UG Healthcare: UG Healthcare was featured on The Edge magazine over the weekend, where more light was shared on the group’s plans going forward, following the recent announcement of its FY15 results.
To re-cap, UG Healthcare’s net profit ditched 35.4% y/y to $3.2m, dragged by IPO costs of $0.8m, and higher marketing costs which surged nearly three-fold to $1.3m, as the group sought to expand its distribution network in UK, China and Nigeria.
UG Healthcare guided that the increase in expenses were necessary in preparing the firm for its next phase of growth in FY16.
With the group’s products mostly priced in USD and costs largely in ringgit, the group was widely expected to benefit from the depreciation of the ringgit, which has fallen ~34% versus the USD over the past year. Yet, the group registered fair value loss on financial derivatives, as ~40% of its sales were hedged via forward contracts as at end-Jun. Going forward, management is guiding for these losses to be reduced.
Management aims to expand its global footprint, especially in the emerging markets, where the per capita glove consumption could be as low as 3% of developed markets. On that front, the group wants to have full control over its supply chain, which will enable it to customise products more effectively to client’s needs.
UG Healthcare intends to raise its annual production capacity to 1.9b pieces of gloves by end-FY16 from the current 1.5b, while also upgrading some of its existing production facilities, which will enable it to effectively meet more client demands. The group has a current utilisation rate of 80-85%.
At the current price, UG Healthcare trades at 13.7x FY15 P/E versus Riverstone’s 20.0x trailing P/E.
Monday, August 31, 2015
Olam
Olam: Maybank-KE believes that the recent private share placement to Mitsubishi Corp is a huge vote of confidence by the Japanese trading giant. Given its current valuations, the house is maintaining its Hold rating with a higher TP of $2.15 (previously $1.90).
Olam is expected to raise about $915m from the placement exercise with Mitsubishi becoming its second largest shareholder with a 20% stake and the counter’s free float dropping from 21.5% to 17.5%.
The deal is part of a wider strategic partnership which would enable collaborative opportunities for both companies to tap into their respective geographic markets and product range. For one, it would give Olam access to MItsubishi’s domestic distribution network and allow the latter to leverage on Olam’s sourcing and distribution exposure to emerging markets, particularly in Africa.
While the new funds raise may augment Olam's future acquisitions, Maybank-KE opines that much of the near term positives has already been priced in. This is particularly so given that Olam is now trading at about 10.6x FY16 P/E, ahead of Wilmar’s 9x.
This comes even as the house raised its TP to account for the group’s strategic partnership with Mitsubishi, with FY16/17 revenue expected to strengthen on the back of increased sales of coffee, cocoa, and edible nuts in Japan.
Overall, the private placement exercise is expected to dilute EPS by about 4% after taking into consideration a 3-5% increase in net profit.
Olam is expected to raise about $915m from the placement exercise with Mitsubishi becoming its second largest shareholder with a 20% stake and the counter’s free float dropping from 21.5% to 17.5%.
The deal is part of a wider strategic partnership which would enable collaborative opportunities for both companies to tap into their respective geographic markets and product range. For one, it would give Olam access to MItsubishi’s domestic distribution network and allow the latter to leverage on Olam’s sourcing and distribution exposure to emerging markets, particularly in Africa.
While the new funds raise may augment Olam's future acquisitions, Maybank-KE opines that much of the near term positives has already been priced in. This is particularly so given that Olam is now trading at about 10.6x FY16 P/E, ahead of Wilmar’s 9x.
This comes even as the house raised its TP to account for the group’s strategic partnership with Mitsubishi, with FY16/17 revenue expected to strengthen on the back of increased sales of coffee, cocoa, and edible nuts in Japan.
Overall, the private placement exercise is expected to dilute EPS by about 4% after taking into consideration a 3-5% increase in net profit.
Banks
Banks: CLSA notes that Singapore banks have suffered a sharp sell down since late Jul'15 with the sector's forward P/B sliding to 1.15x from 1.33x. It notes that given recent developments both domestically and abroad, it is likely that these banks will experience greater topline and asset quality pressure than previously anticipated.
The research house revises its FY15-17 earnings forecasts down by 1-10% with loan growth slipping to 1-4% (previously 3-7%), margin expanding by about 10-16bps (previously 11-21 bps) and bad debts to increase by 18-45 bps (previously 18 - 41 bps) as a % of average loans.
It notes that if the '98 AFC were to have a re-run, share prices would have a further 47-55% to fall. However, it notes that this is unlikely. Nonethless, positive catalysts for the banks remain scarce.
