Sino Grandness

Sino Grandness: 1Q12 net profit of Rmb57m (+81% yoy, +162% qoq) came in better-than-expected. Revenue grew 61% to Rmb285m and GP Margins added 3ppt to 38%. Nonetheless, receivables were higher at Rmb332m (4Q11: Rmb298m), resulting in negative free cash flow of Rmb33m and lower ending cash balance of Rmb45m (4Q11: Rmb82m). DMG revise FY12-FY13 earnings estimates up by 21%-25% to RMB148m-RMB184m respectively following a strong set of 1Q12 results. However, adjust target multiple down to 3.5x (old: 4.0x) to reflect volatile margins observed since 1Q10 and surprise audit adjustments for higher expenses in 4Q11. With current share price offering less than 10% downside potential, house upgrade the counter to NEUTRAL at a slightly higher TP of $0.39

Genting HK

Genting HK: 50% subsidiary Norwegian Cruise Line (NCL) reported inline 1Q12 results in the US. NCL’s net profit came in at US$3.3m, vs loss of US$10.7m yoy. Occupancy rate remained high at 107.6% despite the new capacity from the Norwegian EPIC ship that came on board in 2H10, indicating that demand and bookings are strong. Net yields, the leading indicator of the health of cruise liners, was up 2.4% yoy at US$161. Macquarie expects NCL EBITDA to improve to US$533m in 2012 from US$500m in 2011, adds inflection point will come in 2H13 and 2014, when 2 new large ships would be added to the fleet. The house keeps GENHK at Outperform with TP US$0.47. Sees catalyst in possible NCL IPO (est. 2012-13 timeframe). Adds at GENHK’s current stock price of US$0.37, the stub NCL business is available at only 5x EV/EBITDA, vs the ~8x multiple for the top 2 cruise liners in the US.

SMRT

SMRT: disappointing 4Q/FY12 results. Full year net profit was $120m, -26% yoy, while 4Q12 net profit was $13.9m, -59% yoy. This was mainly due to a $22m impairment of goodwill on the bus business (SMRT had previously warned about this, without specifying the amount). However, the big disappointment came in the form of a cut in dividend, with full year DPS now at 7.45cts, vs 8.5cts in FY11. previously, SMRT committed to maintain an absolute level of dividends, hence this departure from policy is a negative surprise for yield investors. This change was likely motivated by expected capex ($500m) vs sh/h equity ($791m) and annual EBITDA of~$300m. Meanwhile, SMRT disclosed it is in preliminary discussion with LTA on a new financing framework, in which SMRT pays the govt an operating lease instead of owing train assets. This could help reduce strain on SMRT’s balance sheet, as the FY13 guidance capex of $500m would hike gearing to ~70%, leaving limited room for funding other large capex programs. UBS reiterates Sell with TP $1.41. Says a P/E de-rating is warranted, with operating conditions to remain difficult as ridership revenue growth is not strong enough to offset rising costs (eg fuel and staff), while the govt’s push for higher rail capacity means structurally lower margins going forward. JPM downgrades to Neutral from overweight, cuts TP to $1.60 from $2, as its original yield thesis is no longer valid.

