OCBC Report 21 Feb 14

KEY IDEA Ezion Holdings: More growth to come Ezion Holdings’ FY13 revenue rose 77.7% to US$281.9m, forming 95.4% of our FY13 forecast, while PATMI surged 103.4% to US$160.4m. If we exclude its gains on disposal items, we estimate that core PATMI jumped by 115.0% to US$140.7m. This met our expectations, coming in 2.1% above our projection. Looking ahead, we remain positive on the demand for service rigs, and expect Ezion to deploy more assets in FY14. A glitch though, came from two project delays, one of which was caused by bad weather and the other due to upgrading requirements by its customer. We keep our FY14 forecasts largely intact and introduce our FY15 projections. We expect Ezion to continue its growth trajectory, and forecast robust core earnings CAGR of 31.5% from FY13-15F. Maintain BUY and fair value estimate of S$2.57, pegged to 12x FY14F core EPS. (Low Pei Han and Andy Wong) MORE REPORTS Hyflux: Downgrade to SELL Hyflux reported a very disappointing set of FY13 results, with core earnings coming some 15% below our forecast. Going forward, Hyflux also warns of a slower first half in 2014, citing the timing of its projects. Nevertheless, management remains upbeat about its prospects over the next 12 months, where it sees significant opportunities in its key markets with an estimated US$8b worth of projects made available for tender. But we believe that investors may want to switch out of Hyflux first, hence we downgrade our rating from Hold to SELL. Our fair value also drops from S$1.23 to S$0.84, even as we push out our 20x valuation from FY14F to blended FY14/FY15F EPS. (Carey Wong) Neptune Orient Lines: Turbulent waves in FY13 Neptune Orient Lines' (NOL) FY13 revenue came in within our expectations while PATMI loss was lower than expected. Group’s core EBIT narrowed 9% to a net loss of US$167m. Core EBIT for liner narrowed 8% to US$231m loss despite revenue decreasing 9%. This is largely due to cost of sales decreasing 8% from operational cost efficiencies and lower bunker prices. In the logistics business, core EBIT decreased 4% to S$64m while revenue increased 2% to US$1.59b. The decline in core EBIT is mainly because of an extended automotive plant shutdown in North America and slow sector recovery. We do not expect the latest rate increase in Jan-14 to hold up and think freight rates will continue to be under pressure as supply growth continues to outstrip demand. We derive a new fair value of S$0.97 and upgrade to HOLD on valuation grounds. (Yap Kim Leng) Genting Singapore: FY13 results mostly in line - HOLD Genting Singapore (GS) reported FY13 revenue of S$2847.3m, down 3%, and was about 3.8% below our forecast, mainly due to weaker-than-expected win percentages in 4Q13. Net profit was up 1% at S$589.4m, or around 2.8% above our forecast. GS also declared a final dividend of S$0.01/share, unchanged from last year. To reflect a higher capex spend due to the Jeju JV (construction likely to start in 2H13), we have adjusted our cashflow assumptions; this results in our DCF-based fair value easing slightly from S$1.48 to S$1.43. Given the limited upside from here, we continue to maintain our HOLDrating. (Carey Wong) Wilmar: Decent FY13 showing Wilmar International Limited (WIL) reported a fairly decent set of FY13 results. Although revenue was down 3% at S$44085.0m, it was spot on our forecast. Reported net profit climbed 5% to S$1318.9m; core earnings jumped 12% to S$1303m, or 4% above our forecast. WIL declared a final dividend of 5.5c/share (versus 3c last year), bringing the full-year payout to 8c (versus 5c in FY12). Going forward, WIL maintains a pretty positive outlook for FY14, saying it is optimistic on the future of China and its long-term prospects there. We will be attending an analyst briefing at noon and will have more updates after that. In the meantime, we maintain our HOLDrating but place our S$3.55 fair value under review. (Carey Wong) Ascott Residence Trust: To acquire first property in Dalian, China ART has entered into a conditional agreement with a third party to acquire its first serviced residence in Dalian for RMB571m (~S$118.6m) at an EBITDA yield of 5.5%. On a pro forma basis, the accretive acquisition is expected to increase FY13 distribution per unit by 1.5% from 8.40 S cents to 8.53 S cents. This is the first acquisition announced after ART's rights issue in Dec 2013 which raised S$253.7m. The 195-unit international serviced residence, which commenced operations in 2009, has an average occupancy of about 80%. ART will refurbish the property and it will be managed by The Ascott Limited (Ascott) as Somerset Grand Central Dalian when the acquisition is completed, which is expected to be by mid-2014. Management says it is also looking at potential acquisitions from the sponsor, Ascott, in key cities in China, Japan, Australia, Malaysia and Europe. We maintain our FV of S$1.33 and BUY rating on ART.(Sarah Ong) Sheng Siong Group: FY13 results in-line Sheng Siong Group’s (SSG) FY13 results came in within our expectations. Revenue increased 7.9% to $$687.4m and forms 99.9% of our FY13 forecasts. Gross margin improved from 22.1% to 23.0% due to better sales mix and utilisation of distribution centre. Core net profit increased 18.6% to S$38.9m, or about 99.2% of our FY13 forecasts. A final dividend of 1.4 S-cents per share is proposed, bringing the total dividend to 2.6 S-cents per share in FY13, or a yield of 4.3% based on yesterday’s closing price. We maintain our BUY and keep our fair value of S$0.70 under review pending an analyst briefing. (Yap Kim Leng) Dyna-Mac Holdings: Secures new fabrication orders worth S$42m Dyna-Mac Holdings announced that it has clinched three new fabrication orders for a provisional sum of S$42m. This is its first announced contract win for the year. These orders were awarded by Keppel FELS, Armada C7 Pte Ltd (JV of Bumi Armada and Shapoorji Pallonji Group) and Modec Production Systems (Singapore) Pte Ltd. Dyna-Mac is scheduled to deliver two structural blocks, six topside modules and six pipe-racks progressively by 1Q15. These latest orders form 15% of our FY14 orders win forecast. Maintain BUYand S$0.47 fair value estimate on Dyna-Mac, as we view the group as a strong proxy to the improving prospects in the Floating, Production, Storage and Offloading (FPSO) market.  (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks finished with solid gains on Thu after a choppy start to the session, shaking off losses that came amid downbeat reports from the Philadelphia Federal Reserve, China and Europe. - Otto Marine returned to the black in FY13 with a net profit of US$14.1m, versus a US$103.1m loss in FY12. - Bonvests Holdings' net profit more than doubled to S$56.23m for FY13. - ARA Asset Management saw net profit for 4Q13 jump 25% YoY to S$22.13m on the back of revenue rising 19% to S$43.83m. - Chip Eng Seng's 4Q13 net profit fell 11.7% YoY, due to lower profits from its construction and property development divisions.