Monday, December 30, 2013
Starhub: appears to be range bound in the medium term, between $4.00 to $4.50 range. The share price has retraced back to the 200day MA, and it is critical for the counter to break above the indicator for the longer term uptrend to resume. Failure to do so may result in a downward reversal once more, and retest of the $4.00 support .
SingTel: Counter may witness near-term upside from the positive momentum, indicated by the bullish crossover on the MACD last week. This is also supported by the rising Stochastics and RSI. Support at $3.60 while resistance is at $3.70 (200MA) followed by $3.82.
Sky One: share price was rising in an unusually stable fashion from Dec '12 to mid Oct '13, and then featured two flash crashes in mid Oct and mid Nov this year. Such patterns are not usual, and make it difficult for accurate technical analysis. Nevertheless, near term, the counter may have bottomed out and may be at the cusp of a turnaround. Positive signals include break up above the 20day MA, rising RSI from oversold levels, and rising MACD. Price objective at the $0.20 resistance, cut loss at the $0.10 support. The volatility of this penny stock means it is not for the faint of heart.
First Resources: Counter on a stable mid-term uptrend, testing the 20MA today. A close above $2.10 may indicate further upside in the near-term, supported by the rising Stochastics and RSI. Do note however, that volumes on positive days indicate signs of tireness. Support at $2.07 followed by $2.00, with resistance at $2.17 followed by 2.32.
ST Engg: will invest in a 10% stake in newly set up Nova Star Cruises; partner Quest Navigation will hold the remaining stake. Based in the Canadian province of Nova Scotia, Nova Star will operate a cruise ferry service between Yarmouth (Nova Scotia, Canada) and Portland (Maine, USA). It will bareboat charter from ST Marine the Ropax (roll-on/roll-off passsenger) vessel for the service. The charter has commenced in late Dec '13 and the contract is for 3 yrs with options to extend up to 7 yrs.
Nam Cheong: OSK-DMG anticipates Nam Cheong to give shareholders a New Year present with some new orders. The last PSV for CY13 delivery should be sold, together with some vessels for CY14 delivery, if the pattern of selling vessels in batches holds. This will bring FY13 vessel sales to >22, exceeding FY12's record of 21. The house notes Nam Cheong will be entering 2014 in a position of strength. Its orderbook stands at a record RM1.7b , offering a high level of baseline activity that secures future quarters' profitability. Meanwhile, the large rig orderbook and tightening global OSV supply are factors that presage a healthy tailwind for Nam Cheong, which is now the largest shallow water OSV builder in the world (>12% mkt share). Nam Cheong stock combines a high 24% growth and undemanding 6.7x FY14e P/E, 6.8x EV/EBITDA, 0.12x net gearing and expected increases in dividend to yield 3% - 4.2% over FY13-15e. OSK-DMG tips as its sector Top Pick , reiterates Buy and lifts TP to $0.45.
Banks: Based on an increasingly positive global macro outlook and strong fundamentals, PhillipCapital maintain Overweight on the banking sector. House maintain Accumulate rating on DBS (TP $19.09) and UOB (TP $23.03), and “Neutral” rating on OCBC (TP $10.62). DBS remains its top pick for its stable earnings growth profile, standing to benefit the most from higher interest rates, and strong foothold in HK while house remain neutral on OCBC due to its relatively more volatile earnings profile. House is positive on the potential for improving margins in the medium term. Loans growth should continue to be broad based but lower than FY13’s high base and should be at a moderate pace on the back of positive economic outlook. Fees and commission should continue to drive earnings as trade-related, wealth-related, loans-related and bancassurance fees continue to gain traction. With the decision on Dec 18th to start QE tapering, House view that a revival in the interest rate cycle is in sight and confirms its outlook for potential industry NIM recovery in the medium term.
Genting SP: Trading Central notes the stock posted some rebounds recently, and remains strongly supported by a key horizontal level at $1.41. Both the 20-day and 50-day moving averages are still positive. Furthermore, the RSI indicator is heading upward, backed by a rising trend line. As long as $1.41 (a MT key support) is not broken, the house sees a likely advance to $1.55, and $1.59 in extension.
Gaylin: Provides rigging and lifting equipment such as wire rope slings to the offshore oil and gas industry. CEO Desmond Teo was interviewed The Straits Times. Gaylin has ~$110m worth of goods on its shelves as at Sep 30 and it needs all of it to hand. Teo notes with pride that Gaylin has a more comprehensive inventory stock compared to some of its competitors in Australia, Hong Kong, China, Vietnam, Indonesia and the Middle East. This strategy allowed the firm to meet an urgent late-night sale requests. Being known for tight delivery deadlines and efficiency has helped the firm grow. Being in Singapore in the 1970s and 80s, when the energy, petroleum refinery and ship building sectors took off, also helped. The company, which employs 160 staff here, will be busy next year. It will acquire 51% of Rig Marine Holdings FZC. Rig Marine, which supplies and inspects deck equipment, operates in the United Arab Emirates, Azerbaijan and Kazakhstan. It has also acquired 90% of Korean company Phoenix Offshore, a wholesale trader and chandlers' supplier. Gaylin did not have specific plans to expand overseas but increasing demand from places like Malaysia and Indonesia pushed it to seeking opportunities offshore. A new 100,000 sq ft plant in Malaysia has just been completed. Some manufacturing operations will be transferred there from Singapore. Teo reckons at least $20m would be required to start a firm to compete with Gaylin, which listed here last year. The group’s net profit rose 17% y/y to $3.7m in 2QFY14, while revenue soared 38.8% to $29m. The stock listed at 35¢ on Oct 24 last year and closed at 59¢ last Friday.
Property: 2013 wrap. Singapore’s developers posted the worst performance on the STI this year after recording the biggest gains in 2012 as property curbs drove home sales lower and slowed price gains. Property stocks in Singapore, ranked the most-expensive city to buy a luxury home in Asia after Hong Kong, may further languish next year after the government took measures to cool prices. Home sales may decline 10% in 2014 while prices are expected to drop for the first time in two years, according to broker Chesterton Singapore. Higher borrowing costs, falling public housing resale prices, slower population growth and a record number of apartment completions are key factors that could cause residential demand to wane. The property curbs, which included stamp duties and other taxes on home purchases, led Citigroup and UBS to rate the city’s residential developers underweight in the past two months. CapitaLand (-18% ytd) and City Dev (-25%), the nation’s two biggest listed developers, were among the three worst performers on the index after being in the top 10 last year. Four of the 10 poorest performers on the benchmark were property companies. The Singapore property index, which tracks 50 developers in the city, slid 10% this year, after surging 48% in 2012. The Straits Times looks at the top developers to watch in 2014: M+S (unlisted) The company is a 40:60 JV between Temasek and Khazanah Nasional. Fresh off the strong sales of Duo Residences at Bugis last month (87% of the 540 units released sold at $2,000 psf ASP), M+S is riding high. It is expected to launch the much-awaited Marina One, a 3.67m gfa mixed use development, within the next six months. Consultants say homes there could go for around $2,800 to $3,000 psf. CITY DEV Another major project that will hit the market next year is South Beach, a mixed-use development located between Raffles Hotel and Suntec City and next to the Esplanade MRT station. South Beach is developed by City Dev and IOI Corp. The 190 homes at South Beach Residences are expected to go on sale at ~$3,000 psf. No launch date announced, but the project is expected to begin sales by the end of Mar. City Dev and its joint venture partners, Hong Leong and Hong Realty, also plan to launch a 944-unit residential project in Pasir Ris and an 845-unit development in Commonwealth Avenue in 1H14. FRASERS CENTREPOINT Having been infused with fresh cash for acquisitions and a new spirit of daring, Frasers Centrepoint (FCL) could shake up the market next year. FCL is expected to be spun off from its parent company, F&N, and listed on SGX on Jan 9. OXLEY HOLDINGS CEO Ching Chiat Kwong has grand plans for Oxley, which made its maiden foray overseas this year. The local developer has been on an acquisition spree, and now has ventures in Malaysia, Cambodia and China. Last month, it bought Royal Wharf, a 16.2ha mixed-use site on the banks of the River Thames in London, for ~$419m. Oxley plans to transform the site into an entirely new district with residential units as well as commercial, retail, leisure and educational facilities. Oxley is also redeveloping the site of the Pines country club in Stevens Road, which it bought from motoring tycoon Peter Kwee for $318m. The company moved from the Singapore Exchange's Catalist board to the mainboard in Feb.
Market Roundup: US stocks ended Fri mostly flat in light trading after streak of six record-setting closes for the Dow and four straight highs for the S&P 500 on encouraging signs of an improving economy. The S&P 500 has advanced 29% in 2013, putting it on course for its biggest annual rally since 1997. From a technical perspective, the market is a little overbought and needs to take a pause to consolidate its gains. Social networking company Twitter, which soared earlier in the week, fell 13% as investors took profits after Macquarie downgraded the stock on valuation grounds. Other internet stocks also declined, including Facebook (-4%), Netflix (-2.5%) and Priceline (-1.6%). Bond prices fell, tipping the 10-year Treasury yield above the key 3% mark for the first time since Jul 2011 to 3.01%. It remains to be seen how financial markets will react to rising rates but the general consensus is that markets will take the rate hike in its stride if it is gradual and orderly but not if a sharp spike boosts yields so high that it will derail the housing and economic recovery. In Asia, the Shanghai Composite outperformed other Asian markets as fear of stress in China’s money markets eased, while Japan’s Nikkei retreated from a six-year high after data showed consumer prices rising more than expected. Following its mini X’mas rally which sent the STI almost 3% higher over six consecutive days, the benchmark index looks set to test the first resistance at 3,160 before technical indicators cross into overbought territory. Immediate support sits at around 3,120. Stocks to watch: *OKP: Awarded $4m contract by PUB to improve drainage at Chai Chee Road and New Upper Changi Road with completion due in Sep ’14. This brings the group’s gross order book to $451m. *Croesus Retail Trust: Extended its first right to negotiate for the purchase of these properties, Mallage Saga, Forecast Kyoto Kawaramachi, NIS Wave 1 and Luz Omori, till Mar 2014. *China Oilfield: Poposed disposal of all its operating subsidiaries to Executive Chairman and controlling shareholder Gao Yanming for a cash consideration of Rmb2m ($0.4m) vs its net liability of Rmb139m. Upon completion of the sale, the group will become an empty shell with positive equity of Rmb1.8m. The sale of its loss-making business will enable the group to clean up its balance sheet, give it more options to acquire a new business and seek to be removed from SGX Watch-List. *Changjiang Fertiliser: Signed MOU to acquire the production (under construction) and land assets of Yueyang City Xinsheng Fuhefei Co for Rmb136.7m. *Teho International: Proposed renounceable non-underwritten 2-for-5 rights issue @ $0.09 (47% discount to last close of $0.17) to raise net proceeds of $4.1m for repayment of borrowings (62%) and general working capital or potential acquisitions (38%). *Oriental Group: Proposed acquisition of previously leased steel production facilities from Jiangyin Dingsheng Jinshu Yayan Co for Rmb21.5m ($4.5m). The purchase consideration will be funded by proceeds from its convertible note issued in Aug ’12 and share placement in Apr ’13. *Riverstone: Awarded RM21.8m contracts to construct six glove production dipping lines and provide mechanical and engineering works and fire fighting systems to its factory building under construction in Perak Malaysia. When completed in 3Q14, the group’s annual production capacity will increase by 32% to 4.1b gloves. *China Gaoxian: Secured Rmb800m of new project financing comprising 1) Rmb500m five-year syndicated loan facility led by China Construction Bank to repay exisiting bridging loans and finance the construction and operation of new production facilities; 2) Rmb300m equipment finance lease from Hua Rong Finance Lease Co to take over certain purchase contracts entered into by the group with equipment manufacturers.
