OCBC Report 27 Feb 14

KEY IDEA Sembcorp Industries: FY13 results within expectations Summary: Sembcorp Industries (SCI) saw FY13 revenue rising 6% to S$10797.6m, or about 3% above our forecast (met consensus). Reported net profit climbed 9% to S$820.4m. However, excluding exceptional gains of S$35.5m (S$117m gain from the IPO of Salalah and S$48.5m impairment of Teesside being the main items), we estimate that core earnings would have been around S$784.9m, which is almost spot on our forecast (2% above consensus). SCI declared a final dividend of S$0.15/share as well as bonus dividend of S$0.02, bringing the total payout to S$0.17 versus S$0.15 last year. In light of the results and the guidance, we made some very minor tweaks to our FY14 estimates – all less than 1% change. We also maintain our BUY rating on the stock. But to reflect our recent adjustment in SembMarine’s fair value (from S$5.68 to S$5.26), our SOTP-based fair value slips from S$6.67 to S$6.42. (Carey Wong) MORE REPORTS Nam Cheong: Reaching for the sky Summary: Nam Cheong Limited delivered a record set of results for FY13, with revenue and PATMI growing 43.5% and 50.6% to MYR1,257.5m and MYR205.6m, respectively. The latter exceeded our FY13 forecast by 9.8%. This was partly due to a one-off reversal of deferred tax, excluding which Nam Cheong’s FY13 profit before tax (PBT) of MYR199.2m (+43.8%) would have been 2.0% above our PBT forecast. Management guided that it is targeting to deliver 35 vessels worth a total of US$700m in FY15, ahead of our estimate for 32 vessel deliveries, and also higher than its FY14 target. We lift our target PER peg from 8.5x to 9.5x in recognition of Nam Cheong’s solid execution track record and robust industry outlook. Applying this to our FY14F EPS estimate which has also been raised by 4.9%, we derive a higher fair value estimate of S$0.42 (previously S$0.37) on Nam Cheong. Maintain BUY. (Wong Teck Ching Andy) BreadTalk Group: Aggressive expansion boosts FY13 results Summary: BreadTalk’s FY13 revenue met our expectations as it increased 19.9% to S$536.5m, forming 99.6% of our forecast. PATMI came in slightly below our expectations, up 13.3% at S$13.6m, making up 96.3% of our forecast. In order to reach the S$1b sales target, a CAGR of 23.1% is required between FY14 to FY16, which we think has to be driven by new stores more than organic growth of recently opened stores. We think that expansion will become more challenging as BreadTalk gets larger and assume a lower growth of 15% for FY14. While lower than the implied CAGR of 23.1%, our assumed figure is still healthy by any measure. Given the growth prospects, we value BreadTalk with 16.6x PER, which is 1 s.d. above its five year historical average. We obtain a fair value estimate of S$0.85 (previous S$0.77) and maintain SELL as the stock seems overvalued now. (Yap Kim Leng) Venture Corp: Results and dividends in-line with expectations Summary: Venture Corp (VMS) reported a 5.1% YoY revenue growth in 4Q13 to S$622.9m, while PATMI came in flat at S$38.0m. For FY13, revenue slipped 2.4% to S$2,329.6m, or 1.3% ahead of our forecast. PATMI declined by 6.1% to S$131.1m, and was just a shade off our S$132.1m projection. As expected, a first and final dividend of S$0.50/share (similar to FY12) was declared, which will be payable on 19 May 2014 if approved by shareholders at its AGM. This translates into an attractive yield of 6.8%. During the year, VMS added four new customers, thus ending FY13 with a total of 187 customers. Looking ahead, management highlighted that the majority of its customers are showing some signs of recovery, although there are still some customers whose pace of recovery remains unclear. We believe visibility remains limited to the near-term, as there are still pockets of uncertainty in the global economy. For now, we maintain our BUY rating and S$8.50 fair value estimate on VMS, pegged to 15x FY14F EPS. (Wong Teck Ching Andy)    ECS Holdings: FY13 results within our expectations Summary: ECS Holdings (ECS) reported