China Merchants Pacific: 1Q15 results missed estimates, as net profit fell 4% to HK$142.3m on revenue of HK$494.3m (+6%). The higher top-line was largely due to revenue growth from Yongtaiwen Expressway (+4.5%) and the consolidation of revenue contribution from Jiurui Expressway acquired in Sep '14.
This was partially offset by a marginal decline in revenue from the Beilun Port Expressway, as a result of the change in traffic mix whereby traffic flow of passenger vehicles with lower toll rates increased and the traffic flow of goods vehicles with higher toll rates decreased.
Accordingly, Yongtaiwen Expressway, Beilun Port Expressway and Jiurui Expressway contributed 77.3%, 17.6% and 4.7% of total revenue respectively. Gross margin improved 1.3ppt to 55.8%.
Bottom-line was however weighed by a 17% decline in JV contributions to HK$63.5m, due to lower contributions from Gui Huang Highway. Additionally, finance costs rose 7% to HK$33.0m, as a result of increased bank borrowings.
The performance of the Guihuang Highway was affected by the decline in toll revenue of 6% y/y, and a one-off compensation of HK$16.5m received from a local government-linked enterprise in 1Q14. Excluding the impact of the one-off compensation, profit contribution from the Guihuang Highway would have increased 10% over the same period last year.
Going forward, the group guides that despite signs of slowing growth in the Chinese economy, CM Pacific remains optimistic about the business outlook of the toll road industry in China and expect its toll road business to continue to deliver positive results.
Balance sheet remains fairly strong with net gearing at just 29.7%.
The stock continues to sit in Market Insight’s yield portfolio, backed by a forward yield of 5.9%.
Monday, May 4, 2015
SMRT
SMRT: SMRT’s 4QFY15 results slightly missed, as net profit grew 23% to $20.8m, bringing full year net profit to $91m (+47%).
4QFY15 revenue increased 7.5% to $311.2m, with improved contributions from all segments. Train ($159.3m, +3.8%) and bus ($60.3m, +9.9%) revenues grew from increased ridership and fare, while taxi revenue ($36.8m, +7.3%) benefitted from a change in fleet composition and lower accident claim and insurance expenses.
Rental revenue was up 28.1% to $32.1m on increased rental rates, as well as contributions from Ang Mo Kio Xchange and Kallang Wave mall.
At the operating level, fare business’ loss widened to $3.2m from $3.8m, as rail recorded its first ever quarterly loss of $2.4m on increased staff costs, depreciation and repair and maintenance. This was slightly offset by a $0.9m profit from bus ops after 17 consecutive quarters of losses, from lower diesel costs.
Operating profit from non-fare business grew 18.7% to $30.7m on better performances in the rental and taxi businesses.
Management cautions for increased opex in the rail business, from larger headcount, train fleet, and network expansion, and higher fares (+1.9% effective April) and lower energy prices will only partially mitigate the higher operating costs.
In April, SMRT announced its partnership with OMGTEL to bid for the fourth telco license in Singapore. Maybank-KE is broadly positive on the venture, though it is still too early to quantify earnings impact.
The immediate catalyst for SMRT would be the potential bus asset sale to the government. Nevertheless this will be no impact to FY16 earnings. Meanwhile, discussions on the transition to the new rail financing framework are ongoing.
SMRT is currently trading at 22.5x FY3/16 consensus P/E.
Latest broker ratings:
Deutsche maintains Buy with TP of $2.43
UBS maintains Buy with TP of $1.81
UOB KayHian maintains Hold with TP of $1.73
4QFY15 revenue increased 7.5% to $311.2m, with improved contributions from all segments. Train ($159.3m, +3.8%) and bus ($60.3m, +9.9%) revenues grew from increased ridership and fare, while taxi revenue ($36.8m, +7.3%) benefitted from a change in fleet composition and lower accident claim and insurance expenses.
Rental revenue was up 28.1% to $32.1m on increased rental rates, as well as contributions from Ang Mo Kio Xchange and Kallang Wave mall.
