Thursday, July 31, 2014

OCBC (technical)

OCBC: RSI and Stochastics at the overbought region, with Stochastics starting to point downwards, after yesterday's bearish shooting star candlestick pattern. Would wait for further confirmation on the bearish signal on the counter's close today. Support at $9.65 followed by $9.40, while resistance levels are at $10.10 and $10.30.

CapitaLand (technical)

CapitaLand: Counter at new 52-week high, with RSI and Stochastics indicators at the overbought region. Counter may see further upside in the near-term, supported by the rising positive momentum as reflected on the ADX indicator, until further signs of a slowdown. Resistance at $3.50 followed by $3.85, while support levels are at $3.30 followed by $3.20 levels.

First Resources (technical)

First Resources: the technicals are looking quite negative now, given the formation of a rounded top pattern (ie. reverse U-shape). Yesterdays black candle , coupled with today's intraday long bearish marubozu candle , and declining key indicators, suggests that the near term price action has turned negative. The downward momentum could accelerate if the $2.26 support (200day MA) fails to hold with next support at $2.20.

First Resources

First Resources: was leading the declines in the palm oil plays yesterday and today. No particular negative news to highlight. In fact, yesterday, Maybank -KE noted that the 2Q14 profits for the plantation plays will likely be stronger y/y, boosted by strong FFB output and higher CPO ASP. HSBC today says El Nino could turn out to be a non-event, and though there could be short term pressure on palm oil, the house believes any near term weakness in the sector should be seen as an entry opportunity. First Resources and Golden Agri are its preferred plays, both rated Overweight.

Great Eastern

Great Eastern: 2Q14 topline figures deteriorated but not all is bad. Total weighted new sales dropped 16% to $219.9m and new business embedded value dropped 7% to $99.1m, bring operating profit lower by 8% to $142.9m. Stripping tax provisions, operating profit rose due to better product sales mix, lower claims and growing in-force business. Bottomline figures improved, non-operating profit reversed losses to $72.2m gains backed by unrealized MTM gains from rising LT interest rates and narrowing credit and swap spreads. Profit attributable to shareholders for 2Q is $244.6m compared to $18.6m same time last year due to unrealized MTM gains in insurance funds from rising LT interest rates and narrowing credit and swap spreads as well as a $9.6m increase in shareholders’ fund to $37.6m. Company declared interim dividend of 10 cents. Great Eastern is trading at annualized 2Q14 P/E of 22.7x

Excelpoint

Excelpoint: 2Q14 net profit rose 24.3% to US$1.9m while revenue increased 14.2% to US$194.9m on stronger market demand for memory products. Gross margins slid 1.1 ppt to 6.1% on higher sales of memory products which normally yield lower margins. Net profit rose at a faster clip on the reduction of operating expenses and sale of non-core R&D division. The deployment of 4G in China, launch of new smart phones and tables and Chinese government’s economic stimulus paints a rosy outlook for Excelpoint. In addition, it is also high season for its EMS customers in ASEAN on the back of American and European economy. Excelpoint trades at 5.3x annualized 2Q14 P/E

OUE Comm Reit

OUE Comm Reit: Against forecasts, 2Q14 DPU was 5.1% higher at 1.43¢, while distributable income was 5.5% higher at $12.5m. Gross revenue was flattish at $18.7m while NPI was 4.6% higher at $14.3m. OUE Bayfront and Lippo Plaza achieved positive rental reversions of 6.1% and 4.3% respectively for renewals. Occupancy stood at 96.8%. Aggregate leverage stood at 39.5% with average cost of debt of 2.59%. There is no refinancing requirement until 2017. Management expects Office demand in Singapore to remain healthy, with rents extending growth in 2014, but growth from the Shanghai front might be subdued on new supply in Puxi. NAV at end Jun stood at $1.06, translating to 0.8x P/B. Annualized yield 2Q14 yield is 6.9%.

SMRT

SMRT: 1QFY15 results in line. Net profit increased 36.8% to $22.4m, while revenue rose 4.3%. Fare business recorded operating loss of $1.1m, closing the gap by 79.5% on growth in ridership and average fare, weighed by higher depreciation, repair and maintenance, and a $1.6m LTA fine. Non-fare business’s operating profit was 17.4% higher at $29.9m, as taxis contributed higher rentals from a newer fleet and lower diesel tax. Higher renewal rates in the rental segment also boosted bottom line for non-fare segment. Management is optimistic on improving prospects with the impending regulatory changes, but there remains a lacking of details on the impending transition to the new rail model, and Maybank-KE and DBS reckons that the 60% YTD share price rally has largely factored in the potential positives. Particularly, DBS highlights while current share price isn’t excessive, but investors are reminded that the changes will only come in 2 years later. SMRT is trading at 26x annualized 1QFY15 P/E Latest broker ratings: Maybank-KE maintains Hold with TP of $1.36 DBS Vickers maintains Hold with TP of $1.60 Deutsche Bank maintains Buy with TP of $1.90

Ezion

Ezion: Ezion recorded positive 2Q14 results, with net profit of US$45.5m (+26% y/y) and revenue of US$92.6m (+38%), taking 1H14 earnings to US$90.7m (+10%) and revenue to US$187.1m (+53%), 43% and 38% of consensus 2014 forecast. We think the results came in slightly ahead of consensus 2014 forecast, given that most analysts were expecting the numbers to come in only in 2H. The improved topline were buoyed by chartering contribution from deployment of additional liftboats and jack-up rigs, which management expects momentum to continue into 2H14. In addition, group continues to witness strong demand for platform and well-related work from the oil majors in Asia Pacific, Middle East and West Africa regions. The focus for Ezion would be how the management intends to use the capital which the group derived from the sale of its marine base and Australian vessel businesses to Ausgroup. In addition, investors are also optimistic on how the recent entry of Malaysia's Quek Leng Chan would contribute to Ezion's business opportunities in Malaysia. We note that Ezion remains the top pick in the offshore and marine sector for most broking houses for its fundamentally sound and visible earnings growth. The street has 13 Buys, 0 Hold and 2 Sell ratings with a 12-month TP of $2.67. At the current price of $2.11, Ezion trades at 10.3x forward earnings, slightly ahead of the asean peers of 10x.

SG Market (31 Jul 14)

US Market: US shares ended mixed as a surprisingly strong 2Q GDP growth was offset by weaker earnings and Fed’s decision to taper its stimulus for a sixth consecutive month. The DJIA fell 32 pts to 16,880 (-0.2%), while the S&P 500 was flat at 1,970 (unch) and the Nasdaq Composite added 20 pts to 4,463 (+0.5%). Markets opened broadly higher as the economy accelerated by a better-than-forecast 2Q growth of 4%, reversing from a revised 2.1% contraction in the 1Q. Separately, the private sector added 218,000 payrolls, a decline from the 281,000 gain in Jun, but the reading did little to change perceptions that the economy is strengthening. But the key indices tilted lower after the central bank scaled back its monthy bond purchases by another US$10b to US$25b as expected, but held its base fed funds rate near zero. The only notable shift was that the FOMC dropped its previous expression of concern over low inflation. This drove the 10Y treasury yield up 9bps to 2.55%. Banking stocks advanced, including BofA (+1.6%), Citigroup (+1.2%) and Wells Fargo (+1.1%), while biotechnology stocks rose 1%, led by better-than-expected earnings from Amgen (+5.4%) and Edwards Lifesciences (+10%). Twitter bolted 20% higher after its 2Q revenue more than doubled to US$312m with number of active users surging 24% to 271m. Online shop and hotel listing service Yelp jumped 8.8% after posting 2Q profit vs a loss the previous year. Goodyear leapt 8% after 2Q earnings beat estimates. S’pore shares are ripe for a pullback as STI extends into grossly overbought territory on deteriorating momentum. Topside resistance is tipped at 3,360 with underlying support at 3,280. US Market: US shares ended mixed as a surprisingly strong 2Q GDP growth was offset by weaker earnings and Fed’s decision to taper its stimulus for a sixth consecutive month. The DJIA fell 32 pts to 16,880 (-0.2%), while the S&P 500 was flat at 1,970 (unch) and the Nasdaq Composite added 20 pts to 4,463 (+0.5%). Markets opened broadly higher as the economy accelerated by a better-than-forecast 2Q growth of 4%, reversing from a revised 2.1% contraction in the 1Q. Separately, the private sector added 218,000 payrolls, a decline from the 281,000 gain in Jun, but the reading did little to change perceptions that the economy is strengthening. But the key indices tilted lower after the central bank scaled back its monthy bond purchases by another US$10b to US$25b as expected, but held its base fed funds rate near zero. The only notable shift was that the FOMC dropped its previous expression of concern over low inflation. This drove the 10Y treasury yield up 9bps to 2.55%. Banking stocks advanced, including BofA (+1.6%), Citigroup (+1.2%) and Wells Fargo (+1.1%), while biotechnology stocks rose 1%, led by better-than-expected earnings from Amgen (+5.4%) and Edwards Lifesciences (+10%). Twitter bolted 20% higher after its 2Q revenue more than doubled to US$312m with number of active users surging 24% to 271m. Online shop and hotel listing service Yelp jumped 8.8% after posting 2Q profit vs a loss the previous year. Goodyear leapt 8% after 2Q earnings beat estimates. S’pore shares are ripe for a pullback as STI extends into grossly overbought territory on deteriorating momentum. Topside resistance is tipped at 3,360 with underlying support at 3,280.

Wednesday, July 30, 2014

Chip Eng Seng (Technical)

Technically, prices have been trading in uptrend since early May. It made an attempt for upper trend channel but failed. Prices are likely to trade intact within trend channel until support or resistance is broken, with a bias for break on downside given its stickiness to lower trend channel and impulsive retracement in its two attempts for upper channel.

Stamford Land

Stamford Land released 2Q14 results yesterday. 2Q14 revenue down 13% and operating profit down 29.6% yoy on contraction across all business segments. Weaker Australian dollar further weighed on bottomline profits, profit attributable to shareholders almost halved to $3.3m from $6.3m same time last year. Nothing interesting on the balance sheet. Management guides next quarter is not expected to improve due to imminent closure of Stamford Grand North Ryde and advance expenditure incurred without matching revenue for preparation of development sites in Australia.

Samudra Energy (IPO)

Samudra Energy: Upstream oil-and-gas company Samudra Energy has filed for a listing on SGX Mainboard. The company is focused on the exploration, development and production of oil and gas in Indonesia. It will be offering its shares through an international offer and a Singapore public offer. Some shares from the international offer have been reserved for allocation and allotment to Samudra's employees, directors, business associates and others who have contributed to its success. More details can be found at http://www.reuters.com/article/2014/07/25/samudra-ipo-idUSL4N0Q008U20140725

Bumitama Agri

Bumitama Agri: 2Q14 preview. On a y/y basis, Bumitama Agri reported highest FFB output growth among planters in Maybank-KE’s coverage. Also, Bumitama, like other Malaysian and Indonesian planters would enjoy from higher spot CPO ASPs. Bumitama, with USD-denominated debt will likely see forex translation losses as the IDR weakened prior to the presidential election, but this is non-cash flow and merely accounting in nature, as these loans are usually long term. Maybank-KE does not rule out that that Bumitama could post a surprise on the upside for 2Q14. Going forward, key upside risk is the development of strong El Nino. Meanwhile Maybank-KE maintains a neutral view in the short term and 1 year fundamental buys are Bumitama (Buy, TP $1.38), First Res (Buy, TP $2.70), Wilmar (Buy, TP $3.94)

OCBC

OCBC: Received valid acceptances of 97.52% for its voluntary general cash offer for Wing Hang Bank (WHB). OCBC will now exercise its right to compulsorily acquire remaining shares and subsequently delist Wing Hang Bank. The acquisition of WHB will expand OCBC’s China loan book by 81% and raise profits contribution to 16% (from 6% last year). However, the deal is unlikely to produce instant synergies between the two banks. Recall, the merger between DBS and Dao Heng took about 13 years before DBS was able to fully tap on commercial banking and the wealth management market in Hong Kong. Valuation wise, UOB is trading at a premium 1.4x P/B over peers OCBC at 1.3x and DBS at 1.2x.

