OCBC Report 17 Apr 14

KEY IDEA

Ezion Holdings: New contracts and new strategic investors
Ezion Holdings recently clinched two service rigs charter contracts worth a total of US$78.7m, bringing its YTD order wins to US$260.3m. We believe this underscores Ezion’s dominant position in the service rigs market, especially in the Asia-Pacific region. Separately, Ezion also announced that it will issue 100m new shares (7.7% of Ezion’s enlarged share capital) to two subsidiaries of Hong Leong Company (Malaysia) Berhad (HLCM) at S$1.94/share, thus raising gross proceeds of S$194m. As the Chairman and CEO of HLCM is Tan Sri Quek Leng Chan, Ezion believes it will be able to tap on his vast experience and network, and has plans to increase its penetration into the Malaysian oil and gas market. We take into account these developments, and pare our FY14 and FY15 core EPS projections by 6.2% and 3.5%, respectively. Maintain BUY on Ezion, albeit with a reduced fair value estimate of S$2.41 (previously S$2.57). (Low Pei Han and Andy Wong)

MORE REPORTS

Keppel Corporation: A steady quarter
Keppel Corporation (KEP) reported a 8.6% YoY rise in revenue to S$3b and a 5.1% fall in net profit to S$338.7m in 1Q14, and within expectations. Excluding one-off gains in 1Q13, net profit in 1Q14 was largely in line with that in 1Q13. Operating margins in the O&M segment remain healthy at 14.6% in 1Q14, and construction of the semi-submersible rigs for Sete remains on track. On the infrastructure side, we understand that no provisions were made for the Qatar project in 1Q14. The O&M division secured S$1.9b of new orders in 1Q14, and it is expected that the ongoing bifurcation towards premium assets and the replacement of old rigs should continue to support order momentum. As at end 1Q14, the net orderbook stood at a record S$14.4b with deliveries till 2019. Maintain BUY with S$12.25 fair value estimate. (Low Pei Han and Carey Wong)

UOL Group: Top bid for Prince Charles Crescent site
Last evening, a consortium comprising UOL Venture Investments and Kheng Leong put in the top bid of S$463.1m in the government land sales tender for a residential land parcel at Prince Charles Crescent (Parcel B). The tender attracted seven bids and UOL’s bid was 5.2% above the second highest bidder. The site has a land area of 268.7k sq ft with a plot ratio of 2.1, and is located in an established residential estate within a 10-min drive to Orchard Rd and the city center. UOL’s top bid translates to a price of S$821 psf GFA, and we forecast breakeven and selling prices for this project at S$1.35k psf and S$1.60k psf, respectively. These estimates are fairly in line with prices at nearby Alex Residences and Echelon, and the selling price yields a reasonable margin of 16%. We note that UOL’s top bid of S$821 psf GFA is 15% lower than that for the neighboring site awarded in Sep-12 and reflects falling land prices given a weakening housing outlook. Pending the award of the site, our fair value estimate remains unchanged at S$6.95. Maintain BUY. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- US stocks rallied Wed, and three days of gains sent the benchmark S&P 500 into positive territory for the year.

- Fewer Singapore businesses have M&A plans in the next three years than they did a year ago, said Grant Thornton in its International Business Report.

- StarHub has become the first telco to bite the 4G bullet, saying on Tue that it will start charging mobile subscribers S$2.14 per month for using its 4G service in Jun this year.

- Cambridge Industrial Trust has posted 1Q14 DPU of 1.251 S cents, a 1.4% increase YoY.

- QT Vascular is aiming to raise S$55m in what is so far the largest IPO on Catalist this year. The offer is by way of placement, with 196.4m new shares priced at 28 S cents apiece.

- Sabana REIT’s DPU fell 22% YoY to 1.88 S cents/unit for 1Q14.

- Global Logistic Properties has leased 34,000sqm of space to a "leading smartphone manufacturer" at GLP parks in six cities across China.