At the operating level, fare business’ loss widened to $3.2m from $3.8m, as rail recorded its first ever quarterly loss of $2.4m on increased staff costs, depreciation and repair and maintenance. This was slightly offset by a $0.9m profit from bus ops after 17 consecutive quarters of losses, from lower diesel costs.
Operating profit from non-fare business grew 18.7% to $30.7m on better performances in the rental and taxi businesses.
Management cautions for increased opex in the rail business, from larger headcount, train fleet, and network expansion, and higher fares (+1.9% effective April) and lower energy prices will only partially mitigate the higher operating costs.
In April, SMRT announced its partnership with OMGTEL to bid for the fourth telco license in Singapore. Maybank-KE is broadly positive on the venture, though it is still too early to quantify earnings impact.
The immediate catalyst for SMRT would be the potential bus asset sale to the government. Nevertheless this will be no impact to FY16 earnings. Meanwhile, discussions on the transition to the new rail financing framework are ongoing.
SMRT is currently trading at 22.5x FY3/16 consensus P/E.
Latest broker ratings:
Deutsche maintains Buy with TP of $2.43
UBS maintains Buy with TP of $1.81
UOB KayHian maintains Hold with TP of $1.73
Pacific Century
Pacific Century: (S$0.445) Dismisses privatisation talks
In relation to The Business Times' article titled “Pacific Century headed for delisting?” published on 30 Apr, management has disclosed that it is not aware of any restructuring plan involving the group.
Recall Market Insight's previous posting on 27 Apr titled "Rallies 25% in two-weeks as privatization talk re-surface", the most valuable asset of Pacific Century (PCRD) is its 21.7% stake in HK-listed PCCW (8 HK).
PCCW is currently worth HK$8,361.6m ($1,436.9m), compared to PCRD's market cap of $1,218.8m. We continue to see upside from PCRD's attractive stub valuation, as well as share price support, derived from company’s active share buybacks and cancellation.
In relation to The Business Times' article titled “Pacific Century headed for delisting?” published on 30 Apr, management has disclosed that it is not aware of any restructuring plan involving the group.
Recall Market Insight's previous posting on 27 Apr titled "Rallies 25% in two-weeks as privatization talk re-surface", the most valuable asset of Pacific Century (PCRD) is its 21.7% stake in HK-listed PCCW (8 HK).
PCCW is currently worth HK$8,361.6m ($1,436.9m), compared to PCRD's market cap of $1,218.8m. We continue to see upside from PCRD's attractive stub valuation, as well as share price support, derived from company’s active share buybacks and cancellation.
Ramba Energy
Ramba Energy: (S$0.30) Proposed placement to Indonesian tycoon Dato Sri Tahir
Ramba Energy has proposed a private placement of 68m new shares at $0.27 apiece, to the founder of Indonesian conglomerate Mayapada Group, Dato Sri Tahir.
The new shares represent 17.6% of issued share capital and post-placement, Tahir will own a 14.9%-stake in Ramba.
The net proceeds of $17.9m from the placement is intended for Ramba's oil and gas work programme and debt repayment.
The investment by the Indonesian Tycoon and philanthropist may provide investor confidence in the group's portfolio of energy assets mainly located in Indonesia's South Sumatra and West Java, as well as management's strategy to expand in the country through acquisition and development of lower-risk, onshore assets.
At the current price, Ramba is valued at 1.4x P/B.
Ramba Energy has proposed a private placement of 68m new shares at $0.27 apiece, to the founder of Indonesian conglomerate Mayapada Group, Dato Sri Tahir.
The new shares represent 17.6% of issued share capital and post-placement, Tahir will own a 14.9%-stake in Ramba.
The net proceeds of $17.9m from the placement is intended for Ramba's oil and gas work programme and debt repayment.
The investment by the Indonesian Tycoon and philanthropist may provide investor confidence in the group's portfolio of energy assets mainly located in Indonesia's South Sumatra and West Java, as well as management's strategy to expand in the country through acquisition and development of lower-risk, onshore assets.