a 7.1% YoY increase in its 4Q13 revenue to S$1,093.9m and a 19.7% spike in PATMI to S$8.5m, such that FY13 revenue and PATMI grew by 15.3% and 16.1% to S$4,201.1m and S$34.4m, respectively. After adjusting for forex and other exceptional items, we estimate that FY13 core earnings would instead have increased by 11.8% from S$29.4m to S$32.8m. This was within our expectations, forming 99.5% of our full-year core PATMI estimate. ECS declared a first and final dividend of S$0.022/share, similar to FY12 and our projection. This translates into a yield of 3.4%. Looking ahead, ECS will continue its focus on mobile devices and cloud-based services. It will also seek to deepen and widen its distribution network in the region. As current valuation appears rich, we maintain our SELLrating and S$0.585 fair value estimate on the stock, pegged to 6x FY14F core EPS.(Wong Teck Ching Andy) CWT Ltd: FY13 results above expectations Summary: CWT’s FY13 revenue jumped 69% to S$9.1b, beating ours’ and street’s estimates by 18.0% and 34.6% respectively. However, PATMI decreased by 2% to S$106.0m due to exceptional S$22.5m gain from sale and leaseback (SLB) of a logistics property recorded in FY12. Nevertheless, FY13 PATMI exceeded ours’ and street’s estimates by 33.7% and 25.4% respectively. If we exclude the SLB, we estimate PATMI to have increased by 24.7% instead. While the surge in revenue was largely contributed by Commodity SCM business, the increase in gross profit was generated by Warehousing & Logistics services, Financial Services and Commodity SCM business. A final dividend of 3.5 S-cents is proposed, which implies a 2.7% yield based on yesterday’s closing price. We put our Buy and fair value estimate of S$1.68 under review pending a transfer of coverage. (Yap Kim Leng) Yangzijiang Shipbuilding: FY13 results in-line with our expectations Summary: Yangzijiang Shipbuilding (YZJ) reported a 5% YoY fall in its 4Q13 revenue to RMB3.38b and a 8% decrease in PATMI to RMB746.3m, such that FY13 revenue and PATMI declined by 3% and 14% to RMB14.3b and RMB3.10b, respectively. This was within our expectations, as PATMI came in 2% above our FY13 forecast. A first and final DPS of 5 S cents was declared, similar to FY12, and translates into a yield of 4.4%. Looking ahead, YZJ has begun to grow its fleet of vessels owned by the Shipping Logistics and Chartering segment as it sees an improving outlook for the commercial shipping market. We will provide more details after an analyst briefing scheduled later. For now, we place our Hold rating and S$1.22 fair value estimate under review. (Low Pei Han/Wong Teck Ching Andy) Swiber Holdings: Strong contribution from South East Asia Summary: For FY13, Swiber Holdings reported a 11.2% rise in revenue to US$1058.9m and a 36.0% increase in PATMI to US$62.1m, such that FY13 revenue and net profit accounted for 93% and 137% of our full year forecasts, respectively. We judge net profit to be above expectations, mostly due to a stronger-than-anticipated share of profits from associates. The topline increase was mainly due to a higher contribution from SE Asia, and net profits up from firmer sales contribution from associates and a fair value gain from an option agreement between Swiber and Vallianz. Gross margin for the year at 15.9% was again within expectations – and the order book now stands at S$800m. Maintain HOLD with our fair value estimate of S$0.72 under review. (Low Pei Han/Wong Teck Ching Andy)

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NEWS HEADLINES

- US stocks finished a choppy trading session on Wed marginally higher, having pared most of the gains following a better-than-expected report on new home sales. - Pacific Radiance posted a record 4Q13 net profit of US$16.4m, more than six times the US$2.4m it earned a year ago. - China Aviation Oil reported a 25.7% YoY dive in net profit to US$13.5m for the 4Q13, largely due to lower contributions from associates. - Hotel Properties Limited's net profit for FY13 jumped nearly 37% to S$177.64m.