Goodpack

Goodpack: Scheduled court meeting for scheme of arrangement on 14 Aug at 10am. Recall, Goodpack received the buyout offer from US private equity fund KKR at $2.50/share on 28 May this year. This requires sanction by the High Court and a majority of shareholders jointly owning at least 75% of the company to vote in favour of the all-or-nothing deal. KKR has obtained 32% irrevocable undertaking from largest shareholder David Lam. Upon approval, Goodpack will be compulsorily acquired and delisted.

Terratech

Terratech: Marble producer Terratech Group had a stellar trading debut, opening at $0.27, 17% above its offer price of $0.23. The offer of 108.7m placement shares were fully snapped up, with notable investors include Tan Ong Huat (12m)- non-executive director of See Hup Seng and Ng Han Kok (10m)- founder and CEO of Hetat Group. Terratech is in the business of exploration, development, quarrying, extraction and processing of marble from the Kelantan Marble Quarry in Malaysia, and the commercial sale of marble and marble products. The net proceeds of $7m from the IPO will be used for the expansion of production capacity and processing facilities and working capital. Terratech will have a free float of 17.7%, with its controlling shareholders holding ~67.7% of outstanding shares. At the current price of $0.27, Terratech trades at 8x P/B with a total market capitalization of $166.1m. While there are no direct peers listed on SGX, UK-listed peer Fox Marble Holdings trades at 4.5x P/B.

SG Market (30 Jul 14)

US Market: US shares finished lower after EU and US broadened sanctions on Russia overshadowing mixed economic data and earnings reports. The DJIA dropped 70 pts to 16,912 (-0.4%), while the S&P 500 shed 9 pts to 1,970 (-0.5%) and the Nasdaq Composite lost 2 pts to 4,443 (-0.05%). Better-than-expected earnings and upbeat consumer confidence sent the Dow above 17,000 and the S&P 500 near its record but gains soon petered out as investors turned cautious after the US imposed new restrictions on the finance, defence and energy sectors in Russia, following similar moves by EU against Moscow for supporting the civil war in Ukraine. In economic news, US consumer confidence jumped to 90.9 in Jul to its highest level since Oct 2007, but home price gains slowed to 9.3% in May from a 10.8% increase in Apr, underscoring a lull in the housing market. A rally in telecom stocks (+2.2%) helped to limit the broader market decline after Windstream (+12.3%) filed to spin off its telecom assets into a REIT, opening the door for other phone carriers to consider similar deals. UPS fell 3.7% after the world’s largest courier company slashed its earnings forecast following its disappointing 2Q results, dragging down rival FedEx (-1.6%). Drug makers Pfizer (-1.2%) and Merck (+1.1%) both reported results that surpassed expectations although the former lowered its sales outlook on patent expiry. Herbalife tumbled 14% after reporting a drop in quarterly profit, while Corning slumped 9.3% as eanings missed estimates. After the bell, Twitter rallied 33% as its 2Q sales more than doubled, exceeding forecasts. Investors were generally avoiding making big bets ahead of a busy calendar that includes a Fed policy statement and 2Q GDP growth on Wed, employment report on Fri and earnings from Pfizer, ExxonMobil and other corporate giants. S’pore shares likely to hover around current levels as an overstretched STI struggle near its topside resistance at 3,360 with underlying support at 3,280. Stocks to watch: *StarHill Global: 2Q14 DPU rose 5% y/y to 1.25¢, broadly in line with expectations. Similarly, distributable income grew 5.5% to $28.2m. Gross revenue fell 1.4% to $48.4m, due to weak contributions from Chengdu, loss of income following a Japan divestment and currency translation losses. Nevertheless, NPI edged up 0.2% to $39.2m, thanks to lower operating expenses for the S’pore, Japan and China properties. Portfolio occupancy climbed back to its historical high of 99.6%, supported by an increase from all regions except Australia, which stayed flat at 99.3%. Overall Lease expiry profile is evenly distributed. Aggregate leverage remained comfortable at 29.4%, with an average interest rate of 3.22% and weighted debt maturity of 3.2 years. NAV per unit at $0.93. *Soilbuild Business Space REIT: 2Q14 DPU grew 3.5% y/y to 1.5¢, coming in at 1.3% above IPO forecast, and implying an annualised yield of 7.4%. Gross revenue climbed 3.5% to $16.7m buoyed by the newly acquired Tellus Marine. NPI expanded 4.1% to $14.0m, helped by lower maintenance costs for Eightrium @ Changi Business Park and Tuas Connection. Portfolio occupancy stood at 98.5% with a WALE of 3.8 years. Aggregate leverage at 30.3% with an all-in interest cost of 3.08%. NAV per unit at $0.80. *Singapore Shipping Corp: 1QFY15 net profit fell 7.5% y/y to US$1.8m, as revenue plunged 20.1% to US$7.3m. Ship owning revenue declined 18.2% to US$3.7m and agency and logistics revenue plunged 22% to US$3.6m. Operating margins improved 2.2 ppt to 23.7% supported by a narrowing of operating expenses across the board *OCBC: Secured 97.5% of Wing Hang Bank at the close of its HK$125/sh offer, allowing it to proceed with the privatisation of the Hong Kong bank. *Singapore Windsor: Entered into a 65/35 JV agreement with ARCC Offices to set up and operate serviced offices in Myanmar. Separately, Windsor signed an MOU with Sany for the distribution of Sany products in Myanmar via a dealership model. *Sysma: Secured a $8.8m contract to erect a two-storey detached dwelling house at Second Avenue, commencing in Aug for a period of 24 months. *China Sunsine Chemical: Positive profit alert for results due 7 Aug. Expects a substantial y/y increase in 1H14 net profit, driven by to an increase in both ASP and sales volume. The market experienced a shortage of rubber chemical supply after certain players who failed to meet the relevant environmental regulations were forced to suspend production. *SATS: Divested its non-core 51% stake in Urangan Fisheries for A$2.4m for a gain of 370%. *Rotary: Disposed its 100% stake in Rotary Shanghai for Rmb22.2m, a premium over the unit’s end May '14 NTA of Rmb20.1m. *Terratech: The Malaysian marble miner will commence trading on Catalist today at 9am.

Tuesday, July 29, 2014

Accordia Golf Trust

Accordia Golf Trust: Singapore’s first business trust with golf course assets in Japan has completed its Singapore public offering, which was only 0.7x subscribed. The trust is priced at $0.97, the bottom end of its $0.97 - $1 indicative price. Unitholders can expect to receive an annual distribution yield of 9.1% (including non-recurring items) or a normalized distribution of 7.0% for FY15e. The total gross proceeds of ~$758.6m raised makes Accordia the largest IPO on SGX year-to-date. The trust will list with an initial market cap of $1.07b. Its initial portfolio will comprise 89 golf courses located across Japan valued at ~$1.85b. ~86.4% of the initial golf courses are located in Greater Tokyo, Greater Nagoya and Greater Osaka regions. Commencement of listing at 2pm on Friday, 1 Aug.

HPH Trust

HPH Trust: 2Q14 results missed. Net profit fell 12.4% to HK$368.4m, while revenue edged up 1% to HK$3.1b, as Asia Container Terminals was deconsolidated. Throughput in HK rose 13.9% on higher transshipment volumes, offset by weaker intra-Asia cargoes, whilst throughput in China increased 7.7% on growth in transshipment and US cargoes. Average revenue/TEU fell for both Hong Kong (adverse throughput mix) and China (higher proportion of transshipment throughput handled). Bottom line was hit by higher staff costs and increased taxes. Particularly, taxes soared 61.8% after a tax credit for Yantian International Container Terminals (YICT) has been fully utilized, and also after the tax rate was doubled to 25% for YICT Phase 3 with the expiry of an exemption period. Nonetheless, management sounded upbeat on prospects, citing a consensus outlook on recovery in both the US and European economies, going into 2H14. Likewise, outbound cargoes for these 2 economies have been in an upward trajectory. Aside, cargo transshipment for Far East, Central Africa, South America and Oceania are expected to increase considerably. Interim distribution of HK18.7¢ maintained. HPHT is currently trading at 0.7x P/B

Fortune Reit

Fortune Reit: 1H14 DPU rose 16%y/y to HK20.88¢ while distributable income rose 27.2% to HK$390.5m. Revenue was 33.5% higher at HK$813.5m, while NPI was 32.8% higher at HK$581m on strong rental reversions, good returns post AEIs, and additional income from Fortune Kingswood acquired in Oct’13. Aggregate leverage stood at 31.1% with all in cost of debt of 2.2%. Portfolio occupancy remained strong at 99.1%. For renewals in the period, a rental reversion of 21.2% was recorded. AEI in Belvedere Square is expected to start in 2H14 and completed by end 2015, with a target ROI of 15%. NAV stood at HK$11.01, translating to P/B of 0.7x. Annualized 1H14 yield is 5.8%.

GMG Global

GMG Global: 1H14 saw a net loss of $14.8m (1H13 net profit: 14.1m) while revenue fell 9.9% to $442.8m on the sharp decline of natural rubber ASP (1H14: -27.3% to $2,621/ton). Bottom line was further weighed by share of loss of associates of $5.6m (1H13 share of profit: $5.6m), on low rubber market prices and forex loss. 2H14 outlook will be underpinned by rubber market prices, currency fluctuations and wage costs. On rubber market prices, management expects fluctuations around current prices, barring unforeseen circumstances. On the wage front, on-going minimum wage negotiations in Africa and Indonesia might potentially dilute profit margins in said markets. GMG trades at P/B of 0.9x.

SIE

SIE: 1QFY15 results missed. Net profit fell 22.5% y/y to $53.5 while revenue inched lower by 1.6% to $294.1 as higher fleet management revenue was offset by a reduction in airframe and component overhaul revenue. Bottom line was weighed by increased operating expenses and a 28.8% drop from share of associate and JV’s profits to $30.6m. Management turned bearish on its outlook, citing challenges from decline in heavy checks, reduction in engine shop visits and rising business costs. 3 headwinds weighing FY15e earnings are: • New hangar facilities in the Philippines (Hangar 2: Apr 2013, Hangar 3: under construction) are coming on-stream at a time when heavy maintenance workload is slowing down. • Persistent weakness in shop visits for its Rolls-Royce engine shops (FY3/14: 41% of net income). • The scale-back in capacity expansion by regional As such, Maybank-KE downgrades to Sell with TP cut to $4.20 from ($5.75).

SG Market (29 Jul 14)

