Wednesday, December 31, 2014


STATS ChipPAC: Jiangsu Changjiang Electronics Technology (JCET) is making a pre-conditional voluntary offer to acquire all of STATS for US$780m or $0.466/share. The preconditions include: 1) Internal restructuring to transfer all its shares in its Taiwan subsidiaries to a new Singapore subsidiary (NewCo), as these are not within the scope of the offer. 2) Capital distribution of US$15m cash and all its shares in NewCo to shareholders, who can elect to receive the distribution fully in cash (~US4.05¢/share) or NewCo shares. Note that NewCo will not be listed on SGX or any other stock exchange. 3) Non-renounceable rights offer of US$200m perpetual securities to repay debts and strengthen its financial position. Unless there is a competing bid, JCET does not intend to revise the offer price. If the privatization goes through, JCET aims to increase their testing capabilities, plus gain access to STATS’ global customer base with this acquisition. The acquisition is also expected to boost JCET’s economies of scale, given the additional capacity. That said, JCET does not intend to make major changes to STATS’ business operations nor its management team. JCET is the largest electronics packaging player in China, and is listed on the Shanghai Stock Exchange. It reported over US$830m of net revenues in 2013, and has five manufacturing facilities in Jiangsu and Anhui provinces. Loss-making STATS ChipPAC is currently valued at 0.86x P/B, while JCET is trading at 2.9x P/B and 48x forward P/E. The street has 8 Buys and 1 Hold on JCET with a TP of Rmb15.

SG Market (31 Dec 14)

S’pore shares are expected to open lower this morning, following the weak performance on Wall Street overnight, although trading activity is expected to remain tepid, in a shortened trading session. From a chart perspective, downside support for the STI could be found at 3,360 (resistance turned support) followed by 3,307 (20-dma), with upside capped at 3,388. Stocks to watch *Ying Li: Together with China Everbright (CEL), will invest and participate in a mixed-use development project in the central area of the Beijing Tongzhou District. The 750,000 sqm GFA development is its first foray beyond its conventional Chongqing market. Ying Li’s investment is Rmb559m, which will be funded by the proceeds from the convertible bond issue and share placement to CEL. *STATS ChipPAC: Jiangsu Changjiang Electronics Technology (JCET) is making a pre-conditional voluntary offer to acquire all of STATS for an aggregate US$780m purchase price, or $0.466/share based on current diluted share capital. The offer is pre-conditioned on an internal restructuring exercise, a US$15m capital reduction and a US$200m perpetual securities offering. *Hafary: Proposed partial offer for 51% stake by Malaysian-listed Hap Seng at an offer price of $0.24/share. This is expected to bring about synergistic benefits as the group’s tile business complements Hap Seng’s building materials market, and Hap Seng can assist in Hafary’s regional expansion. *Vallianz: Acquiring 45 ordinary shares representing 45% of the issued and paid-up share capital of Holmen Heavylift Offshore for a total cash consideration of US$2.9m. The acquisition of interest in Holmen will diversify Vallianz’s product offering to include construction support vessels. *Kitchen Culture: Clinched ~$6.2m worth of contracts during the five months between Jul to Nov ‘14. As at 30 Nov ‘14, the group’s order book stands at ~$50.1m, of which about $4.1 m in contracts were secured by Kitchen Culture Hong Kong, a JV of Kitchen Culture. *Raffles Education: Has signed the Deeds of Sale pertaining to and in completion of the acquisition of Hotel Nendaz 4 Vallees and the seven commercial units within the hotel complex, in Nendaz, Switzerland.

Tuesday, December 30, 2014

SG Market (30 Dec 14)

S’pore shares are expected to open lower this morning, taking cue from regional markets. The MSCI Asia Pacific Index is down 0.1%, weighed by material and energy producers, as oil sank overnight to its lowest level in more than five years. Trading activity is however expected to stay muted till next week, as we head into the new year in 2015. From a chart perspective, downside support for the STI could be found at 3,360 (resistance turned support) followed by 3,307 (20-dma), with upside capped at 3,388. Stocks to watch: *KrisEnergy: Indonesian government has approved the plan of development for the Lengo gas field in the Bulu production sharing contract offshore East Java, which will allow KrisEnergy to pursue formal negotiations for gas sales agreements with potential offtakers. Production is anticipated to commence ~24 months after the JV partners declare final investment decision and is expected to plateau at 70m cubic feet per day. *Compact Metal: Entered into a conditional placement agreement with SL Capital Ventures, which will see Compact Metal place out 160m new shares to the latter, at an issue price of $0.05. The proceeds for the proposed placement are intended primarily for the investments in the new cement business to be carried on by the group. *Lasseters International: Proposed renounceable non-underwritten rights issues of up to 249.5m new shares in the company at an issue price of $0.06 for each rights share, on the basis of one rights share for every one existing share held. Proceeds from the rights issue will be used to strengthen the financial position and capital base of the company and enable the group to be less reliant on external sources of funding, thereby potentially incurring lower external funding expenses. *Chaswood: Announced its expansion to East China with the opening of its first Bulgogi Brothers outlet in Changning district, Shanghai. *Guocoland: Associate Tower REIT announced that it will dispose of all 19 office parcels and 190 car park bays within Menara ING to Goldstone Kuala Lumpur for a cash consideration of RM132.3m.

Monday, December 29, 2014

Otto Marine

Otto Marine: Sold an AHTS vessel to a renowned buyer for US$100m. The vessel is currently under construction in the Batam shipyard. Upon completion, the vessel will be chartered by the company’s subsidiary GO Offshore (L) Private Limited for a period up to 8 years. This is expected to be earnings accretive for Otto Marine’s FY14 performance. Share price was up 4.3% to $0.048 this morning. Otto Marine is trading at forward P/E of 11.6x and 0.5x P/B. The street has a Buy, Hold and Sell call each on the counter, but does not have a consensus TP.

Parkway Life REIT

Parkway Life REIT: Maiden divestment of 7 Japanese nursing homes for a total consideration of $88.3m and an expected divestment gain of $12.3m. Divestment proceeds are likely to be used for further yield accretive acquisitions as part of PREIT’s asset recycling initiative. While CIMB says FY15-16 DPUs and DDM-based TP drops by ~4% as a result, it is likely temporary and should reverse as yield-accretive acquisitions comes into the picture. CIMB likes PREIT’s stable underlying portfolio, and maintains Add with TP of $2.53

Keppel Corp

Keppel Corp: Keppel Corp has won a timely contract valued at over US$100m, to build one of the world’s largest land drilling rigs for a major operator. Scheduled for delivery in mid-2016, the rig will be capable of operating in harsh conditions. Separately, we note that the group recently initiated its share buy-back program on 10th Dec, and has to date purchased a total of 5.9m shares at between $7.91 and $8.54 each, suggesting the group's confidence in its longer term outlook. The rig builder is authorised to purchase a max of 90.8m shares via share buy-backs. While the latest contract is not expected to have a material impact on the net tangible assets or earnings per shares on Keppel Corp for FY14, it brings the group’s orderbook to ~$11b, with deliveries extending into 2019. At the current price, Keppel Corp trades at 10.3x forward P/E versus its historical 10 year average of 12.4x. Overall, Maybank-KE rates Keppel Corp as a Hold, with TP $9.00, preferring to await further clarity on oil price outlook, before positioning for any entry. Technically, the house tips key support levels at $8.51 followed by $7.53 and key resistance levels at $8.53 and $9.63.

Nam Cheong

Nam Cheong: Nam Cheong has sold two vessels worth ~US$45m, consisting of one AHTS to Netherlands-based repeat customer, Vroon, and one PSV to West Africa-based repeat customer, E.A Temile Development Company. Nam Cheong guides that despite the recent volatility in global oil prices which has affected investor sentiments across the industry, the securing of these orders from its repeat customers evidently reveals the continued interest in oil and gas activities, and the group’s strong reputation in the market for quality and reliable vessels. The order wins from foreign clients also suggest that Nam Cheong has broadened its customer base, which lowers its geographical concentration risks, and placing it in good stead to weather the fluctuations in oil prices. As a guide, shallow water projects (which are the focus area of Nam Cheong vessels) require oil prices to be at US$25 – US$50 per barrel in order to be profitable, while deepwater projects typically require prices to be as high as US$70 a barrel in order to breakeven. This provides a reasonable margin of safety to the group. The latest orders bring the group’s order book to ~RM1.7b, stretching revenue visibility over the next two to three years. At the current price, Nam Cheong trades at an undemanding 5.4x forward P/E.


Oil: Macquarie opines oil could stay at low US$60s/bbl for years, or as long as it takes for OPEC to drive out US shale or to reduce Putin’s power. Hence, positioning for cheap oil will be the key to outperformance in the next 3 years as oil prices are likely a key driver of growth, inflation and interest rates. Assuming oil stays at such prices, Macquarie recommends: Buy Consumer Exposures, esp US/Europe: Cheap oil is a tax cut that benefits low-income consumers most. Highest leverage include food, soda, retail, media, tobacco and beer. Safe to hold yield names for another year: Low oil prices will hold down inflation, keeping Fed on hold for longer, while supporting the case for QE in both Europe and Japan. These will support bond prices and delay a yield sell-off. Housing to accelerate in the USA and China in 2015: The positive effect on US consumers form low oil and low mortgage rates should drive US new home construction. Policy easing should drive a recovery in China property. Latest data suggests a trough in house price growth, which is bullish. Alternative energy will be under pressure. High oil prices the case for alternative energy compelling. With lower oil, gas and coal prices, the economic cost rational for alternatives is dissipating. Macquarie thinks Tesla shareholders should watch out. Macquarie top O/W on US, on tailwinds like cheap nergy, long housing recovery and globally dominant software sector. Valuations can continue to rise until Fed starts to hike. Macquarie like Wells Fargo, FedEx, Union Pacific, Dow Chemical and Liberty Global. It also has Buys on Google and Apple but would short Market Vectors Global Alternative Energy ETF

Insider and buyback transactions

Insider and buyback transactions for week ending 26 Dec: Asia Insider notes that buying declined while selling recovered last week. Buys: 12 companies made 14 purchases worth $3.1m vs. 25 companies, 49 purchases worth $6.76m Sells: 2 companies with 2 disposals worth $9.4m vs. nil sales by directors last week Buyback: 12 companies made 27 repurchases worth $10.2m, vs. 16 companies, 64 repurchases worth $64.5m. Notable transactions: - Keppel Corp: Made repurchases of 5.93m shares at $8.20 between 10-19 Dec, its first since 2000. Temasek bought 3m shares at $8.43 on 18 Dec. Temasek had previously disposed 1.32m shares on 5 Aug a $10.93. CEO Loh Chin Hua made his maiden on-market trade since the January appointment with 100,000 shares purchased on 15 Dec at $7.97. Chairman Lee Boon Yang purchased 100,000 shares on 11 Dec at $8.22. - Sarine Technologies: Bought back for the first time since Sep’12 with 500,000 shares purchased at $2.31. Independent director Chan Kam Loon bought 25,000 shares at $2.37, increasing his stake by 5% to 0.16% of issued capital. - Singapore Press Holdings: Bought back for the first time since Dec’13 with 500,000 shares purchased on 22 Dec at $4.17, slightly higher than the $3.98 price it paid for 2.5m shares purchased between Aug-Dec last year. CEO Alan Chan Heng Loon sold 100,000 shares on 20 Nov at $4.32. - A-Sonic Aerospace: Executive director Irene Tay Gek Lin recorded first on-market trades since Apr’2009 with 130,000 shares purchased at $0.065, on the back of a 31% drop in share price since July from $0.094. CEO Janet LC Tan bought 30,000 shares on 8 Dec at $0.072, boosting her direct stake to 364.2m shares or 50.88%. - Karin Technology Holdings: Chairman Philip Ng Yuk Wing resumed buying with 160,000 shares purchased at $0.30, on the back of a 16% price decline from $0.355 on 8 Dec. He previously acquired 10,000 shares on 18 Nov at $0.30.