UOB (Overweight) is its top pick, with TP of $21 (previously, $25.30) and OCBC (Underweight), its least preferred Singapore bank, with TP of $9 (previously $10.60).
The research house revises its FY15-17 earnings forecasts down by 1-10% with loan growth slipping to 1-4% (previously 3-7%), margin expanding by about 10-16bps (previously 11-21 bps) and bad debts to increase by 18-45 bps (previously 18 - 41 bps) as a % of average loans.
It notes that if the '98 AFC were to have a re-run, share prices would have a further 47-55% to fall. However, it notes that this is unlikely. Nonethless, positive catalysts for the banks remain scarce.
UOB (Overweight) is its top pick, with TP of $21 (previously, $25.30) and OCBC (Underweight), its least preferred Singapore bank, with TP of $9 (previously $10.60).
Capitaland
Capitaland: Malaysian newswire The Star reported that CapitaLand is reviewing details of its RM8b JV in Danga Bay, Johor with its partners, amid a soft property market.
The development, which CapitaLand owns 51% was slated to be one of its largest. The 71.4 acre site is planned to be turned into a waterfront residential community comprising high rise and landed homes, a marina, shopping mall, serviced residences, offices and recreational facilities.
Despite CapitaLand’s hesitation in Iskandar, the developer remains hopeful to widen its footprint in KL, the Klang Valley and Penang. The developer is optimistic about Malaysia favourable long term demographics, despite having to bite the bullet in the short term.
On outlook, the newswire cited Lim Wie Shan, who leads CapitaLand’s Malaysian projects, is hopeful of an economic turnaround next year which will in turn spark a property recovery.
CapitaLand is currently trading at 0.7x P/B.
The street has 20 Buy calls and 3 Hold calls on CapitaLand with a TP of $4.05.
The development, which CapitaLand owns 51% was slated to be one of its largest. The 71.4 acre site is planned to be turned into a waterfront residential community comprising high rise and landed homes, a marina, shopping mall, serviced residences, offices and recreational facilities.
Despite CapitaLand’s hesitation in Iskandar, the developer remains hopeful to widen its footprint in KL, the Klang Valley and Penang. The developer is optimistic about Malaysia favourable long term demographics, despite having to bite the bullet in the short term.
On outlook, the newswire cited Lim Wie Shan, who leads CapitaLand’s Malaysian projects, is hopeful of an economic turnaround next year which will in turn spark a property recovery.
CapitaLand is currently trading at 0.7x P/B.
The street has 20 Buy calls and 3 Hold calls on CapitaLand with a TP of $4.05.
Insider trades
Insider trades: Asia Insider noted that buying was strong a third week, whilst insider selling stayed low for the week ending 28 Aug.
Buys: 50 companies made 122 purchases worth $19.4m, vs. 34 firms, 76 transactions worth $7.54m the week prior.
Sells: One company sold two disposals worth $0.83m, vs. one firm making a trade worth $0.26m
Buybacks: 37 companies made 137 repurchases worth $126.9m, vs. 34 companies, 148 transactions worth $171.2m
Notable transactions:
Ho Bee Land: Resumed buybacks with 917,000 shares purchased at average of $1.94, accounting for 85% of stock’s trading volume. The group had previously acquired 409,000 shares in Jan at $1.95 each.
SMRT: Directors acquired a combined sum of 73,000 shares at $1.15 each, on the back of a 36% drop in share price since Feb.
China Aviation Oil: Independent director Ang Swee Tian recorded his maiden on-market trade with 62,000 shares purchased at 52.4¢ each, on the back of a 41% fall in share price since April.
Q&M: CEO Dr Ng Chin Siau made his first corporate shareholder trade with 1.16m shares purchased at 60¢, on the back of a 39% share price drop since May.
iFast: Chairman and CEO Lim Chung Chun and non-executive director Lim Wee Kian bought 120,000 shares at average of $1.20, after the stock fell 18% since Aug 11.
OSIM: Founder and boss Ron Sim picked up where he left off in July, purchasing 3.2m shares at $1.46, after the stock fell 17% since 11 Aug. He had previously acquired half a million shares in Jul at $1.26.
UOL: Wee Cho Yaw picked up where he left off in Oct ’14 with 542,000 shares purchased at $6.03, after a 26% drop in share price since the last week of April.
Buys: 50 companies made 122 purchases worth $19.4m, vs. 34 firms, 76 transactions worth $7.54m the week prior.
