Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD
Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD
Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED
Market Pulse: Singapore Airlines, Tat Hong & Keppel (7 Oct 2011)
FOCUS
Singapore Airlines: Weakness factored into earnings; maintain BUY
Summary: Singapore Airlines Ltd (SIA) added passenger capacity faster than air travel demand growth in August. This resulted in a fall in passenger load factor to 76.6%, below the recently released load factors of international flights worldwide and in Asia Pacific (from the IATA). SIA may continue to experience falling passenger load factors if 1) it continues its 5% capacity increase for the rest of FY11 and 2) the upcoming peak air travel months disappoint. In cargo, SIA was able to better manage its cargo capacity increase but its cargo load factor continued to fall. Higher cargo capacity and stagnating cargo volumes, due to no growth in world trade, have caused cargo load factors to be on a downtrend. SIA's falling load factors are expected and have previously been factored into our earnings model. With no change to our earnings model, we maintain our BUY rating and a fair value estimate of S$12.59 per share of SIA, representing a potential upside of 11.4%. (Research Team)
Tat Hong Holdings: Maintain HOLD with lower fair value of S$0.59
Summary: Tat Hong Holdings (TAT) could face tougher market conditions down under. According to Australia Industry Group (AIG)'s recent findings, the downturn in the country's construction industry continues to deepen in Aug 2011, driven by a further fall in activity and sharp reduction in new orders. On the other hand, our channel checks indicate increased level of activity in a number of oil & gas and mining projects. Majority of these projects are at the conceptual and design stage and construction has yet to commence. We maintain our HOLD rating as we wait for clearer signs of recovery in Australia. In the meantime, we lower our fair value estimate to S$0.59 (based on 9x blended FY12/FY13 EPS), in line with the weaker overall market. (Chia Jiunyang)
Keppel Corporation: Secures jackup order worth US$245m from Ensco
Summary: Keppel Corporation (Keppel) announced that Ensco plc has exercised one of its two rig options to build an enhanced KFELS Super A Class harsh environment jackup rig for US$245m. The price tag is 11% higher than two rigs of same design ordered by Ensco in Feb this year. Payment terms would be 20% due at contract signing and 80% upon delivery. According to Ensco's press release, an option for an additional ultra-premium harsh environment jackup rig has expired and we think this may be the other rig option that Ensco had with Keppel. Still, Keppel has secured S$8.4b worth of new orders YTD, almost topping our full year estimate of S$8.5b. This is a record high for Keppel which won S$3.2b orders last year, and S$7.4b in FY07 (its previous peak year). Despite uncertainties in the global economy, we keep our FY12 new order estimate of S$5b intact for now as industry fundamentals remain supportive of continued capital expenditure by oil companies. Maintain BUY with S$12.12 fair value estimate. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- The European Central Bank offered new emergency loans to banks yesterday to help them through the turmoil of the government debt crisis; benchmark interest rates were kept at 1.5% despite fears of an economic slowdown.
- Singapore Exchange said it is open to all mergers and acquisition talks, but stop short of specifically commenting on the news that it is joining hands with London Stock Exchange to bid for London Metal Exchange.
- Hyflux, is set to move into power generation, when it starts building a 411-megawatt combined cycle gas turbine plant this quarter.
- ST Engineering's subsidiary unit - ST Synthesis, has secured a five year contract worth approx. S$125m from Singapore's Defence, Science and Technology Agency.
- Dyna-Mac's 1QFY12 (ended 31 Aug 2011) net profit fell 55.5% YoY to S$4.17m. This is mainly due to lower volume of work, as works for projects were substantially completed by the previous quarter.
- AIMS AMP REIT reported that its distribution per unit for 2QFY12 ended 30 Sep 2011 increased by 26% to reach 2.5 cents. Revenue and net property income rose 27.8% and 28.2% respectively YoY.
