MARKET PULSE: SATS, Osim and CSE Global (08 Feb 2012)

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 2.43

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.35

Stock Name: CSE Global
Company Name: CSE GLOBAL LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.80

MARKET PULSE: SATS, Osim and CSE Global

8 Feb 2012

KEY IDEA SATS Ltd: Increased costs eating into margins Summary: SATS Ltd's (SATS) reported 3QFY12 revenue of S$442m and PATMI of S$38m, representing minimal growth in revenue and a fall of 25% in PATMI from a year ago. However, if we remove the contribution of the divested Daniels Group from its 3QFY11 financials, SATS' 3QFY12 revenue is up 32% YoY. The significant fall in PATMI can be attributed to 1) an overall increase in cost, 2) lower profit contribution from overseas associates, and 3) a swing from an operating profit to a disposal loss in the discontinued Daniels operations. We retain our fair value estimate of SATS at S$2.43 per share, derived from a P/E multiple of 15x, and downgrade SATS to a HOLD, based on valuation grounds. (Eric Teo) MORE REPORTS OSIM International: Downgrade to HOLD Summary: OSIM International Ltd (OSIM) reported its 4Q11 results that were within our expectations. Revenue increased 7.6% YoY to S$142.7m, while net profit inched up 0.8% to S$17.1m. For FY11, revenue of S$553.7m (+8.8%) and net profit of S$69.1m (+37.9%) formed 101.5% and 99.5% of our forecasts, respectively. A final cash dividend of 1 S cent was declared, bringing total FY11 dividends to 3 S cents. Looking ahead, we expect OSIM to continue its focus on product innovation and improving its productivity and sales per store. Nevertheless, we opine that slower economic growth in its major markets could pose higher risks for the group. We lower our FY12 earnings forecasts by 5.1% and derive a fair value estimate of S$1.35 (previously S$1.37), partially mitigated by a smaller share base due to recent share buybacks. Downgrade to HOLD. (Wong Teck Ching Andy) CSE Global: Investor confidence may be shaken Summary: Investor confidence inCSE Global may be shaken after recently issuing a profit warning for its 4Q11 earnings. We note that this is the second disappointment in FY11 - which we also view as a leadership transition year - and this could lead to a market de-rating on higher perceived risks. While we have adjusted our FY11 numbers, we have kept our FY12 estimates unchanged. However, we are lowering our valuation peg from 9x previously to 7.5x, resulting in a lower fair value of S$0.80 (versus S$1.06). We also downgrade our call to HOLD. (Chia Jiunyang)

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NEWS HEADLINES - US stocks rose, Treasuries fell and the euro strengthened on the back of progress by the Greek government to secure international aid. Greece is working on a final draft of reform to enable it to receive a second aid package. - The People's Bank of China has pledged support for construction of affordable housing and will ensure that "loan demand for first-home families is met". According to government data, home prices in 52 of 70 major cities declined from Nov to Dec last year. - Global Investments Ltd recorded a net profit of S$12.2m, up 84.8%, for FY11. The increase is mainly due to a 55% decrease in total expenses. - Structural steel specialist T T J Holdings, announced yesterday that it has secured ~S$19m in new contracts, increasing its order book to date to a robust S$200m, which the company says will keep it "busy till FY2013", which ends on 31 Jul 2013. - Fastube Ltd, which manufactures precision steel tubes for automobile, oil and natural gas production and machinery manufacturing, issued a warning loss yesterday for FY11 as a result of negative gross margin and impairment charges.