Friday, November 29, 2013


SMRT: For some reason, CLSA have detected a renewed interest in Singapore’s domestic public transport market over the past two weeks. This could ultimately be due to any number of factors although house would attribute it to three main events: i) ComfortDelGro testing $2, SATS share price correcting to $3 and premature chatter about the benefits of a cost-plus model. The first word in the FRMC report was “Affordable”; this should give some indication as to the direction of the industry’s profitability. Over the past 5-years OPEX has grown at 10% cagr versus revenue at 5%. A fare revision which allows average fares to grow 10% (to meet OPEX growth) given that population growth is 50% slower is an impossibility in our mind. Margin pressure will continue. There has been significant chatter about Singapore’s buses and then trains moving over to a cost-plus or “hybrid” model. This is an obvious conclusion and also the likely one. House view that it is not coming soon as the focus is now on fare review. The market currently suggests that the concession to operate a loss-making transport system is worth SG$0.80. There is ~30% downside to its $0.89 TP. Although on so many metrics, a fair value of ~$0.50 is equally justifiable. Either way, the market’s pricing of this stock is a long way from reality. SELL.

Genting SP

Genting SP: Trading Central notes GENS extended its gains recently, and remains strongly supported by a key horizontal level at $1.41. Both the 20-day and 50-day moving averages are positively oriented, and should also push the price higher. Furthermore, the RSI indicator still holds above its neutral area at 50%. In that case, as long as $1.41 (a MT key support) is not broken, likely advance to $1.55, and even to $1.59 in extension.


MoneyMax: Post the 3Q briefing, Philip believes the strategic shift from trading to retail sales of pre-owned jewellery would yield better results in the long term. This was due to higher margins offered from retail sales as compared to trading sales. MoneyMax continues to improve its branding through its marketing campaign launched in July 2013, in conjunction with IPO. The house maintains its Buy rating but lowers TP to $0.425 (from $0.48). To recap, for 3Q13, MoneyMax reported a decline of 36.5% y-y in revenue to $16.2m. This is mainly due to lower revenue from retail & trading segment, resulting from lower gold prices and deliberate decision to increase inventory of pre-owned jewellery and watches in its retail outlets. Despite lower revenue, gross profit was higher 7.7% y-y due to a shift from trading to retail sales of pre-owned jewellery. Retail sales provide higher margin of 6-10%, compared to 1-3% margin from trading. Net loss was $0.9m mainly attributed to the one-time, non-recurring IPO expense of $1.2m, higher advertising and promotion spending, and increase in rental costs for new outlets on Serangoon Road, opened in Aug ‘13.


NOL: Drewry Maritime Equity Research Upgrade to Attractive. Note that 2014 estimated to be profitable. NOL’s cost saving efficiency drive, which started early last year has helped it secure significant cost savings. 2014 profitability likely on continued cost controls. Believe NOL’s net gearing will reduce marginally starting next quarter and will continue so in the next year as well declining to 1.4x in FY14.


Dyna-Mac: OCBC upgrades from Hold to Buy with a $0.47 TP. Note that Dyna-Mac looks set for a busy year ahead in 2014, buoyed by improving prospects in the FPSO market and a robust net order book of S$346m (as at 13 Nov 2013), thanks to YTD order wins of ~S$320m. There are positive developments happening for its major customers; while Dyna-Mac is also actively pursuing six to seven FPSO projects which it is confident of winning. If successful, this may culminate in healthy order wins amounting to ~S$280-350m for FY14, according to our estimates.


CWT: Following a 28% drop the past six months on back of disappointing earnings, Maybank-KE believe that value has emerged, and reiterate its Buy call with a reduced $1.47 TP. CWT’s logistics business continues to be the gem year-to-date, posting steady growth, on back of an 8.4% rise in warehouse rental rate. Over the next two years, growth will primarily be driven by capacity increase (2m sf), which should help to offset any compression in rental rates. The three new warehouses will add around 20% to the group’s total warehouse area. Despite some short-term volatility in CWT’s commodity unit, the house expect some improvement in copper trading next year, while synergies and margin enhancements could eventuate should CWT successfully integrate its commodity trading with its existing logistics capability. Valuations are undemanding based on Maybank-KE’s sum-of-the-parts valuation, where CWT’s warehouse portfolio has been valued at $758m, representing 99% of current market cap and 55% of enterprise value. At the current price, CWT’s remaining business is valued at 6x FY14 EV/EBITDA, which is at a discount to that of its closest peer Noble (8x EV/EBITDA). Separately another local broker upgrade the counter to O/p this morning, citing similar grounds of attractive valuations, addition of new warehouses and a recovery in soft commodities logistics.


Brazil / GLP: two workers were killed on Wednesday after a crane toppled, crushing a portion of the Itequerao stadium, one of 12 being built for the opening game of the football World Cup in Sao Paulo next year. Fifa, the sport’s governing body has demanded that all work be finished by the end of next month, but several stadiums are already behind schedule. The accident casts another shadow over Brazil’s preparations for the World Cup, which have been plagued by delays, accidents, cost overruns and public anger over govt waste that led to nationwide protests last year. GLP’s Brazil portfolio size currently stands at 2.1m sqm, with pro-rata valuation of US$644m (~6% of group gross asset valuation). Investors remain hopeful that GLP can replicate the success with Brazil, that it achieved developing logistic properties in China and Japan. GLP’s consensus RNAV stands at $3.30.

EMS Energy

EMS Energy: Provides a corporate and business update following its strategic review to counter the challenging macro-economic and operating environment. The major strategic thrusts going forward are: i) to establish strategic business units for its three main product groups comprising rig solutions, crane and lifting solutions and marine solutions, ii) to leverage on its local partners’ connections to obtain orders, eg. its joint marketing agreement with Scana Offshore Vestby of Norway, and iii) to source for a larger waterfront facility to increase productivity and capacity to produce higher-margin offshore modules. Implementation of the strategy thus far, has led the group to secure various projects, worth >$70m to date, to be progressively recognized by the end of FY14. Mgt is cautiously optimistic that in view of the strategic actions being undertaken and the projects in hand, the group’s revenue and gross profit in 2H13 will exceed that of 1H13.


CAO: has expanded its operation in Europe with the establishment of a wholly owned subsidiary, China Aviation Oil (Europe), in the UK. This marks a new milestone towards the group’s strategy to build a global supply and trading network. CAO hopes to leverage on its new London office to capture the increasing trade flows from Asia Pacific to Europe – a market increasingly dependent on imports where ageing and less cost-efficient refineries are being closed. In addition, the Europe footprint would provide opportunities for the group to tap into markets such as the US and Middle East via cross regional deals. CAO Europe will also provide refueling services to airline customers at designated European airports.

Technics Oil & Gas

Technics Oil & Gas: Flagged out by the group's profit warning for 4QFY13, Technics Oil & Gas recorded a net loss of $8.6m from earnings of $2.4m in 4QFY12, on the back of a revenue slump of 69% to $7.7m, due to the spin-off of Norr Offshore Group (NOG), resulting in a significant drop in contributions from subsidiaries. This brought FY13 net loss to $9.9m from a profit of $20.2m in FY12 and revenue to $41.0m (-73%). Going forward, the group remains on track with projects in its pipelines within the regional market, and do not expect any adverse changes from clients' agreed contract deliveries. On its new building block at the existing property at 72 Loyang Way, the group intends to sublet some of the premises in the new building to marine-related and offshore oil & gas industry players for supplemental income, as well as to forge closer ties with industry operators.


Pteris: will acquire the remaining 30% of passenger boarding bridge manufacturer, Tianda from Shenzhen TGM for Rmb208.4m ($41.3m), as part of its RTO plans. This is in addition to the the 70% of Tianda to be acquired from CIMC (HK) for $96.3m, announced in Jul. Valuer JLL will value Tianda and issue a report in due course. Like its purchase of the previous stake in Tianda, Pteris will issue new shares at 13¢ each to satisfy the deal. Pteris will issue 230.8m shares amounting to $30m, and another $7.2m to be raised at a later date, depending on Tianda’s profit conditions. Another $3m of new shares will be issued subject to the result of ongoing arbitration proceedings involving Pteris and a Middle East project. The final $1.1m will be satisfied subject to the settlement of claims relating to outstanding payments due from third parties. When the RTO was announced, some shareholders had grumbled about the valuation. Pteris' NAV stood at 9.6¢ a share as at end-Sep, even though the terms of the reverse takeover are at 13¢ share. But in its 2012 annual report, Pteris revealed that independent valuers had revalued its leasehold building - understood to be their headquarters at 28 Quality Road - to $53m, compared with the $18m that the building was held at cost on its books. This would boost its restated net asset value (RNAV) to $87.7m, or 16¢ a share, 23% higher than the RTO price. In addition, the company also has outstanding arbitration and settlement claims. Pteris's second largest shareholder, non-executive director Winston Tan Tien Hin, who has a deemed stake of 10.5% said "The RTO pricing is too low." Mr Tan has been accumulating shares in the company. The RTO is subject to shareholder and regulatory approval.


Gaming / GENS: The govt is looking to introduce by next year, amongst the most comprehensive curbs in any jurisdiction to online gaming, such as by blocking access to illegal gambling websites, prevent payment to operators and ban advertisements for online gambling. The authorities are also considering whether to allow a limited form of legalized online gambling so that gamblers do not end up resorting to illegal gambling and betting offline. Spore’s remote gambling is estimated to be worth more than $370m and expected to grow by 6-7% pa. Market watchers think that a clampdown could push hardcore gamblers to gamble offline, which may benefit the local integrated resorts. Meanwhile, sentiment in gaming counters could get a lift as lawmakers in Japan are planning to submit an initial bill aimed at legalizing casinos by 6 Dec. GENS mgt has previously mentioned its keenness to expand into other Asian geographies, in particular Japan.


Centurion: Makes first foray into the Australian student accommodation business Worker dormitory provider, Centurion will acquire the RMIT Village and an adjoining car park building for a total purchase consideration of A$60m. The market may react positively to Centurion’s first foray into the student accommodation business, considering the attractive gross property yield, potential earnings accretion, and asset enhancement (AEI) options available to drive further growth. RMIT Village is located on the northern edge of Melbourne’s CBD, in close vicinity to RMIT University and the University of Melbourne. Sited on a 4,000 sqm freehold land parcel, the accommodation comprises 229 apartments and a current capacity of 456 beds. Typically, RMIT University reservations account for 70% of the total occupied beds annually. Occupancy at RMIT Village has been close to 100% in the past three years. In fact, the majority of its residences for 2014 stay are sold out, according to its website. The property will provide an estimated gross property yield of 13.6%, assuming the average per person weekly rate that ranges from A$272 to A$417. Furthermore, the existing student accommodation presents Centurion with asset enhancement opportunities to increase its bed capacity in the future. The adjoining car park building may also be redeveloped into new apartment buildings for university students and/or staff working in the healthcare industry in the vicinity. Slated for completion in early 2014, the proposed acquisition is expected to be earnings accretive, and is in line with Centurion’s business strategy to expand its scope of business and further grow its regional presence. The investment will be funded with proceeds raised from an Oct Medium Term Notes issue Oct and bank borrowings. Centurion currently owns eight worker accommodation assets spread out across Singapore and Malaysia with a total bed capacity of over 30,000 beds. At $0.55, the counter trades at 1.6x P/B, 19.4x annualized 3Q13 P/E.