Sheng Siong

Sheng Siong: Executed a conditional JV (60% owned) with Kunming Luchen Group and Tan Ling San to operate supermarkets in China. Tan Ling San will be responsible for the administration and implementation of Sheng Siong’s policies and strategies and evaluating new growth areas for business. He had previously founded and served as the executive chairman of PSC corporation. Meanwhile, LuChen is in the business of manufacturing and distributing food products like sauces and condiments.

SG Market (29 Dec 14)

S’pore shares are likely to open higher on the back of the festive cheer on Wall Street last Fri but trading activity is expected to stay muted till next week, as we head into the new year. Asian markets are trading slightly higher this morning, with the MSCI Asia Pacific Index up 0.1%. From a chart perspective, upside on the STI may be capped by near term resistance at 3,360 with downside support at 3,280. Stocks to watch: *Keppel Corp: Won a contract valued at over US$100m to build one of the world’s largest land drilling rigs for a major operator. The harsh environment rig is scheduled for delivery in mid-2016. *Nam Cheong: Sold two vessels worth $45m, comprising one AHTS to Netherlands-based repeat customer, Vroon, and one PSV to West Africa-based repeat customer, EA Temile Development Company. The latest orders bring the group’s order book to ~RM1.7b. *Otto Marine: Sold an AHTS to an unrelated third party for US$100m. The transaction is expected to have a positive contribution to the NTA and EPS of the group for FY14. The group’s net order book stood at US$500m as at 30 Sep ’14. *TEE Land: Entered into a 55%-owned JV (Potts Point Hospitality) with Peter & Jan Clark and Kenmooreland to acquire the 76-room, 4-star Diamant Hotel in Sydney for A$23.2m. The acquisition is part of the group’s strategy to build up a portfolio of recurring income generating assets in developed markets. *Isetan: Will cease its own retailing operations at Isetan Orchard, Wisma Atria from 2Q15. However, the group it will continue retailing and F&B services by securing new tenants and providing the necessary facilities management. *Sheng Siong: Executed a conditional JV (60% owned) with Kunming Luchen group and Tan Ling San to operate supermarkets in China. *TT International: Announced that its Big Box property - Singapore’s largest warehouse retail mall - has opened its doors to shoppers on 27 Dec '14.

Friday, December 26, 2014


Sarine: Following recent concerns in regards to the challenging diamond industry conditions and its upcoming 4Q results, Sarine has guided for 4Q14 revenue to be in line with or slightly better than those of 4Q13, notwithstanding the challenges currently faced by the diamond industry. Management strongly believes that the group will be profitable for the quarter, which will allow it to recommend during its AGM to approve a final dividend for the year in accordance with its published dividend policy. Overall, Maybank-KE continues to rate Sarine at Hold with a TP of $2.98, pending better credit conditions for the industry, faster penetration for Sarine’s GalaxyTM, Sarine LightTM and Sarine LoupeTM and new game-changing products. Following the recent sell-down, Sarine now trades at 20.4x forward P/E, compared to its three-year historical average of 15.0x.

SG Market (26 Dec 14)

S’pore shares are likely to consolidate its recent gains with some cheer coming from the latest supportive policies from China. Trading volume is expected to remain tepid till next week, as most investors continue their festive celebrations into the New Year. Asian markets are trading relatively flat this morning, with the Nikkei inching up 0.01% and the Kospi down 0.04%. From a chart perspective, upside on the STI may be capped by near term resistance at 3,360 with downside support at 3,280. Stocks to watch: *Wee Hur: Acquiring a plot of land in Brisbane for ~A$51.3m. To complete the land acquisition, the group will need to, at a later date, acquire an additional 2,194 sqm of land for A$5.2m, bringing the combined land area to 1.91 ha at a total cost of A$56.5m. Wee Hur intends to use the land for a mixed-use development comprising residential, retail and office units. The acquisition will be funded by internal resources. *Poh Tiong Choon: To redevelop warehouse and office at 42 and 48 Pandan Road for $128m, funded by internal funds and debt. The total gfa of the project is ~101,590 sqm and construction is expected to commence in Dec ‘14 and targeted to complete in two phases by Feb ‘18. Subsequently, lease at the sites will be extended for a further 24 years and 4 months from 1 Jul ‘19. *Sarine: Expects revenue for 4Q14 to be in line with or slightly better than 4Q13, despite the challenges currently faced by the diamond industry. Management strongly believes that the group will be profitable for the quarter, which will allow it to recommend during its AGM to approve a final dividend for the year. *Straits Trading: Sold wholly-owned STC International Investment Holdings (formerly known as RendezvousHotels Asia) to Baijia International Group (Hong Kong), for Rmb19.3m ($4.1m), above book value of $3.9m as at Sep ‘14. *Rotary Engineering: Disposed its entire 40% equity interest in ITRO for $3.2m. *TPV Technology: Granted exclusive right and license to use the Philips Trademark in Hong Kong from 1 Jan ‘15 until 31 Mar ‘17.

Wednesday, December 24, 2014


Boustead: Proposed to undertake a demerger of up to 49% stake in wholly-owned Boustead Projects (BP), by way of a distribution in specie to current shareholders. Subsequently, BP intends to seek listing on SGX's Main Board. However, no details have been given at this point on the number of shares that would be distributed. We opine that through the restructuring, Boustead will be able to unlock "hidden value" through more reflective valuations for the separate entities- holding co and real estate business, as opposed to having an appended conglomerate discount. BP is the group's real estate solutions provider with core engineering expertise in the design-and-build and development of build-to-suit projects comprising industrial facilities, industrial parks and business parks for multinational corporations and local enterprises. Its portfolio contains 14 industrial properties (13 Singapore, 1 China) worth an estimated market value of $367.5m, marked at an aggregate $162.5m on its books (as at Sep 2014). In addition, BP also part-owns four joint investments worth $21.6m, based on their costs. These will be adjusted upwards to their market valuation of $53m pending the spin off. Going forward, the real estate entity intends to undertake more industrial projects within Singapore and expand its portfolio of properties to grow recurring income stream, and may potentially undertake the formation of an industrial REIT. Boustead sits on Market Insight’s Value portfolio, and trades at 13.8x forward P/E and 2.6x P/B. The street has 3 Buy calls on Boustead with consensus TP of $2.23.


Economics: Singapore’s headline inflation rate in Nov ‘14 fell by -0.3% y/y (Oct ‘14: +0.1% y/y; consensus: -0.2% y/y), mainly on continued base-effect from drastic change in COE premiums. Declines in the costs of housing and other items except food also contributed to the slower headline inflation. From the previous month, headline inflation was up by +0.3% m/m (Oct ‘14: -0.4% m/m). Despite the deflation, Maybank-KE expects this to be temporary as the base effect from COE premiums fluctuations gradually dissipates in coming months. The Nov ‘14 CPI headline puts the house +1.0% y/y headline inflation estimate for 2014 plausible (YTD 2014: +1.1% y/y). Core inflation rate (CPI ex-accommodation and private road transport) eased further to +1.5% y/y (Oct ‘14: +1.7%y/y). Food price increase was marginal at +2.9% y/y in Nov ‘14 (Oct ‘14: +2.8% y/y) on price increase for both non-cooked food and prepared meals. Going forward, Maybank-KE expects inflation rate of around 1.0%-1.5% in 2015. The tame inflation outlook reflects continued volatility in transport cost and depressed housing cost, which would offset the tight job market conditions as well as stable-to-soft global commodity prices.

SG Market (24 Dec 14)

S’pore shares may get a slight lift from Wall Street’s record busting run but trading volume is likely to remain lethargic in view of the half-day trading session as we head into the Christmas and New Year holidays. From a chart perspective, upside on the STI may be capped by near term resistance at 3,360 with downside support at 3,280. Stocks to watch: *Economy: Singapore’s headline inflation contracted 0.3% in Nov ‘14 (Oct ‘14: +0.1%), mainly on lower costs on COE and housing. Core inflation rate (CPI ex-accommodation and private road transport) eased to +1.5% (Oct ‘14: +1.7%). *Atlantic Navigation: Acquired a new 5,150 BHP AHTS vessel through a jointly-operated company, AtlanticVenture. Atlantic Navigation will manage the vessel for 3 years, with automatic renewal thereafter subject to mutual agreement of terms. Separately, the group has also secured charter extensions for two of its deployed vessels, a jack-up accommodation barge and an AHTS vessel, with total contract value of ~US$18m. The contract comes with an option to extend for one more year, which could bring the total potential value to ~US$33m. *China Essence: Entered non-binding MOU to negotiate on a debt scheme arrangement, on account of the shortage of working capital for raw materials due to its inability to collect overdue receivables. In addition, balance sheet is also heavily burdened by debts from other financial institutions in China. *SIIC Environment: Signed 20-year supplementary concessionary agreement, with minimum off-take volume guaranteed, for its Hanxi Expansion and Upgrading Project. Recall the Rmb722m investment will expand the existing 400,000 tons/day capacity to 600,000 tons/day, with the discharge standard upgraded from the existing Grade 2 to Grade 1B. *AusGroup: Awarded a A$68.5m contract extension with CB&I Kentz Joint Venture, to continue to provide ongoing scaffold services, including the provision of key management personnel, scaffold design and engineering and coordination assistance through the supply of labour services. With the award, AusGroup’s order book stands at $486m. *Boustead: Proposed demerger and Mainboard-listing of up to 49% in its real estate solutions business- Boustead Projects (BP), through distribution in specie. Following completion of the restructuring, BP will have an estimated market valuation of $367.5m, and book value of $162.5m. *Lifebrandz: Proposed placement of 500m new shares at 0.36¢ apiece to three private investors, enlarging share capital by 16.34% to 3,060m shares. Net proceeds of $1.8m will be applied towards working capital.

Tuesday, December 23, 2014


SGX: The regulatory overhaul of the Singapore investment landscape will continue in 2015 with significant changes aimed at attracting listings, improving corporate governance and raising market quality. The most immediate change will take effect on Jan 19, namely, the introduction of board lots of 100 shares compared to the current 1,000, aimed at improving market liquidity as blue chips and index component stocks become more accessible to retail investors. Under the proposed list of changes, Mainboard-listed stocks are required to have a minimum trading price of $0.20, in an attempt to raise the quality of listing, as well as curb speculation and market manipulation. The change is target for Mar 2016 following a 12-month transition period. According to market watchers, the change may potentially cause an increase in M&A activities and share consolidation exercises.

China Everbright (Hankore)

China Everbright: Management expects the capital-intensive environmental industry to undergo consolidation, with smaller players withdrawing as competition intensifies, while state-owned enterprises benefit. The wastewater treatment industry is highly fragmented. Everbright Water has a market share by treatment capacity of about 2%. This puts it in an estimated #5 spot. In the municipal wastewater treatment segment, international players that have entered the market might be forced to retreat in the coming years, due to difficulties in raising capital, and weaker pricing power in China. Maybank-KE believes China Everbright will start acquiring aggressively given sufficient targets in its pipeline and its much stronger financials after the RTO deal. In addition, the company stands to benefit from the rising water tariffs, strong government policy support and industry consolidation, which makes bigger SOEs attractive investment opportunities. House has a BUY rating with TP of $1.26.

