Spice i2i: extends the Long Stop Date for its Proposed Acquisition of Affinity Group’s cellular business and “Nexian” brand, for a 2nd time, from 16 May to 21 May. Recall, the initial completion date was set at 30 Apr, but was delayed after auditors discovered a US$10m gap in Affinity Group’s FY10 accounts. Spice maintains that all other terms and conditions of the agreement are still in full force and effect.
Stock last closed at $0.055.
Wednesday, May 18, 2011
GentingSP
GentingSP: Acquires 68.6% of Goldnature Investments, a holding co with a 51% interest in Montbella Ltd which has interests in natural resource ventures. The acq price was US$60m and Goldnature has a NAV of US$16m…
Acq is to be paid in cash and both BVI companies will become Genting’s subsidiaries. Note that this appears to be a deviation from co’s core gaming business and although a relatively small acq, will not be read positively by mkt.
Acq is to be paid in cash and both BVI companies will become Genting’s subsidiaries. Note that this appears to be a deviation from co’s core gaming business and although a relatively small acq, will not be read positively by mkt.
Sunmart
Sunmart: Co has decided to postpone dual listing on KRX due to unfavourable mkt conditions in Korea. It may submit a fresh listing application in the future. Co trades at current P/E of 6.1x. Closing price of Sunmart $0.135 on low volumes, counter has broken 200 day MA and is in a strong downward trend. Interest, reflected in trading volume, appears to have faded from counter.
Property
Property: DBSV note that monthly sales in Apr hit a high note with 1,788 units changing hands, +29% mom, the highest monthly sales YTD. Bulk of transactions came from 2 mass-market projects – MCL Land’s Eight Courtyards in Yishun and Hong Leong’s Hedges Park condominium, which made up 32% of the total. As sales are already 45-55% of house full year forecast of 10k-12k units, believe that primary private housing demand could exceed annual target but still end up below last year’s 16k+ units…..
However, the flipside is that govt would likely remain hawkish while waiting for supply mechanisms to kick in. In the mean time, possibility of revisiting the $8,000 income ceiling for primary public housing purchase over the next 6 mths, could add more uncertainty into mkt…..
Note that sector valuations are inexpensive but lacking near term catalysts. Sector House strategy would be to prefer stocks with a diversified exposure or strong capacity to deploy balance sheet. Top picks include UOL, Keppel Land and Capitaland.
However, the flipside is that govt would likely remain hawkish while waiting for supply mechanisms to kick in. In the mean time, possibility of revisiting the $8,000 income ceiling for primary public housing purchase over the next 6 mths, could add more uncertainty into mkt…..
Note that sector valuations are inexpensive but lacking near term catalysts. Sector House strategy would be to prefer stocks with a diversified exposure or strong capacity to deploy balance sheet. Top picks include UOL, Keppel Land and Capitaland.
Strategy / Earnings Review
Strategy / Earnings Review: CIMB downgrade STI to Neutral from Overweight, although FSSTI target is unchanged at 3,560. Note that 1Q11 season disappointing and headwinds are looming from rising costs with sales growth losing traction. Globally, US growth appears to have slowed while EU debt concerns are resurfacing. House deem its time to pare down its 2yr old Overweight position on SG……
Add that SG market lacks growth, with conglomerates and ppty Co’s possibly at peak profits now. Banks may find it hard to lift profits meaningfully in low i/r envt, while Telcos face competition and Transport struggling with high fuel costs. adFew growth options in SG are Genting SP, Noble, Olam, DBS and possibly 2nd tier O&M plays. SG’s limited growth opportunities but strong balance sheets, seen in div surprises at SingTel, SIA, SIA Engineering and SATS…..
House top picks for large Caps are DBS, F&N, Noble, SIA, OUE, SembCorp Industries and Wilmar, while top small-midcap picks are CWT, Ezion, FCOT, Midas, STX OSV, OKP, UMS and Foreland Fabritech.
Add that SG market lacks growth, with conglomerates and ppty Co’s possibly at peak profits now. Banks may find it hard to lift profits meaningfully in low i/r envt, while Telcos face competition and Transport struggling with high fuel costs. adFew growth options in SG are Genting SP, Noble, Olam, DBS and possibly 2nd tier O&M plays. SG’s limited growth opportunities but strong balance sheets, seen in div surprises at SingTel, SIA, SIA Engineering and SATS…..