Swissco: Secured charter contracts worth an aggregate of $27m for two anchor handling tug and supply vessels. The new 60-meters vessels will be deployed immediately after the group takes delivery of them in Dec '13 and Jan '14. One of the vessels will have a minimum deployment period of 12 months in the Middle East with a sale and purchase option exercisable after the charter period, while the second vessel will be deployed for a total of 27 months in North East Australia. Swissco is undergoing a fleet renewal initiative, getting their vessels from Chinese shipyards, and targets 50 offshore support vessels (OSVs) over the next few years from the 33 vessels currently. The group expects healthy demand for its vessels in the mid-term. Vessel chartering generates better margins compared to its maritime services and repair segments. In the recent 3Q results, vessel chartering contributed 90% to group’s revenue and we expect the segment to continue its robust performance over the next year as its fleet gets renewed. At $0.295, Swissco trades at an attractive trailing P/E of 8.1x, slightly above its historical average. Valuations may be supported by the group's growth in the near-term, for investors looking for exposure in a conservative OSV player with relative lower gearing compared to peers.

SG Market (29 Nov 13)

Market Roundup: US markets were closed for the Thanksgiving holiday on Thu but Asian and European stocks ended higher. In Europe, equities finished on a moderately positive note in thin volumes despite a Bank of England move to scale back mortgage lending. Asian stocks were led by Japan with the Nikkei hitting its highest level since 2007 after the yen slumped to a 6-month low, boosting shares of exporters on expectations of further monetary easing by the BoJ. Chinese stocks traded higher after Asia’s biggest economy reported a 15% jump in Oct industrial profits, outpacing the 13.5% increase in the previous month, while HK stocks lost steam in late session ahead of the US holiday. With no cues from US, The S’pore market may have to beat its own drum with the STI testing its immediate resistance at 3,190 level. Momentum and breadth indicators are pointing to a possible short term bounce towards the next objective at 3,230, capped by the 200-day moving average, while underlying support stays at 3,123. Stocks to watch: *Swissco: Secured $27m of charter contracts for 2 anchor handling tug and supply vessels. First vessel will deployed immediately for at least 12 months in Mid-East with a sale and purchase option exercisable after charter period, while second vessel will be deployed for 27 months in north-east Australia. *Centurion: Acquiring RMIT Village and adjoining car-park building in Melbourne for A$60m. Sited on a 4,000 sqm freehold land parcel, the accommodation is near to RMIT University and University of Melbourne anfd comprises 229 apartments and a current capacity of 456 beds. The car-park builing may be redeveloped into new apartment buildings for university students and staff working in the healthcare industry in the vicinity. *Oxley: Entered JV to develop 15.3-acre freehold agricultural land in Selangor, Malaysia into a proposed 900-unit residential project. Group will develop the land at its own costs and bear all state development charges up to maximum RM12m, with partner Peninsular Teamwork bearing 30% of any amount beyond the first RM7m. Peninsular will be entitled to 30% of project's gross development value of no less than RM200m or sgd77.7m. *Pteris: Acquiring balance 30% stake in Shenzhen CIMC-TianDa, a passenger boarding bridge manufacturer and operator from Shenzhen TGM for Rmb208.4m. The group has earlier proposed to acquire a 70% stake in TianDa from China Int’l Marine Containers for $96.3m in a RTO deal via issue of 107.7m 5-into-1 post consolidation shares at $0.65 each in a reverse takeover deal. *China Aviation Oil: Expands footprint in Europe with the setting up of new trading unit in UK. The London office aims to capture increasing trade flows from Asia Pacific to Europe and broaden its marketing opportunities to airline customers at designated European airports to enhance its trading activities. *Etika: FY13 net profit plunged 66.2% to RM7.4m on flat revenue of RM981.8m as bottomline was impacted by intensive competition, aggressive marketing effort to promote sales, FX loss of RM6.5m due to weakening of rupiah and higher tax charge. Gross margin improved 2 ppt to 22.8% mainly on reduced raw material costs of core dairy products. The group opened 6 "Texas Chicken" outlets in Klang Valley with another one in the pipeline slated for 1Q14. Final DPS of 0.2¢ has been declared. *Technics O&G: Dived to a net loss of $8.6m loss from $2.4m profit a year earlier as revenue sank 69% y/y to $7.7m due to the spin-off of Norr Offshore Group and unexplained drop in contributions from other units. The miserable results dragged FY13 to a net loss of $9.9m vs $20.2m profit in FY12. The group recorded a gross loss of $1.9m and other charges of $2.4m from bad debt write-offs in the 4Q. Net gearing was elevated to 0.5x from 0.3x in FY12. *Goodland: FY13 net profit came in at $17m (-31%) and revenue at $37.3m (-33%) with the declines attributed to the sales recognition from projects of lower value compared to those in FY12. The group booked revenue from Royce Residences, OneRobey, Suites@Topaz, The Shoreline Residences 1& II and 26A & 26C Poh Huat Road. NAV rose to 35.72¢ from 27.56¢. Final DPS of 0.5¢ was unchanged. *Nam Lee: FY13 net profit dropped 36% to $8.9m even though revenue climbed 10% to $170.8m due to increased sales from building projects but this was offset by a slump in gross margins to 15.1% from 22.6% as a result of higher cost incurred by a project, which has since been substantially completed. Final and special DPS of 1.5¢ has been proposed vs 2¢ the previous year.

Thursday, November 28, 2013


Centurion: has made its first foray into the student accommodation business, after being selected as the successful bidder for the RMIT Village and an adjoining car park building in Melbourne, for a total purchase consideration fo A$60m. RMIT Village is located on the northern edge of Melbourne’s CBD, in close vicinity to RMIT University and the University of Melbourne. Sited on a 4,000 sqm freehold land parcel, the accommodation comprises 229 apartments and a current capacity of ~456 beds. Typically, RMIT University reservations account for 70% of the total occupied beds annually. Occupancy at RMIT Village has been close to 100% in the past three years. The existing student accommodation presents asset enhancement opportunities to increase its bed capacity in the future. The adjoining car park building may also be redeveloped into new apartment buildings for university students and/or staff working in the healthcare industry in the vicinity. The proposed acquisition is in line with Centurion’s business strategy to expand its scope of business to include the student accommodation business and further grow its regional presence. As an operational asset, the proposed acquisition of RMIT Village will be earnings accretive for Centurion and is expected to contribute to its bottom line upon completion of the acquisition which is expected in early 2014. The proposed acquisition will be funded through proceeds from Medium Term Notes issued back in Oct and bank borrowings. Centurion currently owns eight worker accommodation assets spread out across Singapore and Malaysia with a total bed capacity of over 30,000 beds.

Wilmar (technical)

Wilmar: Trading Central notes the stock is still on the upside, supported by a ST rising trend line. Both the 20-day and 50-day moving averages are turning up, and play well as support roles. Furthermore, the RSI bounced off its neutrality area at 50%. As long as $3.25 is not broken, further advance seems more likely to $3.75 and $3.92 in extension.

SinoGrandness (technical)

SinoGrandness: RSI and Stochastics ticking upwards seem to suggest further price upside for the counter in the near term. Support at $0.710 followed by $0.685, while resistance levels are at $0.75 followed by $0.765.

Cosco Corp

Cosco Corp: CLSA reiterate SELL with $0.45 TP, implying 38% downside from current levels. While Cosco has been able to secure large offshore orders in FY13 and now sits on a gross order book of over US$8b, a combination of low pricing and poor execution will lead to sharp margin declines which implies that profitability is likely to disappoint street estimates. Cosco has faced cost and time overruns on multiple projects results in large provisions. CLSA remain sceptical about the company’s ability to drive a margin rebound as diversified product mix will limit learning curve gains and thus cut our gross margin assumptions to 9.1% for FY13 and 10.1% for FY14. Further, the stock is trading at an expensive 35x FY14 PER. House prefer Singapore yards for offshore exposure and Yangzijiang for Chinese shipbuilding.


SuperGroup: Macquarie upgrades to O/p, TP $4.40, citing that its time for a pick-me-up. Stock has corrected far too much after posting a poor 3Q result. Poor 3Q but not a sign of structural deterioration; Competitive advantages in Myanmar intact; New branded consumer market, China, another growth avenue. Risk reward skewed to the upside, op. margins (+10% input costs) implies 5% downside vs. bull case, +43%. Trading at 18x PER 2014E vs 25x for it peers, believe the stock offers an attractive risk-reward pay-off.

RH Petrogas

RH Petrogas: UOB kay Hian maintains Buy with $1.60 TP. Note that RHP announced yesterday that its wire-line logging at its Klagalo-1 exploration well indicated that there were potential hydrocarbon zones from the Kais limestone and final tests are being done now. While it did not mention if the hydrocarbons were recoverable, the house upbeat about the oil discovery. Remain encouraged with potential upcoming newsflow which may boost shareholders’ value.

ST Engineering

ST Engineering: With QE tapering likely to start in early 2014, CS least preferred stock is ST Engineering (UNDERPERFORM with $3.40 TP) on its limited scope for yield compression. STE's yield spread vs the Singapore government bond is 2.1%, one std dev below the historical average. In addition, house note that while bond yields in Singapore have risen from a low of 1.3% to 2.3%, they are still 80 bps shy of normalised levels of 3.1%.


Yangzijiang: CS has an OUTPERFORM rating with $1.19 TP. House expect a mild commercial shipbuilding upcycle in 2014, driven by vessel prices that are close to trough, as well as a sustained recovery in the global economy. A growing order backlog for yards should be positive for newbuild prices, which have improved 4.0% since troughing in May 2013. With its strong financial position, CS expect Yangzijiang to benefit disproportionately from the recovery in newbuild orders. Yangzijiang has secured US$2.63b of contracts as of 13 Nov, representing 88% of its 2013 forecast of US$3.0b. House expect another US$2.4b of orders for the company in 2014, as Yangzijiang has 30 options outstanding worth US$1.48b, including options with Seaspan for nine 10,000 TEU containerships.

Keppel Corp

Keppel Corp: CS maintains its OUTPERFORM rating and $12.90 TP on counter, being its top pick within Singapore's capital goods sector. House believe it will be a key beneficiary of Mexico Energy Reform, with the recent MOU signed with PEMEX to jointly develop, own and operate a yard in Mexico. Despite Chinese competition, CS believe Keppel is well positioned in the rigbuilding market due to its wide offering of proprietary rigs and established ‘near market, near customer’ strategy. Keppel has secured about $6.7b of contracts YTD, representing 96% of our 2013 forecast of $7.0b. Next year, house expect $7b of orders in 2014, driven by strong jackup demand from Mexico, as well as options exercised by Transocean for more jackup rigs.


Olam: StanChart maintains its OUTPERFORM rating on Olam with $1.93 TP, but remove its ACT (Actionable, Conviction, Timely) call on the counter. Industry consolidation appears underway and at 1x current book, house also see considerable value in Olam on a medium-term basis. Olam's investor education programme helped improve knowledge on its operations, but not the positive share price impact that StanChart expected. This was partially due to its weak 4QFY13 earnings and lack of buying by Temasek (24% stake) when the share price fell below $1.60. StanChart now expects that the re-rating process will most likely be a more drawn out affair built around earnings, cash generation and balance sheet management.


