Friday, May 16, 2014

DBSVickers Report 16 May 14

Today’s Focus
 Noble Group - 1Q results beat expectations; maintain BUY;
TP lifted to S$1.60
 Nam Cheong - Another record-breaker; maintain BUY
with adjusted TP of S$0.47
1Q results for Noble Group beat expectations as margins
climbed on greater volatility. Gross margin was >2%, first time
in eight quarters. Looking ahead, margin is set to normalize
sequentially with lower volatility seen thus far. However,
volume growth and recovery of agri segment should continue
to drive y-o-y growth. We have raised FY14 core profit by 9%
for the exceptionally strong 1Q. We expect conclusion of
COFCO deal by early 4Q. Maintain BUY; TP lifted to S$1.60
(Prev S$1.53), still pegged to blended 16x FY14 PE and 1.5x
P/BV, in line with its mean valuation.
Results beat expectations in 1Q14 as Nam Cheong posts a
record net profit of RM71m (up 99% y-o-y). Shipbuilding
margins surprise on the upside as offshore support vessel
upcycle is firmly in place. Given the rather low global
orderbook-to-fleet ratio of <7% for AHTS vessels currently, and
with 30% of the global fleet being more than 25 years old,
management revealed that 17 of the 30 vessels in FY15 builtto-
stock programme would comprise AHTS vessels (majority
being 6,000bhp category). Maintain BUY with adjusted TP of
S$0.47 (Prev S$ 0.46). Nam Cheong's net order book stands at
RM1.2bn, underpinning 21% earnings CAGR over FY13-15.
3Q14 results for Croesus Retail Trust (CRT) were ahead of
projections. Higher tenant sales, better cost management and
contributions from new assets boosted earnings. Looking
ahead, we expect strong organic growth potential and visible
acquisition pipeline to drive earnings. Maintain BUY, TP S$1.05.
We like CRT for its exposure to the stronger macro outlook in
Japan. At the current price, CRT offers investors annualized
FY15 DPU yield of 8.4%.
Ascendas Hospitality Trust’s 4Q14 results in line. Australia
hotels to continue performing strongly; acquisition of Osaka
Hotel to underpin earnings growth. Maintain HOLD, TP
adjusted to S$0.77 (Prev S$0.78). Yield of about 8% is high;
expected to limited downside to share price.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,446.8 (167.2) (1.0)
S&P  1,870.9 (17.7) (0.9)
NASDAQ  4,069.3 (31.3) (0.8)
Regional Indices
ST Index  3,272.5 13.4 0.4
ST Small Cap  542.3 2.3 0.4
Hang Seng  22,730.9 148.1 0.7
HSCEI  9,971.2 (20.4) (0.2)
HSCCI  4,215.9 (11.1) (0.3)
KLCI  1,879.8 0.6 0.0
SET  1,395.2 (0.8) (0.1)
JCI  4,991.6 70.2 1.4
PCOMP  6,849.3 (31.1) (0.5)
KOSPI  2,010.2 (0.6) (0.0)
TWSE  8,880.7 5.5 0.1
Nikkei  14,298.2 (107.6) (0.7)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,845
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$)
15 May
Target Price
(S$)
ComfortDelgro Buy 2.270 2.30
Global Logistic Properties Buy 2.850 3.31
Keppel Corp Buy 10.650 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
15 May
Target Price
(S$)
Goodpack Buy 2.350 2.52
Pacific Radiance Ltd Buy 1.175 1.20
Nam Cheong Buy 0.380 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
1Q14 results for Yanlord Land Group in line with our
expectation; higher net gearing due to payment of land
premium. Slow sales in 4M14 due to limited launches. New
launches will be concentrated in Sept to Nov. Maintain
HOLD and TP of S$1.24 due to the uncertain property sales
outlook.
Capitaland has announced it is revising its offer price for
CMA to $2.35 a share from the previous S$2.22 or $2.2025
excl dividend). It has also further stated it will NOT be
revising this final offer price. In addition, it is waiving the
acceptance condition to a level below the <90% of the
voting rights and as such the offer is declared unconditional.
As at 15 May 2014, CAPL holds 72.9% of CMA shares,
including all acceptances to date. The offer period has also
been extended to 9 June 2014. The revised offer price
would mean that this exercise would cost CAPL $3.168b vs
the earlier $3.06b, assuming getting 100% acceptances. As
at Dec 2013, Capitaland has close to $5b gross cash on its
balance sheet (excluding the $1b cash at CMA level). In
terms of impact, the deal would raise EPS for Capitaland as
well as boost the group's ROE by 1.3% point to 6.7%,
based on FY13 results. Marginal impact from the
additional cost to our valuation and our TP for CAPL
remains unchanged at $3.85, pegged at a 30% discount to
RNAV. The latest offer price of $2.35 for CMA is at a 1.27x
P/bk NAV and at a 3% premium to our TP of $2.28 for the
stock and at an 18% discount to our RNAV of $2.86 for the
stock.
Keppel REIT is divesting its 92.8% interest in Prudential
Tower to a consortium comprising subsidiaries of Lian Beng
Group, KSH Holdings, KOP Limited and Centurion Global
for $512.0m. Prudential Tower, a 30-storey 99-year
leasehold Grade A office building prominently located on
the corner of Cecil Street and Church Street near Raffles
Place, is approximately 16-years old and presently fully
occupied. The sale price is 4.5% above the latest valuation
of the Property of $490.0m. It also represents a 46.7%
premium over Keppel REIT’s original purchase price of the
Property of $349.1m. Assuming that the proceeds are
utilized towards debt repayment, we estimate DPU is
estimated to drop c. 3.5% (mainly due to low interest rates
