Friday, May 30, 2014

Daily Summary 30 May 14

Dow was +66 and closed at 16699 last night.  Europe were flat.  Trend of Dow, short and long term, is up.  Dow's future is now -8.  Europe opened mixed.

Asian bourses were mixed or down slightly.  Nikkei -49,  ShanghaiC -1,  Hangseng +72.  STI closed -9 at 3291.  Volume was 2b shares.  Gainers were 214 to 246 losers.

Trend of STI is slightly up.

Top volumes were WCorp -0.4, YZJ -12, SIIC -0.8, Transcu unchanged, HPHTrust unchanged, KLW -0.1, Blumont unchanged, SuntecReit unchanged, Memstar unchanged, Noble -1.5.  

Market opened down but regained some grounds to closed -5. It was quite a firm closing for the weekend.  Blue chips were mixed.  Penny and speculatives were also mixed.

Europe and Dow are looking flat at the moment.

Thursday, May 29, 2014

OCBC Report 30 May 14

KEY IDEA

Tat Hong Holdings: Reached a trough in FY14?

Tat Hong’s FY14 revenue came in below our estimate and consensus by 4.5% and 1.7% respectively as it declined 22% to S$156m. PATMI dropped by a proportionately larger 53% to S$33.8m. When adjusted for one-off items in 4QFY14, FY14 PATMI would have been S$37.1m − 2.8% below our estimate but 14.2% below consensus. The sharp drop in PATMI is attributable to a slowdown in business activities as well as lack of operational efficiency when scaling down. Management shared a cautiously optimistic outlook for Tat Hong’s bottom line in FY15 as they expect: 1) better performances from Crane Rental and General Equipment Rental divisions, and 2) lower operating expenses as staff strength is reduced. We derive a new fair value estimate of S$0.89 (previous: S$0.72) based on 11.2x FY15F EPS and maintain HOLD. (Yap Kim Leng)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


-  The S&P 500 index climbed to its third record closing high in four sessions as traders shrugged off data that showed the economy shrank in 1Q14 and bet on improvement in 2Q14.

- IHH Healthcare chalked up a 25% YoY jump in net profit to RM$159.05m for 1Q14.


- Singtel has shelled out more than S$2m to make sure that it complies with the new personal data protection law that looms on 2 Jul.

- Eastern Holdings reported a net profit of S$23.05m FY14, up from S$2.17m in FY13.  


- Courts Asia reported a 38% slide in net profit to S$7.84m for Q4FY14, dragged down by higher expenses, while sales rose 9.8% to S$206.9m.

- Old Chang Kee reported a 20.8% increase in net profit for FY14 on improved gross profit margin.


- SIA and US carrier JetBlue Airways are seeking to launch codeshare operations which would put the SQ code on JetBlue-operated flights out of New York to 16 US destinations.

DBSVickers Report 30 May 14

Today’s Focus
 Tat Hong - Better visibility in Australia; upgrade to HOLD,
raised target price to S$0.85
FY14 results for Tat Hong in line; earnings fell due to slowdown
in Australia. Tat Hong’s Australian operations could improve
ahead. The restructured Australian team will result in lower
staff costs in FY15, while the recent Australia Federal Budget
2014-2015 outlines planned infrastructure spending and
development going forward. Premised on these, earnings
visibility has improved for Tat Hong. Upgrade to HOLD, raised
target price to S$0.85 (Prev S$ 0.64).
Courts Asia’s 4Q14 and FY14 results in line, earnings decline
dragged by higher costs. DPS of 0.76 Scts was declared (30%
payout), bringing full year DPS to 1.52 Scts. We believe outlook
remains positive going forward. In the immediate term, new
stores in Malaysia, Singapore and Indonesia will contribute to
growth, with HDB housing completions in Singapore and
Tangerang store opening in Indonesia support growth beyond
that. Maintain BUY and S$0.70 target price on the back of
positive outlook and decent valuations.
1Q14 results for IHH Healthcare inline, forms 20% of FY14F
estimates. Parkway Pantai shows strong contribution, while
Acibadem was impacted by weaker Turkish Lira against MYR
(c.-12%). Management seem optimistic of further EBITDA
margin expansion from 1Q14 on the back of the quick ramp up
of new operations and strong organic growth but valuations
look rich. Maintain HOLD, target price adjusted to
S$1.53/RM3.99 (Prev S$1.49/ RM3.87), after taking into
account a higher value for its stake in PREIT and Apollo
Hospitals, and forex movements.
ASL Marine has secured new shipbuilding contracts worth
approximately S$91m for the construction of three units of
powerful and highly manoeuvrable Infield Support Vessels and
one unit of Seismic Support Vessel. The vessels are secured
from customers in Australia and Norway respectively. The four
vessels will be built at the Group’s shipyard and are expected to
be completed in the first quarter of 2016.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,698.7 65.6 0.4
S&P  1,920.0 10.3 0.5
NASDAQ  4,247.9 22.9 0.5
Regional Indices
ST Index  3,300.7 28.9 0.9
ST Small Cap  558.9 2.2 0.4
Hang Seng  23,010.1 (69.9) (0.3)
HSCEI  10,185.2 (12.8) (0.1)
HSCCI  4,272.8 (43.9) (1.0)
KLCI  1,876.6 5.0 0.3
SET  1,408.5 5.7 0.4
JCI  4,985.6 21.7 0.4
PCOMP  6,676.7 (111.2) (1.6)
KOSPI  2,012.3 (4.8) (0.2)
TWSE  9,109.0 (12.7) (0.1)
Nikkei  14,681.7 10.8 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$bn) 612
Total Daily Vol (m shrs) 2,260
12m ST Index High 3,367
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
29 May
Target Price
(S$)
ComfortDelgro Buy 2.350 2.50
Global Logistic Properties Buy 2.820 3.42
Mapletree Greater China
Commercial Trust
Buy 0.890 1.02
Thai Beverage Public Buy 0.630 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
29 May
Target Price
(S$)
Vard Holdings Buy 1.060 1.21
Nam Cheong Buy 0.390 0.47
Centurion Corporation Buy 0.735 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
PEC adds new contracts worth S$100m to its orderbook. Its
latest wins include a contract from an existing client to
perform EPC works for crude oil storage and handling
facilities in the Middle East Its long-standing relationships
with MNC clients play key role in securing contracts.
Transcu Group is proposing to change its name to “OLS
Enterprise Ltd.”.
Two contracts have been awarded for the building of more
than 200km of sheltered walkways leading to MRT stations,
the Land Transport Authority (LTA) announced. The
contracts awarded, the first two of four, are worth
$156.6m. Work on the walkways will begin in the fourth
quarter, and is expected to finish by 2018.
In property news, the Housing and Development Board
(HDB) has released another executive condominium (EC) site
for tender. The site is expected to yield about 620
residential units. The 99-year leasehold site at Sembawang
Avenue is launched under the Confirmed List of the first
half 2014 Government Land Sales (GLS) programme. It has
a land area of 22,189.7 sq m and has a maximum gross
floor area of 62,131.2 sq m. The site is adjacent to Skypark
Residences, an EC that is jointly developed by JBE Holdings
and Keong Hong and was launched late last year.
U.S. stocks rose despite a weaker-than-expected 1Q GDP
contraction (actual -1%, consensus -0.5%) as investors bet
that the economy will improve going forward. Still, trading
volume stayed below par. About 5.1bil shares changed
hands on U.S. exchanges that is 19% below the 3-mth
average. Weekly jobless claims came in lesser than expected
at 300k (consensus 318k). M&A activities continued, this
time as Tyson offered to buy Hillshire Brands Co.

Daily Summary 29 May 14

Europe closed flat last night while Dow closed -42 at 16633.  Dow's trend is still attempting to break up. Dow's future is now +13.  Europe opened slightly down.

Asian bourses were mixed and slightly on the down side.  Nikkei +11, ShanghaiC -10, Hangseng -70.  STI closed +30 at 3302.  Volume was 2.2b shares.  Gainers were 287 to 178 losers.