US Market: US shares ended nearly flat on Mon in a choppy session as investors weighed soft housing data against a flurry of M&A news ahead of key Fed policy decision, earnings and labour reports. The DJIA gained 22 pts to 16,983 (+0.13%), while the S&P 500 crept up 1 pt to 1,979 (+0.03%) but the Nasdaq Composite lost 5 pts to 4,445 (-0.1%). Markets initially slumped as US pending home sales slipped 1.1% in Jun following a 8.1% drop in new home sales, while the latest preliminary reading on the services sector showed activity stayed at its highest level in 4 1/2 years. But stocks recovered later in the day as traders bought on dips. Utility companies advanced 1.5%, while homebuilders declined 1.2% to the lowest level since Apr. Microsoft fell 1.2% after coming under an antitrust probe in China. Diesel engine maker Cummins slid 3.2% to lead the declines among industrials. In merger news, Dollar Tree (+1.2%) announced a US$9.2b deal to acquire fellow discount retailer Family Dollar (+25%), while real estate website Trilia (+15%) surged on a takeover bid by rival Zillow (+0.9%) in a US$3.5b deal. Tyson Foods (+2.6%) rose on plans to divest its Mexican and Brazilian poultry businesses to rival Pigrim Pride’s parent JBS for US$575m. After the bell, nutrition firm Herbalife tumbled 10.2% after reporting a 17% drop in quarterly profit. Investors were generally avoiding making big bets ahead of a busy calendar that includes a Fed policy statement and 2Q GDP growth on Wed, employment report on Fri and earnings from Pfizer, ExxonMobil and other corporate giants. S’pore shares likely to see cautious trade as the STI appears overstetched amid a miced bag of corporate results from SIA Engineering, Hutchison Port, MGCCT, Indo Agri and Raffles Medical among others. Topside resistance for the benchmark index is capped ta 3,260 with underlying support at 3,280. Stocks to watch: *SIA Engineering: Disappointing 1QFY15, as net profit slumped 23% y/y to $53.5m. Revenue was little changed at $294.1m (+1.6% y/y) with higher fleet management sales offset by lower heavy maintenance workload. However EBIT margin contract to a mere 7%, the lowest in five years, due to higher subcontract cost. Share of profit from associates and JVs also fell 29% to $30.6m due to a drop off in contribution from the engine repair and overhaul centres. Management has turned bearish on outlook. *Raffles Medical: 2Q14 net profit rose 8.5% y/y to $15.6m. Revenue grew 6.6% y/y to $92.6m, as the healthcare and hospital services segments expanded 14.7% and 4.9%, respectively. The group continued to see higher patient load, further clinic network expansion, and secured new corporate contracts both locally and overseas, as it added more Specialist Consultants. Interim dividend of 1.5¢, up from 1¢ in 2Q13. *Mapletree Greater China Commercial Trust (MGCCT): 1QFY15 DPU jumped 11.9% y/y to 1.56cts, coming in 9.3% above the IPO forecast. Gross revenue grew 8.6% to $63.8m and NPI increased 9.9% to $52.6m, thanks to higher than expected rental rates. Portfolio occupancy remained high at 99.2%, with 82% of the expiring leases in FY15 renewed with robust rental reversions (between 21% and 33%). MGCCT had net gearing of 38.6% with a weighted debt maturity of 2.7 years, and average cost of debt of 2%. NAV at $1.018. *Fortune Reit: 1H14 DPU rose 16% y/y to HK20.88¢ while distributable income rose 27% to HK$390.5m. Revenue jumped 34% to HK$813.5m, and NPI climbed 33% to HK$581m, on strong rental reversions (+21%), good returns post AEIs, and additional income from Fortune Kingswood (acquired Oct ’13). Aggregate leverage stood at 31.1%, with all in cost of debt of 2.2%. Portfolio occupancy remained strong at 99.1%. NAV at HK$11.01. *HPH Trust: 2Q14 DPU maintained at HK18.7¢. Net profit dropped 12% y/y to HK$368.4m, mainly due to higher tax (+62%). Otherwise, revenue edged up 1% to HK$3.1b, despite the financial deconsolidation of Asia Container Terminals (now a 40% associate). Container throughput of HIT increased 13.9% due to higher transshipment volume, though average revenue per TEU dipped due to adverse throughput mix from liners. Throughput of Yantian rose 7.7% due to growth in transhipment and US cargoes, though average revenue TEI was also lower, due to the higher proportion of transhipment throughput handled. NAV at HK$7.36 *Indofood Agri: 2Q14 revenue surged 19% y/y to Rp4tr driven by a strong recovery in CPO prices and higher sales from the Edible Oils & Fats division. Gross margin almost doubled from 16.1% to 30.9%, resulting in net profit more than tripling to Rp224b (+240%). CPO production grew 25% to 440,000 mt in 1H14 arising from higher nucleus production (+18% to 1.488m mt) as well as higher purchases of fresh fruit bunches from external parties. *GMG Global: Dived into 2Q14 net loss of $17.4m, from a net profit of $1.2m a year ago. Revenue declined 16.2% to $217.5m, due to the sharp decline of ASP of natural rubber (-31.2% to US$2,409/mt). Bottom line was further weighed by share of loss of associates ($1.9m) and forex loss (3.6m). *China Minzhong: 4QFY14 revenue declined 18% y/y to Rmb664m and net profit fell 23% to Rmb126m, as contribution from the cultivation and processed business segments continued to experience structural declines, driven by rising labour costs in China. Gross margin declined 2.9 ppt to 33.2%. *Genting HK: Positive profit alert. Expects to report net profit of more than US$180 for 1H14 (1H13: US$23m), mainly attributable to i) US$153m gain arising from disposal of certain stakes in NCL in Mar, and ii) US$15m fair value arising from revaluation of certain financial assets. Separately, 28% owned NCL reported 2Q earnings that marginally beat street expectations, thanks to lower fuel expenses which offset higher non-fuel related costs. *Keppel Land: Commited to invest ~US$70m cash in a new residential development with a retail component in Manhattan, New York. The development will be undertaken by Macklowe Properties, an established NY real estate developer, and managed by KPLD’s Alpha Investment Partners. *CapitaLand: Completed the acquisition of an additional 80% stake in CapitaLand (Beijing) Kai Heng for $41.8m, which owns the Beaufort residential development site in Chaoyang District. *See Hup Seng / ISDN: See Hup Seng is in talks to invest US$8m for a 25% stake in the enlarged capital of Aenergy, which is in the midst of developing a series of mini-hydropower plants in Indonesia with a combined installed base capacity of ~53MW. Aenergy is the energy investment vehicle of ISDN. *Armarda: Placed 1.44b new shares at HK$0.05 each to six individuals. The new shares will be traded on Catalist wef today.

Wednesday, July 23, 2014

Kim Heng

Kim Heng shares were admitted on the SGX on 21st Jan '14, where its major shareholders had than in a moratorium agreed not to sell its shares over the six month period, starting from the date of admission. You can refer to page 63 of Kim Heng IPO prospectus below. http://www.sgx.com/wps/wcm/connect/3feef592-715f-4796-bb34-66d419f0b0d8/Kim+Heng+Offshore+%26+Marine+Holdings+Limited+-+Final+Offer+Document+140114.pdf?MOD=AJPERES&CONVERT_TO=url&CACHEID=3feef592-715f-4796-bb34-66d419f0b0d8

Innotek

Innotek: NRA Research Head Kevin Scully thinks that "something is brewing" at Innotek. He notes that some corporate action is possible because: a) in May 2014 - its Managing Director Yong Kok Hoon resigned b) in July 2014 it sold its 15mn Sebana Reits at S$1.05 When the shares started to rise last week - Innotek was queried by the SGX. Innotek's first response was that it was not aware of any reason for the price movement. It subsequently announced that Gazelle Capital, one of its substantial shareholders was in discussions. Looking at its 2013 annual report - the shareholder numbers are as follows: a) Chandaria Trust owns 37.5% b) Gazelle Capital owns 5.56% Scully hypothesizes that any corporate development involving Innotek must involve the Chandaria's. With Innotek's NAV at $0.69 as at end 1Q14, it may be worth waiting to see what will happen.

Apple Play

Apple: Apple reported a positive set of results overnight, driven by solid iPhone sales driven by demand from Brazil, Russia, India, and China. We do not rule out that the positive sentiments would spill over to SGX-listed tech counters with exposure to the supply chain of Apple, as it heads into a major refresh of the company’s flagship product, estimated to be announced in Sep. Proxies to the tech giant includes: Hi-P- supplier of electro-mechanical modules; Amtek Engineering- Produces iPhone chargers; STATS ChipPac- Semiconductor back-end tester and assembler for TSMC, producer of iPhone 6's A8 processor; Epicentre- Apple Premium Reseller; ECS Holdings and Karin Technology- Holds rights to distribute Apple products;

Mapletree Industrial Trust

Mapletree Industrial Trust: 1QFY15 results in line with consensus; Distributable income and DPU grew to $42.8m (+6.3% y/y) and 2.51¢ (+3.3%) respectively, while gross revenue rose 4.3% to $78.4m and NPI gained 6.3% to $56.7m, mainly driven by higher rental rates secured for leases across all property segments except Business Park Buildings. Portfolio passing rents remained resilient, rising 1.1% to $1.77 psf/month. Meanwhile, portfolio occupancy decreased 0.6ppts to 90.7%, partly attributed to the progressive relocation of the tenants from the Telok Blangah Cluster. MINT's portfolio weighted average lease to expiry stood at 2.6 years, with only 13% of leases due for renewal in FY14/15. Aggregate leverage ratio improved 0.8ppts to 33.6%, with average interest cost of 2.1% and debt tenor of 2.9 years. Over the next 12 months, management expects overall industrial market rents to remain stable or ease over the next six months, given the potential higher than historical average supply of factory space. Maybank-KE is cautious on industrial ware house space on impending new supply in both Singapore and Iskandar, which may affect rents and occupancy rates in the near term. At $1.45, MINT trades at 1.2x P/B and 6.9% 1Q15 annualized yield. Latest broker ratings: DB maintains Buy with $1.57 TP

Tee International

Tee International: to sell $3.2m in subsidiary to focus on core business competency in engineering and construction, real estate and infrastructure. Meanwhile, company results for FY2014 ended 31 May 14 was disappointing. Revenue was down 6.3% and net profit down by 37.4%. The group CEO says he is expecting new orders coming in and new contract wins for FY15.

SATS

SATS: Reported 1QFY15 results which came in below expectations, with underlying net income of $43.4m (-9.4%). Top-line revenue was flat at $435.2m, with the 0.9% decline in Food Solutions revenue offset by the marginal improvement in Gateway Services sales (+2.0%). Incremental contribution from a higher stake in PT CAS was also not sufficient to offset air cargo weakness, leading to significantly lower contributions from its Associates at $10.4m (-16.8%). Despite efforts to reduce headcount, EBITDA margins continued to slide due to higher staff cost (+3.0% y/y). Incremental contribution from a higher stake in PT CAS was not sufficient to offset air cargo weakness, leading to significantly lower contributions from its Associates (-16.8% y/y). The negative impact on its bottom-line could have been even more severe, if not for the 14.6% YoY reduction in depreciation charge from a change in accounting policy. On the bright side, aviation statistics at Changi Airport were stable with SATS gaining a larger slice of its air cargo market. Overall, Maybank-KE is downgrading the counter to Sell from Hold, as the house cut its FY15-17E EPS by 8-9% to reflect the disappointing set of results and forecast a 4.5% earnings contraction in the year ahead. The house believes that the market will increasingly look to price SATS on earnings as it struggles to contain escalating costs in the near term.

Frasers Centrepoint Trust

Frasers Centrepoint Trust 3QFY14 results were in line, with distributable income of $25.5m (+8.6%), and DPU at 2.9¢ (+6.7% y/y), taking 9MFY14 DPU to 8.4¢ (+5.7%). Gross revenue and net property income rose 3.1% and 2.4% to $41.2m and $29.1m respectively, due to rental step-up of current leases, better rental rates achieved for new and renewed leases and the maiden contribution from Changi City Point, which was acquired in Jun ’14. The quarter saw Bedok Point’s occupancy improving to 99.3% from 77.0% in March, after several new tenants opened in 3Q14, while occupancy at the other five malls remained relatively stable during the quarter. Overall shopper traffic in 3Q14 (excluding Changi City Point) improved 2.7% q/q, with Causeway Point registering the strongest shopper traffic growth. Overall, FCT’s portfolio occupancy as at 31 Jun ‘14 stood at 98.5%, compared to 96.8% in the preceding quarter, while the entire portfolio average rental renewals in 2Q14 registered a 7.8% increase over the preceding leases contracted 3 years ago. Aggregate leverage remained comfortable at 30.2% and a weighted average debt maturity of 2.75 years. Performance of FCT’s portfolio is expected to remain stable, while the acquisition of Changi City Point is expected to strengthens FCT’s presence in the suburban mall sector, and is DPU accretive. At the current price, FCT trades at an annualized FY14 forecast yield of 6.3% and 1.0x P/B, in line with the retail REIT average of 6.3% forward yield and 1.0x P/B. Latest broker ratings: CS maintains Neutral with TP $2.12

Vard

Vard: Maybank-KE reiterates Buy for Vard despite downward adjustment in TP. Maintaining the peg at 1.4x FY15E P/BV, new TP is $0.02 lower at $1.25 due to slight disappointment in 2Q2014 results. However, two bright spots – Promar and Niteroi yard – give us the confidence for Buy call. Promar yard in Brazil has been the main drag on earnings, raking in an estimated NOK60-70m in net losses in the past quarter. The losses are attributed to short-term factors such as adverse climatic conditions and teething issues, such as training and integration of new workers. As such, the management guides the yard would turn profitable from next year onwards with comfortable EBITDA margins in the range of 8-9%. Meanwhile, Niteroi yard will deliver its two last outstanding vessels by end-2014 and mid-2015 to pave the way for outfitting works to support the Promar yard. Vard is favoured for its strong earnings visibility given its large orderbook of NOK21.6b and relatively cheap valuation. TP of $1.25 is conservative as 1.4x FY15E P/BV is one SD below five-year historical mean.

