Today’s Focus
Small
Mid Caps Radar – Ausgroup: potential earnings
recovery in FY15 while Riverstone
is a glove maker
benefiting from industry shift
towards nitrile gloves and
market share gain
Thailand’s political scene remains
fragile after the Thai army
chief declared martial law in
Thailand yesterday. The move
could further affect Thailand’s
economy and tourism industry.
Thailand’s 1Q GDP shrank 0.6%
y-o-y. Foreign arrivals dropped
4.9% in the first 4 months of
2014 from a year earlier to
8.62mil, this according to the
Thai Department of Tourism.
Singapore listed companies with
hotel exposure in Thailand are
Amara (less than 10% of profit)
and Banyan Tree (c.5% of
profit).
In this month’s Small Mid Caps
Radar, we feature Ausgroup
and Riverstone. Ausgroups’ share
price has gone from strength
to strength, rising some 31% since
our last highlight in Feb. Its
latest corporate developments,
in particular the proposed
partnership with Ezion, is notable
as it offers potential for
Ausgroup to embark on an entirely
new growth chapter. At a
valuation of 17x FY15 PE, it appears
the market has already
priced in a potential turnaround
in its existing business, and
also some potential upside from
opportunities surrounding Port
Melville, in our view. At this
juncture, details on the strategy for
Port Melville’s expansion are
still lacking. But, we believe the
eventual unfolding of the Ezion-Ausgroup’s
grand plan could
be a strong catalyst for the latter.
While the rubber glove industry
may be swarmed by an influx
of new capacity over the next
few years, Riverstone appears to
be a shimmering gemstone embedded
in a muddy riverbank.
The company is enjoying the favourable
industry shift towards
nitrile gloves and is gaining
market share in the relatively
inelastic high-end cleanroom gloves.
The stock is trading at a
20% discount to its Malaysia peers,
which is unwarranted
given its stronger ROE and growth
profile. We expect the
commencement of new production
lines to drive earnings
growth in 2H, and a re-rating
of stock valuation closer to peers.
Apart from the potential revaluation
gain, Riverstone offers an
attractive dividend yield of 4-5%.
Yoma Strategic this morning posted
a 44.9% drop in net profit
to S$6.4m for 4Q14. This was despite
revenue rising 34.4% to
S$27.5m, supported by sales of
residences and land
development rights. The drop in
net profit was mainly due to a
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STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011
2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 609
Total Daily Vol (m shrs) 1,507
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$)
20 May
Target Price
(S$)
ComfortDelgro Buy 2.380 2.30
Global Logistic Properties Buy
2.840 3.31
Keppel Corp Buy 10.590 12.60
Stock Picks – Small
Cap
Rec’n Price (S$)
20 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180
1.20
Nam Cheong Buy 0.370 0.47
Centurion Corporation Buy 0.745
0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
higher "other income"
as well as a higher share of profit by
non-controlling interests in the
corresponding quarter a year
ago. Full-year net profit rose
13.5% to a record S$16.4m on
the back of a 66.2% increase in
revenue to S$100.5m, also
a record. No dividend was declared
for FY14, whereas a
dividend of half a cent per share
was proposed in FY13.
Sembcorp Marine announces this
morning that its subsidiary
Jurong Shipyard has secured a
US$236m (approx. S$296m)
contract to build a high specification,
tailor-made jack-up rig
for new customer Hercules North
Sea Ltd. Hercules North
Sea Ltd is a subsidiary of Nasdaq-listed
Hercules Offshore,
Inc., a global leader in jack-up
drilling and liftboat services
with a fleet of 36 jack-up rigs
and 24 liftboats. The rig is
scheduled for delivery in 2Q 2016.
Upon delivery, the rig
will be chartered out to Maersk
Oil and Gas for deployment
in the UK sector of the North
Sea. This latest contract brings
SMM's total new orders secured
in 2014 to-date to
S$1.93bn, forming 39% of our full
year assumption of
S$5bn. Including this new contract,
the Group’s net order
book stands at S$13.2bn, with
deliveries extending into
2019. Maintain BUY and target
price S$4.80.
Ezra announced that the Group
has won contracts around
the world and across its Subsea
Services and Offshore
Support Services divisions totalling
more than US$95m
(including options). With the
latest wins, the Group
orderbook stands at more than
US$2.0 bn of contracts,
with a majority expected to be
executed over the next 12 to
18 months.
In response to articles on Wall
Street Journal, Reuters and
Business Times, Goodpack has confirmed
that KKR & Co is
the party that it is in discussions
with. According to Reuters,
KKR's Southeast Asia head Ming
Lu is leading the
transaction for the private equity
firm. Mr Lu worked at a
leading global automotive component
supplier before
joining KKR. Mr Lu’s experience
and network in the
automotive industry may offer
synergies to aid Goodpack’s
penetration into automotive market,
which is supposed to
be the medium to long term growth
driver of the company.
Putting things into perspective,
it appears to us that both
parties are keen to close the
deal and it has
likely progressed to an advance
stage after two months of
negotiations.
TA Corporation has, together with
two strategic business
partners, King Wan Corporation,
a Singapore-based
integrated building services provider
listed on the main
board of SGX-ST, and SKM Development
Pte Ltd, a privately
held investment holding group,
secured a land tender in a
hotly contested nine-way bid for
a 9,200-bed worker
accommodation facility for S$113.9m.
The Group’s interest
in this project is 62%, while
the two partners will hold the
remaining 38%. The 37,170.5 square
metre site will enable
TA Corporation to design, develop
and operate one of the
largest workers’ accommodation
facilities in Singapore,
which will cater to foreign workers
in the marine, process
and manufacturing industries.
The Group targets to
commence operations by 2016. TA
Corporation also has a
Right of First Refusal (ROFR)
for appointment as the main
contractor for the development
of the abovementioned
project.
Swee Hong has secured a contract
from the Public Utilities
Board worth approximately S$7.9m
for the ABC Waters
Project at Pang Sua Pond and Toa
Payoh Lorong 8. The
completion date for the contract
is 15 December 2015.
BH Global Corporation is on a
roll with three sets of
contracts worth a total of S$47.0m
secured. The S$12.7m
contracts won by its engineering
subsidiary mark its
successful foray into the drilling
and subsea market.
US stocks fell after retailers
reported lower-than-estimated
earnings and small-cap shares
slumped. According to
Bloomberg, investors are favouring
fixed income over
equities as concern over valuations
roiled stocks from smallcap
companies to Internet shares.
Caterpillar Inc. reported a
fastening decline in retail machine
sales as mining
companies continue to reduce spending.
Global sales fell
13% y-o-y in the 3 months through
April 2014. Home
Depot Inc. says the U.S. housing
recovery is just fine. It
blamed lacklustre 1Q revenue on
the harsh winter and not a
slowdown in the housing market.
It added sales this month
have rebounded as it recoups garden
and other spring
purchases delayed by record snow
and cold temperatures.
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