Friday, December 27, 2013
Unionmet: Latest announcement was 23 Dec where the company announced the completion of a restructuring exercise, where Unionmet is now the ultimate holding company of subsidiaries Union Zinc and Guanxi Intai Technology. This is the first completed restructuring exercise following a majority shareholder change. Recall that in July, Asia Capital Group (ACG) has purchased a 29% stake (1% shy of the 30% level which will trigger the mandatory general offer) Should such a scenario materialize by 23 Jan 2014, SGX rules mandate that the offer price will have to be tabled at a price not less than the $0.14 per share that ACG acquired for on 23 Jul.
HLH: Entered into joint operations agreement with Zhong Fu International Investment to cultivate, process, and produce cassava (or maize and sugarcane) at HLH’s 9,985 hectares of farmland plantation in the Kampong Speu Province in Cambodia. The term of the agreement is 5 years beginning 2014, with an option to renew at the end of 2018 for another 5 years. Annual payment by Zhong Fu will be in the form of cassava produce amounting to US$3m for each of first two years (2014-15) and US$4m each for next three years (2016-18). During the term of this joint operations, Zhong Fu has the option to purchase the Plantation for US$60m subject to regulatory approval and compliance of laws. The total net book value of the 9,985 hectares of plantation and infrastructure assets provided to Zhong Fu is US$22.6m as at 30 Sep 13.
Market Roundup: US stocks continued their bull run of 2013 with the blue-chip Dow Jones Industrial Average climbing for the 6th straight session to its 50th record high this year amid window dressing as a drop in weekly jobless claims boosted optimism about the economy. Historically, markets tend to advance between Christmas and New Year’s Day due to portfolio adjustments for maximizing tax benefits, good investor mood during the holiday season and the absence of short selling in light trading with most traders away on vacation. In a positive sign for the economy, initial jobless claims declined by 42,000 in the latest week to 338,000 from an adjusted 380,000 the previous week. Other stronger-than-expected economic data had raised confidence in the US outlook after the Fed announced on 18 Dec that it was scaling back its easy monetary policy. In the bond market, the 10-year Treasury yield hit 3% before pulling back to 2.99%. In the tug-of-war between accelerating economy and accelerating interest rates, the market seems to come to terms that rising rates mean the economy is doing better, which is a healthy sign. The VIX Index or so-called fear gauge slid to 12.33, its lowest level in more than a month and has dropped 32% this year, it biggest annual decline since 2009. Twitter jumped 4.8% to US$73.31, extending its gain to 76% this month on speculation that the microblogging site has room to expand its digital advertising sales. But Blackberry slid 8.8% on news that co-founder and co-CEO Mike Lazaridis has dropped a plan to buy the company. In Japan, the Nikkei pushed above 16,000 and closed at its highest level since 2008 as the yen weakened against the dollar on hopes that the BoJ will press ahead with its stimulus to end 15 years of deflation but China’s Shanghai Composite fell 1.6% on disappointment over the lack of additional cash injections by the central bank. The S’pore market may extend it mini Santa rally on selective buying with near term objective for the STI set at 3,160 and immediate support at 3,100. Stocks to watch: *SIA: Formalised its proposed JV with Tata by forming a new company called TATA SIA Airlines with SIA owning 49%. *HLH: Entered into five-year joint operations agreement with Zhong Fu International Investment to cultivate, process, and produce cassava (or maize and sugarcane) at HLH’s 9,985 ha of farmland plantation in the Kampong Speu Province in Cambodia. Annual payment by Zhong Fu will be in the form of cassava produce amounting to US$3m for each of first two years (2014-15) and and US$4m each for next three years (2016-18). *Memtech: Received Rmb14.5m in fire insurance claim for its fire outbreak at its touch screen factory in Nantong in Feb 2013. The claim payment would be booked in its 4Q13 results. *GKE Corp: Issued profit guidance that it expects to report a net loss for 1HFY14 mainly due to finance charges incurred for new acquisitions and higher direct costs arising from increase in staff and depreciation expenses. Group is expected to announce its results on or before 14 Jan. *Asia Power: Asia New Energy (ANE) extended its voluntary conditional cash offer of $0.16 each to 10 Jan. To-date, ANE has 82.34% valid acceptances for its offer.
Thursday, December 26, 2013
SGX: Chart appears range-bound. Price has breached 200 day MA, which normally indicates further upside, but might be limited as Stochastics is creeping into Overbought territory. Nearest resistance is around ~$7.50, while nearest support is ~$7.15, and ~$6.95 thereafter.
Wilmar: Latest was Nomura's note on speculations that Wilmar may do a stake purchase in Shree Renuka. As per a few news articles in India, Wilmar may be talking to Shree Renuka Sugars (SHRS IN) to buy a stake in the company. http://www.forbes.com/sites/naazneenkarmali/2013/12/03/wilmar-to-buymajority-stake-in-indian-sugar-firm-shree-renuka/ http://www.moneycontrol.com/news/cnbc-tv18-comments/shree-renuka-sugarsmay-sell-stake-to-singapore39s-wilmar_1001376.html The stake purchase may trigger an open offer which implies >25% stake. Shree Renuka Sugars (SRS) has a market cap of ~US$200mn, with annual crushing capacity of 22mn MT (13mn MT in Brazil); However, it is loss making, and is trading at EV/EBITDA of 6x CY14F (sector average ~5.5x).
Rex: UOB Kay Hian maintains Buy with $1.27 TP. While the oil in the first exploration well is not commercially viable, all is not lost as the presence of hydrocarbons (oil) still underpins Rex’s claims in its ability to find oil. It is important for investors to look at 1 or 2 more well drilling as a more accurate representation of the effectiveness of Rex’s Technology. Rex will be drilling 5 to 7 onshore well in its concessions in Trinidad & Tobago in 2014, with the first drilling to be carried out in 1Q2014. Drilling at Oman is anticipated to also commence again within 2 weeks. The non-commerciality of the oil well could be due to many possibilities such as low pressure at reservoir, oil being too viscous or too heavy etc. Nonetheless, datasets acquired from the coring and logging programmes of the first well will give engineers a better understanding of the Oman prospect, and will aid in the identification of the second exploration well.
Tritech: Group received a "Distinguished Design Enterprise of Environmental Engineering For Year 2013 In China" award for recently acquired wholly-owned subsidiary, Anhui Clean Environment Biotechnology Co Ltd (ACEB). ACEB has a wide range of licenses which includes a Class A Design License for environmental projects with unlimited tender capacity and a Class A Design License for Industrial waste water treatment with unlimited tender capacity. Group intends to ride on the significant growth potential in the areas of design and consultancy for the environmental and wastewater treatment fields in China going forward.
Gold: Investor sentiment is heavily negative on the asset amid its worst annual performance in over three decades, coupled with the Fed's tapering announcement last week which pushed gold prices close to their 2013 low of around $1,180. Given the fact, contrarians believe that the risks for the coming year are firmly skewed to the upside. According to Capital Economics, the worst of the slump may be over on the fact that the latter half of 2013 was less catastrophic for gold than the first half. Capital Economics added that next year, a re-emergence of euro zone instability could work to boost gold prices as investors turn to safe havens once again. Furthermore, worries over the threat of deflation could see higher gold prices. The final supportive factor will be the recovery in gold demand from emerging economies. India, for example, where a government clampdown on gold imports has quashed demand, could see some relief of these restrictions in 2014, proving a catalyst for a rebound in gold prices.
Market Roundup: US stocks closed for Christmas at record highs backed by solid reports on durable goods orders and new home sales. Investors cheered data showing orders for durable goods surged 3.5% in Nov after a 0.7% drop the prior month, while purchases of new home topped forecasts despite declining 2.1% to 464,000 annual pace, following a revised 474,000 rate in Oct that was the highest since Jul 2008. The market was in celebratory mood as general economic conditions are showing a sustainable recovery pattern. The braod-based S&P 500 has climbed 28.5% this year, on course for its biggest annual rally since 1997 and sustained by the Fed’s loose monetary policy and better economic data. The market latest run-up came despite last week’s decision by the central bank to scale back stimulus because of the better-than-expected economy. With Hong Kong, Jakarta and Sydney all closed today for the festive season, the S’pore market is expected to grind higher, taking cue from Wall Strret and positive openings in North Asian markets in Tokyo (+0.9%) and Seoul (+0.3%). Short term momentum remains encouraging but upside may be limited in the absence of any real trading catalysts. Near term objective for the STI is seen at 3,160 with bottomside support at 3,100. Stocks to watch: *S’pore Medical Group: Proposed 1-for-2 renounceable non-underwritten rights issue @ $0.105 to raise up to $7.4m to cater for possible redemption of its 25.5m redeemable convertible preference shares, strengthen its balance sheet and enhance financial flexibility to capitalize on growth opportunities. *Rex Int’l: Updated that Masirah Oil, a 64%-owned subsidiary of its JV Lime Petroleum, has suspended its first exploration well, Masirah North North #1 in Block 50 Oman, for safethy reasons and data analysis indicated the presence of non-commercial hydrocarbons. A second exploration well has been identified in the Oman Block 50 project and drilling will commence in the next two weeks. *WE Holdings: Extended its MOU with Nay Win Tun relating to its proposed collaboration to undertake petroleum onshore projects in Myanmar by an additional three months till Mar 2014. *Singapore Post: Entered into an agreement to acquire Axis Plaza for RM34m ($13.1m) vs its latest valuation of RM37m. The property is located in the Temasya Industrial Park in Shah Alam, Selangor, Malaysia. *City Dev: 59% owned listed hotel arm Millennium & Copthorne is acquiring a luxury hotel, comprising 154 suites and four penthouses, located within the Chelsea Harbour mixed development in London for £65m. *Internet Technology Group: Granted approval-in-principle for its proposed delisting from SGX following the exit offer of $0.138/share by controlling shareholder Ossia Holdings.