CMA: CIMB maintains O/p with TP $2.30. Note that recent ground checks on CMA’s retail malls in China reinforce view that asset management remains its edge over local developers. Asset build is on track, footfalls are encouraging and more malls are maturing. Expect its operational metrics to improve in FY14-15. Tweak FY13-15 core EPS by 1-2% and nudge up our target price (still based on 10% discount to RNAV) for slightly higher rental estimates after our China trip. Reiterate Outperform rating, with rental yield improvements and potential asset recycling being the catalysts.


Cosco: OCBC maintains Sell with $0.61 TP. Note that 2013 is looking to be the weakest year in terms of earnings for COSCO Corp (Singapore). After recording net profit of $139.7m and $105.7m in FY11 and FY12, respectively, net profit for FY13 looks set to be below $50m. Indeed, after five quarters of either little cost overruns or reversal of provisions made earlier, COSCO returned to making provisions on its construction contracts again, dousing hopes that it is gaining footing on the execution front. Looking ahead, expect the operating environment for the group to remain difficult. Any credit tightening in China may also affect the ability of customers to meet their financial obligations.

China Aviation Oil

China Aviation Oil: Reuters notes that CAO, Asia's top jet fuel buyer, is tendering for up to 1.6m bbls of jet fuel for delivery over late Dec to Jan, ~30% higher than what the company has been requiring every month over the past two tenders, though the reason was not immediately clear. CAO had earlier halved its monthly jet fuel requirement for Oct due to a tax policy change that went into effect in Aug. China removed a value-added tax exemption on imported jet fuel used by Chinese airlines on their international flights, making imports more expensive than buying from domestic refiners, traders said. CAO resumed normal purchase volumes in Sep for its late Oct to Nov volumes, though it is unclear if this will be a long-term trend.


Oxley: has sold $100m of three-year bonds, its sixth debt issuance this year. The bonds were priced at 5.10%, and orders were in excess of $120m, according to DBS, the sole arranger of the issue. Private bank clients made up 98% of investors while 99% of the bonds were sold in Singapore. Including the latest deal, the property company has this year raised $600 million from the local debt market. The shoebox apartment specialist has of late ventured overseas. Early this month it acquired three freehold and three leasehold adjacent parcels of land in London's Royal Docks area. The Royal Wharf development site, which was purchased at £200m, yields an effective gross area of ~363,000 sqm. Oxley has said that it intends to develop the parcels, which stretch for about 500 metres facing the River Thames, into more than 3,400 homes, along with a mix of commercial, retail, leisure and educational facilities. This came hot on the heels of a ramp-up in overseas acquisitions over the quarter. In July, Oxley unveiled separate acquisitions of three plots of land in Cambodia. Adding a JV to develop another plot, this brings the total number of pipeline projects in Cambodia to four. In China, Oxley entered into an agreement to acquire a 10% stake in GD Capital, which will ultimately hold the land use rights for two plots of land of 102,506 sqm and 80,599 sqm, respectively, in Xuancheng Economic and Technical Development Zone, Anhui province. Under the deal, Oxley will also be able to participate, with up to 30% interest, in the development of five other land parcels in the same economic zone. The company has a further five projects in Malaysia spread across Selangor, Johor Bahru, Kuala Lumpur and Penang. It marked its first overseas acquisition on May 29, when it bought a Malaysia-incorporated company that clinched the rights for a mixed development site in Kuala Lumpur. Oxley this month posted record-high quarterly earnings, with 1QFY14 net profit surging to a record $250.8m, from just $6.6m a year ago. Revenue soared to $686m, compared with $50m a year ago.

Sing Post

Sing Post: has become the world's first postal service provider to offer bank bilateral remittance services with Myanmar. Through its partnership with four commercial banks in Myanmar - Asia Green Development Bank (AGD Bank), Cooperative Bank (CB Bank), Kanbawza Bank (KBZ Bank) and Tun Foundation Bank (TFB), SingPost will offer fund transfers from Singapore to Myanmar via its Cashome remittance service available at all its post offices. The Myanmar community in Singapore is estimated to be around 150k to 200k strong. Apart from remitting money to their beneficiaries, Myanmar senders can remit salaries back home for savings purpose to earn an interest rate of 8% pa, compounded quarterly, offered by the banks in Myanmar. The money is remitted in Myanmar kyats, with the exchange rate determined at the point of remittance transaction. SingPost believes Myanmar provides new growth opportunities for the group. SingPost also provides remittance corridors to India, Indonesia and the Philippines.

First Resources

First Resources: The latest FFB production figures for Oct showed 18.2% y-y blended growth, and, for 10M13, FFB production grew 3.8% y-y. Mgt said that Oct was FR’s peak production month and Nov and Dec’s FFB growth will be lower y-y, and at best, production will rise 5% y-y in 2013. FR will buy more third-party FFB to keep its mills running above 60% utilisation. For 2013, BNP lowers FFB growth to 3% y-y (from 10%) while in 2014, it now expects 13% y-y FFB growth (15%). Nevertheless the house keeps its TP of $2.76, based on 14.7x FY14e P/E. Maintains its Buy rating as FR still has an attractive oil palm age distribution – 69% of trees are in the maturity stage.

Keppel Land

Keppel Land: Hosted a site visit for analysts in Shanghai. Since Keppel Land China was formed in 2010, China has grown from 20% of assets (or $1.7b) to 44% ($5.8b). The co has made $2.1b of acquisitions since then, largely focused on the key markets of Beijing ($0.2b), Shanghai $0.8b), Chengdu ($0.5b), Wuxi ($0.45b) and Tianjin ($0.05b). The land bank has grown to 5.6m sqm or 40k units. Credit Suisse believes there will be more collaborations between KPLD and China Vanke after their strategic alliance signed in Apr. Meanwhile, ideally, trading profits should make up 70-80% of China's profits, with preference for Tier1/2 cities as they can differentiate themselves as foreign developers and are able to tap into existing relationships, with lower risk of oversupply, given urbanisation. Management also plans to grow its commercial division to provide some recurring income. KPLD has sold 3,600 units (YTD to mid-Nov 2013) vs. 1,650 units in FY12. End-user focused projects such as Springdale (96% of 611 units sold YTD), Stamford City in Jiangyin (73% of 416), and Botanica in Chengdu underpinned volumes. ASPs have firmed y-o-y, with modest sub 5-10% price increases. Achieved selling prices and volumes are consistent with market estimates. Deutsche maintains Buy with TP $4.27. Credit Suisse maintains Neutral with TP $4.24 BNP maintains Hold with TP $3.92

SG Banks

SG Banks: Maybank-KE upgrades sector to OverWeight: DBS remains the popular pick Maybank-KE upgrades the Singapore banking sector to Overweight, with DBS as the house top pick. With short-term interest rates expected to bounce up as early by 2015, this could spark a new re-rating wave as early as 2H14, after several years of depression in net interest margins. The house projects 3M SIBOR to rise to 1.0% by end-2015 and to 2.0% by end-2016 (currently 0.4%) and conclude that overall industry asset quality should remain resilient due to: 1) the majority of the loan growth came from traditionally safer housing loans and short-term US$ trade loans; 2) strong household balance sheet; 3) decent corporate balance sheet; and 4) a growing economy DBS (Buy: TP $19.70) ranks highly given its position to benefit the most from higher interest rates given its strong deposit franchise and liquid balance sheet, while the on-going transformation at DBS should support a higher medium-term ROE profile. Also upgrade UOB (Buy: TP $23.40) on its resilient Asean market exposure which allows it to capture Asian consumer affluence, cheap P/E valuation, and management’s discipline in M&A’s suggests low risk of overpaying for Wing Hang;. OCBC (Hold: TP $11.30) is the house least preferred bank, for its volatile earnings profile, and risk of overpaying for Wing Hang. Separately, we note that two foreign brokers had similarly reiterated their Buy calls on DBS this morning, citing the bank as its top pick Singapore banking pick, on grounds of the group’s ability to leverage off its stronger foothold in the private banking industry, its strong NIM outperformance and limited risky Asean exposure.


Mermaid: Chalked in a strong FY13 performance which was above estimates, as full year net profit came in at US$15.7m (+389%) and revenue at US$269.6m (+47%), with bottom-line buoyed partly by a 45% drop in finance costs to $5.0m and a US$4.4m (FY12: -US$0.3m) contribution from associates. The strong top line was buoyed by Mermaid Offshore Services (MOS) which reported revenue of US$121.2m (+20%), as more subsea services was performed, while Subtech saw revenue at US$117.9m (+173%) primarily due to its Saudi Armaco diving services contract. Mermaid Drilling was the drag, reporting revenue of US$23.6m (-33%), as MTR-2’s utilisation rate was only 43.3% in FY2013, as it was back on-hire on 29 May13 after its special purpose survey. The strong associate contribution was a result of AOD I and AOD II which commenced work on 1 May13 and 13 July13, respectively. The sharp decrease in finance costs was due to the cancellation of a currency swap in last year and a lower average LIBOR in FY13. Going forward, Mermaid notes that the Group is experiencing greater demand for its subsea vessels and related services as evidenced by higher number of contract awards secured, and remains cautiously optimistic on the outlook of the offshore O&G sector, given the stable oil price and continued spending by O&G companies. For tender rigs, add that overall demand for jack-ups has improved globally, particularly in Asia and the Middle East. Positive contributions from Asia Offshore Drilling have begun as all its three jack-up rigs are fully employed each on a 3+1 year drilling contract in the Middle East. At the current price, Mermad trades at 16x FY13 P/E versus its Singapore peer average of between 7.5x to 25.7x. The group has proposed a dividend of US$0.0086, representing a yield of ~2.7%. Latest broker ratings as follow: CIMB maintains O/p and ups TP to $0.51

SG Market (28 Nov 13)

