Tuesday, September 30, 2014


Noble: UBS notes CIC initially acquired its stake in Noble on 21 Sep 2009, with a total consideration of US$850m and a price of $2.1137. Adjusting for a 6-for-11 bonus issue in respect of FY09, the adjusted price is $1.368, putting CIC at a slight loss on its investment made 5 years ago. CIC had initially acquired its stake in Noble given Noble's agricultural assets and supply chain management activities in the space. The acquisition was taken with a view to jointly invest in agricultural commodities, by tapping on both companies' respective strengths. This is similar to the rationale for COFCO's acquisition of Noble Agri, which seeks to tap Noble's origination base and COFCO's access to China; which leaves UBS to question the motivation and timing for CIC's stake sale at a loss. The house believes a quick turnaround in Agri is unlikely, with headwinds at Noble likely to persist in its various divisions. Maintains Sell with TP $1.30


Riverstone: AmFraser visited Riverstone's new production plant in Taiping, Perak last Friday. THe new facility will have a total of 6 glove production lines, with capacity to produce 1b gloves annually. Total capex for the factory is RM80m and is financed with the company's internal cash flows. The house estimates the new facility could add ~Rm80-86m in terms of revenue pa (FY13 rev: RM358m). Meanwhile, construction of a second factory just next door is underway, with expected completion date in 4Q15. This will also increase capacity by another 1b gloves pa, but will only require capex of RM50m because it can share equipment like compressors, cooling and heating equipment with the first plant. Mgt also shared that Riverstone is now trying out a new contracting model with three of its customers, where customers will be able to book exlusive use of pdtn lines. Contracts will run for two years, with a termination notice period of 6 mths. With customers locked in for a longer term basis, pdtn downtime will be reduced. Mgt anticipates 60% of pdtn lines to be put under this model eventually. AMFraser expects Riverstone's growth to outpace its larger Msian peers. Riverstone tradeds at 10.9x consensus FY15e P/E, vs the Msian peer avg of 14.4x. The house does not have a rating on the stock.

Tuan Sing

Tuan Sing: Koh Wee Meng, CHairmand and CEO of Fragrance, has emerged as a new significant shareholder after making new share purchases in the open market, buying 6.5m shares at an average price of $0.432 on 25 Sep, lifting his stake from 4.46% to 5.02%. Tuan Sing soared to a 5-yr high yday, closing at $0.455 per share with 26 m shares traded (~5.5% of float). Yet this closing price represents a still significant 30% discount to its book value of $0.65 per share, though broadly in line with comparable peers also trading at an avg discount of 28%. Tuan Sing is currently controlled by the Liem family, who owns collectively at least 53.5% stake. It remains speculative as to what Koh's intentions are. That said, OCBC notes that Koh, a seasoned real estate developer, has publicly indicated his plans for expansion in Australia following the slowdown in the Singapore residential market, and his company Fragrance Group has also recently proposed plans to spin-off its property business in Australia on the Catalist board. As such, Tuan Sing’s two prime hotels in Melbourne and Perth could be of special interest to Koh. OCBC currently does not have a rating on Tuan Sing.

Comfort DelGro

Comfort DelGro: Transport minister Lui Tuck Yew announced that the DTL 2 MRT line will be opened in 1Q16, a few months ahead of schedule. As at 2QFY14, Comfort recorded loss of $6.2m from its DTL 1 operations . With the opening of DTL 2 brought forward by a months, OCBC believes this is good for Comfort as this would logiically allow it to break even earlier . Ridership shoudl improve significantly given that DTL 2 comprises 12 stations and one depot, including four interchange stations. Advertisement and rental business segments , which offer higher margins, could further boost revenue and profitability. The house maintains Buy with TP $2.92

EMAS Offshore (IPO)

EMAS Offshore has registered its prospectus for its secondary listing on SGX. The group will offer up to 48.6m new shares for subscription at $1.21 each (NOK6.12), comprising a public offer of 9.1m shares and 39.5m placement shares. Accordingly, EMAS’ share price in Oslo jumped 7.1% in the current session to NOK6.16. Net proceeds of $53.8m will be used to finance the cash portion of the consideration for the acquisition of the Offshore Support Companies under the Business Combination Exercise (58%), and for working capital (42%). Separate from and immediately following the close of the offering, Ezra is proposing to sell up to ~20.6m of its EMAS shares at $1.21 each, in a secondary sale amounting up to US$20m. The secondary sale will only be to the Oslo-listed EMAS shareholders who were eligible to vote at the EGM held on 22 Aug, to limit any dilution effects caused by the Singapore offering. EMAS’ offer price implies a valuation of 4.6x annualized proforma 9MFYAug14 P/E and 0.77x proforma P/B. Post the offering, secondary sale and business combination, and assuming the over-allotment option (9m shares) is not exercised, EMAS will have market cap of $532m. Indicative timetable 29 Sep, 6pm: Public offer opens 2 Oct, 12pm: Public offer closes 8 Oct: Commence trading on SGX

Genting SP

Genting SP: The Straits Times notes, plans to open Japan’s first casino in Tokyo before the 2020 Olympics are becoming increasingly unlikely, with developers facing skyrocketing building costs and a city govt that no longer considers casino development an economic priority. Parliament yesterday began its autumn session, during which the initial casino Bill is due to be debated. Proponents hope to pass legislation by Nov that would allow pro-casino lawmakers to prepare a second, detailed proposal, which they hope will be approved next year. Previous Tokyo governors had supported plans for a casino. But current governor Yoichi Masuzoe, who took office in Feb, said in June that pursuing a casino was "not at the top" of his agenda. Tokyo government officials say the governor appears to be overwhelmed by preparations for the 2020 Olympics, and has put the casino plans on the backburner. Casino operators including Las Vegas Sands, Genting Singapore, MGM Resorts and Melco Crown Entertainment have all been positioning themselves as potential investors in what analysts say is one of the world's biggest untapped markets for this sort of gaming.


Starhub: BoAML reiterated Underperform on StarHub with TP adjusted down from $3.35 to $3.25 as operational trends in 2H14 are likely to stay modest while positive catalysts could remain elusive. While the CEO was more optimistic on 2015 prospects, the house is more cautious as the structural pains in broadband and pay TV could remain a drag. Topline growth should be intact for its Mobiles business, which makes up 56% of service revenues, as subscribers migrate from 3G to 4G plans, barring regulators introducing a new entrant (either Mobile Network Operator or Mobile Virtual Network Operator). Revenue from broadband, however, should stabilize in 4Q14 as increasing subs are more than offset by pricing adjustments. Competition from M1 and MyRepublic is stiff due to pricing pressure. The house adjusted down revenue and EBITDA estimates by 2-4% and NPAT by 8-9% for FY14-16E due to slower growth in broadband and higher D&A. Dividends are unlikely to rise, but stable yields are likely to become less attractive in a rising interest rate environment.


Innovalues: Coverage appears to be ramping up on Innovalues, with the counter receiving its third initiation coverage by a local broker within a month. The latest initiation rates Innovalues at Buy with TP of $0.45, based on 9.0x FU15E P/E, and follows after Maybank-KE’s recent initiation on the group (Buy: TP $0.52). MBKE believes that 2014 could be the comeback year for the automotive precision engineering parts manufacturer, having reached a critical mass that allows it to leverage on high-volume, long product life cycle and stable pricing. Over FY14-16, its automotive segment, which contributes >80% revenue, is set to lead net profit gains with sales growth of 18% and 15% forecasted for FY14 and FY15, supported by industry expansion, growth in market share and stouter margins. Meanwhile, high barriers to entry and penetration (stringent qualification and auditing, long gestation to reach critical volume) shield Innovalues from stiff competition. Operationally, margins are likely to improve from the reduction in material wastage and higher labour productivity. The stock is also appealing as a potential dividend play. The group is expected to increase its dividend payout by 50% to 1.8¢ in FY14 and further to 2.5¢ in FY15, translating to a potential yield of 7.5%. Innovalues currently trades at just 5.9x FY15 P/E.


Iskandar: The Business Times reports that Malaysia's Real Estate & Housing Developers Association (Rehda) is cautioning that the looming supply glut in Iskandar, could weigh on rental yields in the economic zone. Rehda expects some 30,000 homes to be completed by 2016 or early 2017, and highlighted that if these homes are sold to buyers mainly outside Malaysia and Singapore, then we will probably see many empty units and once they are put for rent, the heightened supply will inevitably put pressure on rental yields. The latest comments come amidst the onset of a slew of other high-rise apartments by China developers which are set to flood the market. Analysts caution that about half of the 9,000 condos in Country Garden Danga Bay launched last year remain unsold, and Chinese developers appear desperate to unload these units by cutting unit prices. CapitaLand has also been recently rumoured to be cutting down the number of high rise units from its original plan, with an expected huge backlog of upcoming supply putting a dampener on the appeal of Iskandar’s housing developments. With more high-rise projects in the pipeline, this has led to a visible slowdown in sales over the past year, as most investors adopt to take a wait-and-see attitude. Sandwiched by fears of oversupply, and competition from other larger foreign players, we opine that S’pore developers with Iskandar ambitions (eg. Rowsley, CapitaLand, Tat Hong) could be faced with a more challenging outlook going forward.

Far East Hospitality Trust

Far East Hospitality Trust (FEHT): Recently, FEHT entered into a 30/70 JV with sponsor Far East Organisation to develop an 850-key integrated development in Sentosa, comprising two hotels in the mid-tier/upscale segment. The development of Outpost Hotel Sentosa and Village Hotel Sentosa will cost c.$444m, which have land tenures of 60 years from 2014. The hotels are expected to be completed in 2018, and StanChart estimates room sizes could be c.270-300 sf on average. House estimates gearing to reach c.34%, from 31% currently. This is the first major development project for a hotel SREIT and the initial cost of c.$522k/key appears reasonable, given hotel transactions in the past year have been at $0.7-$1.5m/key. StanChart expects the project to be 1-4% accretive to earnings and raised TP by c.3% to $0.75. House maintains our Underperform rating on FEHT.

International Healthway Corp (IHC)

International Healthway Corp (IHC): IHC recorded impressive revenue growth of 47% y/y to $17.8m in 1H14, driven by rental income from Japan's nursing facilities and Wuxi Hospital's medical services. To further entrench its medical services footprint in Asian countries, IHC has built up extensive network of experienced doctors overseas, acquiring integrated medical real estate projects in strategic locations which meet specific healthcare demand from China, Malaysia, Japan and Australia. Voyage reckons these factors enable IHC to capture growth in healthcare demand from the countries. House has a True Gem rating with TP of $0.48.

Noble Group

Noble Group: According to a report from Bloomberg, sovereign-wealth fund China Investment Corp (CIC)- Noble's second largest shareholder with 13.8% stake, is seeking to sell at least 165m shares, part of its 13.8% stake in the company at between $1.32-1.35. Post-sale, CIC expects to see its stakeholding fall to about 10%. This may cause a near-term overhang for the counter, which has seen a pick-up in interest from the street just two weeks ago. Brokers incorporated the disposal gain from Noble's 51%-stake sale of its loss-making agri-business to China's agri-food giant, COFCO, and subsequently raised their target prices for the group. Management earlier gave guidance that the sale will be completed by end Sep-early Oct. At the current price, Noble is valued at 13.8x forward earnings, compared to Olam's 14.4x and Wilmar's 13.5x. Bloomberg consensus has 11 Buys, 3 Holds and 2 Sells on Noble Group, with 12-month TP of $1.51.