Monday, December 23, 2013
CNA: ($0.135) Beneficiary of rising use of SMART technology Amongst the technology game changers in 2014, market watchers highlight that SMART technologies are slated for intensive test-bedding in the year ahead as consumer-centric green building technologies become more mainstream in Singapore. SMART systems provide energy management solutions, and enable efficient energy usage in buildings, thereby alleviating the demand pressure on the electrical grid during peak periods. SGX-listed CNA Group may be a beneficiary of the rising proliferation of SMART technologies. CNA is the exclusive Asia Pacific partner of American Auto-Matrix (AAM), a global solution integrator for SMART technologies and one of the pioneer designer, developer and manufacturer of SMART building solutions. In 2012, CNA installed AAM's SMART system into Singapore's National Heart Centre. The building subsequently achieved the Green Mark Platinum award from BCA, and is estimated to have reduced its energy consumption by 30%, translating to annual savings of ~$1.3m, on top of a drop in carbon emission by 3,000 tonnes a year. At current price of $0.135, CNA trades at 0.8x P/B.
Mirach Energy: No news relating to its 10% drop today. Note technical support level at $0.159; A close below that level may portend a downside towards $0.14, the gap made on 21 Jun. Latest news was on 19 Dec when the group spudded another new well (KM-604) at its Kampung Minyak oil field, the second of the batch of three new wells to be drilled this quarter. Completion of the drilling and logging analysis is expected to be out between end of Dec '13 and Jan '14.
Rowsley: Peter Lim's Rowsley just coming into play with a sudden tick up in volumes in the past hour, taking share price to $0.31 (+5.1%). A repost of a article dated 12 Dec on the development of the Iskandar region: PM Najib Razak assured investors that a lot more will be done to enhance Iskandar’s attractiveness as a prime business and tourism destination, as well as to help the region achieve its 2025 target of having 3m people, 1.46m jobs, cumulative investments of RM383b over 20 years and a GDP of US$93.3b. As Iskandar draws more investments and generates higher economic activity, this may boost property prices in the zone. SGX-listed Rowsley, which is developing the Vantage Bay mega integrated project in Johor Baru, is well-positioned to benefit from Iskandar’s expected rapid growth. The S’pore developer plans to launch the first phase of its residential units by early 2014. Other listed plays with potential Iskandar exposure include Albedo and Jubilee Industries. Both companies are currently in the midst of their respective reverse takeovers (RTO), aimed at transforming them into developers with projects focused on the Iskandar region.
Declout: Counter broke out of its mid-term (60MA) downtrend on Friday and continued its positive momentum on good volumes today. Most notable corporate news occurred in Sep when Declout raised money to reinforce the group’s capital structure, enabling the group to have more flexibility in tapping growth opportunities for its IT Infrastructure Services and Vertical Domain Clouds segments. Declout is a potential beneficiary on the gradual initiation of the cloud computing industry and the commoditization of IT. Cloud computing alters the economic calculus of information technology via transition from products to services, from capex to opex. The transition to public or private clouds is gaining pace as companies in Singapore realize the potential for transforming business capabilities and driving new innovative services. Cloud computing in Singapore is expected to grow 43% from 2012-2017, exceeding the forecast of 29% in the region.
CCM Group: Company is giving 10 bonus warrants for every 1 share held, with exercise price at $0.01 apiece. Each bonus warrant will also entitle the shareholder to one free piggyback warrant upon the exercise of the bonus warrant. The piggyback warrant has an exercise price of $0.011. A warrants issue is not immediately dilutive to the mother share. Further, the credit date of warrants have not been given by the company at this point. Do note that several assumptions need to be made for the calculation of the theoretical value post XB: iii) All bonus warrants are exercised immediately upon credit, since the exercise price is at a large discount to the current mother share; iv) All piggyback warrants are exercised upon credit. The calculation of CCM Group's theoretical price could be derived as [($0.163 * 1) + ($0.01 * 10) + ($0.011 * 10)] / 21 = $0.0178
SMM: Trading Central notes the stock price still remains under pressure below its nearest bearish gap on 6 Nov. Both the 20-day and 50-day moving averages are heading downwards, and should continue to push the prices lower. Besides, the daily RSI stays weak below its neutrality area at 50%, without displaying any reversal signals. Therefore, as long as $4.62 (the previous high) is not surpassed, look for a test of $4.15 in the coming days, if breakout, further decline to $3.9 is more likely to occur.
Noble Group: Noble spun-out Gloucester Coal in 2012 for a 13% stake in Yancoal Australia and CLSA believes that a recent change in government regulations may see the risk of Noble losing a marketing agreement with Yancoal, making up ~4% of Noble’s EBIT. 78% majority owner Yanzhou Coal is proposing to buy-out Yancoal. While this deal would have been blocked by Australia’s Foreign Investment Review Board given that Yanzhou Coal committed in 2009 to list at least 30% of its assets in Australia by end 2013, Australia’s Treasurer, Joe Hockey, has retroactively removed that restriction from Yancoal on 11 Dec 2013, effectively giving the green-light for Yanzhou Coal to take Yancoal private completely. If Noble do lose ownership over Yancoal, Noble will lose a key negotiating angle for getting the marketing rights to future coal volumes. While the marketing operations for this business is only around 20mt of coal (vs. Noble total energy vol. of 135mt), and ~4% of EBIT, CLSA expect further headwinds to come given that control is now in Yanzhou Coal’s hands. CLSA maintain Sell with $0.87 TP.
Del Monte Pacific (DMP): Announced last October that it is going to acquire Del Monte Food’s consumer business for US$1.675b. Management has secured all debt funding of US$930m, including the ability to take on additional $40m. CLSA believes that the delayed fund raising has caused weakness in share price, with current levels presenting a good entry point, given potential growth from its acquisition. By Feb of 2014, Del Monte Pacific will become one of the few Philippine global players. The acquisition paves the way for DMP to expand in the US through the significant scale and reach of Del Monte Food. Post transaction, the company will be highly geared, though strong cashflows should help mitigate balance sheet risk. DMP is currently trading at a 2014 PE of 16.3x, and a cheaper 11.2x 2015 PE. Although there exists some execution risk, CLSA think current valuations mitigate the execution risk for the company. House reiterate BUY with TP of P33/sh (S$$0.94), implying an upside of 44% (62%). Currently, SGX-listed Del Monte trades at a 9% premium to Phillippine-listed counter.
Swissco: Bags three chartering contracts worth an aggregate $15.2m. The first, a 3-year contract for an offshore support vessel, will be deployed in the Middle East with a sale and purchase option exercisable after the charter period. The other two contracts are for accommodation vessels to be deployed in two separate work sites in Southeast Asia, one for 30 days with an option for extension, and the other will be deployed for a 6-month period. Swissco is undergoing a fleet expansion and renewal program with 11 vessels under construction at Chinese shipyards, and targets its fleet to reach 50 vessels over the next few years from 33 currently by leveraging on the healthy demand for offshore support vessels in the mid-term. At $0.305, Swissco trades at a trailing P/E of 9.8x, above its historical average of 7.5x but supported by its growth prospects and relatively lower gearing compared to its peers.
Market Roundup: US stocks scored new record highs capping its best weekly close in months as unexpected strong data on economic growth raise optimisim about the recovery.. Traders drew an early lift from an upward revision in US 3Q GDP growth to 4.1%, its fastest pace in two years, from a prior estimate of 3.6% due to stronger consumer spending and business investment than previously reported. Until recently, investors had viewed positive data as negative because it may prompt the Fed to trim its stilus but now that the central bank has announced its intention to pare its monthly bond purchases by US$10b, there is no real risk of further tapering any time soon. The markets pared their gains towards the close because of quadruple witching, which marked the quarterly expiration of stock/index options and futures as well as quaretly index rebalancing. The S’pore market finally breathed some life on Fri and is expected to trend higher going into the new year, propped by the traditional Capricorn effect as fund managers re-adjust their portfolios. A break of resistance at 3,100 could send the benchmark STI towards the next objective at 3,163, while support seems safe at 2,990. Stocks to watch: *SIA: Agreed on a US$62.8m settlement to resolve the US Air Cargo Class Action brought against its cargo unit, without admitting any wrongdoing or liability. Accordingly, the group will make a $78.5m provision in its financial accounts for FY14. *SIA/Tiger: SIA has acquired an additional 7.3% stake (72.3m shares) in Tiger Airways from Temasek Holdings bringing its holdings to 40%. The purchase consideration of $49m was transacted at $0.6678/share or 34% premium to Tiger's last close of $0.505/share and a 33% premium to its NTA as at Sep. Upon completion, Temasek's stake will be reduced to 48.5% from 55.8%. *CapitaMalls Asia: Formed 49/51 JV with Changi Airport Group to jointly re-develop the 3.5ha car park site fronting S’pore Changi Airport Terminal 1 into a mixed use development Terminal 1. The $1.47b Project Jewel is expected to have a GFA of 134,000 sqm offering airport facilities (17,000 sqm), leisure attractions (22,000 sqm), hotel (5,000 sqm), retail space (90,000 sqm) and 2,500 car park lots. Construction will begin in 2H14 with targeted opening by end 2018. *Swissco: Secured three contracts worth $15.2m, comprising a three-year charter for an offshore supply vessel to be deployed in Mid-East and two accommodation vessels on short term charter in South-east Asia. *Sino Construction: Received a LOI for the award of a RM40m main contract from Kota Kinabalu City Hall to build a proposed mixed commercial development cum bus terminal with built-up space of 410,436 sf in Kota Kinabalu, Sabah, Malaysia. *Cambridge Industrial: Proposed to acquire the industrial property at 11 Chang Charn Road, S’pore for $32m. The property, which has remaining land tenure of 43 years, comprises a six-storey purpose-built warehouse cum light industrial building with GFA of 9,062 sqm. The vendor, Shriro Property will take a partial leaseback while the remaining subsisting sub-leases will be assigned to Cambridge on completion. *ARA: Acquiring Macquarie Real Estate Korea, a real estate management company based in Seoul that manages two privately held Korean REITs (K-REIT) with combined AUM of ~US$554.1m. ARA will also acquire a 10% stake in one of the K-REITs, co-investing alongside one of Korea’s largest pension funds, which is also the sole investor in the second K-REIT. *Yoma: Extended the long-stop date for its proposed acquisition of a landmark development in Yangon to 30 Jun 2014 from 31 Dec 2013 due to ongoing talks with government authorities over the terms of its master lease. Meantime, the group is finalising details with partners The Hongkong and Shanghai Hotels and Mitsubishi Corp on the design and planning of the project and financiers IFC and Asian Development Bank on a debt and equity financing package. *Noble: Acquired a 21.2% stake in ASX-listed coal miner Cockatoo Coal for A$43.3m, making it an associate company. *Courage Marine: Acquired a 72,000 dwt panamax vessel (MV Hsin Ho) from Taiwanese shipping firm Ta-Ho Maritime Corp for US$8.6m. The vessel, expected for delivery in Jan 2014, is part of the group's fleet renewal programme. *Tritech: Announced intentions to switch its proposed spin-off and listing of its limestone business to the Catalist Board on SGX instead of SEHK after taking into consideration the regulatory requirements of both exchanges. However, the listing process is still in preliminary stages and no approval have been obtained from SGX. *Blumont: Disclosed that its proposed subscription for US$100m convertible bonds in Discovery Metals has lapsed after precedent conditions have not been met and the term sheet has been terminated. *Religare Health Trust: Entered into forward currency hedging contracts based on management estimates of incoming rupee cashflow for FY14 in order to meet its projected distributions. *Guocoleisure: Has resolved to delist from the NZX mainboard wef 27 Jun 2014. Following the delisting date, Guocoleisure shares may be traded only on SGX, where it maintains its primary listing.