Market Roundup: US stocks extended their record breaking run in light trading led by a technology rally as upbeat employment and consumer confidence boosted optimism that growth can be sustained when the Fed starts easing its monetary stimulus. The US market will be closed for Thanksgiving holiday on Thu and open for half day on Fri. Economic data showed jobless claims fell 10,000 to 316,000 last week, fewer than the 330,000 expected, while the Thomson-Reuters/Univ of Michigan consumer sentiment index for Nov unexpectedly rose to 75.1 from 73.2 a month earlier. The Conference Board’s index of US leading indicators made a surprise 0.2% gain, rising for a 4th straight month in Oct. Bucking the trend was the 2% decline in Oct durable goods orders. Meanwhile, former Fed chairman Alan Greenspan weighed in on the market, declaring that US stock prices do not show signs of a bubble. Crude oil slipped 1.5% to US$92.30 per barrel on higher supplies, while gold headed for its first annual drop in 13 years, sliding 0.3% to US$1,238/oz. The S’pore market is expected to remain subdued with no clear conviction as investors switch to the Japanese market on BoJ's continued commitment to its massive asset-buying campaign even as tensions rise in the East China Sea following China’s unilateral declaration of an air defence identification zone and US latest challenge to it. The STI is likely to be pinned beneath the 20 and 50-day moving averages at around 3,190 with stiffer resistance at 3,232 and underlying support at 3,123 level. Stocks to watch: *Blumont/LionGold/Asiasons/Innopac/Ipco: Interactive Brokers is suing at least 10 clients to recover US$68m in losses from Oct's penny stock and has obtained court order to freeze assets of 8 clients, including certain directors/shareholders of Blumont, LionGold, Asiasons and Innopac. Assets were frozen for M’sian nationals Neo Kim Hock, Peter Chen Hing Woon, Tan Boon Kiat, Quah Su-Ling, Lee Chai Huat and Kuan Ah Ming and 2 BVI-registered companies, Sun Spirit Group and Neptune Capital. Neo is Blumont’s outgoing chairman and has>20% stake in Neptune, which holds 50m Blumont shares and 1.7% stake in LionGold. Quah holds 2.15% stake in Blumont and is CEO of Ipco Int’l, which holds a 9.7% stake in Blumont. Chen is LionGold’s director of business and corporate development and holds a 2.09% stake in Asiasons. MAS and SGX are currently reviewing the circumstances surrounding the trading of those stocks. *Mermaid Maritime: FY13 net profit soared almost 4-fold to US$15.7m (+391%) on revenue of US$269.6m (+47%), with bottomline buoyed partly by a 45% drop in finance costs to $5m and a US$4.4m contribution from associates. The strong performance came from Mermaid Offshore Services, which saw a 212% increase in operating profits to US$15.2m, while Subtech saw operating profits surge 216% to US$11.6m. A final plus special DPS of US0.86¢ was proposed. *Interra: Completed development well TMT-57 at the Tanjung Mining Timur field in South Sumatra, Indonesia, which achieved a flow rate of 650 bpd and commenced drilling TMT-58, the third of four development wells at the same reservoir. *RH Petrogas: Provided schedule of upcoming updates on its Indonesia production sharing contracts (PSC), with test results for Klagalo-1, Klalin-15 and Klalin-17 wells at Kepala Burung PSC expected in Dec. The group is also is targeting an approval of the overall development plan at Fuyu PSC in the same month. Next year, the group intends to announce its progress on exploration drilling of Koi-2 appraisal well at Selawati Kepala Burung PSC in Jan 14 and an approval of the North Klalin field development plan in Mar 14. *Sembcorp Industries: Issued $200m 3.64% fixed rate notes due 2024 under its $2b multicurrency MTN programme.

Wednesday, November 27, 2013

52 wk highs/ lows

52 wk highs: UE E&C, C&G Environment, ECS, Eastern Holdings, Vallianz, Lizhong Wheel ETF -- Lyxor Nasdaq 100-B, Lyxor UCITS HSI 52 wk lows: Jardine Matheson, Courts, Technics Oil & Gas, Renewable Energy, ISR Capital


Singtel - Latest news was 2 days back when The Infocomm Development Authority (IDA) gave approval for SingTel’s NetLink Trust to acquire 100% of OpenNet for $126m. OpenNet is a joint venture between four partners (which includes SingTel as a 30% shareholder), responsible for building S’pore Next Generation Nationwide Broadband Network (NGNBN). To assuage industry concerns that SingTel could receive special treatment from OpenNet, the IDA has introduced safeguards and conditions to ensure that SingTel would not be able to have control over the management and key operations of OpenNet. In addition, SingTel will be required to cut its 100% stake in NetLink Trust to under 25% via a public listing, though the IDA has extended the dateline for this stake reduction to Apr ’18 from Apr ’14. Maybank-KE opines that StarHub, M1 and other ISPs are likely to view this development as a non-event, as they would have evolved in their own ways of coping with OpenNet. The house makes no changes to its ratings on Starhub (Buy, TP $5.13) and M1 (Buy, TP $3.98). Bottom-line is that SingTel (Hold, TP $3.60) remains the one under official pressure, as shareholders hoping for a special dividend from the spin-off of NetLink Trust would be disappointed now that the required sell-down period has been extended by four years.

Noble Group (technical)

Noble Group: VR Technicals has a Technical Buy Call with $1.17 TP. Note that MACD (26,12,9) is trending higher suggest that upward momentum is still strong on the upside. 14-day stochastic and relative strength index moving above/near its overbought region confirm bullish outlook. For more risk adverse traders, VR Technicals suggest a buy should share price retrace to its 20 day Ma of $1.06.

AP Strategic

AP Strategic: Has proposed a renounceable rights-cum-warrants issue, on the basis of: - 5 rights shares (issue price: 2¢ each) for every 1 existing share, and - 1 warrant (exercise price: 2¢ each) for every 1 rights share subscribed Assuming none of the warrants are exercised, AP Strategic stands to raise between $12.6m and $21.7m, depending on the take-up rate of the rights issue. The additional proceeds arising for the exercise of all of the warrants is ~$21.9m. The net proceeds from the rights shares will be used to defray the company’s costs and expenses arising from its proposed acquisition of Coeur Gold Armenia from George H Richmond, first announced early Sep. The counter is up strongly for the second consecutive day, +14.9% at $0.27. Recall, AP Strat previously tipped that the acquisition of Coeur Gold Armenia would be fulfilled by cash and the allotment and issuance of new shares. Coeur Gold controls the interests in two companies incorporated in Armenia which in turn hold mining exploration rights in the Azatek and Sofi Bina Mineral Deposits, Armenia in respect of gold, silver, antimony and copper.

SP Windsor

SP Windsor: Completed its placement of 24.5m shares @ $0.22 apiece, and the company has met the minimum public float requirement by SGX. The bulk (70%) of the net proceeds of $5m will be used to fund potential acquisitions, investments and business expansion plans in line with the Group’s business, while the remaining will be used for its working capital. The counter will resume trading at 9.00a.m. tomorrow.

MFG Integration Tech

MFG Integration Tech: Corporate news on the manufacturer and distributor of automated equipment for the semiconductor industry is thin, with the most recent being its 1H13 results on 5 Aug. 1H13 incurred a net loss of $4.1m, caused by the weak market for the semiconductor equipment worldwide. Group expects the sluggishness of the industry to bottom in 2H. The Company is positioning itself for the anticipated recovery in 2014 with our new range of equipment to cater to customers’ new advanced packaging requirements. Today’s share price action looks like investors may be taking profit after the unexplainable share price spike of 36% over the 18-25 Nov period, as the counter moves back to the $0.07 level before the run.

Keppel Corp

Keppel Corp: Barclays reiterates Overweight with TP $13.10, says KEP is still its preferred conversion yard. Industry reports from Upstreamonline (22 Nov 13) have signaled another potential contract – from FPSO operator Bumi Armada.With Bumi Armada having gone to Keppel Shipyard for its previous FPSO conversions, expect the finalization of Bumi Armada’s contract with EnQuest could eventually translate into a FPSO conversion contract for Keppel, which could be a contract win of at least US$100-200m. The house believes this potential contract with Bumi Armada would be further affirmation of Keppel’s proven track record and quality – which still acts as a significant barrier to entry for new entrants.


SIIC: Counter had been gaining traction lately after the share placement done at $0.085 apiece. The water purification and wastewater treatment player in China looks forward to obtain more support from its parent company, Shanghai Industrial Holdings to fund its business development and expansion plan. SIIC is poised to benefit from the positive policy directives on the development of the incineration sector in China, with investments in the waste-to-energy industry projected to reach Rmb50b over the next five years from Rmb17b in 2012 and operating income estimated to grow 18% annually over the nexy 10 years.


Hankore: no news to explain today's 4.2% tick up. Nevertheless Hankore is one of the better proxy plays for investors who which to ride on the China water theme. Latest 1QFY14 results out in mid Nov were fairly robust and validates the group's growth potential. The counter is one of the picks for Market Insight's model growth portfolio.

DBS (technical)

DBS: Trading Central notes the stock remains on the upside, backed by a rising trend line, which has played as a key support since June 2013. Furthermore, the ascending 20-day and 50-day moving averages suggest that the stock still has potential for a rise. In addition, the RSI indicator is bullish, and calls for further advance. As long as $16.5 holds on the downside, the house sees a continuation of the rebound to $17.55, and even to $17.9 in extension.

Aims AMP Capital REIT

Aims AMP Capital REIT (AAREIT): On its recent proposed 49% stake acquisition in Optus Centre for $215m, StanChart estimate the acquisition will be c.2% accretive, even if it is 40% funded with equity to keep leverage at c.36%. Management expects to fully debt-fund the acquisition, with at least 60% in AUD debt to provide a natural hedge against the AUD. House estimate this to be c.6-8% accretive, depending on the amount of AUD-debt drawn. However, leverage will rise to 37.7% from 25.2% currently, and reach c.42% upon completion of the ongoing redevelopment projects. StanChart assumes AAREIT to raise $86m of equity in the next 12 months to repay debt and keep leverage at c.36%, making the acquisition just c.2% accretive. AAREIT offers a 2014-16E DPU CAGR of 4.5%, the highest among industrial SREITs, and is currently trading at 1.0x NAV. StanChart lower its TP by 3% to $1.64 and maintain its OUTPERFORM rating.

Tat Hong

Tat Hong: HSBC initiates on counter with an OVERWEIGHT rating and $1.66 TP (implied upside of 84%), based on a DCF valuation. Being the largest crane company in Asia Pacific with a diversified fleet portfolio serving various industries, Tat Hong's earnings growth will be supported by the robust demand in ASEAN and China, outweighing near-term headwinds from Australia’s downturn. HSBC expect Tat Hong’s overall revenue to grow c.7% CAGR in FY13-16e, driven by crane and tower crane rentals, in view of the positive economic outlook in the countries in which the group operate. Rental rates are expected to remain stable in the near term in Australia, while there may be some pressure on rental rates in Asia due to the availability of cheaper cranes from China.


Goodpack: HSBC initiates on Goodpack with a NEUTRAL rating and $2.15 TP, based on a DCF valuation. Goodpack owns the world’s largest fleet of steel intermediate bulk containers (IBCs); it has 2.9m units in total. IBCs are an environmentally friendly alternative to disposable packaging, such as wood pallets, paper cartons and single-use steel drums. Goodpack’s global network – spanning over 70 countries and more than 5,000 locations – gives it a strong competitive advantage. Long-term cost advantages, high exit barriers and a focus on core markets further strengthen the company’s competitive edge in the transport packaging industry. Goodpack’s share price is strongly correlated with world trade volumes and rubber consumption trends, which explains why it de-rated in 2011 when global rubber demand was depressed. The stock has rallied recently on the back of the modest recovery in rubber consumption levels. However, as it is trading close to a 12-month high of SGD1.95 and at a 17.9x 2014e PE, a c19% premium to its five-year historical mean, we believe the recent rerating has largely priced in the growth recovery and there is limited upside to the stock.

Chip Eng Seng

Chip Eng Seng: Entered contracts to purchase 3 adjoining sites in Doncaster, Victoria, Australia, for an aggregate A$19.3m. The sites located at 154-166 Williamsons Road, 5-17 Henry Street and 59 Margot Avenue, have an aggregate area of 28,002 sqm, which the group intends to develop into a residential project consisting of approximately 90 town houses and 50 apartments. This is the group's fourth property project in Melbourne. Chip Eng Seng currently trades at 5.8x trailing P/E, in line with its 1-year historical average

IHH Healthcare

IHH Healthcare: Released 3Q13 results which offered no surprises, despite seasonal effects. The good news is the growth story at its new hospitals, while the bad news is confirmation of house view that rate charges at Singapore’s hospitals have peaked. Its valuation remains the only ugly facet of this story. 3Q13 and 9M13 core earnings were in line, accounting for 21% and 78% respectively of the house FY13 numbers. Make no changes to forecasts and SOTP TP stays intact. Overall, like the IHH franchise, but struggle to find any near-term catalysts, as the house expect better earnings only in FY15-16, and current valuations is decidedly unexciting. Maintain Neutral with $1.72 TP.


