MARKET PULSE: Golden Agri, UOL, Pac Andes, CSE Global, Goodpack, Breadtalk, SATS, Swiber (14 May 2012)

Stock Name: Pac Andes
Company Name: PACIFIC ANDES RESOURCES DEVLTD

Research House: OCBC

Price Call: BUY

Target Price: 0.178

Stock Name: CSE Global
Company Name: CSE GLOBAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.80

Stock Name: Goodpack
Company Name: GOODPACK LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.70

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.57

MARKET PULSE: Golden Agri, UOL, Pac Andes, CSE Global, Goodpack, Breadtalk, SATS, Swiber

14 May 2012

KEY IDEA Golden Agri-Resources Ltd: Upgrade to BUY Summary: Golden Agri-Resources (GAR) reported its 1Q12 results last Friday, with revenue rising 3.8% YoY and 14.4% QoQ to US$1519.1m, while net profit fell 30% YoY to US$162.0m (but made a 113% QoQ recovery). But it was a strong 113% QoQ recovery. All in, with revenue meeting 26.8% and earnings 28.1% of our full-year forecasts, Going forward, GAR believes that the industry outlook remains resilient with robust demand growth for palm oil coming from both emerging and develops countries; prices are also likely to be supported by limited supply growth of other vegetable oils, especially soybean. With numbers coming in mostly in line with our expectations, we are keeping our FY12 and FY13 forecasts unchanged. Still based on 12.5x FY12F EPS, our fair value also remains unchanged at S$0.77. But we upgrade our rating from Hold to BUYas the stock price has corrected quite a bit since our previous downgrade which we believe should have captured quite a bit of the negatives. (Carey Wong) MORE REPORTS UOL Group: 1Q12 earnings in line - Upgrade to BUY Summary. UOL reported 1Q12 PATMI of S$84.0m, down 63% YoY mostly due to reduced profits from the property development segment and from associates (after Nassim Park Residences' TOP in 1Q11). This was broadly aligned with consensus and our estimates. 1Q12 top-line came in at S$297.7m, down 59% again mainly due to lower sales of development properties. Given limited land-bank, we believe UOL to be relatively sheltered from uncertainties in the domestic residential space ahead. The group's balance sheet also remains healthy; cash is at S$334.2m and gearing at 33%. Upgrade to BUY with a marginally higher fair estimate of S$4.80 (30% RNAV discount), versus S$4.77 previously, mostly due to higher ASPs for Katong Regency. (Eli Lee)