AusGroup/ Ezion

AusGroup/ Ezion: AusGroup is acquiring 100% of Ezion Offshore Logistics Hub (which operates Port Melville) and 90% of Teras Australia (which owns 2 landing craft tanks) for $55m. This is part of AusGroup’s strategy to expand its businesses to provide both onshore and off-shore marine services. $14m will be funded by cash, while the balance will be with 92.1m AusGroup shares (12.4% stake of AusGroup’s enlarged stake). Post this transaction, and if Ezion exercises its 110m share options, Ezion would have a total stake of ~27.2% in AusGroup. JPM guides that to build Port Melville, a cumulative capex of ~A$60-70m is required , but the acquisition will be earnings accretive from Year 2. Management guides that initial eranings will be solely from barge services; within the next 12 months, fuel storage and distribution, then finally the supply base business. AusGroup sees limited competition in this space as it views itself as Australia’s sole approved bunkering service provider. Had the deal been completed on 30 Jun’13, AusGroup’s NTA would have been A$0.32 instead of A$0.31, but EPS would have fell from A$0.02 to A$0.009

Suntec

Suntec: 2Q14 results in line. DPU was up 0.8% y/y to 2.266¢ while distributable income rose 11.3% to $56.6m. Revenue increased 45.1% while NPI rose 64.9% to $68.1m and $46.1m respectively thanks to the opening on Suntec Singapore Convention & Exhibition Centre following completion of AEI. Aggregate leverage stood at 34.1% with all-in financing cost of 2.62%. Office enjoyed portfolio occupancy of 99.7%, while retail occupancy stood at 97.6%. Phase 2 of Suntec City AEI was reopened in June, while Phase 3 is expected to be completed by end 2014. Nomura cites hefty valuations, even on FY15e basis, and expects initial reaction to be negative. NAV stood at $2.069, translating to 0.9x P/B. Annualized 2Q14 yield is 4.9%. Latest broker results: Deutsche maintains Hold with TP of $1.68 Nomura maintains Neutral with TP of $1.68

SG Market (23 Jul 14)

US Market: US shares closed modestly higher, inspired by better-than-expected inflation and housing data as well as a slew of 2Q results, while geopolitical tensions in Ukraine and Gaza remained fluid. The DJIA advanced 62 pts to 17,114 (+0.4%), while the S&P 500 added 10 pts to 1,984 (+0.5%) after briefly touching an intraday record and the Nasdaq Composite jumped 31 pts to 4,456 (+0.7%). The markets rode a rebound in risk appetite, prompted by signs of cooperation from Ukraine's pro-Russian separatists over last week’s downing of a Malaysian jetliner, and a largely positive earnings season so far. Sentiment was boosted by upbeat economic news which showed consumer price index rose 0.3% in Jun, but the rise was not broad-based, driven manily by an increase in the cost of gasoline. Rising for a third month, existing home sales grew 2.6% in Jun at the highest pace since Oct ’13. Healthcare and technology stocks rose at least 0.8% to pace the gains. Intel rallied 2.1%, while Apple added 0.8%. Among key companies which released results, Chipotle Mexican Grill (+11.8%), Lockheed Marin (+3%) and Comcast (+1.5%) surged after 2Q earnings beat estimates, with both groups guiding for a more positive outlook. Underperformers include McDonald’s (-1.3%), Coca-Cola (-2.9%), DuPont (-0.9%) and Travelers (-3.8%) and Kimberly-Clark (-3.1%), all of which missed expectations. Netflix fell 4.6% after forecasting 3Q profit that trailed estimates. In other corporate news, Herbalife leapt 25.5%, after hedge fund manager Bill Ackman failed to convince inestors that the nutritional product seller was guilty of fraud. Apache Corp gained 4.6% after a hedge fund disclosed a US$1b stake in the energy firm. S’pore shares may trade sideways, keeping track of modest gains on Wall Street and regional bourses. The STI is likely to consolidate its position above the 3,210 level with the next hurdle at 3,260 and underlying support at 3,280. Stocks to watch: *CapitaMall Trust: 2Q14 DPU rose 6.3% y/y to 2.69¢, implying 5.4% annualized yield. Gross revenue grew 2.5% to $164.3m and NPI expanded 4.4% to $114.0m. During the quarter, 327 leases were renewed with growth of 6.6% over preceding rental rates typically contracted three years ago. Portfolio occupancy for its 16 malls remained high at 98.6%. Gearing of 34.3% with an average cost of debt of 3.6%. NAV per unit at $1.79. *Suntec REIT: 2Q14 DPU edged up 0.8% y/y to 2.266¢ while distributable income grew 11.3% to $56.6m. Revenue jumped 45% to $68.1m, and NPI surged 65% to $46.1m, boosted by the opening of Suntec Singapore Convention & Exhibition Centre following completion of AEI. Aggregate leverage stood at 34.1% with all-in financing cost of 2.62%. Office enjoyed portfolio occupancy of 99.7%, while retail occupancy stood at 97.6%. Phase 2 of Suntec City AEI was reopened in June, while Phase 3 is expected to be completed by end 2014. NAV per unit at $2.07. *Frasers Centrepoint Trust: 3QFY14 DPU grew 6% y/y to 3.0¢, taking 9MFY14 DPU to 8.4¢ (+5.7%). Gross revenue rose 3.1% to $41.2m and NPI improved 2.4% to $29.1m, supported by rental step-up of current leases, better rental rates achieved for new and renewed leases and the maiden contribution from Changi City Point (Acquired Jun '14). NAV per unit at $1.78. *Mapletree Industrial Trust: 1QFY15 distributable income and DPU grew to $42.8m (+6.3% y/y) and 2.51¢ (+3.3%), respectively. Gross revenue accelerated 4.3% to $78.4m and NPI gained 6.3% to $56.7m, mainly driven by higher rental rates secured for leases across all property segments except business park buildings. Portfolio occupancy dipped 0.6ppts to 90.7%, partly due to progressive relocation of tenants from the Telok Blangah cluster. Weighted average lease to expiry stood at 2.6 years. Aggregate leverage ratio improved 0.8ppts to 33.6%, with average interest cost of 2.1% and debt tenor of 2.9 years. NAV per unit at $1.20. *SATS: 1QFY15 results below expectations, as underlying net income fell 9.4% y/y to $43.4m. Revenue was flat at $435.2m, as a 0.9% decline in Food Solutions offset the marginal improvement in Gateway Services (+2.0%). Meanwhile, incremental contribution from a higher stake in PT CAS was insufficient to offset air cargo weakness, leading to significantly lower contributions from its associates ($10.4m, -16.8%). *Tee Int’l: 4QFYMay14 results disappointing, with revenue nearly halving y/y to $46.6m, and net profit plunging 65% to $2.3m. Nevertheless, management continues to expect new orders to come in and new contract wins for FY15. Separately, the group is selling its entire 55% stake in non-core subsidiary, Interlift for $3.2m, to its existing business partners. *Keppel T&T: 2Q14 net profit fell 12.8% y/y to $14.3m, due to higher operating expenses. Revenue however, increased 27% to $51.3m on the back of higher revenue from Data Centre and Logistics divisions. *AusGroup / Ezion: AusGroup is acquiring 100% of Ezion Offshore Logistics Hub and 90% of Teras Australia for a combined $55m, which will be satisfied by $14m in cash, and the issue of 92.2m new AusGroup shares at $0.445 each. AusGroup’s strategy is to expand its businesses to provide both onshore and off-shore marine services. Based on FYJun13 numbers, post-acquisition, AusGroup’s NTA would rise to A$0.32 (from A$0.31), but EPS would fall to A0.9¢ (from A2.0¢) *GLP: Signed new lease agreement totaling 15,000 sqm with a new leading multi-channel retailer customer in China, which is seeking to expand in Midwestern China. *Cosco: 51%-owned Cosco Shipyard secured ~US$300m worth of contracts to build 1 accommodation barge and 7 bulk carriers. The orders are due for delivery through 2016 and 2Q17. *Sino Construction: Acquiring a 52% stake in JEMS Exploration (JEPL) for US$20m, which owns the Grey Range Project in the Eromanga Basin in South West Queensland, Australia. Grey Range is proposing to mine 5m mt of thermal coal p.a., and has an inferred coal resource of 858m mt, based on JORC estimates. The consideration will be satisfied by the issue of 1-year non-interest bearing convertible promissory notes. Assuming full conversion into 126m new Sino Construction shares at $0.20 each, proforma FY13 NTA/share will drop from 0.76¢ to 0.68¢, while loss per share will narrow from 2.72¢ to 2.42¢. *Singapore Medical Group: Its two flagship clinics, Lasik Surgery Clinic in Singapore and Ciputra SMG Eye Clinic in Jakarta, have purchased the ZEISS Visumax Femtosecond Laser Systems, allowing them to be the first private eye clinics in S’pore and in Jakarta, to offer the most complete suite of refractive surgeries. *Xpress: Several creditors have commenced legal proceedings against Xpress and its subsidiary Xpress Print, for sums owed in aggregate of ~$2.4m. Separately, Xpress has issued 480m new placement shares to two subscribers at $0.021 each. The net proceeds of $9.5m will be used to repay creditors (55%) and for working capital (45%). *Next-Generation Satellite Communications: Issued a civil summon by the Head of the District Court of Central Jakarta, relating to an outstanding dispute arising prior to the acquisition of PT MSN by the group. The plaintiffs are claiming for a sum of ~$5.6m and all costs, interest and damages. *AEI: Profit warning. Expects 1H14 operating loss due to waning HDD sales *Intraco: Profit warning. Expects 1H14 loss due to low trading margins amid intense market competition.

Tuesday, July 22, 2014

Terratech (IPO)

Terratech IPO: Marble producer Terratech Group is offering 108.7m placement shares (43.5m new, 65.2m vendor) at $0.23 to list on the Catalist board. The net proceeds of $7.0m will be used for the expansion of production capacity and processing facilities and working capital. Post-IPO, Terratech will have a free float of 17.7%, with its controlling shareholders holding ~67.7% of outstanding shares. Incorporated on Mar ’13 in the Cayman Islands, Terratech principally engages in the business of the exploration, development, quarrying, extraction, removal and processing of marble from the Kelantan Marble Quarry in Malaysia, and the commercial sale of marble and marble products. Terratech registered a net loss of $5.4m in FY13 versus a net loss of $1.6m in the previous year. There was no revenue recorded over the past two years, as the group was focused on quarrying planning, construction, infrastructure development and building of inventory for sale, and as such did not generate revenue from its operations. As at the Jun ‘14, Terretech’s order book for its marble products stood at ~$23.5m, with a significant proportion of the order book expected to be recognised as revenue in FY15. As the group’s products are primarily used in the building and construction industry, revenue recognition of its order book would be dependent on its customers’ project schedules. On its prospects, Terratech expects marble consumption to increase going forward, led by growing consumption in China, while industry reports forecast marble prices to remain stable or slightly increase over the next few years. Based on the IPO price of $0.23, Terratech trades at 6.8x P/B with a total market capitalization of $141.5m. While there are no direct peers listed on SGX, UK listed peer Fox Marble Holdings trades at 4.5x P/B. The IPO placement offer closes on 25 Jul ’14 at noon, with trading expected to commence on 30 Jul ’14 at 9 am. Prime Partners is the sponsor, issue manager and underwriter for the IPO, with OSKDMG as the joint placement agent.

