MARKET PULSE: M1, SGX, SIA and KS Energy (17 Jan 2012)

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.81

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 7.00

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 10.85

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.91

MARKET PULSE: M1, SGX, SIA and KS Energy

17 Jan 2012

KEY IDEA M1: Expecting more of the same in 2012 M1 Ltd reported FY11 results, which came in mostly in line; revenue grew 8.8% to S$1064.9m, or around 4% ahead of our estimate; net earnings came in around S$164.1m, or just 0.5% shy of our forecast. M1 declared a final dividend of S$0.079 per share, bringing the total dividend to S$0.145, or 80% of core earnings as guided. For 2012, M1 expects to maintain stable performance at both top and bottom-line; it has also kept its 80% dividend payout ratio and expects to spend some S$110-130m in capex. We are bumping up our FY12 revenue forecast by 4% but are lowering our earnings forecast by 4%. But due to likely lower working capital requirements and capex expenditure in the near future, our DCF-based fair value inches up from S$2.79 to S$2.81. We continue to like M1 for its defensive earnings and greater NBN potential - maintain BUY. (Carey Wong) MORE REPORTS Singapore Exchange: Dealing with challenges ahead Singapore Exchange (SGX) posted 2QFY12 net profit of S$65.4m, down 12% YoY. Global outlook remains murky and equities are unlikely to shine in this environment. We have cut our earnings projections by between 7-8% for FY12 and FY13 to account for muted performances ahead. While the pipeline of potential IPO candidates looks healthy, it will still be a slow market due to current depressed valuations and weak sentiment. As such, we expect corporate activities to come off in tandem with lower economic growth. Yield is now attractive at 5.7% (with total base dividend of 16 cents per year). Maintain BUY and fair value estimate of S$7.00. (Carmen Lee) Singapore Airlines: Little surprise in weak operating statistics Singapore Airlines (SIA) reported its Dec 2011 operating statistics. The airline's passenger capacity (ASK) increased by 3.2% YoY while its passenger traffic (RPK) gained a smaller 1.8% YoY, resulting in passenger load factor (PLF) falling to 79.6%, compared to 80.7% in Dec 2010. With its ASK already up 3.3% YoY in 3QFY12, SIA is unlikely to achieve management guidance of 2HFY12 ASK similar to that of 1HFY12. We maintain our fair value estimate of S$10.85/share, which has already factored in the challenging times the aviation sector is currently facing, and HOLD rating on SIA. (Eric Teo) KS Energy: Rig on fire KS Energy (KSE) announced that a fire incident has occurred on the KS Endeavor jack up rig, which is owned by a jointly controlled entity of KS Drilling Pte Ltd. The operator of the rig is Chevron, and it is currently in the Funiwa Field in Nigeria. The incident occurred between 5-6am yesterday morning local Nigerian time (GMT +1), which would be about 1pm Singapore time. According to Chevron, all but two of the 154 workers on the rig and a nearby support barge have been accounted for, and at the time of KSE's announcement (about eight hours ago), the rig was still on fire. Recall that KS Endeavor was contracted to work for Chevron from Jan 2011 to Jan 2013, after it was delivered in 2010. Meanwhile the cause of the incident is still unknown, as well as the extent of the damage on the rig. Pending more details from the company, we maintain our HOLDrating and fair value estimate of S$0.91. (Low Pei Han)

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NEWS HEADLINES - French bonds rose after borrowing costs declined at the first bills sale since S&P downgraded the country. However, the euro continued to weaken, and gold and copper advanced as ratings downgrade in Europe has spurred demand for metals as a store of value. - Oil in New York rose 1% to $99.96 per barrel, the first rise in four days. Iran is claiming that it will shut the Straits of Hormuz, a transit route for approximately a fifth of global oil trade, in retaliation to international sanctions on its exports. - Global Logistic Properties announced the pricing of S$250m in aggregate principal amount of 5.50% perpetual capital securities. - Mermaid Maritime has announced the appointment of Bruce Gemmell as its new CEO. He was previously the CEO of CSOTL Offshore Ltd, formerly named CUEL Swiber Offshore (Thailand). - China Aviation Oil (Singapore) announced yesterday its proposed acquisitions of China Aviation Oil (Hong Kong) and North American Fuel Corp for National Aviation Fuel for ~US$11.7m and US$4m respectively.