SG Market (30 Sept 14)

US Market: US shares pared earlier losses but still ended lower ahead of a heavy week of economic data as the civil unrest in Hong Kong adding to geopolitical concerns. The blue-chip DJIA retreated 42 pts to 17,071 (-0.3%), while the broad-based S&P 500 lost 5 pts to 1,978 (-0.3%), hovering near its 50-dma and the tech-heavy Nasdaq Composite dipped 6 pts to 4,506 (-0.1%). The CBOE Volatility Index jumped 7.6% to 15.98, reflecting the market uncertainty, which swung between gains and losses the previous four days. Markets were unnerved by the massive street protests in Hong Kong, which are viewed with some alarm in the broader context of an economic slowdown in China. Casino companies with exposure in neighbouring Macau slumped, with Las Vegas Sands and Wynn Resorts losing 3%. The turmoil in Hong Kong added to the crises in other parts of the world where Ukraine endured its deadliest day since signing a ceasefire with pro-Russian militants, while the US and its allies continued their bombing raids on Islamic State positions in Syria. In economic data, US spending rebounded 0.5% in Aug, while personal income rose 0.3%, reviving concerns that the Fed may raise interest rates sooner than anticipated. But pending home sales dropped 1% in Aug after a 3.2% increase in Jul, weighing on homebuilders, KB Home (-2.4%) and PulteGroup (-0.8%). Consumer discretionary shares (-0.6%) were the hardest hit, with Ford tumbling 7.5% after the automaker lowered its full year profit forecast, attributing to possible losses in South America and Europe. Semiconductor stocks (+0.8%) were the best performers, led by Intel (+1.9%) on news that the tech giant is forming a partnership with Mitsubishi Electric to create next generation factory automation systems. Animated film studio DreamWorks soared 26% on reports that Japanese telecoms group SoftBank plans a US$3.4b takeover. Computer Sciences Corp jumped 5.3% on a leveraged buyout speculation. About 5.9b shares were traded on US exchanges, 4% above the three-month average with declining issues outnumbering advancing ones by 1.4 to 1 on the NYSE. S’pore shares are likely to stay in the doldrums the Wall Street’s yo-yo market direction and tensions in Hong Kong dampening investor sentiment. Expect the STI to continue trading with a downward bias within the 3,320-3,266 range. Stocks to watch: *OCBC: Completed the subscription of 207.5m new shares in Bank of Ningbo at Rmb8.45 per share (17% discount to the last close of Rmb10.22), raising its stake from 15.3% to 20% of the enlarged share base. Accordingly, Bank of Ningbo is now an associated company of OCBC. The total consideration of Rmb1.75b was funded by OCBC”s internal resources. *GLP: Signed new lease agreements totaling 43,000 sqm in China with JD.com and another leading third party logistics company in China *Noble: According to Bloomberg News, sovereign-wealth fund China Investment Corp (CIC) - Noble's second largest shareholder with 13.8% stake, is seeking to sell at least 165m shares (representing 2.4% of Noble’s share base) at between $1.32 and $1.35 apiece. *SGX: Exchanged traded Singapore Kilobar Gold Contract will be launched on 13 Oct (Mon). This is the first wholesale 25 kilobar gold contract to be offered globally. *Eu Yan Sang: The US FDA has warned consumers not to use Eu Yan Sang (Hong Kong)’s “Bo Ying compound”, due potential lead poisoning risk. The company maintains that the item complies with safety requirements set out by the HK Department of Health and has passed all required tests for safety, including lead content. The matter is currently being sorted out by Eu Yan Sang’s lawyers in the US. *Libra Group: Awarded a sub-contract worth $12.1m for the construction, supply, delivery and installation works for a four-storey office building for a shipyard at 15 Benoi Road. Work is expected to commence upon approval from BCA and expected to be completed in nine months. *Lian Beng / KOP / KSH: The consortium has completed the acquisition of a 92.8% stake in Prudential Tower. *Lifebrandz: Posted a FYJul14 net loss of $5.8m (FY13 profit: $0.4m), as revenue fell 14% to $21.9m due to the closure and revamp of operating outlets, slowdown in crowd traffic and increase in competition from other clubs within the vicinity. Bottom line was further dragged by an impairment loss on fixed assets and receivables. *Spackman: Subscribed to an additional 633,000 shares of Opus Pictures at KRW5,000 each, raising its interest in Opus from 93% to 99.7%. The balance is owned by an indirect wholly-owned subsidiary Spackman Equities. *Falcon Energy: Its indirect wholly-owned subsidiary has completed the acquisition of a 50% interest in Brunei company, Maritim Indah, for total consideration of B$62,500. The latter is engaged in the business of offshore oil & gas products and services, and vessel owning and chartering. *LionGold: Updates that it held an estimated 5.5m oz of gold in mineral resources and 0.8m oz of gold in ore reserves (as of 31 Mar ’14), through six gold mining assets. Including its 100% stake in Acadian Mining Corp (acquired Sep ’14) and stake in the Amayapampa gold project, LionGold’s net attributable gold resources stand at ~2.8m oz. *Blumont: Commenced legal proceedings against The Edge magazine and editor Benjamin Paul, in relation to a claim in libel for the publication of the article titled "Hunting For the Truth".

Monday, September 29, 2014

Sunvic (technical)

Sunvic: potential bullish technical breakout candidate if share price can close above the $0.58 resistance today. The volume spike today (3x the five day moving average) is a positive signal , reinforced by the steadily rising RSI and Stochatics indicators, as well key moving averages. Next near term target is $0.64 . Support at $0.54.


DBS: DBS shares hit a new 6½ year high today at $18.60, taking its year-to-date return to ~8.1% return. The strong share price performance is hardly surprising, given that DBS had been widely tipped as the top stock pick by brokers, versus its local peers over the past year. Maybank-KE opines that DBS is the most poised to benefit from potential interest rates hikes, through higher NIMs and having the lowest SGD loan-deposit ratio, as a lower ratio means the bank has proportionately more readily available funds to lend at higher interest rates. Given its dominant position versus its local peers in China, DBS appears the most ready to ride on the next wave of economic growth in China, while the internationalisation of CNY will also be beneficial to the bank. Furthermore, DBS has the best asset quality, with trade finance loans forming a large portion of its portfolio and NPL declining q/q in the most recent quarter. DBS currently trades at 1.26x P/B versus OCBC’s 1.38x and UOB’s 1.29x. Accordingly, the street has the following ratings for the three local banks: DBS: 24 Buy, 4 Hold, 0 Sell; consensus TP $20.80 OCBC: 12 Buy, 11 Hold, 3 Sell; consensus TP $10.63 UOB: 8 Buy, 16 Hold, 4 Sell, consensus TP $24.26

International Healtcare Corp (IHC)

International Healtcare Corp (IHC): Voyage rates the stock as a "True Gem" with TP of $0.48, based on an economic profit valuation model. Notes IHC reported impressive revenue growth of 47% y/y to $17.8m in 1H14, driven by rental income from Japan's nursing facilities and Wuxi Hospital's medical services. To further entrench its medical services footprint in Asian countries, IHC has i) built up an extensive network of doctors overseas, ii) been acquiring or building integrated medical real estate projects in strategic locations which meet specific healthcare demand from China, Msia , Japan and Australia. This strategy allows IHC to capitalise on i) the rise of the affluent class in the PRC, ii) booming medical tourism in Msia, iii) the elderly healthcare market in Japan, and iv) ageing population in Australia.


OUE: investing US$200m in Nuvest Real Return Fund, a Cayman Islands-domiciled exempted mutual fund. The Fund, launched in 2012 with seed capital from GIC, seeks to achieve stable annual returns above inflation through diversification across a range of investment classes and active management styles. Management sees this investment as part of its treasury operations and believes this will allow optimal returns on funds held in the current low interest rate environment through leveraging the expertise of the Fund. As at end 2Q14, OCBC notes that the group has significant net cash and equivalents of $449.3m. Overall, the house is Neutral on this move and prefers mgt to return excess capital not earmarked for allocation into the group’s core businesses over the medium to long term. The house maintains its Buy rating with unchanged TP of $2.69 (20% discount to RNAV).

Lee Kim Tah

Lee Kim Tah: is making a voluntary conditional general offer to take the company private, offering S$1.08/share to buy out minority shareholders. Including concert parties, the offeror holds in aggregate 86.4% of the issued shares, and does not intend to preserve the listing status of the company if it crosses the 90% shareholding level. LKT’s key assets include: - a 50% stake in suburban retail mall Jurong Point, - hotel and investment properties in Sydney, - an associate stake in Marco Polo Xiamen Hotel, and - a 74.85% stake in an integrated township in Chennai. Its construction arm is also active in India where the group has secured several contracts in Bangalore and Chennai with its partner Woh Hup. The Lee family has been actively buying up the stock in the open market for many years, culminating in the latest general offer. OSK-DMG believes the offer is fair, at a 16-23% discount to our fair value range of S$1.28-1.41/share. A successful legal resolution to the group’s large township in Chennai would put fair value towards the upper range of its valuation. The house recommends shareholders to accept the offer.

Pacific Radiance

Pacific Radiance: UOBK expects 3Q14 earnings to be softer q/q, due to the dry docking of one DSV. As a results Pacific Radiance's fleet utilisation was lower in Jul-Aug, and gross margin should be significantly lower than 1Q14's 40.2% and 2Q14's 44.3%. The vessel has now completed its dry docking and is ready to resume work. As such, Pacific Radiance's share price, in view of its strong 62% ytd performance, might see weakness in the near term. UOBK views this as a buying opportunity , as earnings are set to see a strong earnings uptrend from 2015 onwards. Five new vessels have been delivered in Jan-Jul 14. All in all, there will be 12 newbuild deliveries in 2H14 (including the three deliveries in July). Over the next two years, more than 20 vessels will be delivered. The house reiterates Buy with TP $1.76

Singapore IPI

Singapore IPI: Industrial production growth in Aug’14 picked up further to +4.2% y/y (revised Jul 2014: +3.0% y/y; consensus: +4.9% y/y), led by higher output of Electronics and Biomedical products. However, on m/m basis, decline was back to back with -4.3% m/m after the -0.5% m/m in Jul’14. YTD 2014 growth still in line with Maybank-KE forecast of 5% y/y. The cluster grew by 7.2% y/y (Jul’14: -2.0% y/y) on the surge in Computer Peripherals (+45.2% y/y) following the low base last year when demand was weak, as well as a rebound in Data Storage (Aug’14: 18.8% y/y), which benefitted from higher regional orders. These two sub-clusters accounted for 84% of overall electronics growth for the month. Meanwhile, Biomedical output gained 9.7 y/y (Jul’14: +26.6% y/y) on slower growth in Pharmaceuticals (+7.5% y/y), which offset Medical Techonology’s third consecutive month of double-digit gains (+20.6% y/y). Excluding the volatile Biomedical cluster, IP rebounded +3.0% y/y.

