Today’s Focus
Uninspiring
conclusion to 4QFY13 reporting season; still
no end to earnings downward revision
trend
Bumitama
- Undervalued for 3-year earnings CAGR of
32%; maintain BUY call, target
price S$1.19
Midas
- Expect FY14 to be substantially better on
stronger order book. Maintain
BUY and S$0.64 target
price
The 4QFY13 reporting season ends
this week. From data
consolidated till date, STI’s
FY14F PE level is cut by more than
1% compared to the start of the
year. Clearly, the downward
revision trend has yet to end.
An uninspiring conclusion to the
current reporting season and
recent indications of a mixed
to lower data trend from US
and China lead us to keep our
view for the STI to be range
bound from c.3030-3150 through
the remainder of 1QCY14.
Only beyond 1Q do we see the STI
making the move pass
3150 towards 3350.
With the 4Q results season over
and the Singapore market
unable to draw strength from it,
focus turns towards the
economy and monetary policy watch
over the next 1-2
months.
The US 10-year government bond
yield has declined off the
3% mark since the start of the
year to 2.645%. This, even as
US equity investors are optimistic
that a sustained recovery in
the US economy will drive stock
prices higher. There is
disparity between what bond and
equity investors see. US
long bond yields could remain
contained over the next 1-2
months as investors digest incoming
data to gauge whether
the FED might alter its current
QE tapering path.
These developments can underpin
SREITs and yield plays in
the weeks/month ahead given that
the sector is likely under
owned. The SREITs sector offers
6.7% yield with a yield
spread of 4.25%. Meanwhile, interest
in global recovery
theme could pause.
US Indices Last Close Pts Chg
% Chg
Dow Jones
16,321.7 49.1 0.3
S&P
1,859.5 5.2 0.3
NASDAQ
4,308.1 (10.8) (0.3)
Regional Indices
ST Index
3,110.8 14.0 0.5
ST Small Cap
532.5 0.6 0.1
Hang Seng
22,837.0 8.8 0.0
HSCEI
9,891.4 (66.4) (0.7)
HSCCI
4,261.4 12.7 0.3
KLCI
1,835.7 4.0 0.2
SET
1,325.3 7.3 0.6
JCI
4,620.2 51.3 1.1
PCOMP
6,425.0 70.2 1.1
KOSPI
1,980.0 1.6 0.1
TWSE
8,639.6 38.7 0.5
Nikkei
14,841.1 (82.0) (0.5)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011
2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 572
Total Daily Vol (m shrs) 1,975
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$)
28 Feb
Target Price
(S$)
Keppel Corp Buy 10.470 12.60
ST Engineering Buy 3.800 4.30
Yangzijiang Buy 1.135 1.33
Stock Picks – Small
/Mid Cap
Rec’n Price (S$)
28 Feb
Target Price
($)
Ezion Holdings Buy 2.250 3.26
China Merchants Buy 0.935 1.20
Pacific Radiance Ltd Buy 0.975
1.05
Nam Cheong Buy 0.340 0.43
Source: Bloomberg Finance L.P.,
DBS Bank
Singapore
Wired Daily
Page 2
As SREITs have just moved off
modestly above their recent
lows, we see bargain hunting opportunities
and room for an
upside trade. Our picks are CapitaRetail
China Trust, Frasers
Centrepoint Trust and Mapletree
Greater China Commercial
Trust. For yield play, our pick
is China Merchant Holdings.
FY13 net profit of Rmb48m (+71%
y-o-y) for Midas
Holdings was within expectations
as quarterly earnings
improve. We expect FY14 to be
substantially better on
stronger order book as well as
upcoming high speed and
metro rail contracts. Final DPS
of 0.25Scts for FY13 was
declared, same as FY12. Maintain
BUY and S$0.64 target
price.
4Q14 earnings of Rp380bn for Bumitama
Agri was ahead of
our and consensus’ expectations.
Higher average selling
price (due to IDR weakness), and
cost containment boosted
performance. FY14F/15F earnings
trimmed by 6%/4% on
higher fertiliser application
and slower yield growth
(guided). Bumitama expects new
planting to slow to 8k ha
this year (from 10.5k ha last
year, excl.3.2k ha acquisition).
The stock is undervalued for 3-year
earnings CAGR of 32%.
We reiterate our BUY call, target
price S$1.19 (Prev S$1.23)
as we believe the counter still
offers the highest earnings
growth within our sector coverage.
Ex-translational forex loss of
Rp108 bn and biological asset
gains, 4Q13 earnings of Rp315bn
for Indofood Agri
Resources were ahead. Plantations
EBITDA jumped 75%q-oq,
partly offset by 59% drop in Edible
Oils & Fats EBITDA.
