Monday, June 30, 2014


Jaya: ($0.191) Getting a last puff from a classic Buffett “cigarette butt” Jaya’s current price of $0.191 only takes into account the upcoming $0.16/share cash distribution and residual book value of $0.032. However, it has not priced in the additional intrinsic value that Jaya now has as a listed shell company (estimated $15m-30m). Should Jaya be acquired in a reverse takeover transaction, the stock could be worth an additional 2¢ to 4¢, thereby offering potential upside of 60% - 125%, based on a theoretical ex-entitlement share price of 3.1¢. Jaya will go ex-entitlement on 2 Jul, with regard to the $0.16/share cash distribution via a capital reduction. Recall, earlier this month, Jaya had distributed $0.625/share by way of a special dividend, in accordance with its promise to return the bulk of cash back to shareholders following the disposal of its entire core offshore support and engineering services business. After payments of the cash distribution and dividend, as well as directors’ fees, Jaya will be left with a residual cash balance of ~$32m, of which: - $7m has been budgeted for future operating costs and an incentive bonus payable, and - $25m earmarked for warranty claims associated with the above business disposal. Assuming no warranty claims are made, this $25m (3.2¢ per share) may be distributed in due course. As the company has ceased to have any operating business and its assets consist substantially of cash, Jaya has 12 months (plus another 6 month extension) to find a new business or face delisting, under SGX rules. Investors should therefore note the potential liquidity risks in this stock.

Popular Holdings

Popular Holdings: Popular's FY14 net profit dived 54.5% to $10.6m, despite achieving higher revenue of $551.9m (+5.3%). The revenue breakdown is as follows: 1) Property: Revenue increased 22% to $18.2m, with six property units were sold during the year versus one in FY13. 2) Retail & Distribution: Revenue grew 1.4% to $469.5m, largely contributed by new retail outlets, BookFest@Malaysia, Gadgets & Write Fair in Singapore and BookFest@Singapore. 3) Publishing & e-Learning Division: Revenue increased 10.5% to $64.1m, primarily driven by growth in adoption of new textbook series and increase in revenues from new publication of assessment / supplementary titles in Hong Kong, as well as increase in adoption of the group’s teaching aids and teacher’s training programme in China. Gross margin (excluding property) maintained at 18.1%, despite rising rental costs and manpower shortages across the region. Bottom-line was however weighed by a 13% rise in admin, distribution and selling expenses to $78.0m, due largely to higher manpower and rentals expenses, and costs incurred for higher advertising and promotion expenditure. Other operating expenses doubled to $8.0m, due to losses recognised by the group’s property division, which saw an impairment loss for two units at 18 Shelford, and provisions for foreseeable losses on development properties recognised on Permai Residences. Going forward, management remains cautious of the unexpected economic upheavals and the continuing regulations of the property sector, highlighting that inflationary cost pressure on manpower and rental may not ease in the immediate term. Popular declared an unchanged final dividend of 1¢. At the current price, Popular trades at 20.4x FY14 P/E.


GLP: In a company feature by The Business Times, GLP revealed that it was ramping up its growth plans, particularly in China, where there is a big shortage in the supply of quality logistics facilities. Accordingly, GLP has raised its global development start budget for FY15 to US$2.7b (+38%), with US$1.7n set aside for China, US$675m for Japan and US$390m for Brazil, with the group aiming to move ahead of its competitors and capitalize on its market leader position. GLP’s further thrust into China gels in tandem with a recent approval by China’s State Council to develop the logistics industry in the country, with US$2.5t expected to be invested in the industry over the next 15 years, which will see China’s per capita logistics space move to within one-third that of the US. Furthermore, with China now being the number one online retail market in value, GLP expects the e-commerce industry to be a major growth factor for the logistics industry, citing that “the industry has barely scratched the surface”. GLP’s recent 4QFY14 results were at the higher end of estimates, as core proforma net profit (adjusted for J-Reit sale and revaluation gains) jumped 31% y/y to US$54m, taking FY14 core earnings 17% higher to US$250m. Including revaluation gains, proforma net profit for 4QFY14 and FY14 would have come in at US$160m (-8%) and US$685.2m (+31%) respectively. Revenue for the quarter grew 20% to US$150m, mainly attributable to the completion and lease-up of its development projects in China with increasing rents, as well as property management fee income from GLP J-REIT and joint ventures in China and Japan. Going forward, Management remains positive on its prospects, noting that China, Japan and Brazil have attractive supply and demand dynamics for logistics facilities in the medium to long-term. As at end Mar ’14, GLP’s NAV stood at US$1.84, which translates to 1.17x P/B. Overall, the street 12 Buy, 3 Hold and 1 Sell rating with a consensus TP of $3.22.


Riverstone: During a DMG roadshow held recently, Riverstone’s management cite that the renovation of the new plant is on track with trial production starting in 3QFY14 and full production to be ready in 4QFY14. Utilisation rate for the existing production capacity remain high at over 90%, indicating strong performance and margins are likely to remain healthy in the short-run but is expected to be under pressure in the long run in view of the change in sales mix towards lower margin healthcare gloves. Management is also concerned about the intensifying competition in the long run. DMG maintains its BUY rating with TP of $1.15, based on 16.3x FY14 P/E (peer average).

Sing Post

Sing Post: UOBK downgrades to Hold, with TP $1.73. Believes the stock is fairly valued at 24.4x FY16e P/E, after the recent outperformance. Tips entry price at $1.50. Nevertheless the house acknowledges that Sing Post's e-commerce logistics story is in the making with a low cost platform to attract businesses and consumers alike. Meanwhile, it waits for more clarity on the proposed collaboration with Alibaba. Alibaba's proposed invmt of $312.5m for a 10.35% stake in Sing Post has no doubt raised questions about the likelihood that it will take a larger share eventually, but notes that under the Postal Services Act, Alibaba would need to seek prior written approval from the IDA if it crosses the 12% and 30% shareholding threshold in Sing Post.


SPH REIT: CIMB initiates at Add with TP $1.06. SPH REIT is a retail REIT with two quality and well located assets in Singapore (Paragon and Clementi Mall). The house believes the portfolio offers a unique combination of prime Orchard Road and suburban retail and an alternative play on rising medical tourism in S'pore. With an asset leverage of 26.9%, SPH REIT has debt headroom of ~$415m to 40% asset leverage for acquisitions. Its key pipeline asset include The Seletar Mall, which is slated for completion by end 2014.


Valuemax: Met with DMG's institutional shareholders at its ASean HK Corporate Day. Key takeaways from the meetings are i) Expansion plans are on track with 20 outlets in Singapore and 8 in Malaysia by end of FY14. They are still sourcing for the high-end pawnbroking outlet location which will be targeted to open by the end of the year. ii) Earnings turnaround are on track with management seeing an increase in total general loans given out. 2H14 results will be expected to release in August 2014. iii) Key concerns remains mainly with liquidity and the stability of gold prices. The house reiterates BUY with a 1.9x FY14F P/BV of TP0.56.


CWT: CEO Mr LOI Pok Yen met investors at OSK'DMG's Asean Corporate Day. To assuage investors about fallout from the Qingdao port scandal, management says it does not expect any material impact from the probe, and highlighted that the business accounts for only $2.5-3.0m of profit (2.6% of 2014F profit). Meanwhile, DMG believes CWT remains on track to achieve 16-19% earnings growth over next two years, aided by addition of warehouse space, higher marketing volume and rising contributions from its financial services unit. Maintain BUY, with an unchanged TP $1.90.


Reits; The Straits Times notes yield -hungry investors have rekindled their love affair with S-REITs as fears over interest rates hikes recede. The FTSE ST Reit index has gained as much as 12.5% since early Feb, with outperforming constituents being Suntec (+16.1%), CCT (+22%) and MCT (+16.6%) Barclays notes that the S-REITS have been tracking their US counterparts, which have also been enjoying a good run up recently. Believes the S-REITS are attractive bcs of their yields, with an avg yield spread of 3.6 ppts over the SG gov bonds which currently pay 2.4% yield.

Ying Li

Ying Li: Proposed to rope in China Everbright (CEL) as a strategic shareholder, raising an aggregate $284m in the process, intended to be used to accelerate development of existing projects and finance new projects. Subjected to shareholders' approval, Ying Li will issue 381m new shares at $0.26/share to Everbright Hero Holdings (EHH), an indirect wholly-owned subsidiary of CEL, as well as an issue of $185m worth of perpetual convertible securities, which can be converted at $0.318/share between the 3-6 year period. Post issue, EHH will emerge as the second largest shareholder with 14.9% of enlarged share capital. Net gearing of Ying Li will improve substantially, from 61% to around 15%. Both parties have entered into a cooperation framework agreement where a pipeline of projects for joint development will be announced once shareholders have given their stamp of approval for the deal. Following that, CEL will provide the necessary resources and undertake strategic acquisitions of prime location projects in the first-tier and leading second-tier cities in China.


ComfortDelgro: Deutsche maintains its Buy rating and $2.85 TP for ComfortDelgro, citing that management is upbeat about bus prospects, given their experience in running a government contracting cost-plus model in its UK and Australia operations. At this point, the government has not yet decided how an at what price to buy existing bus assets from the operators, but ComfortDelgro's bus assets are estimated at a net book value of $900m ($0.42/share). The house reckons that rail reforms should follow, but losses are not as pressing to urge near term reforms. In addition, ComfortDelgro intends to continue seeking growth through acquisition for its overseas business, as well as organic growth for its recently acquired taxi and bus businesses in UK, Australia and China. Balance sheet remains strong with net cash position and the counter currently trades just under 3% yield, excluding the possibility of a potential special dividend from the sale of bus assets to the government.

Serial System

Serial System: NRA CapitaI’s Kevin Scully adding Serial Systems to his yield portfolio, highlighting that Serial systems has consistently been able to grow its top line at good double digit rates by entering new markets and expanding its product offering. Expect revenue to potentially exceed US$1b in 2014 and by this sheer size and importance to his customers, Serial has been able to sustain and maintain its gross margins at a healthy 9-10% level.


OCBC: Announced that all the pre-conditions for OCBC to buy Hong Kong's Wing Hang Bank have been satisfied, with the group obtaining regulatory approvals various regulators in Singapore and Hong Kong for the US$4.95b deal. OCBC expects the deal to be concluded by Aug ’15, with CEO Samuel Tsien guiding that the deal is reasonably priced, while further highlighting that Greater China has the potential to become one of OCBC’s top three markets in terms of profit contributions. Tsien added that a major push for OCBC’s acquisition was also to catalyse on China’s drive to internationalise the yuan as a global currency, with Hong Kong being the world’s largest offshore yuan hub with deposits estimated to be at ~Rmb800b. Furthermore, the acquisition of WHB will grant OCBC access to additional currency deposits, especially RMB, HKD and USD deposits, which could be used to fund its expansion and increase the suite of products and services offered. Yet, while a successful deal would enable OCBC to close the gap with larger rival DBS, and enable OCBC to diversify out from its traditional Asean-centric focused business, investors could be saddled with hefty goodwill write-offs should OCBC overpays for Wing Hang, citing a parallel experience to DBS and its Dao Heng Bank acquisition almost a decade ago. As a comfort, OCBC boasts a good track record on its recent acquisitions, as evident in its strategic acquisitions of Great Eastern, Bank NISP of Indonesia and ING’s Asian private bank, all of which have enabled the group to grow its asset size, earnings and enter new areas of growth OCBC currently trades at 1.26x P/B versus DBS’s 1.16x and UOB’s 1.31x. Overall, the street has 8 Buy, 11 Hold and 4 Sell ratings with a consensus TP of $10.55.

