Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD
Market Pulse: SPH, Golden Agri & ST Engineering (15 Jun 2011)
FOCUS
Singapore Press Holdings: Upgrade to BUY; awaiting capital deployment
Summary: Singapore Press Holdings (SPH) recently bid S$917m for a 99-year white site beside Jurong East MRT station and came just 5.4% below the top bid. We think management is committed to expanding their retail landlord business and could be interested in three GLS sites in 2H11, or TripleOne and 313@Somerset which are likely to come onto the market. We visited Clementi Mall and found that it has opened for operations smoothly with good foot traffic. Our S$4.32 fair value indicates an upside of 13.4% against the current price of S$3.81. Also, we think the downside is limited by an attractive dividend yield of 7.1%, which is underpinned by a core newspaper segment yielding solid recurrent cash. Upgrade SPH to BUY with a fair value estimate of S$4.32. (Eli Lee)
Golden Agri-Resources Ltd: Higher CPO output expected this year
Summary: Golden Agri-Resources (GAR) was recently quoted by newswires as saying that its output of crude palm oil (CPO) could grow by >10% this year if weather conditions remain favourable. The group had earlier guided that it should be able to achieve a 5-10% increase in CPO production. Meanwhile, management was also quoted as saying that "there is continued tightness in supply, so whatever is produced by the sector in Indonesia and Malaysia is taken by the market", where China and India continue to be the group's core markets. We note that this is supported by the current market demand-supply situation, given that CPO prices have been fairly stable, despite the recent volatility in crude oil prices. While we are expecting CPO prices to ease in 2H11, we believe that the price decline would be more than offset by the expected production increase. Maintain BUY with S$0.96 fair value (based on 16x FY11F EPS). (Carey Wong)
ST Engineering: Secures S$171m contract from Swire Pacific
Summary: ST Engineering (STE) announced that its marine arm - ST Marine (STM) - has won a shipbuilding contract worth S$171m from Swire Pacific Offshore Operations (SPO); this entails the building and outfitting of four AHTS (Anchor Handling Tug Supply) vessels, where STM will commence work immediately and deliver the first AHTS by 1H13 and the fourth by 1H14. SPO will furnish the major equipment for STM's installation and this includes main engines, thrusters, cranes and other deck machinery. As the contract is likely to be recognized progressively until 1H14, we do not expect it to have any material impact on the group's NTA and EPS for FY11; in any case, we have allowed for such contract wins in our estimates. Maintain BUY with S$3.57 fair value (based on 21x FY11F EPS). (Carey Wong)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- China's central bank upped bank reserve ratios to 21.5% yesterday for the ninth time since Oct to try to curb inflation
- CIMB has put Asia Petroleum Hub under receivership. The latter, mandated by the Malaysian government to develop an oil terminal, was given RM1.4b loan.
- K1 Ventures invested US$100m in Guggenheim Capital, a US-based financial services firm.
- CapitaMalls Malaysia Trust agreed to buy Kuantan Mall for MYR310m
- Olam extended the offer to buy the rest of the shares it does not own in NZ Farming Systems Uruguay.
- Territory Resources, which received a takeover bid from Noble, has recommended that investors accept Noble's offer and spurn the first offer from Exxaro Resources.
Company Name: SINGAPORE TECH ENGINEERING LTD
| Research House: OCBC | Price Call: BUY | Target Price: 3.57 |
Market Pulse: SPH, Golden Agri & ST Engineering (15 Jun 2011)
FOCUS
Singapore Press Holdings: Upgrade to BUY; awaiting capital deployment
Summary: Singapore Press Holdings (SPH) recently bid S$917m for a 99-year white site beside Jurong East MRT station and came just 5.4% below the top bid. We think management is committed to expanding their retail landlord business and could be interested in three GLS sites in 2H11, or TripleOne and 313@Somerset which are likely to come onto the market. We visited Clementi Mall and found that it has opened for operations smoothly with good foot traffic. Our S$4.32 fair value indicates an upside of 13.4% against the current price of S$3.81. Also, we think the downside is limited by an attractive dividend yield of 7.1%, which is underpinned by a core newspaper segment yielding solid recurrent cash. Upgrade SPH to BUY with a fair value estimate of S$4.32. (Eli Lee)
Golden Agri-Resources Ltd: Higher CPO output expected this year
Summary: Golden Agri-Resources (GAR) was recently quoted by newswires as saying that its output of crude palm oil (CPO) could grow by >10% this year if weather conditions remain favourable. The group had earlier guided that it should be able to achieve a 5-10% increase in CPO production. Meanwhile, management was also quoted as saying that "there is continued tightness in supply, so whatever is produced by the sector in Indonesia and Malaysia is taken by the market", where China and India continue to be the group's core markets. We note that this is supported by the current market demand-supply situation, given that CPO prices have been fairly stable, despite the recent volatility in crude oil prices. While we are expecting CPO prices to ease in 2H11, we believe that the price decline would be more than offset by the expected production increase. Maintain BUY with S$0.96 fair value (based on 16x FY11F EPS). (Carey Wong)
ST Engineering: Secures S$171m contract from Swire Pacific
Summary: ST Engineering (STE) announced that its marine arm - ST Marine (STM) - has won a shipbuilding contract worth S$171m from Swire Pacific Offshore Operations (SPO); this entails the building and outfitting of four AHTS (Anchor Handling Tug Supply) vessels, where STM will commence work immediately and deliver the first AHTS by 1H13 and the fourth by 1H14. SPO will furnish the major equipment for STM's installation and this includes main engines, thrusters, cranes and other deck machinery. As the contract is likely to be recognized progressively until 1H14, we do not expect it to have any material impact on the group's NTA and EPS for FY11; in any case, we have allowed for such contract wins in our estimates. Maintain BUY with S$3.57 fair value (based on 21x FY11F EPS). (Carey Wong)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- China's central bank upped bank reserve ratios to 21.5% yesterday for the ninth time since Oct to try to curb inflation
- CIMB has put Asia Petroleum Hub under receivership. The latter, mandated by the Malaysian government to develop an oil terminal, was given RM1.4b loan.
- K1 Ventures invested US$100m in Guggenheim Capital, a US-based financial services firm.
- CapitaMalls Malaysia Trust agreed to buy Kuantan Mall for MYR310m
- Olam extended the offer to buy the rest of the shares it does not own in NZ Farming Systems Uruguay.
- Territory Resources, which received a takeover bid from Noble, has recommended that investors accept Noble's offer and spurn the first offer from Exxaro Resources.
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