Special dividend potential

Special dividend potential: Deutsche’s opinion. 1) KepLand – 38% div upside from FY14 forecast (Buy, TP$4.05), from proceeds of MBFC T3 sale 2) OUE (Buy, TP $2.64)– post OUE Bayfront spinoff to OUECT. 3) SIA (Sell, TP $8.80)– could pay but unlikely because of cautious business outlook. Nevertheless, B/S is healthy with net cash of $4.2b 4) SGX (Buy, TP $8.70)– net cash of $757m or 82% of net cash/equity. Still, could be unlikely due to heavy capex pipeline. In addition, last special div was in FY05.

Nam Cheong

Nam Cheong: Has secured sales for another three vessels worth US$41m, taking its Sept ’14 order wins to US$126m. Two of the vessels were sold to two repeat customers based in Europe – Norway and the Netherlands, while the third vessel was sold to a repeat customer based in Asia. The three contract wins come on the back of the group’s recent five vessel sales to Pelayaran Nasional Bina Buana Raya tbk (worth US$85m), and takes its total order book to ~RM1.9b while stretching revenue visibility over the next two to three years. Commenting on the latest order win, Nam Cheong guides that the regional and global OSV industry continues to see good demand for shallow water OSVs, despite some softening of oil prices, and Nam Cheong continues to be a beneficiary of the robust growth in the shallow water segment.


Ziwo: Proposed to spend Rmb160m on a 25% stake in Xisheng (Quanzhou) Investment (XQI), a main contractor for infrastructure construction of Guanqiao Park in Quanzhou Economic & Technology Development Zone (QETDZ). The project, which spans across land area of 22,162 mu, is a prominent national-level development to relocate industries away from the city centre, jointly being developed with CMTCC Shanghai Shisanye Construction, a subsidiary of Metallurgical Corporation of China. Works have commenced for the project, with Phase 1 being valued at Rmb1b. The proposed investment would allow Ziwo to gain access into the industrial reconstruction industry, underpinned by a rising need to re-zone and redevelop new industrial sites in Quanzhou city in Fujian Province, China. This follows the 32% spike in share price over the past week to $0.131. Ziwo primarily manufactures Styrene Butadiene Rubber and Terilene Filament Yarn, for use in vehicle tires production and consumer fabric products. These segments account for 86% of the group's FY13 revenue of Rmb197.1m. Over the last few years, the industry for its products has been challenging, reflected in the gradual decline of the group's gross margin, which fallen 35.3% in FY09 to 15.6% in FY13. Based on the last close of $0.131, Ziwo trades at a trailing 13.6x earnings and 0.4x P/B.

SG Market (29 Sept 14)

US Market: US shares rebounded from its biggest decline since Jul as corporate results from Nike and Micron topped estimates and the US economy grew at its fastest rate since 2011. The blue-chip DJIA jumped 167 pts to 17,113 (+1.0%), while the broad-based S&P 500 advanced 17 pts to 1,983 (+0.9%), climbing back above its 50-dma and the tech-heavy Nasdaq Composite added 45 pts to 4,512 (+1.0%). The CBOE Volatility Index retreated 5.1% to 14.85 after surging 23% last week. Stocks got a lift after data showed US GDP grew at a revised 4.6% in the 2Q versus the previous forecast of 4.2% as companies stepped up investment and households boosted spending. Separately, consumer confidence climbed to a 14-month high in Sep as the economic outlook improved. US Treasuries however eased after bond titan Bill Gross, who built Pimco into the world’s largest bond manager, resigned to join Janus Capital, sparking speculation that the fund could begin shifting away from US government debt. Janus soared 43% and 10Y bond yield rose 3bps to 2.54% on the news. All 10 S&P industry groups advanced with technology shares rebounding 1.2%, while energy shares rallied 1.3% after the US-led coalition expanded air strikes against IS positions in Syria. Nike leapt 12.2% to a record after its 1Q profit beat estimates as the 2014 Fifa World Cup boosted sales. Yahoo bolted 4.4% after investor Starboard Value called for it to explore a tie-up with online rival AOL (+3.7%) to unlock value, while Micron Technology advanced 6.7% after the chipmaker reported 4Q earnings that came in ahead of estimates and raised its outlook for the upcoming quarter. Meanwhile, Apple gained 2.9%, recovering from most of its losses on Thu, after it released a new patch for a software update that had caused glitches in its latest iPhones. Blackberry rose 4.7% after posting a narrower loss amid the release of its latest Passport smartphone. About 5.4b shares were traded on US exchanges, 12% below the three-month average with 70% of stocks traded on NYSE closing higher. S’pore shares may get a slight updrift from Wall Street but the violent democracy protests in Hong Kong may put a lid on investor sentiment with the STI likely to trade within the 3,320 resistance and recent 3,266 support. Stocks to watch: *Nam Cheong: Sold three AHTS vessels worth ~US$41m, bringing the group’s total orders in Sep to eight collectively worth ~US$126m. The vessels are scheduled for delivery in 2014 and 2015, and are expected to contribute positively to FY14 and FY15 financials. *Nam Cheong / Marco Polo Marine (MPM): Nam Cheong is investing ~US$30.7m for a 30% stake in the enlarged share base of Indonesia-listed PT Pelayaran Nasional Bina Buana Raya (BBR). The latter, an indirect subsidiary of MPM, owns and manages a fleet of OSVs, tugboats and barges. BBR will utilise part of the proceeds to purchase five small- and mid-sized OSVs from Nam Cheong for US$85m/ *Lum Chang: Bought out Standard Chartered Private Equity’s 49% stake in Kemensah, a Malaysian property developer, raising its stake in the latter to 100%. The total consideration of RM133.4m comprises RM38.3m cash and a loan assignment of RM95.1m. Post-acquisition, Lum Chang’s proforma FYJun14 EPS is expected to rise 11% to 7.47¢, while its NTA will fall 2.3% to $0.508. Net gearing will increase 9ppt to 54%. *JK Tech: Has successfully completed the acquisition of Caracol Petroleum, which owns a 46.8% working interest in the Mustang project in Alaska. Drilling for the Mustang #2 well is expected to commence shortly after mid-late Nov ’14. *Keppel Infrastructure Trust: To provide additional incineration capacity to the Senoko waste-to-energy plant for the National Environment Agency (NEA). The upgrades will take place between 3Q15 and 3Q16, and will raise the plant’s incineration capacity by 10%. *Ziwo: Spending Rmb160m on a 25% stake in Xisheng (Quanzhou) Investment, a main contractor for the infrastructure construction of Guanqiao Park in the Quanzhou Economic & Technology Development Zone. *China Kunda Technology: The agreement by Ang Kok Teong to acquire a 50.6% stake at $0.0729 per share has been terminated, as certain conditions were not fulfilled by the relevant deadline. Accordingly, the associated pre-conditional cash offer will not be made. *Sino Grandness: Has completed its internal group restructuring exercise. Separately, Sino Grandness has incorporated a new wholly-owned subsidiary, Grandness Anhui, with registered capital of HK$10m, to engage in preparation, processing and production projects of canned fruits and vegetables and snack food product, and (ii) food technology development. *Interra Resources: Completed development well CHK1192 as an oil producer and commenced drilling development well CHK1994. Both wells are located in the Chauk oilfield in Myanmar, in which Interra owns a 60% operating interest. *LionGold: Its stake in the Amayapampa gold project in Bolivia will be diluted from 100% to 10%, following an agreement with Silvermane Investments (owned by Awang Ahmad Sah) to subscribe for new shares worth an aggregate US$45m, over a period of time. *Fu Yu: Entered into a settlement agreement with former CEO Ho Kang Peng, in respect of existing and potential claims in connection with his previous employment with the group. The settlement has been accrued in the FY13 financials. *JB Foods: Trades ex-rights today. The group is undertaking a non-underwritten 1-for-2 rights issue at an issue price of $0.12 each.

Friday, September 26, 2014


Ezra: its big fall in Sep coincides with the drop in share price of Oslo-listed Emas Offshore (EMAS). Oslo-traded EMAS fell from peak of NOK7.41 (25 Aug) to low of NOK5.08 (18 Sep), before recovering to NOK 5.75 now . The volatility in the Oslo-listed EMAS counter could affect demand for upcoming secondary listing of EMAS in S'pore. In fact, on Wednesday, Reuters reported that EMAS has reduced the sale to 57.6m shares at $1.21 (NOK 6.10) each, without giving a reason for the change. Meanwhile, Ezra has also agreed to defer for up to three years the majority of cash owed by assets bought by EMAS. Recall, in Jul, Ezra said it planned to sell its offshore support services division to EMAS for $520m, made up of $370m worth of EMAS shares and $150m in cash.

Interra Resources

Interra Resources: On 24 Sep, SGX has approved in-principle on the company's proposed issue of bonus warrants and piggyback warrants. The bonus issue was first proposed on 28 Mar, on the basis of 1-for-10 with an exercise price of $0.235; Each bonus warrant will be attached with 1 piggyback warrant with an exercise price of $0.175, for every 2 bonus warrants exercised.


Japfa: CIMB initiates at Add with TP $1.25, implying 15.2x CY16 P/E. Says Japfa is a play on the rising wages of Asia's lower middle income population and the inevitable shift in food sources to industrialized farms. With beef and Indochina as future growth pillars, Japfa is set to become a truly diversified agri-food business that spans the entire value chain, producing different animal proteins and entrenching itself in Asia’s most populous markets.


TTJ : FYJul14 net profit soared 47% to $21.8m, thanks to a decline in cost of sales (-2%), even as revenue rose 6% to $134.7m. Revenue growth was driven by both the structural steel business and dormitory business. The structural steel business grew 3% to $115.3m, mainly due to a substantial completion of contract works for a number of major industrial projects including the Lanxess Compass Project, Nalco Eastern Hemisphere Core Plant and the Methionine Plant on Jurong Island, as well as LNG Train 9 project for Petronas in Sarawak, M’sia. On-going key projects such as the Tuas West MRT Extension Depot, the National Art Gallery and Tanjong Pagar Centre, which is set to become Singapore’s tallest building at 290 metres, also provided a boost to the group’s topline. Revenue from the Jalan Papan dormitory (5,300 beds) jumped 19.5% to $18m, attributable to higher rental rates. Gross margin expanded 5.5ppt to 27.5%, mainly due to a greater contribution from the higher margin dormitory business. Order book stood at $97m, to be substantially fulfilled between FY15 and FY16. New projects secured include: Tanjong Pagar Centre, DUO condo at Rochor Road, MediaCorp’s new HQ at Mediapolis @ one-north, the new State Courts complex at Havelock Square, and Yishun Community Hospital. Alongside the first set of results, TTJ proposed a first and final dividend of 1.4¢, up from 0.9¢ a year ago. Going forward, the group is cautious about keener competition from an influx of overseas players entering the market in recent years, and a slower pace of rollout of industry projects due to labor supply constraints in Singapore. Meanwhile, the Ministry of Industry has projected the construction sector to grow at a slower pace for 2H14, pegged to a decline in private commercial and industrial building works. Management expects FY15 to be a challenging year, but remains confident about its long term prospects given its strong track record in structural steel in Singapore. The group has been channeling its fabrication works to its Keluli factory in M’sia, where labor costs are lower, and will strive to raise productivity through training of workers and automation. TTJ trades at 5.6x P/E, 1.1x P/B and offers 3.8% yield.