IPS Securex

IPS Securex: IPS Securex has signed a MOU with United Tactical Systems and Wattre Corporation to jointly collaborate on the development, manufacturing, marketing and sales of HyperWhistle. HyperWhistle is a high decibel traditional form whistle, and the intention of both parties is to develop the world's smallest and loudest whistle. IPS believes its knowledge of the Asia-Pacific markets will help in the development of the next generation of products that are relevant to the specific requirements and environments of the region. Separately, the group is proposing a 1-into-2 share split into a post split share base of 162m shares. IPS also received its maiden initiation by a local broker this month, with a Buy call and TP of $1.26, which cited its “PepperBall” as a game changer for the security group. The stock currently trades at 6.1x forward P/E, backed by an order book of $24.5m which stretches revenue visibility over the next year.


Ramba: Extended negotiations with Risco Energy Investments (REI) up to 31 Jan 2015. Recall, Ramba entered into a binding agreement with REI in Sep 2014, to transfer 25% working interest in the Lemang production sharing contract for up to US$157.5m ($201m). Although details provided on the three-month exclusive agreement are scant, we hypothesize that Ramba's agreement with a reputable investment company can be viewed as a key marker for investors who have endured the wild share price gyrations of the upstream E&P company over the past year. REI is an upstream energy investment company, with a focus in South East Asia, which seeks low risk production assets that can be immediately recapitalised and restructured for rapid growth. First, if a deal materialises, the cash consideration of $201m alone would account for more than Ramba's current market cap of $129m, not accounting for its other working interests (WI) in Jatirarangon (70% WI) and West Jambi (100% WI). Second, a pull-out on the deal by REI may signal as a red flag for investors, which may bring to question the production capability of Ramba's Lemang Block. Currently, Ramba holds a 51% working interest in the Lemang Block, located in South Sumatra, Indonesia, through PT Hexindo Gemilang Jaya, its local subsidiary. At $0.335, Ramba is valued at 2.1x P/B, compared to peers KrisEnergy (1.4x), Loyz Energy (0.4x), Interra Resources (0.7x) and Rex (1.5x).

SG Market (23 Dec 14)

S’pore shares are likely to be lifted by the global Santa Claus rally with blue-chip leading the way but trading activity is likely to slow ahead of the Christmas and New Year holidays. Looking at the technical indicators, the ADX and MACD are exhibiting bullish crossovers, which suggest that the STI may attept to test the near term resistance of 3,360 before reaching for the Jul peak at 3,388. Downside support is now re-set at 3,280, marked by the 50-dma. Stocks to watch: *Centurion / Lian Beng: Proposed 51/49 JV between Centurion and Lian Beng to develop a 7,900-bed workers accommodation and ASPRI training centre in Jalan Papan, Singapore. The development, scheduled to be completed by mid-2016, sits on 1.5ha of land with lease tenure of 23 years. *STATS ChipPAC: SilTech Shanghai (owned by HK-listed SMIC), Jiangsu Changjiang Electronics Tech (JCET) and the IC Fund entered into a co-investment agreement to form an investment consortium in connection with the proposed acquisition of STATS. SilTech, JCET and IC Fund will make total equity contribution of US$100m, US$260m and US$160m, respectively. IC Fund will also contribute a further US$140m shareholder loan towards the acquisition. *PCRT / PREHL: Perennial Real Estate (PREHL) has gained control of 96.3% of PCRT at the close of its takeover offer on 22 Dec. Trading in PCRT will be suspended wef today. PREHL will exercise its right of compulsory acquisition over the remaining PCRT units via the issue of 0.52423 PREHL shares for every 1 PCRT unit. Such a move also paves the way for PREHL to resume listing on the main board of the SGX, following its restructuring and reverse takeover of nightspot operator St James. *IPS Securex: Signed an MOU with United Tactical Systems and Wattre Corporation to jointly collaborate on the development, manufacturing, marketing and sales of the HyperWhistle - a high decibel traditional form whistle, which aims to be the smallest and loudest whistle in the world. *Koyo Int’l: Awarded a two-year contract worth $2.5m to provide maintenance of M&E systems at One Raffles Place, with an option for one-year renewal. *Del Monte Pacific: Proposed a renounceable underwritten rights issue of 641.9m new shares to raise gross proceeds of up to US$180m. The issue price will be at a 20-25% discount to a reference price on the date of receiving regulatory approvals from SGX, PSE and Philippines SEC. The funds will be used to repay a bridging facility used to partially finance the acquisition of its consumer food business. *AEI: Entered into an agreement to issue 20m new shares to Well Global Investments at a price of $0.13 per placement share (8.3% premium to the VWAP for trades done on 22 Dec). The net proceeds of ~$2.6m has been earmarked for the financing of AEI’s investment opportunities or acquisitions of other businesses or companies synergistic to the group’s operations and competence. *China New Town: Expects to make a Rmb622m provision for impairment of land development for sale at one of its subsidiaries. This will reduce the group’s FY14 net profit by Rmb339m. *Ramba: Extended negotiations with Risco Energy Investments till 31 Jan 2015, in relation to its proposed sale of a 25% working interest in the Lemang Block. *CH Offshore: Appointed Provenance Capital as the independent financial adviser for the voluntary conditional cash offer of $0.495 made by Falcon Energy. *C&G Environmental Protection: Obtained government approval for the proposed sale of its waste-to-energy business and assets to Grandblue Environment. *Sarine Tech: In response to SGX's query on trading activity, the company reiterated that the diamond industry has been, and is likely to be, during 4Q14 and early 2015, adversely affected by credit shortage, increase in polish diamond inventories, and the divergence in prices of rough stone and polished diamonds.

Rex (technical)

Rex: has staged a solid recovery after bouncing off the pyschological $0.30 support. The indicators have reversed out of oversold territory and are trending upward strongly now. If the initial resistance at $0.40 is broken, expect further upside to the $0.475 level next.

SIIC Env (technical)

SIIC Env: trading within the $0.133 and $0.15 Fibo band. With the indicators at oversold levels, and starting to reverse upward, the odds favor a recovery in share price toward the higher end of the trading range.

Parkway Life REIT

Parkway Life REIT: Purchased Japanese nursing home and care facility, Ocean View Shonan Arasaki, for ¥1.7b ($18.9m), a discount of 6% below its market valuation. The property is located in the residential area of Yokosuka City in the Kanagawa Prefecture. PLife secured a fresh 20-year master lease arrangement with the seller, Oueikikaku Kabushiki Kaisha, at an annual gross rental of ¥130.9m ($1.45m), 1.4% of PLife’s 3Q annualized revenue of $100.4m. This equates to a 6.9% NPI yield. The accretive acquisition is expected to extend the Reit's overall weighted average lease expiry (by gross revenue) from 10 years to 10.1, and raise its gearing from 33.3% to 35.1%. Market watchers reckon that the move may pave the way for future opportunities with Ouekikaku and is also part of PLife’s asset rejuvenation exercise. At 1.4x P/B and 5.4% dividend yield, PLife trades at a premium compared to its healthcare REIT peers’ valuation at 0.9x P/B and 7.4% yield. Latest broker ratings: CIMB maintains Add and raises TP to $2.63 (from $2.61)

Friday, December 19, 2014


Hyflux: Surged 6.1% today, after the group was awarded a $250m design, build, own and operate water project from government-owned, Oman Power and Water Procurement Company SAOC (OPWP). The 200,000 cubic metres per day water project which will be located in Qurayyat is something familiar to Hyflux- a seawater reverse osmosis desalination plant, similar to the one it completed in Singapore in 2013. The project is scheduled to commence commercial operation by May 2017 under a 20-year water purchase agreement with OPWP. This follows a dearth of new contracts and a depleting order book which the company has been facing, prompting dull sentiments by the street. Overall, market watchers are not optimistic on Hyflux due to its diminishing profitability margins and slower new order momentum, attributed to the weak growth in global municipal water projects. Bloomberg consensus has 0 Buys, 5 Hold and 3 Sell ratings on the counter with a 12-month TP of $1.12.

Innovalues (technical)

Innovalues: CIMB calls for a technical Sell R2: $0.53 R1: $0.50 S1: $0.44 S2: $0.41 The stock is forming a bearish wedge pattern and one more push to new highs is required to finish this pattern. The bearish divergence on both its MACD and RSI are supportive of this bearish pattern. Traders should look to lock in profits on the next move towards $0.50. Only a move above $0.535 would signal that a more bullish pattern is taking place. Falling below $0.43 would likely confirm that the wedge pattern is complete and prices are likely to correct towards $0.34 next.

Midas (technical)

Midas: CIMB calls for a technical Buy. The stock could potentially be forming a ST low at $0.225. Since indicators look stretched, a rebound could take place soon. Bullish divergence signals can be seen on its RSI and MACD indicators. Aggressive traders may go long with a stop placed below $0.225. The bounce is expected to send prices up to $0.27 at least, and could easily fill up the $0.31-32 gap well. R2: 0.270 R1. $0.255 S1: $0.225 S2: $0.200

CH Offshore

CH Offshore: Last Friday, Falcon Energy made a voluntary conditional offer for shares of CH Offshore (CHO) at $0.495 each. Since then, CHO has been trading above the offer price. CHO was last traded at $0.515, indicating that some shareholders may not view the offer price as being attractive enough. Falcon is the largest shareholder of CHO with a 29.1% stake, while Chuan Hup ranks second with 23.8%. Considering that Falcon has independently made the offer, Chuan Hup has a number of options to consider - to accept, reject, or make a counter-offer. There is a fair probability that Chuan Hup may consider the last option. After all, CHO was once a wholly-owned subsidiary of Chuan Hup. The offer price currently values CHO at 1.08x P/B and 10.6x FY14 P/E. In the event of a counter-offer, valuations may be considered reasonable up to a multiple of 1.25x P/B (7-yr historical average), which translates into a share price of $0.57.


OCBC: CLSA reckons that OCBC has limited capital progression in the near term. OCBC management has communicated that it has several levers at its disposal to lift its CET1 ratio to >12% in the next 2-3 years. Successful execution of a significant proportion of these opportunities may be out of OCBC’s control/material progress is dependent on supportive macro conditions. In addition, house calculates that at least 42-53% of the capital generation plan is likely to be back-end loaded. OCBC (Underperform; $10.10) remains CLSA's least preferred pick among the Singapore banks.

Silverlake Axis

Silverlake Axis: Yesterday, Silverlake Axis (SAL) formed a new 51:49 company, Silverlake HGH, with Andrew Holliday, MD of Finzsoft Solutions, a New Zealand-based financial technology company. HGH will make a full takeover of Finzsoft at NZD3.00 a share or 48.1% discount to Finzsoft’s last closing price of NZD5.78. Holliday has committed to accepting the offer for his 65.9% stake in Finzsoft. Maybank-KE sees three positives: 1) Geographical expansion beyond ASEAN into Australia and New Zealand; 2) Attractive valuations. The offer price implies 6.4x annualised EPS for FY3/15E or a 48.1% discount to Finzsoft’s last price on 17 Dec. 3) Earnings potential. The earnings impact is currently negligible. However, venturing into a new market with a local partner raises possibilities for SAL from cross-selling. SAL’s 51% stake in the new company implies a cash outlay of NZD8.6m (MYR23.0m) for 65.9% acceptance and up to NZD13.1m (MYR35.1m) for 100% acceptance. It can comfortably fund this with its net cash hoard of MYR421m as at end-Sep 2014. Maybank-KE maintains BUY with TP of $1.40.


