Thursday, March 13, 2014

DBSVickers Report 14 Mar 14

Today’s Focus
 Kim Heng - Initiate coverage with BUY call, target price
S$0.33
 Vard Holdings - Orderbook set to hit 6-year high;
upgrade to BUY with higher target price of S$1.21
 Parkway Life REIT - Making the right moves; upgrade to
BUY, target price revised up to S$2.62
We initiate coverage on Kim Heng with a BUY call for a
potential 29% upside to our target price of S$0.33. Kim
Heng is a global rig operators’ go-to specialist in offshore rig
services. We forecast 23% net profit CAGR in FY13-15F,
driven by: 1) Buoyant E&P activities and high rig utilisation;
and 2) 38% increase in yearly rig deliveries. We see room for
an earnings upgrade, stemming from: 1) The securing of high
value projects like jackup conversions and newbuild orders,
which may boost bottomline by up to 24% per project if
executed well; and 2) Earnings accretions from acquisitions of
subsea equipment servicing & engineering businesses or other
assets such as OSVs, on the back of fortified balance sheet
post-listing. Value emerges as the stock has fallen 22% from
its high of 32.5 Scts and near its IPO price of 25 Scts.
Vard Holdings signs LOI for its largest single vessel order ever,
and follows up with 2 more order wins. The industry outlook
is optimistic; FY14 new order win forecast is raised from
NOK11bn to NOK14bn. Factoring in the bigger and earlier
contract win profile, our net profit estimates for FY14/15 are
raised by 6% and 17% respectively. Upgrade to BUY with
higher target price of S$1.21 (Prev S$ 0.90).
Parkway Life REIT announced the acquisition of two nursing
homes and an extended-stay lodging facility for the elderly in
Japan for a total consideration of JPY3bn (c.S$37.4m). The
purchase consideration is estimated to be 6% below the
aggregate valuation of the properties and implies a net yield
of 7.3%, which is higher than its Japan portfolio (est. at
c.7.0%). With these acquisitions, its asset base in Japan will
increase to 43 properties worth an estimated S$505m, or
33% of its total assets under management. We project DPU
growth of c.10% to 11.6Scts for FY14F. Upgrade to BUY,
target price revised to S$2.62 (Prev S$ 2.51).
US Indices Last Close Pts Chg % Chg
Dow Jones  16,108.9 (231.2) (1.4)
S&P  1,846.3 (21.9) (1.2)
NASDAQ  4,260.4 (62.9) (1.5)
Regional Indices
ST Index  3,081.4 (16.0) (0.5)
ST Small Cap  536.7 1.9 0.4
Hang Seng  21,756.1 (145.9) (0.7)
HSCEI  9,322.9 (41.6) (0.4)
HSCCI  4,027.5 (39.5) (1.0)
KLCI  1,818.9 0.3 0.0
SET  1,370.5 14.1 1.0
JCI  4,726.2 41.8 0.9
PCOMP  6,429.8 (32.7) (0.5)
KOSPI  1,934.4 1.8 0.1
TWSE  8,747.8 63.1 0.7
Nikkei  14,816.0 (14.4) (0.1)
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$bn) 572
Total Daily Vol (m shrs) 2,265
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
13 Mar
Target Price
(S$)
ComfortDelgro Buy 1.955 2.19
Global Logistic Properties Buy 2.760 3.31
Keppel Corp Buy 10.450 12.60
Yangzijiang Buy 1.060 1.45
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
13 Mar
Target Price
($)
Ezion Holdings Buy 2.160 3.26
Goodpack Buy 2.040 2.25
China Merchants Buy 0.960 1.32
Pacific Radiance Ltd Buy 0.990 1.20
Nam Cheong Buy 0.325 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
HPH Trust announced that it has entered into strategic
partnerships with COSCO Pacific and China Shipping
Development, through their effective and loan interests of
40% and 20% in Asia Container Terminal Holdings
(ACTH), for a total consideration of HK$2.472bn or
S$403.4m. HPHT will book a small gain of c. HK$125m
and the rationale given for this transaction was that it
would a) secure a collaborative and strategically beneficial
relationship with both COSCO Pacific and China Shipping
and b) allow all four berths located at COSCO-HIT
Terminals and Asia Container Terminals to operate as one
contiguous 1,380m long berth and serve multiple mega
vessels simultaneously. For HPHT, the overall impact on
earnings is not material as the lower contribution from
ACT will be offset by the one-off gain as well as lower
interest costs.
First Real Estate Investment Trust (First Reit) has agreed to
buy Siloam Hospitals Purwakarta in West Java, Indonesia,
for $31m, a 17.3% discount to the higher of the two
independent valuations. The acquisition will expand First
Reit's portfolio to 15 properties and broaden its asset base
by 3.8% to $1.09 bn.
The Ascott, CapitaLand's wholly-owned serviced residence
unit, has secured management contracts for its first
property in Yangon, Myanmar, and its third property in
Wuhan, China. Both are slated to open in 2018.
Habitat, a French manufacturer and specialist in designer
homeware and interior decoration since 1964, has signed a
15-year Master Franchise Agreement for the Asia Pacific
with TT International, which is developing Singapore’s
largest mega retail warehouse project, BIG BOX.
ExxonMobil is planning to build a third co-generation
(cogen) plant in Singapore - its biggest manufacturing site
worldwide with well over US$11 billion in plant
investments - to help it meet its in-house needs for utilities
like power and steam. This follows its recent addition of a
220-megawatt plant here (comprising two cogen units of
110 megawatts each) which was part of its massive US$5-
6 billion investment in a second petrochemical complex on
Jurong Island.
U.S. stocks fell with the Dow losing more than 200pts as
weaker-than-forecast data from China and tension in
Ukraine overshadowed reports showing an improving
American economy. US and Germany stepped up pressure
on Russia to back down from plans to annex Crimea from
Ukraine after a referendum to be held in 3 days, warning
they’ll exact an economic toll if Russia doesn’t. US
Secretary of State said the U.S. and Europe will take “very
serious”steps the day after the vote “if there is no sign” of
a resolution to the crisis. Weaker-than-expected industrial
production, fixed asset investments and retail sales from
China also weighed on sentiment. These developments
overshadowed better-than-expected US February retail
sales (actual +0.3% m-o-m, consensus +0.2%) and initial
jobless claims (actual 315k, consensus 330k). Brent crude
fell from 108 to USD107.4pbl. US 10-year bond yields also
fell to 2.645% from 2.7% as investors shifted to safety of
bonds.

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