Sells: One company sold two disposals worth $0.83m, vs. one firm making a trade worth $0.26m
Buybacks: 37 companies made 137 repurchases worth $126.9m, vs. 34 companies, 148 transactions worth $171.2m
Notable transactions:
Ho Bee Land: Resumed buybacks with 917,000 shares purchased at average of $1.94, accounting for 85% of stock’s trading volume. The group had previously acquired 409,000 shares in Jan at $1.95 each.
SMRT: Directors acquired a combined sum of 73,000 shares at $1.15 each, on the back of a 36% drop in share price since Feb.
China Aviation Oil: Independent director Ang Swee Tian recorded his maiden on-market trade with 62,000 shares purchased at 52.4¢ each, on the back of a 41% fall in share price since April.
Q&M: CEO Dr Ng Chin Siau made his first corporate shareholder trade with 1.16m shares purchased at 60¢, on the back of a 39% share price drop since May.
iFast: Chairman and CEO Lim Chung Chun and non-executive director Lim Wee Kian bought 120,000 shares at average of $1.20, after the stock fell 18% since Aug 11.
OSIM: Founder and boss Ron Sim picked up where he left off in July, purchasing 3.2m shares at $1.46, after the stock fell 17% since 11 Aug. He had previously acquired half a million shares in Jul at $1.26.
UOL: Wee Cho Yaw picked up where he left off in Oct ’14 with 542,000 shares purchased at $6.03, after a 26% drop in share price since the last week of April.
China Everbright Water
China Everbright Water: (S$0.75) First major acquisition since merger with HanKore
China Everbright Water (CEW) is making its first major acquisition since its merger with HanKore in Dec '14, with a ~Rmb1b price tag for waste water treatment company Dalian Dongda Water, in line with current market transaction prices.
The target has 17 waste water treatment projects with a capacity of 1.125m tons/day, located across Liaoning Province and Inner Mongolia in China.
Upon completion, group's total capacity is expected to jump 30% to 4.6m tons/day.
CEW has been rather quiet on the acquisition front for the past eight months, which resulted in impatience among investors and market watchers.
Notably after its 2Q15 results posted in early Aug, Maybank-KE cut its FY15 capacity acquisition assumption to 0.5m tons from management's guidance of 1m, given that CEW has only achieved 4% of that target to-date.
Without a doubt, the house is expected to change its earnings assumption yet again and we do not rule out that the major transaction will work to enhance market's confidence on management's execution ability.
It is generally expected that investment in China's water sector will increase significantly, supported by favourable government policies, for instance, the public-private partnership model, which would provide new opportunities to the private sector water players.
At the current price, CEW is valued at 22.4x forward earnings, compared to China-listed peers Tianjin Capital Environmental Protection (37.9x), Beijing Enterprises Water (21.7x) and CT Environmental Group (23.4x).
China Everbright Water (CEW) is making its first major acquisition since its merger with HanKore in Dec '14, with a ~Rmb1b price tag for waste water treatment company Dalian Dongda Water, in line with current market transaction prices.
The target has 17 waste water treatment projects with a capacity of 1.125m tons/day, located across Liaoning Province and Inner Mongolia in China.
Upon completion, group's total capacity is expected to jump 30% to 4.6m tons/day.
CEW has been rather quiet on the acquisition front for the past eight months, which resulted in impatience among investors and market watchers.
Notably after its 2Q15 results posted in early Aug, Maybank-KE cut its FY15 capacity acquisition assumption to 0.5m tons from management's guidance of 1m, given that CEW has only achieved 4% of that target to-date.
Without a doubt, the house is expected to change its earnings assumption yet again and we do not rule out that the major transaction will work to enhance market's confidence on management's execution ability.
It is generally expected that investment in China's water sector will increase significantly, supported by favourable government policies, for instance, the public-private partnership model, which would provide new opportunities to the private sector water players.
At the current price, CEW is valued at 22.4x forward earnings, compared to China-listed peers Tianjin Capital Environmental Protection (37.9x), Beijing Enterprises Water (21.7x) and CT Environmental Group (23.4x).
SG Market (31 Aug 15)
Singapore stocks may take its cue from regional markets, after The Financial Times reported over the weekend that Beijing could halt large-scale share purchases.
Regional bourses are trading lower this morning in Tokyo (-1.3%), Seoul (-0.4%) and Syndey (-1.1%).
From a chart perspective, underlying support on the STI is tipped at 2,950, followed by 2,680, with upside resistance at 3,050.
Stocks to watch:
*Property: NUS data showed that after three straight months of declines, prices of completed non-landed private homes were flat m/m in Jul. Meanwhile, the overall S’pore Residential Price Index is down 3.1% y/y. Analysts highlight that Jul's price stagnation may not signal a turnaround as it "may be just a pause before the index continues its general downward trend", given that there will be more private home completions in coming months, which would lead to a rise in vacancy rates and weaker rentals.
