7%, underpinned by healthy occupancy rates for both SG and Aus portfolios. Looking ahead, FCOT will embark on an AEI’s to upgrade the main tower block office lobby and common areas at China Square Central to complement the proposed covered link way that connects directly to the future Telok Ayer MRT station. At current price, grp trades at 0.73x P/B, with a yield of 6.2%, and leverage ratio at 38%. Ratings as follow. CIMB maintains OutPerform with $1.21 TP


BioSensors: Announced strong set of 1Q13 results, which was in-line with estimates. Rev at US$86.3m, +51% YOY and -2.2% qoq, while net profit excluding exceptional at US$28.3m, +17% YOY and flat qoq. Gross Margins at 81% was a 5% improvement QOQ and 7% YOY due to reductions in manufacturing cost, favorable geographical and product mix. The improved performance was due to the full qtr consolidation of the results of JW Medical System in 1Q13, higher product revenue, licensing revenue and gain on fair value adjustments for the derivatives. Going forward, grp maintains its full-yr financial guidance and anticipates total rev to grow by 20% to 30% over FY12, driven by continued strong DES rev growth as well as modest licensing and royalty rev increase. Grp however anticipates that the higher rev will be partially offset by increased expenses required to support rev growth and development of future products. On the M&A front, grp will continue to explore various opportunities. At current price, grp trades at an annualized 12.6x FY13E P/E. Ratings as follow: CIMB maintains Outperform with $1.82 TP Nomura maintains Buy with $1.84 TP.


SATS: 1QFYMar13 results. Underlying profit was $41m, +4% yoy, but came in slightly below expectations, due to weaker margins. Revenue grew at a faster 14% yoy to $438m, supported by strong aviation gains. In particular, domestic inflight catering revenues rose 16% yoy on an 8% increase in unit meals produced and higher implied rev/meal. TFK rev surged 41% yoy on the back of robust traffic recovery at the Tokyo airports. Gateway services revenues grew 8% yoy on relatively steady growth in the no. of flights handled. However, cargo/mail processed contracted 5% yoy, and non-aviation food revenues were flat. EBITDA margin slipped qoq and yoy to 14.1%, due to higher staff costs (+13% yoy) on higher headcount, statutory levies, overtime pay and wage inflation. Also, cost of raw materials grew 21% yoy, though generally inline with the rate of food solutions revenue increase. Mgt indicated raw materials cost pressure should continue to ease on lower food prices and SGD strength. Deutsche maintains Buy with TP $3.05, sees positives in the co’s balance sheet strength and ongoing capital return potential. Nomura maintains Buy with TP $2.90. Continues to like the co for its solid yields. Citi keeps at Sell with TP $2.20. Says stock now trading near historical peak levels of 16x FY13e P/E, has run ahead of fundamentals. Notes near term, could be supported by impending payment of a final + special div of 21cts, but price weakness could set in post ex-div on 31 Jul.


SIA: 1QFYMar13 results in line with Dow Jones consensus (though the wide range in estimates means SIA would have outperformed about half the houses and underperformed the other half). Net profit was $78m, +75% yoy, and a turnaround from the $38m loss qoq. This came as fuel costs (-6.6% yoy, -7.1% qoq) declined faster than drop in yields (pax yield -3.4% yoy, -2.6% qoq, cargo yield -2.8% yoy, -1.7% qoq). Pax load factor also improved to 79.5% (4QFY12: 77.6%, 1QFY12: 75.6%), while cargo load factor firmed up at 62.9% (4QFY12: 61.9%, 1QFY12: 64.7%) likely supported by capacity growth cuts. Street views are mixed. Nomura maintains Buy with TP $18.25, says positive that FY13 is on to a good start with the seasonally weak 1Q13 having outperformed. Believes this may have positive read across to the 2QCY12 results of other airlines that have yet to report, incl Cathay Pacific (293 HK). Deutsche maintains Sell with TP $8.65, says to focus on declining yields as travel demand outlook has been negatively affected by the European debt crisis and sluggish recovery in the US economy. Believes promotional efforts will continue and add downward pressure on yields. Notes the 2% net margin in the quarter can be easily wiped off by a further 2% qoq deterioration in yields. Citi also maintains Sell with TP $9.40, says the yield erosion “looks disturbing”, and may prompt Street earnings downgrades. Adds, mgt’s downbeat outlook guidance suggests lack of catalysts.

