Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED
Stock Name: M1
Company Name: M1 LIMITED
Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED
Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST
Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD
Market Pulse: ECS Holdings, M1, Ezra, CCT, Sembcorp Marine (15 Jul 2011)
ECS Holdings: Set for a record year; initiate with BUY
Summary: ECS Holdings (ECS) is a leading Information and Communications Technology (ICT) products and services provider which thrives on developing a strategic partnership with major IT vendors. Earnings momentum is expected to gain traction moving forward, as it had recently secured new distributorship agreements, notably Apple's iPad and iPhone distribution rights in China. Moreover, ECS's diverse product offerings and extensive distribution channels, coupled with an increasing focus and penetration in higher growth markets, lend support to our belief that it is poised for a record performance in FY11. We are forecasting double-digit growth for both its revenue and core earnings in FY11 and FY12. We value ECS by ascribing its historical median PER of 7x to our FY11F core EPS forecast. This valuation peg represents a 25% discount to its peers' CY11 PER of 9.3x, which we think is justifiable due to its low free float (10.3%) and trading liquidity. Nevertheless our fair value estimate of S$1.08 still implies an attractive upside potential of 41.2%, supported by a healthy prospective dividend yield of 5.0%. As such, we initiate coverage on ECS with a BUY rating. (Wong Teck Ching Andy)
M1: 2Q11 results mostly in line
Summary: M1 Ltd's 2Q11 results came in within our expectations. Revenue climbed 10.0% YoY to S$245.4m, or 0.2% ahead of our estimate; net profit climbed 5.0% YoY (+0.6% QoQ) to S$42.8m, or around 1.9% ahead of our forecast. M1 has also declared an interim dividend of S$0.066/share, up from S$0.063 for the same period last year. M1 continues to guide for earnings growth in 2011, buoyed by continued customer additions and increasing mobile data usage; it has also kept its S$100m capex guidance. Interestingly, M1 also revealed that it plans to set up its own corporate OpCo (Operating Company) for NBN in 3Q11. Given that the 1H11 results were in line with our expectations, we are leaving our FY11 estimates unchanged. We continue to like M1 for its defensive earnings and attractive dividend yield. Maintain BUY with an unchanged DCF-based fair value of S$2.79. (Carey Wong)
Ezra Holdings: AMC integration remains on track
Summary: Ezra Holdings (Ezra) reported a 51% YoY increase in revenue to US$164.8m but saw a 75% fall in net profit to US$6.6m in 3QFY11, mainly due to a fall in gross profit margin with the consolidation of newly acquired AMC and higher administrative expenses. Excluding AMC's net loss of about US$7.5m to US$10m in the last quarter, Ezra's 3QFY11 net profit would have accounted for about 21% of our full year estimate. With slightly more clarity on the AMC front, we have adjusted our earnings estimates for FY11 and FY12, and deem FY12 to be more reflective of the group's earnings after further integration. As such, we roll forward our valuation to 14x FY12F earnings (from blended FY11/12F previously) for the offshore marine and energy business, and our fair value estimate slips to S$1.87 (prev. S$2.05). A potential catalyst would be higher-than-expected contract wins with healthy margins for the subsea business, which has amassed a decent order book of more than US$300m YTD. Maintain BUY. (Low Pei Han)
CapitaCommercial Trust (CCT): 2Q11 results above expectations
Summary: For 2Q11, CapitaCommercial Trust (CCT) reported a distributable income of S$54.4m or a DPU of 1.92 S cents, bringing the total DPU for 1H11 to 3.77 S cents. 1H11 gross revenue constituted 51% of our annual estimate while distributable income came in above expectations due to a sharper-than-expected dip in operating costs. Management refinanced S$964m of RCS debt with S$800m notes at 3.1% and a $164m term loan facility at 3.0%, versus an estimated cost around 4.2% previously. CCT also announced that it would take a 40% stake in the Market St office development with JV partners, CapitaLand (50%) and Mitsubishi Estate Asia (10%), with a call option to purchase the property within three years after TOP. We update our assumptions and increase our distribution forecast to reflect lower operating costs. As such, we also adjust our fair value upwards to $1.67 from $1.63 previously. Maintain BUY. (Research Team)
Sembcorp Marine: LOI to build S$600m platform becomes effective
- US debt ceiling talks between President Obama and Republican Congressional leaders stall even as Moody's issued a warning of a possible cut to the US' credit rating.
- US retail sales remained flat in June as rising unemployment held back consumer spending.
- Italy's borrowing costs jumped higher as yields on its five-year bond hit 5.9% and that of its 15-year bond hit 4.93%.
- According to the Malaysian Institute of Economic Research, Malaysia's inflation likely rose to a 28-month high of 3.8% in June after the government authorised an increase in power tariffs.
- The Housing & Development Board (HDB) yesterday launched 3,600 units across seven build-to-order (BTO) projects to meet public housing demand.
- CapitaLand said it is looking at the possibility of buying or having the option to buy some components of the Khazanah-Temasek mixed-development in the Ophir-Rochor area.
- Far East Organization plans to raise at least S$500m through listing of some its hotel and serviced residence assets in a REIT next year, according to sources familiar with the deal.