Osim

Osim: Maybank-KE riterates Buy on OSIM with TP raised to $3.50, fourth most bullish on the street. The house believes that the distribution channel synergy between high-end massage chair and high-end tea stores should not be underestimated. In-house estimates show massage chairs sales can move 1.5x faster in a high-end mall than a lower-end location. OSIM now possess the most advanced massage chair technology among its peers through extensive R&D, and its uInfinity and uDiva chairs can be cross-sold as high-end furniture. Effectively, it is breaking into a whole new market. The company is also expanding its presence in North Asia, particularly in affluent Greater China and South Korea, enrolling superstars Lee Min Ho and Sammi Cheng to be celebrity endorsers. TWG is also aggressively opening new stores and recently launched a luxury collection of teabags. The company commands a high net profit margin of 15.8% from all its luxury goods sales, this is higher than the average of 14.3% for global luxury brands such as LVMH, 9.9% for global specialty retailers such as Estee Lauder, and 8.3% for regional specialty retailers such as LĂ“ccitane . It has an impressive balance sheet with short working capital cycle and has proven its ability in generating strong cash flow. In fact, after the conversion of CBs, the company may be sitting on as much as $300.9m cash, more than its total liabilities of $246.2m. OSIM is currently trading at 14.9x FY15E P/E, above its long-term historical average of 11.9x forward P/E but lower than its peers in global luxury goods (18.2x FY2 P/E), global specialty retailing (18.9x FY2 P/E) and regional specialty retailing (19.3x FY2 P/E). Maybank-KE deems the time-series premium in current prices as justifiable and pegs TP to 19x FY15 P/E. Latest broker ratings as follows: CIMB initiated Add at TP $4.60 RHB maintained Buy at TP $3.85 Standard Chartered maintained Outperform at TP $3.57 Maybank-KE maintained Buy at TP $3.50 Phillip Securities maintained Accumulate at TP $3.15

Singapore Post

Singapore Post: Hotly featured in a news coverage of the increasingly popular trend towards e-commerce in Singapore, the supply chain and logistics provider has seen solid growth in e-commerce-related volume from clients across Asia-Pacific. In a bid to becoming a regional leader in e-commerce logistics and fulfilment, Sing Post has been investing in the segment, including cross-border transport, warehousing, and spending capital on mail-sorting machines. The group has expanded its services to include storage and fulfilment of online orders. In FY13, e-commerce-related services accounted for 26% of Sing Post's revenue, which is poised to gain traction over the next four years at a compounded annual growth of 29%, according to market watchers. Market Insight remains bullish on Sing Post, which is currently in our model Growth portfolio. Backed by a net cash hoard of $483m, and its dream partnership with Alibaba, we are hopeful that Sing Post would now be able to rapidly expand its e-commerce business in Southeast Asia, through the acquisition of the smaller logistics players in the region, and thereby achieve better-than-expected earnings growth. At $1.75, Sing Post trades at 24.3x forward P/E and 4.8x P/B.

Frasers Commercial Trust

Frasers Commercial Trust (FCOT) 3QFY14 results were largely in line, with distributable income of $14.8m (+3.0%) and DPU of 2.19¢ (flat y/y), taking 1H14 DPU to 4.12¢ (flat y/y). Gross revenue and net property income (NPI) both fell 1.0% to $29.6m and $22.9m respectively, mainly due to the weaker Australian dollar, although this was offset by higher gross revenue from the REIT’s Singapore properties (+3.0%), mainly due to higher occupancy and rental rates achieved by Central Square Central. Despite the lower gross revenue and NPI, the higher DPU was a result of savings from CPPU conversion and redemption. Overall, FCOT’s portfolio occupancy as at 31 Mar ‘14 stood at a strong 98.0% with a healthy weighed average lease to expiry (WALE) of 3.9 years and a fairly stable aggregate leverage of 37.7%. Going forward, FCOT will continue to focus on maintaining the strong occupancy rates for its portfolio and manage the expiring leases proactively. The expiry of the master lease at Alexandra Technopark in Aug ‘14 will also further boost the performance of the Trust and provide greater growth. At the current price, FCOT trades at an annualized FY14 yield of 6.2% and 0.90x P/B versus its commercial peers average of 6.1% yield and 0.89x P/B. Latest broker ratings: OCBC maintains Buy with TP $1.48.

Vard

Vard: 2QFY14 results were in-line with estimates, with net profit coming in at NOK140m versus a net loss of NOK20m, taking 1H14 net profit to NOK232m (+38.1%). Revenue was flat at NOK 2.9b, with Vard delivering seven vessels during the quarter, although noteworthy was that EBITDA margins rose to 6.4% from 4.1% the previous year, signalling a gradual recovery in profitability. Commenting on its operations, Vard highlighted that its yards in Europe continue to experience generally stable operations and high activity levels, although operations in Brazil remains challenging. As such, additional resources from Europe are being mobilized to Brazil to strengthen the organization and implement productivity improvement measures. Going forward, Vard believes that demand for highly specialised Offshore Subsea Construction Vessels (OSCVs) and subsea support vessels will be the strongest in the near-to-medium term. The group adds that its order flow is supported by a growing and more international client base, but a slowdown in new orders in 2H14 is expected compared to the exceptional order intake in 1H14. Vard’s current order book stands at NOK 21.6b, which will underpin revenue visibility over the next three years. At the current price, Vard trades at 11.8x forward P/E.

Mapletree Logistics Trust

Mapletree Logistics Trust (MLT): Mapletree Logistics Trust (MLT) 1QFY15 distributable income and DPU rose 6% y/y to $46.6m and 1.9¢, while gross revenue improved 7% to $81m and NPI gained 6% to $69m, due to higher contribution from Mapletree Benoi Logistics Hub, 12% positive reversions from Hong Kong and Singapore assets, contribution from a property in Korea acquired in 2QFY14 and higher revenue from four Japan properties after the installation of solar panels last year. Overall portfolio occupancy across MLT's 112 properties dipped 0.7ppts to 97.6%, with weighted average lease to expiry of 4.7 years. Aggregate leverage increased 0.1ppts to 33.4%, at an overall interest cost of 2.0% and debt term of 3.4 years. Separately, MLT proposed to acquire Mapletree Zhengzhou Logistics Park for Rmb205.6m ($41.1m), a 79,000 sqm gfa site located in Zhengzhou, China. Current tenant base at the 99.2% occupied single-storey warehouse includes reputable local and international 3PLs- Deppon Logistics, Menlo Worldwide and Henan Shangchu Logistics, and end-user Dennis Logistics. The DPU-accretive acquisition is expected bring NPI yield of 8% and gearing to 34.5% (+1.1ppts) upon completion. At $1.44, MLT trades at 1.5x P/B and 1QFY15 annualized yield of 5.3%, lower than industrial REIT average of 7.1%.

Ascott Residence Trust

Ascott Residence Trust: 2Q14 core DPU increased 5% to 2.19¢ while core distributable income increased 24.4% to $33.5m. Revenue and gross profit were 14% higher at $88.1m and $46.5m respectively, on $9.4m of incremental revenue from new acquisitions and $2.4m contribution from existing properties. Aggregate leverage stood at 36.4%. Effective borrowing rate was 2.9% with weighted average debt to maturity of 3.9 years. As the global economy is gaining pace going into 2015, management is expecting to benefit. Ascott REIT agreed to acquire 2 residence properties in China and one in Malaysia at an aggregate $173.9m consideration in early July, which will boost asset value by 5% to about $4b. 5 AEIs were completed in 1H14, and uplift post AEI has been good. Plans for other AEIs in China, Vietnam, UK for 2H are also underway. NAV stood at $1.38, annualized 2Q14 yield is 6.9%. Latest broker ratings: UOB-KH maintains Buy with TP $1.40

Cache Logistics Trust

Cache Logistics Trust: 2Q14 results in-line. DPU and distributable income were flat y/y at 2.147¢ and $16.7m respectively. Gross revenue was 1.7% higher at $20.8m on rental escalations while NPI was flat at $19.6m on higher property expenses. Aggregate leverage stood at 28.9% with all-in-financing cost of 3.47%. WALE stood at 3.8 years with 99.6% occupancy. 52% of the leases are due to expire in 2015-16 (including the DHL BTS warehouse in TampinesLogisPark). Cache is working with sponsor to transform portfolio to a more multi-tenanted properties over time. Sponsor, CWT/C&P are expected to gradually wind down their master lease positions. The REIT manager then work with CWT/C&P to secure existing and new end-users to lease premise directly from CACHE. Maybank-KE is cautious on industrial ware house space on impending amount of new supply, which may affect rents and occupancy rates in near term> NAV stood at $0.97, translating to 1.3x P/B. Annualized 2Q14 yield is 6.9%. Latest broker ratings: Maybank-KE maintains Hold with TP of $1.23

Keppel REIT

Keppel REIT: 2Q14 results broadly in-line. DPU fell 3.6% y/y to 1.9¢, while distributable income increased 0.7% to $53.2m. Property income was 15% higher at $47.3m while NPI increased by 21.5% to $39.2m, thanks to higher income from OFC, Prudential Tower and 50% interest in 8 Exhibition street, coupled with lower expenses. Aggregate leverage stood at 42.8% with all-in interest rate of 2.2%. Portfolio occupancy is 99.4% with WALE of 6.2 years. Income support on OFC will end 2017. Maybank-KE guides that KREIT has to maximize rent, which currently stands at $9.20 psf towards $12.60-12.70 to reach breakeven levels. Nonetheless, management guides rental upside to continue till 2015 on low vacancy levels, limited supply and moderately positive demand. Adjusted NAV stood at $1.38 at 30 Jun, translating to~0.9x P/B. Annualized yield 2Q14 yield is 5.9%. Latest broker ratings: Maybank-KE maintains Hold with TP of $1.32 UOB-KH maintains Buy with TP of $1.42

M1

M1: 2Q14 results in-line. Net profit was 12.1% y/y higher at $43.9m while operating revenue fell 2% to $239.7m, as mobile telco revenue, which increased 3.4% to $167.9m was offset by a 19.9% decline in international call services and 17.5% fall in handset sales. Bottom line was buoyed by a 13.4% reduction in cost of sales. Net postpaid ARPU increased 3.5% to $55.5 but data plan ARPU fell 7.5% to $19.7. Broadly, Nomura likes M1 for slow and steady catalysts, simple business model, and fair valuations. M1 is currently in the process of rolling out LTE-A, which can provide stability/ upside. It also already has 94k fibre subscribers, which is about a 17% share. Maybank-KE cites underlying trends still positive as tiered data migration continues to spur growth. Lower handset cost also brings down subscriber acquisition cost. Interim DPS of 7¢ recommended. M1 is trading at 19.3x annualized 2Q14 P/E. Latest broker ratings: Maybank-KE maintains Buy with TP of $4.24 Nomura maintains Buy with TP of $3.75 UOB-KH maintains Buy with TP of $4.05

SG Market (22 Jul 14)

