OCBC Report 30 May 14

KEY IDEA Tat Hong Holdings: Reached a trough in FY14? Tat Hong’s FY14 revenue came in below our estimate and consensus by 4.5% and 1.7% respectively as it declined 22% to S$156m. PATMI dropped by a proportionately larger 53% to S$33.8m. When adjusted for one-off items in 4QFY14, FY14 PATMI would have been S$37.1m − 2.8% below our estimate but 14.2% below consensus. The sharp drop in PATMI is attributable to a slowdown in business activities as well as lack of operational efficiency when scaling down. Management shared a cautiously optimistic outlook for Tat Hong’s bottom line in FY15 as they expect: 1) better performances from Crane Rental and General Equipment Rental divisions, and 2) lower operating expenses as staff strength is reduced. We derive a new fair value estimate of S$0.89 (previous: S$0.72) based on 11.2x FY15F EPS and maintain HOLD. (Yap Kim Leng)

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NEWS HEADLINES -  The S&P 500 index climbed to its third record closing high in four sessions as traders shrugged off data that showed the economy shrank in 1Q14 and bet on improvement in 2Q14. - IHH Healthcare chalked up a 25% YoY jump in net profit to RM$159.05m for 1Q14. - Singtel has shelled out more than S$2m to make sure that it complies with the new personal data protection law that looms on 2 Jul. - Eastern Holdings reported a net profit of S$23.05m FY14, up from S$2.17m in FY13.   - Courts Asia reported a 38% slide in net profit to S$7.84m for Q4FY14, dragged down by higher expenses, while sales rose 9.8% to S$206.9m. - Old Chang Kee reported a 20.8% increase in net profit for FY14 on improved gross profit margin. - SIA and US carrier JetBlue Airways are seeking to launch codeshare operations which would put the SQ code on JetBlue-operated flights out of New York to 16 US destinations.