Company Name: SINGAPORE AIRLINES LTD
| Research House: OCBC | Price Call: BUY | Target Price: 12.59 |
Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD
| Research House: OCBC | Price Call: HOLD | Target Price: 0.59 |
Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 12.12 |
Market Pulse: Singapore Airlines, Tat Hong & Keppel (7 Oct 2011)
FOCUS
Singapore Airlines: Weakness factored into earnings; maintain BUY
Summary: Singapore Airlines Ltd (SIA) added passenger capacity faster than air travel demand growth in August. This resulted in a fall in passenger load factor to 76.6%, below the recently released load factors of international flights worldwide and in Asia Pacific (from the IATA). SIA may continue to experience falling passenger load factors if 1) it continues its 5% capacity increase for the rest of FY11 and 2) the upcoming peak air travel months disappoint. In cargo, SIA was able to better manage its cargo capacity increase but its cargo load factor continued to fall. Higher cargo capacity and stagnating cargo volumes, due to no growth in world trade, have caused cargo load factors to be on a downtrend. SIA's falling load factors are expected and have previously been factored into our earnings model. With no change to our earnings model, we maintain our BUY rating and a fair value estimate of S$12.59 per share of SIA, representing a potential upside of 11.4%. (Research Team)
Tat Hong Holdings: Maintain HOLD with lower fair value of S$0.59
Summary: Tat Hong Holdings (TAT) could face tougher market conditions down under. According to Australia Industry Group (AIG)'s recent findings, the downturn in the country's construction industry continues to deepen in Aug 2011, driven by a further fall in activity and sharp reduction in new orders. On the other hand, our channel checks indicate increased level of activity in a number of oil & gas and mining projects. Majority of these projects are at the conceptual and design stage and construction has yet to commence. We maintain our HOLD rating as we wait for clearer signs of recovery in Australia. In the meantime, we lower our fair value estimate to S$0.59 (based on 9x blended FY12/FY13 EPS), in line with the weaker overall market. (Chia Jiunyang)
Keppel Corporation: Secures jackup order worth US$245m from Ensco
Summary: Keppel Corporation (Keppel) announced that Ensco plc has exercised one of its two rig options to build an enhanced KFELS Super A Class harsh environment jackup rig for US$245m. The price tag is 11% higher than two rigs of same design ordered by Ensco in Feb this year. Payment terms would be 20% due at contract signing and 80% upon delivery. According to Ensco's press release, an option for an additional ultra-premium harsh environment jackup rig has expired and we think this may be the other rig option that Ensco had with Keppel. Still, Keppel has secured S$8.4b worth of new orders YTD, almost topping our full year estimate of S$8.5b. This is a record high for Keppel which won S$3.2b orders last year, and S$7.4b in FY07 (its previous peak year). Despite uncertainties in the global economy, we keep our FY12 new order estimate of S$5b intact for now as industry fundamentals remain supportive of continued capital expenditure by oil companies. Maintain BUY with S$12.12 fair value estimate. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- The European Central Bank offered new emergency loans to banks yesterday to help them through the turmoil of the government debt crisis; benchmark interest rates were kept at 1.5% despite fears of an economic slowdown.
- Singapore Exchange said it is open to all mergers and acquisition talks, but stop short of specifically commenting on the news that it is joining hands with London Stock Exchange to bid for London Metal Exchange.
- Hyflux, is set to move into power generation, when it starts building a 411-megawatt combined cycle gas turbine plant this quarter.
- ST Engineering's subsidiary unit - ST Synthesis, has secured a five year contract worth approx. S$125m from Singapore's Defence, Science and Technology Agency.
- Dyna-Mac's 1QFY12 (ended 31 Aug 2011) net profit fell 55.5% YoY to S$4.17m. This is mainly due to lower volume of work, as works for projects were substantially completed by the previous quarter.
- AIMS AMP REIT reported that its distribution per unit for 2QFY12 ended 30 Sep 2011 increased by 26% to reach 2.5 cents. Revenue and net property income rose 27.8% and 28.2% respectively YoY.
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