At the current price, Ramba is valued at 1.4x P/B.
Banks
Banks: Post-results, Deutsche noted that earnings of all three banks were supported by a decent recovery in non-interest income, driven by stronger trading income from seasonal effects being the key driver.
Although the first quarter earnings run-rate is trending comfortably vs. full-year earnings estimates, an upgrade in core earnings is unlikely as higher NIM from SIBOR/SOR could be offset by weaker loan growth, a lower interbank yield and potentially higher credit costs.
Few common trends among the banks-
1) NIM expects further upward re-pricing and benefiting margins (more for DBS and OCBC);
2) Non-interest income, in particular wealth management growth, remains a key driver;
3) Loan growth remains more challenging in 2015 and, given the current run rate, overall growth could come in around mid-single digits (as opposed to high single digits, as previously guided);
4) Banks are actively managing funding costs (in particular wholesale USD funding), with a slowdown in asset growth;
5) Asset quality remains benign, with no systemic concerns. Relatively, the banks have signalled higher concerns in Indonesia and China.
Overall, house still prefers DBS (Buy, TP $23.20) the most among the banks, given its superior risk-reward and superior upside catalysts versus its peers.
Deutsche also has a Buy on OCBC with TP of $12.00 and UOB on Hold with TP of $25.00.
Although the first quarter earnings run-rate is trending comfortably vs. full-year earnings estimates, an upgrade in core earnings is unlikely as higher NIM from SIBOR/SOR could be offset by weaker loan growth, a lower interbank yield and potentially higher credit costs.
Few common trends among the banks-
1) NIM expects further upward re-pricing and benefiting margins (more for DBS and OCBC);
2) Non-interest income, in particular wealth management growth, remains a key driver;
3) Loan growth remains more challenging in 2015 and, given the current run rate, overall growth could come in around mid-single digits (as opposed to high single digits, as previously guided);
4) Banks are actively managing funding costs (in particular wholesale USD funding), with a slowdown in asset growth;
5) Asset quality remains benign, with no systemic concerns. Relatively, the banks have signalled higher concerns in Indonesia and China.
Overall, house still prefers DBS (Buy, TP $23.20) the most among the banks, given its superior risk-reward and superior upside catalysts versus its peers.
Deutsche also has a Buy on OCBC with TP of $12.00 and UOB on Hold with TP of $25.00.
Venture
Venture: 1Q15 slightly missed, net profit rose 5.8% y/y to $32.6m, while revenue climbed 3% to $608.7m, driven by a stronger USD. Otherwise, revenue would have been flat y/y in USD terms.
Bottom line was weighed by a 181% increase in R&D costs to $13.4m, which comprised tooling and prototyping costs, and a 91.8% increase in taxes to $5.7m from a change in sales mix of tax approved products. Management expects full-year tax rate to be lower. Net margin improved 0.1ppt to 5.4%.
Inventory rose to 90 days, as more components were taken in anticipation of delivery delays following Malaysia’s implementation of GST, and will be worked down in the next few quarters.
Networking & Communications’ sales was up 16.5% y/y on good results from Avago, QLogic and JDSU in the communications space. Higher telco capex should continue to drive this segment.
Meanwhile, Test & Measurement/Life Sciences sales (+7% y/y) should benefit from new product pipelines by
Life Sciences customers. M&A activity, where a stronger customer acquires another underperforming customer could also lead to better results.
Maybank-KE believes that Venture is on course for a FY15e DPS from $0.50 to $0.55, which Venture used to pay till FY11, from improved outlook and working capital management.
If the DPS surprise materializes, FY15e yield would improve from 5.9% to 6.5%.
Venture is currently trading at 14.8x FY15e P/E.
Bottom line was weighed by a 181% increase in R&D costs to $13.4m, which comprised tooling and prototyping costs, and a 91.8% increase in taxes to $5.7m from a change in sales mix of tax approved products. Management expects full-year tax rate to be lower. Net margin improved 0.1ppt to 5.4%.
