Today’s Focus
Yangzijiang - Selldown seems overdone; BUY on
weakness, TP unchanged at S$1.55
STI’s upward bias since the mid-May low of 3221 has lifted it
above the April high of 3286. Technically, this points to the
likelihood of further upside in coming week(s) towards 3340
while not exceeding 3365. But the 50pt or so upside is not
something that we will rave about as a correction off these
higher levels is even more likely since such a move will position
the STI at its +0.25SD 12-mth forward PE level, which is rather
stretch given that the downward earnings revision trend has
yet to end.
Dovish global central bankers and the accompanying decline in
bond yields YTD has enabled emerging equity indices this
region to outperform YTD. Yields plays and SREITs have
benefited. This will be a crucial week for bonds. Expectations
for the ECB to announce a package of measures at its June 5th
policy meeting have built up in recent weeks. Investors await
the details. Any wide reaction in the bond market will impact
equities. This will also be a heavy week for US economic data
releases that end with May’s job numbers this Friday.
During this period, our strategy remains selective on undervalue
defensive names. Following the slew of privatization and M&A
activities in recent months, trading interest remains active in
this area.
Share price of Yangzijiang fell 11% on headlines that CEO Mr.
Ren is under investigation for misconduct relating to his
personal investment in China-listed Tianjin Guoheng Railway
Holding (Guoheng). Yangzijiang has released announcement to
clarify that the allegations are against Mr Ren and not
Yangzijiang. In addition, Mr. Ren has also reassured
shareholders that the accusations are unfounded and he is
taking necessary actions to set matters straight. We believe that
the selldown on Yangzijiang seems overdone. Valuation has
fallen to an attractive 6x FY14F PE and 1.0x P/BV following the
knee-jerk reaction to the news last Friday, presenting buying
opportunities for investors who remain positive on
Yangzijiang’s fundamentals. Maintain BUY, target price S$1.55.
Singapore Airlines will spend $400m buying stock in budget
carrier Scoot, boosting the capital of its subsidiary which plans
to buy Boeing 787s. The airline bought 400m shares in Scoot at
$1 apiece. The investment will be funded through the
company's internal sources.
Swiber Holdings has clinched an Engineering, Procurement,
Installation and Construction (EPIC) contract in Latin America
for subsea development work including pipeline tie-in work,
with an aggregate value of US$80m. The project will
commence immediately and is expected to complete in 2015.
This contract brings total contract wins year-to-date to
US$315m, as of June 2, 2014.
US Indices Last Close Pts Chg % Chg
Dow Jones 16,717.2 18.4 0.1
S&P 1,923.6 3.5 0.2
NASDAQ 4,242.6 (5.3) (0.1)
Regional Indices
ST Index 3,295.9 (4.9) (0.1)
ST Small Cap 558.3 (0.5) (0.1)
Hang Seng 23,081.7 71.5 0.3
HSCEI 10,249.7 64.5 0.6
HSCCI 4,265.1 (7.7) (0.2)
KLCI 1,873.4 (3.2) (0.2)
SET 1,415.7 7.2 0.5
JCI 4,893.9 (91.7) (1.8)
PCOMP 6,647.7 (29.0) (0.4)
KOSPI 1,995.0 (17.3) (0.9)
TWSE 9,075.9 (33.1) (0.4)
Nikkei 14,632.4 (49.3) (0.3)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 616
Total Daily Vol (m shrs) 2,012
12m ST Index High 3,336
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
30 May
Target Price
(S$)
ComfortDelgro Buy 2.350 2.50
Global Logistic Properties Buy 2.830 3.42
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Thai Beverage Public Buy 0.635 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
30 May
Target Price
(S$)
Vard Holdings Buy 1.060 1.21
Nam Cheong Buy 0.385 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 3
Kim Heng Offshore & Marine is exploring some merger and
acquisition (M&A) deals to expand its business, particularly
to grow its supply-chain services to the offshore sector.
Thomas Tan, the company's executive chairman and CEO,
tells The Business Times that the company has a "couple of
M&A (deals) in the pipeline", which would strengthen and
also increase its market share in the supply-chain
(segment), both locally and overseas. Kim Heng's core
business lies in the offshore rig services, but according to Mr
Tan it is also looking to grow its profitable supply-chain
management segment to ride on the growth of offshore
services.
ES Group and Heatec Jietong– both listed on the SGX
Catalist– announced that they will team up with a heat
transfer expert to develop a new heating and cooling
system for marine and other industries.
CSC Holdings has recently been awarded a S$21.6m
contract for foundation and sub-structure works for the
New State Courts Complex at Havelock Square. Together
with the award of this contract, CSC has secured more than
$100m worth of foundation and geotechnical engineering
contracts in Singapore and Malaysia since the start of 2014.
Singapore’s bank lending growth in April held steady
compared to March - though this was nearly flat at 0.6% -
with both business and consumer loans in April growing at
the same pace as they did in March.
Singapore-dollar loans stood at $591 bn in April. Bank
lending growth has been particularly tepid since February,
when this stood at 0.4% on a monthly comparison against
a 1.4% growth in January. The sluggishness reflects weaker
growth in the business loan segment, with growth falling
from about 2% in January, to under one per cent
thereafter. Total business loans in April stood at $363 bn,
which grew 0.7% over the month - as they did in March.
Meanwhile, growth in consumer loans has slipped under
one per cent for all but two months since end-2012. On a
yearly comparison, total loan growth stood at 13.2%, which
is weaker than the 13.5% growth posted in March on a
year-on-year basis.
China's factory activity expanded at the fastest pace in five
months in May due to rising new orders. The official
Purchasing Managers' Index rose to 50.8 in May from
April's 50.4, beating market expectations of 50.6. The
official survey showed a broad-based recovery in
manufacturing activity in May, with nine out of the 13 subindicies
pointing to improvement from the previous month.
A sub-index for new orders, a measure of foreign and
domestic demand edged up to 52.3 in May from 51.2 in
April, marking the highest level since last November. The
PMI data also showed export orders inched higher to 49.3
in May from 49.1 in April, though the indicator remained
below the 50-level threshold that separates growth from
contraction.
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