Overseas Education

Overseas Education: Maybank-KE’s channel checks guides that bigger international schools in Singapore still experience high demand, and that newer entrants may be drawing students from smaller schools, leaving established players like Overseas Education relatively untouched. On the Iskandar front, the two most prominent international schools in the Iskandar region that Singapore-based parents can send their children are Marlborough College and the upcoming Raffles American School. This should not significantly affect Singaporean international schools as: 1) The all-in costs to attend Marlborough and RAS are equally or if not more expensive than Singapore’s international schools. 2) The travelling time that can consume up to 2 hours per day is also hardly appealing. 3) Boarding as an option is only available for 9th graders and above. 4) RAS offers only American curriculum, practical only for someone with American Universities in mind. Maybank KE maintains Buy on Overseas Education with TP of $1.02


Vibrant: FYApr14 net profit rose 11.2% to $42.7m while revenue climbed 8.4% to $191.4m, mainly contributed by Freight and Logistics which grew 5.9% to $163m, on the completion of the new chemical hub in Jurong Island. Share of associates’ profits increased to 369% to $18.5m mainly from a revaluation gain of investment property. Alteration and addition works to exisiting TUas Avenue 10 warehouse has obtained TOP, while its Gul Circle site will be redeveloped into a 5-storey ramp-up warehouse with GFA of about 45,000 sqm, with completion around 2016. In addition, the group had also acquired Cecil House, 139 Cecil Street, on 19 June, and intends to maximize GFA via upgrading and retrofitting work. On 25 Jun, it had also acquired a 35% equity stake in Equity Plaza. First and final DPS of 0.55¢ declared, translating to a 5.5% yield. NAV stood at 14.24¢, translating to a P/B of 0.7x

SG Market (30 Jun 14)

US shares ended Friday modestly higher, trimming its losses for the week. Technology shares took the lead, although a downbeat 2Q14 and FY14 earnings forecast by Dupont placed a cap on overall gains. The DJIA rose 6 pts to 16,852 (+0.0%), while the S&P 500 gained 4 pts to 1,961 (+0.2%) and the Nasdaq added 19 pts to 4,398 (+19 pts). Trading volume surged with ~8.9b shares exchanging hands, largely due to the final realignment of the Russell Investment Indexes, which affected more than US$5t in assets. Shares were boosted by positive economic data which showed that US consumer sentiment rose more than expected in Jun. Gains were however capped after Dupont (- 3.3%) cut its earnings forecast for FY14, citing slower sales from its performance chemical and agriculture units. S’pore shares may open with a slight upward bias following the late positive reversal in Wall Street’s performance last week. Some window dressing may be expected in the later part of the day, this being the last day of Jun. Near term STI support at 3,254, and resistance at 3,285/3,310. The short term momentum indicators supportive of an upward move. Stocks to watch: *OCBC: Both the HK and S’pore authorities have given their blessing for OCBC’s US$4.95b takeover of Wing Hang Bank in Hong Kong. The transaction has yet to be finalized, pending satisfaction of a number of conditions. OCBC management is confident that the deal will be completed by 3Q14. *Ying Li Int’l: Proposed to raise a total of $284m from China Everbright Group (165 HK), through the issue of – i) 381m new shares (14.9% of enlarged share base) @ $0.26 each, to raise $99m, and ii) $185m in aggregate principal amount of convertible perpetual securities (initial 8.75% coupon, $0.318 conversion price). Post deal, Everbright will become the second largest shareholder and a strategic partner of Ying Li. *Stamford Tyres: FY14 net profit slipped 13% y/y to $10m, weighed by a 8% decline in revenue to $290.6m, due to softening demand for Sumo Firenza tyres in Europe, and mining tyres in Indonesia and South Africa. Bottom line was further impacted by a $0.7m share of loss from JV, compared to profit of $13.2m in FY13, due to the absence of a one-off disposal gain from the sale of its China associate last year. Final DPS maintained at 1.5¢. *Vibrant (formerly Freight Links Express): FYApr14 net profit rose 11% to $42.7m, while revenue climbed 8% to $191.4m, mainly contributed by Freight and Logistics which grew 5.9% to $163m, on the completion of its new chemical hub in Jurong Island. Share of associates’ profits increased to 369% to $18.5m, due to a revaluation gain of investment property. *China New Town Dev: Secured a half-year Rmb1b unsecured loan (@ 10% interest p.a.) from its parent, China Dev Bank, to repay a current outstanding credit trust loan and refinance maturing bank loans, as well as to facilitate new and existing projects. *RH Petrogras: Commenced a 2D seismic survey in its 80% owned Block SK331 in onshore Sarawak, with expected completion in Nov ’14. *Stratech: To deploy another 30 or more of its iVACS intelligent Vehicle Access Control Systems in the Middle East. Current order book for iVACS stands at 59 units, which will contribute ~$2.44m of revenue in FY14. 25 of them are deliverable by end Jun ‘14. *Jackspeed: Plans to sell its leasehold factory at Loyang Drive for $6.5m to Tan Soon Huah Gas Supply, as part of on-going efforts to redeploy capital more efficiently. *ICP: To buy a 19.9% stake in Australian coal exploration firm Tiaro Coal for A$3.05m; ICP will also sell its 17.2% stake in Mount Adrah Gold for A$2m. *Otto Marine: Signed MOA to dispose three of its vessels to its 49% owned M’sian unit, Go Marine Services, for US$37.5m. Post transaction, Otto expects to realize an estimated net gain of ~US$1.0m. *FSL Trust: Inked a time charter agreement with Tesoro Corp to lease its 115,000 dwt crude oil tanker for ~US$5.7m over the next 12 months. *Olam: Sold its entire 100% stake in a Gabonese timber company for US$6.0m. *Jasper Investments: Gives notice for three consecutive years of losses.

Friday, June 27, 2014

Sunningdale tech

Sunningdale tech - NTA is at $0.34. Trailing P/E stands at 8.5x. Latest news on counter was this week where Sunningdale Tech has through the help of Chairman, Koh Boon Hwee, has roped in ‘Popiah King’ Sam Goi and Yarwood Engineering, to subscribe for 153m new shares (76.5m each) at $0.1633 each via private placement. The placement price represents a 10% discount to the weighted average price of $0.1814 and the new shares represent ~20% of the existing share capital and ~16.7% of the enlarged share capital of the company. Gross proceeds of ~$25.0m will be used for future M&A’s as well as for working capital. Investor interest in the stock may be revived, given that Sam Goi’s share purchases are typically closely followed by market watchers. Other SGX companies which Sam Goi has built stakes in include the likes of GSH, Yamada, Serial System, Etika, Super Group, Hanwell and JB Foods.


Medtecs: ($0.082) East-North Eastern winds push up stock price of N95 supplier Counter jumped 15% over the past five days from $0.071, as news articles citing that the haze has begun to move toward Singapore and Malaysia gain traction. The Meteorology, Climatology and Geophysics Agency announced the increasing number of hotspots in Sumatra, Indonesia, coupled with the east-northeast winds, indicate the potential for the haze to cloud over Singapore and Malaysia once again. To add gas to the fiery situation, the El Nino phenomenon has a 80% likelihood to occur between Oct-Nov, and a 60% chance that it would occur now-late Aug, resulting in extreme droughts over the forest fires at Central Sumatra. Medtecs, the medical supplies maker, produces the N95 respirators and may see a boost in sales of the face masks again if the winds bring the haze back over to the region.


Rex: SP Angel initiates with Buy rating with $1.19 TP. With a well balanced portfolio, adequate cash resources to meet its near to medium term obligations and a potentially game changing technology in Rex Virtual Drilling, Rex is well positioned. The Company’s portfolio is well balanced, in terms of position in the exploration lifecycle, geographical diversity and play type. While the near term drilling programme focused on appraisal and exploration in Trinidad, Norway’s high impact exploration programme starts in 2H14, and the Omani appraisal and Australian exploration programme kick off in 1H15.

Ramba (technical)

Ramba: Counter still within a sharp mid-term downtrend with no indication of a reversal. Support at the $0.45 and $0.40 psychological levels, with resistance at $0.53.


Vard: Vard’s Norwegian peer, Havyard, has completed its Oslo IPO, following a cut in its IPO price (from NOK36/share to NOK33.50/share). The pricing implies a market cap of NOK755m, and values the stock at 5.4x CY13 P/E and 1.1x CY13 P/BV. In comparison, Vard trades at 14.8x CY13 P/E and 1.7x CY13 P/BV. While CIMB thinks that a premium is warranted, the wide valuation gap does not inspire much confidence. For now, Vard's earnings recovery looks priced in, while risk-reward looks to be balanced. CIMB maintains Hold with TP $1.19, will re-visit the stock on stronger margins and orders.


GLP: Nomura upgrades to Buy from neutral, raises TP to $3.10 (from $2.84). Notes GLP has underperformed the broader SG market ytd, possibily due to: 1) the market’s perception with respect to the China deal, 2) a weaker-than-expected CNY/USD, and 3) a weaker than expected operating margin in FY14 Nevertheless, Nomura believes the mkt view is too bearish, especially as one of the key rationales for bringing in the Chinese partners is to strengthen GLP’s land acquisition capability to accelerate future growth. Current share price implies development starts of only 2m sqm (US$1.4b) in China in FY16e, compared to mgt’s announced FY15e target of 3.3m sqm (US$1.7b), implying an improved risk-reward proposition at current valuation.

Del Monte

Del Monte: Company recently reported its transition Jan-Apr 14 results included contributions from Del Monte Foods Inc. While the losses were not unexpected, CIMB now see FY15 as a transition year with losses as further costs are incurred. House do not foresee profitability till FY16. CIMB maintains Add rating but lowers TP to $0.63 (from $1.14). Given that the US will dominate sales/profits once the operations are successfully integrated, the better comparison may be against listed US peers.


Yoma: Timing of the recent fund raising that Yoma did was earlier than UBS expected, although the dilution impact is lower. Medium term, UBS remain positive on Yoma, and think its investments in certain non-property businesses such as dairy and luxury tourism could have significant upside potential if executed well. With Yoma's near term financing requirements largely laid on the table, house think investor attention will turn to home sales momentum at Star City, where Zone C (940 units) is scheduled for launch in H214. Other key catalysts include: (1) approval of the Condo Law to allow foreign ownership, and (2) the Landmark site lease extension. UBS maintains Buy rating, but lowers TP to $0.88 (from $0.90).

LCD Global

LCD Global: Aspial Corp’s CEO, Mr Koh Wee Seng continues to increase his stake in LCD Global, purchasing another 100,000 shares at an average price of $0.285 via open market transaction, raising his stake to 15.24%. To re-highlight, LCD Global is in the midst of a voluntary conditional offer of $0.17/share by controlling shareholders, Raymond Lum and David Lum. Koh’s recent string of share purchases at prices significantly higher than the share offer, would inherently fuel market speculation of a potential counter offer. With LCD Global's current net asset value at $0.272, the offer of $0.17 represents a steep 38% discount to the group’s book value. In comparison, the recent takeover offers for Singapore Land, Hotel Properties and CapitaMalls Asia were priced at book multiples of 0.72x, 1.12x, and 1.21x respectively. As at 23 Jun, the Lum brothers owns a 35.98% stake in the property developer.