Friday, December 20, 2013
XMH: XMH hopes for a turnaround in operations via its recently-acquired Mech-Power Generator. The new subsidiary is Singapore’s leading manufacturer in the assembly, sale and service of diesel-powered generators, and receives the bulk of its revenue primarily from Singapore. XMH hopes to ride on S'pore's economic and infrastructure growth over the next few years, given that every building of more than 4 storeys is required by law to have standby generator sets. In its latest 2QFY14 results, Mech-Power contributed 19% to group's revenue of $27.1m, which fully mitigated the 15% decline of its distribution and aftersales segment. Over the five-month period prior to Oct '13, XMH went through challenging times when the Indonesian rupiah slid over 10% from 9,700 IDR/USD to over 11,000. This caused vessel owners and operators in Indonesia to delay taking delivery of their engines in the hope of reducing their currency exposure, affecting XMH's diesel engine business. With the continued depreciation of IDR/USD to the current 12,237, we do not foresee a near-term recovery on its Indonesia marine business. Having said that, management provided an indication of green shoots for coal demand from China, which may lead to a pick up in demand of tugs and barges for coal transportation. This comes in support of Indonesia's projected 5.6% GDP growth for 2014. Balance sheet is at a healthy net cash position, which puts XMH in a good position to pursue further acquisition activities to expand its business. At $0.34, XMH trades at an annualized 2QFY14 P/E of 15.3x and 2.5x P/B. Latest broker recommendations: OSK DMG has a Buy rating with a lower TP of $0.50 (from $0.54)
Cosco Corp: UOB KayHian estimate ytd contract wins at US$3b, surpassing its projection of US$2.5b. House raise its 2014-15 net profit forecasts by 7-13% on higher contract win assumptions of US$3.0b each for 2013 and 2014 (previously US$2.5b). Dry-bulk shipping rates appear to have emerged from their cyclical bottom. While 4Q is typically a seasonally high period for dry-bulk shipping, the Baltic Dry Index (BDI) - currently at 2,156 after its recent peak of 2,337 on 12 Dec 13 - is three-fold of its level of 720 a year ago. If dry-bulk shipping rates continue to improve throughout 2014 (notwithstanding a seasonal low in 1Q14), shipyards are likely to see a new dry-bulk shipbuilding cycle. Traditionally, Chinese shipyards dominate in the global building of dry-bulk carriers. UOB KayHian maintains HOLD with $0.85 TP, tips for a entry at $0.70.
OCBC Technicals: Both Stochastics and RSI indicates that OCBC is exiting the oversold territory, and suggest an upside to stock. The nearest resistance would be around $10.10. The nearest support will be around $9.80,with the following one at around $9.60.
Keppel Land: Longer term trend line (200MA) has tilted downwards indicating a possible prolonged pressure on share price. In the recent month, selling volumes have increased as share price slid down and have shown no signs of slowing down as exhibited on the increasing ADX trend. Would wait for selling volumes to taper off before looking at an entry. Support at $3.28 followed by $3.15
Tritech: Counter seems to be in accumulation over the 5 Nov - 16 Dec period, as volumes start deminishing. Counter may see near term upside as volumes start to pick up, supported by the rising RSI and Stochastics. Support at $0.32 with resistance at $0.42.
RH Petrogas: Counter in an attempt to close its gap at $0.63 level made on 18 Nov. However, it may see some downside pressure in the near term, with Stochastic at the overbought region, as buying volumes gets thinner. Support at $0.565 and resistance at $0.65.
SP Ausnet: Australia’s Treasurer Hockey has conditionally approved a foreign investment application from State Grid Corporation of China (State Grid) to acquire 19.9% of SP AusNet from S’pore Power Int’l. The State Grid is the world’s largest electric utility and is 7th on the Fortune Global 500. SP AusNet operates electricity transmission networks, electricity distribution networks and gas distribution networks in Victoria. The application is conditionally approved that at least 50% of members by State Grid to the Board of SP AusNet are Australian residents. According to Business Times, M&A professionals highlighted that the news is likely to spook some international investors who already view Australia as a tough place to do business. Treasury Hockey also stated “Australia is open for business and we welcome foreign investment when it is not contrary to the national interest”
SCI: Entered into a 80/20 JV with Caofeidian Industrial Zone Administrative Committee to build, own and operate a wastewater treatment to the Caofeidian Chemical Industrial Park in Hebei, China. Targeted to begin operations in late 2015, the wastewater treatment facility will have an initial capacity of 10,000 cubic metres/ day and have advanced capabilities to treat high concentration industrial wastewater and high oil content industrial wastewater. This JV has secured a 30 year exclusive concession agreement to provide wastewater treatment services within a 32 sq km area in the chemical industrial park. The total investment of the project is ~$22.4m.
Gold has lost nearly a third of its value year-to-date, and is currently quoted at US$1,220/oz. With the start of the QE taper from Jan next year, the asset that was once considered a safe-haven may further lose its luster due to a continued strengthening of the greenback as the US economy improves. Two major sell-offs occurred during the year in Apr and Jun, that saw the commodity shed an aggregate 26%, sparked by a 1ppt rise in 10-year US treasury notes to 2.61% on the perceived recovery of the economy. As long term yields rise, more funds may be channeled away from the shiny metal that has little economical use, except for jewellery.
Global Yellow Pages: Group will acquire 100% of Gloria Jean’s Coffees business in a deal worth A$35.6m ($40.7m), subject to certain profit conditions. 80% of the consideration will be paid for in cash, and the remaining 20% will be paid by way of 116.4m new GYP shares issued at $0.07 each. Gloria Jean’s Coffees is a leading global specialty coffee and coffee house chain with over 800 coffee houses across 39 countries worldwide, under the “Gloria Jean’s Coffees” and “It’s A Grind” brands. Management believes there is significant potential for further expansion of the brand in Asia, especially China. To fund the acquisition and strengthen GYP’s financial capacity, the group is proposing to raise up to $149.1m in net proceeds via a renounceable rights-cum-warrants issue (assuming full subscription). The proposed entitlement will be 3 rights shares for every 2 existing GYP shares, to be issued at $0.05 each. Each right share will come attached with one free detachable warrant to subscribe for one new GYP share at an exercise price of $0.07. The rights issue will be partially underwritten by UOB Kay Hian and supported by undertakings from CEO Stanley Tan and substantial shareholder Sam Goi. Based on FYMar13 numbers, GYP’s NAV per share will fall from 12.28¢ to 7.21¢, and core EPS will improve from 0.71¢ to 0.85¢, post the proposed acquisition and rights issue. GYP was loss-making in 1HFY14. But investors remain hopeful that the group, now backed by food tycoon Sam Goi, and Chairman Mah Bow Tan, may emerge stronger once the on-going restructuring and strategic business diversification is completed.
Market Roundup: US stocks paused a day after a record-setting surge spurred by the Fed’s modest cutback of its monetary stimulus amid mixed economic signals. Markets ended little changed as existing home sales fell for a third consecutive month in Nov to its lowest level since Dec ’12 and jobless claims unexpectedly climbed by 10,000 to a nine-month high of 379,000. Separately, the Philadelphia Fed index of factory activity edged up in Dec, while the Conference Board of leading economic indicators rose 0.8% last month. The greenback gained against other global currencies and the 10-year Treasury yield touched a three-month high of 2.92%. Gold fell 3.3% to a three-year low of US$1,193.60/oz, while crude oil was up 1% to US$98.77/barrel. Asian markets saw a mixed reaction to the Fed’s taper decision with Tokyo’s Nikkei (+1.7) and Sydney (+2.1%) both soaring but Hong Kong (-1.1%) and Shanghai (-1%) losing ground as most investors have already priced in the cut in bond purchases since May. The marginal STI move (+0.3%) was probably weighed by the 2% drop in SingTel, which went ex-dividend from its 6.8¢ payout. Expect the benchmark index to range trade between 3,100 and 2,990 till end of year with a slight upside bais given the market’s oversold situation. Stocks to watch: *Sembcorp Industries: Setting up a 80/20 JV with the local authorities to build, own and operate an industrial wastewater treatment (WWT) plant in the Caofeidian Chemical Park in Hebei, China. Targeted to begin operations in late 2015 with an initial capacity of 10,000 m3/ day, the WWT facility has secured a 30-year exclusive concession to service customers within the 32 sq km chemical industrial park. Total investment of the project is Rmb108.3m ($22.4m), of which Sembcorp’s equity share is Rmb35m. *euNetworks: Renewed multi-year contract with HUK-COBURG, Germany’s leading insurance provider, to provide hgh bandwidth Ethernet services to connect 47 branches across Germany with HUK’s HQ. The group owns and operates 13 fibre-based metropolitan networks across Europe connected with a high capacity backbone covering 38 cities across nine countries. *SBS Transit: Submitted an application to the Public Transport Council seeking bus and rail fare hikes, citing significant cost pressures despite efforts to lower costs and raise productivity, with any fare adjustments to be announced in 1Q14. *Mirach Energy: Spudded another new well (KM-604) at its Kampung Minyak oil field, the second of the batch of three new wells to be drilled this quarter. Completion of the drilling and logging analysis is expected to be out between end of Dec '13 and Jan '14. *OKH Global: Revised the intended use of proceeds from recent placement in Oct '13. 80% of the net proceeds of $39.5m, originally earmarked for potential acquisitions/investments, will now be used to fund its working capital requirements, of which a substantial $16.5m will be used for the repayment of advances to a director. The remaining $7m will be set aside for acquisitions. *Transcu: Issued a $1m 1.0% equity linked redeemable structured convertible notes due 2016, the first sub-tranche of its note programme. Concurrently, $0.2m worth of notes have been converted into 125m shares @ 0.16¢ each. *Hiap Hoe: Announced EGM schedule on 6 Jan 2014 to get approval from shareholders for its proposed acquisition of the entire share capital of Superbowl Holdings @ $0.75 apiece. *SP AusNet: Australian authorities have conditionally approved the foreign investment application by State Grid Corp of China to acquire a 19.9% stake in SP AusNet from S’pore Power Int’l.