Wilmar: Maybank-KE expects Wilmar's soybean-crushing margins in China to improve from FY15 onwards, and remains as the top sector pick with TP of $4.08. Since the Qingdao port scandal in Jun '14, China's monthly soybean imports has been slowing to single-digits growth, potentially caused by tighter credit controls. The house opines that in the longer term, stricter controls would lead to reduced speculative trading and benefit real soybean crushers like Wilmar. However in the near term, house expects 4Q margins to be weak, owing to: 1) Higher-than-usual US soybean shipments to China; 2) An 8% drop in soybean meal prices since mid-Nov; and 3) A narrowing premium for China’s domestic soybean prices over CBOT’s. The counter currently trades at a forward P/E of 13.4x, below its 5-year average of 14.6x.

SG Market (19 Dec 14)

S’pore shares are likely to extend gains following the big push on Wall Street and positive opening on Tokyo (+1.8%) and Seoul (+1.4%) but upside is expected to be limited by the lack of positive catalyst. From a chart perspective, upper resistance levels for the STI is seen at 3,266 (200-dma) and 3,276 (50-dma) with downside support at 3,200. Stocks to watch: *SingTel: Acquired Ensyst, an IT company which provides cloud-based professional and managed services in Australia, for A$13m (62.5x P/B), as part of the group's ICT transformation strategy. *Mermaid: Its dive support vessel “Mermaid Commander” has been awarded a two-year subsea construction contract valued at ~US$50m, to commence Apr ’15. *China Environmental: Awarded license to enter into money lending business. *CSC Holdings: Entered MOU with New Hope Liuhe, a Chinese agribusiness company, to jointly develop a leasehold industrial land located at Tuas South Street 9. *Europtronic: Failed to reach agreement with the PRC authority regarding the proposed acquisition of its land property in Suzhou. *RH Petrogas: Updates that the controlling shareholders have to-date not received any offer or indication of terms from a potential investor who previously expressed interest in investing in the company, and considers discussions to have terminated. *Keppel DC REIT: Exercised its over-allotment option of 17.7m units in full.

Thursday, December 18, 2014


O&M: Maybank-KE maintains Underweight on the O&M sector, and sees any potential oil-price reversal to come in 2H15. Operators with strong balance sheets and cash flows should better weather the rout as weaker players are weeded out. Now that Brent is hovering around US$60/bbl, the entire value chain could now be vulnerable. Industry margins could be affected as weaker players focus on cashflows than profitability. While most O&M names under coverage have the financial wherewithal to weather this downturn, Cosco and Swiber flags red with its high gearing and weak cash flows, compounded by operational weakness. For asset owners, utilization rate could be favored over pricing. After cutting OSV rates by 4-17%, Maybank-KE lowers FY15-16e EPS for PACC Offshore and Pacific Radiance to 11-19%. For Nam Cheong, prices may be lowered to ensure vessel sales. Maybank-KE cuts sales prices by 5% and shipbuilding margins by 2ppt, resulting in 11-12% FY15-16e EPS cuts. Meanwhile, valuations are looking increasingly attractive for long-term Buys for well-positioned players. Nevertheless these stocks could take another beating before recovering, as the industry comes to grips with a lower oil price environment. Maybank-KE prefers Ezion for exposure, on stronger earnings visibility. Maybank-KE maintains ratings for the following O&M names: Keppel Corp: Hold, TP $9.00 Sembcorp Industries: Sell, TP $4.00 Sembcorp Marine: Sell, TP $2.65 Cosco Corp: Sell, TP $0.54 Yangzijiang: Buy, TP $1.40 Vard: Hold, TP $0.71 Nam Cheong: Buy, reduces TP to $0.35 from $0.50 Ezion: Buy, TP $1.93 PACC Offshore: Buy, reduces TP to $0.81 from $0.92 Pacific Radiance: Buy, reduces TP to $1.15 from $1.33 Mermaid Maritime: Buy, reduces TP to $0.38 from $0.42 Swiber: Hold, TP $0.35


Yoma: DBSV maintains its BUY with TP of $0.82, citing that the recently approved US$100m loan from ADB reflects its support for Myanmar and Yoma. The US$100m loan approved earlier in the week is intended to be utilized on improving infrastructure for sustainable growth in Myanmar. For Yoma, although it remains in net cash position, this additional source of funding comes in very handy for the company’s development in many areas which are supportive of growth and development for the country.

Silverlake Axis

Silverlake Axis: Silverlake Axis has agreed to make a full takeover offer for Finzsoft Solutions, an Auckland-listed financial technology company that develops and implements software and solutions for banks and financial institutions in New Zealand and Australia. The 51/49 joint offer with the managing director and majority shareholder (65.9%) of Finzsoft, Andrew Holiday, will be made at NZ$3.00/share, valuing the company at 10.1x trailing P/E, compared to Silverlake's own valuation of 27.8x. The move helps to expand Silverlake's existing portfolio, comprising 40% of the leading banks in S.E Asia. In a recent roadshow, Management is optimistic on order outlook, with contracts potentially coming from the OCBC-Wing Hang and CIMB-RHB-MBSB integrations. These contracts, and others, could potentially double the group’s order book by end-FY6/15e and start contributing to revenue in FY16-17e. Longer term, Silverlake is eyeing the North Asia market (particularly China) for growth.

SG Market (18 Dec 14)

S’pore shares are likely to halt its sell-off and rebound from oversold levels following the Wall Street reversal and early positive reaction on Asian bourses. From a chart perspective, the STI remains in a mid-term downtrend as long as it stays below the 200-dma at 3,266 with a temporary bottom seen at the 3,200 mark. Stocks to watch: *Silverlake Axis: Proposed a takeover offer for Finzsoft Solutions at NZ$3/sh. Finzsoft is an Auckland-based financial technology company that develops and implements software and solutions for banks and financial institutions in New Zealand and Australia. The offer was made by via a 51/49 shell entity, in partnership with Andrew Holiday, the managing director and majority shareholder (65.9%) of Finzsoft. *Oxley: Emerged as the preferred bidder of a 2.35ha commercial site at 72-80 North Wall Quay in Dublin, next to the proposed new HQ of the Central Bank of Ireland. Should Oxley win the tender, it will proceed to acquire a long leasehold interest with the right to develop, manage and realise the site. The site has potential to accommodate in excess of 60k sqm of Grade A office space with capacity for up to 5,500 employees and over 200 apartments. *Oxley: Completed the acquisition of Chiba Port Square, a mixed development located in the heart of Chiba City’s port area in Greater Tokyo. In Nov, the group announced that it entered into a booking confirmation for the property at the purchase price of ¥3.55b from Masuya Home Co. Built in 1993, Chiba Port Square sits on a site area of 20,073 sqm, and consists of a 28-floor office building (70% occupancy) and a 21-floor hotel called Candeo Hotels China (270 rooms). *Bumitama: Acquiring 100% equity of PT Energi Baharu Lestari, which is engaged in biodiesel production and currently testing and commissioning a biodiesel refinery with capacity of 20,000 tons per annum, for IDR10.4b (~$1.07m). *IPCO: Signed a 30-year concession agreement (CA) with Weihai’s Nanhai New District Regulatory Commission for the exclusive gas supply to China Power International New Energy Holding. This is the second CA secured with Shandong province. The total investment is estimated to cost Rmb120m, with construction to commence in 2015. *Jubilee Industries: Acquired 1.1m shares in Bursa-listed EG via open market purchase for total consideration of RM504m. Jubilee now owns 27.5% of EG shares. *HLH: Terminated the agreement to buy 13,541 sqm of land in Phnom Penh, Cambodia, due to commercial reasons. *Croesus Retail Trust: Increased its hedge for distributable income from 80% to 100%, for FY15, to mitigate forex risks. *HanKore: Counter will change its name to China Everbright Water wef 22 Dec. *PCRT: Trading will be suspended wef 23 Dec, following the settlement of valid acceptances which will result in the public float of the counter falling below 10%. The offeror does not intend to take steps to preserve the listing status of PCRT.

Wednesday, December 17, 2014


ISEC: Maybank-KE initiated with a BUY rating and TP of $0.52, citing that demand for eyecare can only grow owing to ageing populations, rising myopia and astigmatism among the young, and insufficient number of trained ophthalmologists. ISEC aspires to a regional stage, organically and by buying other practices. It aims to grow to a size where Singapore and Malaysia will only contribute 20% to revenue and profit in five years’ time, down from 100%. With its Singapore listing as a platform, house believes it should be able to acquire at EPS-accretive valuations. Risks include key-man and ringgit weakness.

City Dev

City Dev (CDL): On its new partnership (PPS) with Blackstone and CIMB in relation to CDL's properties in Sentosa Cove, management indicated that the PPS has assumed the residential units of the Quayside Collection to be sold at no less than S$2,400psf, implying c.$500m valuation for the commercial component. With the guidance, all valuations previously assumed by Deutsche are substantially above in its RNAV estimates. House sees c. $0.35/share increase in its RNAV estimates from $14.10/share. CDL remains Deutsche's top pick with TP of $12.00.


ISOTeam: Bagged nine contracts worth an aggregate $22.2m, consisting six repairs & redecoration (R&R) contracts of $15.4m, one addition & alteration (A&A) ($3.5m), an interior design project ($3.2m) and its first contract for renovation works ($0.1m). Works are expected over the next 16 months. ISOTeam has been on a tear over the past year, gaining over 45% since the beginning. The R&R and A&A specialist recently had one of its suppliers, Nippon Paint, taking a stake through a placement of up to 5.9% in the company, potentially aiding in shoring up investor’s confidence in the prospects going forward. Management guided that it was on the look out for M&As to grow its business, and aims to expand its services to untapped markets, which could include the likes of military camps, industrial parks and education institutions. The company has an estimated order book of $95m, underpinning revenue visibility over 2015. At $0.515, ISOTeam is valued at 8.6x forward P/E. The street has 2 Buy ratings with a consensus TP of $0.67.


Vard: Vard secured a contract for the design and construction of one offshore subsea construction vessel for Farstad Shipping, with delivery scheduled from Vard Vung Tau (Vietnam) in 4Q16. Overall, the street is concerned on the headwinds against the counter. Following Vard's dismal 3Q14 results (11 Nov), we note that five out of 15 analysts cut its earnings estimate for FY14 and FY15 by up to 47% and 57%, respectively. To sum up, key risks that may continue to keep an overhang on Vard’s share price include: - String of project cost overruns in Brazil and Europe; - Depleting order book and weak order outlook; - Brazil tax claim overhang. While the new contract adds to Vard’s order book, management guided for below-average new orders in 2015, given the declining oil price and expectations of lower E&P spending by oil majors. At $0.60, Vard trades at a hefty 13.4x forward P/E and 1x P/B amidst the headwinds. Bloomberg consensus has 1 Buy, 8 Holds and 7 Sells on the counter with a 12-month average TP of $0.62.