Halcyon Agri

Halcyon Agri: Agreed to buy natural rubber delaer and distributor New Continent Enterprises (NCE). The consideration of the deal will be determined at 118% of NCE’s net book value as at 31 Jul’14, in which the latter is decided between Halcyon and the sellers. Consideration will be paid in four equal payments, starting from completed date of transaction. With the completion of Anson Company in August, Halcyon’s export capacity has risen to ~748,000 tonnes, transforming itself from a niche producer of Standard Indonesian Rubber (SIR) to Indonesia’s second largest SIR producer. Together with the Standard Malaysian Rubber (SMR) asset base, Halcyon is a top 3 rubber producer globally. The purchase of NCE squares off the increase in productive capacity by providing Halcyon with direct access to EU and USA, being the two largest SIR and SMR consumer markets in the world, where the world’s top tyre companies are situated. Halcyon is trading at 28x forward P/E and 2.7x P/B

Kim Heng Offshore

Kim Heng Offshore: Maybank-KE initiated on the counter, with a Buy and $0.305 TP. 1H14 earnings fell 68% YoY because of the late arrival of drilling rigs and OSVs; as a result, revenue bookings will be pushed to 2H. Timing differences aside, business fundamentals remain robust as rig deliveries are expected to rise through 2015, with rig utilisation holding steady at 80%. This bodes well for Kim Heng as rig repair & maintenance business contributed 79% of FY13 sales. Kim Heng is currently in talks to acquire a subsea equipment servicing and engineering company. Although details are scant, it shared in its IPO prospectus that it would be prepared to invest up to SGD7m in such a project. We believe this could add $1-2m to Kim Heng’s earnings, roughly forms 11 -10% of our current FY14E-15E earnings forecasts. Yard renewal concerns may be overdone, as the company is confident that JTC will approve the lease extensions, based on the detailed investment and development plans it submitted in mid-August.


SIA: Pricing pressures continue for the national carrier. In spite of new incentives rolled out by the Changi Airport Group (CAG) and new codeshare alliances with other carriers, SIA continues to be dogged by regional overcapacity and stiff competition from Middle Eastern carriers. OCBC believes SIA is set to benefit from CAG’s expanded incentive programme that includes 50% rebate on landing fees for all non-stop long-haul passenger flights from Sep'14 to Mar'16. House expects the overcapacity issue in the region and competition from Middle Eastern airlines will continue to cause pricing pressure and thus, supressing the yields of SIA, at least for the next few quarters. OCBC maintains its HOLD rating but raised TP to $10.05 (from $9.97).

Sapphire Corp

Sapphire Corp: Sapphire Corp surged 31% over the past three days to a close at $0.106 yesterday, before SGX issued a trading query on the investment holding company. In response, Sapphire highlighted its proposed sale of its loss-making steel manufacturing business for $70m had been approved by shareholders recently. The disposal is expected to result in a $6m gain, which the company intends to invest into an engineering, procurement and construction company, specializing in land transport infrastructure design and engineering works. Sapphire is principally engaged in mining services, through wholly-owned Mancala Holdings based in Australia that provides raised bore, shaft excavation, engineering services and other mining services. Mancala currently operates the largest nickel mine in Son La Province in Vietnam. From the official website, Sapphire's growth strategy includes "expansion into the resource sector and embarking on a Merger & Acquisition spree when the opportunities arise". Sitting on $2.7m cash and debt of $7.5m (excluding proceeds from the divestment) as at 30 Jun, it may not be a surprise to see share dilution at some point, to keep in line with its growth strategy. Notably, Sapphire's CEO, Teh Wing Kwan, is a non-executive and non-independent director of Heng Fai Enterprises (HK-listed), Singapore eDevelopment, and Asian American Medical Group (ASX-listed). At $0.106, Sapphire is loss-making and is valued at post-disposal FY13 P/B of 1.1x.


Biosensors: Morgan Stanley lowers TP from $0.80 to $0.65 to account for slower sales growth, deteriorating gross margins and higher selling expenses in the near term. Competition in China, Japan and international markets are stiff. Despite a gradual pick up in China volume growth, BIOS may continue to face pressures due to the lack of new products. New businesses such as Spectrum Dynamics and BioFreedom may not make any meaningful contribution in the near term. Excel has less technology advantages in China and BioMatrix may take a long time before it can enter China market. There could be potential margin erosion due to product mix and price cuts in China.


OUE: Goldman Sachs adjusts TP down from $2.73 to $2.47 to factor in OUE’s reduced stake in OUE Hospitality Trust, asset sales to OUE Commercial Trust, the $105m impairment charge at Twin Peaks, as well as higher operating expenses.

Wing Tai

Wing Tai: Goldman Sachs revised TP down from $2.24 to $2.04 after lower FYE15E-17E EPS by -10%/-7%/+8% and widening FY15E NAV discount from 30% to 35%. This is to factor in slower sales schedule for Wing Tai’s residential projects as new home sales have been lacklustre, weighed down by the 15% ABSD for foreigners and tighter credit regulations.

SG Market (26 Sept 14)

US Market: US shares suffered its steepest loss in two months, led by Apple’s 3.8% drop, amid weak economic data, geopolitical concerns and quarter end profit-taking. The blue-chip DJIA plunged 264 pts to 16,946 (-1.5%), while the broad-based S&P 500 lost 32 pts to 1,966 (-1.6%), sending the benchmark index below its 50-dma for the first time since Aug and the tech-heavy Nasdaq Composite tumbled 88 pts to 4,467 (-1.9%). The CBOE Volatility Index or gauge of market risk jumped 18% to 15.64, after sliding 11% the day before. Markets opened lower after US data showed that jobless claims crept 12,000 higher to 293,000 last week, although the trend of layoffs continued to improve below the 300,000 pace. But durable goods orders dived 18.2% in Aug, dragged by volatile aircraft orders, after an outsized increase the previous month. If transportation is stripped out, new orders for durable products rose 0.7% in Aug. Sentiment was further rattled by reports that Russian lawmakers have drafted new legislation that would allow the government to seize foreign assets, while in the Mid-East, US-led airstrikes in Syria intensified, targeting oil installations held by the extremist Islamic State group. All except 14 of S&P 500 components retreated in the broadest slump since early Feb as 8 out os 10 industry groups declined at least 1%. Investors sold some of the market’s best performers with tech shares the biggest losers, sliding 2.3%. All 30 Dow blue-chips gave way with JPMorgan and UnitedHealth both down 2.3%. Apple sank 3.8% to a six-week low, sparked by glitches over its new mobile-software update and criticism that its new iPhone 6 can be easily bent. Other high profile tech names also got hit including Twitter (-3%), Yahoo (-2.3%) and Microsoft (-2.2%). Allegheny Technologies crumbled 4.8%, leading losses among materials producers as commodities prices rose across the board after the USD touched a four-year high. After the bell, Micron Technology fell 3.4%, while Nike rose 4.1% after both reported results. Volume was heavy with 6.4b shares exchanging hands, 13% above the three-month average with 80% of stocks traded on both NYSE and Nasdaq ending weaker. S’pore shares are likely to face downside pressure following Wall Street’s broad sell-off with the STI poised to penetrate beneath its 3,280 support to test the recent low of 3,266 set on 16 Aug. Below that, former support can be found at the 3,230 level. Stocks to watch: *Ezion: Entered into an MOU with a large multi-national fuel trading and distribution company for the potential storage and distribution of fuel on Port Melville in Northern Australia. Ezion is currently in the process of developing a 30m-litre tank farm on Port Melville. *Halcyon Agri: Buying New Continent Enterprises (NCE), which is a global natural rubber dealer and distributor. Consideration will be fixed at 118% of NCE’s net book value as at 31 Jul ’14, and is payable in four quarterly instalments. *SIIC Environment: Injected additional capital of Rmb74.5m in its wholly owned subsidiary, Wuhan Huang-Pi Kaidi Water Services, which will be used mainly to fund the construction expenditure and working capital needs in relation to two water projects. *Teho: Signed a non-binding letter of intent to acquire ECG Property Services, which is engaged in the business of real estate, and related services. Consideration of $17m will be satisfied via $5m cash, and the issue of 42m shares at $0.28 each. *Manhattan Resources: JV with Kaiyi Investment to form Manhattan Property Development, which will facilitate the potential restructuring of certain company investments. *TTJ: FYJul14 net profit jumped 47% to $21.8m, driven by a decline in cost of sales (-2%) even as revenue grew 6% to $134.7m. Accordingly, gross margin expanded 5.5ppt to 27.5%. Construction order book stood at $97m. Dividend raised to 1.4¢ (FY13: 0.9¢). BVPS at $0.34. *Hai Leck: Obtained TOP for its second dormitory situated at 9 Tuas Avenue 1. Hai Leck now has bed capacity to house 800 workers. *Lee Kim Tah (LKT): The founding family has made a $1.08 per share offer, with a view to privatise the company and exercise its rights of compulsory acquisition. This values LKT at $546m. The offer is conditional upon the offeror and its concert parties receiving at least 90% control (current stake: 86.4%). *Olam: Changes to the Board. Non-executive director Mark Haynes Daniell and independent director Wong Heng Tew will step down after more than 10 years of service each. In their place, Kwa Chong Seng will assume the role of non-executive director and deputy Chairman, and Nihal Vijaya will be appointed as independent director. Both men have career backgrounds in Termasek-linked companies. *ECS: Will be suspended until further notice, following the fall of free float below the minimum 10% requirement. The controlling shareholder, VST Holdings, does not intend to restore the float. *Sapphire: In response to SGX’s query on trading activity, the group summarized details of its on-going major restructuring exercise. Sapphire will book a $6m disposal gain from the sale of its loss-making steel manufacturing business, with the sale proceeds to be invested in the business of a profitable EPC (engineering, procurement and construction) company specializing in land transport infrastructure design and engineering works. *AusNet Services: Allan Gray Australia has ceased to be a substantial holder *Sitra: Its 7-for-5 rights issue at $0.01 each, received valid acceptances representing ~91%, and excess applications amounting to 36% of the total rights shares available for subscription.

Thursday, September 25, 2014

Ezion (technical)

Ezion - Technicals appear to be trending lower. Share price is currently testing its 200 day MA at $1.83, which will be the critical support level.


Hafaray: UOB Kay Hian maintains Buy witH TP $0.275, implying a 34.2% upside. The house value Hafary using SOTP to reflect the market value of its property assets while benchmarking its tile trading business at peers’ average PE of 9.7x. Technically, The stock appears to be well supported at $0.20 in recent trading sessions when it attempted to break above the downward sloping trendline extension. The stock is likely to trade towards $0.27 after a brief consolidation and could be trending at its rising 30-day SMA. A golden cross has also formed.

First Resources (technical)

First Resources - Technicals appear to be at oversold position, although there is no signs of a reversal yet. The next level of support is tipped at $1.92.

OCBC (technical)

OCBC: Price seems to be consolidating and narrowing. Eye for breakout if price breaches $9.60 (support) or downward sloping trendline for resistance ($9.90). Other supporting indicators neutral

UOB (technical)

UOB: Counter still within its near-term downtrend, although Stochastics recently rebounded from the oversold level over the past week, which may indicate a support for share price. Immediate support at $$22.50, followed by $21.60, while resistances are at $22.85 and $23.50.

DBS (technical)

DBS -Technicals appear a tad neutral, with RSI and Stochastics showing conflicting signs. For now the 20 day MA at $18.2 should provide support for the share price.


