MARKET PULSE: M1, Residential Property, ASL Marine, SATS, SIA, Tiger Airways and Bumi Armada (17 April 2012)

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.81

MARKET PULSE: M1, Residential Property, ASL Marine, SATS, SIA, Tiger Airways and Bumi Armada

17 April 2012

KEY IDEA M1: 1Q12 results as expected M1 Ltd reported its 1Q12 results last evening, with revenue coming in at S$262.5m, up 1.9% YoY, or around 2.1% shy of our forecast. While total revenue was down 17.2% QoQ, it was mainly due to the 44.8% drop in handset sales; mobile services revenue continued to grow, rising 2.6% YoY and 1.4% QoQ. As a result, net earnings - though down 5.3% YoY, rebounded 7.2% QoQ to S$40.3m, or just 1.7% below our estimate. For 2012, M1 has maintained its previous guidance, expecting stable performance at both top and bottom-line; and keeps capex guidance of S$110-130m. While M1 did experience a lower free-cashflow (down 48.5% YoY and 47.6% QoQ) of S$24.1m, it was due to payment made in 1Q12 for stocks delivered in 4Q11. As such, it is likely one-off and will not affect our DCF-based fair value of S$2.81. Maintain BUY. (Carey Wong) MORE REPORTS Singapore Residential Property: Momentum carries into March URA data yesterday showed 3,032 new private residential homes (including 639 EC units) sold in Mar 2012. Excluding EC and landed-units, new home sales were mostly flat MoM and up 76% YoY to 2,363 units - keeping up the rapid pace from Feb 2012. The take-up rate continued to be healthy at 94%, coming down somewhat from 110% last month. We continue to witness broad-based buyer demand across the market underpinned by ample liquidity and buoyant buyer sentiment, but remain cautious of additional curbs given the rapid sales pickup after ABSD measures only in Dec 2011. Moreover, we continue to be wary of potential macro-economic headwinds going forward given residual uncertainty in Europe. We maintain a NEUTRAL stance on residential developers. Our top property picks are CMA [FV: S$1.79, BUY] and CAPL [FV: S$3.40, BUY]. We have a SELL rating on CDL [FV: S$8.92]. (Eli Lee) ASL Marine: Wins S$132.5m shipbuilding orders ASL Marine (ASL) announced that it has secured contracts worth S$132.5m for the construction of five vessels: four 75-tonne bollard-pull hybrid Azimuth stern drive tugs and a platform supply vessel scheduled for delivery between 4Q13 and 4Q14. This brings the group's new shipbuilding contracts to a total of S$454.5m so far in FY12 (FY ends Jun); about US$186.5m worth of contracts have been announced since Jan this year. Meanwhile, the ship-repair division has also clinched conversion and upgrading works for two drilling rigs, which we estimate is likely lower than S$20m in contract value. Order momentum has picked up for ASL and we are expecting more work ahead. Maintain BUY with S$0.68 fair value estimate. (Low Pei Han) SATS Ltd: Strong passenger growth SATS Ltd (SATS) last night announced its 4QFY12 operating statistics. Unit flights handled increased 9.6% YoY to 29,260 while unit meals produced gained 6.3% YoY to 5.26m. The gain in unit meals produced was driven by a strong passenger growth of 10% YoY. However, cargo processed fell 2.4% to 351,430 tonnes due to soft consumer demand for electronics and manufactured goods in Europe and America. We maintain our fair value estimate of S$2.43/share and HOLD rating on SATS. (Eric Teo) Singapore Airlines: Passenger load factor up again Singapore Airlines (SIA) last night reported its Mar 2012 operating statistics and the parent airline's passenger load factor (PLF) gained YoY for the second month in a row. SIA's PLF rose significantly to 79.5%, from 73.2% in Mar 2011. While it is encouraging to see the recovery of SIA's core operations gaining momentum, it is worth noting that air travel in Mar 2011 was hit by an earthquake in Japan. Elsewhere, SilkAir's passenger traffic again gained a strong 20% YoY and its passenger capacity grew 19.1% YoY. As a result, SilkAir's PLF edged 50bps higher YoY to 75.5%. SIA Cargo's freight capacity shrank 2.6% YoY while its freight traffic dipped 1.9% YoY. Consequently, SIA Cargo's freight load factor (FLF) also gained 50bps YoY to 65%. We maintain our fair value estimate of S$10.85 per share and HOLD rating on SIA as we wait for SIA's recovery to gather pace. (Eric Teo) Tiger Airways: SEAir acquisition revived Tiger Airways (TGR) last night said it has signed a revised term sheet with existing foreign investors for it to purchase a 40% stake in the Philippines' South East Asian Airlines (SEAir) for US$7m. The new term sheet replaces the original, where TGR was to acquire a 32.5% stake in SEAir for US$6m. This is a positive development to TGR because 1) its strategy of forming joint-ventures around the region will help it to absorb the upcoming new aircraft deliveries, and 2) this increases the chance of TGR collecting the S$7m owed by SEAir for the sub-leasing of two A319 aircraft. However, we maintain our SELL rating and fair value estimate of S$0.60 per share on TGR because TGR's core operations should only improve later this year when its Australian service ramps up to optimal capacity. (Eric Teo) Bumi Armada: Wins USD200m contract from Lukoil Bumi Armada announced last evening that it has won a USD200m contract from Russian oil major for the engineering, procurement, installation and commissioning (EPIC) work for the Filanovosky field development in Caspian Sea. The project will take about 32 months with majority of the construction work slated for completion by end-2014. As the contract win already formed part of our FY12-14 projections (we expect about M$200-600m of contribution from the Oilfield services segment annually over 2012-14), we will be keeping our estimates unchanged. We currently have a HOLD rating with a fair value estimate of M$4.75. (Chia Jiunyang)

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NEWS HEADLINES - Better-than-expected US retail sales data moved the Dow Jones Industrial Average up, while the biggest drop in Apple's shares since Oct pulled the S&P 500 and the Nasdaq into the red. - K-REIT Asia's distributable income for 1Q12 doubled from 4Q11 to S$48.5m due to the 87.5% interest in Ocean Financial Centre acquired in Dec. DPU is 1.90 S-cents and annualized distribution yield is 7.9%. - CapitaRetail China Trust registered net property income growth of 18.3% YoY for 1Q12. DPU grew 12.1% YoY to 2.41 S-cents, giving an annualized distribution yield of 7.7%. - K-Green Trust, which has three energy and water treatment plants in Singapore, reported net profit of S$3.5m for 1Q12 ended Mar, same as for the previous year.