SG Market (17 Dec 14)

With negative macro news flow (Russia, Brazil, oil, etc), and increased volatility in the global markets, investors are scaling down their risk exposures. Many fund managers and research houses are also winding down activities heading into the Christmas holiday season. Meanwhile, eyes will be on the upcoming FOMC announcement due 18 Dec, and if there are any changes in the Fed’s forward guidance. This morning, the Nikkei and Kospi are recovering from yesterday’s sell-off to trade 0.3% and 0.1% higher, respectively. From a chart perspective, the black marubozu candle yesterday, coupled with the clear break below the 200day moving average, bode negatively for STI price trend in the near-to-medium term. The new trading range for the index is between 3,150 and 3,266, which supports the current sell-into-strength strategy. Stocks to watch: *Straits Trading: Making its first acquisition of a retail development in Chongqing, China, known as Times Midtown, for Rmb668.4m, which will be paid progressively upon the completion of certain milestones. The property has a gfa of ~82,367 sqm, and is part of a large mixed-use development project that comprises 29 residential buildings, 4 office towers, a hotel and an open-air street mall. *Vard: Secured a contract for the design and construction of one offshore subsea construction vessel from Farstad Shipping. Delivery is scheduled from Vard Vung Tau (Vietnam) in 4Q16. *ISOTeam: Bagged nine contracts worth an aggregate $22.2m, consisting six R&R contracts of $15.4m, one A&A ($3.5m), an interior design project ($3.2m) and its first contract for renovation works ($0.1m). Works are expected over the next 16 months. *Sinopipe: Subsidiary Aton Plastics won a pipe and fittings procurement tender from Chongqing Airport for the construction of a rain drainage system at the third runway, and East Terminal, for Rmb30m. The contract is expected to contribute materially to FY15 performance. *Goodland Group: Updates that its T-City project in Ipoh, Malaysia, has an appraised land value of $147.5m, compared to its purchase price of $62.7m for a 70% stake in the 51.3 acre land plot. Construction will begin by 3Q15. Management believes the group’s NAV will increase significantly from 1H15 compared to the $0.46 per share as at end FY14. *YuuZoo: Delivered personal social e-commerce networks to 40 national beauty queens participating in the “Miss SuperTalent of The World” competition which is being held in Seoul, Korea, this week. Each network features an e-commerce shop from which consumers can buy goods relating to fashion, beauty, lifestyle and entertainment. The revenues from e-commerce and advertising within each network will be shared between the contestant, event organisers and YuuZoo. Management believes “the deal will be immediately accretive to YuuZoo’s earnings, and add several millions in USD, with potential for significantly more once the marketing of the networks commence.” *ecoWise: Profit warning for 4QFY14 and FY14 due to impairment loss from Wuhan ecoWise Energy.

Tuesday, December 16, 2014


Zico: UOB Kay Hian initiated with a conviction BUY and TP of $0.57, citing that Zico has a first-mover advantage and will use the additional capital from its IPO to consolidate the fragmented professional services market. This will drive double-digit earnings growth for the next few years from both organic expansion and acquisitions. House reckons that Zico has the potential to grow into a powerful presence in the ASEAN region and emerge as a genuine challenger to the big accounting firms as an integrated provider of professional and legal services. Slater & Gordon’s success in Australia and the UK has shown that buyouts of smaller rivals can be a highly value-enhancing strategy for shareholders. Zico’s active but disciplined approach to bolt-on acquisitions emphasises: a) businesses with efficient operations, b) suitability of integration into the Zico network, and c) an ASEAN presence. UOB Kay Hian thinks their concentration on the ASEAN region will be especially lucrative for the company, given the favourable structural growth of ASEAN and the implementation of the ASEAN Economic Community from 2015.

Noble Group (technical)

Noble Group - While technicals are in Oversold territory, there is no signs of any reversal yet. Share price could find some support on the resistance turned support level at $1.04.


Oil: WTI (US$55.91, -3.4%) and Brent (US$61.06, -1.29%) extended their downward carnage following OPEC’s reiteration that it will maintain production output. One article is making headlines, where investors are advised to pick up four oil stocks, on the premise of attractive yields. Investment Quality Trends recommend Chevron (CVX), ConocoPhillips (COP), ExxonMobil (XOM), Suncor Energy (SU), all listed on the NYSE. On average, these are yielding 3.93%, relative to the 10Y US Treasury at 2.11%. These oil players fit the following bill: • Increased dividend at least 5 times over the past 12 years • S&P Quality Ranking in the “A” category • At least 80 institutional investors • Paid dividends for at least 25 years straight • Produced higher EPS in the past 7 out of 12 years. On fears that oil prices could go lower and dampen dividend prospects, Investment Quality Trends advises that these four majors continued to pay dividends in 2008-09 when oil prices fell to the high $30s.

Sembcorp Ind (technical)

Sembcorp Ind, unfortunately, no sign of the end of the decline yet, prices just made new 52-week low today at $4.090 and price momentum is negative, with the MACD line leading the signal line down, on both the daily and hourly chart. In fact, the weak correction in the last plunge suggests more downside. Support at $3.88, resistance at $4.34

Mirach Energy (technical)

Mirach Energy,prices seem to have bottomed out at $0.071, but the steep correction may not necessarily mean a reversal. The hourly chart shows consolidation around $0.09-$0.10, just shy of the 50% Fibonacci retracement of the most recent plunge from the high of $0.130 to the low of $0.071. Immediate support and resistance at $0.087 and $0.100 respectively, with second level resistance at $0.107. I see confirmation of reversal beyond $0.117.

Malaysia Airlines

Malaysia Airlines: announced trading would be suspended from today, three clear days prior to the entitlement date for its selective capital reduction and repayment exercise (SCR). "Under the SCR, ordinary shareholders of MAS, other than Khazanah Nasional Bhd, whose names appear on the company s record of depositors as at 5pm on Dec 19, shall be entitled to receive a cash amount of 27 sen for each MAS share," The capital repayment was expected to be made within 10 days from the entitlement date. The stock would cease trading until the completion of the SCR and the subsequent delisting of MAS from the official list of Bursa Malaysia Khazanah Nasional, an investment holding arm of the government and the single largest shareholder in MAS, is taking over the helm of the company with the aim of reviving the national carrier under a corporate exercise including privatisating it and setting up a new entity called Malaysia Airlines Bhd (MAS NewCo).


Riverstone: Maybank-KE maintains Buy with TP $1.21. The house expects Riverstone to benefit from a strengthening USD/MYR as 70-80% of its revenue, of which around 50% hedged, and 40-50% of its cost of sales (73% of revenue) is denominated in USD. This translates into positive net exposure of around 3-6%, where its profit before tax can gain or lose 0.3-0.6% for every 1% movement in USD, ceteris paribus. While the USD/MYR has strengthened by 4.1% y/y in 4Q14E, there is negligible earnings impact as these benefits are usually passed on to its customers. About 90% of Riverstone’s gloves are nitrile gloves. Its main raw material, nitrile butadiene, is a substitute for latex and by-product of crude oil/natural gas. Butadiene prices are expected to remain low, along with latex and crude oil prices. Maybank-KE estimates an earnings sensitivity of 0.4% for every 1% change in its raw-material prices. However, the positive impact will be neutralised by downward ASP adjustments as benefits are passed on to customers. The house also sees limited downside for butadiene prices due to tight supplies. Valuations are undemanding, as Riverstone’s 12x FY15E P/E trails peers’ 15x average, although it has the strongest EPS growth prospects.


Olam: Acquiring the business of one of the world’s largest cocoa processors and suppliers, Archer Daniels Midland (ADM), for US$1.3b, entrenching Olam's position as a global top three cocoa processor. The transaction is expected to be accretive in its first full year, with segmental EBITDA growth of between 86%-95%, overall group EBITDA growth of between 20%-22% and bottom line growth of between 25%-30% by FY2018. One of the world’s largest processors and suppliers of cocoa liquor, powder and butter, ADM’s worldwide cocoa business includes processing assets comprising 8 factories with total capacity of 600,000 MT, 10 warehouses, 2 usines, 4 innovation centres, the iconic deZaan® brand and its 2,150 plus customer franchise, and a marketing network across 16 countries.

SG Market (16 Dec 14)

With negative macro news flow all around, investors are adopting a risk-off approach. Mirroring yesterday morning, the Nikkei and Kospi are currently down 1.7% and 0.6%, respectively. Coupled with the overnight sell-off in the US market, expect the STI to open on a weak note today. From a chart perspective, the STI’s break of the psychological 3,300 level suggests that the index could move down to test the next support at 3,274 (50 day moving average). Stocks to watch: *Olam: Acquiring Archer Daniels Midland's global cocoa business for US$1.3b. Completion of the deal will propel Olam to become one of the world's top three cocoa processors. The transaction is expected to be accretive in its first full year. Management guides for segmental EBITDA growth of 86%-95%, overall group EBITDA growth of 20%-22% and bottom line growth of 25%-30% by FY18. *City Dev (CDL): Partnering Blackstone and CIMB to create a $1.5b investment platform that will invest in CDL’s properties in Sentosa Cove (Quayside Collection), comprising - W Singapore (hotel), Quayside Isle (retail) and apartments of the Residences at W Singapore. CDL will continue to manage the Quayside Collection. Upon completion, net gearing of CDL is expected to improve from 36% to 25%. Based on FY13 numbers, CDL’s NTA per share will rise by 4.3% to $8.98 post transaction. *SIA: Its Indian JV airline, Vistara received the Air Operator Permit (AOP) from India’s aviation authority to begin commercial operations. *Yoma: Received loan approval for up to US$100m from the Asian Development Bank, to improve infrastructure connectivity in Myanmar. *Yongnam: Secured two orders worth $22.8m comprising i) a specialist civil engineering contract in Hong Kong for the Central-Wan Chai Bypass Tunnel, and ii) a contract for addition and alteration works for the Trisonic Wind Tunnel in Singapore. *Ryobi Kiso: Clinched $56.3m worth of new contracts for foundation works and geoservices works for infrastructure projects and large development projects. Total contracts secured year-to-date amount to $235.5m. *Kori: Won two contracts amounting to $52.9m for strutting works related to the Marina Bay and Stevens stations and tunnels located along the Thomson Line MRT. *Sysma: Won a $13.5m contract to erect a two-storey detached dwelling house with basement at Ridout Road. *Tee Int’l: Its 50%-owned infrastructure engineering associate CMC Communications is proposing to list on Catalist Board of SGX. *Spackman Entertainment: To receive KRW2b ($2.4m) in advance ancillary distribution (post-theatrical) rights from KT Hitel for four of its future productions. *Hankore: Financial year-end changed from Jun to Dec

Monday, December 15, 2014


SGX: Macquarie launches new warrant on SGX after the shares rallied 4.5% last wk (versus the STI’s +0.3%), in particular, jumping 3.4% last Tuesday to make its biggest one-day gain in 3 years. Currently, exchanges are attractive to investors as a dividend play, or as a proxy to the domestic market. However, Macquarie believes topline growth for ASEAN exchanges will get more exciting again, after years of muted performance. Potential growth drivers are higher volatility in the near term from macroeconomic conditions, including from potential changes in interest rates due to US Fed policy updates, and (ii) the futurization of over-the-counter (OTC) derivatives. Specifically, MER believes the futurization of foreign exchange futures will be an exciting growth opportunity for the exchanges. SGX is well positioned to be a centre for Indonesian-Ringgit denominated futures and an offshore-Renminbi centre. Renminbi-denominated currency futures could be an attractive product offering for Bursa. SGX (Outperform, TP to $ 8.00, from $7.80) has positioned itself well in equity index derivatives, thus leveraging Singapore’s role as an offshore financial centre. SGX has been a dividend play, and a proxy to the Singapore market. A turnaround in revenue trends would be a major positive catalyst for the share price. Growth has been disappointing with low single-digit compound annual growth rates in recent years. However, with higher futures trading volumes and more retail participation from a low base, MER believes SGX is well place with the right products and platform to ride on the next wave of securities and derivatives growth.

