Monday, March 3, 2014

DBS Vickers Report 4 Mar 14

Today’s Focus
􀂃 China Merchants Hldgs – Strong cashflow, attractive
valuations and yield. BUY, TP raised to S$1.32
US stocks declined most in a month, in line with the selloff
among global equities as tensions in Ukraine and Russia
escalated after Russian President Vladimir Putin declared he
had the right to invade his neighbour. The uncertainty lifted
Brent crude higher by $2.13 to USD111.2pbl. Gold price rose
and US 10-year bond yield edged lower to 2.6% as investors
switched from risky to safe haven assets. On the data front,
February ISM manufacturing improved better-than-expected
to 53.2 (consensus 52.3, January 51.3). This will be a heavy
week for economic data releases that ends with February jobs
numbers. Non-farm payroll is expected to improve to 150k
from 113k the previous month while the unemployment rate
is seen holding at 6.6%.
Geopolitical uncertainties provided the excuse for local
investors here to lock in gains from an uninspiring 4QFY13
results season and STI’s short-term technical oscillators went
overbought. We maintain our view for the index to be range
bound from 3030-3150 in coming weeks. Immediate
resistance in the current session is seen at 3100.
FY13 earnings for China Merchants Hldgs (Pacific) outperform
due to strong operating performance and forex gains. A final
dividend of S 4.25cts is also a positive surprise. The group
guided for a minimum payout of 50% of recurring profit in
the future. Firm cash flows and healthy balance sheet
provides room for potential acquisitions. Valuations are
attractive as earnings growth has outstripped share price
rerating. Stock is also trading at less than 1x P/B and offering
7.5% dividend yield. Maintain BUY with higher target price of
S$1.32 (Prev S$ 1.20).
Keppel Corp has secured a contract from TS Offshore, to
construct an ultra-high specification jackup rig worth about
US$500m. Scheduled for delivery in 1Q 2017, it will be the
first jackup built to Keppel’s new proprietary KFELS N Plus
design. This lifts YTD win to S$1.7bn, represents 29% of full
year assumption of S$6bn.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀙 16,168.0 (153.7) (0.9)
S&P 􀀙 1,845.7 (13.7) (0.7)
NASDAQ 􀀙 4,277.3 (30.8) (0.7)
Regional Indices
ST Index 􀀙 3,087.5 (23.3) (0.7)
ST Small Cap 􀀙 526.6 (5.9) (1.1)
Hang Seng 􀀙 22,500.7 (336.3) (1.5)
HSCEI 􀀙 9,751.7 (139.8) (1.4)
HSCCI 􀀙 4,215.9 (45.5) (1.1)
KLCI 􀀙 1,824.7 (11.0) (0.6)
SET 􀀘 1,339.2 13.9 1.0
JCI 􀀙 4,584.2 (36.0) (0.8)
PCOMP 􀀙 6,407.5 (17.5) (0.3)
KOSPI 􀀙 1,964.7 (15.3) (0.8)
TWSE 􀀙 8,602.0 (37.6) (0.4)
Nikkei 􀀙 14,652.2 (188.8) (1.3)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 572
Total Daily Vol (m shrs) 2,602
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$)
3 Mar
Target Price
(S$)
ComfortDelgro Buy 1.930 2.19
Global Logistic Properties Buy 2.800 3.31
Keppel Corp Buy 10.410 12.60
Yangzijiang Buy 1.120 1.45
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
3 Mar
Target Price
($)
Ezion Holdings Buy 2.170 3.26
Goodpack Buy 1.850 2.25
China Merchants Buy 0.930 1.20
Pacific Radiance Ltd Buy 0.965 1.05
Nam Cheong Buy 0.330 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
Artivision Technologies is proposing to undertake a
renounceable and partially underwritten rights issue of up
to 273.4m new shares at an issue price of S$0.02 for each
Rights Share, on the basis of two (2) Rights Shares for every
five (5) existing shares held. The estimated net proceeds of
approximately S$5.3m will be used for the Group’s general
corporate and working capital purposes.
Partial offer for 10.3% of the shares of plastic parts supplier
Fu Yu Corporation has been made by the general manager
of two of the company's subsidiaries. Ng Hock Ching, a
former executive director of Fu Yu, currently holds a 7%
stake. He is making an offer for 70m shares at a price of 9
cents a share. The price represents a 3.2% premium to the
last traded volume weighted average price. The offer is
made for investment purposes, according to Mr Ng.
Uni-Asia’s new subsidiary, Regina Bulkship, has entered in
an agreement to acquire a 37,000 dwt newbuilding handy
bulk carrier to be delivered around 1Q2015 for
approximately US$25m. Regina Bulkship has agreed with
Pacific Basin on the major terms of a time charter
agreement to be executed at a later date for the New
Vessel. The charter period for the New Vessel is for a period
of five years, with an option to extend the period of charter.
February's PMI reading for Singapore stood at 50.9. This
followed a January reading of 50.5, and surpassed market
consensus forecast of 50.3. While the electronics sector
continued to expand for the 13th consecutive month, the
electronics PMI slipped to 51.2 in February, down from 52
in January. The improvement in overall PMI has been
attributed to expansion in new orders and new export
orders, as well as production output and inventory. The
inventory sub-index posted a reading of 52.9, the highest
since December 2011, while the index for stocks of finished
goods rose beyond the 50-point threshold to 50.8.
Chinese manufacturing activity contracted last month at its
worst rate in seven months. The PMI published by
investment bank HSBC and Markit fell for a third straight
month to 48.5, down from 49.5 in January. The HSBC PMI
reading showed that new orders and output both
contracted for the first time in seven months, while new
export orders contracted less than in January. The HSBC
release mirrored the official PMI published over the
weekend by China's National Bureau of Statistics which fell
to an eight-month low in February at 50.2. The official PMI
covers a larger base and tends to be geared towards larger
state-owned firms which perform better than their private
peers.

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