SG Market (26 Jul 12)

SG Market: S’pore shares likely to open lacklustre following mixed cues from Wall Street on mixed bag of results and continuing eurozone concerns. There are stillfears of contagion with Spanish and Italian bond yields creeping up. With fire-fighting the main activity across Spain and Greece, investors have one eye on where the next explosion might come from. Initial support for the index stands at 2970 with resistance tipped at 3000 level. Among stocks in the news: *SIA 1Q results were spot on with market estimates; net profit +73% yoy to $78m on better traffic, offset by lower yields *SATS 1Q results slightly missed estimates; net profit -2.8% yoy to $41.3m, revenue +13.6% to $437.9m *Biosensors 1Q results in line; net profit +45% yoy to US$32.63m on 51% rise in revenue to US$86.32m buoyed by strong growth in DES business and better margins *Mapletree Commercial Trust 1Q results in line; 1Q distributable income +15.6% to $28.7m, DPU 1.537¢ *Frasers Commercial 3Q distributable income +25.8% yoy to $11m, DPU 1.7¢ *Cache: 2Q distributable income +4.5% yoy to 13.9m, DPU 1.98¢ *CapitaRetail China: 2Q DPU 2.41c *PEC: Secured $65m worth of new contracts from new and existing clients

Wednesday, July 25, 2012


FNN: jumps 4.5% to $8.36 in high volume of ~3% of shares traded on the SGX after a series of large trades, mirroring moves the stock made in the day's leading up to the announcement OCBC and Great Eastern were in talks to sell their APB and F&N stakes. Players are likely positioning on the outcome of Heineken's $50/sh offer for F&N's APB stake, with the board's decision due Friday. Speculation that some potential scenarios for the Heineken bid outcome could lead to a breakup of F&N's disparate F&B, property and publishing businesses may also be bolstering the stock. Heineken's offer price for APB, still above the $49.01 currently traded price, likely may be leading to a re-pricing of F&N's sum-of-the-parts valuation also. The intraday high of $8.47, its highest in at least twenty years, likely offers a near-term cap, while the $8.88/share price Thai Beverage paid for its F&N stake may offer a longer-term cap.

JB Foods

JB Foods / Msia cocoa processing: Cocoa processing in Malaysia will likely to remain steady in 2012, underpinned by increased bean production in key producing countries, says Msian Cocoa Board Director General Lee Choon Hui. The forecast by MCB comes at a time when Asian cocoa processing, or grinding, is rising, reflecting better grinding margins and growing demand in the region. Overall cocoa grinding in Asia has overtaken levels seen in Europe and the U.S as global chocolate sales are forecast to reach US$108b this year, likely the result of "a switch in processing activity from the West to origin, where South-East Asia is a key producer of cocoa beans. MCB says, as long as bean supply is adequate, grinding in Malaysia could reach 300k mt/ yr. In 2011, Msia processed 299.3k mt of cocoa. Asian cocoa grinding rose 5.7% yoy to 150.7k mt in 2Q12. The top 3 players, Malaysia, Indonesia and Singapore, together account for up to 12% of global grindings. Cocoa prices in London have climbed 12% so far this year and could rise further amid worries about a developing El Nino weather event, usually associated with a dry spell and below-average rainfall that could curb production in West Africa and Asia. MCB expects cocoa prices to move in the US$2,200-3,000/mt range during the rest of the year, underpinned by steady demand and tight supplies. ICE Sep cocoa futures closed 1.2% down at US$2,209/ton Tuesday.

