Stock Name: Lian Beng
Company Name: LIAN BENG GROUP LTD
Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED
Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.
Stock Name: PEC
Company Name: PEC LTD.
Market Pulse: Lian Beng, Midas, Keppel, Biosensors and PEC Ltd (04 Oct 2011)
FOCUS
Lian Beng: Initiate with BUY - Strong order book with room for more
Summary: We initiate coverage on Lian Beng Group with a BUY rating - TP of S$0.52 (derived from applying 5x P/E on its FY12F earnings) implies c.54% upside from here. Lian Beng's current order book is one of its strongest in history and yet it is trading at a steep discount to peers. We like Lian Beng for 1) their track record in both private residential and public housing construction projects; 2) its strong order book giving management room to focus on improving margins; and 3) its undemanding valuations. (Research Team)
Midas Holdings: Double whammy; but still a BUY
Summary: The outlook for Midas Holdings (Midas) has grown increasingly murky in recent times, due to accidents involving both high-speed and metro trains in China in Jul and Sep this year respectively. Media reports have also surfaced that China has postponed construction of 80% of its railway projects, which seems substantial, in our view. Any delay in contract tenders would affect the earnings visibility of upstream railway parts suppliers such as Midas. Despite the current overhang on China's rail transport sector, we opine that the long-term prospects are still positive, driven by the fundamental need to fulfil China's rising transportation needs and continued economic development. We are keeping our estimates for now until there is greater clarity on the Chinese government's railway policies. Nevertheless, given the macroeconomic uncertainties and significant de-rating of China's railway sector related stocks, we see the need to lower our valuation peg on Midas to 8x blended FY11/FY12F EPS (previously 16x), in-line with the average forward PER of its railway parts manufacturing peers. Consequently, our fair value estimate is reduced from S$0.805 to S$0.435. Notwithstanding this, we are maintaining our BUY rating on valuation grounds. (Wong Teck Ching Andy)
Keppel Corporation: US$199m contract for rig refurbishment and upgrade
Summary: Keppel Corporation (KEP) announced that it has secured a contract for its high-spec KFELS B Class rig from Safin Gulf FZCO (Safin) worth US$199m. Delivery time is shorter with completion scheduled for 3Q12 as the rig will be a refurbishment and upgrade of a KFELS B Class jack-up rig that Keppel FELS purchased earlier this year. The earlier delivery is valued by Safin as the tight jack-up market has resulted in dwindling yard slots for the local rig builders. We believe this is the reason why KEP could command such a high price for the refurbishment and upgrade work since a typical newbuild of similar design is also about the same price - Gulf Drilling had ordered a KFELS B Class Bigfoot jackup worth US$197m in May 2011 while Japan Drilling had ordered a KFELS Super B Class jackup for US$210m in Mar 2011. KEP has secured S$7.8b worth of contracts YTD, accounting for 92% of our full estimate. Maintain BUY with fair value estimate of S$12.12 on KEP. (Low Pei Han)
Biosensors International Group: Completes acquisition of remaining 50% stake in JWMS
Summary: Biosensors International Group (BIG) announced that it has completed its acquisition of the remaining 50% stake in JW Medical Systems (JWMS) from Shandong Weigao Group Medical Polymer (Shandong Weigao). As a result, Shandong Weigao has received (i) a cash payment of S$160m; (ii) 260m new ordinary shares, making it a key shareholder of BIG; and (iii) US$120m principal amount of 4% convertible notes due 2014. We believe that BIG would now be able to concentrate on increasing its penetration into the Chinese DES market given JWMS's strong positioning there. The group would also be able to leverage on Shandong Weigao's experience in China. We had already incorporated this acquisition in our assumptions and consolidated JWMS's numbers in our estimates from 3QFY12 onwards. As such we retain our forecasts and fair value estimate of S$1.68. Given an attractive upside potential of 45.4% from current price level, we reiterate our BUY rating on the stock. (Wong Teck Ching Andy)
PEC Ltd: Contract wins of S$45m
Summary: PEC yesterday announced recent contract wins worth S$45m, including one with JGC Corporation to provide steel structure, piping and electrical & instrumentation works for a refinery in Singapore for an oil major, bringing its current order-book past the S$300m mark. We believe the market impact will be neutral. Recall PEC's order-book was already at S$300m as of end-June. Thus, we believe part of the S$45m contract wins would be used to replenish order-book that were used up during the quarter ended Sep. Maintain BUY with fair value estimate of S$1.12. (Chia Jiunyang)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US manufacturing data unexpectedly accelerated in Sep - the Institute for Supply Management (ISM) factory index climbed to 51.6 from 50.6 in Aug.
- Prices of HDB resale flats and mass-market private condominiums climbed in 3Q11. URA's flash estimates show that overall private home price index rose 1.3% QoQ, albeit slower than the 2% increase in 2Q.
- Reflecting the buoyant industrial property market last year, JTC posted a total surplus of S$918m for the FY ended 31 Mar, +39%.
- Avic International Investments - which recently acquired the Singapore listing status of Sino-Environment following a scheme of arrangement announced yesterday that building of two vessels on its order books will be suspended.
- Ascendas REIT has bought Ascendas Z-Link, a business park property in Zhongguancun Software Park. It is their maiden purchase in Beijing.
- SATS clarified news reports and stressed that ongoing discussion for sale of UK unit is not complete yet - discussions are at a stage where there is no certainty that a definitive agreement may be arrived at.
- Stamford Land has signed a memorandum of understanding for the sale of three hotel properties in Australia for an indicative consideration of A$316m.