*Dukang: Recorded FY15 net loss of Rmb561.4m versus FY14’s net profit of Rmb44.1m. FY15 revenue of Rmb863.4m tumbled 40.5% as both its Luoyang Dukang (-25.1% in sales volume to 24,454 tons) and Siwu operations (-99.9% in sales volume to 10 tons) were impacted by China’s current austerity measures on luxury gifts and spending. Bottom line was weighed heavily by impairment losses on PPE, associates and intangible assets totalling Rmb547.4m. NAV/share: Rmb1.80.
*AusGroup: 4QFY15 net profit plunged 88.4% y/y to A$0.3m, taking FY15 net profit to A$6.2m versus a net loss of A$11.9m the previous year. Revenue for the quarter climbed 7.7% to A$90.6m, led by stronger project segment contributions. Gross margin expanded 11.9ppt to 23%. Nevertheless, bottom line was weighed by the absence of a A$5.8m profit from the sale of an asset last year.
NAV/share at A$0.326.
Grand Banks Yachts: 4QFY15 turned into net loss of $2.4m (4QFY14: +$0.8m), weighed mainly by a surge in operating expenses (+65.4%) from the inclusion of recently-acquired Palm Beach Motor Yachts (PBMY) and new management appointment. The result took FY15 net loss to $4.8m versus a net profit of $1.0m the previous year. Revenue for the quarter inched 3.5% y/y to $13.7m, led by contribution of PBMY and the sale of older inventory yachts. Gross margin crashed to 3.9% (-13.8ppt) as the group underwent a significant reorganization plan. NAV/share at $0.243.
*Loyz Energy: Swung to 4QFY15 net loss of US$63.9m from US$0.6m profit a year earlier, while revenue fell 14% to US$5.8m, as increased production volume from the Thai concession could not mitigate the slump in oil price. Bottom line was weighed by impairment charges of US$71.8m, largely from the impairment of non-core assets in India, Australia and US. Separately, Loyz reported a significant increase in oil production and reserves following successful drilling campaign in Thailand, with combined production rate in excess of 4,000 bpd. NAV/share at US$0.053.
*Yamada Green: 4QFY15 net profit grew 42.8% to Rmb24.7m taking FY15 net profit to Rmb86.2m (-15.9%). Revenue for the quarter fell 10.1% to Rmb73.2m due to lower sales from both the cultivation business segment (-3.3% to Rmb29.5m) and processed food segment (-14.1% to Rmb43.7m). Gross margin fell 7.8ppt to 23.7% due to a change in sales mix. Bottomline was buttressed by a 146.2% jump in other income which included government grants as well as a 39.7% jump in the fair value of its biological assets to Rmb18.2m. NAV/share: Rmb1.62.
*China Everbright Water: Proposed to acquire waste water treatment company Dalian Dongda Water for ~Rmb1b, in line with current market transaction prices. The target has 17 municipal waste water treatment projects with a capacity of 1.125m tons/day, located across Liaoning Province and Inner Mongolia. Upon completion of the acquisition, CEW's capacity will increase 31% to 4.6m tons/day.
*IHH Healthcare: To acquire a 73.4% stake in Global Hospitals for INR12.8b (RM819m) in cash. Global Hospitals is a chain of hospitals in India with about 1,100 beds across Hyderabad, Chennai, Bangalore, and Mumbai. IHH previously had a $137m deal to acquire Singapore’s Radlink-Asia being rejected by competition regulators.
*Raffles Medical: Acquiring International SOS (MC Holdings), a healthcare provider that operates 10 clinics in China, Vietnam and Cambodia, for US$24.5m ($34.3m), or 4.5x P/B.
Keppel Corp: To acquire the offshore rigs business of Cameron International for US$100m. The sale comprises several jackup rig designs such as LETOURNEAU™ Super 116E, WORKHORSE, Super Gorilla XL and Jaguar, that have a proven track record of operating in a variety of environments.
*Chiwayland: 60%-owned subsidiary purchased a land parcel located in Jiangning District, Nanjing City, China for Rmb570m. The 14,185 sqm land parcel is expected to be developed into residential and commercial units. The purchase will be financed through internal sources and/or external borrowings.
Regional bourses are trading lower this morning in Tokyo (-1.3%), Seoul (-0.4%) and Syndey (-1.1%).
From a chart perspective, underlying support on the STI is tipped at 2,950, followed by 2,680, with upside resistance at 3,050.
