OCBC Report 26 May 14

KEY IDEA Bumi Armada Berhad: Slow start; but improvement expected Bumi Armada Berhad (BAB) started FY14 on a poor note, recording a 40.9% YoY dip in its 1Q14 PATMI to MYR64.8m on the back of a 4.1% decline in revenue to MYR468.9m. This fell short of expectations, with the former making up just 12% and 11% of ours and Bloomberg’s FY14 consensus forecast, respectively. Nevertheless, management still expects its financial performance in FY14 to be better than FY13, which implies significant improvement ahead. Meanwhile, BAB also proposed a bonus and rights issue exercise (both entail one new share for every two existing shares held), with completion expected in 3Q14. We update our assumptions following a change in analyst coverage. Maintaining our target PER peg of 21x and applying this to our revised blended FY14/15F EPS forecast, we derive a new fair value estimate of MYR3.72 (previously MYR3.74). Maintain HOLD. (Wong Teck Ching Andy) MORE REPORTS Vard Holdings: New offshore support vessel contract secured Vard Holdings Limited (VARD) announced that it has been awarded a new contract for the construction of one offshore support vessel of Rolls-Royce design. The value of the contract is in excess of NOK1b and is for Island Offshore, a repeat customer which manages a fleet of more than 30 high quality vessels. Delivery is scheduled in 2Q16 from one of its Norway yards. This latest contract win boosts VARD’s YTD order wins to ~NOK6.8b, based on our estimates. We maintain our HOLD rating and S$0.97 fair value estimate on VARD, pegged to 9x FY14F EPS. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks finished a bumpy week on a high note as technology and small-cap equities shook off the blues from recent weeks and led the overall market higher. - Q&M announced a strategic partnership with IMC by signing a call option with HHI, granting HHI the right to call upon Q&M to issue 63m new shares within a 2-year option period for a minimum exercise price of S$0.48 per share. - Buying rose while selling among directors was flat and buyback activity fell according to filings on SGX from May 19 to 23. - Frasers Centrepoint Limited is looking to grow its landbank albeit through moderate bids, tap its strength in mixed-use development and scale up its hospitality arm. - Thailand's junta met the head of the central bank, the stock exchange and other economic officials to discuss how to safeguard economy growth, three days after staging a military coup. - The emergence of Prabowo Subianto, an ex-general, as a genuine contender has turned Indonesia's presidential election into a clash between the old guard and a new generation representing fledgling democracy.