Sakari

Sakari: Announced very poor set of 1Q12 results, which was below estimates, and a stark contrast to last qtr’s blowout results. Rev at US$188.8m, -16% yoy and -39.6% qoq, while net profit at US$14.5m, -65% yoy and -80.1% qoq. Gross Margins plunged to 20.2% vs 34% yoy and qoq. Poor results were mainly due to poor contributions from both its Sakari and Jembayan mines. In Sebuku, work in the qtr saw a significant amount of development work for the future, such as river diversions, mud stabilisation, drainage channels and protective bunds, although mgt has highlighted that Sebuku remains slightly ahead of its ramp up schedule and the robust start to 2012 has lifted the mine’s production target for the year to not less than 2.5Mt. Jembayan mines were faced with appalling weather conditions, restricting access to mine’s deep pits for long periods. Grp’s original 2012 mine plan was to open two new pits later in the yr but, faced of adverse weather conditions, decision was taken to accelerate work to open new pits. Therefore fleet was concentrated towards south of concession with emphasis on development work rather than coal extraction, resulting in high strip ratios, low coal production and production costs being concentrated on that lower coal output. Going forward, grp confident on prospects, noting that both China and India are returning to mkt and placing orders for additional vol of coal. Emphasis for production growth in 2Q will remain firmly on Sebuku with its high margins and attractive product. Jembayan is preparing the mine for higher production when mkt strengthens and Grp will stay focused on mine’s margins. Highlight that in current conditions, cost savings spread over an entire production base can be more profitable than a strategy to produce higher vol at lower margins. Grp is therefore positioning its mines, particularly Jembayan, for an expected upturn later in the yr. Merrill Lynch concludes that while there is potential share-price overhang on the regulatory front and coal price headwinds, house see an enhanced buying opportunity for SAR after 1Q results. After all, the share price has corrected more than 20% since the release of 4Q results and now trades more than 1STD below its historical mean P/E. Ratings as follow: Macquarie maintains O/p with $3.50 TP. Note that only way now is up. Merrill maintains Buy with $2.40 TP. Goldman maintains neutral with $2.20 TP.

Capitaland

Capitaland: Results in line with estimates1Q rev was $641.1m +4.8% yoy with net profit at $133.2m +31.3% yoy. Excluding revaluation and portfolio gains of $55m core net profit was a positive $78m. Overseas operations contributed 61% of total EBIT. Singapore contributed $52m approx 16% of total EBIT with sales of 57 units. Sg sales was driven by Bedok Residences with 39 units, d’Leedon sold a mere 8 units (below 60% sold). Co also gave guidance on Sky Habitat with 129 units sold from $1642-1747 psf. In China, co sold 189 units vs 400-500 units each in 1Q, 2Q, 3Q11. Co continues to retain Sg and China as key focus markets and expects longer term demand to remain healthy. New launches in various projects, eg The Interlace, d’Leedon and Sky Habitat are expected over the course of the year. Lease renewals at Raffles City projects in Sg, Shanghai and Beijing have witnessed upward revisions. Capitaland now trades at P/B of 0.84x Ratings as follows, JPM maintains Overweight with TP$3.40 UBS maintains Buy with TP$3.60 Deutsche maintains Hold with TP$3.18 MS maintains Underweight with TP$2.90

SG Market

SG Market: S’pore shares are likely to trade higher, tracking gains in Wall Street and regional markets on improved sentiment from positive US economic data but gains are likely to be limited as investors continue to remain cautious over the debt crisis in the euro zone and absence of any major local leads. The convergence of the 20 and 50-day moving averages at around 2985 may prove to be a stiff resistance, followed by the 3000 level, with 2960 offering underlying support. Among stocks likely in focus, SMRT reported a shock 59% drop in 4Q profit to $13.9m on higher operating costs and on-off impairment charge, which raises questions over its future dividend payouts, while CapitaLand's 1Q12 net profit rose 31.3% yoy to $133.2m, largely in line with expectations. SingTel unit Optus plans to cut about 750 jobs. High-end residential-property company SC Global may take a hit after guiding a $10m 1Q12 loss. Sakari also posted a poor set of 1Q12 results with net profit plunging 65% to $14.5m as lower coal production and higher strip costs put pressure on margins.

Myanmar

Myanmar: STRATEGIC partnership between Vietnam and SG, if cemented, could see the two countries jointly investing in Myanmar in the near future. Speaking at the close of his inaugural state visit to Vietnam, President Tony Tan revealed that both nations are in talks to deepen bilateral cooperation, which may encompass partnerships for investments in Indochina.." Add that with Vietnamese companies increasingly looking to invest and expand beyond their home country, Singapore can contribute with its expertise in overseas investments, and in turn leverage on Vietnam's close ties with its neighbouring countries.