Trend of STI is making a golden crossing and turning up.

Top volumes were WE unchanged, Addvalue -0.3, Armarda unchanged, SingaPost +13, Federal +0.3, APAC +0.1, Noble +3.5, Charisma -0.1, Blumont +0.2, Memstar -0.1.

STI opened up and gained strength by late morning to close near day high.  Blue chips were mostly green. Penny and speculatives were also firmer. SingPost gapped up on opening and gained 13c after news of Alibaba buying a 10% stake in the company.

Europe and Dow are looking steady at the moment.

OCBC Report 29 May 14

KEY IDEA

Singapore Post: Alibaba takes a stake

Following a trading halt yesterday morning, SingPost announced that Alibaba Investment Ltd will be investing S$312.5m in SingPost via a placement at S$1.42/share, following which Alibaba will hold 10.35% of SingPost upon completion. Both companies will also set up a JV in the business of international e-commerce logistics. From SingPost’s point of view, this move will allow it to benefit from Alibaba’s expertise in e-commerce and business volumes, thereby obtaining a scale effect and bringing down cost per unit of good handled, though it is hard to quantify the near term impact given the lack of details so far. We assume a higher terminal growth rate in our FCFE valuation (2.5% vs 2% previously), but after taking into account the dilutive effect of the placement, our fair value estimate drops from S$1.42 to S$1.38. Maintain HOLD, though we note that sentiment on the stock may be strong in the near term due to factors such as the “Alibaba effect”. (Low Pei Han)


MORE REPORTS


Goodpack Ltd: KKR’s offer at S$2.50

Goodpack announced the proposed acquisition by an affiliate of KKR via a scheme of arrangement at S$2.50 cash/share. This will require: 1) the approval by a majority of Goodpack shareholders who are holding at least 75% in value of Goodpack shares held by those present and voting, and 2) sanction by the High Court of Singapore. If this all-or-nothing deal succeeds, KKR will delist Goodpack. Though the offer is only at a 6.8% premium to the last closing price before this announcement, we note that the run up since March has largely priced in a privatisation. Given the above and that our fair value estimate of S$2.61 is just 4.4% higher than KKR’s offer price, we recommend shareholders to accept the offer. (Yap Kim Leng)


Biosensors International Group: Another weak showing; new CEO appointed

Biosensors International Group’s (BIG) 4QFY14 core PATMI dipped 63.7% YoY to US$10.8m, falling short of our below-consensus expectations. Another disappointment came from its decision to not declare any dividends. Looking ahead, management did not provide any revenue guidance for FY15 given the weak visibility. Meanwhile, BIG also announced the appointment of a new CEO, and this will take effect from 1 Nov 2014. We pare our FY15 revenue and PATMI forecasts by 8.0% and 18.0%, respectively, and introduce our FY16 projections. We also switch our valuation methodology from FCFE to PER given the uncertainty over BIG’s future licensing agreements with Terumo. Applying a target peg of 20x (in-line with its peers’ forward average) to our revised FY15 forecasts, we derive a new fair value estimate of S$0.85 (previously S$0.77). However, we maintain our SELL rating on BIG given its rich valuations and unexciting near-term outlook.  (Wong Teck Ching Andy)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- Wall Street stocks finished lower following mixed earnings reports as investors looked ahead to major US economic data releases on Thu.

- Valuetronics Holdings raked in full-year earnings of HK$147.9m (S$24m) as business in its industrial and commercial segment grew and a change in product sales mix improved margins.


- Boosted by fair-value gains on investment properties, Metro Holdings posted 4QFY14 net profit of S$43.8m, almost three times that of S$14.9m in 4QFY13.


- Global Yellow Pages swung into the black with a net profit of S$5.13m in FY14, from its loss of S$124.27m in FY13.


- CCM Group has revised terms to issue 12 rights shares at 0.3 S-cents each for every existing share, instead of eight rights shares at 0.5 S-cents each announced previously.


- Property consultants predict that the government will further trim land supply for private housing development for the second half of this year.

- Keppel Corp's senior executive director Teo Soon Hoe will step down after almost 40 years with the multi-business group.

DBSVickers Report 29 May 14

Today’s Focus
 Biosensors - 4Q14 and FY14 results missed expectations;
expect muted growth ahead. Maintain HOLD and S$0.90
target price
4Q14 and FY14 results for Biosensors International missed
expectations on weak royalty income, lower ASPs and weaker
margins. We expect muted growth ahead with moderate
revenue growth and falling margins. However there may be
upside risk to our call, including CITIC Private Equity making a
takeover offer for BIG. Maintain HOLD rating and S$0.90 target
price.
Banyan Tree Holdings has issued and successfully placed out
S$125m 4.875% fixed rate notes. It plans to used the proceeds
to finance the general working capital, capital expenditure and
investment requirements and refinancing needs of the
company and its subsidiaries.
Sarine Technologies announced cooperation with Rapaport's
RapNet® Diamond Trading Network to provide Sarine Loupe
imagery on polished diamonds showcased for sale on their
industry-standard website. Rapaport's RapNet® web-based
platform has been enhanced to optionally provide Sarine Loupe
imagery in an integrative and seamless manner, providing
unique visual information that will empower online trade.
Soilbuild Construction Group has been awarded construction
contracts worth approximately S$175.5m for the development
of a 7-storey multiple-user general industrial building at 60
Jalan Lam Huat. The Project comprises contracts for the
construction, completion and maintenance and the excavation
and earth works in relation to the development, and is the
Group’s largest project secured since its listing in May 2013.
The Project is expected to commence by July 2014 and to be
completed by the fourth quarter of 2016. It also brings the
Group’s latest order book to approximately S$512.8m to date,
which would be substantially completed in 2016.
WE Holdings has secures iron ore contract for shipment of
30,000 wet metric tonne worth an estimated US$1.7m.
Delivery of iron ore from Malaysian mine to China-based
trading company Ningbo Foreign Trade is at the price of
US$57.0 per dry metric ton. This is the second iron ore contract
with Ningbo Foreign Trade, with first contract of US$1.4m
secured in March 2014.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,633.2 (42.3) (0.3)
S&P  1,909.8 (2.1) (0.1)
NASDAQ  4,225.1 (12.0) (0.3)
Regional Indices
ST Index  3,271.8 (2.2) (0.1)
ST Small Cap  556.6 3.5 0.6
Hang Seng  23,080.0 135.7 0.6
HSCEI  10,198.0 115.2 1.1
HSCCI  4,316.6 15.5 0.4
KLCI  1,871.7 4.1 0.2
SET  1,402.8 10.1 0.7
JCI  4,985.6 21.7 0.4
PCOMP  6,787.9 7.6 0.1
KOSPI  2,017.1 19.4 1.0
TWSE  9,121.7 66.4 0.7
Nikkei  14,671.0 34.4 0.2

