MARKET PULSE: CapitaLand, STX OSV, Olam, Goodpack, Tat Hong, Karin, Marco Polo Marine, Rotary, Sakari, SIAEC & ST Engineering (15 Feb 2012)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.11

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.25

Stock Name: Goodpack
Company Name: GOODPACK LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.63

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.09

Stock Name: Karin
Company Name: KARIN TECHNOLOGY HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.27

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.43

Stock Name: Sakari
Company Name: SAKARI RESOURCES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.06

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.61

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.88

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.01

MARKET PULSE: CapitaLand, STX OSV, Olam, Goodpack, Tat Hong, Karin, Marco Polo Marine, Rotary, Sakari, SIAEC & ST Engineering

15 Feb 2012

KEY IDEA CapitaLand: Outlook mostly intact Summary: CAPL reported 4Q11 PATMI of S$476.6m, down 20% YoY. Adjusting for one-time items, we estimate 4Q11 PATMI at S$221.9m - in line with our expectations. About 1,500 residential units were sold in China over FY11 and we see anemic Chinese sales in FY12 as buyer restrictions are likely to stay. In Singapore, 844 units were sold in FY11. A key launch ahead is Sky Habitat at Bishan which we believe would perform well. Major Shanghai malls, Minhang and Hongkou, opened for operations in FY11 and we forecast CMA's core earnings to increase 84% from S$120m in FY11 to S$221m in FY12, partially offsetting slowing residential sales. We maintain our BUY rating and adjust our fair value to S$3.11 from S$2.76 previously, mostly due to higher valuations for listed entities. (Eli Lee) MORE REPORTS STX OSV: Stellar 4Q results STX OSV reported a stellar set of 4Q results, which were above our and the street's expectations. Revenue declined by 12.9% YoY to NOK3.1bn, while net profit jumped 116.6% to NOK638m during the quarter. The exceptional high profitability in 4Q was mainly due to successful project deliveries and the release of risk contingencies at the end of complex projects. On a full year basis, revenue increased slightly by 4.4% YoY to NOK12.4bn, while net profit increased by 54.6% YoY to NOK1.6bn, supported by stable operations and productivity improvements. The group has recommended a 10 S cents dividend. We maintain BUY and raised our fair value estimate to S$2.25 (from S$1.60 previously) on higher order intake assumptions. (Chia Jiunyang) Olam Int'l: 1HFY12 results mostly in line Olam International Limited posted 1HFY12 revenue of S$7,716.4m, up 18.8%, meeting 40.8% of our FY12 estimate; core net profit fell 13.2% to around S$ S$132.8m, which still met 42.8% of our full-year forecast; this is also in line with the group's historical seasonality where it typically achieves around 35-40% of its earnings in the first half. Going forward, management remains positive of its prospects in 2HFY12; and is also on track to achieve US$1b net profit by FY16. As its results were mostly in line with our forecast, we will leave our estimates intact for now. Our fair value also remains unchanged at S$2.63 (18x FY12F EPS). Maintain HOLD. (Carey Wong) Goodpack Limited: Outlook and growth stable Goodpack reported 1HFY12 results that were in line with our expectations: revenue grew 22.2% YoY to US$87.2m while PATMI climbed 8.1% YoY to US$22.5m. Both figures constituted 53.4% and 55.3% of our FY12 projections respectively. Going forward, we expect demand for Goodpack's IBCs in 2HFY12 to remain stable at close to current levels as its main revenue segments, the natural and synthetic rubber businesses, continue to be supported by the automotive industry. In addition, price increases of between 9-12% on new IBC three-year contracts will take effect in 2HFY12 and provide some downside protection for Goodpack should demand taper off in the face of deteriorating macro-economic conditions. Reiterate BUY at an unchanged fair value estimate of S$1.70. (Lim Siyi) Tat Hong Holdings: Recovery underway Tat Hong Holdings (Tat Hong) reported a set healthy set of 3Q12 results with revenue and net profit increasing by 43% and 178% YoY to S$196m and S$13m respectively, attributable mainly to higher levels of activity across all divisions. Over a nine months period, net profit was S$31m (a 40% YoY increase), and represented 71% of our FY12F estimates. As the 3Q12 results marked a fourth consecutive quarter of improvement and with net margins reverting back to 6-7% (4Q11: 2.5%; 1Q12: 3.5%; 2Q12: 6.9%; 3Q12: 6.6%), we are optimistic of a steady recovery. Maintain BUY with unchanged fair value estimate of S$1.09 (on 10x FY13F EPS). (Chia Jiunyang) Karin Technology: Sequential improvement likely Karin Technology (Karin) reported 1HFY12 revenue of HK$1,519.4m (+68.6%) which topped our forecasts; but estimated core earnings of HK$25.5m (-2.6%) missed our expectations. This was due largely to lower-than-expected gross margin and higher effective tax rate. Top-line