Thursday, December 19, 2013
Global Yellow Pages: to acquire 100% of Gloria Jean’s Coffees business in a deal worth A$35.6m ($40.7m), subject to certain profit conditions. 80% of the consideration will be paid in cash, and the remaining 20% to be paid by way of 116.4m new GYP shares issued at $0.07 each. Gloria Jean’s Coffees is a leading global specialty coffee and coffee house chain with over 800 coffee houses across 39 countries worldwide. The business being acquired comprises all “Gloria Jean’s Coffees” and “It’s A Grind” intellectual property, the global supply chain operations, and the master franchisor business for all Gloria Jean’s Coffees coffee houses world-wide. Mgt believes there is significant potential for further expansion of the brand in Asia, especially China. To fund the acquisition and strengthen GYP’s financial capacity, the group is proposing to raise up to $149.1m in net proceeds via a renounceable rights-cum-warrants issue (assuming full subscription). The proposed entitlement will be 3 rights shares for every 2 existing GYP shares, to be issued at $0.05 each. Each right share will come attached with one free detachable warrant to subscribe for one new GYP share at an exercise price of $0.07. The rights issue will be partially underwritten by UOB Kay Hian and supported by undertakings from CEO Stanley Tan and substantial shareholder Sam Goi. Based on FYMar13 numbers, GYP’s NAV per share will fall from 12.28¢ to 7.21¢, and core EPS will improve from 0.71¢ to 0.85¢, post the proposed acquisition and rights issue. The group was loss-making in 1HFY14, and is currently in the midst of a restructuring and strategic business diversification.
XMH: Announced that Mr Tan Seng Hee, Executive Director and Deputy CEO has left the company to pursue personal interest. Last wk, the group reported uninspiring 2QFY14 results. Revenue was flat y/y, but net profit plunged 44% to $2.0m , due to a weakening rupiah and higher operating expenses following the acquisition of the MPG Group.
GLP: notwithstanding today's long black candle, the counter remains in a longer term uptrend supported by the 200day moving average ($2.83). RSI remains tilted on the upside, and MACD is on the verge of featuring a positive crossover, which suggests that near term price action could reverse back up. The chart features a lower risk -higher reward technical set up currently, if a stop loss is placed just below $2.80 with upside potential to $3.00.
Yoma: has been whipsawing around the 20 and 50 day moving averages and is trading range bound in a symmetrical triangle pattern. The key indicators have also flatlined and offer little trading direction. Watch for a breakout above the $0.75 or below the $0.70 levels for the next directional clues . On a bullish break, see $0.80 (near the 200 day MA) as a near term cap. A bearish break could signal the resumption of a longer term downtrend. Initial support at $0.67 followed by $0.60
Ying Li: Counter still within its downtrend although downward pressure may lighten up from the declining ADX trend. However, other indicators are inconclusive at this point. Recent volumes indicate that buying pressure are starting to taper off, limiting the counter's near-term upside. Support at $0.375 and resistance at $0.415.
Keppel: CLSA is positive on the jackup market in 2014 from strong demand for high spec jackups in Middle East and Mexican market, coupled with replacement demand driving order flow. A heavy jackup orderbook implies healthy low-mid teens margin for the O&M segment. CLSA expects another jackup 40-50 orders for 2014. CLSA also believes that FLNG (costing about US$600-700m) has the long term potential to drive orders for Keppel, in light of multiple stranded gas opportunities in North America, West Africa, and Asia Pac. The house expects US$5.75b order wins in 2014 driven by new jackup and FLNG orders. Keppel presently already has 12 jackup rigs commitments with Pemex, and Golar has indicated interest of building 3-6 FLNG vessels with Keppel. CLSA upgrades from Hold to Buy, with increased TP of $12.40 from $12.00
OCBC: While BNP expects OCBC’s loan growth to be ahead of industry average, given 1) strong growth momentum in the Greater China Region, and 2) a relatively lower household credit exposure (compared to UOB). BNP expects OCBC’s loan growth at 14% in 2014. The house also expects non-interest income to growth at 15% y/y in 2014, driven by wealth management and insurance income. 3Q13 Bank of Singapore’s AUM grew 15% y/y to US$45b, representing a significant source of US$ funding for OCBC. Investment income rom insurance should also grow with a rising long-term Asean yield curve. With regards to the above, BNP prefers OCBC to UOB. Ratings as below: OCBC: Buy, raised TP to $12.40 (from $12.30) UOB: Hold, TP at $22.00
Aussino: Following the receipt of delisting notification from SGX on 21 Nov, the company announced that there may not be an exit offer after seeking various options, due mainly to its capital deficiency of $3.3m recorded in its latest 1QFY14 results. As a last straw, the group now intends to seek shareholders' approval to either (i) commence a winding up of the Company; or (ii) explore fund-raising options to recapitalise its business operations, and if necessary, apply for judicial management.
Market Roundup: US stocks surged, sending the Dow (+293 pts, +1.84%) and S&P 500 (+30 pts, +1.66%) to record highs as investors welcomed the Fed’s surprise decision to trim its stimulus as a vote of confidence for the economy and commitment to low interest rates for a considerable time. Starting Jan, the Fed will taper its monthly bond purchases to US$75b from US$85b now in a first step towards unwinding its easy money policy amid an improving labour market, while keeping interest rate near zero. The move effectively removes investor uncertainty over the timing of the pullback. Fed officials also predicted the unemployment rate will fall to as low as 6.3% by the end of 2014. The rally adds to what has already been a historic run for stocks with the S&P 500 up almost 27% this year. With the economic recovery picking up steam, market strategists are predicting that equities will continue their rise in 2014 with gains of 6-8% from current levels. Earlier, housing starts jumped 22.7% in Nov to a 1.09m annualized rate, its highest level since Feb 2008 and permits for future projects held near a five-year high, indicating the pick-up will be sustained well into 2014. The US Senate also cleared a US$1.01t budget deal to lower the US Deficit over 10 years and ease US$63b in automatic spending cuts. The VIX Index or benchmark fear gauge sank 15% to 13.8, its biggest decline since Oct. Ten-year Treasury yields added 4bps to 2.88%, while the greenback surged to a five-year high against the yen and climbed versus most major currencies. Oil and coffee drove gains in commodities. Asian bourses in Tokyo (+1.6%), Soeul (+0.7%) and Sydney (+0.9%) opened higher in reaction to the win-win news from Wall Street with the STI primed to test its resistance at 3,100 from an oversold position. Downside support remains at 2,990. Stocks to watch: *Rex Int’l: 64.2% owned subsidiary Caribbean Rex is acquiring the remaining 25% stake in the South Erin Block in Trinidad & Tobago, which is currently producing an average of 50 bpd of oil from four shallow wells. Caribbean Rex retains a 100% interest in Inniss-Trinity and 20% interest in the Cory Moruga block, which will increase to 51% after completion of its drilling obligations. *ST Engineering: Its land systems arm ST Kinetics is setting up a Brazilian manufacturing unit to further grow the market presence of its LeeBoy brand of road construction equipment in Brazil and South America. LeeBoy Brazil will acquire the manufacturing assets from Brazilian construction equipment firm Ticel for $9.2m. *Yoma: Formed a 20/60/20 JV with Sumitomo Corp and First Myanmar Investment, to distribute and service Toyota’s Hino brand trucks and buses in Myanmar. Hino Motors is the largest manufacturer of heavy and medium duty trucks in Japan. This collaboration will further broaden Yoma’s burgeoning automotive interests in Myanmar. *Mermaid Maritime: Awarded a subsea construction support services contract for its dive support vessel in the Gulf of Thailand. The contract will commence in May 2014 for a term of 200 days with estimated value of US$32m and comes with options for two additional years. *Pacific Radiance: Exercised its option to build two high-spec PSVs scheduled for delivery in 4Q15. This brings the group’s newbuild programme to 19 vessels in all. The acquisitions will be internally funded, using the new proceeds of $150.6m raised in its Nov IPO. *UPP: Terminated its 75/25 JV agreement with Myan Shwe Pyi Ltd to undertake quarry-related operations and engineering services in Myanmar after extending the long-stop date three times in the past 18 months. *China Print Power: Proposed placement of 41.8m shares at HK$2.60 ($0.42) apiece, ~5% discount to last close. Maximum net proceeds of HK$106.4m will be used for potential acquisition activities and general working capital. *CapitaMall Trust: Issued $100m 7-year 3.15% fixed rate notes, part of its $2.5b multicurrency MTN programme.
Wednesday, December 18, 2013
Marco Polo Marine (MPM): MPM has secured a 26-month contract for MP Prelude (with a 10-month extension option), a 13-month contract for MP Premier, and a 100-day contract for newly-acquired MP Prevail. The implied charter rates for these contracts at US$2.03-2.12/bhp/day are higher than previous rates of US$1.50/bhp/day, but within OSK DMG's expectations. House estimate these charters will yield >45% net margins and >64% asset ROEs, and provide good earnings visibility. MPM will be growing its AHTS fleet, capitalising on the strong returns available to Indonesian vessels in the cabotage-protected offshore space. Vessel prices have jumped 15% since the start of 2013, following a >35% charter rate jump over the last 18 months. MPM’s stock trades at 6.0x FY14F P/E and 0.76x P/BV, undervaluing its strong growth potential and high-margin businesses. House believe the weaker tug and barge fleet returns and lower yard utilisation have already been priced in. Maintain BUY with $0.55 TP based on 9x FY14F P/E.
STATS ChipPAC: ($0.315) Errant conduct by industry peer ASE may benefit company A week ago, Advanced Semiconductor Engineering Inc (ASE), was ordered by the local government of Kaohsiung, China, to close part of their production complex in the state after they were found dumping wastewater containing heavy metals into Houjing Creek, a major source of irrigation water for farmland in southern Taiwan. The world's largest integrated circuit packaging and testing services provider with 30% global market share was given 10 days to explain and correct its misconduct, or face a suspension or shutdown of its K7 plant, a substantial revenue generator (~9%) for the group. Market observers note that client orders which have been affected by the disruption may potentially see order flow towards ASE's competitors. One of the beneficiaries includes SGX-listed STATS-ChipPac Ltd. At the current price, STATS ChipPAC trades at an attractive 0.59x P/B. In addition, investors would be able to gain exposure to TSMC, a key client of STATS ChipPAC, which is tipped to emerge as the main beneficiary to Apple's diversification strategy of its supply chain, away from Samsung.
Tiger: CLSA view that the most material alliance announcements made yesterday is the formation of a new airline in Taiwan, whilst only taking an initial 10% stake it could provide access to new North Asian markets. This will tie in with the deepening link with Scoot where they aim to increase marketing of each other services and run parallel flights. The press release does not mention China as a market but rather Taiwan, Japan and Korea as the North Asian markets to target. China is going to be difficult to access., given how tight the cross strait traffic is controlled. CLSA has a SELL rating with $0.52 TP on Tiger Airways, based on high valuations and unsustainable operations in Australia and the Philippines which partly led to excess capacity being deployed in Singapore, saturating the market.