52 wk lows / High

52 wk lows: seem to be increasing in number, along with the pullback in the STI. Of note, China (DBS X-Trackers CSI 300 ETF) and India (iShares MSCI India Index ETF) are making new lows. Weak big caps include - Genting SP, Noble. Recent IPO debutante Neo Group is below its offer price. Other names include - STX PO, China Fish, Oceanus, Manhattan Resources, FSL Trust, TPV, Koon Holdings, Armada, Etika, Far East Group, Unified Comms 52 wk highs: A-Reit, Isetan, Pan Pacific Hotels, Civmec


Yanlord: stock is -1.6% at $1.22, and off 3.6% from its intraday high of $1.265. Yanlord's decline follows the 1.9% drop posted by the real estate sector in China's stock market, likely spurred by sector policy risks. Investors are likely concerned, after the Shanghai Securities News reported that Chinese authorities are weighing the possibility of implementing further property tightening measures, given the risks that property loans could pose to the banking system. The State Council will send 6 teams to investigate the property markets in 12 provinces, which will include inspecting property loans. The China Securities Journal also said China may raise transaction tax and fee for sale of existing homes (that are vacant) as part of new measures to curb speculation. The govt may also extend a property tax trial to cities in addition to Chongqing and Shanghai in 2H12.


Aussino : halted since 8.30am this morning. No clues as to the content of the pending announcement. Recent updates by the co continue to focus on progress of the RTO of the petrol kiosk business in Myanmar. In early Jul, Aussino hired PrimePartners as its financial advisor in the transaction, and said it is working towards a definite legally-binding sale and purchase agreement before 14 Aug '12. Recall, some wks back, the media pointed out that Aussino faces potential hurdles in this acquisition, as it involves Myanmar businessman Zaw Zaw, who is on a US blacklist. Last wk, substantial sh/h Ong Ah Whatt pared down his stake from 11.9% to 4.6% in the open market.


IHH: +8.7% at $1.21 from its $1.113 IPO price, with more than 17% of shares traded, while peer Raffles Medical is down 4.3% at S$2.47 in strong volume. Analysts note that it's not been such a strong debut. Not as much as some people expected. If IHH had opened around 30% higher, it would have signaled a sector re-rating. Note that Raffles Medical's shares ran up before IHH's debut; the stock is still up around 12% month-to-date. Orderbook quotes suggest IHH shares may find a cap at the S$1.23 intraday high, while Raffles Medical shares aren't likely to retest the S$2.45 intraday low.

Apple / Hi-P

Apple / Hi-P: 2Q12 sales rose 23% to US$35b. Net profit climbed 21% to US$8.82b, or US$9.32/ sh, falling short of consensus estimates of US$10.37/ sh on revenue of US$37.2b. Shares fell as much as 6% in late trading. The company’s sales climbed at the slowest pace since mid-2009, following a 26% drop in purchases in 2Q12, as consumers wait out for the next iPhone model to be introduced. The iPhone is Apple’s biggest source of revenue. The 26m iPhones sold compared with consensus estimates of 28.4m sales volume. Looking ahead to the current quarter, Apple forecast revenue of ~US$34b and net profit of US$7.65/ sh. That compares with consensus’ forecast of sales of US$38b and net profit of US$10.27/ sh. Competition may be another factor for Apple’s sales disappointment, as it battles with Samsung for leadership in the global smartphone market. While Apple has debuted one new model iPhone every year, Samsung has released a variety of handsets, including the Galaxy S III released in May, which is touted as the “iPhone-killer”. Already, Hi-P has to contend with a slowdown in orders from its top customer Blackberry. The latter has been having trouble competing in the smartphone space, and has been posting lower earnings guidance and culling staff. In response, Hi-P recently shuttered its Mexican factory. Slower growth in Apple iPhone sales would likely be further detrimental to Hi-P, which produces iPhone components, and counts Apple as its number 2 customer. Combined, both Blackberry and Hi-P are estimated to account for ~30% of Hi-P’s sales. Hi-P stock trades at 8.6x P/E, 1x P/B.