SG Market (27 Jun 14)

US Market: US shares trimmed early losses from a selloff in the morning session after a Fed official hinted that interest rate hikes may come sooner than expected. The DJIA shed 21 pts to 16,846 (-0.13%), while the S&P 500 dipped 2 pts to 1,957 (-0.12%) and the Nasdaq edged down 1 pt to 4,379 (-0.02%). Investor sentiment took a hit after non-voting Fed member James Bullard suggested that interest rates could rise in 1Q15, adding that the jobless rate could drop below 6% and inflation reach 2% by year end, and that the market is not pricing in how close the Fed is to its goals. Markets were also on a sour mood after economic data showed consumer spending rose a less than forecast 0.2% in May after a flat Apr and new jobless claims slipped 2,000 to 312,000 last week. Financial shares (-0.3%) led the declines, possibly triggered by the the fraud lawsuit against Barclays (-7.4%) for giving unfair treatment in favour of US high-frequency trading clients. Among stocks in focus, aluminum producer Alcoa rose 2.7% after announcing a US$2.9b purchase of British aircraft parts maker Firth Rixson, while retailer Bed Bath & Beyond tumbled 7.2% after projecting a 2Q earnings outlook which came in below expectations. Tobacco firm Philip Morris slid 2.7% after slashing its 2014 earnings forecast amid unfavourable currency shifts, major price discounting in Australia and weak macro-economic environment in the EU. S’pore shares are expected to open relatively flat following the lacklustre performance in Wall Street. But downside risk for the oversold STI may be limited with supports tipped at 3,270/3,220 and resistance at 3,285/3,310 and short term momentum indicators supportive of an upward move. Stocks to watch: *Wing Tai/Metro/UE E&C: The consortium of Wing Tai (40%), joined by Metro (40%) and UE E&C (20%) launched The Crest, a 469-unit 99-year leasehold condo at Prince Charles Crescent over the week-end. About 130 units wre released, of which only 30 were sold. ASPs are tipped in the region of $1,750-1,800 psf before a 7% ABSD reimbursement. The site was purchased at a land cost of $960 psf ppr in Sep ’12, with estimated breakeven of ~$1,400 psf. *PNE Micro: Disclosed that it is in late stage discussions with potential investors who are interested to acquire not more than 30% of the company. But no definitive agreement has been reached yet. *Global Invacom: Plans to issue 44.6m new shares (16.1% enlarged share capital) at 19.75p ($0.42) each via placement to finnCap, Mirabaud and three directors of the company in relation to its proposed secondary listing on the AIM of the London Stock Exchange *Anwell: Warned that a trade creditor has obtained a court order to seize and auction off Rmb229.4m of pledged assets for outstanding trade payables of Rmb94m, which may adversely impair the business operations of its subsidiary Henan Kerry, which contributed 82% to its sales in 1H13. Trading in the shares has been suspended since 9 Aug ’13 until further notice. *KOP: Booked FYApr14 net loss of $5.5m, which relates to the previous business, prior to completion of the reverse takeover by KOP Properties on 6 May and the company’s change of name to KOP. Investors will find the next 1QFYApr15 results relevant to the new business. *LCD Global: Market talk of a counter bid for LCD Global, as Aspial CEO Koh Wee Seng continues to buy LCD shares at prices above the $0.17/share offer price. *Hotel Prop/Wheelock Properties: Unconditional offer of $4.05/share by 68 Holdings (40/60 JV between Wheelock and Ong Beng Seng) closed yesterday, with valid acceptances bringing the offeror's stake to 57.73%. *Jaya: Proposed capital reduction via cash distribution of $0.16/share will go ex on 1 Jul, and is expected to be paid on 14 Jul. *Great Eastern: Group CEO, Christopher Wei, has resigned to take on an appointment with another MNC. His last day of service will be 30 Sep '14. *GLP: Chairman Ang Kong Hua will step down wef 17 Jul, following his retirement from the Board and be replaced by current GLP Non-Executive Director, Seek Ngee Huat. *Superbowl: Will be delisted from 9am today, following completion of privatisation exercise. *HanKore: Appointed PrimePartners Corporate Finance as the independent financial adviser for its proposed RTO of China Everbright Water Investments.

Thursday, June 26, 2014


Yoma: Yoma is issuing 135m new shares at $0.70 each via a private placement to fund its expansion plans. The placement price represents a discount of ~8.4% to the volume weighted average market price of $0.7642 on 25 Jun ‘14. Net proceeds of $92.83m will be used to help fund the growth and expansion of the group’s various businesses with over half being earmarked for its real estate division and the remainder for its businesses in telecommunication towers, automotive and agriculture and logistics. Post deal FY14 NTA will rise to 35.41¢ from 31.01¢ while its EPS will fall from 1.42¢ to 1.13¢. DBS and CLSA as the joint bookrunners for this placement exercise. This comes after the Myanmar-based group posted in line 4QFY14 results, led by robust sales from its flagship projects at Star City and Pun Hlaing Golf Estate, which triggered a wave of Buy calls from both local and foreign brokers. Management is optimistic about its growth prospects in Myanmar and believes that its property projects will continue to benefit from the country’s ongoing urbanisation as well as the housing mismatch in supply and demand. Yoma currently trades at 52.5x forward P/E and 2.3x P/B. Overall, the street has 4 Buy and 1 Hold rating with a consensus TP of $0.89

Keppel Corp (technical)

Keppel Corp: Trading Central notes bullish bias above $10.60 , with targets at $11 and $11.20 in extension.

SMJ International (IPO)

Upcoming IPO - SMJ International SMJ specialises in the sale and distribution of a wide range of premier carpets marketed under its proprietary “SMJ” brand through its global distribution network of more than 260 carpet dealers, carpet importers and carpet installation companies in over 20 countries, mainly in Asia. The Group aims to become a one-stop office furnishing solution provider in the region. SMJ serves both the commercial and institutional sectors in Asia, with an established reputation and track record of more than 25 years. Its revenue model is split into contract sales and distribution sales. SMJ has a large warehouse spanning approximately 42,614 sqft in Singapore, which is stocked with a wide variety of carpet tiles and broadloom carpets in approximately 80 different designs of carpets, in up to 400 different colours. AS a testament of its track record, SMJ has been appointed by Shaw Industries, a subsidiary of Berkshire Hathaway, as its authorised supplier for “Shaw Contract Group” brand of carpets in Singapore since 1992. Issue Statistics Offer Price $0.28 Placement Share: 20.24m placement (14m new, 6.24m vendor) Market Cap $21.8m Placement Close: 25 Jun 2014, 12.00 noon Share Trading: 30 Jun 2014, 9 am (Catalist) Sponsor, Issue Manager: Hong Leong Finance

W Corp

W Corp: Snap report by Voyage, which has a Potential Gem rating and TP $0.10 on the stock. Notes the next milestone for the company will be its EGM to be held on 23 Jul, where shareholders will vote on the proposed acquisition of YuuZoo . Background: Since 1 Jul 2013, YuuZoo has been contracted for the development of eight client branded networks with cumulative contract value of at least US$72m. As of 13 Jun 2014, YuuZoo has 19 resellers with strong local expertise and networks to market client branded networks to corporate clients keen on developing their own social platform. In turn, these resellers allow YuuZoo to extend its reach to countries such as India, Hong Kong, European markets such as Finland and Russia. China Expansion: In Dec 2013, YuuZoo entered into a cooperation agreement with Xing Lei Network Technology (Shanghai) to promote the PRC variant, which will hold all PRC YuuZoo networks. Drawing on Xing Lei’s relationship with state owned enterprise Shanghai Media Group (SMG), Xing Lei shall coordinate with a subsidiary of SMG to design, develop and market social platforms for its television shows and introduce a local service provider to provide relevant network content, advertisements and products on the network platforms. In turn, YuuZoo will receive as license fees 30% of direct and indirect revenue after deducting third party costs. YuuZoo may even consider extending the relationship to open a sports betting website due to a partner’s access to football betting rights in China.


Cordlife: OSKDMG initiates coverage with Buy call and $1.50 TP. The house notes that Cordlife stores cord blood, which is being used to treat various diseases. Cordlife’s strong presence in the mature markets of Singapore and Hong Kong, and recently, high-growth countries like India, Indonesia and the Philippines, allows it to tap the rising awareness and adoption of cord blood storage in Asean. Having developed a strong presence in mature markets like Singapore and Hong Kong, where the industry penetration rate is 22%, Cordlife is expanding into the India, Indonesia and Philippine markets, where the penetration rates are 0.1-0.2%. It also has exposure in Malaysia and China through investments in Stemlife (STEM MK, NR) and China Cord Blood Corp (CO US, NR), respectively. Expect earnings to reach a 60% CAGR during FY14F-16F, aided by: i) the ramp-up in high-margin cord tissue storage service business, and ii) rapid growth in three burgeoning markets. Our 10% annual penetration growth assumption for growth markets is lower than the 20% estimated by an independent consultant, as well as the growth achieved in recent years. Cordlife’s 21-year deferred payment scheme for its cord blood/tissue storage services translates into a stream of recurring revenue. Customers also have an option to have the cord blood/tissue stored for life after the expiry of their contracts. The house remain optimistic that most existing customers may potentially extend their contracts. The company is looking to diversify into diagnostics services in the “mother and child” segment and roll out 1-2 new diagnostics products over the next few years. Given the low margins in the diagnostics services business, any meaningful contribution would depend on volume. We have not factored this into our estimates as yet.

Keppel Corp

Keppel Corp: Following the completion of a FEED study, Keppel has signed a condition contract with Golar LNG for the conversion of an LNG carrier to a floating LNG vessel (FLNGV). The contract will be made effective upon initial milestone payment, which will be met through a share issuance by Golar raising about US$600m. According to Golar, Keppel will be awarded the main contract for vessel conversion, and Black & Veatch will have a sub-contract for the liquefaction topsides. The conversion of the vessel is expected to take 31 months and be completed in end-2016. CS believes Keppel's profitability for this project will depend on the degree of risk-sharing in the contract, given the new technology and potential for cost overruns. The project will also raise questions on the economics of newbuild vs converted FLNG. House maintains OUTPERFORM rating on Keppel Corp as they believe progress made on the FLNG conversion presents a potential growth driver if proven to be commercially viable. CS has a TP of $12.70 for the counter.


SCI: HSBC likes SCI for its stability of business and its 10-15 year supply contracts, and expects power capacity to increase 70%+ and water capacity 20%+ in 2014-16. That said, bright utilities outlook is dampened by challenges by subsidiary Sembcorp Marine, faced with a weak rigbuild order market and margin pressure from expansion and Petrobras orders, which HSBC expects to only recede in 2015. Therefore, HSBC cuts SCI’s consolidated profit forecast for FY14-15 by 9-10% with a lion’s share of the cuts driven by SMM, plus the deconsolidation of Sembcorp Salalah Power and Water in Oman following its IPO. As such, HSBC downgrades SCI to Neutral and TP falls to $5.75 from $5.95.