CH Offshore

CH Offshore: Last Friday, Falcon Energy (FEG) made a voluntary conditional cash offer to acquire the remaining 70.93% stake in CH Offshore (CHO) for $247.5m, or $0.495 per share. We note that CHO is trading at $0.515/share currently, above the offer price, which could possibly indicate that some shareholders do not view the offer price as being attractive enough. As a gauge, CH Offshore has a 7-year average P/B of 1.25x, translating it into $0.577/share.


LionGold: LionGold registered a net loss of $14.4m (2QFY14 net loss at $44.9m) for 2QFY15 on revenue of $18.5m (-22.9%). The lower revenue was mainly due to a record gold grade achieved in 2Q14 of 12.8g/t as compared to 6.8g/t in 2Q15, resulting in a decrease in gold sales. Meanwhile, bottom-line was further weighed by other expenses of $11.3m, arising from the reduction of shareholding interest in MNV, impairment in available-for-sale financial assets, loss on disposal of subsidiary and loss in foreign exchange translation. Going forward, LionGold is guiding for challenging times ahead, amidst weak gold prices, rising cost of production, and a challenging fundraising environment, adding that should gold prices and operating costs reach a sustaining level where gold mining becomes unprofitable, the group may decide to diversify into other minerals or businesses. In regards to on-going investigations by the Commercial Affairs Department (CAD) on the group for trading irregularities, following the “penny stock crash” last year, LionGold disclosed that the CAD has not given any further details of its investigations. LionGold currently trades at 0.4x P/B.


Oil: WTI (US$57.81, -3.7%) and Brent crude (US$61.85, -3%) continue to slump, after the United Arab Emirates (UAE) said that the OPEC will resist output cuts even if prices fall to as low as $40. OPEC CEO Abdullah el-Badri added that while the organisation does not provide a target price for oil, he believes that oil price has fallen below fundamental valuations. The OPEC head further urged the Gulf states to continue investing in exploration and production, underpinned by reliance by the US on Middle East oil for years to come. el-Badri disagreed with market hypotheses that OPEC’s decision to maintain output were aimed at disrupting the development of the US shale market, and reducing the political bargaining power of Russia and Iran. If weak oil prices persist, BlackRock sees potential for emerging Asian equity markets to gain momentum. The IMF estimates that every 10% drop in oil price potentially results in a 0.2% boost to global GDP. This is a boon for Asia’s largest economies, which are reliant on oil imports and consumer exports. China, India, South Korea and Taiwan account for 84% of the MSCI Emerging Markets Asia ETF (NYSE Arca: EEMA). At the same time, BlackRock sees low oil prices also fuelling momentum for Turkey’s stock market, of which BlackRock expressed it was “aggressively bullish” towards at the start of the year. In the current quarter, the Borsa Istanbul main index is the best performing main index in Europe, and third globally, behind the Shanghai Composite Index and the Venezuela Stock Market Index. BlackRock in Nov, increased Turkey’s weighting in its Emerging Europe Fund to 28% (+6ppt) on expectations that the outperformance could continue. Investors can gain access to Turkey via NYSE Arca listed iShares MSCI Turkey Fund ETF (NYSE Arca: TUR). Alternatively, investors may also express a view on oil directly via ETFs, such as the United States Oil Fund ETF (NYSE Arca: USO). With IATA expecting global airlines to break 2010’s profit record next year, Maybank-KE upgrades AirAsia to Buy from Hold with TP of RM 3.25, while it reiterates its Buy call on Singapore Airlines (TP $11.63), and Sell call on AirAsiaX (TP RM 0.69).

Hankore / China Everbright Intl

Hankore / China Everbright Intl (257 HK) : CEI announced the completion of injecting CEI's entire water assets into Hankore in exchange for a 79.2% interest in the merged company. This move would increase CEI's attributable water capacity by 45% to 2,750k tpd, and support a 28% net profit enhancement for CEI's environmental water business segment in 2015e (or 4% of CEI's total net profit). Hankore will change its name to China Everbright Water. Daiwa views the CEI deal with Hankore as a near term earnings catalyst for CEI's environmental water business. As at Oct '14, CEI had 21 WWT plants in operation with total capacity of 1,855k tpd and 1WWT plant at the preparation stage with capacity of 75k tpd. Hankore operates a total of 11 WWT projects with total operating capacity of 745k tpd while its total water treatement contracted capacity (incl WWT, water supply and water reclamation ) is 1,570k tpd. Daiwa has an Outperform rating on CEI with TP HK$12.20, implying 24x FY15e P/E, supported by CEI's status as the only HK-listed large cap China WTE operator with a solid execution record and decent project portfolio.

Ezion/ Pacific Radiance

Ezion/ Pacific Radiance: CIMB derived a floor price of $0.83 for Ezion and $0.71 for Pacific Radiance, based on a 20% discount to RNAV- which we find a rather unconventional approach for O&M service providers. Based on the above prices, Ezion and Pacific Radiance are trading 26% and 7% higher. CIMB believes that long investors could benefit enormously by positioning themselves in at our recommended entry points, and ride the anticipated rebound in oil prices come 2H15. Until then, CIMB maintains Neutral on the sector. House top picks remain ST Engineering and Swissco.

Falcon Energy

Falcon Energy: Its voluntary conditional cash offer for CH Offshore at $0.495/share translates to 10.6x FY14 EPS and 1.085x book value, compared to the FTSE ST O&G Index of 8.8x P/E and six-year median of 11.7x. Voyage reckons that the offer will likely allow Falcon to expand its fleet at an attractive price, while offering relative premium to existing CHO shareholders. House maintains its Increase Exposure rating, but lowers TP to $0.555 (from $0.58).

ST Engineering

ST Engineering became a top 50 global defense company in 2013, according to the Stockholm International Peace Research Institute, or SIPRI, which placed ST 49th in its annual top 100 list based on arms sales of $2.02b. This makes it the third-largest arms company in Asia, excluding China, which SIPRI did not include in its analysis due to a lack of data. ST made overall sales of $5.3b last year. With strengths in armored vehicles, naval ship building, and defense electronics, ST has been the chief beneficiary of Singapore's high levels of defense spending, which rose to around $9.5b this year, but has struggled to secure export contracts.


Swiber: Swiber marked its first foray into West Africa with a US$710m award from a Houston-based O&G company, which also helped shore up its depleting revenue visibility. Swiber will provide engineering, procurement, construction, installation and commissioning services for an offshore field development project in West Africa, which is expected to commence in 1Q15 and target for completion in mid-2017. This bumps up order book from an estimated US$483m to US$1.2b, providing revenue visibility to over three years, following a 6-month drought of new orders. Maybank-KE estimates that despite the new contract, Swiber may still record a marginal loss for FY15, aside from potential execution risk in a new market. At $0.29, Swiber is valued at 0.24x P/B, compared to its 5-year average of 0.81x P/B.

Insider transactions/Buyback

Insider transactions/Buyback: Asia Insider notes buying among directors surged last week, while selling stayed low for the sixth consecutive week for the week ending 12 Dec. Purchases: 26 companies made 50 purchases worth $6.5m, vs. 15 companies, 27 purchases worth $3.95m. Selling: 4 firms made 6 disposals worth $1m, vs. 3 companies with 3 disposals amounting $4.1m Notable transactions: - Keppel Corp: First buyback since Jun’00 with 1.56m shares at average of $8.27. Chairman Lee Boon Yang also bought 100,000 shares at $8.22. He previously bought 20,000 shares in April at $10.99. - SATS: Bought back 2.59m between 1 – 9 Dec at average of $2.93. These were lower than buybacks made between Feb to Nov. Meanwhile, CEO Alexander Hungate made his first on-market trade since appointment to the board in Jul’11, with 100,000 shares bought at $2.89. The combined trades made 25% of trading volume. -Rotary Engineering: Chairman and managing director Chia Kim Piow recorded his first on-market trade since Aug’11 with 280,000 shares bought at average of $0.50. The purchases were made on the back of the 39% drop in share price since the final week of May from $0.82. -Oxley Holdings: CEO Ching Chiat Kwong recorded his first on-market trades in real estate developer Oxley Holdings since October 2013 with 494,000 shares purchased from 8-11 Dec at average of $0.513. The trades accounted for 48% of trading volume, and were made on the back of a 38% drop in share price since April from $0.82. -Halcyon Agri: Executive director Pascal Demierre recorded his first on-market trade since the stock was listed in Feb’13, with 40,000 shares purchased on 10 Dec at $0.557. The trade increased his direct holdings to 21.8m shares or 5.17% of issued capital. -Ezion Holdings: CEO Chew Thiam Keng recorded his first on-market buys since appointment to the board in 2007 with 150,000 shares purchased from 4-9 Dec at average of $1.13, on the back of a 41% share price drop since Sept from $1.91. In the quarter, Commonwealth Bank of Australia (CBA) bought 3.8m shares at $2.07, raising interest to 5.13% (+78%). First State Investment bought 5.2m shares at $1.40, increasing deemed holdings to 8.07% (+59%) -Jason Holdings: Project director Nelson Sim Choon Joo made first on-market trades since the stock was listed in Sep’12 with 602,000 shares sold on 4 Dec and a further 398,000 shares on 11 Dec at average of $0.535. The trades were made on the back of a 58% rise in share price since Sep from $0.34, and IPO price of $0.225.

SG Market (15 Dec 14)

With negative macro news flow all around, investors are adopting a risk-off approach. The Nikkei and Kospi are down 1.5% and 0.6%, respectively this morning. Coupled with the sell-off in the US market last week, expect the STI to open on a weak note today. From a chart perspective, the STI has continued to trade within the 3,300 – 3,360 band, If the psychological 3,300 level fails to hold, expect the index to test the next support at 3,274 (50 day moving average). Stocks to watch: *Swiber: First foray into the offshore O&G market in West Africa, after securing a US$710m award from a Houston-based O&G company for engineering, procurement, construction, installation and commissioning services. Work is expected to commence in 1Q15, with completion in mid-2017. *Vallianz: Clinched a US$97m charter contract with a Middle Eastern national oil company to supply a specialized vessel for up to five years from 3Q15. This brings the group’s order book to US$626.4m. *C&G Environmental Protection: Received approval from China Securities Regulatory Commission for the sale of its waste-to-energy business and assets to Shanghai-listed Grandblue Environment for Rmb1.85b ($390m). *China Environment: Placing 72.5m new shares at $0.104 apiece, and 72.5m warrants (exercise price: $0.104), to GlobalWin International Consultants, which is owned by Dharma Rustam Winata. *Cortina: Sold an option-to-purchase (till 22 Dec) its un-tenanted strata unit in The Adelphi for $5.4m, 5-7% below market valuation. The group expects to realise a disposal gain of $800k upon completion of the sale. *Sinarmas: Disposing its New Brook Buildings in London for £113.4m ($223.7m) to realize a gain of ~$72.3m. The property is a freehold Grade A office building consisting of a 12-storey tower connected to a 9-storey wing with net lettable area of 99,911sqf. Post disposal BVPS will rise by $0.02 to $0.51. *XMH: 2QFY15 net profit slumped 65% y/y to $0.7m, even though gross margin improved 6.6 ppts to 29.7%. Revenue fell 29% to $19.2m due to slower sales in the distribution business. The group continued to be affected by the sluggish demand for Indonesian coal and consequently fewer vessel new-builds. Going forward, management expects increased deliveries and new orders in Vietnam, underpinned by the expansion of its fishing fleet. The recently acquired Mech-Power Generator is on track to deliver its best ever year on strong demand for standby generator sets, while the Z-Power Automation acquisition is in the final stages of completion. BVPS at $0.125. *LionGold: 2QFY15 losses from continuing operations narrowed to $11.6m from $44.1m a year ago, mostly the result of absence of $47.7m fair value loss. Revenue fell 23% y/y to $18.5m due to lower gold sales. BPVS at 5.5¢. *IPCO: 2QFY15 losses narrowed to $0.4m from $114.7m a year ago, thanks to the absence of fair value losses and net losses on disposal amounting to $351.9m. Revenue climbed 11.2% y/y to $8.8m, as lower semiconductor revenue was more than offset by increase in income from US real estate development and supply of natural gas in China. The group broke even on the operating level but was loss-making after share of results from associates and income tax. BVPS at $0.02. *Wilmar: Meeting for the scheme of arrangement to acquire Goodman Fielder (to be held 26 Feb ‘15) was approved by the Federal Court of Australia. If Goodman shareholders approve the scheme, they will be entitled to receive a payment of A$0.675 cash/sh on the implementation date (expected: 17 Mar ‘15).

