K1 Ventures

K1 Ventures: to sell its entire 80% stake in Long Haul Holding Corp (“Helm”), a US locomotive and railcar leasing company, to Wells Fargo Bank for aggregate cash consideration of ~US$152m ($192m). The sale is part of the group’s proactive mgt of its invmts. While mgt says the transaction is not expected to have material impact on the group’s FYJun14 financials, on completion of the sale, K1 Venture’s book value per share would jump from $0.15 to $0.18. This implies K1 shares are trading at a more attractive 1x pro-forma P/B. Market reaction may be positive when the stock releases its trading halt at 3pm, given that the Helm stake sale is priced at a ~20% premium to OSK-DMG’s estimate of Helm’s fair value of $159m (Aug ’13 report). Moreover, following the stake sale, K1 will see its cash per share balloon from 1¢ to 10¢ (55% of share price), which could inspire hopes of a generous payout. Since 2004, the group has returned some $540m to shareholders in capital distribution and dividends through profitable exits, reflecting its positive invmt track record. Meanwhile the group has a portfolio of other quality assets that offer meaningful capital upside, including: - A 12.2% stake in Knowledge Universe Holdings, a global pre-school education services provider - US$100m invmt in preferred shares of Guggenheim Capital with a 7% coupon rate and a conversion option, and - A 1.6% stake in China Grand Auto, the largest auto dealership in China. OSK-DMG’s last rating on the stock was Buy with TP $0.25 (Nov ’13 report).

SG Strategy

SG Strategy: UOB Kay Hian has an SG strategy report, focusing on M&A's. The house see M&A as a continuing area of interest. Other than privatisation candidates, companies with accretive acquisitions or monetisation of assets could attract investor interest. Overall, see see several angles for M&A. This could include companies looking for growth through: a) accretive acquisitions; b) monetisation of assets through disposals or listings; and c) privatisation. - Accretive acquisition. In the acquisition space, think stocks such as CapitaCommercial Trust (CCT), Frasers Centrepoint (FCT) and Halcyon could benefit from accretive acquisitions and availability of financing. CCT’s and FCT’s low net gearing of 29% and 30% respectively means that these two groups have an ample warchest for acquisition. As for Halcyon, believe the group is a beneficiary of accretive acquisition opportunities in mid-stream rubber processing. - Monetisation of assets. In this bucket, the likely beneficiary is Sino Grandness. The group is considering a proposal to list its F&B subsidiary Garden Fresh, which could help unlock value and to allow Garden Fresh to fund its growth plans. The oil services sector is expected to be very active too in terms of monetising its assets by listing due to reasons such as cabotage (in Indonesia) and access to capital markets. Companies potentially spinning off their subsidiary include ASL, Swiber, Ezra and Otto Marine. - Privatisation candidates. Interest in this area has been heightened by the recent speculation over the potential privatisation of Biosensors by its substantial shareholder. Kreuz was recently successfully taken over by SEA9. Screening for undervalued stocks, see potential privatisation interest in Jaya Holdings (non-rated), Wheelock, Guocoland, Tuan Sing (non-rated), Biosensors (non-rated) and GP Industries (nonrated).

Nam Cheong

Nam Cheong: OSK-DMG has a preview note on the upcoming FY13 results (due 26 Feb) Tips healthy top-of-the-street earnings of RM190m (+39% y/y ) , vs the street's range estimate of RM171m-190m. Expects Nam Cheong to raise its dividend on the back of strong earnings growth and a lower net gearing. Forecasts 0.87cts dividend at 25% payout ratio, but notes a 30% payout (1.05cts) is possible. Adds, investors will want to look ahead. The street is forecasts 25-30 vessels for the company's FY15 build-to-stock programme, and any figure above this range will prompt upward revisions. Reiterates Buy with TP $0.45

Hankore

Hankore: OSK DMG maintains Buy with TP $0.161. The house notes that HanKore Environment Tech (Hankore) chairman David Chen and ED/CFO Felix Yau participated in its 19 Feb non-deal roadshow (NDR) in Singapore. Hankore’s strong points include further progress in its merger with CEI, potentially lower financing costs and solid asset quality. As reiterated earlier, Hankore’s merger with CEI is making good progress. The injection of the latter’s assets should take place going into FY15 and will bring the former’s combined capacity to ~3.6m tonnes/day. The union between HanKore and CEI is a highly complementary one, given the location of their water assets. Each has a foothold in Jiangsu and Shandong, which are amongst China’s provinces with the highest GDP growth levels. State backing to lower HanKore’s financing cost. With CEI – a state-owned enterprise (SOE) backed by the State Council of China – as HanKore’s parent, will see the company’s financing costs fall to ~4% from 7.5% currently. This will give rise to cost savings as well as provide the company with higher returns on its wastewater treatment investments. HanKore’s existing 11 wastewater treatment plants, which have design capacities of ~155,000 tonnes/day on average, are the key large-sized plants in their respective regions. These plants have the potential to tap on rising economies of scale and operating leverage as they grow in operating capacity, thereby outperforming other plants of smaller scale through greater cost efficiencies. Re-rating in motion. Maintain BUY with $0.161 TP. The house believe that as HanKore draws closer to completing its merger with CEI, its valuations will re-rate. This process is already underway. At the current price of SGD0.123, the stock is trading at a 19x FY15 P/E (incorporating CEI’s asset injection), compared with the peer average of 30x.

RH Petrogas

RH Petrogas (RHP): UOB Kay Hian reiterates Buy, lowers TP to $1.50 (from $1.60), given the slew of newsflow that will be announced over the next few months. On its Koi-2 appraisal well, House value the success at the Koi structure at $0.03/share but if its plan of field development is approved, there could be an additional upside of $0.08/share. UOB Kay Hian believes that RHP’s share price could re-rate significantly if the ODP for Fuyu-1, China is approved. Further, management may be looking to acquire additional production assets this year (one in 1H14 and one in 2H14). The acquisition, coupled with other production wells put in place, would enhance its cash-flow generating capabilities, removing concerns on its cash flow if the Indonesian government does not renew its concessions in Basin and Island PSC (both are expiring in 2020).

Yoma

Yoma: Announced that the design for the Landmark Development has been finalized, with an estimated development cost of US$415-US$440m, on top of the land development rights of US$101.6m. On the deal, Yoma remains confident that the master lease will be issued and that the completion will take place before the long-stop date of 30 Jun 2014.

RH Petrogas

RH Petrogas: Found 4m estimated recoverable barrels of oil from Koi-2 appraisal well, located within the Salawati Kepala Burung PSC in Indonesia. The JV partners has agreed to commence a preliminary front end engineering design study to evaluate the development design and concept for the field for submission to the authorities, before production can begin. RH Petrogas holds 33.21% working interest in Salawati Kepala Burung PSC.