Keppel Land/ GSH

Keppel Land/ GSH: A consortium led by GSH (51% stake) is buying over Equity Plaza from Keppel Land for $550m. Equity Plaza is on a site with ~74 years bal lease term, and has 97% occupancy. Equity Plaza is within a two-minute walk to the Raffles Place MRT Interchange station and is in close proximity to landmark office developments such as Republic Plaza and Ocean Financial Centre. Equity Plaza underwent major refurbishment works in 2009 and improvement works have been carried out progressively to increase the building’s efficiency Keppel Land is expecting to book $59.5m divestment gain from the sale. On a pro forma basis, Keppel Land’s NTA would have rose to $4.56 instead of $4.52 and EPS would have increased to $0.582 instead of $0.573. Keppel Land is trading at pro forma FY 13 P/NTA of 0.75x


Hyflux: Signed MOU with Grupo Finacieor Interacciones (Mexico’s leading infrastructure bank) to jointly carry out exploration, structuring, pursuit and/ or installation of water and other projects and developments in Mexico. Under the MOU, HIPL and Interacciones will cooperate and work with each other on a sole and exclusive basis to explore early stage and pre-specified greenfield water-related and infrastructure projects in Mexico. Banco highlights "alliance represents a market potential of advising, constructing and operating no less than 3 projects this year, and no less than 200 projects in the next 5 years". Projects could range US$10-150m in value. HYF noted Conagua, Mexico's nationtal water commission, has committed to spend US$4.0bn on water infrastructure over 5 yrs.


GLP: Nomura upgrades to Buy from neutral, raises TP to $3.10 (from $2.84). Notes GLP has underperformed the broader SG market ytd, possibily due to: 1) the market’s perception with respect to the China deal, 2) a weaker-than-expected CNY/USD, and 3) a weaker than expected operating margin in FY14 Nevertheless, Nomura believes the mkt view is too bearish, especially as one of the key rationales for bringing in the Chinese partners is to strengthen GLP’s land acquisition capability to accelerate future growth. Current share price implies development starts of only 2m sqm (US$1.4b) in China in FY16e, compared to mgt’s announced FY15e target of 3.3m sqm (US$1.7b), implying an improved risk-reward proposition at current valuation.

Overseas Education

Overseas Education: Maybank-KE initiating coverage on the counter with a Buy call and TP $1.32. The recent successful raising of $150m cash to build its new $271m campus has eliminated the overhang on the stock which once faced severe growth constraints. While growth in recent years was decent, it was hampered by space constraints at its old campus. This is set to change, with the new campus increasing its student capacity by 22% and allowing the group to hike its tuition fees. By targeting the children of high-income foreign professionals in Singapore, Overseas education commands strong pricing power at a time when demand still outstrips supply. With the new campus commencing next August, OEL is expected to close the 15% gap between its tuition fees and competitors’. At 16x FY14E P/E, OEL is attractively priced vs sector peers’ 27.5x.


CWT: DBSV raising its TP to $2.08, where they expect the group's core logistics business to post Broad-based revenue growth, led by higher rate renewals for the rest of 2014 and the addition of two more logistic facilties. With two more logistics facilities expected to TOP in 4Q, the additional 1.4m sf of owned warehouse space will boost the segment’s prospects further. Meanwhile, revenue from Financial Services has grown exponentially from $9m in 2Q13 to $48m in 2Q14. The house now projects this segment to contribute $220m (+237% yoy) in revenue in FY14, with a conservative 15% growth estimate in 2015. Regarding the recent Qingdao scandal..CWT’s Logistics revenue exposure to China is less than 3%, the segment will be little affected by the systemic impact. In addition, Commodity Marketing earnings is expected to be fairly resilient. The heat will be mostly felt by those reliant on in-warehouse stock financing. CWT is still trading at attractive valuations 16.7% ROE and less than 9x FY14 PE, versus 17x PE for Logistics peers and 15x PE for commodity trading companies. Reiterate BUY.


Ezion: CLSA remains optimistic for a strong 2H performance on new contract wins and expect momentum to pick up over next couple of months. House expects Ezion to bag 12 contract wins for FY14 (five clinched year-to-date) and eight in FY15. Management clarified that recent issues at its largest and most complex project “Prime Exerter” is not a structural execution issue, as the turn-key project indicates that Ezion does not have its own people on the ground to manage the project. Strong demand environment underpinned by Malaysian enhanced oil recovery projects represent the largest opportunities for deployment of liftboats/service rigs and Ezion is the only qualified contractor currently. CLSA maintains its long standing Buy rating on Ezion with a TP of $2.82.

Ascendas REIT

Ascendas REIT: Ascendas REIT proposed to acquire Hyflux Innovation Centre from Hyflux for $191.2m on a sale-and-leaseback arrangement. The 43,434 sqm gfa 10-storey prime high-specifications building located at 80 Bendemeer Road has a lease till 2068 and an occupancy rate of 83.9%, with tenants that include Hyflux, tech solutions provider NEC, healthcare supplier Covidien and American Express. Hyflux has commited to lease 50% gfa for a 15-year period, as well as provide rental support for the vacant space (16.1% gfa) in the property for three years. Proforma DPU for FYMar14 post acquisition of the property will be boosted by 0.8% to $0.144 and will extend A-REIT's weighted lease expiry profile to 3.96 years. DB cites that the recent share price volatility on the counter after its recent inclusion into the STI may present a potential opportunity for investors. Key thesis include sound fundamentals on firm occupancy levels and stable rental rates, which would be boosted by the trust's continued asset enhancement works across its portfolio, while the kicker for DPU growth may come from further asset acquisitions, especially in green field development projects in China. Gearing for Ascendas REIT remains conservative at 30%. FY15 distribution yield of 6.4%, above Mapletree Commercial Trust and CapitaCommerical Trust. House has a TP of $2.55 for the counter.

SG Market (26 Jun 14)

US Market: US shares closed higher led by drugmakers and broadcasters despite a dismal 1Q GDP report, which showed the US economy contracted much more than previous estimate of -1%. The DJIA rebounded 49 pts to 16,818 (+0.3%), while the S&P 500 climbed 10 pts to 1,960 (+0.5%) and the Nasdaq climbed 29 pts to 4,380 (+0.7%). The final reading of 1Q economic growth showed GDP shrank 2.9%, its worst since 2009, which was largely blamed on an extremely harsh winter. Orders for durable goods also fell 1% in May following three months of gains but excluding aircraft, new bookings for non-military capital goods rose 0.7%, reflecting the strong trend in the manufacturing sector. Shares of major broadcasters and cable companies including CBS (+6.2%), 21st Century Fox (+2%), Disney (+1.5%) and Time Warner Cable (+1.3%) and Comcast (+1.1%) rallied after the Supreme Court ruled that online TV startup Aereo violated copyright laws. But oil refiners Valero Energy (-8.3%), Marathon Petroleum (-6.3%) and Phillips 66 (-4.2%) slumped after the US relaxed restrictions on oil exports, allowing energy companies to export unrefined light crude oil. Among other stocks in focus, agro giant Mosanto jumped 5.1% after it beat its 3Q profit estimates and announced a US$10b share buyback plan. But General Mills fell 3.6% as its 4Q earnings came in well below expectations. With the end of quarter approaching, some market watchers are expecting some funds to take profit on equities and buying bonds as part of their portfolio rebalancing. Taking cue from Wall Street and possible window dressing from the half-year portfolio reviews by fund managers, S’pore shares are expected to rebound from oversold levels with overhead resistance for STI capped at 3,285 and underlying support at 3,220. Stocks to watch: *Hyflux: Signed MOU with Banco Interacciones, Mexico’s leading infrastructure bank, to cooperate on a sole and exclusive basis to explore early stage and pre-specified greenfield water-related and infrastructure projects in Mexico. Interacciones management believes the tie-up could lead to three projects this year, and up to 200 over the next five years, with each one being valued from US$10m to US$150m. *A-REIT / Hyflux: Proposed to acquire Hyflux Innovation Centre for $191.2m, via a sale-and-leaseback arrangement. Hyflux has committed to lease 50% of gfa for 15 years, thereby extending A-REIT’s WALE to 3.96 years (from 3.85 years). Post-acquisition, A-REIT estimates a proforma FYMar14 DPU accretion of 0.118¢, and net property income yield of 6.98% (assuming 100% occupancy). The acquisition is expected to complete on 30 Jun. *Keppel Land: Is selling its entire stake in Equity Plaza in Raffles Place for $550m, or $2,181psf NLA. Keppel Land expects to book a divestment gain of $59.5m, and receive net proceeds of ~$195.3m. On a proforma basis, the group’s FY13 NTA is expected to increase from $4.52 to $4.56. The transaction is expected to be completed by 3Q. *GSH / Vibrant (previously Freight Links Express): GSH is leading a consortium that has jointly invested $550m to acquire the entire stake in Equity Plaza from Keppel Land. The deal is estimated to be priced at ~3% net yield. The consortium comprises GSH (51% stake), Vibrant’s 51%-owned Vibrant DB2 JV (35%) and Sam Goi’s investment vehicle TJY Group (14%). GSH intends to retrofit the building, which has a 74-yr remaining lease life, to make it “on par with the top buildings in the area”. *Equation: Entered into a JV agreement with Tengah Engineering & Hardware, and Lim Hong Kia to invest in Tengah GreenTech, which shall provide oil dialysis services and distribute oil dialysis machines for the external cleaning of lubricants using micro filtration. Equation’s share of investment is $0.2m, which will be funded by the proceeds from the recent rights Issue. *China Yongsheng: In response to SGX’s query on trading activity, the company says it has received a letter from controlling shareholder Ever Universe Investments (68.1% stake), informing that the latter is considering various options in relation to its shares. *Etika: Entered into supplemental agreement with Asahi, that the completion of sale of its dairies and packaging business shall take place as soon as practicable on 30 Jun. *Vallianz: Completed the issue of 230m placement shares and 170m subscription shares at $0.13545 apiece.

Wednesday, June 25, 2014

SG Banks

Banks: A framework for domestic systematically important banks (D-SIBs) is in the works. The immediate implication is that foreign banks with a large retail presence will have to locally incorporate their retail units. A bank is deemed to have a significant retail presence if it has market share of resident non-bank deposits of 3% or more, plus it has at least 150,000 depositors with accounts of less than or equal to $250,000. Maybank-KE guides little implications for now, but competition could intensify. This is as systematically important banks would want to go up the risk curve tin search of higher returns to commensurate the higher capital requirements. Nevertheless, Maybank-KE remains Overweight on banks, with the following ratings: DBS: Maintain Buy with TP of $20.70 UOB: Maintain Buy with TP of $25.70 OCBC: Maintain Hold with TP of $9.63

JES (technical)

JES - Technical appear to be heading higher, although caution that it is not far off from Overbought territory. The recent high of $0.099 would act as the near-term resistance, followed by the gap resistance at $0.12.

RH Petrogas (technical)

RH Petrogas: Recent inverted hammer after the gap down on 23 Jun indicate a bullish signal for the counter. This was followed by a higher open the next day, which may portend to a higher upside. Support at $0.75 followed by $0.65, while resistance is at $0.915.

Hankore (technical)

Hankore - Technicals appear to be trending higher with RSI and Stochastics hooking upwards from oversold territory. The 200 day MA at $0.975 will be the critical resistance for share price.

Super (technical)

Super - Technicals appear to be trending downwards from overboght territory, with RSI and STochastics all hooking dowards. Share price is testing the 20 day MA of $1.43. A close below these levels could indicate further downside

UOB (technical)

UOB: appears to be range bound between $22.20 - $22.80, with slight positive bias in view of the indicators which are poised upwards. Share price is trading close to the 52 wk high , which is often reflects positive medium term trends.