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$bn) 611
Total Daily Vol (m shrs) 2,172
12m ST Index High 3,406
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
28 May
Target Price
(S$)
ComfortDelgro Buy 2.360 2.50
Global Logistic Properties Buy 2.820 3.42
Mapletree Greater China
Commercial Trust
Buy 0.890 1.02
Thai Beverage Public Buy 0.630 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
28 May
Target Price
(S$)
Vard Holdings Buy 1.060 1.21
Nam Cheong Buy 0.390 0.47
Centurion Corporation Buy 0.735 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Under the new government contracting model, the first
public bus service package to be tendered out will comprise
24 bus services originating from the western part of
Singapore, with 16 of the bus services from SBS Transit and
the rest from SMRT. The bus services in the first package
(out of a total of three packages) originate from the Jurong
East, Bukit Batok and Clementi bus interchanges. To be
operated out of the new Bulim bus depot located off Jurong
West Avenue 2, they serve largely Jurong East and Bukit
Batok.
The LTA said that the package would start with about 380
buses in 2016, and grow to involve about 500 buses in
2021, in tandem with ridership growth and the
development of Tengah New Town and Bukit Batok West.
The package will be tendered out in the second half of
2014, for implementation from the second half of 2016.
More than $2 billion worth of government projects will be
shelved to help ease the shortage of construction workers
as the government continues to tighten the inflow of
foreign workers. Disclosing this in Parliament yesterday,
Prime Minister Lee Hsien Loong described these projects -
which include the extensions to Gardens by the Bay and a
new Science Centre - as "less urgent". HDB homes, rail
network and other urgent developments are not affected.
Deferring the projects will save Singapore 20,000 or 30,000
foreign workers, he said.
In property news, an overwhelming majority of property
consultants predict that the government will further trim
land supply for private housing development in the
confirmed list for the second half of this year, citing the
sharp slowdown in home sales and the substantial supply
pipeline. They also expect the authorities to offer
commercial sites on the confirmed list and/or reserve list in
locations such as Paya Lebar and Woodlands to speed up
their development as commercial hubs.
US indices fell moderately ahead of the release of 1Q GDP
figure that is expected to show a 0.5% contraction q-o-q.
US bond yields fell, in tandem with the rise in European
bonds prices on the optimism that ECB President will act to
stimulate the economy and boost inflation next week. U.S.
10-year note yields slid 8bps to 2.44%. Lenovo Group
shares gained as Chinese technology shares advanced amid
speculation local companies will benefit from a government
dispute with the U.S. over cyber-spying.

Wednesday, May 28, 2014

Daily Summary 28 May 14

Europe and Dow were up last night.  Dow +69 closing at 16676.  Dow's short term trend is looking slightly up.  Dow's future is now +21.  Europe opened flat.

Asian bourses were mostly up.  Nikkei +34, ShanghaiC +16,  Hangseng +136.  STI closed -2 at 3272.  Volume was 2.1b shares.  Gainers were 285 to 170 losers.

Top volumes were Addvalue +3.6, JES +0.6, Mirach +0.7, Armarda unchanged, Charisma unchanged, Noble +2.5, Memstar +0.2, Albedo +0.1, APAC +0.3, ThaiBev +1.

Market opened flat and traded flat throughout the day. It closed flat but lost 2 pts during matching to end at day low. Blue chips were mixed. Penny and speculatives did better with more gainers.

Europe and Dow are looking positive at this moment.

OCBC Report 28 May 14

KEY IDEA

KSH Holdings: Proposes final dividend of 1.75 S-cents

KSH Holdings reported 4QFY14 PATMI of S$11.0m, down 28% YoY mostly due to weaker contributions from the property development segment. Full year FY14 PATMI cumulated to S$44.5m, which increased 18% and constituted 92% of our full year forecast. While FY14 earnings reflected decent growth, it is slightly below our expectations due to slower-than-anticipated progressive recognition at development projects over the fourth quarter. In terms of the topline, FY14 revenues increased 40.1% to S$324.5m as we saw stronger contributions from the construction segment (up 38.6%), the development segment (up 62.9%) and rental income from investment properties (up 13.5%) as well. The group also proposed a final dividend of 1.75 S-cents. Maintain BUY. After updating our model for latest assumptions, our fair value estimate slips to S$0.71 from S$0.73 previously. (Eli Lee)

MORE REPORTS


Goodpack Ltd: KKR offers at S$2.50/share

Following news reports last week that global PE firm KKR is interested to acquire Goodpack, the former has now made an offer of S$2.50/share to the latter’s shareholders, valuing the company at about S$1.4b. This represents a 23.2% premium to Goodpack’s closing price on 18 Mar 2014, a day before the announcement by Goodpack of a possible transaction. This also represents a 6.8% premium to Friday’s closing price of S$2.34. IBC Capital, a company held by a fund affiliated with KKR, has received irrevocable undertakings from Goodpack's executive chairman David Lam who owns a 32% stake in Goodpack. We have a BUY rating on the counter with a fair value estimate of S$2.61, which is just 4.4% higher than KKR’s offer price.  As such, we recommend shareholders to accept the offer. (Yap Kim Leng)

Yoma Strategic Holdings: Announces shareholding structure in telco JV

This morning, Yoma reported its shareholdings in Digicel Asian Holdings (“the Digicel JV”), which is involved in telecommunications infrastructure projects in Myanmar. Under the announced structure, YSH Finance (80% owned by Yoma and 20% owned by FMI group) will hold 25% of the Digicel JV. The JV plans to roll out telecommunications towers across Myanmar as the country aims to rapidly increase mobile phone penetration after the award of two telco licenses last year. We note that the JV has already clinched a contract to provide telecommunication towers to Ooredoo (which won one of the telco licenses) and also intends to offer similar services to other telco operators in Myanmar. Maintain BUY on Yoma with an unchanged fair value estimate of S$0.87. (Eli Lee)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- The S&P 500 Index reached its all-time high, up 0.6% to close at 1911.91.


- The U.S. S&P/Case Shiller composite index pointed to a rise in home prices by 12.4% YoY in Mar 2014, beating the street’s 11.8% expectations.

- According to the Department of Statistics, Singapore’s services sector recorded a 4.9% YoY growth in sales for 1Q14.


- PACC Offshore Services Holdings reported a 76% YoY jump in its 1Q14 PATMI to US$36.7m despite a 6% decline in revenue to US$52.9m.

- Bukit Sembawang Estates’ 4QFY14 revenue surged 94.5% YoY to S$89.5m but PATMI slumped 29.1% to S$18.2m.


- EuroSports Global Limited’s 153.3% spike in its FY14 PATMI to S$17.0m was boosted by a S$16.3m gain on disposal of PPE.

DBSVivkers Report 28 May 14

Today’s Focus
 Goodpack - Proposed acquisition by KKR at S$2.50 per
share. We recommend accept the offer.
After months of discussions, KKR, through its affiliate IBC
Capital, has proposed to acquire Goodpack under a scheme of
arrangement (SOA) at an offer price of S$2.50 per share.
Unlike a takeover offer, a SOA requires approvals from 75% of
shareholders at a Court meeting and sanction by the High
Court of Singapore. After that, KKR can proceed to acquire
100% of Goodpack and delist the company. KKR has received
an irrevocable undertaking from founder Mr. David Lam who
has a controlling stake (32%). The offer price is close to our
DCF-based target price of S$2.52 and offers 7% premium to
the last closing price (risen 23% since 19 Mar). We recommend
to accept the offer and vote in favour of the deal, which allows
investors to realise their investment in Goodpack.
To become a top player in China’s environmental space, SIIC
Environment reaffirmed its plan to add 1-1.5m tons of water
asset and 2k tons of waste-to-energy capacities each year to
reach 8m tons of water and 10k tons of waste-to-energy (WTE)
capacities in 2016. SIIC is a beneficiary of positive industry
outlook. Beyond acquisitions, SIIC can still grow through
upgrades /phased expansion of portfolio. Maintain BUY and
target price of S$0.25.
Yoma Strategic Holdings said its 80%-owned subsidiary YSH
Finance had increased its stake in Myanmar's Digicel Asian
Holdings from 8% to 25%, thereby making the latter an
associated company of Yoma. The remaining 75% interest in
Digicel Asian Holdings is held by Digicel Group.
WE Holdings is acquiring a cumulative 25.5% stake in Catalistlisted
Jubilee Industries for S$14.5m. The consideration is
satisfied by S$12.0m in cash and S$2.5m worth of new We
Holdings shares issued at S$0.01323 per share. Jubilee will be
used to drive the Electronic Components business while the
Group will focus on growing the Coal & Iron Ore and Cement
& Oil business units.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,675.5 69.2 0.4
S&P  1,911.9 11.4 0.6
NASDAQ  4,237.1 51.3 1.2
Regional Indices
ST Index  3,274.1 (8.8) (0.3)
ST Small Cap  553.1 1.5 0.3
Hang Seng  22,944.3 (18.9) (0.1)
HSCEI  10,082.9 (43.6) (0.4)
HSCCI  4,301.1 (6.9) (0.2)
KLCI  1,867.6 4.8 0.3
SET  1,392.7 4.4 0.3
JCI  4,963.9 (9.1) (0.2)
PCOMP  6,780.3 (10.2) (0.1)
KOSPI  1,997.6 (12.7) (0.6)
TWSE  9,055.3 19.2 0.2
Nikkei  14,636.5 34.0 0.2