Friday, December 12, 2014

RH Petrogas

RH Petrogas: DMG maintains Buy , but slashes TP to $0.50 (from $1.19), on lower long term oil px assumptions. Notes RHP has fallen 63% in the 6-mth period vs brent's 44% decline. DMG says RHP is now priced as if long term oil prices were US$55, but the house values the stock at a long term oil px assumption of US$80 (down from US$100). Separately, RHP has received final approval for the Fuyu 1 field, upgrading its 2P reserves to 17.4mmboe and the house is satisfied it has the financial capability to develop this field.

Tianjin Zhongxin Pharma

Tianjin Zhongxin Pharma (TJZX): Tianjin Pharma (TPG) the major shareholder of TJZX revealed that it intends to acquire up to 1% of the co's total issued shares (7.4m shares) in SG over the next six months. This will lift its stake from 44.04% to 44.67%. CIMB notes that such a move would allow TPG to buff up its stake in TJZX to counter the potential dilution impact from the new A share placement to third parties, as well as to take advantage of the huge price gap between the A-and-S shares. Recall the proposed 90m share placement on the A share mkt would dilute TPG's stake in TJZX from 44.04% to 39.26%. If TPG wants to maintain its current sh/h level, it needs to acquire 5% of TJZX total issued capital, ie. 40m shares from the SG market over the next 2-3 yrs. Apart from the sh purchase, CIMB expects TJZX to benefir from the NDRC decision to lift the price cap on low cost drugs. Under a blue sky scenario, net profit could double in the next 2-3 yrs, driven by the sales and margin expansion of Su Xiao Jiu Xin Pills after the px ceiling is lifted. TJZX S-shares trade at 13.8x FY15e P/E vs the peer avg of 22.2x . The S-shares trade at a whopping 60% discount to the A-shares. CIMB reiterates its Add rating and TP US$1.45.

Pacific Radiance

Pacific Radiance: UOB Kay Hian estimates that current share price has factored in Brent oil price of US$60/bbl. Should oil price fall to US$50/bbl, share price could fall another 16%. However, house sees oil prices at US$40-50/bbl to likely be temporary. For investors with a longer-term view, house calls an opportunity to bottom fish. UOB Kay Hian maintains BUY with TP of $1.57.


EpiCentre: Share price rocketed 25% to $0.15, on news that EpiCentre has entered into a binding term sheet with Healthtrends Medical Investments (HMI) for the proposed reverse takeover (RTO) of HMI’s interest in its operating units in Singapore, Malaysia, Hong Kong and Vietnam. The operating units are namely Eastlife, Maxglobe, The Sloane Clinic (Plastic Surgery), The Sloane Group, HealthTrends Specialists, Dermagenesis, Astique CliniCentral, Green Jade, and Truong Giang Investment and Trading Joint Stock Company. The RTO if successful will see EpiCentre engage in the businesses of medical aesthetics and cosmetic surgery; primary care and medical wellness; and distribution of medical products and solutions. The aggregate consideration for the proposed acquisition is $100m, and will be satisfied by the issue and allotment of 298.6m new shares at an issue price of $0.335 per share, representing 76.2% of the enlarged share capital. Under the term sheet agreement, both parties have till 28th Feb ’15 to negotiate and agree on the terms.


H-Shares: Barclays examines widening A-H Share premium for dual-listed stocks and filtered four stocks to focus on: 1. China Oilfield Services (2883.HK, OW TP HK$19.00) Defensiveness in revenue streams and competitiveness in cost structure is underestimated. Domestically, demand at CNOOC, COSL’s largest client, is expected to remain robust. Overseas, COSL’s rigs managed to secure longer-term contracts that insulates it from weakening international dayrates. 2. China Life Insurance (2628.HK, OW TP HK$30.30) Value of new business growth to resume double-digit 12%/14% growth for 2015/16E and company has attractive risk-reward profile. 3. China Citic Bank (998.HK, OW TP HK$6.80) Recently upgraded as the house believes CITIC Bank will likely be one of the first batch among peers to push forward with hybrid ownership reform as well as employee stock incentive programme. Largest A-H share premium of 45%. 4. PetroChina (857.HK, OW TP HK$11.00) Lower crude prices a material near-term headwind but impact on cash earnings may be less accentuated than feared. Capex controls should help shore up balance sheet, and delay in gas price cuts may cushion crude price slide in China. Long-term play.

Falcon Energy / CH Offshore

Falcon Energy / CH Offshore: Falcon Energy (FEG) has made a voluntary conditional cash offer to acquire the remaining 70.93% stake in CH Offshore (CHO) for $247.5m, or $0.495 per share. The offer price represents a 6.45% premium over the last traded price of CHO, and is part of FEG's plan to acquire more vessels to broaden the number of vessel types and to cater to a broader group of customers. FEG believes that by increasing its control of CHO, it will be able to explore opportunities to unlock synergies in the CHO group’s businesses, and aims to embark on programmes to maximise operational efficiency and optimise capital management of the enlarged group, should the acquisition materialize. The acquisition will be funded by internal cash and bank borrowings, and FEG intends to maintain the listing status of CHO. Based on the offer price of $0.495, the deal values CHO at 1.08x P/B and 10.6x FY14 P/E. In light of the recent market rout amongst O&M counters, we will not be surprised to see more share buybacks or M&A’s going forward, given that valuations for some counters are undemanding at current levels following the sell-off.


UE E&C: Second largest shareholder, Singapore Tong Teik, has again increased its stake in UE E&C from 6.98% to 7.06% on 9 Dec, snapping up 239k shares at an average $1.28 each, from the open market. This comes amidst the $1.25/share voluntary offer from Southern Capital group, where the offeror has obtained irrevocable undertakings of 74.1%, from United Engineers (68.2%) and UE E&C's chairman, Chua Hock Tong (5.9%). Meanwhile, shareholders should be expecting the offer document from the company between 13-19 Dec, along with the independent advice by IFA, Phillip Securities. With the continued buy up by Singapore Tong Teik at prices above the offer price, we do not rule out the potential angle of a counter-offer. At $1.275, UE E&C trades at 4.8x forward earnings and 1.3x P/B.

SG Market (12 Dec 14)

This morning, the Nikkei is up 0.3% and the Kospi is flat, mirroring the slight gains in the US market overnight. While this points to a mildly positive open for the Singapore market, expect continued volatility in the China and Hong Kong markets to affect the STI later in the day. Trading of late has been volatile, exacerbated by the daily swings particularly in the O&M plays. Momentum however, remains on the downside. From a chart perspective, the STI has continued to trade within the 3,300 – 3,360 band, But if the psychological 3,300 level fails to hold, expect the index to test the next support at 3,273 (50 day moving average). Stocks to watch: *GLP: Signed new leases of 65,000 sqm with four existing customers - a leading ecommerce retailer, two leading third-party logistics (3PL) providers and one of the world’s largest health and beauty retail chains. *UE E&C: Second largest shareholder, Singapore Tong Teik, has again increased its stake from 6.98% to 7.06% on 9 Dec, snapping up 239k shares at an average $1.28 each from the open market. There is an on-going offer for UE E&C shares at $1.25 each. *Falcon Energy / CH Offshore (CHO): Falcon made a voluntary conditional cash offer to acquire the remaining 70.9% stake in CHO that it does not own for $247.5m, or $0.495 per share (~6.45% premium over the last close). The acquisition is part of Falcon’s plan to acquire more vessels to broaden the number of vessel types and to cater to a broader group of customers. Falcon intends to maintain the listing status of CHO. *Hwa Hong: 70% owned subsidiary to acquire a freehold retail and commercial property in Holborn, London for £24.6m. The property has gfa of 30,533 sf and is within walking distance of landmarks like Covent Garden, The British Museum and Royal Courts of Justice. The property produces annual gross rental income of ~£1.4m *Low Keng Huat: 9M14 net profit doubled to $83.5m, while revenue soared $459m, contributed by development revenue (9M13: nil), and an increase in construction activity at Genting Hotel, though offset by lower hotel and F&B revenue. Share of associates’ profit halved to $14.7m. BVPS at $0.74. *Lee Kim Tah: Offer by controlling Lee family closed yesterday, resulting in the offeror owning 98.4% of shares. The offeror intends to exercise its right of compulsory acquisition on or after 12 Jan 2015. The counter will be suspended wef today. *TEE International: Awarded $26m worth of contracts, comprising addition & alteration works for Changi Airport Terminal 1 and 2, Singapore University of Technology and Design and Temasek Polytechnic. This raises total outstanding order book of $467m. *Logistics Holdings: Awarded a $13.5m contract by the Ministry of Education, for the addition and alteration of existing Concord Primary School. This brings the group’s order book to ~$370.3m. *Datapulse: Turned profitable in 1QFY15 with earnings of $0.72m as an 11.3% y/y drop in gross profit was offset by cost cutting across functions. *Weiye: Acquisition of the 51% equity interest in Hanfang Yaoye is underway, with Hanfang transferring its land use rights to Weiye’s 51% owned subsidiary. *Vibrant: 2QFY15 net profit tumbled 47% y/y to $6.0m despite a 5.6% increase in revenue to $50.3m, due to lower gross profit margin, absence of re-measurement gains and increased administrative expenses arising from several property development and upgrading projects. BVPS at $0.14. *KLW: Dropping the proposed acquisition of equity interest in Wah Loon Group. *New IPO: Keppel DC REIT will commence trading on SGX Mainboard at 2pm today. The IPO of 261.2m units priced at $0.93 each, received overwhelming demand, with the institutional tranche 24.4x subscribed, and the public offer 9.6x subscribed. Investors can expect a distribution yield of 6.8% in FY15e and 7.1% in FY16e.

Thursday, December 11, 2014


OCBC: JPM resumes coverage at Overweight with TP $12, following a period of restriction. Believes OCBC is now best positioned among Singapore banks to pursue organic growth after the deal and rights issue. Expects the bank to reach 11% CET1 over the next 4-5 qtrs , addressing a key investor concern. At the same time, 2015 street EPS forecasts will likely move up as the profit contribution from Bank of Ningbo (raised stake by 4.7% to 20% associate stake in Sep) gets factored in and as ongoing consolidation in wealth mgt leads to better returns in the business.