SMM: HSBC downgrades to Underweight, slashes TP to $3.80 (from $4.50). Notes the environment for new rig orders is weak, and SMM is undershooting its estimates for new orders. The house remains cautious about the offshore new build rig market due to a delivery concentration in the next couple of years comprising ~22% of the global rig fleet. Meanwhile, around a quarter of the new rigs have yet to be contracted and hence the industry will take time to digest this additional capacity. Further woes may come from a continuation of margin pressure – heavier cost structure of Brazil local content requirements , gradual ramp up of the new Tuas Singapore yard and aggressive rig pricing and financial terms from Chinese and Korean competition. HSBC lowers FY14-15 profit forecasts by 8-14%, by lowering annual order intake assumption to $4.5-6.4b from $6-6.6b, cutting EBITDA margins for rigbuilding and conversion by 75-100 bps and factoring lower associate contribution from Cosco.


Q&M: Channel News Asia interviewed Q&M CEO Dr Ng, and he said that there’s a possibility of acquiring more dental hospitals in China. With over 1000 dental hospitals in China, Q&M sees much scope for growth Some key points Dr Ng highlighted: 1) All 6 of recently announced acquisitions of dental hospitals are covered under Yi Bao (state medical insurance), effectively giving them an exposure to >90% of Chinese population, who are covered. 2) IPO for its Chinese operations may be possible post acquisitions. Singapore and Hong Kong will be focused looked at. 3) Dr Ng addressed concerns of quality consistency between Singapore and China, and highlighted only graduates or those with Masters are hired. He added that the sheer population provides more cases to practice on. Link to story:


DBS: Has underperformed index by 4% and UOB by 7% YTD. This is a reflection of higher uncertainty in Mainland China where DBS has higher exposure. Deutsche highlights 1Q14 results should offer comfort level for investors. Deutsche further ressures investors that its HK ops remains poised to deliver sustainable growth. HK ops has been a consistent earnings contributor to DBS and the transformation has continued to work well. There is increased focus on trade finance lending (33% vs FY07: 18%), while fee income contribution is best among HK peers at 36%, with growing focus on mass affluent/wealth management segment. While DBS has cut its branch to 51 (-15% from FY11), profitability per branch has improved to $17m/branch in FY13 (CAGR of 21% since 2009), one of the highest among domestic peers in HK. Deutsche continues to prefer DBS over UOB, and maintains a Buy rating with a TP of $19.50

Cache Logistics Trust

Cache Logistics Trust: UOB Kay Hian maintains Buy with TP $1.35. The house anticipate positive reversions of 10-15% and strong underlying tenancies supported by MNCs to mitigate risks from potential non-renewal of master-leases in 2015/16. Key upside catalyst will be the completion of BTS development for DHL Supply Chain, which is close to 80% pre-committed. Maintain BUY with a higher target price of $1.35 (up from $1.31) based on DDM.

ISO Team

ISO Team: CIMB has an unrated note on the counter, where the house notes that ISO team is backed by favourable regulatory requirements, and the group is in a prime position to leverage on upgrading initiatives by the government and earn recurring building repainting revenue. Yet, a low profit margin and lack of longer term scalability may point towards inorganic expansion to streamline operations and expand into new markets. ISOTeam benefits from a constant stream of revenue for its repairs and redecoration business (R&R) due to regulatory requirements for building maintenance every five years. This segment contributed 54.7% of the total revenue and 59.0% of the total profit in FY13. In addition, the business will also benefit from various upgrading initiatives by the government and increasing demand for upgrading projects. This has resulted in a strong order book of $86m. ISOTeam’s status as the exclusive applicator of paint works for both SKK and Nippon Paint in the Singapore public housing sector should also ensure that a sizeable amount of R&R projects is captured. In its listing documents, ISOTeam had indicated interest in obtaining vertical and horizontal skillsets through inorganic growth. The house believe the company is exploring some potential targets and any acquisition could involve cash, share placement or an issue of shares. Such a move may help achieve greater cost efficiency and penetration into more lucrative businesses.

Nam Cheong

Nam Cheong: We highlight that share price has hit a new all-time high, closing at the $0.40 resistance mark, partly inspired by recent news that the group has sold two Accomodation Work Barges (AWB) worth US$84m, with options to sell another two vessels, to Perdana Petroleum. The two AWBs are the largest to be built by Nam Cheong, and boasts the highest value per unit for the group. In a boost to shareholder’s confidence, Nam Cheong recently conducted two share buyback transactions, buying back a total of 5.5m shares at 37.5c - 38.5capiece, which is near the all time high. This could potentially give investors more confidence to follow suit. Would not be surprised to see the street beginning to rerate their share price upwards, given that most of the TPs has been reached. This is justifiable given their monopolositc position in Malaysia and its robust order book. The group also recently raised its dividend to 1c per share, representing a yield of abt 3%.

Longcheer Holdings

Longcheer Holdings: Longcheer entered agreement with First Prosperous International (FPI) to sell its entire interest in wholly-owned subsidiary, Mobell Technology (MT), for Rmb240m ($48.2m). The disposal is subjected to approval from shareholders for a cash distribution of Rmb450m ($0.256/share), which consists MT's profits and retained earnings of Rmb212.7m, and net proceeds of Rmb237.3m from the disposal. MT is Longcheer's handset design business which provides solutions for the entire value chain, from system testing to exterior design. It operates in four continents, including China and India. After completion of the disposal, Longcheer will primarily be a holding company which will have interests in mobile handset trading and property investment. Proforma FYJun13 post-acquisition NTA will remain at Rmb1.84/share ($0.37/share), while EPS will drop from Rmb1.692 ($0.34) to Rmb0.304 ($0.061).

SG Market (25 Jun 14)

US Market: US shares backed off from early gains as early enthusiasm from positive economic data gave way to profit taking amid geopolitical concerns in Iraq. The DJIA tumbled 119 pts to 16,818 (-0.7%), while the S&P 500 dropped 13 pts to 1,950 (-0.6%) and the Nasdaq lost 18 pts to 4,350 (-0.4%). The VIX, or Wall Street’s measure of market volatility, rose 10% to 12.13. The market opened higher with the S&P 500 climbing to another intraday record, buoyed by reports which showed consumer confidence for Jun surged to its highest level since Jan 2008, while new home sales jumped 18.6% in May to a six-year high. The gains however reversed in the afternoon session on newflow out of Iraq that Syrian war planes had struck insurgent targets in western Iraq, prompting fears of a widening conflict. Energy stocks fell 2%, led by ExxonMobil (-1.6%), while homebuilders rose 1.1% with both DR Horton (+1.2%) and Lennar (+1.4%) advancing. Among stocks in focus, chipmaker Micron Technology rallied 4% as its 3Q sales and earnings beat estimates. Vertex Pharmaceuticals surged 40.4% higher after reporting promising test results on two clinical trials for cystic fibrosis treatment. But drug chain Walgreen slid 1.7%, after its 3Q revenue and profit missed forecasts S’pore shares are expected to remain in negative territory following the tumble on Wall Street and weak openings in Tokyo (-0.6%) and Seoul (-0.2%) but downside risk for the oversold STI may be limited with support tipped at 3,220 and overhead resistance at 3,285. Stocks to watch: *Longcheer: Disposing its interest in wholly-owned Mobell Technology (MT) to First Prosperous for Rmb240m ($48.2m). The proposed disposal is conditional on shareholder approval to distribute Rmb450m from its retained earnings and sale proceeds by way of a cash dividend. Post-acquisition, proforma FYJun13 NTA will remain at Rmb1.84 ($0.373) per share. *Roxy Pacific: Has launched its freehold 222 unit Trilive condo project in Kovan. Only ~30 units of the 80 units released, have been sold at ASP of $1,550psf (after early-bird discount). The land was acquired at a cost of ~$830 psfppr, with estimated breakeven cost of $1,350 psf. *ICP: Has agreed to acquire the “Travelodge” hotel brand name and trade mark rights in 22 territories and countries in the Asia Pacific region (excluding Australia and New Zealand), for consideration of A$3m. The acquisition will allow ICP to gain access to an international midscale hotel brand. *XMH: Disclosed that from Apr till yesterday, its newly acquired subsidiary MPG has secured five new contracts worth a total of $10.6m that will provide the group with activities through to Jan ’16. *Polaris: Says the group is in discussions for a potential acquisition of a South East Asian company in the same business, and related fund-raising options to finance the potential acquisition. *LionGold: Has mutually agreed with four individuals, to terminate a previously proposed share subscription and proposed issue of convertible bonds. Separately, LionGold has agreed to issue 52m new shares at $0.08135 each to M’sian businessman Mr Moi Hsien Hur. The net proceeds of $4.2m will be used for the group’s gold mining operations (70%) and working capital (30%). *Q&M Dental: CEO Dr Ng Chin Siau speaks to ChannelNewsAsia with regard to the group’s growth opportunities in China. *Oxley: Has terminated the MOU with Sepang Goldcoast and Sepang Bay, on a mutual basis, to develop two parcels of land in Sepang, Selangor, M’sia. *Manhattan Resources: A barge and pusher boat operated by the group was involved in an accident at Tepian Ulak jetty, in Indonesia’s Kalimantan region. Investigations are on-going and the financial impact would be announced at a later date. *JES: Executive Director and CFO Mr Kan Wei Shiu has resigned. Separately, Ms Jin Yu, who is an Executive Director, has been promoted to Vice CEO wef 24 Jun. *Armarda: Independent auditor, Crowe Horwath First Trust, gives unqualified opinion, flags emphasis of matter in the group’s FYMar14 financials, which shows a net loss of $88.2m and negative operating cash flows of $70m.

Tuesday, June 24, 2014


GLP: CIMB maintains Add rating, but lowers TP to $3.29 (from $3.48). While the house is bullish on GLP’s asset-recycling pipeline and visible growth from China, it cuts FY15-17 EPS by 4-22% and RNAV by 5.6% , as it believes a greater proportion of partnerships in China will dilute GLP’s attributable earnings. Potential catalysts include faster-than-expected capital recycling and growth in China. There remains value as GLP is trading at a 19% discount to RNAV, about 1 s.d. deeper than its historical mean discount of 12%.

RH Energy

RH Energy: Voyage says stock is a Convincing Gem, tips potential value of $0.83 (post 3-into-1 share consolidation). RH Energy will acquire Chiwayland for consideration of $399m, in exchange for Chiwayland shareholders owning 81.1% of the enlarged share capital of RH Energy (549.3m new consolidated shares @ $0.69 issue price) and a cash component of $20m. Chiwayland Group is seeking a listing on SGX via an RTO of RH Energy. Chiwayland is a China property developer that has 1) proven track record of property development in Yangtze River Delta since 2002, and has delivered a total GFA of 1.4m square metre for its nine completed projects, with opportunity coming from saleable GFA of 2.3m square metre that is held under development, 2) integrated educational element into real estate planning, such as collaboration with EtonHouse International Education Group, therefore differentiated itself from other developers and 3) diversified its portfolio into China’s public housing projects which may generate steady revenue in the future. Voyage believes that the RTO may offer value as Chiwayland has been able to generate positive PATMI for the past few years (PATMI for FY13:RMB109.0m, FY12:RMB89.6m, FY11:RMB87.1m). Based on the company’s project pipeline, the house is optimistic about the company’s profitability going forward as the contracted sales to be recognized as revenue in FY14 and FY15 is ~ RMB1.2b for each year.