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$bn)
Total Daily Vol (m shrs)
12m ST Index High
12m ST Index Low
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
27 May
Target Price
(S$)
ComfortDelgro Buy 2.350 2.50
Global Logistic Properties Buy 2.780 3.42
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Thai Beverage Public Buy 0.620 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
27 May
Target Price
(S$)
Vard Holdings Buy 1.060 1.21
Nam Cheong Buy 0.385 0.47
Centurion Corporation Buy 0.735 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Technics Oil and Gas has been awarded contracts worth a
total of S$7.4m through its subsidiaries. These contracts
involve supply of booster gas compressor package for a
wellhead platform for Vietnam and also for construction of
steel structure.
CCM Group announced that it would revise terms for a
proposed rights and bonus issue and said that it would
expand the scope of its investment activities beyond
construction and property. CCM said that it now plans to
issue twelve rights shares at S$0.003 each for every existing
share instead of eight rights shares at S$0.005 each for
every existing share. The number of rights shares will now
increase to 43.1bn instead of 28.75bn previously. The
Company’s concurrent proposal for a bonus issue, in which
it would issue one bonus share for every rights share
subscribed for, remains unchanged although the total
quantum of Bonus Shares will increase to 43.1bn. The issue
of the New Shares is renounceable and non-underwritten.
Tiong Seng Holdings and its JV partner have been awarded
the contract for the construction of the Great World Station
and Tunnels for the Thomson Line by the Land Transport
Authority. The contract is worth approximately $316m and
expected to commence in May 2014.
Sincap Group proposes to expand its core business to
include property development and property investment. It
also intends to allot and issue up to 175.5m new shares at
an issue price of S$0.07 per Placement Share to raise gross
proceeds amounting to S$12.3m.
The Singapore government has planned for S$1.2bil
government IT tenders this year with prominent feature on
smaller and more focused IT projects. This covers areas
include cybersecurity, infrastructure, system development
and maintenance, data and analytics, cloud and mobile
services. 33% of the tenders will be valued at between
$200,000 and $500,000, and 22% below $200,000. Out of
the approximately 380 infocomm tenders that are likely to
be awarded this year, 90% will be valued below $5mil. This
will mitigate risk and allow for faster completion of projects,
according to IDA.
The services sector raked in 4.9% more in first- quarter sales
than it did a year ago, with all segments experiencing
single-digit increases in turnover. But the pace of growth
has slowed from a revised 7.1% in 4Q13, said the
Department of Statistics (DOS). DOS noted all services
industries fared well during the quarter, highlighting health
& social services as having recorded the highest turnover
growth of 9.5%, mainly from higher receipts by hospitals
and specialised medical centres.This was followed by the
increases in revenue recorded by education services (7%)
and transport & storage services (5.6%). The financial &
insurance services segment - which carries the biggest
weight on the index of almost 25% - saw receipts grow
3.4% y-o-y.
US markets continued its climb as economic data
underpinned a recovery in the economy. Orders for April
durable goods climbed for a 3rd month (actual +0.8%,
consensus -0.7%). Consumer confidence increased to 83 in
May from 81.7 a month earlier. The S&P/Case-Shiller index
of property prices in 20 U.S. cities for March increased
12.4% y-o-y (consensus 11.8%).

Tuesday, May 27, 2014

Daily Summary 27 May 14

DAX was up last night. Dow was closed.  Dow's trend is looking up. Dow's future is not available at the moment. Europe opened mixed but more on the positive side.

Asian bourses were mixed in narrow trading.  Nikkei +34, ShanghaiC -19, Hangseng -8.  STI closed -7 at 3276.  Volume was 1.6b shares.  Gainers were 234 to 212 losers.

Trend of STI is slightly up.

Market opened slightly up but turned weaker after lunch.  Blue chips were mixed. Penny and speculatives were mostly firmer.  Otherwise another quiet trading day with volume below 2b shares.

Europe is looking steady tonight. Only concern is the tension in South China Sea between China and Vietnam.

DBSVickers Report 27 May 14

Today’s Focus
 PACC Offshore Services Holdings – Initiate coverage with a
BUY recommendation and target price of S$1.36.
We initiate coverage on PACC Offshore Services Holdings
(POSH) with a BUY recommendation and target price of
S$1.36. Being the largest Asia-based provider of offshore
support vessels and the youngest midwater/deepwater fleet of
AHTS/PSV globally gives POSH the competitive edge. POSH’s
strategy is to be market leader in several niches, and with
minimal exposure to competitive shallow water spaces. With
the delivery of two semisubmersible accommodation vessels by
end-2014, FY15 will be a game changer for POSH, whereby
Group’s earnings base is expected to double from that in FY14.
Key near-term catalysts will be: i) Significant charter contract
wins, including a contract for its second SSAV, which should
provide very strong visibility for FY15 earnings; ii) Resolution of
certain near-term issues at its Mexico JV, and iii) Better-thanexpected
earnings delivery.
Cosco has secured contracts worth US$120m to build four
platform supply vessels (PSVs) for a Singapore-based customer.
In addition, the contracts also come with two options for
similar vessels. The vessels are scheduled for delivery
progressively from 2Q16 to 1Q17. Unit price of US$30m per
PSV is similar to the last two PSV orders contracted with this
customer in Feb14. The latest wins lifted Cosco's YTD orders to
US$521m, but still lagging behind peers and our expectations
as it only forms 21% of our full year assumption. While Cosco
is one of the leading offshore yard in China, near term earnings
remain vulnerable to cost overrun issues. Maintain FULLY
VALUED and target price of S$0.69.
Mapletree logistics Trust (MLT) acquires its ninth property in
Korea for a total consideration of KRW 25.5bn (S$31.2m). The
3-storey, 25,600 NLA property is a newly completed warehouse
located in a prime logistics hub in Korea. At an initial yield of
8.3%, the property is expected to be accretive to earnings. We
expect MLT to fund this acquisition fully by debt – thus gearing
is expected to increase marginally to 33.8% vs 33.3%
previously. Our earnings estimates are maintained given that
we have previously priced in S$100m worth of acquisitions in
our estimates. Maintain BUY, target price S$1.20.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,606.3 63.2 0.4
S&P  1,900.5 8.0 0.4
NASDAQ  4,185.8 31.5 0.8
Regional Indices
ST Index  3,282.9 4.9 0.1
ST Small Cap  551.7 3.4 0.6
Hang Seng  22,963.2 (2.7) (0.0)
HSCEI  10,126.5 5.4 0.1
HSCCI  4,308.0 (9.1) (0.2)
KLCI  1,862.8 (6.4) (0.3)
SET  1,388.3 (8.5) (0.6)
JCI  4,963.9 (9.1) (0.2)
PCOMP  6,790.4 (20.9) (0.3)
KOSPI  2,010.4 (6.8) (0.3)
TWSE  9,036.1 27.9 0.3
Nikkei  14,602.5 140.4 1.0

