Today’s Focus
SIA - Profitability to remain muted on challenging
environment; downgrade to HOLD, target price cut to
S$10.12
FY14 net profit of S$398m for SIA was below our expectations
on continued weak yields and greater share of losses from
Tigerair. Final DPS of 11Scts, plus special of 25Scts declared,
against net cash of over S$3.50 per share. SIA’s profitability is
expected to remain fairly muted. We are projecting ROEs of
4% for FY15 and 5.7% for FY16, with potential for downside
risk if yields decline even further than expected. Downgrade to
HOLD with target price of S$10.12 (Prev S$ 11.40) (0.9x FY
Mar 15 P/BV).
1Q14 profit for Hyflux was boosted by S$54m divestment
gains; operations still weak. Orderbook declined to S$651m
but big bidding pipeline and asset recycling provide upside.
FY14F/15F earnings adjusted to reflect divestment gains and
delayed recognition of Dahej. Maintain HOLD, target price
adjusted to S$1.23 (Prev S$ 1.18).
Wilmar’s 1Q14 core net profit came in at US$215m (-31% y-oy;
-39% q-o-q), 28% below lower-end of our expectations.
Consumer and Plantations were ahead of expectations; but
more than offset by weak M&P and sugar. 1Q14 top line came
in at US$10,269m (flat y-o-y, -12% q-o-q). Higher CPO prices
were offset by lower prices of sugar and consumer pack oils.
Our forecasts and S$4.00 target price are under review,
pending briefing today.
ST Engineering posted 1Q14 results this morning. Net profit up
2% y-o-y to S$137.2m on the back of flat revenues of about
S$1.55bn. 1Q is a seasonally weaker period for STE and
revenues and profits should pick up over subsequent quarters.
This is largely in line with our estimates, with 1Q net profit
accounting for 22% of our full year estimates, in line with
historical range of between 19-23%. Order win momentum
continued to impress in 1Q14, with more than S$1bn worth of
new contracts announced publicly, led by Aerospace and
Electronics divisions. Orderbook now stands at S$13.4bn, up
from S$13.2bn at end of FY13, signifying that actual orders
secured in 1Q outstripped the pace of revenue recognition.
Balance sheet continues to strengthen, with close to S$750m
net cash position at end of 1Q14, which enables STE to pursue
organic and inorganic growth opportunities in the near term.
More updates to follow.
US Indices Last Close Pts Chg % Chg
S&P 1,875.6 (2.6) (0.1)
NASDAQ 4,051.5 (16.2) (0.4)
Regional Indices
ST Index 3,247.7 11.3 0.3
ST Small Cap 542.6 1.0 0.2
Hang Seng 21,837.1 90.9 0.4
HSCEI 9,735.0 79.4 0.8
HSCCI 4,099.3 9.0 0.2
KLCI 1,862.8 2.4 0.1
SET 1,379.0 (23.6) (1.7)
JCI 4,860.9 (1.2) (0.0)
PCOMP 6,765.2 16.7 0.2
KOSPI 1,952.8 2.2 0.1
TWSE 8,930.9 37.7 0.4
Nikkei 14,163.8 130.3 0.9
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 606
Total Daily Vol (m shrs) 1,478
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$)
8 May
Target Price
(S$)
ComfortDelgro Buy 2.040 2.19
Global Logistic Properties Buy 2.770 3.31
Keppel Corp Buy 10.630 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
8 May
Target Price
(S$)
Goodpack Buy 2.350 2.60
China Merchants Buy 0.960 1.32
Pacific Radiance Ltd Buy 1.070 1.20
Nam Cheong Buy 0.360 0.46
Centurion Corporation Buy 0.750 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
COSCO Corporation has secured a USD184m contract from
Derwent Ocean, part of Foresight Group to build one unit
Jackup Drilling Rig. Foresight is a repeat customer of Cosco
with an existing jackup rig under construction at Dalian
yard. The Rig is scheduled to be delivered in the third
quarter of 2016. The contract lifted Cosco’s YTD win to
US$401m, making up 16% of our expectation of US$2.5bn.
No change to our FULLY VALUED call and target price of
S$0.69. We would like to see sustainable earnings
turnaround, strong order flow and conclusion of the
drillship legal case before turning positive on the counter.
Intraco has unveiled plans to acquire a 70% stake in KA
Group, a homegrown fire-protection specialist, for $16.6m.
KA Group provides the company an immediate entry point
into the industry and serves as a good platform to further
expand into other niche building-related activities and
products, according to Intraco’s CEO. Intraco will pay the
first $3.15m of the consideration in the form of 5m new
shares at an issue price of 63 cents apiece. The balance will
be paid in cash.
China's exports and imports rose marginally in April,
rebounding from sharp declines in March. Exports crept up
0.9% y-o-y to US$188.54bn while imports increased 0.8%
to US$170.09bn, resulting in a surplus of US$18.45 bn.
The Dow finished higher while the S&P 500 and Nasdaq
remained in the red. The Dow was up after Federal Reserve
chair Janet Yellen reiterated her commitment to keep
interest rates low until the economy is on firmer footing.
She made her comments when appearing before the Senate
Budget Committee. This was similar to her remarks made to
the Joint Economic Committee of Congress the day before.
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