4Q13 operating margin (ex biological
asset gains) recovered
q-o-q to 20.5% from 12.3% in 3Q13,
on higher average
selling price. FY14F/15F earnings
tweaked by -2%/-4%, as
we impute FY13 numbers. Maintain
BUY and Target price
of S$1.00.
CSE Global’s FY13 net profit
and outstanding orders were
below our estimates but superior
cash generation led to
higher dividends. We trim FY14F
earnings by 8% due to
weaker outstanding orders. Going
forward, better margins
and interest cost savings are
expected to drive growth
despite lower outstanding orders.
Valuation is cheap at excash
PE of 8.1x vs 9.6x historical
average. Maintain BUY,
S$0.72 target price based on 9.6x
FY14F ex-cash PE; implies
potential returns of 20% including
4% yield.
FY13 core earnings for Centurion
Corporation were in line.
Ramp up of dorm operations to
drive organic growth.
Looking ahead, growth for FY14
will be driven by: (a) Fullyear
contribution from Westlite Mandai,
(b) The ramping up
of operations in Malaysia, (c)
Contribution from RMIT
Village, (d) Organic rental reversions
for the Singapore
dormitories, as well as (e) One-off
recognition of sale of
industrial land at Mandai. Maintain
BUY, target price raised
to S$0.86 (Prev S$ 0.77).
Swissco Holdings has entered into
a heads of agreement
Scott and English Energy, which
is in the business of owning
and leasing of mobile offshore
drilling units and service rigs
to meet the needs of major oil
and gas corporations in their
offshore oil and gas exploration
and production activities.
The proposed acquisition represents
an opportunity for the
Group to penetrate the upstream
oil and gas market sector.
Operational synergies are expected
with the acquisition,
providing Swissco Group with a
diversified earnings base
with stable, recurring income.
The purchase consideration
will be S$285.0m, to be satisfied
by the issuance of 452.4m
Consideration Shares at an issue
price of S$0.630 per
Consideration Share. In connection
with the proposed
acquisition, the Company will
undertake a share
consolidation on the basis of
every two existing Shares into
one consolidated share.
JES International Holdings has
secured shipbuilding
contracts for the construction
of 4 Newcastlemax and 1
Post-panamax bulk carriers with
a total contract value of up
to US$240.0m. These contract orders
came from European
customers amongst which, one of
them is a repeat
customer.
Loyz Energy is set to buy into
its first oil-producing
concessions, which are expected
to be immediately
cashflow-positive, for US$65m.
The current production is at
around 1,200-1,400 bopd (gross).
There are plans in place
to ramp up production to 3,000-5,000
bopd (gross).
Cordlife Group has extended its
strategic alliance and
cooperation with CordLabs Asia
in relation to the provision
of human postnatal umbilical cord
tissue storage services to
certain territories in the PRC.
This capitalises on economies
of scale by expanding its geographical
reach through
collaborative partnerships.
Global Logistic Properties has
signed a strategic partnership
agreement with Bank of China.
The partnership provides a
one-stop solution for GLP’s customers
while enhancing
GLP’s brand and accelerating
growth.
Jason Holdings has been awarded
contracts worth
approximately S$15.9m to supply
and deliver Falcata sawn
lumber on a monthly basis over
a 2-year contractual period:
Further to an earlier announcement
to acquire a 10.92%
stake in Merlin Diamonds, Blumont
announces a takeover
bid for all of the remaining shares
in Merlin Diamonds.
Merlin Diamonds’ flagship diamond
project is the only
diamond mine in Australia’s Northern
Territory. The Project
has a combined Mineral Resource
and Ore Reserve of 30.1
million tonnes representing a
total contained 7.2 million
Singapore
Wired Daily
Page 3
carats, making it the second largest
combined diamond
resource and reserve in Australia.
Bank lending in Singapore in January
grew at a slower clip
for the second straight month,
dragged down by softer
growth in the business loan segment.
The weaker growth in
loans to manufacturers comes on
the back of concerns over
the recovery in the manufacturing
sector and as banks in
Singapore brace for slower loan
growth this year. Domestic
banking unit (DBU) loans stood
at $582 bn in January, up
1.4% from December. This was slightly
weaker than the
1.5% month-on-month growth registered
in December. On
a yearly basis, the value of DBU
loans rose 16.5% in
January, a slight dip from the
17% growth in December.
This is the second consecutive
dip in growth on a year-onyear
basis, and was dragged by weaker
numbers in both the
business and consumer loan segments.
Business loans grew
22.5% in January, weaker than
the 22.9% gain in
December. On a month-on-month
basis, business loans in
January grew 2.1% to $356 bn.
This is a narrower
expansion compared with the 2.3%
growth posted in
December. The main drags came
from softer growth in
loans to the manufacturing and
general-commerce
segments.
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