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$bn) 611
Total Daily Vol (m shrs) 1,816
12m ST Index High 3,406
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
26 May
Target Price
(S$)
ComfortDelgro Buy 2.310 2.50
Global Logistic Properties Buy 2.810 3.42
Mapletree Greater China
Commercial Trust
Buy 0.905 1.02
Thai Beverage Public Buy 0.605 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
26 May
Target Price
(S$)
Vard Holdings Buy 1.075 1.21
Nam Cheong Buy 0.385 0.47
Centurion Corporation Buy 0.740 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Thakral Corporation has signed agreements with a private
Australian developer, as capital partner for a mixed
development property project in Brisbane, Australia. The
project is branded FV (the “Project”). It is located in
Fortitude Valley, Brisbane, which over several stages, will
comprise up to 950 apartments and 5,500 sqm of retail plus
car parking. The Group has agreed to invest up to A$46.2m
for the Project.
China Essence Group expects to register a net loss for FY14,
mainly due to low potato yield as well as the starch yield,
and also high finance and operating expenses.
A surprise production cutback by a semiconductor player
here has ended two consecutive months of double-digit
expansion in Singapore's factory output. Industrial
production slowed in April to grow 4.6% y-o-y, but still
slightly better than market consensus of 4.3% growth.
Electronics production fell 8.8% y-o-y, mainly due to an
11% contraction in the key semiconductors segment, which
accounts for one-fifth of all manufacturing output.
Excluding the volatile biomedical sector - which, with an
expansion of 23.8%, was the main driver of growth -
output would have fallen 0.7% y-o-y. Apart from the
electronics sector, all other manufacturing clusters -
biomedical, chemicals, precision engineering, transport
engineering and general manufacturing industries - posted
year-on-year increases in output. On a month-on-month
basis, industrial production decreased 4.7% in April.
Excluding biomedical manufacturing, output would have
fallen by a larger 7.3%.
The Housing & Development Board (HDB) is set to launch
more projects in Tampines North, Punggol Matilda, and
Bidadari regions - the three new towns that were identified
for further development under the Draft Master Plan 2013.
In the second half of this year, housing projects will be
launched in Tampines North and Punggol Matilda, followed
by Bidadari in the second half of 2015. These follow two
housing projects in Punggol Matilda - Matilda Edge and The
Verandah@Matilda - which were launched in a build-toorder
(BTO) exercise last September. Work on the
developments for the three housing areas has started on the
ground. When fully developed, they are expected to provide
about 40,000 new homes for Singaporeans, HDB said.

OCBC Report 27 May 14

KEY IDEA

Olam International: SELL now that Temasek offer has expired

The S$2.23/share cash offer for Olam International by a consortium led by Breedens Investment – a Temasek-owned unit – has closed on 23 May, with the group collectively owning 80.4% of all issued shares (71.9% of fully diluted share capital). As the free-float of the company remains well above the 10% threshold, Olam will continue to be listed on SGX. We had previously advised shareholders to accept the offer of S$2.23. And with the expiry of the offer, we do not expect the current share price to be supported around current levels. Hence, we recommend a SELLon Olam with a new fair value of S$1.87 (10x FY15F EPS). (Carey Wong)

MORE REPORTS


KSH Holdings: Proposes final dividend of 1.75 S-cents

KSH Holdings reported 4QFY14 PATMI of S$11.0m, down 28% YoY mostly due to weaker contributions from the property development segment. Full year FY14 PATMI cumulates to S$44.5m, which increased 18% and makes up 92% of our full year forecast. While this is a healthy set of numbers, we judge this to be slightly below our expectations due to slower-than-anticipated progressive recognition at development projects over the fourth quarter. In terms of the topline, FY14 revenue increased 40.1% to S$324.5m as we saw stronger contributions from the construction segment (up 38.6%), the development segment (up 62.9%) and rental income from investment properties (up 13.5%) as well. The group has proposed a final dividend of 1.75 S-cents. We will speak with management later today regarding its 4Q results and, in the meantime, maintain BUY while our fair value estimate of S$0.73 is under review. (Eli Lee)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- Singapore's manufacturing sector expanded at a faster-than-expected pace of 4.6% YoY in Apr.


- Boustead Singapore's net profit for 4QFY14 slipped 8% YoY to S$25.5m, dragged down by lower value of non-recurring items.

- Mapletree Logistics Trust has entered into a sale-and-purchase agreement with Daehwa Logistics Co to acquire Daehwa Logistics Centre in South Korea for KRW25.5b (S$31.2m).


- A healthcare private equity fund seeded by IMC Group has become a substantial shareholder of Q&M Dental Group (Singapore) with a 10% stake which it acquired from existing shareholders for S$29.1m.

- Leveraged buyout loans in Asia are set to increase as the region's companies mature and seek to grow by acquisition rather than organically, according to Credit Agricole SA.


- Yongmao Holdings posted net profit of RMB11m (S$2.2m) in 1Q14, almost double that of RMB5.7m in 1Q13.


- Singapore faces hotel room crunch as there is an imbalance between the forecasted tourist arrivals and the supply of hotel rooms, Chesterton Singapore said in a report.

Monday, May 26, 2014

Daily Summary 26 May 14

Europe closed mixed while Dow +63 at 16606.  Dow's short term trend is about to turn up.  Dow's future is now +51.  Europe opened firmly up.

Asian bourses were mostly up.  Nikkei +140, ShanghaiC +10, Hangseng -3.  STI closed +5 at 3283.  Volumes were 1.8b shares.  Gainers were 243 to 197 losers.

Trend of STI is also firming up.

Top volumes were NextGen -0.1, HuAnCable -0.3, SIIC +1.1, Oceanus +0.2, JES +0.1, Charisma unchanged, KLW +0.3, Vallianz +.04, LifeBranz unchanged, Memstar +0.1.

Market opened slightly up and stayed positive through the session in a tight band. There were more losers than gainers among the blue chips. Penny and speculatives were much firmer, Second liners too were firmer as well.

Europe and Dow are looking very firm at this moment.

OCBC Report 26 May 14

KEY IDEA

Bumi Armada Berhad: Slow start; but improvement expected

Bumi Armada Berhad (BAB) started FY14 on a poor note, recording a 40.9% YoY dip in its 1Q14 PATMI to MYR64.8m on the back of a 4.1% decline in revenue to MYR468.9m. This fell short of expectations, with the former making up just 12% and 11% of ours and Bloomberg’s FY14 consensus forecast, respectively. Nevertheless, management still expects its financial performance in FY14 to be better than FY13, which implies significant improvement ahead. Meanwhile, BAB also proposed a bonus and rights issue exercise (both entail one new share for every two existing shares held), with completion expected in 3Q14. We update our assumptions following a change in analyst coverage. Maintaining our target PER peg of 21x and applying this to our revised blended FY14/15F EPS forecast, we derive a new fair value estimate of MYR3.72 (previously MYR3.74). Maintain HOLD. (Wong Teck Ching Andy)


MORE REPORTS


Vard Holdings: New offshore support vessel contract secured

Vard Holdings Limited (VARD) announced that it has been awarded a new contract for the construction of one offshore support vessel of Rolls-Royce design. The value of the contract is in excess of NOK1b and is for Island Offshore, a repeat customer which manages a fleet of more than 30 high quality vessels. Delivery is scheduled in 2Q16 from one of its Norway yards. This latest contract win boosts VARD’s YTD order wins to ~NOK6.8b, based on our estimates. We maintain our HOLD rating and S$0.97 fair value estimate on VARD, pegged to 9x FY14F EPS. (Wong Teck Ching Andy)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks finished a bumpy week on a high note as technology and small-cap equities shook off the blues from recent weeks and led the overall market higher.


- Q&M announced a strategic partnership with IMC by signing a call option with HHI, granting HHI the right to call upon Q&M to issue 63m new shares within a 2-year option period for a minimum exercise price of S$0.48 per share.


- Buying rose while selling among directors was flat and buyback activity fell according to filings on SGX from May 19 to 23.

- Frasers Centrepoint Limited is looking to grow its landbank albeit through moderate bids, tap its strength in mixed-use development and scale up its hospitality arm.


- Thailand's junta met the head of the central bank, the stock exchange and other economic officials to discuss how to safeguard economy growth, three days after staging a military coup.


- The emergence of Prabowo Subianto, an ex-general, as a genuine contender has turned Indonesia's presidential election into a clash between the old guard and a new generation representing fledgling democracy.