House top picks for large Caps are DBS, F&N, Noble, SIA, OUE, SembCorp Industries and Wilmar, while top small-midcap picks are CWT, Ezion, FCOT, Midas, STX OSV, OKP, UMS and Foreland Fabritech.
Rig builders
Rig builders: may see near term weakness, on increasing evidence that Petrobras’ rig orders are at risk of being delayed/ cancelled.
Petrobras itself has said it is considering a lower capex budget as it revises a US$224b 5-yr business investment plan. The co invested US$9.7b in 1Q11, -11% yoy as exploration and production invmts dropped...
Separately, SembMarine said that the tender price submitted in late 2010 to Petrobras will be valid only until end-May, leaving just two weeks before the deadline. Meanwhile Noble Corp mentioned in its 10Q filing this month that Petrobras has notified them very recently that the 21-rig tender has been cancelled...
BNP notes local content requirements remain one of the key sticking points for the 21-rig tender, due to the Brazilian govt’s insistence on the rule. Petrobras was previously fined in Apr 2011 for failing to buy sufficient locally produced eqpt. While Petrobras is currently in talks with the govt regarding the issue, BNP believes that until a more equitable solution is found, the risk of further delays, or even a cancellation, will likely persist...
Together with the recent sharp depreciation of the USD imposing a negative technical indication to oil price outlook, BNP adds that near-term uncertainty could well intensify in the next two weeks.
Still, house expects order momentum for SMM to play catch-up from non-Petrobras orders and KEP’s orders to fast approach the 2007 peak-cycle level, when P/E held up at 17-22x. Favors KEP, SMM then SCI in descending order.
Petrobras itself has said it is considering a lower capex budget as it revises a US$224b 5-yr business investment plan. The co invested US$9.7b in 1Q11, -11% yoy as exploration and production invmts dropped...
Separately, SembMarine said that the tender price submitted in late 2010 to Petrobras will be valid only until end-May, leaving just two weeks before the deadline. Meanwhile Noble Corp mentioned in its 10Q filing this month that Petrobras has notified them very recently that the 21-rig tender has been cancelled...
BNP notes local content requirements remain one of the key sticking points for the 21-rig tender, due to the Brazilian govt’s insistence on the rule. Petrobras was previously fined in Apr 2011 for failing to buy sufficient locally produced eqpt. While Petrobras is currently in talks with the govt regarding the issue, BNP believes that until a more equitable solution is found, the risk of further delays, or even a cancellation, will likely persist...
Together with the recent sharp depreciation of the USD imposing a negative technical indication to oil price outlook, BNP adds that near-term uncertainty could well intensify in the next two weeks.
Still, house expects order momentum for SMM to play catch-up from non-Petrobras orders and KEP’s orders to fast approach the 2007 peak-cycle level, when P/E held up at 17-22x. Favors KEP, SMM then SCI in descending order.
Capitaland
Capitaland: Announced the divestment of a 144,657 sqm residential site in Shanghai’s Qingpu District, for a cash consideration of Rmb807.7m (S$152.6m) to a n undisclosed party (unrelated to CapitaLand) for the divestment of its entire 100% interest in BR Properties, which holds the site. Divestment is part of grp’s ongoing strategy of capital productivity and will be deployed for growth opportunities….
Completion of the divestment which is subject to the fulfillment of certain conditions set out in the agreement, is expected to take place in 2Q11. Financial effects of divestment on grp using 31Mar11 statements, would see grp’s EPS increase from 2.4c to 4.3c and financial impact on CapitaLand’s NTA would not be material. Majority or street have a Buy rating on stock with a mean $4.18 TP.
Completion of the divestment which is subject to the fulfillment of certain conditions set out in the agreement, is expected to take place in 2Q11. Financial effects of divestment on grp using 31Mar11 statements, would see grp’s EPS increase from 2.4c to 4.3c and financial impact on CapitaLand’s NTA would not be material. Majority or street have a Buy rating on stock with a mean $4.18 TP.
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