Soilbuild Construction

Soilbuild Construction: Soilbuild Construction secured a $38.6m contract to build a global distribution center for an affiliate of Pepperl+Fuchs, the leading developer and manufacturer of electronic sensors and intrinsic safety components for the global automation market that is headquartered in Germany. Construction for the proposed five-storey high-tech industrial building at Pioneer Turn is expected to be complete by 3Q15. The fifth contract won by the group raises order book to $531.5m to-date. More notably, reliance on the property development business from its parent, Soilbuild Group, has been declining over the past three years- with revenue derived reducing from 100% in FY10 to 58% in FY12. The spinoff of the construction business in May '13 has been rather successful, with the company obtaining a permit to provide construction and related services in Myanmar just five months after. Investors may be keeping a keen eye in this space for any new developments to spearhead the company into its next leg of growth. At $0.25, Soilbuild Construction trades at 6.4x trailing P/E.

Hu An

Hu An: Executive Chairman & CEO, Mr Dai Zhi Xiang has snapped up 6.1m shares from the open market last Friday, raising his stakes in the group from 17.01% to 17.61%. Hu An guides that despite concerns on China’s prevalent market risks, the group remains sanguine on China’s growth potential, with the National Development and Reform Commission recently announcing plans to stem economic slowdown. As such one of its objectives would be to quicken the pace of infrastructure and power-related projects to facilitate rapid urbanization. In light of this trend, Hu An sees more opportunities to expand its foothold into China’s power generation and transmission infrastructure sector, with its current solid orderbook of Rmb900m stretching revenue visibility for the year.


OUEHT: MKE Initiates coverage, stating this as the only trust with a pure Orchard Road play, owning the integrated 125,000 sf high-end fashion mall Mandarin Gallery (MG; 30% of revenue and portfolio value) and the upscale 1,077-room Mandarin Orchard Singapore hotel (MOS; 70% of revenue and portfolio value). MKE views that OUEHT is a proxy for growing hospitality segment in Orchard Road. Yield is attractive at FY14E of 7.3%, highest among Singapore-based hospitality and retail SREITs. Aggregate leverage stands at 32.2%. DPU growth should be underpinned by modest room additions in Orchard Road and the ongoing refurbishments to upgrade 430 rooms at MOS. Limited new retail space on Orchard Road over the next 3 years and measures to optimize tenant mix at MG suggest scope for rental upside at MG. In addition, close proximity to key tourist attractions, commercial and medical clusters put them in good stead to ride various tourism waves. The sponsor, OUE Limited’s right of first refusal includes Crowne Plaza Changi Airport (320 rooms, S’pores first airport hotel). Post development of an adjescent site, the enlarged hotel will offer 563 rooms. Expected to be injected in 2015, this will be a catalyst for the trust. Maybank has a Buy on OUEHT with TP of $0.93.

SG Market (24 Jun 14)

US Market: US shares ends flat, halting a six-day rally, amid mixed global economic data as investors kept watch over the conflict in major oil producer Iraq. The DJIA retreated 10 pts to 16,937 (-0.06%), while the S&P 500 was little changed at 1,963 (-0.01%) and the Nasdaq barely budge 0.6 pt to 4,369 (+0.01%). In a contrast of fortunes, the HSBC flash manufacturing PMI for China rose to 50.8 in Jun, its highest level since Nov but Markit composite PMI for eurozone slipped to 52.8 from 53.5 in May, its weakest level since Dec. In the US, existing home sales climbed 4.9% in May to an annual rate of 4.89m units, the most since Oct but the price increase was at the slowest pace in more than two years. A separate Markit report showed manufacturing growth rose to 57.5 in Jun from 56.4 in May. Oil prices dipped 0.6% as investors came to grasp that the unrest in Iraq has yet to disrupt supplies. But the situation remained fluid with government forces regaining control of the border crossings into Syria and Jordon while Sunni insurgents advanced towards Bagdad. In corporate news, Dow component General Electric fell 1.1% after it agreed to buy the energy business of French company Alstom for US$16.8b, while software giant Oracle was up 0.7% after offering to buy rival Micros Systems (+3.4%) for US$5.3b in a bid to expand its data presence in the hotel and restaurant sectors. S’pore shares may open relatively flat today following the muted close on Wall Street, with the 50-day moving average on the STI offering near term resistance at 3,265 with support at 3,220. Short term technicals indicators are still exhibiting signs of weakness while dipping into oversold territory. Stocks to watch: *Yoma: Parent SPA is offering the first right of refusal to acquire the economic benefit of 80% of the 250-acre land in Pun Hlaing Golf Estate for US$70m. Once approved, Yoma intends to revise its proposed 1-for-8 rights issue into a 1-for-3 rights issue with the rights price remaining at $0.38. *Olam: Mitsubishi Corp is investing US$64m for an 80% stake in its wholly owned Grains Australia. Olam will retain the remaining 20% in the unit, which is engaged mainly in origination, trading, logistics and marketing activities and holds a 32.5% stake in Newcastle Agri Terminal. *KS Energy: Awarded a US$199.2m contract to Shanghai Zhenhua Heavy Industry Co for construction of one newbuild jack-up drilling rig with option for an additional rig. Delivery of the rig is expected within 27 months. *Soilbuild Construction: Secured $38.6m contract to build a global distribution centre for Germany’s Pepperl+Fuchs, a leading developer and manufacturer of electronic sensors and intrinsic safety components for the global automation market. Construction of the five-storey industrial building at Pioneer Turn will commence this month and is expected to be completed by 3Q15. This contract brings the group's order book to $531.5m. *United Envirotech: Its wholly owned M’sian subsidiary has secured a RM45m engineering, procurement and construction (EPC) contract to build a sewer network in Johor Bahru. The project is expected to be completed by end '15. *Captii (formerly Unifed Communications): Terminated its proposed investment in Express In Music, as the parties could not come to agreement on the terms of agreement. *Karin: Signed a distributorship agreement with CA Technologies in Hong Kong for the provision of Infrastructure Management, Application Performance Management, and Security and Application Delivery solutions. *SinoTel: Issued “Trade with Caution” notice by SGX, following company’s failure to explain any reason for its 24.1% share price surge on 23 Jun. *Hu An Cable: Chairman and CEO Dai Zhi Xiang snapped up 6.1m shares, raising his stake from 17.0% to 17.6%.

Monday, June 23, 2014


OKH: Proposed distribution-in-specie of IT business by way of capital reduction Property development and construction firm, OKH Global intends to fully divest its non-core IT businesses in the PRC. Through a restructuring, OKH will inject the IT businesses into a Holding Company (HoldCo), and undertake a 1-for-1 distribution-in-specie of its entire shareholding in HoldCo via a capital reduction. OKH shareholders who do not wish to own the (unlisted) HoldCo shares may fill out the relevant form, requesting HoldCo to repurchase their HoldCo shares for $0.0487 each (1x HoldCo P/NTA). Effectively, OKH shareholders stand to receive a cash return of $0.0487 per OKH share. Such a move allows OKH to dispose of the IT business, which has low return on equity, with minimal impact to the firm’s financial performance. Timetable: 19 Jun - OKH shares to trade ‘ex-entitlement’ 27 Jun – Despatch of Buyback form to entitled shareholders 27 Jul – Closing date for submission of Buyback form by shareholders to HoldCo


HK/China - China shares edged down on Monday even though a preliminary survey showed activity in China's factory sector in June expanded for the first time in six months, a new sign the economy is stabilising. But a liquidity squeeze resulting from new initial public offerings (IPOs) continued to weigh on the markets. The squeeze is not expected to improve before the end of the month

StarHub (technical)

StarHub: Nearest support is around $4.09 while nearest resistance is $4.32. Both RSI and Stochastics are steeply facing downwards, suggesting slight downward pressure in near term

UOL (technical)

UOL: Counter still within its mid-term uptrend, although share price may see further slide on accumulation from the declining volumes. Support at $6.50 (60MA) followed by $6.00, while resistance levels are at $6.75 followed by $6.85.

M1 (technical)

M1 - Technicals appear to be trending down with RSI and Stochastics all heading down from oversold territory. The 50 day MA at $3.45 will be the near-term support.

Food Empire

Food Empire: ($0.39) Waiting to strike back Global markets are correlating less with the Crimean conflict, as news flow suggests some progress towards stability. With the Russian stock market and ruble rebounding smartly off their lows, Food Empire, which counts on Russia and Ukraine for ~74% of its revenue, may be poised for an earnings rebound and share price recovery. Over the week end, Russian President Vladimir Putin expressed support for Ukraine’s unilateral ceasefire against pro-Russian separatists, even as he ordered large-scale military exercises across central Russia. Investors have started to return to Russian assets, as the threat of a worst-case war scenario has diminished. The Micex index comprising Russia’s 50 largest and most liquid stocks has rebounded 26% to 1,492 from its low in mid-Mar. Similarly, the ruble has risen by ~7% over the same period, recovering nearly half of its losses since the peak of the crisis. In the most recent two quarters, Food Empire’s financials were adversely impacted by the downward revaluation of its outstanding non-USD trade debts, due to its USD reporting currency. If the Russian geopolitical situation improves, the ruble and hryvnia could rebound just as quickly as they came down, which means Food Empire could benefit from the positive FX translation gains in subsequent periods. Operationally, Food Empire continued to perform well in 1Q14, managing to eke out a 2% y/y sales growth in Russia to US$37.1m, and posted a 41% jump in sales in other markets (Europe, Middle East, Vietnam and Malaysia) to US$6.2m. Sales from the Eastern Europe and Central Asia region fell 5% to US$16.8m, nevertheless, sales from Ukraine would have been up 19% in local currency terms, despite the turmoil in the region. Food Empire shares continue to languish near a two-year low, and trade at par to book value. Investors will likely be keeping an eye out for an earnings recovery in the upcoming 2Q14 results (estimated 13 Aug), and return of research coverage, as a potential re-rating catalysts for the stock.

Nam Cheong

Nam Cheong: announced that it sold two Accomodation Work Barges (AWB) worth US$84m, with the option to purchase another 2 vessels to a repeat customer, Bursa-listed Perdana Petroleum Berhad. Nam Cheong had previously sold another AWB of a smaller size last July to Perdana. Management cited that the 2 AWBs are the largest to be built by Nam Cheong, and boasts the highest value per unit for Nam Cheong. With the order, cumulative order book is now a whopping RM1.5b. The vessels are expected to be devliered in 2016 and is expected to contribute positively to FY14-16 earnings Nam Cheong trades at 8.3x forward P/E with 9 straight Buys and a TP of $0.46


REITs: CIMB likes luxury hotels and highlights that despite a 0.7% y/y drop in occupancy, hotel RevPAR improved 2.1% y/y for the first 4 months of the year, attributable to upscale and luxury hotel segments. There was a slowdown in Chinese visitors, possibly due to China’s new tourism law, and the MH370 incident. That said, while there are less Chinese travelling via tours, more are travelling on their own and the latter group tends to spend more. CIMB guides that this spending trend is expecting to continue as the government aims to position Singpaore as a top luxury lifestyle destination. In tandem, upscale and luxury hotel segments are expected to benefit. Aside, other boons for luxury hotels include 1) stronger Indonesian visitor arrivals, 2) packed 2014 event calendar, and 3) a potentially stronger corporate spending trend. Of beneficiaries, CIMB maintains Add on OUE-HT (TP $0.96) as the company boasts the ability to boost RevPAR through sponsor-funded AEI of Mandarin Orchard, and Add on CDL-HT (TP $1.97) on continual good performance from its Singapore and Maldives portfolio. CIMB has a Reduce call on FEHT (TP$0.80) as its mid-tier portfolio, particularly those along Orchard Road, to come under pressure amid intensifying competition.