Keppel Corp (technical)

Keppel Corp: indicators are at oversold levels but there is no signal yet that a reversal is taking place. However, there is also limited downside with the latest share buy back by Keppel to provide some respite for the stock to hold the psychological $8 level. Unless oil mounts a sustained recovery, expect the stock to continue range trading between the $7.80 - $8.60 Fibo band.

GLP (technical)

GLP, Current downtrend started in early September, there are now initial signs of end of downtrend on the hourly chart consolidation at $2.52-2.54 breaks out of prevailing downward trend channel, (ii) MACD loses positive momentum. Meanwhile, volume shows buying interests picking up. Immediate support-resistance at $2.50-$2.61


BreadTalk: DMG maintains Buy with TP of $1.90 (from $2), based on 7.5x FY15e EV/EBITDA. Believes that the stock is undervalued, and that BreadTalk's diversified offerings and mass market prices will continue to thrive despite the weak spending environment. Two catalysts: 1) The Food Atrium division (25% of group profit) is expected to be an important pillar of growth, underpinned by the group's store expansion plans particularly in China , where this concept is still relatively new but popular. Targeting 100 food courts in the medium term (currently 63). 2) Through its 50/50 JV agreement with substantial shareholder Minor Int'l, DMG expects BreadTalk to expand its number of bakeries in Thailand from just 23 to an eventual goal of 100-150 outlets. Minor will be involved in the day to day operations, and its expertise in Thailand will be invaluable. The collaboration could extend further into restaurants and food courts.

Suntec REIT

Suntec REIT: OCBC expects it to be beneficiary of robust momentum in Singapore’s prime office sector, but rental growth is likely to moderate from 2015. Situation appears less sanguine in retail segment, the house views. Phase 3 clocked in lackluster committed occupancy rates (60% at 30 Sep). If situation remains sluggish, there could be downside risks to DPU. OCBC downgrades to Hold with TP of $1.90

Lippo Malls Indo REIT

Lippo Malls Indo REIT: CIMB initaites coverage with Add and TP of $0.40. The house notes that being the only SGX-listed REIT with pure exposure to Indonesia’s retail sector, Lippo Malls Indonesia Retail Trust (LMIRT) is well placed to benefit from a growing pool of middle-class consumers and a potential rise in rental rates due to robust demand from local and international retailers as well as limited supply of new mall space. The house begin coverage with an Add rating and DDM-based target price (discount rate: 11.3%) of S$0.40. Downside risk could come from continued volatility of the Indonesian rupiah (Rp) against the Singapore dollar.


TTJ: TTJ’s 1QFY15 net profit fell 10% y/y to $4.2m, while revenue fell 23% to $24.7m mainly due to lower sales in the structural steel business offset by increased dormitory revenue. Gross margin rose 4.7ppt to 30%, mitigating deterioration in bottom line. Order book stood at $99m, which would be recognized over FY15-16. Meanwhile, management cites healthy level of enquiries in both private and public sector projects. TTJ is trading at 7.5x annualized 1QFY15 P/E.


Popular: Swung to 2QFY15 net profit of $1.3m, while revenue fell 8% to $125.6m, attributed a 4.6% drop in retail and distribution sales due to the absence of the Singapore Gadget & Write Fair this year. On the property front, one unit of Ei8ght Raja sold for $2.5m, vs. 2 units of 18 Shelford last year. Gross margin held steady at 15.4%. Bottom line boosted by a one-off disposal gain from two commercial property units, and higher rental income. If Popular is unable to sell unsold property units by the time the Qualifying Certificate conditions expire, i.e. 28 May 2015 for the 21 unsold units of Ei8ght Raja, it would face escalating extension charges. Permai Residences, which should be completed by end 2015, could face the same situation if current situation persists over the medium term. Popular is trading at annualized 1HFY14 P/E of 9x.


Airlines: The International Air Transport Association (IATA) expects global airlines to report record profits for 2014, as fuel costs dive, with airlines to post a record net profit of US$19.9m for 2014 and US$25b in 2015. IATA however guided that US carriers will likely fare the best in 2014, followed by Asia-Pacific carriers, with Brent crude likely to average around $US85 per barrel next year, the first time since 2010 where prices are below the US$100 per barrel mark. The association however cautioned that fuel hedging by airlines meant that it could take some time before the lower fuel prices translate into lower fares, and some Asian carriers could find their hedges working against them instead. Maybank-KE’s has a Buy call on SIA (TP: $12.00), where the house had previously highlighted that depressed oil prices provides SIA with much needed operating leverage, shoring up bottom line. Maybank-KE estimates every US$5 decline in jet fuel prices could add 22% to FY3/16e earnings. Given that carriers typically hedge their fuel requirements 6-12 months ahead, a sustained oil price slump is expected to spur an earnings-revision cycle. This is especially so if SIA maintains its discipline in capacity cutbacks.


Cordlife: Maybank-KE reiterated its BUY call and TP of $1.30 on the counter, following a meeting with China's leading cord blood bank, China Cord Blood Corporation (CCBC). According to the house, Cordlife’s recent sell-down was led by the lack of understanding and appreciation for the motivation behind the recent US$50m purchase of CCBC's convertible notes and a US$46.5m loan extended to Magnum Opus International, a company controlled by CCBC's management team. Maybank-KE believes that Cordlife's current mere 10% stake in CCBC (14.2% upon conversion of full convertible notes in 2017), allowed the company to hit far above its weight, as new products by Cordlife are being pushed out through CCBC's vast China network. While the loan to Magnum Opus was unorthodox, it was necessary to cement the relationship with CCBC. House views the loan as a proxy to influence the equity portion held by CCBC's management, terms it a "master-class move by a grandmaster".


iFAST: Trading debut at 9am for the internet-based investment products distribution platform, parent company of and iFAST Financial platforms. Its IPO of 32.8m new shares (30m placement shares, 2.8m public offer shares), at the upper end of the IPO price of $0.95/share, were 12.4x subscribed. Institutional investors allotted over 5% include Schroder Investment, Affin Hwang Asset Management and Lion Global, while cornerstone investors are FIL Investment Management and OWW Capital Partners. Proceeds from the IPO will be earmarked for M&As, JVs and business expansion into the Chinese market, as well as to enhance its product, IT and service capabilities, and working capital. The financial technology firm distributes investments products to consumers and businesses via its platforms, with operations in Singapore, Hong Kong, Malaysia, and its newest addition, China. The firm also provides investment administration and transactions services, research and trainings, IT services and backroom functions to financial companies and investors. Key revenue drivers are: 1) Recurring commission income drawn as a percentage of assets under administration ($5.13b as at end-Sep); 2) Non-recurring commission derived from investment subscription via front-end loading or processing fees; and 3) Non-recurring B2C currency conversion service and advertising fees. Growth is highly dependent on offering of innovative advisory solutions and the rising trend of back-end transactional and operational outsourcing. The group has a lean balance sheet, with no borrowings, high operating leverage, and 80% recurring revenue. Based on the offer price, iFAST trades at 24x annualized 9M14 P/E, compared to closest peer, ARA Asset Management, which provides similar services for property assets, of 16.1x.

SG Market (11 Dec 14)

Amid the lack of corporate news flow, the Singapore market will likely take direction from the overnight sell-off in the US market to open lower this morning. Trading of late has been volatile, exacerbated by the daily swings particularly in the O&M plays. Momentum however, remains on the downside. From a chart perspective, the STI has continued to trade within the 3,300 – 3,360 band, But if the psychological 3,300 level fails to hold, expect the index to test the next support at 3,273 (50 day moving average). Stocks to watch: *TTJ: 1QFY15 net profit fell 10% y/y to $4.2m, as revenue dropped 23% to $24.7m, mainly due to lower sales in the structural steel business offset by increased dormitory revenue. Gross margin rose 4.7ppt to 30%, mitigating the deterioration in bottom line. Order book stood at $99m. BVPS at $0.35. *Keppel Corp: Initiated its first share buy-back yesterday, with the purchase of 0.5m shares at between $8.31 and $8.39 each. The rig builder is authorised to purchase a max of 90.8m shares via share buy-backs. *GLP: Rating agency, Moody’s says that the group’s announcement to acquire a stake in Blackstone’s US logistics real estate portfolio will not impact its Baa2 rating and stable outlook. *YuuZoo: Management clarifies that no decision has been made by the Board with regard to the issues highlighted in a recent DealStreetAsia article titled: “YuuZoo in early talks to raise $100m, mulls secondary listing on Nasdaq”. *CH Offshore / Chuan Hup / Falcon Energy: All three companies on trading halt. Falcon Energy and Chuan Hup own 29% and 23.8% of CH Offshore, respectively. *New IPO: iFAST to commence trading at 9am. iFast is an Internet-based investment products distribution platform with assets under administration of ~$5.13b. iFast has two main businesses, i) its B2C website,, and ii) a B2B platform that caters to financial institutions and high net worth clients. The offer of 32.8m new shares was 12.4x subscribed. Based on the offer price of $0.95 per share, iFast is valued at 24x annualized 9M14 P/E and 3.9x P/B.

Wednesday, December 10, 2014


Hyflux: low price is not without reason. Negative NTA means shareholders may not be left with much residual value in a default situation. Also, looking at Bloomberg data, in the nearly five years between 2010 and 9M14, the group has bled $1.15b in cumulative free cash flow , compared to its market cap now of $650m.

First REIT

First REIT: Share price is at its 1½ year high of $1.27, taking its year-to-date return to ~18%. The healthcare REIT was featured in The Edge Daily today, where the magazine highlighted the record distribution of 2.02¢ paid in the group’s latest 3Q14 results. The strong earnings performance was led by full contribution from the group’s latest acquisition, Siloam Hospital Purwakarta, and the REIT had guided that Joko Widodo’s victory at the recent presidential elections bodes well for Indonesia’s healthcare sector, with the government’s universal healthcare programme expected to be rolled out as planned. The group continues to see strong opportunities in the Indonesian healthcare sector and will tap on its sponsor, Lippo Karawaci’s strong pipeline for future acquisitions. Lippo Karawaci currently owns 18 hospitals under PT Siloam International Hospitals, with a pipeline of another 29 hospitals over which First REIT has the right-of-first-refusal. Outside of Indonesia, First REIT aims to continue searching for more yield-accretive and quality healthcare assets in Asia to expand and diversify its portfolio. First REIT’s balance sheet remains healthy, with net-gearing at just 30.0%, providing further debt headroom for expansion. At the current share price, First REIT trades at an annualized 6.4% 3Q14FY yield and 1.3x P/B versus closest peer ParkwayLife REIT’s of 4.8% forward yield and 1.5x P/B.

United Engineers

United Engineers: According to Bloomberg reports, Charoen's TCC Top Enterprise plans to start due diligence on United Engineers (UEL) next week, laying the groundwork for a potential acquisition. Recall on 27 Aug, majority shareholder, OCBC and subsidiary Great Eastern, which owns a combined 20.5% stake in UEL entered into exclusive talks with TCC in relation to a possible transaction. The period of exclusivity will expire on the date falling six weeks from the date that due diligence access is granted to TCC. At $2.90, UEL valued at a 13.8% discount to RNAV of $3.30, based on independent valuation as at Dec 2013.