Banks: With the odds of the US Federal Reserve tapering its quantitative easing programme on the rise, interest rates are set to rise. The implications will manifest in banks’ net interest margin (NIM), asset quality and loan growth. Based on Maybank-KE's estimates, every 5bps increase in NIM will raise FY14F-15F EPS by 4% on average. The earnings uplift is significant after the past few years of depressed NIMs. Meanwhile, every 5bps increase in credit charge will impact earnings by 2.5-3.1%. Maybank-KE believe DBS is best positioned to take advantage of a rising interest rate environment, given its liquid balance sheet and strong deposit franchise with cheap funds accounting for 58.4% of total deposits. House have a BUY call on DBS with $19.70 TP, based on 14x FY14F core EPS, a slight premium to its rolling PER average since 2005.
DBS: Yesterday, Bank Danamon's shares jumped 11% on speculation of DBS deal revival. Back in Jul this year, DBS dropped the $6.5b Bank Danamon bid after failing to win control. According to a Bernstein note, if DBS were allowed to go ahead and wanted to, it may pay significantly cheaper price with the rupiah weakness and improved DBS share price. ie. if DBS re-offered at same price of 7,000 rupiah/shr, it would save $3.3b on deal. House notes the strategic rationale for deal remains.
Market Roundup: US stocks ended slightly lower with markets getting on edge ahead of a key FOMC policy meeting that could signal when the Fed would dial back its monetary stimulus that has kept interest rates low and helped boost equity markets. There has been some chatter recently about a possible Dec cutback following the release of encouraging economic data but an unchanged reading on CPI in Nov and a tame 1.2% annual inflation which came in well below the Fed’s guidepost suggests that the Fed could afford to wait on a taper decision this week. Markets also got a lift from aerospace giant Boeing, which announced US$10b share buyback and a 50% dividend hike, while feloow Dow component 3M raised its dividend payout by nearly 35%. Asian bourses opened mostly firmer this morning on expectations that the Fed will hold off until its Jan or Mar meetings to make sure that the economy is heading in the right direction. The STI could extend its oversold rally but upside may be capped by the fibonacci resistance at 3,100. Underlying support lies at 2,990. Stocks to watch: *KrisEnergy: Received government approvals for its acquisition of Tullow Bangladesh, which holds a 30% working interest and operations of the onshore Bangora gas field in Block 9, which covers 1,770 sq km. The Bangora gas field commenced production in 2006 and produced 92.7mmscfd and 285 barrels of condensate per day in 3Q13. *Tiger Airways: Nov operating figures for Tigerair S'pore saw a 6% y/y rise in traffic, while capacity expanded 20.8%. Consequently, passenger load factor dived 10.4ppt to 74.2%. Tigerair Mandala carried 182,000 passengers (+345%) on an improved load factor of 71.9% (+7.5 ppt), while Tigerair Philippines achieved a load factor of 77.2% (+12.9 ppt) from 104,000 passengers (+8.3%). *Transview: Disposed its golf business (including properties and assets) in S’pore and Malaysia to Japanese sports gear retailer Xebio for $28m. The group will book a gain of $12m from the proposed sale, which will add 6.9¢ to its NAV/share of 17.1¢ as at Apr. It intends to use the sale proceeds to expand into other businesses or invest in new business opportunities to enhance shareholder value. *Petra Foods: Filed notice of arbitration in relation to its disputed sale of its cocoa ingredients business to Barry Callebaut. *Nam Cheong: Up-sized its medium term note programme from $200m to $600m with net proceeds used for refinancing of existing debt and financing capex, investments and general working capital.
Tuesday, December 17, 2013
CCM Group: Company is giving 10 bonus warrants for every 1 share held, with exercise price at $0.01 apiece. Each bonus warrant will also entitle the shareholder to one free piggyback warrant upon the exercise of the bonus warrant. The piggyback warrant has an exercise price of $0.011. Several assumptions need to be made at this point. Any changes to the factors listed below may create a wide variance on the calculation of the counter's theoretical value. Do also note that a warrants issue is not immediately dilutive to the mother share. i) The counter has 4 days to go before going XB on 23 Dec. Daily share price variance of 1-10% for the counter on the past five market days shows the level of inaccuracy if we use the current share price of $0.175, as the price before the counter goes XB; ii) Credit date of warrants have not been given by the company; iii) All bonus warrants are exercised immediately upon credit, since the exercise price is at a large discount to the current mother share; iv) All piggyback warrants are exercised upon credit, assuming that they are in-the-money. However for your reference, the calculation of CCM Group's theoretical price could be derived as [($0.175 * 1) + ($0.01 * 10) + ($0.011 * 10)] / 21 = $0.01833
OCBC: Counter trading in a short-term trend channel between $9.80-$10.50. Share price may see a near-term upside after bouncing off the lower end of the trend channel, supported by rising RSI and Stochastics, in a bid to cover the gap at $10.10 on 6 Dec. Resistance at $10.05 followed by 10.20, with support at $9.80.
RH Petrogas - Technicals appear to be nearing Oversold territory, as evident by Stochastics, although there is no sign of any reversal yet. Share price is stuck between the 20 and 50 day MA, and would wait dfor a break-up/break-down to confirm the trend.
Viva Industrial Trust: CIMB initiates and says it is a proxy for Singapore’s progress into higher value-added services. The house also highlights this as a long term growth segment, with embedded master lease/ rental support to ensure mid-term cashflow stability. Summit Group (key shareholder for VIT), Ho Lee Group (sponsor) and United Engineers will be/ have granted ROFRs to VIT on industrial assets in Singapore and logistics facilities in Korea, potentially adding over 2.3m sf of GFA to initial portfolio. CIMB has an Add rating with target price of $0.87
SIA: Following yesterday’s announcement of the JV between Nok and Scoot, CIMB suggested that SIA’s cash reserves could be used for business expansion during tough times such as these. CIMB’s opinion is that if managed properly, this JV could be similar to how AirAsia X brings traffic to AirAsia. However, more scale will be needed before the JV can effectively compete with more established low-cost brands. That said, CIMB underscores competitive pressures from Middle Eastern and Low Cost Carriers to weigh on earnings, hence keeps rating unchanged at Hold and a TP of $10.50
Halcyon: No corporate news on its relatively strong share price performance since Friday. Latest corporate update was their EGM that was held on 12 Dec, which approved the group's proposed allotment of shares in a private placement to Credence Capital Fund II (Koh Boon Hwee's fund) at $0.72 apiece. Do note that today's gap up was done on relatively lower volumes and current price may not be sustainable.
DBS: Mizuho Securities questions if would DBS have another chance to buy control of Bank Danamon? The Chairman of the newly established Indonesian Financial Services Authority (or OJK) recently indicated that the agency might be willing to review the issues surrounding DBS’ aborted bid to acquire control of Bank Danamon, Indonesia’s 5th largest bank. Recall, in Apr’’12 DBS offered to buy up to 99% of Danamon’s shares in a deal that would have been worth US$7.2b. In Jul12 Indonesian authorities capped the foreign ownership limit for the banking sector at 40%. In May13, unable to negotiate for an exception to the foreign ownership rule, DBS pulled out of the deal. Danamon generated pre-tax profits equivalent to 13% of DBS group profits for 9m13. Danamon’s ROE stands at 14.5% for the 9m on a Tier 1 ratio of 17.8%. In comparison, DBS reported ROE at 10.9% and Tier 1 at 13.3%. The financial impact on the group of a successful bid for control of Danamon would be substantial in our opinion. The Financial Services Authority will take over supervision of the banking sector in Jan’14. The Chairman was recently asked about the DBS offer for Bank Danamon. He indicated that it may be possible for the OJK to review the circumstances around the failed bid. Overall, the house thinks that a compromise could be reached and the price could be 23% lower in SGD terms. The OJK Chairman’s statement clearly opens the door to a new deal for Danamon. If a deal is agreed at the IDR7,000/share that was offered in 2012, this will represent a 23% discount in SGD terms, due to the significant depreciation of IDR since April last year.
Myanmar O&G: Results of Myanmar’s offshore licensing round will be known in the last week of Dec or the first week of Jan, as industry players watch with keen interest at the tender award by Myanmar’s Ministry of Energy for 30 offshore oil and gas exploration blocks. The outcome of the tender will highlight the progress, or lack of one, as the country attempts to improve the climate for energy investments. SGX-listed companies with an exposure include RH Petrogas and Interra Resources. RH Petrogas has a previously signed a joint venture partnership agreement with Myanmar's IGE Co in Mar 07. IGE Co is run by the sons of Aung Thaung, who was the Minister of Industry for Myanmar from 1997 to 2011. In addition, group has also applied for pre-qualification to participate in Myanmar's offshore bid round for 30 blocks. Interra Resources, which derives ~58% of its revenue from Myanmar, is a beneficiary of increased foreign investments within the oil and gas sector in Myanmar. The group is banking on further investments by oil majors in Myanmar’s oil and gas infrastructure to open up new opportunities.
Loyz Energy: has begun its very first oil production in the US, marking the commencement of revenue contribution from the group’s US asset. Schlak #3 well, located in North Dakota, USA, has reached a stable early production of 50-60 barrels of oil per day. This well is part of the onshore drilling programme under a participation-and-exploration agreement, covering about 60,000 acres of exploration and production leases owned by Fram Exploration ASA. The group adds that the latest development marks the start of recurrent earnings from its investments in various concessions and participation agreements, and will continue to be driven by its twofold strategy to bring concessions to production and at the same time, add other producing assets to bolster its bottom line. Outside of the US, Loyz's concession portfolio includes Area 14 in the East Palawan Basin, located offshore the Philippines, and two petroleum exploration permits; one for New Zealand’s Taranaki Basin and the other for an area offshore Victoria in Australia. At the current price, Loyz trades at 2.1x P/B versus peers Rex International of 3.4x and RH Petrogas of 1.7x.
Keppel: Keppel O&M secured 5 contracts worth $150m in total. The contracts include 3 FPSO and FSO projects from Armada C7 Pte Ltd, a JV between Bumi Armada and Shapoorji Pallonji Group; Apache Energy Ltd; EMAS AMC Pte Ltd (EMAS AMC), and 2 contracts for construct 2 semi-submersible barges for Royal Boskalis Westminster Group Keppel O&M’s has secured ~$7b ytd. Just last week, Keppel announced the construction of its new CAN DO drillship even without a firm order. This drillship (which typically has a price tag of US$800m, recall SembMarine bagged seven drillship orders from Sete Brazil in 2012 for about US$804m each) could potentially fall in Keppel’s 2014 orderbook. Other potential new orders could also come from the five jackup rig options from Transocean (US$220m each), one option from Ensco (US$265m) and a floating liquefied natural gas vessel conversion project from Golar (US$600-650m) With 20 buys and 7 holds, and a mean TP of $12.62, Keppel Corp is generally loved by the Street.