DBSVickers Report 26 May 14

Today’s Focus
􀂃 Vard - Wins second newbuilding contract in a week,
robust order momentum continues
We peg STI’s year-end objective at 13.9x (average) FY15F PE
that is currently at 3400 but in the short-term, we remain
watchful of a correction to support at 3170, base 3100. STI’s
current resilience even as it stayed above average PE valuation
the recent dip in bond yields. A dovish FED and macro
uncertainties such as China slowdown concerns and
developments in Ukraine have led to an up tick in interest for
bonds.
While South-East Asian (SEA) equity indices have outperformed
this year, investors should stay watchful of the current
developments in this region. If the political situation in Thailand
and the territorial spat between Vietnam and China worsens,
the strong performance enjoyed by SEA equity indices YTD
could come to a pause.
Vard has secured another significant newbuild contract from
repeat Norwegian customer Island Offshore for the
construction of a high end Offshore Support Vessel worth more
than NOK1bn. This is the second newbuilding contract secured
in a week, following a PSV order from Carlotta Offshore
recently. The value of the contract comes as a surprise, as
typically high end AHTS and PSV vessels built by Vard are below
NOK500m. The vessel will be delivered from Vard Brevik yard in
Norway in 2Q-2016. The contract brings Vard's YTD-FY14
contract wins to above NOK7bn, which represents 50% of our
full-year assumption of NOK14bn. Order win momentum has
been strong this year, in line with recovery in OSV market as
well as continued strength in subsea construction vessels space.
We maintain our BUY call with target price of S$1.21.
Improving earnings execution on a sequential basis hereon will
be the key catalyst.
Vallianz Holdings will be boosting its fleet capabilities with the
addition of platform supply vessels of Ulstein P128 and PX128
designs (New PSVs). The New PSVs are the first of its kind in
the world and charts the start of the modernisation and
diversification for Vallianz’s current fleet of 28 vessels.
Q & M Dental has announced a strategic partnership with IMC
Group (IMC) by way of signing a call option with Heritas Helios
Investments (HHI), a healthcare private equity fund seeded by
IMC and managed by IMC’s wholly owned subsidiary, Heritas
Capital Management, granting HHI the right to call upon Q&M
to issue 63m new shares within a 2-year option period for a
minimum exercise price of S$0.48 per share. Q&M also
announced that QMH, together with Dr Kelvin Koh and Dr
Felicia Koh, sells shares collectively equivalent to 10% of Q&M
to HHI.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀘 16,606.3 63.2 0.4
S&P 􀀘 1,900.5 8.0 0.4
NASDAQ 􀀘 4,185.8 31.5 0.8
Regional Indices
ST Index 􀀘 3,278.0 12.4 0.4
ST Small Cap 􀀘 548.3 4.5 0.8
Hang Seng 􀀘 22,965.9 12.1 0.1
HSCEI 􀀘 10,121.1 11.5 0.1
HSCCI 􀀘 4,317.1 47.5 1.1
KLCI 􀀙 1,869.2 (5.9) (0.3)
SET 􀀙 1,396.8 (8.4) (0.6)
JCI 􀀘 4,973.1 3.2 0.1
PCOMP 􀀙 6,811.3 (19.3) (0.3)
KOSPI 􀀘 2,017.2 1.6 0.1
TWSE ?? 9,008.2 38.6 0.4
Nikkei 􀀘 14,462.2 124.4 0.9
STI Index Performance
Singapore
Total Market cap (US$bn) 611
Total Daily Vol (m shrs) 1,771
12m ST Index High 3,406
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
23 May
Target Price
(S$)
ComfortDelgro Buy 2.380 2.50
Global Logistic Properties Buy 2.810 3.31
Keppel Corp Buy 10.710 12.60
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
23 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180 1.20
Nam Cheong Buy 0.380 0.47
Centurion Corporation Buy 0.740 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 3
Sinjia Land announced its joint venture with Real Time
Engineering (RTE) to explore new business opportunities in
clean technologies. The joint venture will leverage RTE’s 10-
year test-bedding partnership agreement with JTC
Corporation under JTC’s CleanTech Park Living Lab
Programme for the installation and operation of a fuel cell
power plant that will generate clean electricity for JTC’s
CleanTech One development in CleanTech Park.
Inflation in Singapore grew at a faster clip in April - rising
from 1.2% y-o-y in March to 2.5% last month, slightly less
than the 2.6% growth that the market had expected. The
jump in April's consumer price index (CPI) was largely due to
a rise in car prices; private road transport costs climbed
5.7% in April, reversing four consecutive months of decline.
The increase reflected the rise in COE premiums -
exacerbated by the low base in April 2013 - and an edging
up of petrol pump prices. With the exception of
accommodation - which moderated further to 1.1% from
1.7% in March, mainly due to a smaller increase in imputed
rentals on owner-occupied accommodation - all other major
categories showed slightly stronger price increases in April.
Core inflation, which excludes accommodation and private
road transport costs, crept up to 2.3% in April from 2% in
March. Services inflation was higher at 2.7% compared to
2.4% in March, led by a pick-up in the cost of holiday travel
and public road transport. Food inflation, meanwhile, rose
to 3.1% from 2.9% a month ago, reflecting steeper price
increases of both non-cooked food and prepared meals.
MAS and MTI said that core inflation is expected to "stay
elevated" at 2-3% in 2014, while headline inflation is
projected to come in at 1.5-2.5%. Car prices are likely to
add "negligibly" to inflation, they said.
International ratings agency Standard & Poor's (S&P) has
affirmed Singapore's sovereign credit strength over the long
and short term with the vaunted top risk-free ratings. S&P
has assigned triple A long-term rating and A-1+ short-term
rating for Singapore's creditworthiness. Even so, the agency
warned that brisk credit growth relative in real terms and
vulnerabilities in a small and open economy present some
risks to Singapore's credit profile.
US markets rose as data showed purchases of new homes
climbed in April. The rise was on very weak volume though,
as about 4.6bil shares changed hands on U.S. exchanges,
the lowest figure for the year. Sales of new U.S. homes
increased 6.4% to a 433k (consensus 425k), the most since
October. Hewlett-Packard shares rose despite reporting an
11th straight quarter of declining sales. This after CEO said
profit will be propped up by cutting as many as 16,000
more employees, on top of 34,000 already announced.

Friday, May 23, 2014

Daily Summary 23 May 14


Europe and Dow were marginally up last night.  Dow +10 at 16543. Dow's trend is starting to turn up. Dow's future is now +12.  Europe opened flat.

Asian bourses were mostly positive.  Nikkei +124, ShanghaiC +13, Hangseng +12.  STI closed +12 at 3278.  Volume was 1.7b shares.  Gainers were 250 to 174 losers.

Trend of STI is turning up.

Top volumes were Advance SCT unchanged, JES +0.8, Yoma +8, Charisma +0.2, ICP +0.3, SIIC +0.4, CapitaMallAsia unchanged, HPHTrust +1, STATSChip +1.5, Noble +1.

Market opened flat but inched up through the day to close at day high.  Blue chips were mostly firmer. Penny and speculatives too were firmer.
Today's big gainers were HanKore +15.5 and Yoma +8.

Europe and Dow are looking steady at the moment.