Vard: OCBC highlighted the industry de-rating, following the sharp dip in oil prices. Brent crude oil prices have taken a 15% tumble to S$97.7/bbl from the YTD peak of S$115.1/bbl, driven by a stronger USD and easing geopolitical tensions. On a positive note, average AHTS spot rates in North Sea have rebounded strongly YoY in Aug due to the peak summer period. However, average PSV rates in the North Sea have deteriorated. Similarly, utilisation rates have increased for AHTS (YoY basis for Aug) but declined for PSVs, highlighting a possible oversupply situation for the latter. Vard share price has fallen 19.0% since it announced on 5 Aug 2014 that it has received an additional tax claim of ~NOK200m (including penalties and accrued interest) from the tax authorities in Brazil. VARD intends to file an appeal against the ruling. Given the uncertainties over the tax claims by the Brazilian authorities on Vard, volatility in the North Sea market and recent de-rating in the industry, OCBC opt to lower its valuation peg from 10x to 9x. House also cut its FY14 and FY15 PATMI forecasts by 4.8% and 7.5%, respectively, to account for cost pressures in Brazil. Correspondingly, TP dips from $1.12 to $0.94, still based on blended FY14/15F EPS. Maintain HOLD.


Wilmar: The ACCC announced today that it will not oppose the proposed acquisition of Goodman Fielder by Wilmar and First Pacific. The commission had initial concerns on the packaged edible oils market in Australia, on the overlap between Wilmar's existing edible oils wholesaling business, and Goodman Fielder's position as the leading supplier of branded edible oils to supermarkets. However, the commission concluded that there is no material overlap in this case, and the acquisition is unlikely to lead to competition concerns in the market. While the approval brings Wilmar one step closer to finalising the deal, Wilmar will only have a 50% stake in the JV, with Goodman Fielder making normalised profits of only A$63m in FY06/14, against house estimate of Wilmar's net profit at US$1,187m in FY14E. UBS remains Neutral with TP of $3.50.

Kim Heng Offshore

Kim Heng Offshore: Maybank-KE initiated on the counter, with a Buy and $0.305 TP. 1H14 earnings fell 68% YoY because of the late arrival of drilling rigs and OSVs; as a result, revenue bookings will be pushed to 2H. Timing differences aside, business fundamentals remain robust as rig deliveries are expected to rise through 2015, with rig utilisation holding steady at 80%. This bodes well for Kim Heng as rig repair & maintenance business contributed 79% of FY13 sales. Kim Heng is currently in talks to acquire a subsea equipment servicing and engineering company. Although details are scant, it shared in its IPO prospectus that it would be prepared to invest up to SGD7m in such a project. We believe this could add $1-2m to Kim Heng’s earnings, roughly forms 11 -10% of our current FY14E-15E earnings forecasts. Yard renewal concerns may be overdone, as the company is confident that JTC will approve the lease extensions, based on the detailed investment and development plans it submitted in mid-August.


TTJ: announcing their FYJul14 results after market closes today (25 Sep). Based on 9MFY14 results so far, Phillip thinks that the FY14 results could be positive, leading to a possible price upside ex-post results announcement. TTJ has two core business segments of Structural Steel and Dormitory. The Structural Steel business fabricates steel structures used in construction of buildings, factories, plants and infrastructure. The Dormitory business operates a 5,300-bed dormitory in Singapore. The Structural Steel (87.8%) business segment was the significant contributor to revenue compared to Dormitory (11.8%) in FY13, with 0.4% from Other business. TTJ improved its gross margin y-y from 21% (9MFY13) to 25% (9MFY14), and net margin improved y-y from 10% (9MFY13) to 15% (9MFY14); indicating that TTJ had managed to control costs and improvements to gross margin flowed down to bottom line during 9MFY14. For the period of 9MFY14, there had been both q-q and y-y EPS growth for each of the three quarters. Over the last three quarters, price of TTJ also reacted positively the following day after their earnings announcement: • 1QFY14 announced 12 Dec 2013; next day closing price +1.7%. • 2QFY14 announced 12 Mar 2014; next day closing price +3.3%. • 3QFY14 announced 12 Jun 2014; next day closing price +7.1%. Annualising 9MFY14 EPS implies a forward P/E of 5.9x. With the visible pipeline of infrastructure projects in Singapore (e.g. new MRT lines till 2030), Phillip believes TTJ as a supplier of essential construction material could arguably deserve a higher P/E rating due to the recurring nature of earnings. The house does not have a rating on the company.


GLP: Completed second tranche of China consortium agreement comprising US$875m. The consortium is led by HOPU Investments, with participation by GLP employees. Following the announcement, the consortium now holds a 33.8% stake in the China Holdco. The first tranche of US$1.6b was completed in Jun'14. The additional partners in the second tranche further augments GLP’s access to best-in-class customers and strategic sites, enabling GLP to accelerate its development pace and strengthen its market-leading position across China. In light of Alibaba’s recent IPO, investors are paying more attention to Chinese ecommerce, to which GLP should be a beneficiary. Among its top 10 largest customers in China, GLP boasts customers such as Amazon, VIPshop, JD.com and Alibaba. Meanwhile, GLP’s modern logistic facilities should help it ride the ecommerce boom, which is forecasted to triple to Rmb5.6t by 2017. GLP now trades at 1.2xP/B


Noble: Noble’s operating profit growth – with a 25% CAGR between 2006 and 2013 from the energy and metal trading business – has been offset by its foray into asset heavy agriculture processing and a consequent decline in ROE and earnings since 2011. Barclays expects that to change with its ROE moving back to a double-digit rate from 2015. Three catalysts for this includes: 1) completion of 51% stake sale in the loss-making agri business by end-2014 and resultant de-gearing; 2) Noble’s seed investment in X2 Resources and long-term optionality attached to this; and 3) earnings-accretive M&A over the past 6-12 months. With its P/B valuation at -1 SD to its long-term average, house sees this as an opportunity to gain exposure to the start of Noble’s transformation back to an asset-light and high return business model. Barclays maintains its Overweight rating and raises TP to $1.75 (from $1.60).

Sinarmas Land

Sinarmas Land: In a site visit to two major Sinarmas Land (SML) projects in Jakarta, PhillipCapital returned with more confidence on the company’s outlook. The land development sales performance has been optimistic with average selling price improving steadily over the recent years. With greater clarity in the business climate of Indonesia following the denouement of the presidential election, house believe Sinarmas Land will continue to post healthy margins with the positive real estate market outlook as new President Mr Jokowi will likely push for more pro-business policies and infrastructure developments in coming future. PhillipCapital remains positive on the outlook for SML for: 1) the potential bottom-line growth with land sales from the huge land bank, 2) solid balance sheet with a strong cash holding and 3) expansion of international portfolio for recurring income. House has a BUY with TP of $0.97.

SG Market (25 Sept 14)

US Market: US shares rebounded after a three-day slump, led by a strong housing report, as investors continue a long-running trend of buying on dips. The blue-chip DJIA jumped 154 pts to 17,210 (+0.9%), while the broad-based S&P 500 gained 15 pts to 1,998 (+0.8%), bouncing off its 50-dma and the tech-heavy Nasdaq Composite added 47 pts to 4,555 (+1.0%). The CBOE Volatility Index or gauge of market risk fell 11% to 13.27, the steepest drop since early Aug. Sentiment took a lift after the US new home sales surged 18% in Aug to an annual rate of 504,000, its fastest pace in more than six years, , signifying the housing recovery is making progress. Separately, Chicago Fed President Charles Evans called for patience as the central bank withdraws stimulus, fuelling speculation of a sustained period of low interest rates. Healthcare stocks rallied 1.7% amid signs that new rules to curtail tax inversions may fall short as Pfizer (+0.9%) and AbbVie (+2.6%) advanced. Other biotechnology companies, including Biogen (+4.2%) and Celgene (+3.3%0 also rose. Valeant Pharmaceuticals leapt 6.9% after guiding 3Q earnings and revenue to be above forecasts and cooled its unsolicited offer for Botox maker Allergan (+4.2%). Gilead Sciences gained 3.2% after announcing successful clinical trials on a HIV treatment. Consumer staples ran 1.2% on an upbeat Deloitte report that US retail sales may soar 4.5% this holiday season exceeding last year’s increase. Wal-Mart rose 2% after unveiling a deal with pre-paid debit card provider Green Dot (+24.4%) to offer no-fee checking accounts to its customers. Among other stocks in focus, home goods retailer Bed Bath & Beyond shot up 7.4% after its full-year earnings forecast topped estimates, while Apple slipped 0.9% after halting its iOS 8 upgrade due to software bugs, as well as complaints of soft bodies of its new iPhone 6, which result in physical bending. Volume was active with 6.1b shares traded, 7% abover the three-month average with advancing issues slightly edging out declining ones on the NYSE. S’pore shares are expected to open slightly firmer following the technical bounce on Wall Street but any upside may be limited by lack of clear direction and catalysts. The STI is likely to trade within the immediate topside resistance seen at 3,330 with underlying support at 3,280. Stocks to watch: *Office property: Consultant Cushman & Wakefield expects Singapore’s Grade A office rents to rise to its highest levels since 2008, by the year end. Current Grade A office rents are at a three-year high of $10.20 psf pm (+9.9% y/y, +2% q/q), with further strong leasing activity expected in 4Q14, led by the completion of CapitaGreen and South Beach. *Retail property: Colliers International expects monthly gross rents for Orchard Road prime ground floor retail space to either remain flat or dip marginally by 1% for 2014, following a softer 3Q14. This is due to weaker visitor arrivals, which is likely to exert further on malls in the prime shopping district of Singapore. *Lian Beng: Its JV has signed the conditional definitive agreement regarding the proposed disposal of the former Midlink Plaza for $270m. Market watchers had estimated Lian Beng’s share of disposal gains to be between $8.5m and $10m. *GLP: Completed the second tranche of the China consortium agreement (CCA) worth US$875m. The strategic partners include China Life Insurance, China Development Bank Int’l, Bank of China, China Post Insurance, Boyu Capital and HOPU Fund. The US$2.5b agreement CCA is now completed, with the China consortium holding a 33.8% stake in GLP’s China Holdco. *Ascendas Hospitality Trust: Together with JV partner Melic, are in preliminary discussions with a number of parties on the potential divestment of Pullman Cairns International. *AusNet Services: Has been served with court documents which initiate class actions in relation to two separate bushfires. While the group has liability insurance which provides cover for bushfire liability, it does not believe it was negligent and intends to vigorously defend the proceedings. *Singapore eDevelopment: Proposed to issue up to $300m perpetual bonds and a 100-into-1 share consolidation, to accelerate its strategy for corporate recovery. The bonds will have an 8% coupon, and holders will have the right to receive a pro-rated 30% profit on property development projects in the US, Australia, China and Singapore, which are financed by the bonds. *Trading halts: Libra, Sino Construction

Wednesday, September 24, 2014

vard (technical)

vard - Technicals appear to be at Oversold territory, although technicals have yet to show a reversal yet. ADX is however at the 40 levels, which could inidicate that the current downtrend could be exhausting. The next level of support could be tipped at $0.78

SGX (technical)

SGX: Trading Central prefers to go long as long as share price stays above $7.13, with targets at $7.50 and $7.65 in extension. On a break below $7.13, look for further downside to $6.90 and $6.65. Notes that RSI has landed on the neutral 50 mark, and is turning up.