US Market: US shares pared early losses as geopolitical tensions in Ukraine and Gaza worries weighed on sentiment before major earnings reports. The DJIA dropped 48 pts to 17,052 (-0.3%), while the S&P 500 declined 5 pts to 1,974 (-0.2%) and the Nasdaq Composite lost 7 pts to 4,425 (-0.2%). Investors remained jittery amid escalating conflict and mounting death toll in Gaza, and threat of tougher sanctions against Russia in the wake of the downing of the Malaysia Airlines passenger jet. With no economic data out on Mon, corporate earnings were in focus. Toymaker Hasbro fell 2.7% after its 2Q sales missed of estimates. After the bell, Netflix (+0.7%) and Chipotle Mexican Grill (+9.3%) rose as their 2Q results beat expectations. In other corporate news, Herbalife tumbled 11% after hedge fund manager Bill Ackman accused the nutritional product seller of engaging in a fraudulent pyramid scheme. Fast food chains McDonald’s (-1.5%) and Yum Brands (-4.3%) came under pressure following a new food safety scare in China over expired meat supplies. Taking cue from Wall Street, the STI is expected to open a tad lower as short-term stochastic indicators extend into overbought territory. Downside support lies at the 3,280 level with topside resistance at 3,360. Stocks to watch: *M1: 2Q14 results in-line. Net profit increased 12.1% y/y to $43.9m, buoyed by a 13.4% reduction in cost of sales. However, operating revenue dipped 2% to $239.7m, as mobile telco revenue (+3.4% to $167.9m) was offset by a lower international call services (-19.9%) and handset sales (-17.5%). Interim DPS of 7¢ proposed. *Mapletree Logistics Trust (MLT): 1QFY15 distributable income and DPU rose 6% y/y to $46.6m and 1.9¢, respectively. Gross revenue grew 7% to $81m and NPI gained 6% to $69m, due to higher contribution from Mapletree Benoi Logistics Hub, positive reversions from Hong Kong and Singapore assets, contribution from a new Korea property (acquired 2QFY14) and higher revenue from four Japan properties that had solar panels installed last year. Portfolio occupancy however dipped 0.7ppts to 97.6%, with weighted average lease to expiry of 4.7 years. Aggregate leverage increased 0.1ppts to 33.4%, at an overall interest cost of 2.0% and debt term of 3.4 years. NAV per unit at $0.97. *MLT: Acquiring Mapletree Zhengzhou Logistics Park for Rmb205.6m ($41.1m), a 79,000 sqm gfa site located in Zhengzhou, China. Current tenant base at the 99.2% occupied single-storey warehouse includes reputable local and international 3PLs- Deppon Logistics, Menlo Worldwide and Henan Shangchu Logistics, and end-user Dennis Logistics. The DPU-accretive acquisition is expected bring NPI yield of 8% and gearing to 34.5% (+1.1ppts) upon completion. *Frasers Commercial Trust: 3QFY14 DPU was flat y/y at 2.19¢, while 9M14 DPU grew 9% to 6.29¢. 3Q14 gross revenue dipped 1% to $29.6m mainly due to a weaker AUD, though mitigated by higher occupancy and rental rates for the S’pore properties. Nevertheless, lower CPPU distributions arising from conversions helped lift distributable income by 3% to $14.8m. NAV per unit at $1.58. *Keppel REIT: 2Q14 results broadly in-line. DPU fell 3.6% y/y to 1.9¢, although distributable income was roughly flat at $53.2m (+0.7%). Property income grew 15% to $47.3m, and NPI jumped 21.5% to $39.2m, thanks to higher income from OFC, Prudential Tower and 50% interest in 8 Exhibition Street, and lower property expenses. Aggregate leverage stood at 42.8% with all-in interest rate of 2.2%. Portfolio occupancy is 99.4% with WALE of 6.2 years. NAV per unit at $1.40. *Ascott Residence Trust: 2Q14 core DPU rose 5% y/y to 2.19¢, while core distributable income expanded 24.4% to $33.5m. Revenue and gross profit both grew 14% to $88.1m and $46.5m respectively, driven by new acquisitions and higher contribution from existing properties. Aggregate leverage was 36.4%, with effective borrowing rate at 2.9% and weighted average debt to maturity of 3.9 years. NAV per unit at $1.38. *Cache Logistics Trust: 2Q14 results in-line. DPU and distributable income were flat y/y at 2.147¢ and $16.7m, respectively. Gross revenue grew 1.7% to $20.8m driven by rental escalations, although NPI was flat at $19.6m due to higher property expenses. Occupancy remained high at 99.6% with WALE of 3.8 years. Aggregate leverage at 28.9% with all-in-financing cost of 3.47%. NAV per unit at $0.97. *Keppel Infrastructure Trust: 1H14 DPU stable y/yat 3.13¢. Revenue dipped 1.6% to $33.2m, while net profit fell 3.1% to $6.8m, weighed by higher operational expenses. NAV at $0.96. *Keppel Corp: Its majority owned Ocean Mineral Singapore has received approval from the International Seabed Authority on its application for its first seabed exploration licence, that will allow it to explore for polymetallic nodules at a site within the Clarion-Clipperton Fracture Zone of the Pacific. Polymetallic nodules contain copper, nickel, cobalt and manganese, as well as rare earth minerals. *Keppel Corp: According to Qatari news, a JV shipyard between Nakilat and Keppel Offshore & Marine has secured a contract worth 69m Qatari Riyals to design and construct a floating jetty for Qatar Primary Materials Company. *Land transport operators: The LTA will fine SMRT and SBS Transit a total of $1.6m and $50,000, respectively, for past disruptions on their MRT lines. Both companies have 14 days to appeal. *Biosensors: Significant shareholder CITIC Private Equity informs that it has undertaken certain steps to restructure its shareholdings in Biosensors, and is still considering the options available to it to enhance the value of its investment. Separately, Fidelity has raised its stake from 4.7% to 5.1%, via the open market purchase of 6.2m shares at an average $0.875 each. *mDR: MDR Golden, the business partner of mDR’s subsidiary, MDR Myanmar, has signed a three-year agreement with Ooredoo to distribute SIM cards, top-up cards and such other telco services related products in 22 townships within Myanmar's Mandalay region. This comes as Ooredoo is expected to roll out its mobile communication services by Aug ’14. MDR Myanmar provide consultancy and retail franchisee procurement services to MDR Golden. *800 Super: Awarded a $204.9m contract over a seven-year period by the National Environmental Agency, to provide integrated public cleaning services for the south-west region of S’pore. *Frasers Centrepoint / Keong Hong: Jointly won the HDB tender for a 99-year leasehold land parcel at Sembawang Aveneue with site area of 22,190 sqm, which will be developed into a 728-unit executive condo. Keong Hong will be the main contractor for the project.

Monday, July 21, 2014

Spackman (IPO)

Spackman IPO: Voyage Research has issued an IPO preview note on Spackman Entertainment this morning, placing the counter’s fair value at $0.41. Spackman will make its IPO debut on 22 Jul ’14 (tomorrow) at 9.00 am. The South Korean film producer/distributor is raising net proceeds of $10.8m, which will be used for investment in films, M&A’s and JVs, establishment of overseas offices and general working capital. Post-IPO, Spackman will have a free float of 17.6%. In an interview with The Edge Magazine, Spackman’s executive Chairman, Charles Spackman likened the group’s business model to that of the fund management business, whereby the firm earns fixed fees and a performance fee on the films that it invests in. Charles added that even if a movie is not well received by its audience, movie producers and investors could potentially recoup their investments via ancillary revenue, eg. DVD sales, pay-TV subscriptions and movie downloads, thus limiting the downside risk for the group. For 2014, Spackman is targeting to release four movies, namely - For The Emperor, Confession, My Brilliant Life and Big Match - compared to only one movie released last year. Based on its IPO price of $0.26, Spackman will trade at 30.8x FY13 P/E (post-IPO), versus some South Korean and US movie production companies which are trading in excess of 50x. Charles however, believes his company may resemble more closely the bio-tech industry, whereby the market can award a significant valuation premium for companies that possess the right technology and know-how.

RH Petrogas (technical)

RH Petrogas: chart is showing a lot of volatility for this counter, given the recent trading range between $0.72 and $0.915 created in just a span of 3 days. Overall the key indicators are drifting slightly lower, and at below neutral levels, suggesting that caution is needed despite today's share price spike.

Loyz Energy

Loyz Energy: In an interview with The Edge magazine, Loyz Energy’s CEO Adrian Lee remains convinced that the potential rewards offered by the upstream oil and gas business, would outweigh the amount of time, investments and commitment put into the company. Lee added that once Loyz has built up its war chest and earnings begin expanding, investors could potentially be looking at triple-digit growth, highlighting that the recent three concessions in Thailand which Loyz took over in Feb, has already begun delivering free cash flows. With regards to investor concerns on the on-going political uncertainty in Thailand, which currently accounts for the bulk of Loyz oil production, Lee guided that the concessions are located at least about 300km north of Bangkok, and were relatively unscathed by the recent political turmoil in Thailand. Eventually, Lee aims to amass a portfolio of assets that are able to generate steady earnings and cash flows, which will steer the growth of the company. Lee however cautioned that building a sizeable portfolio of assets would require more capital, guiding that Loyz is currently looking at the equity-linked note programme as one of the many ways to raise capital, although he reassured investors that Loyz will also take steps to pace any potential cash-calls. Going forward, with fine progress from its Thailand operations and increasingly the US, Lee expects Loyz earnings to return to the black in the near future, which follows after two years of consecutive losses (FY13: $2.5m net loss).

Tritech

Tritech: Its wholly owned subsidiary, Terratech Group has today launched its IPO in S’pore and registered its offer document with the SGX. The placement, comprising 43.5m new shares and 65.2m vendor shares at $0.23 each, will close at noon, 25 Jul. Listing of Terratech shares on Catalist is expected to commence at 9am on 30 Jul, whereby Terratech will have an initial market cap of $141.5m. Terratech is a producer of premium-quality marble. Its key asset is an exclusive sublease lasting till Jan 2044, to explore, develop, and quarry the Kelantan Marble Quarry in M’sia, consisting of four marble hills with an extraction area of ~26ha, with total estimated resources of 20.3m sqm and total estimated reserves of 11m sqm. Terratech commenced commercial production of marble blocks at two of the marble hills in Mar ’12 and ’13, and has an orderbook for its marble prodicts of ~$23.5m. Terratech intends to use the estimated net proceeds of ~$7m for the expansion of production capacity and processing facilities as well as for working capital. The group is targeting to extract ~230,000 sqm of dimension stone blocks by FY18 onwards. Tritech to lift trading halt at 2pm

Silverlake

Silverlake: PhillipCapital reiterates call to ACCUMULATE on the leading provider of core banking solutions for financial institutions; lifts TP to $1.32. The house believes Silverlake will be the key beneficiary of ongoing M&A of OCBC-WHB and CIMB-RHB-MBSB. The acquirers, OCBC and CIMB, use Silverlake’s products for their core banking system and regional core banking platform respectively. Hence if the M&A deals go through, it would almost certainly lead to WHB, RHB and MBSB’s adoption of Silverlake’s banking system. The company has excellent track record to date, having successfully implemented 150 projects with zero failure and zero switch-outs in its 25 years of existence. The company derives ~20% of revenue from license expansions and upgrades and 45% of revenue from high-margin recurring maintenance services. Silverlake’s market leading position is evident in Asia, where IT spending is expected to grow at 7% CAGR leading up to 2017. It is targeting Asian banks with old in-house systems that restrict their expansion of core banking functions. According to its management, Silverlake’s proprietary software developed over 25 years has an estimated worth of US$1b, and unlike its peers has expensed most of its R&D costs. This gives an enviable boost to its balance sheet

Spackman Entertainment

Spackman Entertainment: Spackman will be the first Korean film entertainment company to list on the SGX. With an impressive portfolio of blockbusters, Spackman will be attractive to investors looking to profit from the regional popularity of Korean entertainment. Other than growing its film production business, Spackman will also be embarking on mergers and acquisitions to grow its pipeline of movies and participate in synergistic entertainment businesses. These plans, if successful, may potentially rerate the company beyond its IPO market capitalization of $102.8m. Voyage reckons Offer document suggests that Spackman may want to replicate its formula with the consolidation of Opus Pictures and Zip Cinema to acquire other production and entertainment businesses. In recent years, Spackman has been moving beyond film production to present and invest in other films, as well as to invest in adjacent businesses. Such partnerships may potentially be game changing. For instance, partnerships with major film distributors in overseas markets like China may substantially raise the penetration of Spackman's films outside of Korea and lead to higher revenue per film. Voyage has a TP of $0.41 for the counter.

SMRT

SMRT: Macquarie is listing a new warrant over SMRT this morning. ADOW SMRT MBeCW150102 CALL 02 Jan 15 1.80 In early Jul, Macquarie upgraded SMRT to Outperform with TP $1.80. Notes, the Singapore government’s big policy initiative to convert the public transport operators (PTO) business model to “asset-light” has saved SMRT from the brink, potentially converting its business model from loss-making to a highly profitable one by FY18. SMRT, given its 100% domestic exposure, is a key beneficiary of the policy changes in the Singapore public transport segment. Macquarie now expects SMRT’s profits to jump by 155% by FY18 from its end-FY14 levels, driven mostly by changes in the “rail” segment in which SMRT has 54% revenue exposure. SMRT is now a key long-term thematic play on the improving policy environment in Singapore and the expansion of public transport. Catalyst 1: Asset purchases in the bus segment: SMRT has ~S$150m book value worth of bus assets on its balance sheet. The government is due to announce policy around these re-purchases soon, which should help SMRT reduce leverage. Catalyst 2: Rail sector policy announcements: This is the major one for SMRT. Rail constitutes 54% of SMRT’s revenues, which is loss-making at the moment. MER expects rail policy announcements to be effective in 2017 and EBIT margins to move toward 10% levels. Catalyst 3: Asset purchase in rail: SMRT has ~S$750m worth of rail assets. Given that MER expects the government to make new rail policy effective by 2017, MER has incorporated the sale of rail assets from 2017, leading to significant de-leveraging of SMRT’s balance sheet (Net debt/equity down to only 25% in 2017 vs 60% now). Catalyst 4: MRT lines tender: Two new MRT lines tender – the Thomson and Eastern lines – are due in end-2014/early-2015. SMRT, with its vast experience in running MRT lines, will be one of the front runners, in MER’s view. MER believes any positive outcome would be a key catalyst. With many key policy announcements due and further public land transport expansion on the anvil, MER thinks SMRT has become the best way to play the SG land transport sector.

