Thursday, May 8, 2014

OCBC Report 8 May 14

KEY IDEA

Singapore Strategy: Are sunny days here again?

The Singapore market has outperformed some regional indices so far this year, and despite recent gains, we believe that valuations remain undemanding and below that of key regional markets, and with the added bonus of a decent dividend yield of 3.3%. Liquidity in the market remains healthy. Key risks include a slowdown in China and a prolonged decline in the local property market. Recent excitement in the local M&A scene indicates that valuations are not expensive, and firms with huge cash reserves are in a good position to buy assets or companies to realize synergies, extract values or grow organically. Other under-valued or not liquid stocks are also likely candidates for M&A. We believe key policy makers will remain generally pro-growth and that central banks will continue to adopt an accommodative stance. For the Singapore market, we deem a stock pick strategy is still preferred. We continue to be OVERWEIGHT the Oil & Gas and Healthcare sectors and selective quality blue chips and high yielding stocks. (Carmen Lee)


MORE REPORTS


Ezion Holdings: Still has room to run

Ezion Holdings reported a 72.3% YoY rise in revenue to S$94.4m but saw a 2.0% decrease in net profit to S$22m in 1Q14, such that the latter met 22% and 20% of ours and the street’s full year estimates, respectively. There were delays in four projects which pushed back revenue contributions by three to six months, but had a smaller than proportionate impact on our forecasts with our buffer for certain projects. Meanwhile, Ezion also announced that it has secured another project (with no capital outlay), and it will also be taking full ownership of liftboat 1. We tweak our estimates, trimming our net profit forecast for FY14F by about 4% but bumping up our FY15F earnings estimate by about 1.4%. At the same time, we roll forward our valuation to blended FY14/15F core earnings with an unchanged P/E of 12x, raising our fair value estimate from S$2.41 to S$2.70. Maintain BUY. (Low Pei Han)


UOL Group: 1Q boosted by divestment gains

UOL’s 1Q14 PATMI came in at S$120.8m, up 69% YoY mostly due to a one-time divestment gain of its Malaysian Jalan Conley site which contributed S$44.3m. Adjusting for this, we estimate core PATMI at S$76.5m; this constitutes 23% of our full year estimates which we judge to be mostly in line with expectations. The 555-unit Riverbank@Fernvale, launched in 1Q14, is currently 41% sold, whereas the residential component of The Espanade in Tianjin China is now 98% sold (average selling price of RMB 18.6k psm). The group indicates that the housing sector in Singapore continues to face headwinds and they would likely adopt a wait-and-see stance in terms of launching Seventy St. Patrick’s this year. The pre-commitment level at One KM, slated for opening in Sep 2014, is now slightly above 80%. Maintain BUYwith an unchanged fair value estimate of S$6.95 (20% RNAV disc.).  (Eli Lee)


StarHub Ltd: Uninspiring FY14 start

StarHub Ltd posted 1Q14 revenue of S$571.4m, down 1.5% YoY and 6.9% QoQ, meeting just 23.5% of our full-year forecast; net profit fell 7.7% YoY (+0.6% QoQ) to S$84.2m, or 22.4% of our FY14 estimate. StarHub declared a quarterly dividend of S$0.05/share as guided. Going forward, StarHub has kept its previous guidance for FY14, and continues to see intense competition in the Broadband segment; also seeing erosion in its voice and SMS usage in its main Mobile business. For now, we opt to keep our estimates unchanged for now; but we will be looking to trim them if 2Q14 results show no signs of recovering. Our DCF-based fair value also remains unchanged at S$3.81; and with no likelihood of a special dividend this year, we maintain our SELL rating on the stock. (Carey Wong)

Petra Foods: 1Q14 results affected by weaker regional currencies

Petra Foods’ 1Q14 reported results for continuing operations appears disappointing because of weaker regional currencies against USD on a YoY basis. Reported 1Q14 revenue declined 3.6% YoY to US$122.7m, forming 21.0% of our FY14 forecast. Reported PATMI declined 1.6% to US$13.9m, making up 19.2% of our forecast. However, in constant currency terms, growth continues to be robust as 1Q14 revenue and PATMI increased by 15.7% and 14.8% respectively. Gross margin remained steady at 31.9% (vs. 31.7% in 4Q13). In constant currency terms, 1Q14 Own Brands sales grew 16.0% due to both pricing adjustments and volume growth. We maintain BUY but put our fair value estimate of S$4.08 under review pending an analyst briefing later. (Yap Kim Leng)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks ended Wed’s choppy trading session generally higher, though selling of shares in Internet companies and high-growth companies resulted in a loss on the Nasdaq Composite.


- Tiger Airways Holdings said that group chief executive Koay Peng Yen would be stepping down after less than two years on the job.

- ARA Asset Management's 1Q14 net profit rose 6% YoY to S$17.8m on the back of revenue rising 18% to S$38.2m.


- AIMS AMP Capital Industrial REIT achieved a 10.5% YoY rise in distribution to unitholders to S$15.6m for 4QFY14, taking full-year distribution to S$57.2m, up 19%.


- Rotary Engineering recorded a net profit of S$14.4m for 1Q14, up from S$2.5m a year ago.


- Tiong Woon Corporation posted 1Q14 net profit of S$3.87m, down from S$3.92m the same quarter a year ago.

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