Jumbo Group (IPO)

Jumbo Group: According to Bloomberg, sources indicate that Singapore’s popular seafood restaurant chain Jumbo Seafood, owned by the Jumbo Group, is preparing for an IPO next year, with plans to raise about $30m. The group aims to use the IPO proceeds to expand in China, where it opened its first overseas restaurant in Shanghai last December. Over in Singapore, the group currently owns five restaurant outlets. When asked to comment on the latest market news, Jumbo Group stressed that while it does not discount such a scenario on being in the pipeline, it will not comment on market speculations.


Yangzijiang: OCBC downgrades to Hold , with TP of $1.24 (from $1.21) . Cautions that YZJ remains exposed to risks from its financing business. YZJ has held-to-maturity (HTM) assets of Rmb13b , with a signficant portion comprising entrusted loans, in which an agent bank (trustee) arranges a loan between two commercial enterprises. In addition to allowing companies with idle funds to earn higher rates of interest, it may also allow stronger borrowers to borrow from banks at lower rates and lend out to weaker companies at higher rates, thereby pocketing a spread. For YZJ, 38% of borrowers in its HTM assets were in real estate, 30% were in manufacturing, and 25% in "others". It is hard to determine how deep an understanding YZJ, a shipbuilder, has in real estate and other unrelated industries.


Noble: UBS keeps Sell rating with TP $1.30. Sees further downside risk to consensus earnings estimates in the near term. Views Noble's partial divestment of its agri division as a step in the right direction, but believes this is already reflected in the share price. Further, the partnership with COFCO in itself is unlikely to result in a quick turnaround in volume and profit at the agri division , given the structurally challenging operating conditions in South America. OVerall, UBS sees payoff for Noble's investment in energy , MMO to take time, compounded by the fact the near term outlook for the energy division looks challenging given the weak coal price environment, arising from reduced volume growth on import controls into China and export restrictions out of Indonesia.


Olam: UBS reiterates Sell with TP $2.23. Says valuation remains rich at 1.2x FY15e P/B, against an expected ROE of only 10%. Notes Olam is making progress on its 2013 strategy review to formulate and adopt a re-balanced approach to growth and cash flow generation. But doubts remain. Olam did not achieve its target of turning FCF positive by FY14, even after excluding net interest paid of $476m, and including divestment proceeds of $309m. Apart from cash flow issues, UBS believes another key uncertainty lies in Olam's ability to deliver on earnings growth, given its significant historical investments. Notes EBITDA/interest coverage was flat from FY12-14, with returns still a considerable distance from Olam's target in FY16, and mgt guiding that we will not see the full potential of its upstream investments until FY19. Even then, this is contingent on successful execution and future commodity prices.


Rex: SPAngel reiterates Buy with TP $1.10. Notes the recent fundraising of $75m is timely, and provides two things to the company: i) balance sheet strength - given that funding mkts are not fully open, a dollar on the balance sheet is worth more than a dollar to third parties outside the company, and ii) Corporate flexibility - can pick and choose , and be more aggressive in their pursuit of terms, which is good for shareholders. Entering the end of 2014, SPAngel sees Rex's drilling programme starting to accelerate, with focus points being Norway and Oman appraisal wells. Nevertheless, there will also likely be significant activity right across the portfolio in all their jurisdictions.

Sembcorp Marine

Sembcorp Marine: BoAML reinstates Neutral on SMM with TP $4.0 based on SOTP valuation. Softer operating margins are expected in 2014-16 (~10-11%) compared to that of 2012-13 (~10-13%), which is mainly the result of: increased revenue contribution from drillship orders placed by Sete Brasil and Transocean, which comman only high single-digit margins, vs 11-12% for jackups, (ii) potential cost overrun during the new Tuas and Brazil yards ramp-up process, (iii) potential extended down-cycle for ship repair business, which would see margin contraction on lower per-vessel revenue, (iv) new designs, which are still in the testing stage and have yet to be widely recognized by the industry However, there are fundamental factors driving confidence in the long term. As mentioned, the actual supply of jackup rigs are believed to be overstated and Chinese consolidation of the excess capacity in rig building industry reduces the challenge to Singapore rigbuilders. SMM now trades at 2.7x P/BV, higher than Keppel.

Keppel Corp

Keppel Corp: BoAML gives new Buy on Keppel Corp with TP at $14.20, 15% above consensus. The positive view is mainly driven by: a positive outlook on Singapore rig building sector to face lessening competition from Chinese shipyards, (ii) readiness to fill niche for East China Sea and benefit from the increasing demand from PEMEX and Petrobras, and (iii) growing market in FLNG conversion. The house believes that actual supply of global jackup rigs under construction in the global market is overstated and should be 44/40 for 2015/16 instead of 65/45 under current delivery schedule. This is due to slippage days from Chinese yards. In addition, Chinese rig builders may have to face a major consolidation and capacity elimination exercise over the next 5-40 years, reducing the challenge posed to Singapore rigbuilders, not to mentioned established ones like Keppel Corp. Over in South America, Petrobras and PEMEX are also set to increase deepwater drilling projects strategically (i.e. may remain unaffected by commercial cycle). Keppel Corp is expected to benefit given its solid track record and relationships in Brazil. Company specific, the Titan Quanzhou shipyard is expected to fill the niche for jackups in E. China Sea water, which holds 14% of China’s gas recoverable reserve (more than S. China sea), but has yet been largely explore due to lack of rigs capable of drilling in over 450/500ft depth. Besides, order momentum in FLNG conversion seems to continue, and with estimates of global capex on FLNG facilities growing at 41% CAGR in 2014-17, Keppel stands to benefit substantially given its expertise in this area. Recall also, Golar has yet to exercise its last option for FLNG conversion with Keppel. Keppel now trades at 1.8x P/BV.

SBI Offshore

SBI Offshore: Will be raising $16.2m from placing new shares to four investors to raise $16.2m. From the placement, Mirzan Mahathir will emerge as the third largest shareholder with a stake of 10.8%, via his BVI registered company CE Ventures Offshore. Mirzan Mahathir is the eldest son of Malaysia’s former prime minister, Tun Mahathir bin Mohamad. He is a veteran in the oil and gas industry, and a non-executive director of Petron Corp in the Philippines. The others taking up the placement are Millennium Marine (Singapore-registered firm involved in offshore and marine activities in China and controlled by Chinese investor Guo Hairong), Osith Ramanathan and Pang Shun Pen, the latter two being founder and co-founder of private investment management firm Ostara Capital. SBI Offshore’s stock price has increased two-fold between Aug 19 and Sep 19, as SBI Offshore said was in talks with a Middle East-Chinese consortium to build up to five jack-up rigs. A week before that, it announced that it had bagged a US$24 million jack-up rig design and engineering contract from the consortium which comprised six parties with varied interests in the oil and gas sector. The group said that it was in early discussions on several sizeable projects involving the engineering, procurement and commissioning of drilling equipment packages. SBI Offshore is trading at 18.6x trailing P/E and 1.4x P/B.


Biosensors: Biosensors is transitioning from being heavily reliant on licensing and royalty income to becoming a self-sustaining company that is capable of generating profits from its own operations. This seems achievable with the new corporate leadership now in place. CIMB upgraded the counter from a Hold to an Add rating in view of its improving valuations, stabilising sales environment and earnings bottom-out, while clinical trials in Japan and soon the US are important milestones to track. Its current net cash (US$272m) forms c.30% of market cap, with no immediate major acquisitions on the horizon. Biosensors is trading at 0.75x P/BV and below Asian peers' P/E FY15. CIMB does not think that there is much share price downside from hereon.

Venture Corporation

Venture Corporation: UOBKH downgraded the counter to Hold and lowered its TP to $8.15 (from $8.50), due to weakness from key customers Agilent and Toshiba TEC in 2H14. The reorganisation and reshuffling of key executives at Agilent has resulted in a slowdown of orders from in 2H14. However, house notes that Venture is optimistic of growth from the LDA and EM businesses in 2015 after completion of the reorganisation by end-14. House also expects weakness from Toshiba TEC, a key customer for the retail store solutions segment, after it lost market share for point-of-sale systems post-acquisition of IBM’s retail store solutions business. In addition, the seasonal pick-up in 2H14 is expected to be gradual and modest. Actual orders received have fallen behind customers’ previous forecast as corporate spending on IT and capex remains weak. Performance in 3Q14 is expected to be flat, followed by gradual seasonal ramp-up in 4Q14. House reduced its net profit forecasts by 4.3% for 2014 and by 2.5% for 2015. The stock faces short-term headwinds but should be supported by an attractive dividend yield of 6.4%.


Vicom: Maybank-KE issued an unrated report for the counter, citing that valuation appears rich, amidst the unfavourable structurals of the Singapore car market. Historically, VICOM's core vehicle inspection business was powered by a 5.6% annual growth over FY08-13, driven by the rising demographics of cars in Singapore. As of Aug 2014, 276k or 45% of cars are 7-10 years old. Going forward, the house opines that Singapore's new-car market is expected to be revived, as older cars are taken out at the end of their 10-year COE lifespan. New cars enjoy a honeymoon in the first three years with no inspections required, and this is expected to drive down inspection volumes. However, upside may potentially come from higher inspection prices or a revival of the COE market for cars older than 10 years old. Inspection prices are not regulated and were last raised in 2007. But until then, Maybank-KE believes the market could react negatively to VICOM's falling inspection volumes. At $6.03, VICOM is valued at 18x trailing P/E, significantly above its 10-year average of 11.9x.

SG Market (24 Sept 14)