Pacific Andes: Outlook is fairly positive Summary: Pacific Andes Resources Developments Ltd (Pacific Andes) reported a stronger-than-expected 23% YoY jump in 2Q net earnings to HK$333.0m. Going forward, there are several positives including better quota, catch volume, higher selling prices for fishmeal as well as better efficiency and contribution from Tassal. In terms of its key markets, China is stable and it is seeing demand coming back from Japan and Korea. Africa is expected to be the fastest growing market for the group. We have raised our FY12 earnings from HK$731m to HK$791m due to the stronger 2Q. Using the same 6.5x earnings peg and adjusting for the rights issue, our fair value estimate for the stock is 17.8 cents. At current price, we maintain our BUY rating. (Carmen Lee) CSE Global: Buy into the recovery Summary: CSE Global (CSE)'s 1Q results came in broadly in line within our and the street's expectations. 1Q12 revenue increased by 31% to S$134.7m (1Q11: S$102.6m), while net profit was flat at S$12.6m (1Q11: S$12.5m). Gross margin declined to 31.4% (1Q11: 40.9%), on (i) additional work incurred on its telecom projects, (ii) higher proportion of greenfield projects and (iii) lower license contribution from the UK healthcare sector. After three consecutive quarters of operating cash deficits, CSE reverted back to a positive operating cashflow (S$8m) in 1Q12 and lowered its net gearing to 30.4% (end Dec-11: 34.6%). With improvements seen in its cash-flow and gearing level, we upgrade our rating to BUY with unchanged fair value estimate of S$0.80. (Chia Jiunyang) Goodpack Limited: Cost controls working out Summary: Goodpack's 3QFY12 revenue grew 4.2% YoY (-0.1% QoQ) to US$43.5m following increased contribution from its newly-won automotive business and higher prices charged on existing customers while a 1.5% YoY (+2.2% QoQ) reduction in logistic and handling costs pushed PATMI higher by 8.6% YoY (+8.0% YoY) to US$11.5m. For 9M12, Goodpack's revenue and PATMI constituted 75.6% and 75.9% of our FY12 projections, falling within our overall expectations. Going forward, we expect Goodpack to close out FY12 well with demand of its IBCs holding up well in the face of automotive industry support, and further reductions in operating expenses with its cost control initiatives. Following our 15 March take-profit call on Goodpack, the counter has since retreated by more than 13% and we deem the sell-downs to be over. As its results were largely in-line with our expectations, we leave our FY12 and FY13 projections and corresponding fair value estimate of S$1.70 unchanged. Upgrade our rating to HOLDon valuation grounds. (Lim Siyi) BreadTalk Group: Promising outlook ahead Summary: BreadTalk Group's (BTG) reported slight improvements in its 1Q12 results that were well within our expectations. Revenue grew 27.4% YoY (+5.6% QoQ) to S$106.1m on the back of stronger sales in China's bakery division, and gross profit margin improved by 0.5 percentage points YoY (-0.5 ppt QoQ) to 54.3%. Net profit climbed 15.1% YoY to S$1.4m - although it fell 64.3% QoQ on seasonality factors (4Q is typically the strongest quarter) - following higher contributions from the Bakery and Restaurant segments. Going forward, we expect BTG's revenue growth to persist as the growth in Asia maintains its upward push. While operating margin may remain depressed, as is typical of a company undergoing an expansion phase, we retain our confidence in management's ability in controlling costs and highlight the general stability in gross profit margins over the years. With BTG's results in-line with our expectations, we keep our FY12 projections unchanged and reaffirm our HOLD rating with an unchanged fair value estimate of S$0.57. (Lim Siyi) SATS Ltd: Results in line with expectations Summary: SATS Ltd (SATS) this morning released its 4QFY12 and FY12 financial results that were mostly in line with market expectations. SATS' FY12 PATMI came in at S$171m, or 2% higher than consensus estimate, even though revenue was 2% below the street's estimate at S$1.7b. SATS' FY12 revenue from continuing operations jumped 24% but PATMI tumbled 11%. For 4QFY12, revenue from continuing operations gained 8% to S$433m though PATMI fell 1% to S$50m. The fall in PATMI in 4QFY12 can be partially attributed to the discontinued operations, which contributed S$6m of PATMI in 4QFY11. We put our fair value estimate of S$2.43/share and Hold rating on SATS UNDER REVIEW, pending a briefing with management later today. (Eric Teo) Swiber Holdings: 1Q12 results within expectations Summary: Swiber Holdings (Swiber) reported a 29.1% YoY rise in revenue to US$194.4m but saw a 10.6% fall in net profit to US$8.6m in 1Q12, accounting for 27.0 % and 27.4% of our full year estimates, respectively. Gross profit margin increased from 16.2% in 1Q11 to 19.8% in 1Q12, but was lower on a sequential basis (4Q11: 21.0%). Current borrowings stood at US$372.8m with a cash balance of US$139.3m as at 31 Mar 2012. Meanwhile, the outstanding order book of about US$1.2b is expected to contribute to results over the next two years. Pending an analyst briefing in the afternoon, we put our Hold rating and fair value estimate of S$0.75 UNDER REVIEW. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - The US stock indexes edged lower as news of US$2b in trading losses at J.P. Morgan Chase led financials lower. The S&P 500 Index and DJIA both dropped 0.3% on Friday. - Over the weekend, Greece failed to form a coalition party, increasing concerns about an exit from the euro-area zone. Another vote might take place as early as next month. - Chuan Hup Holdings 3Q12 net profit rose by 24% YoY to US$12.8m. Revenue had jumped from US$1.8m to US$56m mainly due to the consolidation of PCI Ltd's results. - Chemoil Energy's saw 1Q12 net profit decline 62% YoY to US$8.8m. Revenue had grown 36% to US$3.5b. - Shipbuilder Jaya Holdings registered a 89% YoY drop in net profit for 3Q12 to US$3.8m. Revenue had climbed by 17% to US$16.2m. - Kencana Agri posted a 54% YoY decline in 1Q12 net profit to US$2.2m, despite revenue increasing 62% to US$48m.