MARKET PULSE: Golden Agri, Swiber, Bumi Armada, CSE Global, ECS, Lian Beng & OKP (28 Feb 2012)

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.77

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.70

MARKET PULSE: Golden Agri, Swiber, Bumi Armada, CSE Global, ECS, Lian Beng & OKP

28 Feb 2012

KEY IDEA Golden Agri-Resources Ltd: 4Q11 disappoints; cut to HOLD Golden Agri-Resources (GAR) reported core earnings that missed our forecasts, coming in at US$90.6m, or 41.5% below. For FY11, revenue jumped 69.9% to US$5952.9m, or just 0.2% shy of our forecast; while core earnings climbed 47.6% to US$571.4m, it was 12.3% below our estimate (nearly 10% below consensus). Meanwhile, GAR declared a final cash dividend of 1.84 S cents, versus 0.77 S cent last year; payable on 15 May. In light of the latest results and also using a slightly higher CPO assumption of US$1000/ton (US$950/ton previously), we bump up our FY12 revenue estimate by 2.7%; but cut our earnings by 6.8% (due to lower margin assumptions). Still based on 12.5x FY12F EPS, our fair value eases from S$0.82 to S$0.77. Given the limited upside, we downgrade our call to HOLD; we would be buyers below S$0.70. (Carey Wong) MORE REPORTS Swiber Holdings: Results below expectations Swiber Holdings (Swiber) reported a 40.5% increase in revenue to US$654.5m but a 14% drop in net profit to US$32.1m in FY11. The latter was significantly below ours and the street's estimates due to 1) lower other operating income, 2) higher administrative expenses, and 3) a jump in income tax expense in 4Q11. We are confident of the group's ability to secure projects going forward, given the buoyant industry outlook and its strong foothold in certain geographical areas. However, we are expecting higher administrative costs and tax expenses which will impact core earnings. We are now assuming an US$850m new order win for 2012 after Swiber secured US$216m worth of work (excl. US$38m JV contract) YTD. Although this bumps up our fair value estimate to S$0.70, we maintain our HOLDrating due to limited upside potential. (Low Pei Han) Bumi Armada Berhad: Steady Execution Bumi Armada reported a good set of FY11 results, with full-year revenue and net profit largely within our and the street's expectations. FY11 revenue jumped 24% YoY to M$1.5bn, supported by stronger contributions from its FPSO, OSV (Offshore Support Vessel) and OFS (Oil Field Services) segments. However, FY11 net profit increased by only 2.5% to M$365m. This was due to higher vessel depreciation, interest charges and tax expenses. The group has also announced a 2.5 Mcts dividend. With our FY12F estimates largely unchanged, we keep our HOLD rating and M$4.00 fair value estimate. (Chia Jiunyang) CSE Global: FY11 Net Profit down 47% CSE Global announced its FY11 results last evening. FY11 revenue and net profit came in at S$457m (+2% YoY) and S$27.7m (-47% YoY) respectively and were within our and the market expectations. The decline in net profit was mainly due to cost over-run in its Middle East projects. Its order-book declined to S$455m as of end-Dec 11 (end-Sep 11: S$482m). CSE Global has also proposed a 2 S cents final dividend for FY11. Pending an analyst briefing later, we put our Hold rating and S$0.80 fair value estimate UNDER REVIEW. (Chia Jiunyang) ECS Holdings: FY11 results in line with expectations ECS Holdings (ECS) reported 4Q11 PATMI of S$9.0m (-38.5% YoY; -0.9% QoQ) on the back of a 10.0% YoY increase (-6.8% QoQ) in revenue to S$924.5m. FY11 results were within our expectations, with revenue growing 16.9% to S$3,607.2m, forming 100.6% of our forecast. PATMI dipped 26.0% to S$39.2m due to lower gross margin, a large spike in finance costs and disruption caused by the Thailand floods, which is ECS's second largest market. Adjusting for forex effects and exceptional items, we estimate that core earnings declined 17.1% to S$36.0m, or 0.5% shy of our projection. A dividend of 2.2 S cents was declared (FY10: 3.6 S cents), below our 2.6 S cents forecast and translates into a yield of 3.9%. Nevertheless, one of the key positives from ECS was its effective working capital management during the reported quarter, which helped to increase its net operating cashflows generated from S$21.3m in 4Q10 to S$128.6m in 4Q11. This enabled the group to repay some of its borrowings, and its net gearing ratio now stands at 33.8% as at 31 Dec 2011, versus 73.9% in 3Q11. We will provide further details pending the analyst briefing. Meanwhile, we place our Buy rating and S$0.61 fair value estimate under review. (Wong Teck Ching Andy) Lian Beng Group: Secures S$49m Mindef contract Lian Beng Group (LBG) last night announced it has secured a construction contract worth ~S$49m, with a contract period of 21 months, from Ministry of Defence. LBG added that this contract is expected to have a positive financial impact on its financial year ending 31 May 2012. At the end of 1HFY12, LBG had a strong order book of S$772m. We reiterate our BUY rating and fair value estimate of LBG at S$0.51/share. (Eric Teo) OKP Holdings: S$75m LTA contract win OKP Holdings (OKP) last night announced it has secured a S$75.3 million contract from the Land Transport Authority to expand the intersections of Central Expressway (CTE), Tampines Expressway (TPE) and Seletar Expressway (SLE). OKP expects to start work on this design-and-build project in Mar 2012 and complete it by 2015. This project will improve connectivity between Yishun, the new Seletar Aerospace Park and Singapore's expressway network. We are positive on this latest contract win as it adds a substantial amount to OKP's order book of S$249m at end-FY11. We maintain our BUY rating and fair value estimate of OKP at S$0.75/share. (Eric Teo)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - The S&P 500 Index rose 0.1% to close at 1,367.59, the highest close since June 2008, as an increase in US home sales helped to stop a global drop in equities. Oil fell from a nine-month high, breaking a seven-day rally, while Treasuries and the Yen advanced. - Orchard Parade Holdings registered FY11 net profit of S$124m, up 50% YoY. Revenue had increased by 49% YoY to S$292m, mainly from the progressive recognition of revenue from a Floridian property development project. - Kingsmen Creatives recorded FY11 net profit of S$16.3m (+8.4% YoY). Revenue rose 11.7% to S$261m. The group has already secured ~S$106m of contracts for 2012 and expects good performance for the year. - Amara Holdings saw FY11 revenue flat at S$61.8m, but a substantial gain in fair value on investment properties of S$25.4 (vs. S$5.0m a year ago) helped NPAT surged 166% YoY to S$32.7m.