OCBC Report 15 May 14

KEY IDEA Thai Beverage PLC: Growing despite Thai unrest Despite Thailand’s political unrest scaling up in 1Q14, Thai Beverage PLC (ThaiBev) has shown earnings resilience. 1Q14 revenue increased 4.8% YoY to THB41.0b, in-line with expectation as it forms 25.1% of our FY14 forecast. Due to better-than-expected gross profit (GP) margin, PATMI increased 72.9% to THB6.0b, making up 30.2% of our expectation. Alcoholic segments retain market shares while competition caused sales volume drop in non-alcoholic beverage segment. We revise the GP margins for beer and spirits segments upwards to take into account the higher ASP post-excise tax increase. We maintain BUY with a slightly higher TP of S$0.74. (Yap Kim Leng) MORE REPORTS Dyna-Mac Holdings: Earnings growth and new orders won Dyna-Mac Holdings reported a strong 31.3% YoY surge in its 1Q14 revenue to S$78.9m. PATMI grew by a smaller magnitude of 6.5% to S$7.1m, but in-line with our expectations. This was largely due to a weaker gross margin and 43.3% jump in its administrative expenses. Looking ahead, we forecast Dyna-Mac to clinch S$240m of new orders in 2014, of which S$92m has already been secured YTD. As its flagship Singapore yards are already running at full-capacity, it is pertinent that Dyna-Mac executes well on the ongoing projects at its Johor and Guangzhou yards in order to convince its customers to place orders at these yards instead. The group continues to receive active tender enquiries from both its long-term and new clients. We keep our earnings forecast intact, and maintain our BUY rating and S$0.47 fair value estimate on Dyna-Mac. FY14F dividend yield is also attractive at 5.2%.(Wong Teck Ching Andy) Golden Agri-Resources: Decent 1Q; but 2Q may be slow Golden Agri-Resources (GAR) posted 1Q14 results that came in within expectations - revenue +34% YoY at US$1914.2 (met 27% of our FY14 forecast), while net profit eased 8% to US$103.9m (still met 26% of our full-year estimate). While GAR remains upbeat about the long-term outlook for the CPO industry, it could face some headwinds in 2Q14 - the same reasons that were a drag in 1Q14, namely negative crush margins in China and pressure on refining margins in Indonesia. But a continued rise in CPO prices could mitigate these factors and more, given that its upstream operations can contribute as much as 70% of its bottom-line. Nevertheless, current share price looks rich around current levels; downgrade to SELL with an improved S$0.55 fair value (now based on 13.5x blended FY14/FY15F EPS). (Carey Wong) Neptune Orient Lines: 1Q14 results below expectations Neptune Orient Lines' (NOL) 1Q14 results came in below ours and the street’s expectations. 1Q14 revenue declined 4% YoY to US$2.3b, which is 9.8% lower than our forecast. Correspondingly, it forms 24.1% of consensus’ FY14F revenue, which below expectation as 1Q typically contributes more to the full-year revenue. 1Q14 PATMI was a US$97.9m loss, which is 18% bigger than our forecast. Note that the street is expected a full-year earnings of US$42.2m. Nevertheless, liner’s core EBIT has improved by narrowing loss from US$92m in 1Q13 to US$83m in 1Q14 while logistics’ core EBIT increased from US$16m in 1Q13 to US$18m. As we incorporate the latest results and revise ARPU downwards, we derive a fair value of S$0.92 (previous: S$0.97) based on a forward PBR of 0.99x and thus downgrade NOL to SELL.  (Yap Kim Leng) City Developments Limited: Housing market remains weak 1Q14 PATMI came in at S$119.7m, down 13.1% YoY mostly due to the absence of disposal gains recorded in 1Q13 from the sale of strata units in Elite Industrial Building I, Elite Industrial Building II and Citimac Industrial Complex. Without these gains, PATMI would have increased 4.0% YoY. We judge 1Q figures to be broadly within expectations and YTD PATMI now constitutes 19.1% of our full year forecast. In terms of the topline, 1Q14 revenues fell 5.4% to S$734.2m due to a lower contribution from the property development segment. Maintain SELL on CityDev with an unchanged fair value estimate of S$8.72; we remain cautious on the stock due to headwinds in its core development business. With a weak domestic outlook, management’s strategy of accelerating its diversification into overseas growth markets is sound but a meaningful repositioning would likely take some time. (Eli Lee) Nam Cheong: Strong 1Q14 results Nam Cheong Limited reported its 1Q14 results this morning, with revenue soaring 73.5% YoY to MYR407.3m and PATMI jumping 98.7% to MYR71.1m. This constituted 22.8% and 29.1% of our FY14 forecasts, respectively. Even after adjusting for exceptional items, estimated core PATMI came in at MYR66.0m (+118.9% YoY), forming 27.0% of our full-year earnings projection and ahead of our expectations. Both of Nam Cheong’s core segments performed well, with revenue for its Shipbuilding and Vessel Chartering division surging by 68% and 274% YoY, while gross profit also spiked up by 94% and 131%, respectively. As such, 1Q14 gross profit came in at 21.2%, above the 18.6% achieved in 1Q13. We will provide more details after the analyst briefing. Maintain BUY, but our fair value estimate of S$0.42 is under review.