and core PATMI met 61.2% and 44.4% of our full-year projections, respectively. Karin's strong revenue growth was driven by a 131.8% surge in its IT Infrastructure segment, which more than buffered declines in its Components Distribution and ICAD segments. A dividend of 7 HK cents (inclusive of a 3.5 HK cent special dividend) was declared, versus 5 HK cents in 1HFY11. Looking ahead, we opine that Karin's new IT retail store operations could be its next leg of growth. We pare our core PATMI forecasts and obtain a new fair value estimate of S$0.27 (S$0.28 previously) after rolling forward our valuation to 6x blended FY12/13F core EPS. Downgrade to HOLD. (Wong Teck Ching Andy) Marco Polo Marine: 1QFY12 results within expectations Marco Polo Marine (MPM) reported a 26.8% rise in revenue to S$24.6m and a 8.5% increase in net profit to S$4.4m in 1QFY12, within ours and the street's expectations. The group's shipyard operations now accounts for 76.4% of total revenue with correspondingly lower contributions from ship chartering as associate BBR has been assuming more of the chartering business. However, BBR's profits were impacted by one-off forex losses in 1QFY12. The group's businesses are growing steadily, and the stock currently has an upside potential of about 17% based on our fair value estimate of S$0.43, but this is within our 30% range for small cap stocks. Hence we maintain our HOLD rating. (Low Pei Han) Rotary Engineering: Secures US$34m contract for storage tanks in Saudi Arabia Rotary Engineering announced that it has secured a US$34m EPC contract to build 17 field storage tanks in Saudi Arabia. Work is scheduled to start in Jun and is expected to be completed around middle of 2013. In the same announcement, Rotary also said that it has chalked up more than S$100m worth of contracts over the last several months. We will speak to management to get more clarity. In the meantime, we put our Hold recommendation and S$0.61 fair value estimate UNDER REVIEW. (Chia Jiunyang) Sakari Resources: Strong 4Q11 showing Sakari Resources Limited (SRL) posted a strong set of 4Q11 results, with revenue jumping 42.4% YoY and 40.4% QoQ to US$312.6m, aided by higher ASPs of coals sold in the quarter. Net profit was up 139.0% YoY and 97.3% QoQ at US$73.0m, the highest in any quarter, as sales of higher-value coal from Sebuku's Northern Leases helped to lift ASP to US$100/ton. For the full-year, revenue climbed 30% to US$1,013.6m, or 7.4% above our forecast, while net profit surged 116% to S$190.3m, or 17.9% above our estimate. Meanwhile, SRL is continuing with its policy of paying 60% of its net profit as dividend - this by declaring a final dividend of 5.83 US cents, bringing the total to 10.07 US cents for FY11. We will be attending an analyst conference call later in the evening, and until then, we place our Hold rating and S$2.06 fair value under review. (Carey Wong) SIA Engineering: JVs progressing well SIA Engineering Co Ltd (SIAEC) last night announced new developments to its recent joint ventures with SAFRAN and Panasonic Avionics Corp. SIAEC signed an agreement with Messier-Bugatti-Dowty, a division of the SAFRAN Group, to appoint SIAEC as its authorised repair centre (ARC) to provide MRO services for Messier-Bugatti-Dowty wheels and brakes. Separately, SIAEC and Panasonic Avionics Corporation announced the official opening of Panasonic Avionics Services Singapore (PACSS), a joint venture owned by SIAEC (42.5%) and Panasonic Avionics Corporation (57.5%). Singapore-based PACSS will provide MRO of IFEC systems and components for aircraft transiting at Changi Airport. SIAEC said both announcements are not expected to have a material impact on its financial performance in FY12. With an estimated dividend yield of 4.5%, we currently have a fair value estimate of S$3.88 per share and BUY rating on SIAEC. (Eric Teo) ST Engineering: New 10-year MRO contract ST Engineering (STE) last night announced its aerospace arm has been awarded an engine maintenance, repair and overhaul (MRO) contract to support Korean LCC Eastar Jet. The contract value is estimated to be ~US$15m (S$18.8m) per year. And the engines will be maintained by ST Aerospace's engine facilities located in Singapore and Xiamen, China. Pending the FY11 results announcement, our Buy rating and fair value estimate of S$3.01/share on STE is currently UNDER REVIEW. (Eric Teo)

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NEWS HEADLINES - European finance ministers have postponed a meeting (originally scheduled for today) on the Greek debt crisis to 20 Feb. The euro traded close to a one-week low. - Moody's mass downgrade of the creditworthiness of European countries yesterday had little market impact. The downgrade echoes those from Standard & Poor's and Fitch last month. - The Hour Glass Ltd reported an 18% YoY increase in revenue for 3QFY12 ended Dec 2011 to S$170m, and net profit increased 66% to S$18.4m. The group is cautiously optimistic about luxury retail sentiment. - Global Logistic Properties' 3QFY12 ended Dec 2011 saw revenue increase 19% YoY to US$145m and NPAT increased by 3% to US$86m.