Tuesday, February 4, 2014

DBS Report 5 Feb 14

Today’s Focus
􀂃 Yongnam consortium back in the running for Myanmar
airport
Asian equities are tracking modestly higher in a technical
rebound following the mauling in recent sessions. The Nikkei
is higher by c.1.5% after falling 4.1% yesterday. Korea’s
KOSPI is up by 0.5% but Australia’s ASX All-Ords continued
lower down 0.4%. Data in US showing factory orders fell less
than estimated in December. Orders slipped 1.5%, compared
with consensus estimates for a 1.8% decline. STI should see a
mild rebound in the current session with immediate resistance
noted at 2980 and 2990. We maintain our view that the
index had fallen to attractive forward PE valuation after
touching c.2950 yesterday. Downside is limited in the shortterm.
According to the Straits Times today, luxury car sales stalled in
2H13 on the back of higher registration fee and loan curb
that caps borrowing at 50% of purchase price to be repaid in
5 years. The number of Lamborginis registered in 2H13 fell to
3 from 20 in 1H13, a decline of 85%. Luxury car dealer
Eurosports shares could fall on the news.
Yongnam and its consortium has received an invitation from
the Department of Civil Aviation (DCA), Myanmar to enter
into negotiation on the design, construction, operation and
maintenance of Hanthawaddy International Airport (HIA) and
its facilities on the basis of a public-private partnership
agreement for a 30-year concession period. The consortium
had previously submitted a proposal on 8 February 2013 to
the DCA for the aforementioned project. On 10 August
2013, the consortium was named as a back-up tenderer for
HIA by the Tender Selection Committee of the Myanmar
Ministry of Transport. The value of the project was estimated
by the market to be around US$1 bn.
We believe that for Yongnam to be invited to into HIA
discussions, plans for the construction of HIA between the
DCA and Incheon Airport Consortium must have broken
down. While we do not have details on the situation between
DCA and Incheon Airport Consortium, we believe the fact
that the appointed contractor failed to proceed with the
construction exhibits some element of risk-reward mismatch
in this project. Yongnam now has a chance of undertaking
the HIA project, which is a slight positive. However,
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀘 15,445.2 72.4 0.5
S&P 􀀘 1,755.2 13.3 0.8
NASDAQ 􀀘 4,031.5 34.6 0.9
Regional Indices
ST Index 􀀙 2,965.8 (25.1) (0.8)
ST Small Cap 􀀙 520.9 (4.0) (0.8)
Hang Seng 􀀙 21,397.8 (637.6) (2.9)
HSCEI 􀀙 9,509.7 (308.7) (3.1)
HSCCI 􀀙 4,049.8 (168.8) (4.0)
KLCI 􀀙 1,778.8 (25.2) (1.4)
SET 􀀙 1,276.8 (16.0) (1.2)
JCI 􀀙 4,352.3 (34.0) (0.8)
PCOMP 􀀙 5,886.0 (129.3) (2.1)
KOSPI 􀀙 1,897.3 (22.6) (1.2)
TWSE 􀀙 8,462.6 (135.7) (1.6)
Nikkei 􀀙 14,008.5 (610.7) (4.2)
STI Index Performance
Singapore
Total Market cap (US$bn) 546
Total Daily Vol (m shrs) 2,280
12m ST Index High 3,454
12m ST Index Low 2,966
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
4 Feb
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.65 0.80
Keppel Corp Buy 10.19 12.60
ST Engineering Buy 3.69 4.90
Yangzijiang Buy 1.12 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
4 Feb
Target Price
($)
Ezion Holdings Buy 2.15 3.36
China Merchants Buy 0.89 1.20
Pacific Radiance Ltd Buy 0.92 1.05
Nam Cheong Buy 0.32 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
developments remain preliminary which may or may not
lead to Yongnam undertaking the project. Hence, we are
not factoring this into our estimates as it remains
uncertain if Yongnam will be the appointed contractor.
We have previously assessed that the project could add
S$10.4m to earnings and could add S$7.2m annually to
Yongnam's pre-tax earnings.
3Q FY14 net profit for SIA Engineering was down 10%
y-o-y, missed estimates. Rising labour costs a drag on
core operating profits, mitigated partly by higher JV/
assoc contributions. Our analyst has cut FY14/15
earnings estimates by 4-5%. Dividend potential is key
silver lining; maintain HOLD rating with lower target
price of S$4.80 (Prev S$ 5.10).
Wee Hur was awarded a S$103.6m public housing
building works project in Sengkang from the Housing &
Development Board (HDB). This newly secured contract
strengthens order book to S$358.5m; revenue from
project will flow in mainly from FY2014 to FY2017. The
Group will continue to tender for more public housing
projects.
Tritech Group has been awarded a S$8.1m
instrumentation and monitoring contract by the Land
Transport Authority (LTA) for the Thomson Line. The
commencement date of the contract is 3 February 2014
and the expected completion date is 30 December 2020.
Lian Beng Group has secured a construction contract worth
approximately S$117m for the construction of a multi-storey
building. With the addition of this contract, the group’s
construction order book has increased to S$1.17bn as at 4
February 2014.
Logistics Holdings has been awarded a contract
amounting to S$31.7m by the Housing &
Development Board, for the design and build of
upgrading projects and contingency works. With the
award of the project, the Group’s order book
amounted to approximately S$245.9m.
WE Holdings has signed a non-exclusive distributor
agreement with Samsung Electro-Mechanics and to
expand customer base with new assigned customer
base to the Group. This is in line with the Group’s
intention to achieve economies of scale in its
component business and to broaden the Group’s
revenue stream. Separately, WE Holdings has also
entered into an agreement to terminate the proposed
acquisition of Europtronics.

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