Europe: more negative noises on the Europe front. Moody's lowered the outlook for its debt rating on the European currency zone's temporary rescue fund to "negative" from “stable”. The move comes a day after Moody’s lowered the outlook for its ratings on Germany, the Netherlands and Luxembourg. Germany has a large stake in the €440 b rescue fund. The Netherlands and Luxembourg also have stakes in the fund, though they are much smaller. The mounting uncertainty over the debt crisis and the possibility that those stronger economies will have to provide aid to Spain or Italy prompted the move Monday to lower the three countries' debt outlook. The debt crisis has flared anew as fears intensify that Spain, the fourth-largest economy in the euro group, would be next in line for a government bailout. The temporary rescue fund is to be replaced by a permanent, €500b European Stability Mechanism when it's up and running - which won't be before Sep. European leaders agreed at a summit last month that the ESM will eventually be able to funnel money directly to distressed banks - rather than govts -- once an effective European banking supervisor is set up.

China Fish

China Fish: announces US$300m issue of 9.75% fixed rate unsecured notes, maturing 30 July 2019. This compares with a previous issue of 7 yr senior notes totaling US$225m in Dec ’06, with an interest rate of 9.25%. The latest notes issue are non-investment grade, rated Ba3 by Moody’s, BB- by S&P, and BB by Fitch Ratings. Estimated net proceeds are ~US$290m, to be used to i) fund the expansion of the Group’s fishing operations in the North Pacific Ocean, including but not limited to prepayment of an existing long term supply agreement and entering into new long term supply agreements, ii) repay outstanding debt, and/or iii) working capital. DBSV expresses surprise by this issue, but remains neutral at this stage. Notes that the funds needed for the North Pacific Ocean operations amount to US$150m – 200m, leaving about US$100m to be deployed, which will accrue interest cost of ~US$9m a yr. Highlights there is uncertainty regarding the deployment of remaining funds at this stage. Nevertheless, the house makes no change to its Buy rating with TP $1.32.

Genting SP

Genting SP: Deutsche cuts TP by 18% to $1.36, maintains Hold rating. Notes the stock is the second worst performing gaming stock YTD in its coverage. Sees earnings risk still to the downside, given the weak regional macro trend and recent downgrade in Spore GDP. Expects GENS 2012 VIP revenue growth to be negative, while operating costs to stay high on a higher VIP commission rate, promotional/ rebates and bad debt provisions. Cuts GENS FY12-14e net profit by 14-17%. Notes GENS valuations is at a premium to Macau peers (9.2x FY12e EV/EBITDA), despite Spore’s lower growth profile. Adds, an unclear invmt strategy in Echo Entertainment and a tightening regulatory environment in Spore may further cap near term performance. GENS to report 2Q12 results on 10 Aug.


Sincap: opens +55% at $0.31, vs $0.20 IPO price on debut, following support from recent strong investor appetite for IPOs in Singapore. Sincap is involved mainly in trading alumina and thermal coal as well as mining and selling gypsum in China. It offered 25.5 m new shares and 7 m vendor shares. The company expects net proceeds of ~$2.3m after expenses. Plans to use the funds for its K-gypsum powder project, including acquiring a plant and machinery, and general working capital.


NOL: Citi upgrades to Buy from Sell and raises TP to $1.35 TP from $1.05. (Note that Citi has been very bearish on this counter for a while) House note that NOL has made good progress on an improved strategy under its new CEO. Impressive initiatives are being executed to cut US$500mn costs in FY12E (vs. US$9bn cost base), enhance yield, and improve service offering. These best practices are a good start for NOL to narrow its financial under-performance against industry profit leaders such as OOIL. NOL’s 2H12-2013 earnings may be resilient, as NOL has >40% rev exposure to the relatively stable Transpacific trade. NOL is also taking delivery of many cheap new ships ordered near the bottom of the shipbuilding cycle that have high fuel efficiency, and which may replace high-cost chartered-in vessels. House raise estimates significantly, to above Street’s, on higher rates assumptions. Add that valuations appear mispriced and NOL share price has under-performed its peers YTD, declining 6% vs. industry +2%. The market may have over-looked progress in NOL’s improved strategy, due to lack of clear data points. NOL is trading at 0.7x FY12-13E P/B, or -1 SD. to the mean, a wide disparity vs. its FY12-13E ROE. Separately UOB Kay Hian upgrades NOL to Hold frm Sell and raises TP to $1.12 fron $1.05

