Stock Name: Lian Beng
Company Name: LIAN BENG GROUP LTD
Market Pulse: Commodity Sector & Lian Beng (24 Nov 2011)
FOCUS
Commodities Sector: Outlook remains mixed at best
Summary: Looking back at the Sep quarter results, soft commodity plays under our coverage generally did better, with most coming close to our expectations. Meanwhile, the biggest surprise came from Noble, which reported a net loss of US$17.5m - its first in 14 years. In any case, even for those companies that performed within expectations, we note that there were increased signs of margin pressures, despite healthy volume growths. Renewed weakness in the US economy and uncertainties over the EU sovereign debt issues have exacerbated the risk of the economy slipping into a "down cycle". Even though we maintain a NEUTRAL weight on the sector, we attach a downside bias to our rating, as we could see a faster-than-expected deterioration in the global economies, especially in China. Our pick in the sector is Golden Agri. (Carey Wong)
Lian Beng: Another new addition for development.
Summary: Lian Beng recently announced that it has acquired the site of Dragon Mansion at Spottiswoode Park Road for S$130m. Together with its recent Midlink Plaza acquisition, the group has deployed around S$260m in recent months to acquire land resources. Given these sites' good locations and the potential opportunity for LBG's construction arm to win the related construction contracts, we believe these additional development resources are positive for the group. We factor in the financial impacts of these new sites and its strong sales so far for Mandai Industrial development and this raises our earnings estimates for FY12/FY13 by around 8% and 17% respectively. This in turn raises our fair value estimate to S$0.55, implying potential upside of 60%, therefore, maintain BUY. (Benjamin Lim)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- The European crisis worsened further after a German government bond auction flopped with only EUR 3.64b out of EUR 6b worth of 10-year bunds taken up by investors.
- European banks clamoured for emergency funds from the ECB on Tuesday, borrowing the most since early 2009 in a clear sign that the eurozone's financial institutions are having trouble obtaining credit at reasonable rates in the open market.
- Singapore's inflation remains stubbornly high at 5.4% in October, on the back of higher rentals, transport and food costs.
- On the first day of the property's launch, Capitaland sold more than 350 apartments in its 583-unit Bedok Residences condominium with an average selling price of S$1,350 psft.
- Newly listed property and construction group TA Corporation has secured two new construction contracts from Allgreen Properties and its subsidiary worth S$271m.
- Hisaka Holdings' net profit for the fiscal year ended Sep 30, 2011 dropped 30.5% YoY to S$6.4m, mainly due to the slowdown in global manufacturing. It has also proposed a final dividend of half a cent per share.
Company Name: LIAN BENG GROUP LTD
| Research House: OCBC | Price Call: BUY | Target Price: 0.55 |
Market Pulse: Commodity Sector & Lian Beng (24 Nov 2011)
FOCUS
Commodities Sector: Outlook remains mixed at best
Summary: Looking back at the Sep quarter results, soft commodity plays under our coverage generally did better, with most coming close to our expectations. Meanwhile, the biggest surprise came from Noble, which reported a net loss of US$17.5m - its first in 14 years. In any case, even for those companies that performed within expectations, we note that there were increased signs of margin pressures, despite healthy volume growths. Renewed weakness in the US economy and uncertainties over the EU sovereign debt issues have exacerbated the risk of the economy slipping into a "down cycle". Even though we maintain a NEUTRAL weight on the sector, we attach a downside bias to our rating, as we could see a faster-than-expected deterioration in the global economies, especially in China. Our pick in the sector is Golden Agri. (Carey Wong)
Lian Beng: Another new addition for development.
Summary: Lian Beng recently announced that it has acquired the site of Dragon Mansion at Spottiswoode Park Road for S$130m. Together with its recent Midlink Plaza acquisition, the group has deployed around S$260m in recent months to acquire land resources. Given these sites' good locations and the potential opportunity for LBG's construction arm to win the related construction contracts, we believe these additional development resources are positive for the group. We factor in the financial impacts of these new sites and its strong sales so far for Mandai Industrial development and this raises our earnings estimates for FY12/FY13 by around 8% and 17% respectively. This in turn raises our fair value estimate to S$0.55, implying potential upside of 60%, therefore, maintain BUY. (Benjamin Lim)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- The European crisis worsened further after a German government bond auction flopped with only EUR 3.64b out of EUR 6b worth of 10-year bunds taken up by investors.
- European banks clamoured for emergency funds from the ECB on Tuesday, borrowing the most since early 2009 in a clear sign that the eurozone's financial institutions are having trouble obtaining credit at reasonable rates in the open market.
- Singapore's inflation remains stubbornly high at 5.4% in October, on the back of higher rentals, transport and food costs.
- On the first day of the property's launch, Capitaland sold more than 350 apartments in its 583-unit Bedok Residences condominium with an average selling price of S$1,350 psft.
- Newly listed property and construction group TA Corporation has secured two new construction contracts from Allgreen Properties and its subsidiary worth S$271m.
- Hisaka Holdings' net profit for the fiscal year ended Sep 30, 2011 dropped 30.5% YoY to S$6.4m, mainly due to the slowdown in global manufacturing. It has also proposed a final dividend of half a cent per share.
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