Monday, May 12, 2014

DBSVickers Report 12 May 14

Today’s Focus
 Wilmar - Rating cut to HOLD on 3% upside to revised TP
of S$3.30
 Overseas Education - Share price has performed well,
downgrade to HOLD on limited upside to S$1.02 TP
We continue to expect May-June to be a consolidation period
for blue chips following the c.300pt run-up from 2960 since
beginning February. We view the anticipated consolidation as
healthy and should be contained at 3170, above the 13.12x PE
(-0.5SD) blended FY14/15 PE level.
There are still a handful of key STI stocks (eg Jardine C&C) that
will go ex-dividend in the next few weeks that could cap STI
gains in the near term.
With one more week to go before the end of the 1Q results
reporting season, we have thus far cut our FY14F and FY15F
earnings by 1.6% each. We are hopeful that the earnings
downward revision trend may plateau or come to an end.
In terms of sector earnings revision, Consumer Services suffered
the biggest cut in earnings after the release of the results,
down 9.6% and 7% respectively for FY14F and FY15F.
Contributors to the cut in earnings are SIA, SPH, SMRT and
Tigerair. Next in line is the Financials sector. Earnings were cut
6.0% for FY14F and 5.4% for FY15F, mainly due to HPH Trust
and Singapore Exchange.
The Industrial sector saw the biggest upgrade in earnings,
mainly due to Yangzijiang, the best proxy to shipbuilding
recovery in China. Our analysts have also raised earnings for
REITS by 2.4% for FY14F and 1.2% for FY15F.
Wilmar’s 1Q14 core earnings of US$215m was significantly
below our/consensus expectations. Strong Plantations and
Consumer contributions were more than offset by drop in M&P
pretax. FY14F/FY15F earnings cut by 21%/19%; as we adjust
both Oilseeds & Grains and Palm & Lauric pretax margins/MT
by 23-90%. Plantation and Consumer segment profit forecasts
are unchanged. Forecasts and target price adjusted down on
reduced M&P margin expectations. Rating cut to HOLD on 3%
upside to revised target price of S$3.30 (Prev S$ 4.00).
US Indices Last Close Pts Chg % Chg
Dow Jones  16,583.3 32.4 0.2
S&P  1,878.5 2.8 0.2
NASDAQ  4,071.9 20.4 0.5
Regional Indices
ST Index  3,252.1 4.4 0.1
ST Small Cap  539.2 (3.4) (0.6)
Hang Seng  21,863.0 25.9 0.1
HSCEI  9,684.6 (50.4) (0.5)
HSCCI  4,067.2 (32.1) (0.8)
KLCI  1,866.7 3.9 0.2
SET  1,377.4 (1.7) (0.1)
JCI  4,898.1 37.2 0.8
PCOMP  6,847.3 82.1 1.2
KOSPI  1,956.6 6.0 0.3
TWSE  8,889.7 (41.2) (0.5)
Nikkei  14,199.6 35.8 0.3
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$bn) 606
Total Daily Vol (m shrs) 1,873
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
9 May
Target Price
(S$)
ComfortDelgro Buy 2.040 2.19
Global Logistic Properties Buy 2.750 3.31
Keppel Corp Buy 10.670 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
9 May
Target Price
(S$)
Goodpack Buy 2.320 2.60
China Merchants Buy 0.955 1.32
Pacific Radiance Ltd Buy 1.060 1.20
Nam Cheong Buy 0.365 0.46
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Overseas Education’s 1Q14 net profit of S$5.5m in line;
impact from tuition fee hikes was offset by higher staff
costs. Strong demand for int’l schools, especially from Asian
expats, is key to further fee hikes. But major upside unlikely
before FY16 as OEL is at maximum capacity at current
campus. Share price has performed well, and with limited
upside to S$1.02 target price, we downgrade to HOLD.
1Q14 core earnings of Rp276bn (+78% y-o-y) for Bumitama
Agri were below our expectations, mainly due to higherthan-
expected COGS. Interim DPS of S$0.013 was declared.
Y-o-y jump in earnings was driven by a 35% y-o-y hike in
CPO ASP and a 10% y-o-y increase in CPO sales volume.
Forecasts and target price of S$ 1.25 unchanged, as we
expect volume growth to accelerate in subsequent quarters.
Maintain BUY call.
Midas’ 1Q14 net profit turned around from a loss of
RMB5m a year ago to a net profit of RMB11.5m, which was
slightly below our expectations. We expect stronger
quarters ahead as the Group delivers more high speed
railway contracts, which typically have higher margins.
Associate Nanjing Puzhen should also continue its strong
earnings contribution trend to the Group. Maintain BUY
and S$0.64 target price (1.2x P/B).
1Q14 results for Centurion Corporation in line. Net profit of
S$23m was boosted by one‐off gain of S$17m. We have
adjusted our FY14F and FY15F earnings by +2% and ‐7%,
respectively, to account for the divestment of the group’s
accommodation business, as well as later completion of the
Woodlands dormitory in 2015. Maintain BUY and S$0.86.
Sarine Technologies announced another record set of
financial results1Q14. Revenue was up by 21% y-o-y to
US$24.4m, of which over 30% was recurrent in nature.
Bolstered by the growth in sales volume and recurring
revenue, gross profit climbed 22% to US$17.8m and gross
profit margin improved to 73%. The complementary nature
of Sarine’s planning systems and inclusion mapping systems
underpinned higher sales of traditional planning products
and accelerated GalaxyTM family systems deliveries.
Deployment of 15 GalaxyTM family systems in Q1 2014
expanded total installed base to just under 160 and boosted
recurring revenue.
Otto Marine is expected to report a loss for 1Q14 primarily
due to lower utilization resulting from the docking of
several vessels for survey as required by class rules on a
periodic basis over a 5 year cycle and the re-position and
mobilization of some other vessels.
MRT commuters will continue to enjoy free early morning
rides to the city, with the Land Transport Authority (LTA)
extending its free pre-peak travel trial on the rail network by
a year till June 2015. The government estimates that
extending the trial by a year will cost about $12m.
Tourism falters in Q4 last year. For the whole of last year,
Singapore's tourism receipts grew and more visitors came,
but the performance in Q4 was lacklustre. Receipts from
foreign visitors' consumption expenditures or payments for
goods and services in the last three months of 2013
amounted to $5.7 bn, 5% less than for the last quarter of
2012. The latest performance report by the Singapore
Tourism Board (STB) indicates that visitors shopped less, and
did less sightseeing in Q4; receipts from these two
components fell by the most – 10%. Receipts from
entertainment and gaming fell 9%; during the period,
revenues of the Marina Bay Sands and Resorts World
Sentosa integrated resorts fell by double digits. Only receipts
from accommodation rose (by 7%) in the quarter from a
year ago. The STB registered gazetted hotel room revenue
for Q4 2013 to be $0.7 bn, a 4.7% y-o-y increase.

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