Serial System/ Achieva

Serial System/ Achieva: Serial System proposed to acquire Achieva to extend its electronic and electrical components distribution business. Both companies intend to enter into a definitive agreement by 31 Jul. The consideration of the acquisition is to be made over two tranches- 60% at NTA as at 30 Jun 2014, while the remaining 40% will be acquired at Achieva's NTA as at 30 Jun 2015. As a gauge, Achieva's NTA as at 31 Mar stood at 6.42¢, 14.6% above its last close. In comparison, Serial currently trades at an 11.4% premium to its NTA.

RH Petrogas

RH Petrogas: In relation to the potential takeover offer, the group announced that there has been no further discussions or progress regarding the matter between the parties since the Company’s last announcement on 20 May 2014.


M1: UOB reiterates the ongoing theme that M1 is a prime beneficiary of a) growth and monetization of data, and b) easing of handset subsidies. Aside, M1 also intends to pursue opportunities to provide fibre broadband to SMEs beginning 3Q14 when the details of the eligibility of the budget 2014’s subsidy program is finalized. UOBKH expects a yield of 4.4% for 2015F. UOBKH maintains Buy with increased TP of $4.05 from $3.89


MoneyMax: Entered into a conditional agreement with Chong Mei Sang as a partnership to grow the Malaysian network to up to 34 over the next few years. As part of the deal, Chong will restructure 8 outlets and place their ownership under a new holdco (which MoneyMax will have 51%). MoneyMax will pay Chong an initial RM4m within 3 days of confirming that conditions of the SPA are met. Subsequently, another RM4.9m will be paid upon the operation of two additional outlets, and a final tranche of RM6.7m will be paid progressively as 24 new outlets are launched in various parts of Malaysia. MoneyMax trades at 30x forward P/E.


CWT: OCBC notes that the recently Dagang bonded warehouse at Qingdao Port was being investigated for the fraudulent practice of pledging single batches of metals as collateral for multiple loans. CWT’s revenue exposure to Qingdao port comes from collateral management service under its Logistics segment, which we understand from management is negligible. Thus, the house do not expect Logistics earnings to be adversely affected. The incident’s indirect effects, through tighter credit and moving stocks offshore, will lower liquidity and commodity trade flows. Examined a similar steel-for-loan fraud in 2012 and found that the shock factor to market and impact on physical trade flows lasted only a few months. Think it would be similar this time round unless the probe widens significantly. Moreover, given that CWT’s Logistics revenue exposure to China is less than 3%, and think the segment will be little affected by the systemic impact. Maintain BUY with $1.92 fair value estimate.


Yongmao: Hosting quite a couple of plant visits recently and trying to build-up media coverage on the co. Their investment story revolves around its dominant market position in China’s tower crane industry, and China’s rapid urbanization development. Tower cranes are becoming very popular in China because they are more cost effective than crawler cranes, which typically cost 3 to 4 times as much. Despite Yongmao's tower cranes bring amongst the most expensive in China, there has been increasing demand over the years, with construction contractors becoming more discerning in equipment choice. Price points of brand new Yongmao cranes are also kept high in order to give customers a good resale value for their used cranes. The quality of made-in-China cranes have over the years become increasingly, and is closing the gap with European products, with Yongmao’s cranes being used by a host of global companies to build iconic landmarks around the world, like the Beijing National Stadium and the Imperial Wharf in London.


Silverlake: Maybank-KE initiates with Buy and $1.40 TP. The house expects a solid 16% earnings CAGR over the next three years to sustain its re-rating, while the group’s highly cash generative business should support rising dividends. Ranked fifth in Asia Pacific and top 2 in Southeast Asia, Maybank-KS expects Silverlake to benefit from growing IT spending by banks, and an ongoing drive to upgrade ageing core banking systems, which will continue to drive sales and allow it to monetize the large installed base of its products. With an ungeared balance sheet and sizeable war chest of more than Rm300m in cash, Silverlake could optimize their capital structure by announcing a special dividend or initiating a share buyback program. Silverlake currently trades at 22.1x forward P/E and 4.3% forward yield versus closest peer Temenos’s 24.8x and 1.2% respectively.

SG Market (23 June 14)

US Market: US shares rose on Fri, driving the Dow and S&P 500 to fresh records as intensified fighting in Iraq lifted oil prices and drugmakers rallied on merger activity. The DJIA gained 26 pts to 16,947 (+0.2%), while the S&P 500 added 3 pts to 1,963 (+0.2%) and the Nasdaq advanced 9 pts to 4,368 (+0.2%). Volume picked up largely due to quadruple witching when futures and options contracts on indices and stocks expire. 330 companies on the NYSE set new 52-week highs, while the VIX or fear gauge stayed near the lowest level since 2007, prompting concerns that the market may be getting too complacent with Energy stocks were the big winners as oil prices rallied to a new nine-month high of US$107.20 a barrel as the battle between Iraqi army and Sunni insurgents showed no signs of abating. Heathcare companies rose amid merger activity as European drugmaker Shire Pharmaceuticals rejected a US$46b takeover bid by Abbvie (-1.6%). This sent other drugmakers higher including Merck (+1.1%), Eli Lilly (+3.6%) and Amgen (+2.7%). Among stocks in focus, software company Oracle fell 5.3% after its 4Q results fell short of estimates, while used car firm CarMax surged 16.5% after its 1Q sales topped expectations. Other companies that saw gains included Caterpillar (+2%), Johnson & Johnson (+1.4%), Wells Fargo (+1.7%) and American Airlines (+3.5%). S’pore shares may attempt to climb back above its 50-day moving average at 3,265 following the record-breaking run on Wall Street and positive early trades in Tokyo (+0.4%) and Seoul (+0.4%) but upside is likely to be capped at the 3,285 resistance as short term indicators have yet to show any signs of improvement. Stocks to watch: *Wilmar: Signed a 50/50 JV agreement with Repi Soap and Detergent S. Co, to upgrade an existing manufacturing and build a new integrated manufacturing complex in Ethiopia, that will house an edible oil refinery and packing plant, production plants for specialty fats, soft oils, soaps and detergents, as well as a facility for sesame seed processing. *SIA: Newswires say the 51/49 Tata-SIA JV is expected to get the air operators’ permit next month, announce its brand name in early Aug, and start commercial operations in Sep. The venture will start with five aircraft in the first year of operations, and raise to 20 over the first four years. *MoneyMax: To invest RM15.6m for a 51% stake in a network of Malaysian pawnshops in its maiden overseas venture. The vendor is Mr Chong Mei Sang, a veteran who has 30 years of experience in the production and trading of jewellery. *Loyz Energy: Signed MOU for Enso Oil & Gas to invest in Loyz’ 52% owned subsidiary, Interlink Petroleum (IPL), and recommend suitable exploration and production (E&P) assets in the Irkutsk region of Russia to be acquired by IPL. HK-based Enso owns a 51% stake in a Russian company which holds a licence for gas E&P in Russia. *Serial System/ Achieva: Serial System proposed to acquire Achieva to expand its electronic and electrical components distribution business. The purchase price will be based on the sum of 60% of Achieva’s FYJun14 NTA and 40% FYJun15 NTA. Achieva's NTA as at 31 Mar was 6.42¢. Both companies intend to sign a definitive agreement by 31 Jul. *Yamada Green Resources: To acquire 19% of Zhangzhou Meisei Foods (ZMF) at Rmb36.4m (1x P/B), a manufacturer and supplier of agricultural processed food products and one of the leading processed bamboo shoots suppliers in Fujian, China. Yamada’s proforma FYJun13 NTA and EPS will remain at Rmb1.338 and Rmb0.157 post-acquisition. *HLH Group: 49% owned associate D’Lotus Development will acquire 13,541 sqm of freehold land in the city centre of Phnom Penh, Cambodia, with plans to develop an office tower, luxury condominiums, and F&B retail buildings, for consideration of US$14.9m. *UE E&C: Awarded a $38.8m subcontract by GS Engineering & Construction, the supply and installation of air-conditional and mechanical ventilation and utilities systems for the proposed additions and alterations for multi-user research buildings at Fusionopolis Way. *Biosensors: Says CITIC Private Equity Funds Management is still considering its options to enhance the value of its investment in the company (including the restructuring of its shareholding interests). *Innopac: Proposing a rights-cum-warrants issue, on the basis of 2 rights shares (issue price @ 1¢ each) that come with 1 free detachable warrant (exercise price @ 1.2¢ ), for every 1 Innopac share. The estimated net proceeds of $68.9m from the rights issue will be used for working capital, and to strengthen the group’s capital base to pursue potential growth and acquisition opportunities. *ISDN: Says it is expected to benefit from a recent upward revision of electricity tariff rates (from Rp656 to Rp1,075 per Kwh) to be paid to mini-hydropower developers (10MW capacity or less) by the Indonesian government. *IPCO: Profit warning. Expected to report a FYApr14 pretax loss due to unrealised fair value loss on financial assets, and allowance for impairment loss on available-for-sale financial assets. *LionGold: Has sought a three-month extension to hold its AGM for FYMar14 to 30 Oct. The company has had difficulty providing certain information to the auditors of its Bolivian gold mine subsidiary. *Nordic Group / PSL Holdings: Nordic has exercised its option to put its 30m shares in PSL (7.76% stake) to Sudirman Kurniawan for $9m. *RH Petrogas: Updates that there has been no further discussions or progress relating to the potential takeover proposal previously announced 20 May. *Poh Tiong Choon Logistics: Issued a “Trade with Caution” label by SGX, following a substantial 26.9% increase in share price over 19 and 20 Jun.

Friday, June 20, 2014

K1 Ventures

K1 Ventures: According to media news, China Grand Automotive Services Co., the largest automotive dealer in China, has received approval from the HKEX for an IPO. China Grand Auto, which is majority-owned by TPG Capital, is looking to raise USD700m by selling a 15% stake in the company. OSK-DMG estimates that k1 Ventures, which has an effective stake of 1.6% in China Grand Auto, could potentially monetize its stake for SGD90m, and realize gains of some SGD70m. k1 recently sold its rail equipment leasing business in the U.S. for USD143m in net proceeds and paid out a five cent special dividend. The house expects k1 to continue to dish out dividends upon portfolio divestments as management has committed not to make new investments and return excess cash from investment sales. Since 2004, the group has returned some SGD700m to shareholders in capital distributions and dividends from profitable exits. The house rates k1 at Buy with TP $0.23 , based on 20% holdco discount on SOTP valn of $0.29

Sing Post

Sing Post: DBSV expects new business from Alibaba and new acquisitions to uplift Singapore Post’s FY16F earnings significantly. The house projects 7% EPS dilution in FY15F after issuing new shares to Alibaba for its 10.35% stake in SPOST. However, DBSV sees EPS accretion from FY16F onwards. With S$482m net cash, SPOST may acquire profitable companies across the e-commerce value chain. DBSV has been early believers in SPOST’s low-cost and pan-Asia e-commerce strategy. Alibaba’s entry convinces further that SPOST is well-positioned to benefit from ecommerce sales, which according to eMarketer, is expected to see CAGR of 29% in Asia over the next 4-years. Maintain BUY with target price raised to $2.00 (Prev $ 1.60).