(Wong Teck Ching Andy) SingTel: FY14 results within forecast SingTel posted FY14 revenue of S$16848.1m, down 7.3%, but was just 0.8% above our forecast, while reported net profit edged up 4.1% to S$3652.0m, and was just 0.5% shy of our estimate; excluding exceptionals, core net profit came in around S$3611m, almost unchanged from FY13. SingTel declared a final dividend of S$0.10/share, bringing its total payout to S$0.168, or a payout ratio of 74% of underlying profit. For FY15, SingTel expects its core business revenue to remain stable while EBITDA to grow by low single-digit level. It expects to spend S$2.3b as capex, with S$900m for Singapore and the rest for Australia. As SingTel also expects free cashflow to remain stable, it has kept its dividend payout at 60-75% of underlying net profit. Pending the analyst briefing later, we maintain our BUY rating but place our S$3.74 fair value under review. (Carey Wong) CWT Ltd: Strong 1Q14 earnings beat street’s estimates CWT Limited delivered a strong set of 1Q14 earnings. 1Q14 revenue increased 207% YoY to S$4,536b while PATMI is 30% higher at S$35.0m, forming 25.6% of our FY14 forecast. Excluding our house’s net income forecast, which is the highest on the street (14.8% above the next highest, according to Bloomberg), CWT’s 1Q14 net income of S$36.1m would have formed 32.5% of the remaining analysts’ FY14 forecast, beating their expectations. Considering that CWT will see further earnings from two more TOPs this year (CWT Cold Hub 2 in 2Q14 and Pandan Logistics Centre in 4Q14), we think the stock will re-rate upwards. We re-iterate our BUY call but keep our S$1.87 fair value estimate under review as we speak to management later.(Yap Kim Leng) Swiber Holdings: Dim outlook for next two quarters Swiber Holdings reported a 35.6% YoY fall in revenue to US$199.5m but saw a 139.3% increase in net profit to US$48.0m in 1Q14, boosted by a US$95.1m gain on disposal of subsidiaries (Kreuz). Excluding this one-off and a US$20.9m fair value on financial liabilities, the group saw a core net loss of US$26.2m in the quarter, below our expectations. The group has a current order-book of US$650m, of which a significant portion of projects will commence in 4Q14. We will have more details at the analyst briefing later in the afternoon, but with the disappointing results and dim earnings outlook for the next two quarters, we put our Hold rating and fair value estimate of S$0.72 under review. (Low Pei Han) ECS Holdings: 1Q14 results below our expectations ECS Holdings (ECS) reported a 14.6% YoY decline in its 1Q14 revenue to S$930.9m and a 13.0% dip in PATMI to S$7.2m, such that topline and bottomline both formed 20.2% of our FY14 forecasts, respectively. We view this as below our expectations. Despite a 36.6% YoY revenue growth in its Enterprise Systems segment to S$351.6m, this was more than offset by a 30.6% fall in its Distribution segment revenue to S$571.0m. Given this change in product mix, ECS managed to increase its gross margin by 0.5 ppt YoY to 4.1%. However, this was insufficient to make up for the decline in revenue, higher finance costs (+13.6%) and lower share of profit of associates (-20.4%). Looking ahead, market watcher IDC believes IT spending will continue to grow, driven by both consumers and enterprises. However, ECS is watchful of the ongoing political uncertainty in Thailand, which is expected to cause its operations there to remain challenging. We will speak to management to gather more information. For now, we place our Sell rating and S$0.585 fair value estimate on ECS under review. (Wong Teck Ching Andy)

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NEWS HEADLINES - The US stock market closed broadly lower on Wed, as investors turned cautious amid a sell-off of small and high-growth companies. - The consortium led by tycoon Ong Beng Seng and Wheelock Properties has raised its offer price for shares in Hotel Properties Ltd to S$4 per share from S$3.50. - Raffles Education ended its 3QFY14 with a net profit of S$23.84m, against S$4.46m a year earlier, thanks to a divestment of investment properties. - Jaya Holdings posted 3QFY14 net profit of US$14.1m, more than treble the US$4m a year ago. - Pacific Radiance posted a 1Q14 net profit of US$17.8m, more than double the US$8.5m a year earlier. - Haw Par Corporation posted a 59% increase in its 1Q14 net profit to S$12.2m, due to higher operating income and gain from dilution of an associated company.