Tritech: Voyage Research maintains its TP $0.88 and Potential Gem rating on Tritech. Following mgt’s sharing at Voyage’s Chinese seminar two days ago, and a visit to Tritech’s quarry in Msia, Voyage says it is comfortable with the group’s operation and reckons that there is a huge price-value gap, if Tritech’s plans can bear fruits. Tritech has three business divisions namely the engineering, water-related and resources divisions For the engineering division, Tritech has a stable order book of ~$83m, most of which are public sector jobs. Mgt reiterated their underground specialty as an avenue for future growth. For the water division, Tritech is constructing a mega membrane processing plant with five factories in Qingdao. The unit intends to position itself as a one-stop membrane related center, capable of providing engineering works on water and wastewater treatment plants, mgt of treatment plants and production of purified and bottled water. Tritech currently has 16 patented products which they intend to manufacture as the factories get completed. They also recently acquired Anhui Clean Environmental Biotechnology to leapfrog their position in the water treatment business in China. Voyage visited Terratech Resources’ quarry last week and saw the actual extraction of marble from the hills. Tritech has begun production on Hill 2B and Hill 3 and reckons it can expand the capacity by about four fold towards the end of next year. The division recently entered into contracts to sell marble and related products worth ~$18m to China.

Capitamall Trust

Capitamall Trust: Maybank-KE downgrade to Hold and reduce TP to $2.10 from $2.15 on valuation grounds and lackluster DPU growth prospects, citing that most of the group’s eligible portfolio malls have already undergone asset enhancements. The house opines that near term acquisitions would be unlikely, despite a comfortable gearing ratio of 34.8% and management being open to acquisitions. This is because CMA’s most stabilized asset, ION Orchard, remains a major contributor to recurrent income while the other properties (The Star Vista, Bedok Mall and 50% stake in Westgate) are either not stabilized or still under construction. Going forward, do not expect significant contributions from the AEI of Bugis Junction and Tampines Mall, with a projected increment in capital value (net of capex) of $22.1m and $16.4m respectively, adding ~3¢ to the group’s RNAV. Meanwhile, expect attention to focus on the active leasing of Westgate and Westgate Tower, with 320k sf NLA in the tower now available for lease by end 2014. Catuion however that Westgate will face competition in its next rent review cycle in 2016-2017 when Sim Lian’s nearby mixed development project in Venture Avenue comes onboard. At the current price, Capitamall Trust trades at 1.2x P/B with a forward yield of 5.2%.


Mermaid has been awarded additional contracts worth US$30m, which involves subsea services contracts for air diving services, which includes air diving for pipeline free span correction and a subsea cable lay contract. Gels well with its recent outperformance, and if mermaid is able to surprise on their upcoming results, could potentially see further upside. The subsea cable lay contract will utilize a chartered in DP2 construction barge, which is the latest addition to Mermaid’s fleet to serve its expanding customer base and requirements in the Middle East.

SG Market (27 Nov 13)

Market Roundup: US stocks pared gains in the final minutes to end little changed amid rebalancing in the MSCI indices but the Nasdaq surged past the 4,000 mark for the first time in 13 years. Encouraging housing data offset weaker-than-expected reading on consumer confidence. Trading is expected to be light for the rest of the week ahead of the Thanksgiving holiday. In economic news, new building permits climbed 6.2% on Oct to its hghest level in more than 5 years, while US home prices rose 13.3% y/y in Sep, the most since Feb 06. But confidence among consumers declined in Nov to a 7-month low of 70.4, missing expectations for a rise to 71.2. The S’pore market is likely to stick to its consolidation pattern with no near term catalyst in sight. Immediate upside is capped at around 3,190 where the 20 and 50-day moving averages are converging with stiffer resistance at 3,232, while underlying support is at the 3,123 level. Stocks to watch: *Global Logistic Properties: Leased another 13,000 sqm of space at GLP Park Suzhou to Geodis Group, one of the world’s largest supply chain solutions providers. This brings Geodis’ total leases with GLP across three cities in China and Brazil to 46,000 sqm. *Vallianz: Awarded US$150m worth of chartering contracts in the Mid-East for platform supply vessels, starting 1Q14 for 5 years, including option for extension. The contracts will boost its current order book by 45% to a record US$485m. Management intends to expand its vessel fleet to 50 by 2016 from the current 26. *Mermaid Maritime: Awarded additional US$30m diving and cable lay subsea contracts in Mid-East, which will commence in Dec 2013 and take 6 months to complete. *United Envirotech: Its transfer-operate-transfer project to acquire and operate a 40,000 m3/day municipal wastewater treatment plant in Shangzhi, Harbin city in China has been terminated due to construction delays and failure to commission the plant. Separately, the group has extended the long stop date for its proposed acquisition of Memstar Technology from 28 Jan 2014 to 28 Apr 2014. *Chip Eng Seng: Acquiring a former nursery and orchard site in Victoria, Australia for A$193m and plans to develop the 28,002 sqm site into a residential project consisting of 90 townhouses and 50 apartments. *Marco Polo: 4QFY13 net profit of $4.2m (+9% y/y) failed to keep pace with the 44% rise in revenue to $28.5m due to a six-fold jump in finance costs, in connection with vessel loans incurred by BBR, a former associate turned subsidiary. FY13 earnings edged up 5% to $22.3m on revenue of $93.5m (+4%), driven by BBR and strong demand for OSVs in the region. Gross margin improved from 32.5% to 37.2%, lifted by its offshore chartering business. Higher personnel and interest expenses were offset by an exceptional gain of $5.9m, which arose from the change in interest of BBR. Special DPS of 1.4¢ has been declared. *JEP Holdings: Disposing all the assets of JEP Precision Engineering Thailand (JEPT), comprising freehold land, factory building and machinery in Thailand for Bt41.8m ($1.67m) against its book value of Bt36.1m ($1.44m), following which JEPT will be dissolved and liquidated. *Novo Group: Warns of an expected loss for 1HFY14, which are attributable to start-up costs for its new tinplate manufacturing plant in Jiangsu and processing plant in Tianjin. *China Environmental Resources: Trading in the shares will be suspended wef today, in both the S’pore and HK exchanges, pending the release of an announcement in relation to a very substantial acquisition by the company. *Food Empire: Established $200m multicurrency MTN programme. *Banyan Tree: Issued $50m of notes due 2018 under its $400m multicurrency MTN programme.

Tuesday, November 26, 2013

CosmoSteel Holdings

CosmoSteel Holdings: Voyage Research rerate CosmoSteel to Increase Exposure with a TP of $0.40, citing the group as a beneficiary of sustained energy investment in the Asia Pacific region. For instance, the company is experiencing demand from China, which is investing in natural gas facilities as it switches away from coal driven power plants. Note that Oil majors are continuing to invest in the Asia Pacific region. Chevron has allocated 42% of its 2013 capital expenditure budget to this region, while Exxon Mobil has increased its investments overseas with capex outside of US growing by 24% year-on-year in the first nine months of 2013. Shell, BP and PetroChina are also building large scale floating LNG terminals to tap offshore gas fields in Australia. Over in China, investments in natural gas fields and pipelines are poised to increase as the country taps into shale gas reserves and shifts away from using coal as an energy source. Given the healthy pipeline of projects in the region, we are optimistic that the company should revert to double digit growth in 2014. 2013 revenue would have been higher if not for competition and to some extent, timing differences between delivery and the award of contracts. As such, expect the company to deliver sequential growth in 1Q FY14 (ending Dec 2013).

Keppel Corp (technical)

Keppel Corp: Trading Central notes the stock remains well supported by its ascending 20-day moving average, as well as a ST rising trend line. Furthermore, the daily RSI is also backed by a bullish trend line, displaying strong bullish momentum. As long as $10.9 (short term trailing stop loss) is not broken, the house expects a continuation of the rebound to $11.45 and then to $11.7.

First Resources

First Resources: UOB Kay Hian maintains Buy with $2.60 TP. House note that FR is the best performing plantation stock on SGX and it has outperformed its purer plantation peers, thanks to its outstanding results despite volatile production and low CPO prices. This is supported by good age profile, high yield from its prime mature areas and stringent cost control. FR’s share price is highly correlated with CPO price as its earnings are still highly sensitive to CPO price despite its downstream exposure.


Gold: Fell to its lowest level in more than four months yesterday as the accord between Iran and world powers damped demand for a haven. Silver sank to its lowest in more than 15 wks. Brent crude slumped from a six-week high yesterday, and the USD reached the strongest in six months against the yen after Iran agreed to curtail its nuclear activities and in return won an easing of "certain sanctions" on oil, auto parts, gold and precious metals.

Sino Grandness

Sino Grandness: AM Capital initiates coverage with a bullish Buy, TP $1.51. Note that recent results showed strong performance in all areas with high margins of 32%-52% exceeding expectations. The group’s canned export business saw improving orders from Germany, whilst the domestic fruit business sold higher margin products. The beverage division is key, as a spin off in Hong Kong in 2014 could attract multiples of 15x valuing the division higher than the current SGX listco.


SGX: SGX and China Securities Regulatory Commission (CSRC) had established a direct listing framework, which aims to facilitate Chinese firms seeking a listing on the Singapore board. In the past, firms required to set up an overseas entity as a layer between the company and investors as part of the listing process. Under the framework, the CSRC will review and provide Chinese enterprises with a better understanding of the requirements and platform to list on SGX, while SGX will reach out to intermediaries and issuers on the process and requirements. On the legal end, applicants must comply with all relevant laws and regulations in China, as well as all requirements and regulatory standards of Singapore and SGX. The due diligence processes conducted on both sides is expected to provide a greater assurance to investors. While the new framework is a step in the right direction to boost our capital markets, we caution that it does not guarantee the quality of companies that seek listings here. Investors may still be marred by the fallout of S-chips when corporate scandals were brought to light in 2007, when accounting irregularities were raised, missing husband-and-wife management team after corporate bankruptcy and on-going concerns were some of the issues raised. Valuations are attractive for SGX, with a forward P/E of 21.2x on generally low expectations for a 3% growth in earnings, compared to regional peers Hong Kong Exchanges' 33.7x P/E on 9% earnings growth, and Bursa Malaysia's 23.3x.


Yongnam: Yongnam clinched a landmark $168m subcontract for works at Marina One mixed-development, awarded by a JV between Hyundai Engineering and Construction and GS Engineering & Construction Corporation. The order to fabricate and construct a record 30,000 tonnes of structural steelwork will lift group's order book to $397m. The contract consists of three packages which includes the conversion of the original reinforced concrete design of the office towers to a composite structural steel design, as well as the application of fire-proofing and supply & installation of a specialist floor damping system. Works for the subcontract is expected to be completed by 1Q16 and expected to have a positive impact to the group's current financial year onwards. The Marina One project is being developed by M+S Pte Ltd, a 60:40 JV between Khazanah Nasional Bhd and Temasek Holdings Pte. Ltd. The iconic project at the upcoming central business district located at Marina South will comprise two 30-storey office blocks, two 34-storey residential blocks and four basement levels. At 0.24, Yongnam trades at a steep 14.0x annualized 3Q13 P/E, compared to industry peer Tiong Seng's 7.8x.