Inventory rose to 90 days, as more components were taken in anticipation of delivery delays following Malaysia’s implementation of GST, and will be worked down in the next few quarters.
Networking & Communications’ sales was up 16.5% y/y on good results from Avago, QLogic and JDSU in the communications space. Higher telco capex should continue to drive this segment.
Meanwhile, Test & Measurement/Life Sciences sales (+7% y/y) should benefit from new product pipelines by
Life Sciences customers. M&A activity, where a stronger customer acquires another underperforming customer could also lead to better results.
Maybank-KE believes that Venture is on course for a FY15e DPS from $0.50 to $0.55, which Venture used to pay till FY11, from improved outlook and working capital management.
If the DPS surprise materializes, FY15e yield would improve from 5.9% to 6.5%.
Venture is currently trading at 14.8x FY15e P/E.
SG Market (04 May 15)
Regional bourses are trading slightly higher this morning in Tokyo (+0.1%), Seoul (+0.1%) and Sydney (+0.1%).
From a chart perspective, technica, support for the STI is seen at 3,445 (50-dma) with topside resistance capped at around 3,550.
Stocks to watch:
*CapitaLand: 1Q15 results in line. Core net profit inched down 0.3% to $155.3m on revenue of $915.0m (+49.4%), with the weaker bottom-line partly attributable to the absence of contributions from Australand. Revenue growth was led by higher contributions from the group’s residential projects in S'pore and Vietnam, and also due to the consolidation of CapitaLand Township’s revenue into CapitaLand China as it became a wholly owned subsidiary in Mar '15. In addition, the group recorded higher rental revenue from its shopping mall and serviced residence businesses. Gross margin fell 14.9ppt to 39.5%. Bottom-line was partially weighed by a more than 3x rise in other operating expenses to $29.7m and a 10.6% decline in associate and JV contributions of $125.6m. NAV/share of $4.05.
*SMRT: 4QFY15 slightly missed, as net profit grew 23% to $20.8m, bringing full year net profit to $91m (+47%). 4QFY15 revenue increased 7.5% to $311.2m, with improved contributions from most segments. Rail and bus revenues grew from increased ridership and fare, while taxi revenue benefitted from a change in fleet composition and lower accident claim and insurance expenses. The fare business recorded an operating loss of $3.2m, as rail recorded its first ever quarterly loss of $2.4m, offset by a $0.9m profit from bus ops after 17 consecutive quarters of losses, while operating profit from non-fare business grew 18.7% to $30.7m on better performances in the rental and taxi businesses. Final DPS of 17.5¢, bringing full year DPS to 3.25¢. NAV/share of $0.565.
*Cosco: 1Q15 results below estimates, as net profit slumped 94% y/y to $0.77m, while revenue fell 5% to $991.2m, driven by a decrease in shipyard revenue, from lower contributions from marine engineering and ship repair, partially offset by revenue increase from ship building. Bottom line weighed by gross margin that contracted 1.8ppt to 7.4%, and increased finance expenses. Order book stood at US$8.1b with progressive deliveries up to 2017. NAV/share of $0.631.
*Venture: 1Q15 missed, with net profit up 5.8% y/y to $32.6m, while revenue climbed 3% to $608.7m, driven by a stronger USD. Otherwise, revenue would have been flat y/y in USD terms. Bottom line dragged by higher tax, due to changes in sales mix of tax approved products. NAV/share of $7.04
*Frasers Hospitality Trust: 2QFY15 adjusted DPU was at 1.18c (no y/y comparison due to IPO debut the previous year), taking its payout from 14 Jul '14 to 31 Mar '15 to 3.69¢. Gross revenue was at $24m (+1.7%) and NPI at $19.0m (+0.9%), led by stronger performances from the group's Australian and UK properties, offset by a weaker contributions from the S'pore and KL properties. Gearing ratio was at 38.4%, with average debt cost of 2.08% and tenor of 4 years. NAV/unit of $0.867.
