MARKET PULSE: Sembcorp Marine, UOB, ST Engineering, Sheng Siong & Global Palm (24 Feb 2012)

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: HOLD

Target Price: 5.70

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 19.74

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

Research House: OCBC

Price Call: BUY

Target Price: 3.32

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

Stock Name: Global Palm
Company Name: GLOBAL PALM RESOURCES HLGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.195

MARKET PULSE: SEMBCORP MARINE, UOB, ST ENGINEERING, SHENG SIONG & GLOBAL PALM

24 Feb 2012

KEY IDEA Sembcorp Marine: Looking beyond FY11 Sembcorp Marine (SMM) reported a 1.5% YoY rise in revenue to S$997.6m and a 4.3% fall in net profit to S$229m in 4Q11 such that FY11 net profit was 8% higher than our expectations. This was mainly due to foreign exchange gains and substantially lower general and administrative expenses in 4Q11. Besides lower margins going forward, we also note that there are hardly any major catalysts left in the medium term after Petrobras awards its drillships orders. We have tweaked our estimates to take into account our higher new order wins assumption and updated the market value of SMM's stake in Cosco Corp. As such, our fair value estimate rises from S$5.63 to S$5.70. SMM's stock price has rallied about 37% YTD vs the STI's 12% rise and the FTSE Oil and Gas index's 24% gain. As we now see limited upside potential in the stock price, we downgrade SMM to HOLD. (Low Pei Han) MORE REPORTS UOB: Below expectations 4Q UOB Group turned in FY11 net earnings of S$2327m, down 14%, and below market expectations of S$2407m (4Q net earnings of S$558m). While Net Interest Income rose 4% to S$3678m, Non-interest Income slipped 11% to S$2020m. Impairment charge went up 10% to $523m, or S$225m in 4Q alone. Net Interest Margin reversed from 1.89% in 3Q11 to 1.95% in 4Q11. We expect corporate banking to continue to do well in FY12 as it grows its regional franchise. We are leaving our FY12 estimates intact, but raising our fair value estimate to S$19.74. Maintain BUY. (Carmen Lee) ST Engineering: Near miss with positive outlook ST Engineering (STE) 4Q11 revenue fell 5% YoY to S$1.5b but PATMI edged 2% higher to S$152m. The 4Q11 PATMI gain was primarily driven by two factors - 1) a total of S$10m of one-off losses in 4Q10 and 2) a lower tax rate of 16% in 4Q11. For the full year, STE's FY11 revenue remained flat at a tad shy of S$6b while PATMI grew 7% to S$528m, missing consensus revenue and PATMI estimates by 8% and 4% respectively. STE disclosed a record order book of S$12.3b at end-FY11 and announced a total dividend payout of 12.5 cents/share, made up by a final dividend of 4 cents/share and a special dividend of 8.5 cents/share. We increased our fair value estimate of STE to S$3.32/share, from S$3.01/share previously, and maintain our BUY rating. (Eric Teo) Sheng Siong Group: FY11 results within expectations Sheng Siong Group's (SSG) FY11 results were broadly in-line with our expectations. Revenue fell 8% YoY to S$578m following the closure of the two key outlets while net profit fell 36.1% to S$27.3m in the absence of trading gains. SSG's top-line figure exceeded our revenue projections slightly by 2.3% but an unexpected tax charge caused SSG's net profit to come in under our projected S$31m. The increase in tax was related to sale of investments in 2009 and SSG is currently requesting IRAS to review the tax assessment. A final dividend of 1.77 SG cents per share was declared (90% of net profit as previously committed) for a dividend yield of 3.6%. We will be speaking to management at SSG's results briefing later this morning and put our HOLD rating and fair value estimate of S$0.44 UNDER REVIEW. In the meantime, as mentioned in our previous report, we could see some initial selling pressure at market open due to the lower net profit. (Lim Siyi) Global Palm: Poor 4Q11 finish Global Palm Resources (GPR) ended FY11 on a pretty weak note. 4Q11 revenue grew 8.9% YoY but declined 13.3% QoQ to IDR79.23b, which the group attributed to weaker ASPs of CPO. While net profit jumped 410.6% YoY and 302.8% QoQ to IDR55.8b, it was mainly due to non-cash biological asset revaluation gains. Stripping that out, we estimate that core earnings would have been around IDR12.1b, or 3.9% below our forecast, while revenue was 10.6% below. For FY11, revenue of IDR345.6b was 2.6% below our estimate, while core net profit of IDR57.8b was 5.5% below. GPR has declared a final dividend of S$0.002/share. The group also added just 951ha in FY11, way short of its 1.6-1.7k ha target for this year. We will be speaking with management later; until, then, we place our Hold rating and S$0.195 fair value UNDER REVIEW. (Carey Wong)

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

NEWS HEADLINES - The euro rose to a 10-week high against the US$ after better-than-expected data on German business sentiment (the highest in seven months) reduced concerns about the outlook for the eurozone. - Singapore's CPI eased to 4.8% in Jan from 5.5% in Dec 2011, but core inflation, which strips out accommodation and private transportation costs, reached a 3-year high of 3.5%. The government said that core inflation is likely to hover around 3% in the next few months. - Cosco Corp. (Singapore) saw profit attributable to equity holder decline 44% to S$139.7m for FY11, due to higher operational costs in its shipyard business and higher taxes. Sales had increased by 8% to S$4.16b. - Gallant Venture reported a 44% YoY increase in revenue to S$62.9m for 4Q11. Total comprehensive income attributable to equity holders jumped to S$11.6m from S$1.05m a year ago.