MARKET PULSE: StarHub, Rotary and MP Marine (07 May 2012)

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: HOLD

Target Price: 3.10

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.61

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.43

MARKET PULSE: StarHub, Rotary and MP Marine

7 May 2012

KEY IDEA StarHub Ltd: 1Q12 results slightly ahead Summary: StarHub Ltd saw 1Q12 revenue climbed 5.8% YoY (but eased 3.5% QoQ) to S$590.9m, or just 2% shy of our forecast. Net profit jumped 27.0% YoY (down 4.6% QoQ) to S$88.3m; while the figure was nearly 13.2% ahead of our forecast, we note that the increase came mainly from the NBN roll-out - higher adoption grants and also higher amortised income. And as expected, StarHub has declared a quarterly dividend of S$0.05/share. For FY12, management has kept its previous guidance and this could disappoint the street as some expectations of a possible capital management, or a higher dividend payout, have been built in by the recent share price outperformance. As the numbers were mostly in line with our expectation, we are leaving our forecasts unchanged. We also note that the higher adoption grants and amortised income for the NBN roll-out are unlikely to be repeated in the subsequent quarters, or at least not in the same magnitude. Hence, we are also keeping our DCF-based fair value of S$3.10. Maintain HOLD. (Carey Wong) MORE REPORTS Rotary Engineering: 1Q results hit by lower gross margin and FX loss Summary: Rotary Engineering (Rotary) reported a dismal set of 1Q12 results and this came in below our and the street's expectations. Although net revenue increased by 2% YoY, profit attributable to shareholder fell by 41% to S$3.2m on lower gross margins (1Q12: 14%; 4Q11: 18%) and a steep foreign exchange loss of S$4.6m. On a positive note, Rotary's net cash position has improved to S$46m as of end-Mar 12 (end-Dec 11: S$5m). We lowered our FY12-13F gross margin assumptions to 15-16% (previously 20%) and our P/B valuation peg to 1.2x (previously 1.3x). This in turn lowered our fair value estimate to S$0.61 (previously S$0.72). Maintain HOLD. (Chia Jiunyang) Marco Polo Marine: In-line 2QFY12 results Summary: Marco Polo Marine (MPM) reported a 40% YoY rise in revenue to S$31.0m but saw a 22% fall in net profit to S$4.2m in 2QFY12, such that 1HFY12 figures accounted for 53% and 49% of our full year estimates, respectively. Revenue was boosted by the group's shipbuilding and repair operations, but a drop in other operating income and an increase in administrative expenses led to a lower bottom-line. There was also a S$0.8m share of loss of associated companies which was mainly due to unrealized foreign exchange losses by BBR. Pending an analyst briefing later, we maintain our HOLD rating but put our fair value estimate of S$0.43 under review. (Low Pei Han)

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

NEWS HEADLINES - US stocks slumped on Friday, sending the S&P 500 Index to its biggest weekly retreat this year, due to disappointing data on the labour markets in America and Europe. - SC Global recorded a net loss of S$10.0m for 1Q12 versus a net profit of S$72.8m a year ago. Revenue had declined 78% YoY to S$49.8m. - GEMS TV saw PATMI for 3Q12 jump 896% YoY to S$1.45m, mainly due the sale of its remaining inventory to Multimedia Commerce Group. - Ultro Technologies posted a net loss of S$360k for 1Q12 versus a net profit of S$2.15m a year ago. - Eratat Lifestyle registered a 19% YoY drop in 1Q12 revenue to RMB187.7m. PATMI dropped 64% to RMB13.5m.