Stocks to watch:
*Property: NUS data showed that after three straight months of declines, prices of completed non-landed private homes were flat m/m in Jul. Meanwhile, the overall S’pore Residential Price Index is down 3.1% y/y. Analysts highlight that Jul's price stagnation may not signal a turnaround as it "may be just a pause before the index continues its general downward trend", given that there will be more private home completions in coming months, which would lead to a rise in vacancy rates and weaker rentals.
*Dukang: Recorded FY15 net loss of Rmb561.4m versus FY14’s net profit of Rmb44.1m. FY15 revenue of Rmb863.4m tumbled 40.5% as both its Luoyang Dukang (-25.1% in sales volume to 24,454 tons) and Siwu operations (-99.9% in sales volume to 10 tons) were impacted by China’s current austerity measures on luxury gifts and spending. Bottom line was weighed heavily by impairment losses on PPE, associates and intangible assets totalling Rmb547.4m. NAV/share: Rmb1.80.
*AusGroup: 4QFY15 net profit plunged 88.4% y/y to A$0.3m, taking FY15 net profit to A$6.2m versus a net loss of A$11.9m the previous year. Revenue for the quarter climbed 7.7% to A$90.6m, led by stronger project segment contributions. Gross margin expanded 11.9ppt to 23%. Nevertheless, bottom line was weighed by the absence of a A$5.8m profit from the sale of an asset last year.
NAV/share at A$0.326.
Grand Banks Yachts: 4QFY15 turned into net loss of $2.4m (4QFY14: +$0.8m), weighed mainly by a surge in operating expenses (+65.4%) from the inclusion of recently-acquired Palm Beach Motor Yachts (PBMY) and new management appointment. The result took FY15 net loss to $4.8m versus a net profit of $1.0m the previous year. Revenue for the quarter inched 3.5% y/y to $13.7m, led by contribution of PBMY and the sale of older inventory yachts. Gross margin crashed to 3.9% (-13.8ppt) as the group underwent a significant reorganization plan. NAV/share at $0.243.
*Loyz Energy: Swung to 4QFY15 net loss of US$63.9m from US$0.6m profit a year earlier, while revenue fell 14% to US$5.8m, as increased production volume from the Thai concession could not mitigate the slump in oil price. Bottom line was weighed by impairment charges of US$71.8m, largely from the impairment of non-core assets in India, Australia and US. Separately, Loyz reported a significant increase in oil production and reserves following successful drilling campaign in Thailand, with combined production rate in excess of 4,000 bpd. NAV/share at US$0.053.
*Yamada Green: 4QFY15 net profit grew 42.8% to Rmb24.7m taking FY15 net profit to Rmb86.2m (-15.9%). Revenue for the quarter fell 10.1% to Rmb73.2m due to lower sales from both the cultivation business segment (-3.3% to Rmb29.5m) and processed food segment (-14.1% to Rmb43.7m). Gross margin fell 7.8ppt to 23.7% due to a change in sales mix. Bottomline was buttressed by a 146.2% jump in other income which included government grants as well as a 39.7% jump in the fair value of its biological assets to Rmb18.2m. NAV/share: Rmb1.62.
*China Everbright Water: Proposed to acquire waste water treatment company Dalian Dongda Water for ~Rmb1b, in line with current market transaction prices. The target has 17 municipal waste water treatment projects with a capacity of 1.125m tons/day, located across Liaoning Province and Inner Mongolia. Upon completion of the acquisition, CEW's capacity will increase 31% to 4.6m tons/day.
*IHH Healthcare: To acquire a 73.4% stake in Global Hospitals for INR12.8b (RM819m) in cash. Global Hospitals is a chain of hospitals in India with about 1,100 beds across Hyderabad, Chennai, Bangalore, and Mumbai. IHH previously had a $137m deal to acquire Singapore’s Radlink-Asia being rejected by competition regulators.
*Raffles Medical: Acquiring International SOS (MC Holdings), a healthcare provider that operates 10 clinics in China, Vietnam and Cambodia, for US$24.5m ($34.3m), or 4.5x P/B.
Keppel Corp: To acquire the offshore rigs business of Cameron International for US$100m. The sale comprises several jackup rig designs such as LETOURNEAU™ Super 116E, WORKHORSE, Super Gorilla XL and Jaguar, that have a proven track record of operating in a variety of environments.
*Chiwayland: 60%-owned subsidiary purchased a land parcel located in Jiangning District, Nanjing City, China for Rmb570m. The 14,185 sqm land parcel is expected to be developed into residential and commercial units. The purchase will be financed through internal sources and/or external borrowings.
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