MARKET PULSE: STX OSV, OSIM and Hengyang (29 March 2012)

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.25

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.35

MARKET PULSE: STX OSV, OSIM and Hengyang

29 Mar 2012

KEY IDEA STX OSV: Well-positioned to ride an upcycle Last week, STX OSV announced that it has secured two contracts worth a total of NOK1.2bn (USD200m). As these contracts already form part of our total contract win projections for FY12F (NOK13bn), we are not making changes to our forward estimates. Of noteworthy was the contract win for an Offshore Subsea Construction Vessel for DOF, which features an innovative moon pool design developed by STX OSV. We think this is further testament to the group's ability to stay ahead of the curve for product development and garner customers' orders. Meanwhile, we are optimistic on the OSV market given the improving industry fundamentals. Maintain BUY with fair value estimate of S$2.25. (Chia Jiunyang) MORE REPORTS OSIM International: Macro risks the main concern We believe that further downside risks have emerged for OSIM International (OSIM) since our last update on 8 Feb 2012. This stems from increasing signs of easing growth in OSIM's key addressable markets, including China, Malaysia and Taiwan. In our opinion, lower economic growth could manifest into softer demand for OSIM's high-end products, which are largely discretionary in nature. To mitigate this, management would continue its innovation drive to introduce novel products with fresh concepts and better functionality, while focusing on improving its productivity per store and man. We maintain our HOLD rating and S$1.35 fair value estimate given limited upside potential. (Wong Teck Ching Andy) Hengyang Petrochemical Logistics: Coveted locations We visited Hengyang Petrochemical Logistics' port and storage facilities at Deqiao and Jiangyin along the Yangtze River in China. We anticipate that revenue could increase by ~38% in 2012 with a full-year contribution from the Deqiao facility, which came into operation in Nov 2011. In addition, the company has won coveted logistics sites at Chongqing and Wuhan. In 2012, it expects to complete the first phases of these sites and a site in Yueyang. Hengyang will need to raise additional funding for these sites. We have NO RATING on Hengyang. Although it does not currently offer dividends, it is trading at a historical P/E of 13x, which is lower than its peer group's average of 22x. According to Bloomberg, there is no target price available for this stock. (Sarah Ong)

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NEWS HEADLINES - US stocks fell, led by commodity producers, as oil slid on an increase in crude supplies and growth in orders for durable-goods missed estimates. The S&P 500 Index dipped 0.5% to 1,405.54. Oil dropped 1.8% to US$105.41 a barrel - Hiap Seng Engineering has established a strategic alliance with PetroVietnam Energy Technology Corp. This move gives Hiap Seng first priority consideration as a preferred partner for JV, consortium or subcontracting works. - AVIC International Investments announced last night that it has secured contracts worth US$60m for three tugboats, one driver boat and a bunkering tanker. - Nam Cheong announced today that it has secured US$36.8m (~S$46.3m) worth of contracts for three Anchor Handling Tower Supply vessels. - Lafe Corporation announced that its wholly-owned subsidiary has entered an agreement to sell its entire stake in Lafe Computer Components Ltd. The disposal is consistent with the group's decision to discontinue its manufacturing activities.