*China Merchants Pacific: 1Q15 net profit fell 4% to HK$142.3m on revenue of HK$494.3m (+6%). The higher top-line was largely due to revenue growth from Yongtaiwen Expressway and the consolidation of revenue contribution from Jiurui Expressway acquired in Sep '14. Gross margin improved 1.3ppt to 55.8%. Bottom-line was partly weighed by a 17% decline in JV contributions to HK$63.5m, due to lower contributions from Beilun Port Expressway and Gui Huang JVs. NAV/share of HK$6.17.
*Rowsley: 1Q15 net profit increased 70% to $3.1m, while revenue fell 25% to $16.3m, weighed by decline in revenue from architectural services, partially offset by civil and structural engineering services. Bottom line was boosted by fair value adjustment from the remeasurement of the purchase consideration payable to RSP vendors, as well as reduced depreciation & amortization. NAV/share of 11.66¢
*Tuan Sing: 1Q15 net profit doubled to $15.9m, while revenue jumped 153% to $155.3m, led by higher contributions from the property segment and the consolidation of revenue from Grand Hotel Group (GHG). Gross margin expanded 4ppt to 20.8%. Share of equity accounted investees shrank 83%to $0.8m from the consolidation of GHG, and lower contribution from GulTech, while finance cost expanded 378% to $7m, to finance the acquisition of GHG. NAV/share of $0.702.
*JAPFA: 1Q15 net profit slumped 48% y/y to US$7m, while revenue slipped 2% to US$675.7m, weighed by lower sales in animal protein (-2%) and consumer segments (-12%) from the 5% depreciation of IDR against USD, partially offset by higher volumes in the dairy segment (+18%) from the contribution of new farms. Bottom line was also dragged by FX losses of US$13.9m (1Q14: +US$7.6m), partially mitigated by higher gains in fair value of biological assets (+30%). NAV/share of US$0.37.
*Federal International: Exploring potential opportunities to supply equipment on lease which is able to enhance output from marginal oil and gas fields in Indonesia.
*TEE Land: Associate Chewathai has acquired 8 plots of land of ~1,364 sqm in Bangkok for Thb101.1m. The freehold land is presently zoned for residential use.
*Ramba: Private placement of 68m new shares at $0.27 each to Indonesian Tycoon and philanthropist Data Sri Prof. Dr. Tahir MBA. Net proceeds of $17.9m is expected to be used for group’s oil and gas work programme.
*Far East Orchard: Acquired a portfolio of student accommodation properties within Shieldfield, Newcast
From a chart perspective, technica, support for the STI is seen at 3,445 (50-dma) with topside resistance capped at around 3,550.
Stocks to watch:
*CapitaLand: 1Q15 results in line. Core net profit inched down 0.3% to $155.3m on revenue of $915.0m (+49.4%), with the weaker bottom-line partly attributable to the absence of contributions from Australand. Revenue growth was led by higher contributions from the group’s residential projects in S'pore and Vietnam, and also due to the consolidation of CapitaLand Township’s revenue into CapitaLand China as it became a wholly owned subsidiary in Mar '15. In addition, the group recorded higher rental revenue from its shopping mall and serviced residence businesses. Gross margin fell 14.9ppt to 39.5%. Bottom-line was partially weighed by a more than 3x rise in other operating expenses to $29.7m and a 10.6% decline in associate and JV contributions of $125.6m. NAV/share of $4.05.
*SMRT: 4QFY15 slightly missed, as net profit grew 23% to $20.8m, bringing full year net profit to $91m (+47%). 4QFY15 revenue increased 7.5% to $311.2m, with improved contributions from most segments. Rail and bus revenues grew from increased ridership and fare, while taxi revenue benefitted from a change in fleet composition and lower accident claim and insurance expenses. The fare business recorded an operating loss of $3.2m, as rail recorded its first ever quarterly loss of $2.4m, offset by a $0.9m profit from bus ops after 17 consecutive quarters of losses, while operating profit from non-fare business grew 18.7% to $30.7m on better performances in the rental and taxi businesses. Final DPS of 17.5¢, bringing full year DPS to 3.25¢. NAV/share of $0.565.