Company Name: ECS HOLDINGS LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 1.08 |
Stock Name: M1
Company Name: M1 LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 2.79 |
Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 1.87 |
Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST
| Research House: OCBC | Price Call: BUY | Target Price: 1.67 |
Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD
| Research House: OCBC | Price Call: BUY | Target Price: 6.30 |
Market Pulse: ECS Holdings, M1, Ezra, CCT, Sembcorp Marine (15 Jul 2011)
FOCUS
ECS Holdings: Set for a record year; initiate with BUY
Summary: ECS Holdings (ECS) is a leading Information and Communications Technology (ICT) products and services provider which thrives on developing a strategic partnership with major IT vendors. Earnings momentum is expected to gain traction moving forward, as it had recently secured new distributorship agreements, notably Apple's iPad and iPhone distribution rights in China. Moreover, ECS's diverse product offerings and extensive distribution channels, coupled with an increasing focus and penetration in higher growth markets, lend support to our belief that it is poised for a record performance in FY11. We are forecasting double-digit growth for both its revenue and core earnings in FY11 and FY12. We value ECS by ascribing its historical median PER of 7x to our FY11F core EPS forecast. This valuation peg represents a 25% discount to its peers' CY11 PER of 9.3x, which we think is justifiable due to its low free float (10.3%) and trading liquidity. Nevertheless our fair value estimate of S$1.08 still implies an attractive upside potential of 41.2%, supported by a healthy prospective dividend yield of 5.0%. As such, we initiate coverage on ECS with a BUY rating. (Wong Teck Ching Andy)
M1: 2Q11 results mostly in line
Summary: M1 Ltd's 2Q11 results came in within our expectations. Revenue climbed 10.0% YoY to S$245.4m, or 0.2% ahead of our estimate; net profit climbed 5.0% YoY (+0.6% QoQ) to S$42.8m, or around 1.9% ahead of our forecast. M1 has also declared an interim dividend of S$0.066/share, up from S$0.063 for the same period last year. M1 continues to guide for earnings growth in 2011, buoyed by continued customer additions and increasing mobile data usage; it has also kept its S$100m capex guidance. Interestingly, M1 also revealed that it plans to set up its own corporate OpCo (Operating Company) for NBN in 3Q11. Given that the 1H11 results were in line with our expectations, we are leaving our FY11 estimates unchanged. We continue to like M1 for its defensive earnings and attractive dividend yield. Maintain BUY with an unchanged DCF-based fair value of S$2.79. (Carey Wong)
Ezra Holdings: AMC integration remains on track
Summary: Ezra Holdings (Ezra) reported a 51% YoY increase in revenue to US$164.8m but saw a 75% fall in net profit to US$6.6m in 3QFY11, mainly due to a fall in gross profit margin with the consolidation of newly acquired AMC and higher administrative expenses. Excluding AMC's net loss of about US$7.5m to US$10m in the last quarter, Ezra's 3QFY11 net profit would have accounted for about 21% of our full year estimate. With slightly more clarity on the AMC front, we have adjusted our earnings estimates for FY11 and FY12, and deem FY12 to be more reflective of the group's earnings after further integration. As such, we roll forward our valuation to 14x FY12F earnings (from blended FY11/12F previously) for the offshore marine and energy business, and our fair value estimate slips to S$1.87 (prev. S$2.05). A potential catalyst would be higher-than-expected contract wins with healthy margins for the subsea business, which has amassed a decent order book of more than US$300m YTD. Maintain BUY. (Low Pei Han)
CapitaCommercial Trust (CCT): 2Q11 results above expectations
Summary: For 2Q11, CapitaCommercial Trust (CCT) reported a distributable income of S$54.4m or a DPU of 1.92 S cents, bringing the total DPU for 1H11 to 3.77 S cents. 1H11 gross revenue constituted 51% of our annual estimate while distributable income came in above expectations due to a sharper-than-expected dip in operating costs. Management refinanced S$964m of RCS debt with S$800m notes at 3.1% and a $164m term loan facility at 3.0%, versus an estimated cost around 4.2% previously. CCT also announced that it would take a 40% stake in the Market St office development with JV partners, CapitaLand (50%) and Mitsubishi Estate Asia (10%), with a call option to purchase the property within three years after TOP. We update our assumptions and increase our distribution forecast to reflect lower operating costs. As such, we also adjust our fair value upwards to $1.67 from $1.63 previously. Maintain BUY. (Research Team)
Sembcorp Marine: LOI to build S$600m platform becomes effective
Summary: Sembcorp Marine (SMM) announced yesterday that its wholly-owned subsidiary SMOE has secured a contract close to S$600m from PTTEP International for the engineering, procurement, construction, transportation, installation, offshore hook-up and commissioning of an integrated Processing and Living Quarters platform. According to Upstream, SMOE and Saipem had earlier been awarded a letter of intent (LOI) for this large central processing platform, in which platform fabrication work is expected to take place in SMOE's Batam facility and Saipem's Karimun yard in Indonesia. The platform will be installed at a water depth of 150m in Block M9 in offshore Myanmar, and construction is expected to start in Oct 2011 with offshore completion in Nov 2013. We will be obtaining more details on the split of work between SMOE and Saipem, but assuming a 50-50 split, this would boost SMM's new order wins to about S$1.8b YTD, forming 40% of our full year estimate. Maintain BUY with S$6.30 fair value estimate. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US debt ceiling talks between President Obama and Republican Congressional leaders stall even as Moody's issued a warning of a possible cut to the US' credit rating.
- US retail sales remained flat in June as rising unemployment held back consumer spending.
- Italy's borrowing costs jumped higher as yields on its five-year bond hit 5.9% and that of its 15-year bond hit 4.93%.
- According to the Malaysian Institute of Economic Research, Malaysia's inflation likely rose to a 28-month high of 3.8% in June after the government authorised an increase in power tariffs.
- The Housing & Development Board (HDB) yesterday launched 3,600 units across seven build-to-order (BTO) projects to meet public housing demand.
- CapitaLand said it is looking at the possibility of buying or having the option to buy some components of the Khazanah-Temasek mixed-development in the Ophir-Rochor area.
- Far East Organization plans to raise at least S$500m through listing of some its hotel and serviced residence assets in a REIT next year, according to sources familiar with the deal.
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