SG Market (26 Nov 13)

The Dow logged another record high close, after edging up 0.05% to 16,073, but the fade in the rally toward the final hour of trading may be a signal that investors are becoming more realistic as the markets become pricier. Meanwhile, overnight US data on Nov manufacturing outlook and Oct pending home sales disappointed. The weakness in Japan this morning (Nikkei -0.8% at 8.32am) may contribute to some market softness in Asia, paving the way for a tepid open in the Spore market. Following a relatively dull 3Q corporate results season, there continues to be a lack of significant developments to drive strong interest in the local market. The STI has penetrated below its 50-day moving average at 3,190 but remains largely bounded by the wider 3,123-3,233 trading band. 8:58:36 AM: Benjamin Oh Sze Wei: Stocks to watch: *SIA: Has received approval from India’s Foreign Investment Promotion Board (FIRM) to establish the proposed 49/51 JV full-service airline in India with Tata Sons. Further approvals from India’s Directorate General of Civil Aviation remain pending. Both companies intend to put up a combined investment of US$100m, with first flight take-off anticipated by mid-2014. *Yongnam: Secured a landmark $168m subcontract for works at Marina One mixed-use development located at Marine South, slated to be Spore’s new CBD. The subcontracts, awarded by the main contractor, a JV between Hyundai Engineering & Construction (E&C) and GS E&C, involve the fabrication and construction of a record ~30,000 tonnes of structural steelwork. Completion is expected by 1Q16. The latest deal lifts Yongnam’s orderbook to $397m. *ST Engineering: Its US Shipyard, VT Halter Marine has won a shipbuilding contract from Crowley Maritime to build two container roll-on/roll-off vessels, valued at ~US$350m. The vessels will be powered by LNG, a new standard in shipping. Construction will take place in 1H14, with deliveries in mid and late 2017. *CapitaLand: Its wholly-owned serviced residence business unit, The Ascott, has secured contracts to manage four more properties with a total of 797 apartment units in Hangzhou, Chongqing and Shenzhen, under the Somerset and Ascott brands. The properties are slated to open over 2015-18. With these deals, The Ascott has crossed its milestone of having 10,000 apartment units in its key market in China. *City Dev: Has been approached by independent third parties regarding the possibility of a sale of its controlling stake in HK-listed City e-Solutions (557 HK). The approaches have been entirely exploratory in nature and may or may not lead to a definitive agreement. *SGX: Together with the China Securities Regulatory Commission (CSRC), has established a framework to allow Chinese companies that have obtained CSRC's approval to seek a direct listing on SGX. *Rex: Its 41.6%-owned Masirah Oil has begun drilling for a prospect in Masirah North North #1 (MNN #1), located in the block 50 Oman concession. MNN #1 will be drilled up to a depth of 1km, after in-depth technical evaluation and verification using the proprietary Rex Virtual Drilling technology, as well as confirmations provided via conventional methodologies. *HPH Trust: The Capital Group ceases to be a significant shareholder after paring down its stake to 4.5% from 5.1%, via open market sales at an average US$0.68 per share. *SIIC Environment: Will undertake the expansion and upgrading of the Hanxi Waste Water Treatment Plant in Wuhan City, to increase the facility’s capacity by 50% to 0.6m tpd. *Cedar: Its newly acquired subsidiary, Guiyang Shunhe Real Estate Devt (GSRE) has delivered 7,416sqm of commercial units in its development project known as Xiao Cheng Gu Shi in Guiyang City, Guizhou Province. GSRE will record revenue of ~Rmb36m from the sale, and this is expected to contribute positively to the Cedar’s consolidated revenues in 4Q13. *NH Ceramics: Swung into an FY13 net loss of $0.7m versus a net profit of $3.7m from a year ago. Revenue fell 46% y/y to $2.8m, as it supplied less building materials following the completion of a project supply contract during FY13. In addition, during the financial year, the group continued to scale down its business in the trading of building materials. *Sheng Siong: Has renewed the lease for its supermarket at Yuan Ching Road till 31 Mar ’14. Upgrading works have been proposed for the building in which the supermarket is located in, and Sheng Siong is in discussions on leasing suitable premises in the upgraded building. The supermarket has a floor area of ~16,500 sf and contributed less than 5.0% of group revenue for 9M13. Upgrading works at the building had been proposed and the group is currently in discussions to lease suitable premises in the upgraded building.

Monday, November 25, 2013

52 wk highs/ lows

52 wk highs: Transit Mixed Concrete, C&G Environmental, ECS, Manufacturing Integrated Technology, DB X Trackers MSCI World TRN 52 wk lows: Technics Oil & Gas, IEV, Aussino, Qingmei, Sinjia Land, UPP, Hiap Seng, Hi-P, DB X Trackers S&P 500 Inverse DA

Mermaid Maritime (technical)

Mermaid Maritime: rises 6.8% to $0.395, earlier breaking briefly past the psychological $0.40 threshold. likely on the back of CIMB's TP upgrade. See 8.56am post.


GLP: Brazil beckons. The Changi Airport Group (CAG), will partner with Brazil conglomerate, Odebrecht to run the Galeao airport in Rio de Janeiro for 25 years. The duo offered a tender price of US$8.3b for the concession to operate Brazil’s second-busiest airport, almost four times the minimum required bid. This underscores the investor support for President Rousseff’s infrastructure development programme, as the country prepares to host the soccer World Cup in Jun next year, and the Olympic Games in 2016. GLP is one of the few SGX-listed companies positioned to ride on Brazil’s infrastructure-themed growth. Back in Nov ’12, GLP teamed up with the Canada Pension Plan Investment Board (CPPIB), China Investment Corp (CIC) and the Government of Singapore Investment Corp (GIC) to invest a total US$1.5b in two fund platforms holding about 40 logistics properties in Brazil, of which about 35 will be located in Rio de Janeiro and Sao Paolo. GLP’s Brazil portfolio size currently stands at 2.1m sqm, with pro-rata valuation of US$644m (~6% of group gross asset valuation). Investors may be hopeful that GLP can replicate the success with Brazil, that it achieved developing logistic properties in China and Japan. In particular, GLP may be inspired by its positive experience with GLP Park Beijing Capital Airport logistics facility which is fully leased, and may consider a similar concept at the Galeao airport in future, as part of its Brazil expansion plans. The presence of another S'pore partner would help greatly lubricate the investment process. GLP remains a key constituent in Market Insights’ model Growth portfolio. At $2.96, the counter trades at a 10% discount to consensus RNAV of $3.30.

CapitaLand (technical)

CapitaLand: Trading Central notes the stock recently broke below a "symmetrical triangle" pattern, and is now turning down. Both the ST & MT moving averages are above the prices, and should prevent any upside potential. Moreover, the daily RSI remains capped by a negative trend line, calling for further decline. In conclusion, below $3.3, the house expects a new down leg to $2.75 and $2.6 in extension.


GLP J-REIT: Has first refusal rights on ¥270b in sponsor properties. With development costs for logistics centers on the rise, CS expect the market to take another look at GLP J-REIT’s potential for external growth regardless of the sponsor’s pace of new development. The current distribution yield of 4.2% (FT2/15E) looks attractive vs. the 3.8% average for the TSE REIT Index. LTV (49.3% at end FT8/14) is also higher than at other logistics REITs, leading house to believe that GLP J-REIT could outperform should additional BoJ easing drive expectations for a rise in asset value. CS believe sponsor GLP is looking to sell ¥30-50b in properties per year to GLP J-REIT.

AIMS AMP Capital Industrial REIT

AIMS AMP Capital Industrial REIT: Proposed its first acquisition in Australia, after entering a MOA with Australia's managed fund, Stockland, to acquire a 49% interest in the Optus Centre for A$184.4m (S$215m), to be fully funded by debt. The premium business park located at Macquarie Park in Sydney’s north is currently 100% leased to Optus Administration Pty Limited, a wholly owned subsidiary of SingTel Optus, with a long weighted average lease term of 8.62 years and fixed annual escalation of 3%. On a pro forma basis as at 30 Sep 2013, the acquisition will raise DPU by 5.7%, while NPI will increase to 6.6% from 6.3%. 60% of the debt will be from a new five year AUD term loan facility, providing a substantial natural currency hedge, while the remaining will be from an existing dual currency SGD/AUD revolving credit facility. Weight average debt maturity will improve from 2.8 years to 3.4 years post-acquisition. At $1.525, AIMS AMP trades at 6.9% 1HFY14 annualized yield .

Mermaid Maritime

Mermaid Maritime: CIMB maintains O/p with TP $0.47. Note that Mermaid is due to report its FY13 results on 27 Nov, after market hours. The house expect the company to post 4Q core earnings of US$9.6m, bringing FY13 core earnings to US$10.6m. TP (based on 0.9x CY14 P/B or 10% discount to 3-year mean) rises as the house roll forward its valuation. Raise oFY14-15 EPS by 9-10% for lower financial costs. Catalysts are stronger subsea and more clarity on its tender rig investments.


Yangzijiang: CLSA reinitiating coverage on Yangzijiang with an O/P rating and $1.34 target price which implies 14% upside. Both dry bulk and containership segments have shown signs of bottoming out with strong order flow coupled with improvement in pricing. YTD 203 containerships (1653k TEUSs) and 318 bulkers (54m DWT) have been ordered. While initially the ordering activity was driven primarily by rock bottom prices both bulkers and large containership prices have recovered between 5-10%. Further, orderbook/fleet ratio is now back to 06-07 levels. Combination of revival in shipbuilding orders and pricing coupled with order concentration among the top yards will drive market share gains for Yangzijiang which in turn will support order growth. Finance business also continues to generate healthy returns and strong risk control measures imply risk of write downs is low. Stock is trading at 10x FY14 PER and 1.2x PB which is close to mid-cycle valuations but well supported by 13% ROE.


Yangzijiang: CLSA reinitiating coverage on Yangzijiang with an O/P rating and $1.34 target price which implies 14% upside. Both dry bulk and containership segments have shown signs of bottoming out with strong order flow coupled with improvement in pricing. YTD 203 containerships (1653k TEUSs) and 318 bulkers (54m DWT) have been ordered. While initially the ordering activity was driven primarily by rock bottom prices both bulkers and large containership prices have recovered between 5-10%. Further, orderbook/fleet ratio is now back to 06-07 levels. Combination of revival in shipbuilding orders and pricing coupled with order concentration among the top yards will drive market share gains for Yangzijiang which in turn will support order growth. Finance business also continues to generate healthy returns and strong risk control measures imply risk of write downs is low. Stock is trading at 10x FY14 PER and 1.2x PB which is close to mid-cycle valuations but well supported by 13% ROE.