Company Name: LIAN BENG GROUP LTD
| Research House: OCBC | Price Call: BUY | Target Price: 0.52 |
Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 0.435 |
Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 12.12 |
Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.
| Research House: OCBC | Price Call: BUY | Target Price: 1.68 |
Stock Name: PEC
Company Name: PEC LTD.
| Research House: OCBC | Price Call: BUY | Target Price: 1.12 |
Market Pulse: Lian Beng, Midas, Keppel, Biosensors and PEC Ltd (04 Oct 2011)
FOCUS
Lian Beng: Initiate with BUY - Strong order book with room for more
Summary: We initiate coverage on Lian Beng Group with a BUY rating - TP of S$0.52 (derived from applying 5x P/E on its FY12F earnings) implies c.54% upside from here. Lian Beng's current order book is one of its strongest in history and yet it is trading at a steep discount to peers. We like Lian Beng for 1) their track record in both private residential and public housing construction projects; 2) its strong order book giving management room to focus on improving margins; and 3) its undemanding valuations. (Research Team)
Midas Holdings: Double whammy; but still a BUY
Summary: The outlook for Midas Holdings (Midas) has grown increasingly murky in recent times, due to accidents involving both high-speed and metro trains in China in Jul and Sep this year respectively. Media reports have also surfaced that China has postponed construction of 80% of its railway projects, which seems substantial, in our view. Any delay in contract tenders would affect the earnings visibility of upstream railway parts suppliers such as Midas. Despite the current overhang on China's rail transport sector, we opine that the long-term prospects are still positive, driven by the fundamental need to fulfil China's rising transportation needs and continued economic development. We are keeping our estimates for now until there is greater clarity on the Chinese government's railway policies. Nevertheless, given the macroeconomic uncertainties and significant de-rating of China's railway sector related stocks, we see the need to lower our valuation peg on Midas to 8x blended FY11/FY12F EPS (previously 16x), in-line with the average forward PER of its railway parts manufacturing peers. Consequently, our fair value estimate is reduced from S$0.805 to S$0.435. Notwithstanding this, we are maintaining our BUY rating on valuation grounds. (Wong Teck Ching Andy)
Keppel Corporation: US$199m contract for rig refurbishment and upgrade
Summary: Keppel Corporation (KEP) announced that it has secured a contract for its high-spec KFELS B Class rig from Safin Gulf FZCO (Safin) worth US$199m. Delivery time is shorter with completion scheduled for 3Q12 as the rig will be a refurbishment and upgrade of a KFELS B Class jack-up rig that Keppel FELS purchased earlier this year. The earlier delivery is valued by Safin as the tight jack-up market has resulted in dwindling yard slots for the local rig builders. We believe this is the reason why KEP could command such a high price for the refurbishment and upgrade work since a typical newbuild of similar design is also about the same price - Gulf Drilling had ordered a KFELS B Class Bigfoot jackup worth US$197m in May 2011 while Japan Drilling had ordered a KFELS Super B Class jackup for US$210m in Mar 2011. KEP has secured S$7.8b worth of contracts YTD, accounting for 92% of our full estimate. Maintain BUY with fair value estimate of S$12.12 on KEP. (Low Pei Han)
Biosensors International Group: Completes acquisition of remaining 50% stake in JWMS
Summary: Biosensors International Group (BIG) announced that it has completed its acquisition of the remaining 50% stake in JW Medical Systems (JWMS) from Shandong Weigao Group Medical Polymer (Shandong Weigao). As a result, Shandong Weigao has received (i) a cash payment of S$160m; (ii) 260m new ordinary shares, making it a key shareholder of BIG; and (iii) US$120m principal amount of 4% convertible notes due 2014. We believe that BIG would now be able to concentrate on increasing its penetration into the Chinese DES market given JWMS's strong positioning there. The group would also be able to leverage on Shandong Weigao's experience in China. We had already incorporated this acquisition in our assumptions and consolidated JWMS's numbers in our estimates from 3QFY12 onwards. As such we retain our forecasts and fair value estimate of S$1.68. Given an attractive upside potential of 45.4% from current price level, we reiterate our BUY rating on the stock. (Wong Teck Ching Andy)
PEC Ltd: Contract wins of S$45m
Summary: PEC yesterday announced recent contract wins worth S$45m, including one with JGC Corporation to provide steel structure, piping and electrical & instrumentation works for a refinery in Singapore for an oil major, bringing its current order-book past the S$300m mark. We believe the market impact will be neutral. Recall PEC's order-book was already at S$300m as of end-June. Thus, we believe part of the S$45m contract wins would be used to replenish order-book that were used up during the quarter ended Sep. Maintain BUY with fair value estimate of S$1.12. (Chia Jiunyang)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US manufacturing data unexpectedly accelerated in Sep - the Institute for Supply Management (ISM) factory index climbed to 51.6 from 50.6 in Aug.
- Prices of HDB resale flats and mass-market private condominiums climbed in 3Q11. URA's flash estimates show that overall private home price index rose 1.3% QoQ, albeit slower than the 2% increase in 2Q.
- Reflecting the buoyant industrial property market last year, JTC posted a total surplus of S$918m for the FY ended 31 Mar, +39%.
- Avic International Investments - which recently acquired the Singapore listing status of Sino-Environment following a scheme of arrangement announced yesterday that building of two vessels on its order books will be suspended.
- Ascendas REIT has bought Ascendas Z-Link, a business park property in Zhongguancun Software Park. It is their maiden purchase in Beijing.
- SATS clarified news reports and stressed that ongoing discussion for sale of UK unit is not complete yet - discussions are at a stage where there is no certainty that a definitive agreement may be arrived at.
- Stamford Land has signed a memorandum of understanding for the sale of three hotel properties in Australia for an indicative consideration of A$316m.
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