OCBC Report 23 May 14

KEY IDEA

Land Transport Sector: Another step towards sustainability

LTA announced that it will restructure the public bus industry to a “Government contracting model” beginning from 2H14 (but implementation to take place only in 2H16). The key implication of this is that revenue risk will now fall under the Government instead of the public transport operators (PTOs). Only 20% of existing buses will be tendered out initially, while the remaining 80% of buses will continue to be operated by the incumbent operators. Overall, we believe this will enable the PTOs’ bus operations to return to profitability, and expect ComfortDelGro (CDG) to be a bigger beneficiary than SMRT. In light of these positive changes, we upgrade the land transport sector from Neutral to OVERWEIGHT. We maintain our BUY rating on CDG(FV lifted from S$2.30 to S$2.56) and HOLD rating on SMRT(FV lifted from S$1.25 to S$1.40). (Wong Teck Ching Andy)


MORE REPORTS


ComfortDelGro: Key beneficiary of policy change

ComfortDelGro’s (CDG) core Singapore bus operations have raked in operational losses since FY11, due to a lack of a commensurate increase in fare adjustments despite heightened operating requirements. However, following LTA’s decision to implement a “Government gross cost contracting model”, we expect more significant improvements in its bus operations ahead, although the financial impact will only be felt in 2H16. While there is risk that CDG may lose some market share, we believe its strong knowledge of the local operating environment and experience in operating a gross cost contracting model for its UK and Australia bus businesses will put it in a good stead to clinch the upcoming tenders. Despite keeping our FY14-15 forecasts intact, we raise our FY16-18 PATMI projections by 4-12%, based on an 8% operating margin assumption for its Singapore bus operations. Consequently, our DDM-derived fair value is raised from S$2.30 to S$2.56. Maintain BUY. (Wong Teck Ching Andy)


SMRT Corporation: Clearer skies ahead

Operating profits for SMRT’s fare business (Bus, LRT and MRT) has been on the downtrend since FY09, with the main drag coming from its Bus operations. However, the transition of the public bus industry towards a “Government contracting model” will allow SMRT to return to profitability for its bus operations in FY17, based on our estimates. We retain our FY15-16 forecasts but raise our FY17, FY18 and FY19 PATMI projections by 7.9%, 13.4% and 12.3%, respectively. This bumps up our fair value estimate from S$1.25 to S$1.40. We believe there are now also stronger expectations for updates from the Government on the rail financing framework, with SMRT set to be a key beneficiary. However, given its robust share price run-up in recent weeks, we believe these positives have been priced in. Hence, we maintain HOLD on SMRT. (Wong Teck Ching Andy)

SATS Ltd: 4QFY14 results disappoint

SATS’s 4QFY14 results came in below our expectations. Revenue declined 3.2% YoY to S$434.6m, or 7.9% below our forecast. Correspondingly, PATMI dropped 7.8% to S$42.6m, which is 5.8% below our estimate. FY14 revenue dropped by 1.8% to S$1.8b. Food Solutions revenue saw 5.2% decline to S$1.1b, mainly due to: 1) weaker TFK performance from JPY translation losses, and 2) Quantas’ move to Dubai from Changi Airport. FY14 PATMI came in 2.4% lower at S$180.4m. While management sees growth through PT CAS, increasing connectivity and scaling up, we think the aviation industry headwinds will be the larger force in SATS’ near- to mid- term outlook. Based on 20x FY15F EPS, we derive a lower FV of S$3.23 (previous: S$3.35) and maintain HOLD. (Yap Kim Leng)


City Developments Limited: Top bid at GLS tender for Yishun EC

Yesterday evening, City Developments (CDL) was part of a consortium that put in the top bid of S$178.5m at a GLS tender for an EC site at Yishun Street 51 (Parcel A). The tender attracted six bidders in total, and CDL’s bid was 2.1% above the second highest bidder’s. The site has a land area of 17.9k sqm and a maximum GFA of 50.2k sqm, and we estimate breakeven and selling ASPs of S$525 psf and S$650 psf, respectively, for the EC condominium project with ~480 units. Overall, we see CDL’s bid to be a fairly decent price and note that the EC segment has been more resilient to headwinds in the domestic residential space. We opt to keep our fair value estimate of S$8.72 unchanged, pending the award of the site and more color from management. Maintain SELL. (Eli Lee)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks built on advances from the previous session and closed modestly higher on Thu, with high-growth and small-cap companies leading gains.

- Poor health in old age is the topmost concern among Singapore investors, followed by unaffordable healthcare costs, a survey by Manulife Financial has found.


- JES International Holdings has snagged contracts to build and deliver six Ultramax bulk carriers plus five options to build a total of 30 similar carriers collectively worth US$974m.


- KS Energy has secured drilling contracts worth more than US$60m as a result of contract extensions awarded to subsidiaries of its 80% owned unit, KS Drilling.


- OKP Holdings' subsidiary secured a S$50.6m contract from PUB to construct a canal underneath the road and road-raising works at the Tanglin and Kim Seng Road areas.


- Magnus Energy Group is the latest in the string of firms under a Commercial Affairs Department probe to be hit by the resignation of a key executive.

DBSVickers Report 23 May 14

Today’s Focus
􀂃 Thailand’s coup adds to market uncertainty
􀂃 SATS earnings below expectations on weaker yen, outlook
challenging
From a non-coup to now, a coup, the Army chief on 22 May
has detained the leaders of the rival groups who attended the
crisis talks that failed to reach a conclusion. Thailand’s 1Q GDP
had fallen 2.1% q-o-q. The concern is that the situation will
further affect the economy and result in a recession should the
situation be allowed to drag on. The country’s credit rating
could also be affected.
Still, the coup is seen by some to provide short-term certainty
to markets after months of street protests and upheaval that
led to the removal on May 7 of caretaker Premier Yingluck
Shinawatra by the Constitutional Court. Our analysts in
Thailand look forward to seeing the new Cabinet soon,
particularly the Prime Minister and economic ministers, who
will determine the outlook for Thailand for at least the next one
year.
On the other hand, the political situation in Thailand and the
territorial spat between Vietnam and China could spell a pause
at least, to the strong performance enjoyed by South East Asian
equity indices YTD. For the STI, current valuation isn’t a plus
factor as the index trades at slightly above its 13.9x (average)
12-mth forward PE level even as the earnings downward
revision trend continues. It’s a watch and see situation.
SATS’s headline 4Q14 and FY14 earnings of S$43mil and
S$182mil respectively came in slightly below expectations. Food
Solutions revenue declined on the weaker Japanese Yen.
Dividend is also below expectations. No special dividend is
declared but a higher final DPS of 8 Scts is proposed (2H13: 6
Scts). The outlook remains challenging on mild aviation outlook
and higher staff costs. SATS currently trades at 18x FY15F
earnings at +1SD of its historical mean PE. Maintain HOLD and
reduce TP to S$2.95 as we trim our forecasts marginally by 7%.
JES International’s wholly-owned Jiangsu New East Marine
Engineering Co has won contracts to build and deliver 6
Ultramax bulk carriers plus 5 options to build a total of 30
similar carriers collectively worth US$974mil.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀘 16,543.1 10.0 0.1
S&P 􀀘 1,892.5 4.5 0.2
NASDAQ 􀀘 4,154.3 22.8 0.6
Regional Indices
ST Index 􀀘 3,265.7 3.9 0.1
ST Small Cap 􀀘 543.8 1.5 0.3
Hang Seng 􀀘 22,953.8 117.2 0.5
HSCEI 􀀘 10,109.6 114.2 1.1
HSCCI 􀀘 4,269.6 63.9 1.5
KLCI 􀀙 1,875.1 (1.9) (0.1)
SET 􀀘 1,405.2 2.3 0.2
JCI 􀀘 4,969.9 59.6 1.2
PCOMP 􀀘 6,830.6 68.2 1.0
KOSPI 􀀘 2,015.6 7.3 0.4
TWSE 􀀘 8,969.6 107.2 1.2
Nikkei 􀀘 14,337.8 295.6 2.1
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,600
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$)
22 May
Target Price
(S$)
ComfortDelgro Buy 2.250 2.50
Global Logistic Properties Buy 2.770 3.31
Keppel Corp Buy 10.670 12.60
Mapletree Greater China
Commercial Trust
Buy 0.890 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
22 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.160 1.20
Nam Cheong Buy 0.375 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
OKP Holdings has won a S$50.6m PUB tender to build the
Stamford diversion canal and is due for completion by 17
December 2017. The contract is expected to contribute
positively to, but has no material impact on, the EPS and
NTA/share of the Company and its subsidiaries for the
current financial year ending 31 December 2014.
U.S. stocks rose as data showing strength in manufacturing
boosted confidence in the global economy. The Markit
Economics preliminary index of U.S. manufacturing
increased to 56.2 in May from 55.4 a month earlier
as output accelerated. An index of homebuilders rallied as
sales of previously owned U.S. homes rose in April. Hewlett-
Packard Co. shares fell after it reported second- quarter
sales that fell short of estimates and announced it is cutting
more jobs.

