Monday, March 24, 2014

DBS Report

Today’s Focus
􀂃 Nam Cheong - Offshore support vessel upcycle firmly in
place, raise FY14/15 EPS estimates by 7-9%. Maintain BUY
with higher target price of S$0.46
According to the latest guidance from the management of
Nam Cheong, the FY14/15 work programmes consist of 30 and
35 vessels respectively, including built-to-order vessels. We
estimate the built-to-stock programme target for both FY14/15
is likely to be around 28 vessels worth about US$560-570m per
year, higher than our existing estimate of 25 vessels worth
about US$520m per year. The larger FY14/15 built-to-stock
programmes envisaged by Nam Cheong are testament to the
improving outlook for the OSV market. Buoyed by the
scheduled double-digit growth in offshore rig fleet over the
next two years, combined with declining orderbook-to-fleet
ratios, OSV demand supply dynamics look positive. Rising day
rates for PSVs and AHTS, combined with high proportion of
replacement demand for older fleet above 25 years of age, will
result in more near-term requirements for OSVs.
Margin execution for Nam Cheong is also better than expected
in FY13. We therefore raise our FY14/15 EPS estimates by 7-
9%. Valuations look very attractive currently at 7x FY14 PE;
maintain BUY with higher target price of S$0.46 (Prev S$ 0.43).
United Engineers announced that its subsidiary, UE E&C has
been approached by parties in connection with a possible
transaction involving its shares in UE E&C, which may or may
not lead to a general offer for the shares of UE E&C. United
Engineers is in ongoing discussions with a third party and no
binding agreement has been reached. There is no assurance or
certainty that these discussions will result in any transaction.
KrisEnergy has been granted a US$100m revolving credit
facility maturing in March 2016 with an option to extend for an
additional one year. The Facility will be used for the acquisition
of hydrocarbon assets, general corporate purposes and
working capital requirements.
Singapore's inflation rate eased more than expected to a fouryear
low of 0.4% in February, smaller than January's inflation
of 1.4% and the 0.9% that the market is expecting. Much of
this was due to an unusually high base of comparison in
February 2013, and had been anticipated by the Monetary
Authority of Singapore (MAS) and the Ministry of Trade and
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀙 16,276.7 (26.1) (0.2)
S&P 􀀙 1,857.4 (9.1) (0.5)
NASDAQ 􀀙 4,226.4 (50.4) (1.2)
Regional Indices
ST Index 􀀘 3,111.8 38.4 1.3
ST Small Cap 􀀘 539.5 4.1 0.8
Hang Seng 􀀘 21,846.5 409.8 1.9
HSCEI 􀀘 9,695.0 267.6 2.8
HSCCI 􀀘 4,044.8 70.8 1.8
KLCI 􀀘 1,833.9 13.4 0.7
SET 􀀙 1,349.9 (10.6) (0.8)
JCI 􀀘 4,720.4 20.2 0.4
PCOMP 􀀘 6,400.7 61.4 1.0
KOSPI 􀀘 1,945.6 10.6 0.5
TWSE 􀀘 8,605.4 28.2 0.3
Nikkei 􀀘 14,475.3 251.1 1.8
STI Index Performance
Singapore
Total Market cap (US$bn) 566
Total Daily Vol (m shrs) 2,309
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
24 Mar
Target Price
(S$)
ComfortDelgro Buy 1.950 2.19
Global Logistic Properties Buy 2.630 3.31
Keppel Corp Buy 10.610 12.60
Yangzijiang Buy 1.070 1.45
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
24 Mar
Target Price
($)
Ezion Holdings Buy 2.170 3.26
Goodpack Buy 2.280 2.60
China Merchants Buy 0.955 1.32
Pacific Radiance Ltd Buy 1.070 1.20
Nam Cheong Buy 0.320 0.46
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
Industry (MTI) in their commentary on January's CPI. Going
forward, pent-up wage pressures, rising food prices and a
weakening Singapore dollar may drive inflation back up
above 2% in the next few months. The 7.1% drop in
private road transport costs, a main contributor to last
month's low inflation, was due to the surge in COE
premiums in January last year that was captured in February
2013's CPI, alongside lower petrol pump prices. Core
inflation, which excludes accommodation and private
transport costs, was also tempered by high-base effects on
food and services inflation. February’s core inflation eased
to 1.6% from 2.2% in January.
Passenger traffic at Changi Airport dipped 0.2% y-o-y last
month while freight traffic was lower by 2.6%.
The airport registered 4.1 million passengers last month,
while cargo volume slipped to 127,681 tonnes. However,
aircraft landings and take-offs were up 3.2% at 26,764. The
decrease in February's passenger traffic could be partly due
to seasonal factors, since Chinese New Year was in February
last year. For the first two months of the year, Changi saw
8.7 million passengers passing through the airport, up 3.1%
y-o-y, while air freight edged up 0.8% to 279,057 tonnes.
Last year, Changi handled a record 53.7 million passengers,
a 5% increase over 2012. This year, Changi is projecting a
growth rate of 3-5% in passenger throughput, citing base
effects and macroeconomic conditions.
US stocks fell following a weaker-than-expected set of
March preliminary manufacturing PMI (actual 55.5,
consensus 56.5). This was in sync with China’s weaker-thanexpected
preliminary manufacturing numbers for March
released earlier in the day. Tensions between Russia and the
West over Ukraine also dampened sentiment. The yield on
the 10-year Treasury note edged down to 2.734% from
2.748%. Bio-tech sector led the decline. The S&P 500
Health Care index fell 1.4% with drug maker Pfizer posted
the biggest decline among the Dow component stocks.-

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