SIA Engineering

SIA Engineering: 1Q13 results in-line with expectations, reinforcing view that it offers earnings growth, high ROEs, almost-zero debt, decent yields and reasonable valuations. Rev rose 8% yoy due to higher fleet management rev During previous discussions, mgt had indicated that it expected to add 20 aircraft to the fleet mgt programme, bringing the total to 180 in FY13 (FY11: 120, FY12: 160). No segmental breakdown is provided but CIMB believe that line maintenance could have risen in 1QFY13 with stronger aircraft movements at Changi Airport (no. of flights handled up by 8% yoy to 880 flights/day). Operating costs rose 11% yoy to $257m, mainly due to a 20% rise in material costs and a 24% increase in other and subcontract costs. This suggests a higher workload form airframe & component MRO. Mgt expects stable demand for core MRO in the near term. Associates/JVs profits increased 8% yoy and 4% qoq in 1Q13. The steady US$/S$ rate during the quarter suggests that the underlying operations are growing. Ratings as follow: CIMB maintains OutPerform with $4.56 TP.

First REIT

First REIT: Good set of results which was inline. DPU at1.93c, +22.2% yoy and flat qoq, while distributable income +23.1% yoy and flat qoq to $12.17m.With an annualized DPU of 7.07c and a closing price of 96.0 cents on July 23, First Reit registered a distribution yield of 7.4%. Results were due to contribution of Sarang Hospital in South Korea and higher rental income from rest of its properties. Grp will be turning its attention to the Indonesian market in the coming period, where Fitch Ratings recently upped the country's investment grade status a notch to BBB-minus while Moody's has raised its foreign and local currency ratings to Ba1. In SG, grp's five-storey extension block for The Lentor Residences is slated to be completed later this yr and will be part of asset enhancement for its properties.Going forward, grp aims to look for new yield-accretive acquisitions for its portfolio with a view to raising our portfolio size to at least $1 billion in the short to medium term. We note that gearing remains low at 15.9%, well below the regulatory limit of 35% and trades at 1.2x P/B.

Starhill Global

Starhill Global: 2Q results in-line with expectations. DPU at 1.08c, +3.8% yoy and flat qoq, while NPI at $37.1m, +4.4% yoy and flat qoq. Grp note that healthy retail sales performance and rising tourist arrivals allowed SG REIT's assets to continue achieving high occupancies and improved rents and will continue to create value with its active mgt strategies and source for yield accretive acquisitions of prime assets in our core markets when opportunity arises. REIT's SG portfolio, comprising Wisma Atria and Ngee Ann City, contributed 62.8% to total rev, while redevelopment at Wisma Atria has helped boost demand for retail space. The property has achieved 99.5% occupancy. Meanwhile grp’s Msian portfolio provided 16.7% of total rev in the qtr. At current price, grp trades at 6.2% yield, while gearing stood at a comfortable 30.5% and valuation remains compelling at 0.75x P/B. Ratings as follow: CIMB downgrades to Neutral with TP $0.75

SIA Engg

SIA Engg: 1QFYMar13 results in line. Net profit came in at $70.1m, +2.9% yoy, on revenue of $300.5m, +8.2% yoy. Maybank Kim Eng notes concerns of margin erosion and a delayed recovery in the aviation sector remain as risk factors, evidenced by higher subcontract, staff and material costs being main contributors to the 9.6% yoy rise in operating expenses in this qtr. Nevertheless, the house maintains its Hold rating with TP $4.00, pegged to the historical P/E avg of 15.4x FY13e earnings. Notes the MRO segment remains relatively resilient, amidst continue growth in aircraft movement at Changi Airport; highlights sustainability in the stock’s 5-6% dividend yields.