Biosensors: Majority shareholder Shandong Weigao has agreed to dispose its entire 21.7% stake in Biosensors to CB Medical Holdings for US$312.3m, valuing Biosensors at $1.05 per share, a 12% premium to its last closing price. SGX filings have identified CB Medical to be a subsidiary of Citic Private Equity, a well known PE fund manager in China, managing ~US$2.6b of committed capital. We note that the street appears divided on their opinion in the latest development, with the positives claiming that the latest acquisition by CB Medical, would enable Biosensors to tap and utilize the resources / network of Citic PE, in regards to business expansion and product development. Others however opine that the sale by Shangdong Weigao, depicts a lack of confidence in the prospects of Biosensors going forward, and the presence of two PE funds (Hony Capital holds 15.8% shares outstanding, CB Medical holds 21.7% shares outstanding) could lead to differing views and a less cohesive organization. Yet, some market watchers are not ruling out a future take-over bid by CB Medical, especially if should Hony Capital divest its stake holdings to them, and trigger a general take-over offer. At the current price, Biosensors trades at 18.2x forward P/E versus HK listed peers Shangdong Weigao’s 33.7x and Microport Scientific’s 22.5x. Overall, the street has 1 Buy, 6 Holds and 2 Sell call ratings with a mean TP of $0.95.

SG Market (25 Nov 13)

Morning Bites Amid the lack of meaningful news flow, expect the S’pore market to drift upwards slightly today, taking cue from the global markets. Iran’s agreement to temporarily halt its nuclear programme in exchange for sanctions relief has quelled oil prices, and may give a lift to stocks today. Brent crude dipped 2% to US$108.81/bbl, while the S&P500 futures gained 0.3% and Nikkei rose 0.9% this morning. Nevertheless, broader sentiment for the S’pore market remains lackadaisical following the penny stock fiasco and a relatively dull 3Q corporate results season. The STI has penetrated below its 50-day moving average at 2,188 but remains largely bounded within the wider 3,123-3,233 trading band. Stocks to watch: *Biosensors: SGX filings reveal that CITIC PE Funds Management has become the new majority shareholder in Biosensors, following its purchase of Shandong Weigao’s entire 21.7% stake at $1.05 per share. *AIMS AMP Capital Industrial REIT: Has agreed to acquire a 49% interest in Optus Centre from Stockland, an Australian managed fund. The consideration of A$184.4m ($215m) will be fully funded by debt. The premium business park, located at Macquarie Park in north Sydney, is currently 100% leased to Optus. The weighted average lease term of 8.62 years comes with fixed annual rent escalation of 3%. On a pro forma basis, the acquisition is expected to accretive and raise the AIMS’ DPU by 5.7%. *OCBC: Sold its 14.88% stake in Vietnam Prosperity Joint Stock Commercial Bank for US$55.5m, a 20% premium to the FY12 book value. *Keppel Land: Completes the divestment of its 51% shareholding in the integrated township, Jakarta Garden City to PT Modernland, initially announced late Jul. Keppel Land will realize a net gain of ~$149m and receive net proceeds of ~$237m, which will be redeployed to new residential and commercial projects in Indonesia, with a focus on Jakarta. *Cosco: Contracts for two advanced semi-submersible accommodation vessels placed with its 51% owned subsidiary, Cosco Shipyard Group, have been declared effective. The vessels are worth in excess of US$200m each, and are scheduled for delivery in 2016.

Friday, November 22, 2013


Biosensors: strong run up post lunch on higher volumes. We recap the company's announcement this morning that came in just before the opening bell. Majority shareholder Shandong Weigao has agreed to dispose its entire 21.7% stake in Biosensors to CB Medical Holdings for US$312.3m. This transaction values Biosensors at $1.05 per share, a premium of 12% to its last closing price.


GLP: ($2.99) Cresting the e-commerce wave in China According to consultant Bain & Co, Chinese shoppers spent a whopping ~US$213b online in 2012, just trailing behind their US counterparts who made ~US$225b worth of purchases. If the Chinese internet consumer market continues its blistering 71% average annual growth since 2009 (about five times faster than the US), China can be expected to overtake the US as the global leader in e-commerce once the 2013 industry statistics are published early next year. Such stellar industry growth will inevitably have a knock-on effect on GLP. The e-commerce operators are scrambling to rapidly expand their distribution network and capability, leading to a scarcity of the high-end, modern logistics facilities that GLP develops and operates across the key cities in China. In fact, in the recent months, Market Insights has posted numerous updates on GLP’s new lease signings, reflecting the strong market demand. GLP’s high quality customer base boasts e-commerce giants such as Amazon, Tencent and Vipshop, to name a few. GLP remains a key constituent in Market Insights model Growth portfolio. The counter is up 1.0% at $2.99 today, and trades at a 9% discount to consensus RNAV of $3.30.


SPH REIT: OCBC initiates coverage with a HOLD rating and $0.99 TP. OCBC like SPH REIT’s exposure to the local retail landscape as the outlook is expected to remain robust, bolstered by growing retail sales, rising visitor arrivals, an expanding population and comfortable supply of retail space. In addition, the underlying growth drivers for the regional healthcare scene are expected to remain strong. Since its listing, OCBC note that SPH REIT has enjoyed a strong run-up in unit price of 8.9%, significantly outperforming the FTSE ST REIT Index over the same period. At current price, SPH REIT is trading at 1.10x P/B, slightly higher than the local retail subsector P/B of 1.05x.

Keppel Land

Keppel Land: There are no other negative news relating to its decline besides the property cooling measures introduced by the govt this year. Technically, counter had been trading in a narrow channel between $3.30-$3.75 since Jun. May see downward pressure in the near-term after crossing below its 20 and 50 MA this week, towards the $3.40 level, supported by both the RSI and Stochastics hooking downwards.

Keppel Land

Keppel Land: There are no other negative news relating to its decline besides the property cooling measures introduced by the govt this year. Technically, counter had been trading in a narrow channel between $3.30-$3.75 since Jun. May see downward pressure in the near-term after crossing below its 20 and 50 MA this week, towards the $3.40 level, supported by both the RSI and Stochastics hooking downwards.


Tigerair: has faced booking issues with its website, which UOBK says generates ~80% of its ticket bookings, for at least two days. Though mgt says, the problem which was triggered by a scheduled maintenance event, has since been resolved. According to comments on Tiger’s Facebook page, complaints about the inability to book flights on the website started as far back as Monday. The counter is down 1% today at $0.50


SingTel: The IDA has approved SingTet’s acquisition of an indirect 100% stake in OpenNet, though to prevent anti-competition, SingTel will not be able to influence mgt and major operational decisions of OpenNet. As background, SingTel will own CityNet, a trustee-manager of NetLink Trust, which in turn will acquire 100% of OpenNet from Axia NGNetworks, SP Telecoms, SPH and SingTel, for an aggregate consideration of $126m. Specifically for SingTel, its original 30% stake in OpenNet will be sold for a consideration of $37.8m. Nevertheless Deutsche does not expect material divestment gains on the back of the latest transaction. With the termination of existing service and lease agreements with OpenNet, SingTel will cease to book an estimated $55m in annual revenues from OpenNet going forward. But the net impact on SingTel’s earnings will be minimal, given the OpenNet revenues were merely passed through to NetLink Trust under the previous structure. Deutsche believes a more interesting development would be SingTel’s obligatory divestment of NetLink Trust (to <25%), which, under this proposal, has been extended to Apr 2018 (from Apl 2014). Assuming a 76% stake divestment and NetLink Trust value at $1.89b (as per SingTel’s initial sale of assets into the business trust), this would imply total sale proceeds of $1.44b. Further assuming full shareholder return of these proceeds, a special dividend of up to 9¢ per SingTel share appears possible. The house maintains its Buy rating and TP $4.30.


Biosensors: Fresh out this morning. Majority shareholder Shandong Weigao has agreed to dispose its entire 21.7% stake in Biosensors to CB Medical Holdings for US$312.3m. This transaction values Biosensors at $1.05 per share, a premium of 12% to its last closing price.


Aussino: End of the road for Aussino, after SGX rejected its application for a time extension to be removed from the Watch-List. Aussino now has to provide a reasonable exit offer to shareholders within one month, and counter will be suspended from trading on 21 Dec 2013 onwards. As at 30 Sep 2013, group recorded a NAV per share of -0.08¢.

WE Holdings

WE Holdings: Extended the long-stop date for its $20m acquisition for a minority stake (20%) in Myanmar cement producer, Dragon Cement, from 21 Nov 2013 till 20 Feb 2014. This is the fourth extension which was originally slated to be completed on 16 Aug 2013. The group cited that they are still in the process of consulting the Myanmar Investment Commission on the proposed acquisition.


CosmoSteel: Achieved 4QFY13 net profit of $1.2m (-53% y/y), despite revenue growth of 24% to $33.6m. This was attributed mainly to an FX loss of $216k compared to the gain of $1.5m in 4QFY12, in spite of a $255k tax credit. The strong top line was due to higher sales from the energy and marine sectors (+27%), while gross profit margin declined to 19.0% from 25.9%, due to an allowance for slow-moving stock. This brought FY13 earnings to $6.4m (-42%) and revenue to $155.7m (0.4%). Group proposed a final dividend of $0.01/share, 20% lower than FY12's $0.0125. Notably, its cash of $20.4m (before paying FY13 dividend) might be an issue against its short term debt of $59.5m. Going forward, the group believes the energy and marine sectors to continue to be important markets for them, and expects intense competition within the industry. At $0.305, CosmoSteel trades at a steep 12.7x trailing P/E and 0.8x P/B, compared to steel peer BRC Asia's 5.2x trailing P/E.

Lippo Malls Indonesia Trust

Lippo Malls Indonesia Trust (LMIR): Raised $100m via a private placement at $0.405/unit, 5.8% discount to its last close and 10% discount to its NAV of $0.45. Management said proceeds could be used to finance asset enhancements, acquisitions or to pay down debt. StanChart expects LMIR's leverage to rise to 30% post-acquisitions from 28% as of 30 Sep 2013, in line with management's target. Lippo Mall trades at an 8.2% 2014E yield and 0.95x P/NAV, offers investors a high-yield exposure to Indonesian consumption. Latest broker ratings: StanChart maintains Outperform and raised TP to $0.48 (from $0.46)

SG Market (22 Nov 13)