US shares fell for the third straight day, with healthcare/drugmakers falling on a government crackdown on tax-saving mergers, and further dragged by coordinated attacks on Syria The DJIA fell 80 pts to 17,092 (-0.5%), while the S&P 500 slipped 8 pts to 1,987 (-0.4%) and the Nasdaq dipped 12 pts to 4,516 (-0.3%). The VIX index rose 8.8% to 14.90. European shares also trade lower after a gauge of activity in the eurozone's manufacturing and services sectors for Sep fell to its lowest level for the year. Sentiment in US stocks was impacted after the Treasury’s new rules on inversions begin applying to deals that were closed yesterday. The rules include a prohibition on “hopscotch” loans which enables companies to gain access to foreign cash without paying US taxes. Medtronics and AbbVie, with pending inversions, fell 2.9% and 1.2% respectively. Separately, in the Middle East, the US and its allies launched a series of airstrikes against key positions in Syria, targeting the militant Khorasan Group, increasing geopolitical concerns. The news caused oil prices to advance, resulting in energy shares outperforming. Among other stocks in focus, Alibaba fell for a second day, shedding 3% on further profit taking following its stellar IPO debut. This morning, Japan and Korea indices are trading lower at -0.6% and -0.3%, respectively. Expect a soft open for Singapore, and continued dull activity as investors stay on the sidelines. Immediate topside resistance seen at 3,330 where the 20 and 50-day moving averages are converging. Downside support remains at 3,280 level. Nevertheless, the rig builders segment may get a slight reprieve after a foreign broker issued a bullish initiation report on Keppel Corp, and on new order wins by SMM and Cosco. Stocks to watch: *SMM: Secured a US$190m contract with Bechtel, to fabricate LNG processing modules for deployment in a Western Australia resource project. Work is expected to commence from Nov’14. *Cosco: Its 51% owned Cosco Shipyard Group secured contracts valued at ~US$230m to build one 21,000dwt module carrier and one floating accommodation unit (FAU). Deliveries are scheduled for 2Q16 and 1Q17, respectively. Cosco also secured options for five additional FAUs. *OEL: Non-binding MOU with Shao Tianping to acquire 60% to 100% of Hong Kong firm, Allied Resources, for between $22.5m and $37.5m. Allied Resources holds a 50% stake in Qian An Oilfield Development, which is involved in extracting oil and natural gas from two producing oilfields in China. PetroChina owns the other 50% stake in Qian An. OEL will begin due diligence and work towards finalizing the agreement within 60 days. *Global Invacom: Acquiring OnePath Networks, an Israel incorporated company with principal activities in telco solutions for the commercial, government and military markets. The deal is conditional upon satisfaction of certain conditions, expected to take place in ~45 days. *Pteris: Awarded a Rmb227m contract by Zhengzhou XinZheng International Airport for the supply and installation of Airport Passenger Boarding Bridges, which will contribute positively to Pteris’ earnings in FY14. *SMRT: JV with Toshiba to supply energy efficient propulsion systems to mass transit operators in global markets (excl. Japan). The technology, called Permanent Magnet Synchronous Motor, will cut power consumption of SMRT’s first generation trains by 30%, reduce noise levels and is maintenance-friendly. *Ying Li: The share placement to China Everbright (CEL) has been completed and the latter is now the second largest shareholder of Ying Li with a 14.9% stake. Accordingly, CEL has appointed two directors to join Ying Li’s Board. As part of their growth plans, CEL and Ying Li are currently exploring several mix-use development projects in China’s first-tier cities. *China Sunsine: Says that it organised a plant visit for analysts and investors to its Shandong factories between 15 and 18 Sep. There were subsequently a few positive reports issued by certain brokerage houses, which has led to heightened public awareness of the company, and may explain the higher volume and price movement of its shares. *Versalink: The Malaysia-based office furniture maker will make its listing debut today. The group offered 37m invitation shares at $0.30 each. Its public offering comprising 1.5m shares was 12x subscribed.

Tuesday, September 23, 2014


Healthcare: Goldman updates that 3Q volume growth in Singapore healthcare market did not recover from 2Q’s weakness. International patients, particularly from Indonesia, have stayed slow in 3Q-to-date given weak IDR. Furthermore, cost inflation could pinch margins. Specifically, MOH had announced in August that eligible nurses in public healthcare facilities will get 0.5 months special bonus and 10% pay increases in addition to their normal yearly increment. The effect may spill over to private healthcare facilities in order to stay competitive to employees. With an almost saturated market, expansion into overseas is crucial. IHH and Raffles are expected to take the initiative to enter China market after the government opened doors to wholly-foreign owed private hospitals in Beijing, Tianjin, Shanghai, Jiangsu, Fujian, Guangdong and Hainan. IHH and Raffles Medical are the two stocks being watched. While IHH had gained some 15.9% in the last three months, Raffles Medical is almost flat at +0.8% during the same period. IHH has 6 Buys 7 Holds 9 Sells; Raffles Medical has has 5 Buys, 4 Holds, 2 Sells.

Rex Int'l

Rex Int'l: ($0.615) Twin equity boost from prominent investors Alan Wang and Fidelity Shares of Rex International may get a boost after SGX filings showed that prominent investors Alan Wang and Fidelity Worldwide Investment (FIL) were the cornerstone investors in a recent share placement, leading them to become new substantial shareholders. Recall, Rex recently completed the placement of 168m new shares at $0.57 each. The net proceeds of $93.5m will be used to settle liabilities and working capital of Rex Technology Management (20%), for field development (60%) and to pursue existing and potential new business opportunities (20%). FIL picked up 70m placement shares, lifting its stake from 0.17% to 5.7%. Wang’s stake vaulted to 5.1% from 1.1%, after he took up 52m shares. Accordingly, parent Rex Commercial’s stake dropped to 44.1% from 50.9%, following the corporate action. The entry of two respected fund managers as substantial shareholders may lift sentiment in Rex’s shares. In particular Wang’s share transactions may be closely followed by some admirers. Wang is noted for his string of high-profile investments in stocks like HanKore, Memstar, Sarin, Sino Grandness, Asiatravel.com and UE E&C, all of which recorded significant share price outperformance subsequent his purchases. Rex trades at 2.5x proforma P/B.

Sing Post

Sing Post: stock still looks to be trading range bound between $1.70 - $1.80. While the indicators suggest slightly positive near term momentum, traders would prefer to wait for a break out of the range as a confirmation of the next directional trend.

Genting HK (technical)

Genting HK: the counter has likely bottomed out from the $0.37 trough. Near term momentum looks positive, with the RSI and MACD indicators steadily rising, and having recently emerged above neutral levels. The huge volume spike today, mainly due to a 66.6m married share deal at $0.395 that took place at 11.07am , could prompt traders to watch the counter more closely. Although downside appears limited to $0.37 support, would prefer to wait for a close at $0.405 or higher (ie. above the 200day MA) , as a bullish breakout signal for the stock to head towards the medium term resistance at $0.44.

Lian Beng

Lian Beng: Maybank-KE has an unrated report on Lian Beng with a fairvalue of $0.96. Lian Beng ended FYMay14 strong, driven by broad based improvements in almost all business segments. The construction orderbook is expected to remain over the $1b mark, while earnings from the property segment would be led by Spottiswoode and Midtown development. Lian Beng’s recent diversification into the Leng Kee motor belt and Australia’s residential and hotel segment also suggests that management is proactive in seeking new market opportunities to offset the sluggish domestic residential property segment. Recurring income base is expected to grow to 18% of pretax by FY16 with the addition of asphalt-premix, higher contributions from its workers dormitory in Mandai and concessions to a new granite quarry. We believe that markets are not pricing in Lian Beng’s stellar margins in the construction business and future proceeds from its property development and investment segment. The group’s growing stream of recurring income would help mitigate earnings volatility in an industry that is susceptible to cyclicality.


Vard: OCBC sees an industry de-rating. Vard's share price has tumbled 19% since announcing 5 Aug that it has received additional tax claim of NOK200m from the Brazilian tax authorities. Also Vard's share px has been impacted by the sharp dip in oil px. Given the uncertainties, OCBC lowers its PE target for Vard from 10x to 9x, cuts earnings forecasts. Maintains Hold on Vard with lower TP of $0.94 (from $1.12)


ECS: shares halted. ECS has been informed by its parent VST Holdings (856 HK) that its free float has fallen below the requisite 10% . ECS is seeking clarification on VST's intention with regards to the reinstatement of the requisite public float, and is seeking guidance from SGX.

China Sunsine

China Sunsine: CIMB visited the group's facilities over 15-18 Sep. Notes while the operations of some key competitors have been suspended due to environmental issues, Sunsine has expanded its market share and profitability, thanks to its continuous implementation of adequate environmental standards. Since IPO in 2007, Sunsine 's capacity has expanded by almost threefold , and the group is now the global leader in rubber accelerators. It boasts a diversified customer base and serves more than 60% of the top 75 global tyre makers, including Bridgestone, Michelin, Goodyear, Sumitomo, etc. As the rubber chemical industry continues to undergo structural reform, this will provide Sunsine with the opportunity to further consolidate its market share through potential M&A. CIMB believes Sunsine's recent improved profitability may warrant a relook at the stock. Says in a blue sky scenario, Sunsine could be worth up to $0.65 if pegged to the peer average of 8.9x CY15 P/E. CIMB does not have a rating on the counter.

First Ship Lease Trust (FSL)

First Ship Lease Trust: Is a business trust that charters bareboats and commercial ocean-going transportation vessels. Its portfolio of vessels consist chemical tankers, product tankers, crude oil tankers, containerships and dry bulk carriers. Maybank-KE met with management and highlights a potential turnaround. After 10 quarters of losses, it has turned profitable in 2Q14 with net profit of US1m. FSLT had earlier breached debt covenants in Jun 2012, but is currently compliant with relaxed covenants. FSL has been paying down its debt at a run rate of US$44m a year, and if market conditions improve, it could even meet the original covenants. Maybank-KE guides that the potential upside comes from meeting the covenants, citing two metrics in which investors will value the company: 1) Market value of fleet – Since it is asset heavy, the liquidation value should be the floor of the unit price. If FSL can comply with the original value-to-loan convenant of 125%, the fleet is worth about US$424m at current market price, or $0.181/share. 2) Dividend yields – Since suspending dividends from the breach of covenant has caused an overhang in the trust, any dividend resumption should be a potential catalyst. When the VTL covenant of 125% is met, interest costs would be lowered and the trust could start paying dividends then. FSL is currently trading at ~0.2x P/B

Genting SP

Genting SP: Morgan Stanley upgraded the stock from equal-weight to Overweight and raised TP from $1.25 to $1.30 noting attractive valuation (9x EV/FY15E EBIDA) and four upcoming catalysts: 1. Japan – could legalize casinos in 4Q14, GENS is a front-runner and could outperform in near term 2. S.Korea - Ground breaking at Jeju likely in 1H15, Jeju gaming market would benefit from visa-free entry and potential residency for Chinese visitors 3. Singapore – opening of Jurong Hotel in mid-2015 is on track and mass market volume is expected to drive profitability 4. Macau – gaming market declining, GENS’ Singapore market relatively outshines peers with large exposure in Macau

SG Market (23 Sept 14)