MINT: 1QFYMar13 results ahead. DPU was 2.26cts, +14% yoy, +1.8% qoq, on lower than expected operating costs. Revenue and NPI rose 21% yoy and 26% yoy respectively, supported by stable occupancy (94.9%), positive rental revisions and the contribution from Tranche 2 of JTC’s portfolio. Rent revisions continue to be strong, rising 9.3% to 31.7% for business park space, flatted factories, warehouses, and stack up/ ramp up buildings. Overall, avg portfolio passing rents were flat at $1.56psf. Mgt believes rents for industrial will remain resilient near term and will continue to focus on organic growth. AEI’s remain on track with 50% of new space at Woodlands Central Cluster pre-committed, and completion slated for 2Q13. Meanwhile, its Toa Payoh North 1 Cluster is slated for completion in 4Q13, and its first BTS project for Kulicke & Soffa is scheduled to complete in 2H13. Gearing remained flat at 37.7%, while avg funding cost increased from 2.3% to 2.5%. Deutsche notes valuations look attractive with FY13e yields of 6.9% implying a generous 557bps spread over the 10yr bond. Reiterates Buy with TP $1.26. CIMB downgrades to Neutral from Outperform but raises TP to $1.31 from $1.24.

SG Market (25 Jul 12)

SG Market: Spore shares are likely to come under pressure following the 3rd consecutive triple-digit decline on Wall Street. Technical indicators on the STI are also deteriorating from overbought levels with corporate results showing upside no surprises. Support for the index stands at 2960 with resistance at 3000 level. Hospital-operator IHH Healthcare makes its trading debut, as does alumina-trader Sincap. SIA Engineering 1QFY13 net profit rose 2.9% yoy to $70.1m. ASX and SGX plan to boost trading links. MIT's 1QFY13 came in marginally above expectations as DPU rose 14.1% yoy to 2.26¢. Starhill Global 2Q results was in line with estimates with DPU +3.8% yoy to 1.08c.

Tuesday, July 24, 2012

First Resources

First Resources: DBS Vickers cuts to Hold from Buy, citing the stock has outperformed the STI and CPO prices by 23% and 45% ytd. House notes that while FR's long term prospects remain robust with 3-year earnings CAGR of 19.7%, this has been priced in. It keeps a $2.15 target and suggests locking in gains now. Highlights 2Q12 CPO output rose 5% qoq, slightly ahead of expectations, but CPO price averaged US$828/MT, -7% qoq. It expects 2Q12 earnings to come in ~US$41-46m or down 5-16% qoq. Tips 2H12 output should remain normal as FR did not experience any adverse effects from 1H10's El Nino. DBSV also expects FR to continue to benefit from strong 2Q12 spot refining margins and raises FY12-14 earnings by around 1% after adjusting 2011-14 CPO output CAGR to 8.3%. The stock is down 0.3% to $1.995.

Sino Grandness (technical)

Sino Grandness: Counter appears to have broken out of its one year high at $0.48. A close above those levels could potentially see higher highs. Recall in May, the grp sold Rmb 270m Zero Coupon covertible bonds due 2015 to Goldman Sachs and a Co investor, with its CEO citing Goldman Sachs’ investment as an endorsement of the management of the Group as well as the growth prospects of its beverage business which have grown at a phenomenal pace over the past two yrs. Grp add that in addition to funding support, it could leverage on Goldman Sachs’ global network and extensive knowledge in the capital markets which will add value to its future development, Especially on the Potential Listing of its beverage business in HK.


SIA: Citigroup believes SIA may de-rate and fall below its 1x P/B support level as its strategy lacks coordination and is ineffective. It notes the carrier faces downward pressure on premium yields and from the growing presence of Gulf carriers in Asia, while weak demand and high fuel costs squeeze margins. Its strategy to tap low-cost airline demand by setting up independently-managed airlines, Scoot and Tiger may also have the unintended effect of hollowing out its own economy class while limiting flexibility to react to new opportunities and demand patterns. The house expects SIA to report 1QFY13 net profit of $50m vs consensus estimates of $78m, and cuts FY13-14 earnings forecasts by 70-73% on lower yields and higher fuel costs, noting its estimates are 35-46% below the street. Citigroup is lowering its target to $9.40 from $10.40, based on 0.85x FY13 P/B from the previous 0.97x FY12 P/B, and keeps a Sell call. The stock is currently down 1.9% to $10.60.

DMX Technologies

DMX Technologies: Technical Buy Call by UOB kay Hian with $0.26 TP and potential 13% return. Note that prices appear to trend up and the stock has crossed its mid-Bollinger band. Its MACD and Stochastics indicator appear to form a bullish crossover. Tight stops could be placed at below $0.215.