Market Roundup: US stocks rebounded, sending the Dow to its first close above 16,000 after economic data pointed to an improving labour market and tame inflation. The gains come on the heels of a drop in weekly jobless claims to 323,000, below the 335,000 estimate and a 0.2% fall in producer prices for the second straight month in Oct, indicating inflationary pressure remain muted. This prompted St Louis Fed President James Bullard to remark that the inflation data gives the central bank more leeway to keep its accommodative monetary policy in place. US consumers also became less pessimistic about the economic outlook in Nov as the Bllomber consumer comfort index showed the gap between positive and negative expectations for the economy sharnk to -14 from -31 in Oct. The market is also becoming more comfortable with tapering talk and expectations that the Fed could cut its bond purchases but not raise interest rates have steepened the yield curve. Investors are also pouring more money into stock mutual funds than they have in 13 years, and pulling out of bonds. About US$172b flowed into US stock funds in the first 10 months, the highest amount since 2000. The S’pore market may get a slight lift from Wall Street’s rally and firmer openings from Asian bourses with Nikkei (+0.7%) and ASX 9+1%) but sentiment remains lackadaisical after the penny stock fiasco followed by a dull corporate results season. The STI has penetrated below its 50-day moving average at 2,188 but remains largely bounded within the wider 2,120-3,234 trading band. Stocks to watch: *Biosensors: Majority shareholder Shandong Weigao has agreed to dispose its entire 21.7% stake in Biosensors to CB Medical Holdings for US$312.3m. This values Biosensors at $1.05 per share, a premium of 12% to its last closing price. *SingTel: Secured IDA approval to acquire a 100% indirect ownership of OpenNet via CityNet for $126m. Separately, SingTel has also been granted an extension till Apr ’18 (originally Apr ’14) to pare down its stake in NetLink Trust, which owns the fibre network infrastructure in S’pore to below 25%. *Tigerair: Reported to have faced issues with its website booking system over the past two days, which management says has been resolved. Market watchers note that Tigerair’s website bookings could contribute up to 80% of the budget carrier’s ticket sales. *Lippo Malls: Raising ~$95m net proceeds via the issue of 246.9m new placement units at $0.405 apiece, representing a 5.8% discount to the last closing price. This will be used to fund acquisitions, asset enhancement initiatives and refinancing of existing asset linked debts, and for working capital. The new units will commence trading on 29 Nov. *CosmoSteel: 4QFY13 net profit halved y/y to $1.2m, despite revenue growth of 24% to $33.6m, mainly due to gross margin compression (to 19% from 25.9%) arising from an increase in allowance for slow-moving steel stock, as well as FX losses. Final DPS of $0.01 is 20% lower from a year ago. *KLW: Secured 3 contracts valued at $6.4m to supply and install timber doors for 1,499 apartments in 3 residential developments – Hillsta ($1.1m), Water Bay EC ($1.9m) and Topiary EC ($3.4m). The projects are expected to be completed in 2H15. *Aussino: Reaching the end of the road, after receiving SGX's rejection with regards to its application for a time extension to be removed from the Watch-List. The counter will be suspended from trading from 21 Dec. While the company has to provide a reasonable exit offer to shareholders within one month, there may not be any meaningful return of capital given Aussino’s negative equity of 0.8¢. *WE Holdings: Extended the long-stop date for its $20m acquisition for a 20% stake in Myanmar cement producer, Dragon Cement, from 21 Nov ‘13 to 20 Feb ‘14. This is the fourth extension for the deal which was originally slated to be completed on 16 Aug ‘13. *Internet Technology Group: Revised its exit offer price to $0.138/share from $0.127. *SP Windsor: Receives SGX's in-principle approval for its proposed placement of 24.5m new shares at $0.22 apiece. *Linair: Flagged that its engineering revenue for FY13 would not be maintained at 2012 level as earlier guided due to fewer contracts secured and some project delays.

Thursday, November 21, 2013

Lian Beng

Lian Beng: ($0.535) Series of share purchases by controlling Ong family provides insider support We highlight a series of open market share acquisitions, which took place since 11 Oct, by controlling stakeholders Ong Sek Chong and his family members. During the past 41-day period, the Ong-family’s controlling stake advanced from 30.14% to 34.33%, arising from the purchase of 22.2m shares at between $0.525-0.565 apiece. Traditionally, insider purchases are viewed as having a positive signaling effect on stocks. At $0.535, Lian Beng’s valuations remain attractive at 4.3x forward P/E, compared to its closest peer Tiong Seng at 6.7x. The Ong family includes separate shareholders mainly Ong Sek Chong & Sons, Ong Pang Aik, Ong Lay Huan and Ong Lay Koon.

Golden Agri

Golden Agri/ CPO: Crude palm oil (CPO) futures rallied as much as 2.6% today to RM2,648/ton on Bursa Malaysia Derivatives, the highest since Sep 2012. On a year-to-date basis, prices for CPO have gained 8.5% in its first advance in three years. Notwithstanding the rise in CPO prices, plantation owner Golden Agri fell to an intra-day low of $0.56 (-4.3%) today on profit taking, after surging 8% between 13 and 18 Nov. We highlight below several positive factors over the past few months that have been supportive of firmer CPO prices, which should benefit the upstream players: 1) A spike in coconut oil price in the Philippines due to Typhoon Haiyan lifted palm kernel oil price, which is a close substitute; 2) 'CPO guru' Dorab Mistry turning bullish after output trailed estimates in Oct; 3) US FDA's proposed ban on artificial trans fats in foods, which may lead to a consumer switch in favour of non-trans fat vegetable oils such as palm oil and canola; 4) Growing concerns that a wet weather forecast for 4Q in the major palm oil growing states of Sabah, Sarawak and Johor, could hinder the harvesting and transportation of the crop; 5) Indonesian government raising its biodiesel blend in subsidized fuel to 10% from 7.5% in Sep, which would increase demand for CPO feedstock; 6) Soybean crop production in the US fell short of expectations in Aug after planting delays and unusually cool and dry weather; 7) Malaysia's stockpiles for Jun fell to a 27-month low of 1.65m mt on the back of weak production and robust domestic consumption; Maybank Kim Eng’s top picks within this sector are Bumitama Agri (Buy, TP $1.14), First Resources (Buy, TP $2.39) and Wilmar (Buy, TP $4.30).

Eratat Lifestyle

Eratat Lifestyle: Voyage has an Increase Exposure rating with $0.28 TP. House reiterate that Eratat has showed progress in its distribution and sales strategies, as new distributors have been signed up and the relationship based sales model will be implemented at these new outlets. The company is also targeting to open two to three self-owned stores in Shanghai in 1Q FY14. Voyage like the progress made by Eratat to add new distributors and to open self-owned stores, with a potential for Increased financial contribution in 2Q 2014 from these initiatives when sales at both new distributors and the new self-owned stores start to ramp up. Eratat has been reducing footwear sales in favour of apparel products. In 3Q FY13, the number of pieces of apparel products sold grew by 11% year-on-year, while the number of footwear sold fell by 32% year-on-year. House expect overall sales to resume its growth as footwear sales volume stabilizes. Core focus area apparel products continued to grow.

Ying Li

Ying Li: Voyage Research has an Increase Exposure with $0.865 TP, as house expect Ying Li’s share price to recover once it reports profits from the Ying Li International Plaza (YLIP). Voyage notes that its recent 3Q13 loss was negligible in the sense that construction at the YLIP is reported to be nearing completion and the company has clarified that it has already received the necessary building approvals for handover of Phases 1 and 2 to take place. Therefore, revenue recognition has merely been pushed to 4Q13 due to what appears to be more stringent fire safety and regulatory checks. Moreover, the completion of the 98,439 sqm (total net lettable area) YLIP retail mall this year is likely to lead to healthy revaluation gains.


Figtree: No corporate news for Figtree's 22% decline today. Do note that Freight Links has a 20% stake in this Company post IPO and it increased its stake by buying an additional 13.1m shares at $0.20 each from Danny Siaw in Oct 2013 in order to maintain its shareholding at 20% to make it an associated company. The 20c level will probably served as a "independent valuation" of the firm.


Dyna-Mac: Supported by the growing global fleet of FPSOs (both newbuild and converted units), Dyna-Mac is optimistic that demand for topside module fabrication work will be fairly healthy over the next 3-5 years. In addition, management pointed out that Singapore yards such as Keppel Corp and SembMarine remain market leaders in securing FPSO conversion jobs. Compared to 2012, Dyna-Mac’s 9M13 gross-profit and net-profit margins contracted by 2.5pp and 3.3pp, respectively. The company attributed this to weaker-than expected productivity levels in some of its overseas operations. Management stated that it is putting in place more stringent cost controls and additional productivity improvement measures, which is expected to achieve gross-profit margin improvement next year. Based on Bloomberg consensus data, Dyna-Mac is trading at a 13.5x PER for 2014E, compared with the Southeast Asia-based yard peer average one-year forward PER of about 11.4x.

HPH Trust

HPH Trust: earlier this wk, StanChart upgraded the stock to Outperform from Inline, with TP US$0.75, noting that the share price pullback has made valuations attractive, with FY14e yield in excess of 8.4%. Share price has been trending down, after the poor throughput data from the 3Q13 results, and downbeat guidance from mgt for 2H13. There may also be spillover concern that the Shanghai Free Trade Zone may displace the importance of HPH Trust's ports in HK and Yantian, though this is likely a longer term issue. Broadly, the yield sector is weak today, likely reflecting a broader macro play as investors position for a higher interest rate environment.


Datapulse: Company proposed a capital reduction exercise involving a cash distribution of $0.035 per share, to be approved at its upcoming EGM to be held at 2.30pm on 29 Nov.


Biosensors: Counter seems to be supported at the $0.855 level, before bouncing up towards the high of $0.95 yesterday. Coincidentally, this was the price range that management performed several share buybacks over the Aug-Oct period. On its disappointing results released 12 Nov, it prompted a fresh round of target price downgrades by analysts, as management revised downward its previous guidance of 15% top line growth, and now anticipates overall revenue growth to be “moderately positive” over FY13. Market watchers note that Biosensors continues to face challenges in China amid product ASP cuts and an on-going anti-corruption campaign, and intense competitive pressures in Japan.


Yoma: is releasing 433 new apartment units at its illustrious Star City residential development situated on a 135-acre site in Thanlyin Township in Yangon, Myanmar, available for public purchase from 23 Nov, 10am Yangon time, with with simultaneous booking of units at three locations – Star City’s Singapore sales gallery, Yangon Thanlyin sales gallery, and the Mandalay Hill Resort Hotel in Mandalay.

ASTI Holdings

ASTI Holdings: Has proposed to dispose 30m shares at $0.11 each in Dragon Group International, reducing its' stake to 44.54% from 53.91%. The purchasers are namely: Asdew Acquisitions (4m shares); Warrior First Investment Corp (15m shares) and STF Investments Ltd (11m shares).

Fischer Tech

Fischer Tech: CIMB has a non-rated report on the counter post FY13 results, highlighting that its valuations are currently undemanding and earnings expansion could be in the cards. Fischer Tech believes that the strategy for a more stable earnings profile involves a deepening of its auto business and becoming a strategic partner to its customers. There are plans to expand its capacity in China significantly, a move that could lead to earnings expansion over the next few years. Funding is unlikely to be an issue given its net cash position which allows it to take on some debt, if necessary. If expansion pans out, Fischer Tech could be a value play, as the counter currently trades at a historical P/B of 0.46x.


CapitaLand: Has placed out 115.7m Australand shares (20% stake) in a secondary placement exercise, priced at A$3.685 a piece, at the bottom of the indicative range of A$3.685 to $3.75, but broadly on par with Deutsche’s SOTP of A$3.73 for Australand. This reduces CapitaLand’s effective interest in Australand from 59.1% to 39.1%. The placement allows CapitaLand to maintain effective control of Australand, while crystallizing a significant proportion of its NAV at levels not dissimilar to the previous indicative takeover price. CapitaLand will receive ~$485.3m in proceeds, but will book a loss of ~$127.5m, mainly due to recognition of FX translation losses and hedging reserves, which offset the divestment gain of $8.8m, fair value gain of $26.6m on re-measurement of the remaining stake. No material impact to the group’s NTA as the losses were already accounted for in equity, but 9M13 EPS will be reduced from $0.166 to $0.13, assuming the placement was effected 1 Jan ’13. Assuming that the cash proceeds are used to pay down debt at an average cost of 4.65%, Deutsche estimates that the divestment will dilute FY14-15 core earnings by 2%. Still the house believes valuations for CapitaLand are attractive at a 36% discount to RNAV of $4.88, c.1 standard deviation below its long term average. CapitaLand has already divested c.$900m in assets year to date, and further NAV crystallization could help narrow this discount. CapitaLand remains as Deutsche’s top sector pick, maintain Buy.