*Cosco: 1Q15 results below estimates, as net profit slumped 94% y/y to $0.77m, while revenue fell 5% to $991.2m, driven by a decrease in shipyard revenue, from lower contributions from marine engineering and ship repair, partially offset by revenue increase from ship building. Bottom line weighed by gross margin that contracted 1.8ppt to 7.4%, and increased finance expenses. Order book stood at US$8.1b with progressive deliveries up to 2017. NAV/share of $0.631.
*Venture: 1Q15 missed, with net profit up 5.8% y/y to $32.6m, while revenue climbed 3% to $608.7m, driven by a stronger USD. Otherwise, revenue would have been flat y/y in USD terms. Bottom line dragged by higher tax, due to changes in sales mix of tax approved products. NAV/share of $7.04
*Frasers Hospitality Trust: 2QFY15 adjusted DPU was at 1.18c (no y/y comparison due to IPO debut the previous year), taking its payout from 14 Jul '14 to 31 Mar '15 to 3.69¢. Gross revenue was at $24m (+1.7%) and NPI at $19.0m (+0.9%), led by stronger performances from the group's Australian and UK properties, offset by a weaker contributions from the S'pore and KL properties. Gearing ratio was at 38.4%, with average debt cost of 2.08% and tenor of 4 years. NAV/unit of $0.867.
*China Merchants Pacific: 1Q15 net profit fell 4% to HK$142.3m on revenue of HK$494.3m (+6%). The higher top-line was largely due to revenue growth from Yongtaiwen Expressway and the consolidation of revenue contribution from Jiurui Expressway acquired in Sep '14. Gross margin improved 1.3ppt to 55.8%. Bottom-line was partly weighed by a 17% decline in JV contributions to HK$63.5m, due to lower contributions from Beilun Port Expressway and Gui Huang JVs. NAV/share of HK$6.17.
*Rowsley: 1Q15 net profit increased 70% to $3.1m, while revenue fell 25% to $16.3m, weighed by decline in revenue from architectural services, partially offset by civil and structural engineering services. Bottom line was boosted by fair value adjustment from the remeasurement of the purchase consideration payable to RSP vendors, as well as reduced depreciation & amortization. NAV/share of 11.66¢
*Tuan Sing: 1Q15 net profit doubled to $15.9m, while revenue jumped 153% to $155.3m, led by higher contributions from the property segment and the consolidation of revenue from Grand Hotel Group (GHG). Gross margin expanded 4ppt to 20.8%. Share of equity accounted investees shrank 83%to $0.8m from the consolidation of GHG, and lower contribution from GulTech, while finance cost expanded 378% to $7m, to finance the acquisition of GHG. NAV/share of $0.702.
*JAPFA: 1Q15 net profit slumped 48% y/y to US$7m, while revenue slipped 2% to US$675.7m, weighed by lower sales in animal protein (-2%) and consumer segments (-12%) from the 5% depreciation of IDR against USD, partially offset by higher volumes in the dairy segment (+18%) from the contribution of new farms. Bottom line was also dragged by FX losses of US$13.9m (1Q14: +US$7.6m), partially mitigated by higher gains in fair value of biological assets (+30%). NAV/share of US$0.37.
*Federal International: Exploring potential opportunities to supply equipment on lease which is able to enhance output from marginal oil and gas fields in Indonesia.
*TEE Land: Associate Chewathai has acquired 8 plots of land of ~1,364 sqm in Bangkok for Thb101.1m. The freehold land is presently zoned for residential use.
*Ramba: Private placement of 68m new shares at $0.27 each to Indonesian Tycoon and philanthropist Data Sri Prof. Dr. Tahir MBA. Net proceeds of $17.9m is expected to be used for group’s oil and gas work programme.
*Far East Orchard: Acquired a portfolio of student accommodation properties within Shieldfield, Newcast
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