(c.2.2% for its debt facilities in Singapore). However, we
believe that it is not an optimal scenario for the trust. We
believe that this sale will be the first of few steps that K-REIT
will take towards funding the highly anticipated purchase of
MBFC Tower 3 from its sponsor Keppel land. As such,
proceeds from the sale of Prudential Towers will come
handy as it will mean that K-REIT will not need to raise as
much equity as previously expected and it will also lower the
overall funding cost for K-REIT without gearing up overexcessively.
Our estimates and HOLD call is maintained
pending the completion of this sale in Sept’14 and/or
further updates.
Singapore Airlines' (SIA) systemwide passenger carriage (in
revenue passenger kilometres) last month edged up 0.4%,
outpaced by a 1.9% expansion in capacity (in available seat
kilometres) which pushed passenger load factor (PLF)
downwards. PLF slipped 1.1 percentage points to 76.7%
last month, while the number of passengers carried
increased 0.9% y-o-y to 1.5 million. Cargo traffic (measured
in freight tonne kilometres) for SIA Cargo was weaker partly
due to the Easter period, with load factor declining on
nearly all routes except West Asia & Africa and Europe.
Cargo traffic fell 6.7% while capacity slipped 4.9%. This
caused load factor to drop 1.1 percentage points to 61.7%.
China Environment has secured eight contracts amounting
to RMB166.8m in total, from six customers. These contracts
are scheduled for delivery in 2014 and by the first half of
2015, and are expected to contribute positively to the
earnings of the Group for FY14 and FY15.
Linc Energy has been awarded a third coal exploration
licence in Poland. This brings total “in country” coal reserves
to over 5bn tonnes. Linc Energy is now one of the largest
private owners of coal in the Upper Silesian Coal Basin
providing a strong platform for UCG commercialisation in
Poland.
Vallianz Holdings has received a Letter of Award (LOA) for
the provision of Charter and Ship Management services
worth US$82.0m to a major offshore construction
company. This boosts current order book to a new record of
US$524.0m.
STATS ChipPAC said that it has received a non-binding
expression of interest from a third party keen on buying all
its shares. But this was "subject to a number of conditions'',
the Group said in response to queries by the regulator on its
unusual price and volume movements recently.
Logistic Holding had secured a S$72m contract from HDB
for the construction of a 432-unit, four-residential block
precinct along Yishun Avenue 1. This contract is the Group’s
first construction contract worth above S$70m,
demonstrating the Group’s growing reputation and its
capability in taking on larger construction projects. Order
book strengthens to S$329.8m with projects lasting until
FY2017.
Singapore's non-oil domestic exports rose 0.9% in May
compared to a year ago, thanks to a rise in non-electronic
shipments that outweighed a continued fall in electronic
exports. Last month's increase in the NODX came after a
6.6% decline in March. Month-on-month, the NODX
jumped a seasonally-adjusted 9.0% in April compared to a
8.9% drop in March. Non-oil re-export growth eased from
an 18.7% surge in March to 6.6% in April, due to higher
Singapore
Wired Daily
Page 3
electronic and non-electronic NORX. Among the 10 major
markets, shipments to Hong Kong, the European Union,
Japan, South Korea and Indonesia fell. Shipments rose in
the rest of the markets with China, the United States and
Malaysia the top three contributors to the increase.
Developers cut prices and succeeded in reviving private
home sales last month. April's private home sales reached
the highest level since last November, following price cuts at
several projects. Figures released by the Urban
Redevelopment Authority (URA) showed transactions
rebounding 55% in April to 745 units, after a slump in
March when only 480 units were moved.
Retail sales fell for the second consecutive month, declining
3.9% y-o-y in March. However, stripping out the sales of
motor vehicles - which were down 19.3% from March 2013
- sales still experienced a slight contraction, edging down
0.4%. This follows a slump of 9.5% y-o-y in February,
although that was distorted by base effects from the
Chinese New Year holidays which fell in February in 2013.
When comparing month-on-month, retail sales (seasonally
adjusted) for March dropped 4%. Excluding motor vehicles,
retail sales were down just one per cent from February.
U.S. stocks with the Dow down triple digits on continued
selling of small-cap shares and Wal-Mart Stores Inc. forecast
profit that missed estimates. This even as treasury yields
dropped with the US 10-yr bond yield dipping below 2.5%.
Data showed April industrial production dipped 0.6% m-om;
lower than consensus expectation for a flat reading.
Capacity utilization also came in weaker than expected at
78.6% (consensus 79.1%). General Motors shares fell after
it announced that it is recalling additional 2.7mil vehicles,
pushing the total number to 11.1mil. Cisco shares rose after
it said revenue in the quarter ending July will be US$12-
12.3bil better than consensus expectation for US$11.8bil

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