Thursday, May 22, 2014

Daily Summary 22 May 14

Europe and Dow rebounded last night. Dow closed +159 at 16533. Dow's trend is down but with last night's rebound is holding. Dow's future is now +28.  Europe opened up.

Asian bourses were mostly up. Nikkei +296, ShanghaiC -4, Hangseng +117.  STI closed -0.5 at 3261.  Volume was 1.6b shares.  Gainers were 243 to 207 losers.

Trend of STI is still sideways.

Top volumes were APAC +0.6, Armarda -0.1, Amplefield unchanged, Charisma unchanged, LCDGlobal +0.7, Vallianz +0.1, SMRT +3.5, RHPetroGas +1.5, GoldenAgri +1.5, SIIC +0.6..

Market opened slightly up and stayed positive for most part of the day. It started to slip to negative in the last hour of trading to close at day low. Volume was still low. Blue chips were weaker.  Penny and speculatives were mixed. Transport counters were sold down on opening but recovered and make more gains.

Europe and Dow are looking good for tonight.

DBSVickers Report 22 May 14

Today’s Focus
􀂃 Singapore Strategy – Prefer yields and value plays. Our
yield picks are ComfortDelgro, Singapore Post and Sheng
Siong; undervalued stocks are CWT, Thai Bev, Ezion,
Keppel Land and UOL
􀂃 Singapore Land Transport - Positive transition for
operators. Maintain BUY on CD on higher TP of S$2.50;
HOLD SMRT with S$1.41 TP
The market is likely to consolidate ahead of the World Cup
and mid-term elections in the US. We peg STI’s year-end
objective at 13.9x (average) FY15F PE that is currently at 3400
and remain watchful of a short-term correction with base
support at 3100. Our strategy is to select value stocks with
catalysts to unlock value or play defensive, focusing on yield
plays and REITs. We prefer retail REITs – Mapletree Commercial
Trust, Frasers Centrepoint Trust, CapitaRetail China Trust and
Mapletree Greater China Commercial Trust –which delivers an
above average CAGR of 6%, driven by acquisitions and AEIs.
Our preferred yield plays are Singapore Post, which is the best
proxy in SGX to ride on the emerging e-commerce trend.
Revenue from e-commerce contributed 26% to its 1Q
earnings. We like Sheng Siong for its strong cash flows, stable
earnings and attractive dividend payout of 90%. The stock
currently yields 4.4%. Comfort Delgro is a key beneficiary of
the bus restructuring plan to a cost-plus contracting model,
which will stem existing losses and relieve the capex burden
from incumbents
We also like undervalued stocks with value realising potential
such as CWT, Thai Bev, Ezion, Keppel Land and UOL.
The Land Transport Authority (LTA) announced that it is
restructuring the public bus industry to a contracting model in
phases from 2H2014, with implementation from 2H2016. We
see this move as positive for both the current bus operators
(SBS Transit, ComfortDelGro’s subsidiary) and SMRT, as it
should erase losses currently incurred by both (c.S$40m in the
past year). The Government will also undertake the ownership
of infrastructure and operating assets, which will lighten the
burden on the operator’s financing requirements and balance
sheet.
Based on preliminary estimates/assumptions, we project that
CD and SMRT should see uplift in earnings from bus operations
to register EBIT of $25m and S$8m (from 2H2016),
respectively, accounting for c.5% of projected Group earnings
by then. However, these estimates may be subject to further
review given limited information. We have raised our target
price for CD to S$2.50 and SMRT to S$1.41, as we factor in
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀘 16,533.1 158.8 1.0
S&P 􀀘 1,888.0 15.2 0.8
NASDAQ 􀀘 4,131.5 34.6 0.8
Regional Indices
ST Index 􀀙 3,261.8 (3.7) (0.1)
ST Small Cap 􀀘 542.3 0.9 0.2
Hang Seng 􀀘 22,836.5 1.8 0.0
HSCEI 􀀘 9,995.4 111.2 1.1
HSCCI 􀀘 4,205.7 25.5 0.6
KLCI 􀀙 1,877.0 (4.1) (0.2)
SET 􀀘 1,402.9 8.2 0.6
JCI 􀀘 4,910.3 14.3 0.3
PCOMP 􀀙 6,762.4 (120.3) (1.7)
KOSPI 􀀙 2,008.3 (2.9) (0.1)
TWSE 􀀙 8,862.4 (25.4) (0.3)
Nikkei 􀀙 14,042.2 (33.1) (0.2)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,358
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$)
21 May
Target Price
(S$)
ComfortDelgro Buy 2.300 2.50
Global Logistic Properties Buy 2.800 3.31
Keppel Corp Buy 10.660 12.60
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
21 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180 1.20
Nam Cheong Buy 0.370 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
the potential uplift in earnings from 2016 in our DCF model.
At this stage, we still prefer CD given its diversification,
lower valuation and as the incumbent bus operator in
Singapore. Maintain HOLD for SMRT.
FY14 core earnings for Yoma Strategic Holdings slightly
below; property still going strong with Star City’s Zone C to
launch in 2H14; non-real estate besides tourism will take
time to contribute. FY15F earnings cut by 13% to trim LDR
sales and lowering estimates of non-property businesses.
Maintain BUY, target price slightly lowered to S$1 (Prev
S$1.02). As the long-stop date for Landmark’s acquisition
closes end of June, we expect the conclusion of the deal to
be a catalyst for the stock.
Manhattan Resources announced that it has entered into a
conditional sale and purchase agreement to acquire the
entire issued share capital of mining group Singxin
Resources at a price of S$1.0 billion. The proposed
acquisition marks the Group’s foray into the mineral mining
industry in the PRC and allows the Group access to
exploration activities in Xinjiang, PRC. As purchase
consideration, the Group plans to allot and issue 1,369.9m
new shares at S$0.73 per share, representing approximately
73% of the Group’s enlarged share capital. Conditional
upon the completion of the proposed acquisition, the
Group will offer a 1-for-1 bonus issue of 1,876.4m warrants
at an exercise price of S$1.00 per share for existing
shareholders and the vendors to counter the dilutive effects
of the new enlarged share base.
Lian Beng Group has secured a contract from Westlite
Dormitory worth approximately S$44.5m. The contract
period is 12.5 months.
Against a backdrop of Chinese developers turning to
Singapore to raise funds through bonds, Moody's has
revised its outlook for China's property industry to
"negative" from "stable". The revised outlook reflects the
credit rating agency's expectations for the fundamental
business conditions in the industry over the next 12 months.
Moody's sees a significant slowdown in residential property
sales growth, high inventory levels and weakening liquidity
over the coming 12 months. Moody's expects modest 0-5%
year-over-year growth (on a 12-month trailing basis) over
the next 12 months. This growth rate is materially lower
than the 26.6% y-o-y rise in nationwide cumulative
contracted sales in full year 2013.
US equity indices erased Tuesday’s declines after FED policy
makers said continued stimulus doesn’t risk sparking a jump
in the inflation rate. With inflation expected to remain well
below its 2% goal, the FOMC doesn’t “face a trade- off
between its employment and inflation objectives, and an
expansion of aggregate demand would result in further
progress relative to both objectives,” this according to the
FED minutes of its April 29-30 meeting. Tiffany shares lead
an advance among retailers as quarterly profit beat
estimates. Netflix Inc. said it will expand its online-video
service in Europe. Shares of oil refiners Exxon Mobil Corp
and Chevron Corp rose, following the rise in oil price