Innotek

Innotek: Substantial shareholder in talks regarding share transaction Innotek shares have been charging up from its early May low of $0.285, delivering a whopping 35% gain to date. In response to SGX’s query regarding the recent unusual volume movements of its shares, Innotek says its substantial shareholder Gazelle Capital (5.6% stake) is in discussions regarding a transaction which may or may not result in an offer for shares of the company. The discussions remain very preliminary. Separately, just a few weeks ago, InnoTek highlighted that it is disposing its investment of 15m units in Sabana REIT, which it acquired in 2010 at the IPO price of $1.05/unit. The share sale will be disposed over a period of time, and a financial institution has been appointed to invest the estimated $15.8m of proceeds into other financial instruments including dividend stocks, bonds and different sectors of REITs.

Kim Heng

Kim Heng: Philip initiates at Buy with TP $0.33, based on 11x FY14 P/E, in line with the small/mid cap O&M players. . The house likes Kim Heng for its asset light business model, by nature of it being in the services industry. Gross profit margins and net margins are high , resulting in superior returns on equity and invested capital, which can be attributed to cost mgt discipline and being an "all-in-one" service provider to the top rig owners. Operating and free cash flows has been robust and positive since FY10, once the capex cycle is over, and the house expects it to expand rapidly, signalling good potential for increasing shareholder returns. Meanwhile, Kim Heng will be enhancing their yard facilities and expanding their fleet as it ramps up capex with the IPO proceeds. Kim Heng has indicated plans to expand its subsea capabilities and could potentially acquire a subsea service contractor.

DBS

DBS: favoured by Deutsche over other two local banks. The three banks are releasing their 2Q earnings results on 31 July (UOB), 1 Aug (DBS) and 5 Aug (OCBC), seasonality declines are expected. Strong earnings results in 1Q brought about by low credit costs and non-recurring gains are unlikely to be repeated in 2Q. In fact, the industry experienced slower client trading and flow activities, lower NIMs, falling loan growth and deteriorating asset quality in 2Q and softer earnings are expected across all three banks. The house expects sound fundamentals for DBS and believes it is undervalued. UOB’s 10% YTD outperformance on DBS takes into consideration discount on DBS for dependence on China’s economy, but Deutsche thinks the impact should be limited and DBS is in fact well-positioned to ride on the next wave of growth in China. In Singapore, DBS is likely the key beneficiary of rate rise given their strong CASA and SGD deposit franchise. Valuation wise, DBS’s 1.2x 2014E P/B is the cheapest, compared to OCBC’s 1.3x and UOB’s 1.4x. Deustche gives BUY recommendation on DBS, sets TP at $17.43.

SG Market (21 Jul 14)

US Market: US shares rebounded from its worst drop since Apr as upbeat earnings from Google offset worries about the worsening crises in Ukraine and Gaza. The DJIA jumped 123 pts to 17,100 (+0.7%), while the S&P 500 leapt 20 pts to 1,978 (+1%) and the Nasdaq Composite surged 69 pts to 4,432 (+1.6%). The VIX or Wall Street’s fear gauge dropped 17% to 12.06 after rallying 32% the day before. Geopolitical concerns had a dampening effect on consumer sentiment this month, but the Conference Board’s index of leading indicators rose in Jun for the 5th straight month, suggesting that the economy continues to gain momentum following a 1Q slowdown. Broad-based gains were led by technology and healthcare names, particularly biotechnology companies. Many technology stocks rallied, including Apple (+1.4%), Amazon (+1.8%) and Facebook (+3%), all of which will report earnings this week. Investors also focused on strong earnings from Google (+3.7%), which beat estimates on more paid clicks, brushing aside implications of the MH17 plane crash in Ukraine and Israel’s invasion of Gaza. Airlines recovered following Thu’s 3.2% slide with American Airlines (+2.9%), Delta Air Lines (+1.7%), United Continental (+2.1%) and Boeing (+1.4%) all recovering some lost ground. General Electric slipped 0.6% its earnings matched estimates but AMD tumbled 16% after its 2Q profit missed and 3Q sales projection indicated that the chipmaker is not benefitting from the rebound in PC spending. The S’pore market may move higher, buoyed by the resilient Wall Street performance, with the STI breaking past its 3,210 resistance (last Fri’s close) to the next objective at 3,360. Downside support now lies at the 3,280 level. Stocks to watch: *Sembcorp Marine: Secured a ~$600m contract from France’s Saipem for the conversion of two VLCCs into two turret-moored FPSOs for the Kaombo project in offshore Angola. The VLCCs will enter Sembawang Shipyard in 3Q14 and 1Q15, respectively, with total project duration of 32 months. *OCBC: Dr Cheong Choong Kong will retire as Chairman on 31 Aug after an 11 year tenure, but will remain a director of OCBC and Great Eastern to provide continuity. He will be succeeded by Mr Ooi Sang Kuang, currently a non-executive lead independent director of the board. *Aspial / Fragrance: Launched City Gate, a JV mixed development project along Beach Road, over the week end. 78 out of the 150 residential units released were sold at a median price of more than $1,800 psf, and 62 out of the 155 commercial units released were sold at prices ranging from $2,900 to $6,200 psf. The project will have 311 apartments and 188 commercials in total. The site was purchased in Jun ’12 for ~$360m ($920 psf ppr). *Kingsmen: Awarded a $25.2m contract for the construction and maintenance of fit-out works for the KidZania indoor family edutainment centre located in Singapore. KidZania is part of a fast-growing global edutainment chain headquartered in Mexico City, and is slated to open at Sentosa Island’s Palawan Beach by 2015. *Ezion: Templeton Asset Management disposed 2.4m shares at an average price of $2.009 each on 15 Jul, paring its stake from 6.1% to 5.9%. *Artivision: Non-binding MOU with Lenovo to test and integrate its "Face-It" mobile application - an application that is able to secure the user’s device using face recognition technology. *Jubilee Industries / WE Holdings: Jubilee will acquire WE Components for US$8.4m ($10.4m) to boost its upstream electronic manufacturing business. Going forward, WE Holdings will focus on two key business units - coal & iron ore, and cement & oil. *Koyo Int’l: Its indirect subsidiary AVSC Technologies has secured a contract for the supply and delivery of ~170,000 mt of reclamation materials to a buyer for a period of two months ending Aug ’14. *Golden Agri: Partnering CEPSA to establish a 50/50 JV to jointly develop, formulate, produce, distribute and sell fatty alcohols globally. *Next-Generation Satellite Communications: Proposed $27.6m acquisition for 75%-stake in Star Chariot has lapsed, as several conditions in the sales and purchase agreement have not been fulfilled. Recall, the acquisition was intended to assist the group in exiting the SGX Watch-List. *Hyflux: Intends to launch a proposed offer and issue of SGD perpetual capital securities today. Credit Suisse has been appointed as the sole lead manager and bookrunner. *CNMC: Produced another record single gold pour of 2,586.75 oz of gold dorĂ© bars *Cacola: Proposed to issue 74.1m new shares at 2.7¢ each, to Liao Jienan to settle a three-month loan of $2.2m which expires 31 Aug. *Isetan: Profit warning. Expects 2Q14 loss due to the challenging situation at its flagship Scotts store where sales have been affected by major renovations by owners of Shaw House and the adjoining Shaw Centre.

Friday, July 18, 2014

Alliance Mineral Assets (IPO)

Alliance Mineral Assets: Australian miner Alliance Mineral Assets is offering 67.7m placement shares (43.5m new, 24.2m vendor) at $0.23 each, as it seeks to list on the Catalist board. The net proceeds of $7.7m will be used for exploration & drilling, internal scoping study, development of mining deposits and working capital. Post-IPO, Alliance will have a free float of 16.3%. Alliance primarily engages in the business of developing and exploiting of Tantalite Mineral Resource in Australia. The group owns the Bald Hill Tantalite Mine, the various surrounding Tenements, the Project Intellectual Property and the Bald Hill Treatment Plant. The group has also entered into a non-exclusive distribution agreement with Mitsubishi Corporation RtM Japan for two years, appointing Mitsubishi as a non-exclusive distributor of its processed Tantalite concentrate in Asia. As a guide, Tantalite a tantalum mineral and is used in alloys for strength and higher melting points, in glass to increase the index of refraction, and in surgical steel, as it is non-reactive and non-irritating to body tissues Alliance achieved a net loss of $0.5m in FY13, narrowing the net loss of $1.1m from the previous year, with interest income coming in at $6.4m (-15.9%). The group currently has no revenue as it has not commenced production, and the Bald Hill Project is in the process of being refurbished; with plans to commence trial mining and processing of Tantalite concentrate at the Bald Hill Tantalite Mine site in 2H14. Production and sale of Tantalite concentrate is expected to commence in FY15. On its prospects, Alliance expects prices of Tantalum to trend upwards in the near-term due to resurgence in demand for consumer electronics, especially from China, where the scale of China’s Tantalum market has reached Rmb1.95b. Based on the IPO price of $0.23, Alliance trades at 3.0x P/B with a total market capitalization of $90.6m. While there are no direct peers listed on SGX, closest Australian peers, Galaxy Resources trades at ~0.53x P/B and Pilbara Minerals at ~1.91x P/B. The IPO placement offer closes on 23 Jul ’14 at 12.00 pm, with trading expected to commence on 25 Jul ’14 at 9.00 am. Prime Partners is the sole sponsor, issue manager and underwriter for the IPO.

Grand Banks

Grand Banks: ($0.28) Upcoming 4QFY14 result holds key to Watch-list exit Market Insight reiterates its value call on Grand Banks. Recall, Grand Banks obtained shareholders' approval to acquire Australian yacht maker Palm Beach Motor Yacht earlier this week. The acquisition is expected to be completed by mid-Aug and Grand Banks will be able to tap Palm Beach’s manufacturing processes and technology to further improve production efficiencies, as well as expand beyond its product line of three existing yacht series. Upon consolidation, Grand Banks' order book will surge nearly three-fold to ~$29.2m. Based on 9MFY14 figures, revenue of the enlarged group will rise by 25% to ~$34.1m and net profit will jump more than four-fold to ~$1m. Separately, we highlight that majority shareholder, Exa Limited, linked to Genting Bhd chairman and CEO Lim Kok Tay and his son Lim Keong Hui, has been acquiring shares over the market on three separate occasions this year. Exa now owns a 26.43% stake in Grand Banks, up from 22.76% at the start of 2014. Going forward, a positive 4QFY14 result, estimated to be out end-Aug, holds the key to the group’s exit from the SGX Watch-list. Under SGX rules, a company stands to be delisted, if it fails to meet the profitability conditions required to be removed from the Watch-list after two fiscal years of getting onto the list. Having already made a small pre-tax profit in 9MFY14, Grand Banks will meet the criteria for removal from the Watch-list if it can just breakeven in the fourth quarter. Given the group’s focus on cost management in recent quarters, we believe such a scenario is more likely than not, and could lead to a potential re-rating of the counter. At the current price, Grand Banks is attractively valued at ~1x P/B, supported by a net cash of $0.134/share.

Jardine Group

Jardine Group: announcing their 2Q results on 1st August, Friday. There are five Jardine group companies listed in Singapore: Ultimate parent company Jardine Matheson Holdings (JMH 4000USD, J36.SI), investment holding company Jardine Strategic Holdings (JSH 500USD, J37.SI), auto distribution company Jardine C&C (C07.SI), retail company DairyFarm Int’l (D01.SI) and property investment company HongKong Land (H78.SI). JP Morgan expects no upside surprise in earnings. Good profitability but expectantly high currency translation losses are likely to weigh on profits higher in the Jardine chain. JPM expects earnings results to be better down the Jardine Group chain as profit contribution to companies higher up the chain may be eroded by weak IDR this year. JP Morgan reiterates OVERWEIGHT on JMH with an upward adjustment in TP from $60.00 to $62.50. JMH is valued for its high-quality, diversified exposure to growth in emerging Asian economies. At the same time, the house also reiterates UNDERWEIGHT on JSH despite upward adjustment of TP from $30.00 to $34.00 as JSH is currently trading above TP. JSH is less favoured for its significant cross-holding with JMH. It is usually difficult to put an accurate number to see-through value in a complex group structure like Jardine Group. Jardine C&C had its TP reduced from $51.00 to $50.00 but JPM maintains OVERWEIGHT rating on the company with 8.5% upside. Jardine C&C is liked for its P/E discount to Astra, making it a good proxy to gain cheaper exposure to Astra.

