MARKET PULSE: Ezion, Technology Sector, Sembcorp Marine & ST Eng (5 April 2012)

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.21

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.31

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.41

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: HOLD

Target Price: 5.70

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

Research House: OCBC

Price Call: BUY

Target Price: 3.32

MARKET PULSE: Ezion, Technology Sector, Sembcorp Marine & ST Eng

5 April 2012

KEY IDEA Ezion Holdings: Secures yet another service rig contract Ezion announced that it has secured a charter contract worth US$80m to provide a service rig over a four-year period in the Gulf of Mexico and is expected to be working by 4Q12. We are positive on this due to the decent forecasted ROE, management's previous working relationship with the customer, as well as the project's ability to generate a steady stream of earnings within a short period of time, barring any hiccups. We tweak our estimates, and based on 10x blended FY12/13F core earnings, raise our fair value estimate to S$1.21 (prev. S$1.05). The stock has risen 52% YTD, and is now at a 44-month high since Jul 07. However, given an estimated upside potential of about 21%, we maintain our BUYrating. (Low Pei Han) MORE REPORTS Technology Sector: Likely tale of two halves We believe that 1QCY12 could be a point of inflection for the tech sector. We are expecting a gradual improvement in industry conditions from 2QCY12, with a more significant recovery in 2HCY12. Latest industry data has provided optimism on the outlook of the tech sector, but we believe that pockets of uncertainty remain in the macro economy, while cost pressures could also pose a dampener to corporate growth. As such, we maintain NEUTRAL on the tech sector. We advocate investors to be selective on stocks within the sector. Besides Valuetronics Holdings [BUY; FV: S$0.31], we add Venture Corp [BUY; FV: S$9.41] to our preferred picks following our upgrade on 3 Apr 2012. Both companies are run by strong management teams, offer an attractive dividend yield, and are in a healthy financial position. (Wong Teck Ching Andy) Sembcorp Marine: Secures US$218.5m jack-up order Sembcorp Marine (SMM) announced that PPL Shipyard has secured a US$218.5m contract to build a jack-up rig for Gulf Drilling International. The unit will come with accommodation for 150 persons, and be able to operate in water depths of up to 400ft and drill to a depth of up to 30,000ft. The rig is scheduled for delivery in 1Q13, and will be built based on PPL's Pacific Class 400 design. We note that Gulf Drilling had earlier ordered two KFELS B Class Bigfoot jack-ups from Keppel in May last year for US$393m which will be delivered in 3Q13 and 3Q14. The short delivery time for this latest rig by SMM should mean that construction of the rig has been underway. Besides semi-sub orders, jack-up work is still streaming in, attesting to the positive outlook of the industry. Meanwhile, SMM has clinched about S$2.7b worth of new orders this year, accounting for 31% of our S$8.7b full-year estimate (inclusive of Petrobras orders). Maintain HOLD with S$5.70 fair value estimate. (Low Pei Han)

ST Engineering: Electronics arm won S$100m of contracts ST Engineering (STE) announced that its electronics segment has won a total of ~S$100m of new contracts in 1Q12. The new contracts included S$67m secured by STE's subsidiary VT iDirect to provide satellite communications systems to customers. Meanwhile, Singapore's Land Transport Authority awarded a contract to a consortium, comprising of STE and its partners, to design, supply, test and commission the onboard equipment for the additional 16 trains of the Circle Line of Singapore's mass rapid transit network. STE's portion of the contract is worth S$27m. At the end of FY11, STE reported a robust order book of S$12.3b. We maintain our BUY rating and fair value estimate of S$3.32/share on STE. (Eric Teo) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - The S&P 500 Index fell 1%, its second-biggest decline of the year, as a weak Spanish bond auction triggered a global stock selloff. - Keppel Corp.'s subsidiary Keppel Shipyard announced that it has won two FPSO projects worth S$170m. - Otto Marine's wholly owned subsidiary Otto Ventures is capitalising its A$15m (~S$19.4m) loan to its subsidiary Go Marine Group Pty. Ltd. Consequently, Otto Ventures will own a 92.6% stake. - Eastgate Technology expects to report a loss for the half year ended Feb 2012 due to longer than expected negotiations on the novation of a lease and under-provision for prior years taxes. - The couple behind the roast duck chain Dian Xiao Er has agreed to buy out Catalist-listed Soup Restaurant Group's stake in the chain for S$7.9m.