Market Roundup: US stocks rallied from the open as upbeat economic reports and mega corporate deals boosted optimism ahead of the two-day FOMC meeting starting today. A measure of manufacturing activity in the New York region rebounded in Dec, while US PMI expanded to 54.4 in Nov. Industrial production climbed 1.1% in Nov for its biggest gain in a year, while 3Q productivity jumped 3%, indicating solid improvements in business activity. Sentiment was also bolstered by manufacturing data in the euro area, which reached a 31-month high in Dec, led by Germany although China’s manufacturing setor grew at a slower pace. It appears that markets may be anticipating the Fed to lay the groundwork for tapering but do not expect any cutbacks in Dec. The consensus view is that any winding down of stimulus will only come from a position of strength when the economy is self-sustaining. With 10 days remaining in 2013, the stock market enters a period where equities tend to outperform the rest of the year. According to Bloomberg, the S&P 500 has gained 1.2% on average in the last 10 days of the year since 1928. In S’pore, hopes for a Santa Claus rally are starting to fade as traders are reluctant to take positions before a key Fed decision this week. The STI remained trapped in oversold territory above the 2,990 support but capped by its fibonacci resistance at around the 3,100 level. Stocks to watch: *Global Logistic Properties: Pre-leased 35,000 sqm of space at GLP Park Liantang in Shanghai to Haier Logistics, which will use the facilities as its Eastern China distribution centre to meet rising demand from both retail and e-commerce customers. This marks the extension of its strategic partnership with the world’s largest appliance group, which currently uses 28,000 sqm at GLP Park Jiaonan in Qingdao. *Keppel Corp: Secured five contracts worth $150m, which comprise FPSO and FSO projects from Armada C7 (JV between Bumi Armada and Shapoorji Pallonji), Apache Energy and EMAS AMC, as well as construction of two submersible barges for Smit Shipping. This brings the new orders bagged year-to-date to $7b. *SIA: Passenger load factor fell 0.7 ppt y/y in Nov to 77% as traffic declined 0.4% as capacity grew 0.5%. Loan factors softened across all key markets except Americas and Europe especially in West Asia and Africa (-3.8 ppt) which saw capacity injection on India routes. Cargo traffic dropped 2.1%, while capacity rose 1.4%, depressing load factor by 2.3 ppt to 63.8%. Carrier cautioned that the operating environment remained challenging and efforts to stimulate demand to boost loads will continue to place downward pressure on yields. *LionGold: Raised its resource estimate at its Ballarat Gold Mine in Australia from 263,000 tonnes @ 8.5g/t grade to 411,000 tonnes @ 8.5g/t for 112,200 oz of gold, representing a 55% increase from previous estimate. Since Sep 12, the Ballarat mine has produced 200,000 tonnes @ 7.8g/t for 51,000 oz of gold, of which 29,000 oz was produced for the Apr-Nov 13 period. *First Resources: Reported Nov 2013 CPO production of 57,914 tons (+18% y/y, -11% q/q) and palm kernel (PK) production at 13,136 tons (+14.1% y/y, -11% q/q). CPO extraction rate was flat at 23.3%, while PK extraction rate dipped slightly to 5.3% from 5.5% For 11M13, CPO production was 538,836 tons (+12%) and PK production was 123,523 (+10%) *ICP: Proposed renounceable non-underwritten 1-for-1 rights issue @ 0.1¢ apiece, to be followed by a 10-into-1 share consolidation. Net proceeds of $12.5m will be earmarked to fund existing business, as well as an entry into new business ventures (90%), while the balance will be used for general working capital purposes.
Monday, December 16, 2013
China New TOwn (CNTD) - China Development Bank International Holdings (CDBIH), has agreed to subscribe for some 5.3b new shares in CNTD, which represents about 54.32% of the total issues shares of the enlarged capital base. The CDB Capital platform was established back in 2009; in the past four years, they have expanded to more than 20 cities in China, so they are a very dominant player in this field. CDB has a competitive advantage - its network with local governments, and deep pockets to raise substantial funds at competitive rates, and it is also worth noting that CNTD has entered into a disposal master agreement with SRE Investment Holding Limited (SREI), the original controlling shareholder, which will hold 14.91% of the enlarged total share following the transaction. Under the terms of the agreement, SREI has agreed to purchase CNTD's non-core assets for a total consideration of Rmb2.07b. These assets include schools, hotels, exhibition centres and hospitals, which were built to enhance the value of the towns. bThis adds a little bit of a sweetener for shareholders because these assets have traditionally been loss-making to the company. SREI is contemplating buying this basket of assets at book value. Down the road, future new towns developed by CNTD will have such amenities run by its strategic partners. Both the subscription and proposed disposal are subject to shareholders' approval at CNTD's extraordinary general meeting, scheduled for Dec 30 at 10am.
Ipco Int’l: Reported 2QFY14 loss of $114.7m on operating revenue of $8m, arising from fair value loss of $83.7m and disposal loss of $29.5m pertaining to its trading exposure to Blumont (9.7%) and Innopac (7.9%). Consequently, NAV plunged to 2.5¢ from 8.5¢ a year ago.
Super: UOBKH noted that weakness in consumer markets like Myanmar and Philippines is already reflected in share price. In Myanmar, sales volumes have stabilized following a knee-jerk reaction of decline in sales volume (8%) following a 3-10% price increase. Super continues to enjoy early-mover advantages, such as a strong distribution network (with ~50% market share) In the Philippines, playing field remains competitive and Super’s plan is to focus on product innovation and development with partner San Miguel. 4Q13 turnover may be impacted by typhoon Haiyan 9M13 turnover was up 8% and 7% for Thailand and M’sia respectively. Singapore turnover dipped 3%. UOBKH reckons management’s 13% sales grown for FY2014 is achievable given rebranding exercise in 2013 and normalization in markets such as Myanmar UOBKH maintains Hold with shaved TP of $3.86 (from $4.50)
Tigerair: signed a JV agreement with China Airlines to establish Tigerair Taiwan, where Tigerair will hold a 10% stake. The new budget airline will operate under the Tigerair brand, utilizing the Tigerair website as its main sales platform, but will be managed as a standalone entity with a separate Board and Management team. Separately, Tigerair has signed a three-year interline agreement with SpiceJet Ltd, allowing a seamless connection between 14 Indian cities (SpiceJet’s network) and Singapore (via Tigerair) connecting through Hyderabad’s Rajiv Gandhi International Airport. The airline also signed an alliance with Scoot to further align commercial activities, enabling passengers from outside Singapore to purchase itineraries involving the services of both airlines. Management pointed that this could include the joint operation, sales and marketing of parallel routes, which will offer customers increased flexibility and flight options. It could also pave the way for seamless integration of systems and improved connectivity. The stock currently trades about 1x P/B
DBS Private Bank strategy: DBS CIO Lim Say Boon has their strategy outlook for 2014. Note that global equities were likely to stage a modest correction in near term going into 2014, from technically overbought conditions. Suggest investors ignore the noise from the markets, especially in regards to the Fed budget. Three main themes to note: 1) US monetary policy remains accommodative: Fed reserve will start tapering after US debt ceiling obligations are resolved in Feb, and probably in March. Policy rate likely to stay close to zero for 2014. 2) We are in the midst of synchronized global upturn: WIth China, EU, Japan and US showing growth 3) Corporate earnings in developed markets continue to grow: Current US earnings positive for mkts sentiment and confirms continued corporate earnings growth. Overall, bullish on equities for 2014, and the markets are getting less bothered by US debt talks according to the house research, and any scenario will likely end the way it is in the past. Arguable if QE now still has any meaningful impact on the US economy. Going forward, US Govt bond yields will likely increase which will create more volatility and push up the spread of emerging mkts bond yields. In recent mths, consensus has been downgrading expectations of emerging markets and Asia ex-japan economy growth for 2014. Until the house see a pick up in upgrades and stronger growth momentum of emerging mkts and Asia ex-japan growth, it will be hard to see these markets sustain their outperformance. When tapering starts, some emerging countries will be struggling with the deficits on their current accounts. Overall, the house is cautious on Asia ex-Japan in the near-term, with a neutral weight call, noting technical postures beginning to worry the house. Not withstanding long-term view in Asia ex-Japan, continue to favour developed markets over emerging markets.
JPY/USD at 5 year lows: According to Bloomberg consensus estimates, the greenback is expected to appreciate further against the yen going into 2014, with a mean forecast of ¥109 by 4Q14 versus current ¥103.68 spot rate. Counters with significant revenue exposure to JPY could continue to see some weakness. Notable counters with Yen exposure includes: Saizen REIT (100%) Croesus Retail Trust (100%) IPC (83%) Uni-Asia (74%) Singapore Shipping (46%) Global Logistic Properties (40%) ParkwayLife REIT (38%) Mapletree Logistics Trust (22%) Biosensors (20%) Yamada Green (19%) SATS (18%) China Fishery (17%) CapitaMalls Asia (13%) Ascott Reit (10%)
Albedo spreads its wings further into the Iskandar game, after agreeing to buy an additional six parcels of land from Malaysian tycoon, Tan Sri Dato’ Danny Tan in a move that will increase the size of the reverse takeover (RTO) deal by more than twofold to $1.86b. The purchase consideration was at a 16.6% discount to the aggregate market valuation of all the land parcels, which consists mostly of agricultural land, and a prime waterfront commercial site. Albedo first agreed to buy seven parcels of land from Tan Sri Dato’ Tan’s Infinite Rewards Inc in Sept13, and the latest additional six land parcels will bring Albedo’s Iskandar landbank to 13 parcels of about 1,182.58 acres. Albedo will pay for the land parcels to be acquired by issuing 39.5b new shares at 4.7¢ per share to the vendor, representing 95% of the enlarged issued capital of the Company. Albedo will also consolidate its existing shares on a seven-to-one basis, and is planning to issue 260m warrants which are convertible to 260m shares. Separately, Albedo is also negotiating with Kawasan Mestika Sdn Bhd to acquire Kawasan’s entire issued capital which holds or will hold a 228-acre property in Pulai, north of Iskandar’s Nusajaya Development. Valuations are meaningful at this point of time, as the group is still undergoing its potential RTO and book building process.