Innotek

Innotek: shares halted. Has been informed by substantial shareholder Gazelle Capital (5.6% stake) that it is in discussions regarding a transaction which may or may not result in an offer for shares of the company. Discussions remain very preliminary.

Dairy Farm

Dairy Farm: stock is up 13% ytd, outperforming the STI by 9%, thanks to a recovery in the low expectation on retail conditions, particularly in SE Asia in the beginning of the year. Share price is now close to UBS' TP of US$11, and without catalyst for further re-rating, the house downgrades the stock to Neutral. Meanwhile, latest retail sales data indicate a marginal slowdown in topline growth in Hong Kong and Singapore. In HK, Supermarket and Medicines & Cosmetics sales were up 6.1% and 8.7% yoy respectively for 5M14, compared with 6.4%/10.6% growth in 1H13/2H13. In Singapore, supermarket sales dipped into negative territory a t -2.2% yoy (v +2.5% in 2H13) while Medical Goods & Toiletries grew at 2.7% yoy (inline with 2H13) during Jan-May 2014. In Malaysia and Indonesia, although Foods, Beverages & Tobacco sales accelerated to 11% yoy in 1Q14 (from 10% in 2H13) and 17% yoy in 1H14 (from 8% in 2H13), the depreciation of the MYR/IDR by c6%/c17% respectively v USD would have dragged reported growth and contribution for DFI.

First Resources

First Resources: Production jumped 13.5% m/m (+8.7% y/y) in Jun but UOB Kay Hian expects it to slow down in Jul-Aug due to the fasting month and the long Hari Raya Puasa holidays. While FFB production rose 9.8% y/y in 1H14, house maintains its FFB production growth forecast of 6-8% y/y for 2014 as production in 2H14 should be weaker y/y due to the lagged impact from 2Q13 and 1Q14 drought. First Resources is scheduled to release its 2Q14 results on 13 Aug. House forecasts net profit to rise 5-8% q/q and 25-29% y/y (2Q13: US$37.7m, 1Q14: US$45.0m), buoyed by higher sales volumes from both upstream and downstream to mitigate the impact of lower ASP. House expects management to give a better production outlook guidance in the coming briefing, given better visibility in 2H14 now. UOB Kay Hian maintains BUY with $2.80 TP.

OCBC

OCBC: OCBC’s life insurance arm Great Eastern has seen itsshare price increase 5% in 1Q14, 16.9% in 2Q14 and a further 3.8% in Jul 14. Nevertheless, the stock remains thinly traded with an average daily turnover of US$0.6m for the past three months. UOB Kay Hian reckons the recent change at top management coupled with the meteoric rise in Great Eastern’s share price has given life to speculation that OCBC is seeking to divest Great Eastern. House do not expect OCBC to rush into disposing Great Eastern. However, the rationale for owning an insurance subsidiary has diminished due to hefty deduction to CET-1 capital based on Basel 3. Bancassurance sales could be enhanced by distributing third-party products from a broad panel of insurance partners without in-house manufacturing from Great Eastern. Disposing its 87.1% stake in Great Eastern at 2013 P/EV of 1.5x, or S$12b, would increase CET-1 CAR from 7.3% to 13.8% post-acquisition of Wing Hang Bank. UOB maintains Buy rating with TP of $11.14.

Sheng Siong

Sheng Siong: facing growing competition from budding online supermarket. Budding tech start-up and online supermarket, Redmart reportedly received US$23m of fresh funds from heavyweight investors Garena, Softbank Ventures, Visionnaire Ventures and Facebook co-founder Eduardo Saverin, to finance its expansion in Singapore. In less than three years since inception, Redmart has grown rapidly. In May last year, the group chalked up annualized sales of US$5m. The average customer now makes purchases online every two to three weeks. The online store currently stocks ~8,000 products, with plans to add another 7,000 more. Redmart is on track to expand into fresh foods by 4Q14, once it moves into its 100,000 sf AVA-approved warehouse that is technologically equipped to store fresh foods. Redmart’s growing clout presents a direct challenge to local supermarket chains such as Cold Storage (under Dairy Farm Int’l) and NTUC FairPrice, which also have started growing their online presence. However, in the long run, it may pose the biggest threat to Sheng Siong. Sheng Siong adopts a low-cost high-volume strategy, not unlike what Redmart is targeting. Online stores typically already enjoy lower labour cost. As Redmart gains economies of scale and builds a more efficient logistics and distribution network, it has the potential to enjoy much lower overheads per unit sales than Sheng Siong. Meanwhile, Sheng Siong’s business model is one that is sensitive to competition. We estimate that a 10% erosion in revenue could result in a 15% decline in net income, based on the group’s current cost structure. Longer term investors may consider its current valuations provides little safety buffer due to the potential threat of disruptive technology. Sheng Siong trades at 18.4x annualized 1Q14 P/E and 5.7x P/B.

Tigerair

Tigerair: Singapore operations improved q/q in 1QFY15 on the back of peak travel period and active capacity management – passenger load factor (PLF) edged up by 7.1ppt from 79.2% in Mar-14 to 86.3% in Jun-14. On a Y/y basis, PLF increased for the first time in nine months by 1.8 ppt in Apr-14. OCBC believes improved PLF Y/y can be sustained in FY15 because: 1) tigerair will not be taking on plane deliveries in 2014-2015, 2) we think the four planes returning from now-defunct Tigerair Mandala will be grounded, and 3) near-term fleet expansion is scaled back by rivals Jetstar Asia and AirAsia. OCBC thinks improved PLF will only help TR’s performance to bottom out but insufficient for a turnaround; downward pressure on yield will stay as SE Asia’s LCC fleet is projected to grow by a high 17% in 2014 according to CAPA. OCBC maintains Sell with TP of $0.30.

Jaya Holdings

Jaya Holdings: In response to a Business Times article posted on 17 Jul titled "Hot stocks: Jaya rallies further on RTO speculation", Jaya has disclosed that the speculation cited was unfounded and there is no material development on such activities. Meanwhile, SGX has cautioned investors to exercise caution while trading for the counter.

CapitaCommercial Trust

CapitaCommercial Trust: 2Q14 results came in line with street expectations, as the commercial REIT posted distributable income of $64.1m (+7.6% y/y) and DPU of 2.18¢ (+5.3%), alongside revenue and NPI improvement of 3.2% and 3.5% to $65.8m and $52m respectively. The stable growth for CapitaCommercial Trust (CCT) was buoyed by a 3.4% rental reversion in its office spaces, savings from lower interest expenses and release of retained income distribution. Portfolio occupancy remained healthy at 99.4%, above market occupancy rate of 95.8%, while weighted average lease to expiry remained at 7.8 years. Gearing lowered 1.2ppts q/q to 28.8%, with average debt cost of 2.4% and term to maturity of 4 years. Assuming a leverage target of 40%, the trust has more than ample debt headroom of $1.3b for investment opportunities. Management cites that Office leasing activities are expected to remain healthy, supported by the tight supply in the core CBD market till 1H16 and brisk leasing activities, supporting further rental growth. CCT's asset enhancement works at Raffles City Tower has completed as scheduled in 2Q14, resulting in a ROI of 9.3%, higher than the target ROI of 8.6%. In addition, its 40%-owned CapitaGreen is on track for completion by end-2014, and has secured 23% of net lettable area of 700,000 sf. At $1.665, CCT trades at 1x P/B and 1H14 annualized yield of 5.1%, not as attractive compared to other office REIT peers' average of 0.9x P/B and 6.2% forward yield. Latest broker ratings: OCBC maintains Hold rating with TP of $1.67 (under review)

SG Market (18 Jul 14)

US Market: US shares tumbled with the broad-based S&P 500 posting its biggest one-day percentage drop since Apr on a heavy selloff amid intensifying geopolitical tensions in Ukraine and Mid-East, headlined by a Malysian plane crash. The DJIA fell 161 pts to 16,977 (-1%), while the S&P 500 sank 23 pts to 1,958 (-1.2%) and the Nasdaq Composite lost 63 pts to 4,363 (-1.4%). The VIX or Wall Street’s fear gauge surged 32% to 14.54, its highest level since Apr 2013. Equities initially fell after the US and EU imposed sanctions against Russian banks, energy companies and defence firms in the latest attempt to end its support for Ukraine rebels. Adding to the pressure, Israel began a ground invasion in Gaza, stoking concerns of a widening conflict. Markets extended losses after a Malaysian B777 aircraft was shot down near the border, killing at 298 passengers on board. The disaster sparked a flight to safety in safe haven assets like gold (+1.4%) and US government bonds, pushing down 10Y Treasury yields to 2.47% (-7bps). Economic data showed housing starts unexpectedly declined in Jun to a nine-month low but initial jobless claims dropped to 302,000 last week, suggesting further healing in the labour market and Philadelphia Fed’s factory index improved. Airlines slumped the most with Delta Air Lines (-3.4%), American Airlines (-4.1%), United Continental (-3.5%) and Boeing (-1.2%) all dropping. Energy and inustrials also retreated at least 1.5%. News of the plane crash overshadowed a busy day of corporate results. Chipmaker Sandisk (-14%), fast food chain Yum Brands (-6.9%) and toymaker Mattel (-6.6%) all tanked as sales fell short of estimates. Morgan Stanley dipped 0.6% despite beating expectations by a wide margin. Among the gainers, UnitedHealth rose 1.6% on sales that beat estimates. Microsoft rallied 1% on news of 18,000 job cuts. Google (+1.6%) and IBM (+1.3%) rose after the close, after reporting quarterly results which were ahead of estimates. Weighed by the rising geopolitical risks and elevated US markets, the S’pore market is likely to open lower with downside support for the STI seen at 3,270. Stocks to watch: *CapitaCommercial Trust: 2Q14 distributable income spiked 7.6% y/y to $64.1m and DPU climbed 5.3% to 2.18¢, as gross revenue climbed 3.2% to $65.8m and NPI grew 3.5% to $52m. The positive results were buoyed by a 3.4% rental reversion, savings from lower interest expenses and release of retained income for distribution. Portfolio occupancy remained healthy at 99.4%, with long weighted average lease to expiry of 7.8 years. Gearing of 28.8%, with 2.4% average debt cost and a term to maturity of 4 years. NAV stood at $1.67. *GLP: Signed two new lease agreements totalling 23,000 sqm with two leading third-party logistics providers in China, which are seeking to strengthen their distribution capabilities in Central and Northern China amid increasing demand from the consumer goods industry. *StarHub: Signed three new partnerships yesterday - i) a seven-year deal with Sports Hub to become the National Stadium’s official telco partner, and to get the branding rights to the South West gate entrance, ii) a five-year deal to be the official broadcaster for the Women’s Tennis Association (WTA), and iii) a five-year deal to become the official telco partner of the BNP Paribas WTA Finals Singapore tournament this Oct. *Wing Tai: Chairman Cheng Wai Keung tells The Business Times that the group will not undertake delisting as a way to avoid paying extension charges for unsold units, under the current Qualifying Certificate (QC) rules for foreign housing developers. *Super: Ranked 31 out of Singapore’s Top 100 Brands in 2014 (2013: #40) with a brand value of US$201m (2013: US$150m) by Brand Finance. *Sheng Siong: Granted extension of lease from HDB for its Woodlands’ Centre Road till 30 Jun ’17. *Hiap Hoe: Says the Next Insight article dated 16 Jul was misleading and the rate of sales is not true. Company clarified that its Melbourne project was 85% sold in one week. *Sing Post: MAS has given approval for Alibaba to become a substantial shareholder under the Money-changing and Remittance Businesses Act. *Jaya: In response to SGX’s query on recent trading activity, company highlighted that the speculation of a reverse takeover from a Business Times article is unfounded.