Singapore Medical Group

Singapore Medical Group: CIMB has an unrated report on the counter. The house notes that the market is understandably excited over SMG's new management; Mr Tony Tan and Dr Beng Teck Liang both have outstanding track records. The aggressive streamlining of the company has also resulted in encouraging 2H13 numbers. However, the stock's 67% run-up within six months from Nov 2013 may just be too fast and too furious. Believe Singapore Medical Group (SMG) could be worth $0.17 per share, based on a 21x FY15 P/E (30% discount to peers' 30x P/E). The house assume its revenue growth can match Singapore healthcare industry’s CAGR of 8% from 2013 to 2017, and that it can earn a 6.6% net profit margin for FY15. Key re-rating catalysts include strong earnings growth and expansion of its services.


Ezion: UOB Kay Hian maintains Buy with TP $2.62. The house notes that with the further delay in the deployment of the Caspian-related service rig to 2H-July to mid-September, the additional cost of US$10m-12m could either be expensed off in 3Q14 or amortised over 10 years, depending on auditors’ decision. A full write-off could reduce the house 2014 net profit forecast by US$12m, or 5.6%, which the house see this as a oneoff negative impact on earnings. Any share price weakness would be a buying opportunity.

GENTING Singapore

GENTING Singapore's plans to build a casino in South Korea have been stalled, Channel NewsAsia (CNA) reported yesterday evening, citing a statement from the mainboard-listed casino operator. The postponement is to "allow the company to brief the newly-elected governor of Jeju and his team on the casino's development plans and its contribution to Jeju Island. Previously, Genting Singapore had said that Resorts World Jeju was expected to break ground in Q3 this year, and slated to open in stages three years from now. With Genting Singapore's recent sterling Q1 results, some analysts have been recommending a buy on the stock, as they expect the Jeju project in South Korea and a potential bid win in Japan next year to boost the share price.


SIA’s subsidiary low cost carrier Scoot, has signed a JV with Nok Airlines to set up NokScoot, via the acquisition of Pete Air, which will see both companies invest ~$80m each and eventually own ~49% stake each, with the remaining 2% held by Pueannammitr Co. The exisiting company will be renamed NokScoot Airlines. Commenting on the latest JV, SIA guided that Thailand is Asia’s premier tourist destination and a logical hub for Scoot to expand to, with the JV Airline aiming to develop a new market segment and to offer Thai consumers and travellers to Thailand more travel options. Acquiring Pete Air instead of setting up a greenfield venture, would also expedite the startup of NokScoot. The Transaction is not expected to have a material effect on the net tangible assets or earnings per share of SIA for MarFY15. We highlight that Scoot’s latest expansion comes at a time when local peer Tigerair is reducing its overseas exposure, with the ailing ‘Tiger’ announcing yesterday that it is ceasing operations of its 36% owned Indonesian associate Tigerair Mandala from 1 Jul ’14 after failing to sell its ‘struggling cub’ to rivals. With SIA currently trading at 0.93x P/B, we opine that downside could be limited based on its historical trough P/B of ~0.8x (post-GFC) and its solid net cash position of $3.9b. Overall, the street has 7 Buy, 11 Hold and 5 Sell call ratings with a consensus TP of $10.60.


HanKore: Share price has corrected by 25% since details of the RTO by CEI was announced 2 June. Market viewed the deal negatively on the back of a higher-than-expected transaction price, causing a larger-than-expected EPS dilution. In effect, HanKore’s FY15e P/E is inflated to 23.4x, exceeding closest peer SIIC< which is priced at 22.1x FY15E. That said, Maybank-KE feels that the benefits that CEI could bring, such as stronger project sourcing ability, lower borrowing costs and stronger balance sheet is still underappreciated by the market. Maybank KE expects HanKore to embark on an acquisition drive to position itself as a key player in the WWT industry, and expects annual acquisition of 1m ton/day WWT capacity for FY15e and FY16e vs orinal amoung of 500k ton/day. Maybank KE has a Buy call on HanKore with reduced TP of $1.23 from $1.70

SG Market (20 Jun 14)

US Market: US shares edged higher with the S&P extending its record run as investors weighed ongoing violence in Iraq with solid economic data amid optimism over the Fed’s latest policy statement. The DJIA eked out 15 pts to 16,921 (+0.1%), while the S&P 500 added 3 pts to 1,959 (+0.1%) but the Nasdaq dipped 4 pts to 4,359 (-0.1%). Markets briefly lost ground after President Obama offered to send up to 300 military advisors to help Iraq counter an insurgency and take targeted action if necessary. Oil prices ended higher with Brent crude pushing above US$115 per barrel. Reaction to positive economic news was muted. The Conference Board’s index of leading economic indicators rose for the 4th straight month in May, showing the economy gained momentum following the slowdown at the start of 2014. Factory activity in the Mid-Atlantic region also grew at a faster pace than expected in Jun, while the Philadelphia Fed’s business activity index climbed to 17.8 from 15.4 in May, topping forecasts. Meanwhile, initial jobless claims slipped 6,000 to 312,000 last week, sign of steady progress in the labour market. Among stocks in focus, Blackberry jumped 9.7% after reporting a narrower loss than expected, while supermarket chain Kroger gained 5.1% after raising its full year forecast. Open-source software developer Red Hat rose 3.8% after its 1Q sales and profit beat estimates and guided for higher earnings in FY15. But Coach slumped 8.9% after the luxury handbag maker forecast a prolonged slump in sales at its North American stores. Rival Michael Kors lost 1.6%. S’pore shares are losing momentum despite the record-breaking rally on Wall Street with the STI trapped between its 20 and 50-day moving averages marked by 3,287 and 3,263 respectively. A downside break of 3,263 could take the index lower to the next support at 3,220. Stocks to watch: *SIA: 100% owned low-cost carrier Scoot has signed a JV with Nok Airlines. Both companies will invest THB2b (~$80m) each to acquire existing airline Pete Air, which will be renamed NokScoot. SIA and Nok will each own a 49% stake, with Nok management holding the remaining 2% in NokScoot, which will be based in Don Mueang Int’l Airport, and will operate on medium and long-haul international routes. The new airline is subject to regulatory approvals. *Genting S’pore: Plans to build a casino in South Korea have stalled as ground-breaking in Jeju Island scheduled for 24 Jun has been postponed to allow the company the opportunity to brief the newly-elected governor of Jeju and his team on the casino's development plans and its contribution to Jeju Island. *EuroSports Global: Proposed to acquire 60% stake in each of Autoinc Sports, Autoinc Lifestyle and Birel S’pore for $1.5m. In addition, EuroSports will pay an additional $0.3m earn out amount, subject to certain profit targets being met, to be satisfied by new shares issued at $0.0303 each. The target companies, owned by Benjamin Solomon Tan, are involved in the trading, maintenance of luxury automobiles, and retail, maintenance and storage of go-karts. * Refers to the article Äsiatravel jumps as talk of Alibaba interest returns” published in the Business Times yesterday. The company reiterates that it is in varying stages of discussions with several potential parties to explore strategic collaboration and/or M&A, but there is no certainty that any agreement may materialize. *KS Energy: 80% owned subsidiary KS Drilling will sell its KS Orient Star 1 rig for US$84.88m, an excess of US$45.24 above book value. *KrisEnergy: The deed of assignment to transfer Neon Energy’s 42% working interest in Indonesia Tanjung Aru PSC to KrisEnergy has been formalized. Upon completion, KrisEnergy will hold 85% working interest in the field. *Geo Energy: Proposed to acquire a stake in Borneo Int’l Resources (BIR) from Indonesian national Lenny Limanto for US$55m. BIR holds the mining licences for two coal concessions in South Kalimantan. The deal is subject to due diligence and a number of conditions precedents, and has a long stop date of 12 months. *Cosco: 51% owned Cosco Zhoushan has delivered two bulk carriers of 64,000DWT to an European buyer. *Amarda Group: Proposed placement of 1.44b new shares at an issue price of HK$0.05 each. Net proceeds raised will be used for potential acquisitions, investments and working capital.

Thursday, June 19, 2014

52 wk highs/ lows

52 wk highs: SMRT, Chip Eng Seng, Poh Tiong Choon, Innovalues, Hotel Grand Central, Silverlake, Achieva, Singapore Kitchen Equipment,, Metro, Metech Int'l, DB X Trackers MSCI Taiwan, DB X Trackers MSCI World TRN 52 wk lows: Yamada, JB Foods, Parkson Retail Asia, Karin Tech

OCBC / Great Eastern

OCBC / Great Eastern: Macquarie believes a reduction of OCBC’s 87% stake in Great Eastern Holding (GEH) would be an easy way for OCBC to unlock shareholder value and could trigger a re-rating for both stocks. Macquarie believes that OCBC could avoid a capital increase and fund the pending Wing Hang Bank (WHB) acquisition by reducing its stake in GEH. At the same time its underlying profitability profile would improve, earnings visibility would be higher and it would not impair the cross-selling story for OCBC. At the moment Macquarie has an Underperform on OCBC with TP $ 8.20. A potential reduction in OCBC’s 87% stake in GEH could fundamentally change the house's investment case .


ValueMax: OSK-DMG reiterates Buy with TP $0.56, pegged to 1.9x FY14e P/B. Notes that the govt's plan to further tighten the moneylending industry is positive for pawnbrokers, as more people are expected to turn to pawnbrokers given fewer loans available, as well as the decrease in the number of money lenders. The gradual improvement in loans given out by pawnbrokers from $431.5m in Jan to $441.1m in Mar, reaffirms the house's belief in a 2014 turnaround. DMG believes 2Q14 could be an inflection point for pawnbrokers, especially ValueMax.


StarHub: UOBKH expects pricing erosion for residential broadband as STH seeks to protect its existing subscriber base to fend off attractive offers from SingTel and M1. Resi broadband ARPU fell $3 to $39 in 1Q14, helping StarHub gain 7,000 subscribers y/y but revenue declined 4.3% y/y in 1Q14. UOBKH expects ARPU to drop another 11.5% to $34.5 over the next 12 months. In addition, UOBKH believes that saturation point is approaching in the pay TV market, with penetration rate of 81.8%. The market expanded by only 1.8% in 2003 with growth mainly from SingTel’s mioTV. Market was a standstill in 1Q14 as both STH and SingTel did not add new subscribers. SingTel was more successful in increasing ARPU by 41% y/y to $35 in 1Q14 by broadening portfolio content. UOBKH maintains Hold on STH with lower TP of $4.33 from $4.48

Halcyon Agri Corp

Halcyon Agri Corp: The Business Times reports that Halcyon is currently in talks to buy rubber processing plants in Indonesia from Lee Rubber for $400m to $500m. With three rubber process factories in Indonesia and two in Malaysia, Halycon has been aiming to expand its operations via the acquisition of more rubber processing assets. Halycon has however declined to comment on the purchase plan, although in an SGX announcement last week, the company guided that it was in talks on a potential acquisition of assets and properties. The company has requested for a trading halt yesterday afternoon, pending the release of an announcement. Halycon currently trades at 22.9x forward P/E versus closest peer Sri Trang’s 14.7x forward P/E.