US shares ended lower, with the S&P 500 suffering its biggest one-day drop since early Aug, on weaker-than-expected housing data and renewed anxiety about China’s economic growth. The DJIA dropped 107 pts to 17,173 (-0.6%), after ending last week at an all-time high. The S&P 500 declined 16 pts to 1,994 (-0.8%), and the Nasdaq tumbled 52 pts to 4,528 (-1.1%). About 6.3b shares changed hands on the US exchanges, 11% above the three-month average. The VIX, a volatility gauge and indicator of market risk, surged 13% to 13.69. Concerns about the level of growth in the US economy resurfaced, after the National Association of Realtors reported that existing home sales fell 1.8% in Aug, reversing from four straight months of gains. Accordingly, homebuilder stocks were amongst the biggest losers, with Toll Brothers down 3.1% and KB Home and Lennar both shedding 2.8%. Momentum stocks also sold-off, particularly in the internet, solar, and enterprise sectors. Following its stellar IPO debut, Alibaba succumbed to profit taking and declined 4.3%, leading Yahoo, which owns a 22.4% stake in Alibaba, to plunge 5.6%. Other tech plays were also weak - Amazon.com (-2.1%), Netflix (-3.2%) and Tesla Motors (-3.6%). Among other stocks in focus, Clorox jumped 7.4% after the detergent and household-goods manufacturer raised its 2015 profit outlook and announced plans to shut down its Venezuelan operations. Meanwhile, Sigma Aldrich surged 33.2% after Merck KGaA said it was buying the company for US$17b. With sentiment was crimped by a recent run of soft economic data in China, eyes will be on China’s HSBC PMI due this morning. Another poor read will underscore weakness in the world’s second largest economy and could prompt further market declines. This morning, Korea and Australia are trading lower at -0.5% and -0.3%, respectively. Japan is closed for holiday. Expect a soft open for Singapore, and continued dull activity as investors stay on the sidelines. Immediate topside resistance seen at 3,330 where the 20 and 50-day moving averages are converging. Downside support remains at 3,280 level. Iskandar-related stocks in particular, may be harder hit, after news reports that even CapitaLand has had to delay the launch of its Danga Bay development in Iskandar, pending key approval from the Johor authorities. Stocks to watch: *Vallianz: Acquiring the entire stake in JetLee Shipbuilding & Engineering and a 99% stake in PT United Sindo Perkasa (PTUSP), which owns a fabrication and engineering shipyard located in Batam, Indonesia. The consideration of $19.8m will be satisfied by the issue of ~143.3m new Vallianz shares at an issue price of $0.138. *Pacific Radiance: Acquired the remaining 40% of CrestSA from Soon Aik Marine Engineering for an aggregate sum of $2m, making CrestSA a fully-owned subsidiary. *Wee Hur: Secured a $157.7m contract from HDB for a Punggol West project, raising order book to $404.9m. Works will commence in Oct’14 and expected to end by May ’17. *Tritech: Won two contracts worth $13.8m from the LTA, for the construction and completion of Marina South station and Gardens By The Bay stations on the Thomson Line. Work commenced yesterday and will be completed by 30 Dec ‘20. *CNA: Will record a $6m gain on its 4.7% stake in Urbanise, after the latter successfully listed on the ASX yesterday. Urbanise, which delivers industry-specific cloud-based solutions, had an offer price of A$0.50 and ended the day at A$0.70. *Trek 2000 International: In preliminary discussions with potential partners to collaborate on joint technologies development and commercialisation. *China Energy: In connection with its proposed voluntary delisting, offeror Lianguo Int’l has an on-going exit offer of $0.052 per share that closes on 7 Oct. Accordingly, the last day of trading of China Energy shares will be 29 Sep, and the counter will be suspended thereafter.

Monday, September 22, 2014


SGX: SGX has introduced a new research and company fundamentals portal on its website. The portal, called SGX StockFacts, is powered by S&P Capital IQ and has features such as: 1) Comprehensive research database, covering stock fundamentals for all SGX-listed companies 2) Customised search, giving investors flexibility to filter stocks across 20 screening criteria (although only four screening criteria can be used at any one time). 3) New proprietary tools, including S&P Capital IQ Alpha Factor Composites, which ranks stocks based on eight investment style classifications (e.g. valuation, earnings quality, volatility etc) 4) Ability to chart a company’s financials for the past five years. Investors can plot charts using up to two criteria (e.g. revenue and gross margins), to visualize trends. 5) Downloading and printing of company snapshots for easy analyzing. We think the portal is nifty tool for retail investors who are keen on exploring and understanding companies’ fundamentals. We also like its friendly user-interface. Aside abovementioned features, we also think retail investors would appreciate certain qualitative tidbits like the consensus rating criterion, the peer comparison function, and the news (within a month) function.

LCD Global

LCD Global: ($0.29) Lum brothers bow out; to become JTrust's SE Asian growth platform The controlling Lum family has agreed to sell its 29.5% stake in LCD Global to J Trust at $0.30 per share. Lum brothers, David and Kelvin, will relinquish their directorships and employment with the company upon completion of the deal. Thereafter, LCD Global will be renamed to JTrust International (JTI), and the group will appoint J Trust’s CEO Nobuyoshi Fujisawa and Shigeyoshi Asano, as executive directors. Interestingly, the Lum family’s exit of their holdings comes just two months after their mandatory conditional offer for LCD Global at $0.17 per share lapsed. Back then, there were cries from minority shareholders that the offer price undervalued the stock. Affirming this view, Aspial Corp’s CEO Koh Wee Seng continued to buy shares in the open market at prices between $0.255 - $0.29 per share. Currently, Koh and Aspial own a combined 18.1% stake in LCD Global. Should J Trust also acquire Koh’s additional stake, this would trigger a mandatory general offer under SGX rules, and provide the Japanese financial services provider with an opportunity to make JTI a subsidiary. Amid a sliding yen and stagnant domestic growth, Japanese companies have been eager to seek expansion via overseas acquisitions. Accordingly, J Trust intends to leverage on JTI as a platform to conduct diversified real estate business in the SE Asia region. LCD Global currently owns a string of hotels and serviced apartments in Thailand, the UK, Vietnam and Lao PDR, as well as a 55% stake in property consultancy group Knight Frank Singapore. The counter is up 3.6% today at $0.29, and trades at 1.1x P/B.

Keppel Corp (technical)

Keppel Corp technicals - RSI indicates over-selling after consecutive days of sell-down and downward pressure. There may be some buy-back in the short-term but this is unlikely the end of the downtrend given that the previous low was broken. Support is at $10.420

GLP (technical)

GLP - Technicals appear to be heading down, although it is near the oversold level. Share price is currently testing the critical 200 day MA at $2.78, where a close below these levels could see further downside.


Rubber gloves / Riverstone: HSBC notes 1H14 has been challenging for the industry due to rising operating costs from power tariff hikes and water rationing, resulting in slight margin compression for most players. Nevertheless, the house remains positive on the glove sector, and expects share price performance to turnaround in 2H14/2015, as new capacity has been pushed back to end 2014/15 ,alleviating fears of overcapacity , while firm demand should keep utilisation high. Strong demand for nitrile gloves is a positive catalyst for the sector, and is growing in tandem with incremental capacity in the nitrile segment, and has not yet been factored in by the market yet, in HSBC's view. The house remains Overweight on the sector. While HSBC does not cover Riverstone , the stock price has been steadily rising on the back of its new capacity rollout. UOBK has a Buy rating with TP $1.14 , NRA has a Neutral rating with TP $1.01 , and CS (no rating) recently visited the company.


Hyflux: Lost bid for PUB’s Changi NEWater BOT project to 80:20 consortium formed by Beijing Enterprise Water (371 HK) and United Engineers (UE). The project will have daily treatment capacity of 228,000 tonnes under concession of 25 years. While the contract value was not announced, Maybank-KE estimates it to be ~$180m. This is a piece of negative news as Changi NEWater was one of the key projects eyed by Hyflux this year. However, this does not come as a complete shock to Maybank-KE as the competition for new projects has been fierce, given a dearth of large contracts globally in the recent two years. Hyflux had been making core net losses over the past two quarters. The nearest catalyst for the stock maybe the financial close of its Dahej Spring project in India, but in the short term, expect Hyflux’s stock price to be dogged by a low orderbook and weak earnings visibility. As the project was not accounted for in forecasts, Maybank-KE maintains Hold with the same TP at $1.07 for Hyflux. This implies a 25x FY16E P/E. Meanwhile, the house prefers HanKore and SIIC for water-sector exposure.

China Sunsine

China Sunsine: ($0.42) Positive vibes from China plant visit; expect more follow-up coverage Earlier this week, China Sunsine organised a site visit to three of its production facilities in Shandong, China. The tour began at Sunsine’s headquarters in Shanxian in inland Shandong, then to a smaller facility in nearby Dingtao, before concluding at the Weifang facility. The latter is located in northeast Shandong, and mainly produces for export (~40% of group sales) via Qingdao port to the east. Attendees comprised a mix of private investors, five analysts and two journalists. Reactions were mostly positive, as management showcased new add-ons to cut costs and boost production, particularly in the antioxidant and insoluble sulphur product categories, which should provide another leg up for the group’s longer term growth. Key takeaways: - At Shanxian, Phase 1 of the new Guangshun heating plant will kick off operations next month. Constructed at a cost of ~Rmb115m, the plant will provide steam and electricity mainly for Sunsine’s use, and help the group achieve an estimated Rmb40m of cost savings annually. - In addition, Sunsine has achieved ~50% utilization for Phase 1 of its 6PPD antioxidant line (15k mt/yr output). Seeing strong product demand, management will bring forward its production target by a year, and is on track to commence Phase 2 production (15k mt) by early 2015 once the current test trials are completed. - At Weifang, the plant is prepping new lines that would potentially add capacity for DM accelerator (8k mt) and insoluble sulphur (10k mt). Meanwhile, we observed that Sunsine’s existing lines were mostly running at full capacity, and even the warehouses were low on stocks of finished products, reflective of the tight supply for rubber chemical products. Recall, a number of Sunsine’s peers were suspended or forced to shut down, in the wake of a government anti-pollution clamp down, particuarly in the Beijing-Tianjin-Hebei (BTH) hub. Management believes the supply-demand conditions will not normalize soon, as the BTH region supports an increasingly dense urban population and will likely seek to further reduce the presence of heavy industries over the longer term. Fortunately for Sunsine, its facilities are located in designated industrial zones, and the group is now reaping the rewards of its past investments in environmental protection equipment – representing roughly a third of capex spend. Such industry developments have caught the attention of the China analysts, resulting in a chorus of bullish calls being made on Sunsine’s closest peer, Shenzhen-listed Shandong Yanggu Huatai (YGHT), which is also viewed as a beneficiary. Yet, a language barrier has resulted in Sunsine being grossly overlooked by the street and local investors. Sunsine shares trade at just 3.9x annualized 2Q14 P/E - an undeserved 90% discount to YGHT’s 47x forward P/E. We do not rule out room for substantial price discovery once investor awareness improves, with analysts and the media likely to pick up coverage on Sunsine soon. Assuming an upward re-rating to the average 7x P/E for the Singapore-listed chemicals manufacturers, Sunsine would trade at $0.75 (~80% upside from current levels).


Smartphone casings / Hi-P: Deutsche is positive on the Asian metal casings sector given, i) the design trend for thinner, lighter mobile devices and with larger screens, and ii) Apple's preference (86% adoption rate) for using metal casings for the iPhone, iPad and Macbook, and iii) a rising adoption rate from non-Apple brands, and iv) higher entry barriers in casing manufacturing and surface treatment. The house is less concerned about the over-supple risk within three years, , and believes the better product diversification and low growth base will help boost revenue, margins and EPS momentum for Taiwan and HK players like Catcher, Casetek , Ju Teng and Tongda. In S'pore, Hi-P is a key beneficiary of such trends.


IREIT: Barclays initiated coverage with Equal-Weight recommendation on the stock, in line with the Neutral view on the industry. DDM-derived TP is $0.93, with forward yield of ~6.5%. Main merits for investment include: 100% occupancy with WALE of 7.6 years to offer stable yields, and (ii) potential rental uplift as lease agreements provides for rent adjustment each time German CPI crosses 5%, 7% or 10%. However, near-term SGD DPU is more likely to decline in view of expected EUR depreciation. DPU-accretive third-party acquisitions are needed to lift DPU out of the base-case of -1.4%/-0.6% DPU contraction in FY15E/16E respectively. IREIT seems fairly priced as it currently trades in the mid-range of peers yield spreads over German 10-yr bunds, but are susceptible to key risks including (i)hedged exposure to EUR, with the house expecting 13% depreciating of EURSGD over next 12 months, (ii) tenant concentration risk, with 79% of NPI from Deutsche Telekom, (iii) uncertainty of rental growth, (iv) key shareholders risks, two major shareholders together own 76.4% stake, (v) interest rate risk. Among REITs, the house recommends exposure to Singapore office REITs for near-term cyclical upturn with CCT and KREIT as the top picks.