Market Roundup: US stocks ended Fri’s session little changed after a three-day slump, posing a second weekly loss in a row on concern that th Fed could start winding down its monetary stimulus this week. The FOMC meets on Dec 17-18 and will announce any decisions on Wed. Investors in US-based funds withdrew US$6.5b from equity mutual funds last week in its biggest weekly outfow this year. To some extent, the market is showing signs of indigestion and sicounting the possibility of a taper this week. However, some market watchers believe that the central bank will err on the side of caution and try to prempt its intentions well in advance and since it has not done so, it suggests the Fed will not act till spring. The broad-based S&P 500 closed right above the 1,775 support level, showing no signs of investor panic. The S’pore market staged technical rebound from oversold levels last Fri but is expected to stay with the 2,990 support and 3,100 resistance limits ahead of the Fed meeting and Christmas holiday. Stocks to watch: *Albedo: Acquiring an additional six parcels of land totalling 520 acres belonging to Malaysian tycoon Danny Tan at a 16.6% discount to market valuation that will bring its total Iskandar landbank to 13 parcels of 1,183 acres, including Lido Waterfront, a prime waterfront commercial site. The group will now issue 39.5b shares @ $0.047 representing 95% of the enlarged share base instead of the initial 34.6b shares @ $0.0224/share to Infinite Rewards, doubling its RTO deal to $1.86b from $774m and effect a 7-into-1 share consolidation. Separately, Albedo is also negotiating to acquire a 228-acre property in Pulai, north of Iskandar's Nusajaya development from Kawasan Mestika Sdn Bhd. *Tiger Airways: Signed alliance with Scoot to further align commercial activities, enabling passengers from outside S’pore to purchase itineraries involving the services of both airlines and include joint operation, sales and marketing of parallel routes, which will offer customers increased flexibility and flight options. Separately, Tigerair has signed a three-year interline agreement with India’s budget carrier SpiceJet, allowing a seamless connection between 14 Indian cities and S’pore connecting via Hyderabad’s Rajiv Gandhi International Airport from Jan 14. *FJ Benjamin: Terminating its exclusive distributorship agreement with Sowind for Girard-Perregaux watches in North Asia and Southeast Asia upon expiry on 28 Feb 2014. The manufacturer will repurchase all of the group’s remaining inventory of watches and accessories at the landed cost, valued at ~$30m. *IEV Holdings: Secured a five-year gas sales agreement from PT Ultrajaya Milk Industry to supply >500 mmbtu of compressed natural gas to its manufacturing plant in West Java, Indonesia. At the minimum off-take and contract price, the GSA is expected to yield revenue in excess of US$8m over the period from Oct 13 to Sep 18. *Loyz Energy: Schlak #3 well in North Dakota, USA, drilled in collaboration with Fram Exploration ASA (operator) and Rex Oil & Gas (partner), will be the first well to be put on production, following an oil discovery. Stable early production is ~50-60 bpd. *Transview: Issued a profit warning of a net loss in FYOct13 due to a write-off of three parcels of land (from negative coal mining survey) in Kalimantan Timur, Indonesia and decline in fair value of an an investment below acquisition cost due to the slowdown in the Australian mining sector. *Medi-Flex: 4QFY2013 net profit rose 37% y/y to RM7.1m in line with the 33% growth in revenue to RM58m on the back of increased capacity from new and refurbished nitrile lines to meet growing nitrile demand. Separately, the EGM for shareholder approval for its delisting (initially proposed by parent, Top Glove, who owns 80%) will be held on 30 Dec 2013
Friday, December 13, 2013
Hankore: CIMB has an unrated report out on the counter following its recent co. visit. The house note that Riding on China’s inevitable trend of increasing environmental awareness, HanKore’s water treatment business is set to soar on both capacity expansion and higher tariffs from the water standard upgrades. The stock has the most attractive valuation among its peers. Driven by capacity expansion, higher water tariffs and the recently-acquired EPC business, HanKore‟s revenue is set to expand in FY14. The house also expect the group‟s profitability to improve due to highe margins. By conservatively pegging to 1x trailing P/BV, the book value of Hankore is at $0.078, but the house believe this valuation is conservative as the group has strong expansion potential. HanKore is currently trading at 12.2x TTM P/E and 0.90x 1QFY14 P/BV, the most attractive valuation among its peers that average 18.5x and 2.03x respectively. By pegging to 1x 1QFY14.
First Res: Counter has almost retraced back to the halfway mark at $2.05, since its uptrend which started 21 Oct. A close below that level would leave traders to question the validity of the short-term uptrend. On the flipside, a bounce off that level would opine a continuation on the uptrend, supported by the Stochastics at oversold levels. The three previous occasions within the past year when Stochastics were at oversold levels saw the counter's share price move into a short-term uptrend. Key support at $2.05 followed by $1.95. Resistance at $2.20.
Falcon Energy: Counter went XB today for its 1-for-10 bonus warrant. Each warrant has the right to subscribe for one new share at an exercise price of $0.43 only after six months of being credited and expires after two years. Assuming all warrants are exercised after six months, the theoretical XB price of counter should be: [ ($0.35 * 10) + ($0.43 * 1) / 11 ] = $0.3573 Tomorrow will be XD for its dividend of $0.005
Cosco Corp: Latest news flow was yesterday, when sister company China Cosco Holdings (1919 HK) is reportedly considering to purchase dozens of orders for new cargo ships in 1H14, in what could be the group’s first major purchase over the last five years. This comes after the Chinese government announced new cash subsidies for vessel scrapping of old cargo ships and tankers, giving an impetus for shipping companies to upgrade their aging fleet. According to industry sources, China Cosco is already in talks with several shipyards in regards to the new builds. We note that the news could be positive for its sister company, SGX-listed Cosco Corp, which specializes in the construction of container and bulk carriers, and some of these potential orders could be contracted from Cosco Corp. Cosco Corp’s current order book now stands at ~ US$7.7-7.9b, with progressive deliveries up to 2015/16 but this could have been won at the expense of margins. The group delivered another set of miserable results in 3Q13, with net profit diving 84% y/y to $4.2m despite achieving higher revenue of $989.4m (+6%). In view of its poor execution, the stock is generally unloved by the street. Analysts generally prefer larger peer Yangzijiang, which has not only enjoyed strong order win momentum year-to-date, but also better profitability. Cosco trades at a hefty 34x forward P/E, compared to Yangzijiang’s 7.2x. Overall, the street has 4 Holds and 9 Sell ratings and a consensus TP of $0.65 on Cosco.
SG Strategy 2014: Macquarie has sector report for 2014. The house see green shoots emerging with NODX, retail sales growth and productivity expected to rise. expect the S$ to hold steady and see a quieter year ahead in terms of macroprudential policy. FSSTI 2014 target of 3,376 implies ~13% total return. Top 5 FSSTI and mid-cap stock picks are: Hongkong Land - O/w, TP 7.88, Cheap in so many ways, trading at PB of 0.53x, a ~30% discount to its historical average of 0.74x. CapitaMall Asia - O/w, TP 2.40, Spore’s best play on Asian retail and consumption. Sembcorp Marine - O/w, TP 5.80, S$14b order book is the biggest and healthiest it has ever had, which provides visibility for the next three years. The company is also well positioned vis-à-vis the big-ticket deepwater floater order surge. Genting Spore - O/w, TP 1.85, best play on Spore’s continuing visitor arrival growth. DBS - O/w, TP 18.64, key beneficiary of tapering due to its superior funding franchise and confident that management will continue to deliver value. Mid caps: Sarin Tech - O/w, TP 2.91, growth story with its revolutionary Galaxy series products and strong competitive advantage in both existing and new market. Asian Pay TV - O/w, TP 1.09, delivers an attractive and stable 10%+ yield with management adding long-term growth with expansion into new areas. Super Gp - O/w, TP 4.40, cheap play on rising instant coffee consumption in ASEAN Genting HK - O/w, TP 0.55, valuation as very attractive, has 65% of earnings coming from NCL (45%), which operates out of the US, and Asia-focused Star Cruise (20%). Its 44% stake in Manila hotel and casino operation, Travellers International, accounts for the rest. Ezion Holdings - O/w, TP 2.55, has established itself as the world's no. 2 liftboat contractor within a span of 4 years and has taken a monopolistic hold in the SEU market in Asia driven by its first-mover advantage.
Centurion: Entered into its first worker accomodation investment in Indonesia with a $0.8m acquisition of a 7,220 sqm plot of land in Jakarta. The land located in Bekasi district will house a facility comprising approximately 750 units and will target and house workers as well as middle-level executives working in nearby industrial parks. Centurion's wholly owned subsidiary, PT Westlite Accomodation Cibitung, will develop, own and operate the facility, which is expected to be completed in 2016. Centurion continues to actively look for opportunities to further grow its accommodation business, not only in worker accommodation but also in other viable accommodation segments. Group is currently in the process of acquiring a student accommodation asset, RMIT Village in Melbourne, Australia.
TTJ: TTJ 1QFY14 net profit soared 45% y/y to $4.6m mainly attributed to improved gross margin of 25.3% from 14.4% due to higher sales from its dormitory business, as well as higher margins derived from projects secured and executed during the period. Revenue slumped 26% to $32.1m due to its weak structural steel business which was partially mitigated by its dormitory business. TTJ has current order book of $126m which is expected to substantially complete between FY2014 and FY2015. Group continues to receive a healthy level of enquiries for a mix of public and private sector projects, and remains positive on the construction demand in Singapore. At $0.29, TTJ trades at a 1QFY14 annualized P/E of 5.5x, below forward valuations of larger cap peers Yongnam (8.9x) and Tiong Seng (7.0x).
Yoma: Yoma announced that it had set up a second after-sales service centre for Mitsubishi vehicles in Myanmar. The announcement came shortly after the company also announced its involvement in building telecommunications towers and a new property deal. Currently, more than 90% of total revenue still comes from property, but the co now dabbles in auto servicing through its Mitsubishi partnership; telecommunications through a partnership with Digicel; and retail, through a joint venture to develop Parkson department stores in Myanmar. But overall, the group remains focused on building a diversified conglomerate in Myanmar and will selectively expanding into other businesses in the country.
Environment / Water / Hankore, SIIC: CLSA has a sector report out today, which comes days after CS sector initiation report, suggesting that foreign brokers are latching on to the water play. Overall, the house foresee a mad rush to enforce the new pollution policies China introduced this year, going into 2014. Recent tour across China confirms that waste, water and renewables plays remain good investments. Note that in the short term, air pollution pales in comparison to the impact of dirty water and soil, where the house met with water distributors and wastewater processors to see the impact of tightening standards and better transparency. Fundamentally, the house still likes environmental blue chips China Everbright Intl and Longyuan, but in the near term, like smaller, cheaper names like Huadian Fuxin. On the flip side, investors across industries could get caught off-guard by rising environmental and social-compliance costs. That being said, attention could be shifted back to our local water plays, Hankore and SIIC environment, which has been gaining traction by investors. Hankore recently hosted a plant visit, which was attended by local broking houses, suggesting that interest is building up. Accordingly, Coal producers are the main culprit of China’s air pollution, and CLSA notes that it would not be surprised if social costs and regulations gets tightens up for some of the energy producers, which could impact on their margins. We note that the increasing coverage on the sector, bodes well for Singapore listed waterplays, notably, HanKore and SIIC Environment, which has seen a pick-up in investors interests in recent months. Compared to its HK-listed counters that trades at P/E valuations of between 17x and 38x, Hankore trades at just 12.5x P/E and SIIC Environment at 19.8x P/E, and could be poised to play catch up, as investors continue to ride on the China water theme. Both companies build, own and operate a portfolio of waste water treatment plants in China; their pipeline of facility upgrading programs are expected to underpin rapid capacity expansion and selling price improvements over the next few years, leading to strong earnings growth. Both companies have also emerged from a corporate restructuring, and now boast backing from institutional shareholders. With an improved financial profile, the companies now have an added option for more rapid expansion via M&A. There is no rating on either counter at the moment.