MARKET PULSE: STX OSV, Residential Property, Olam, KS Energy, Biosensors, SIA (16 May 2012)

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.00

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.24

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.85

MARKET PULSE: STX OSV, Residential Property, Olam, KS Energy, Biosensors, SIA

16 May 2012

KEY IDEA STX OSV: Results in line STX OSV reported 1Q12 results that were broadly in line with our and the street's estimates. 1Q revenue decreased by 12% YoY to NOK2.8b (1Q11: NOK3.2b), while net profit attributable to shareholders fell by 13% YoY to NOK269m (1Q11: NOK310m). Operating margin was unchanged at 12.9%. Order-book fell slightly to NOK16.0b (end-FY11: NOK16.7b). To account for the increasing uncertainty over the eurozone bloc, we tweaked our valuation peg to 9x (previously 9.7x). Maintain BUYwith lower fair value estimate of S$2.00 (previously S$2.25). (Chia Jiunyang) MORE REPORTS Singapore Residential Property: Signs of life in high-end/mid-tier segments URA data yesterday showed 2,660 new private residential homes (including 173 EC units) sold in Apr 12 - down 12% MoM. Excluding EC and landed-units, new home sales were up 4% MoM and 40% YoY to 2,449 units - a 33-month high since Jul 09. The take-up rate continued to be exuberant at 103%. While Apr sales in the mass-market segment (OCR) came down 18% MoM, we saw a 53% increase in mid-tier sales (RCR) to 779 units mostly due to a sell-out launch at the 244-unit Katong Regency. Interestingly, we also saw high-end sales (CCR) come up 247% to 191 units, boosted by the launch of Eon Shenton and healthy sales at older projects, such as Marina Bay Suites and Scotts Tower. Maintain NEUTRAL weight on the sector given potential property measures and residual uncertainty in Europe. Our top property picks are CapitaMalls Asia [BUY, FV: S$1.76] and CapitaLand [BUY, FV: S$3.21]. Within the small-cap space, we favor Roxy-Pacific [BUY, FV: S$0.45]. We have a SELL rating on City Developments (FV: S$8.92). (Eli Lee) Olam Int'l: HOLD but expect near-term weakness Olam International Limited (Olam) reported 9MFY12 revenue of S$11,947.7m and estimated core net profit of S$215.3m, meeting 63.2% and 60.5% of our FY12 estimates respectively. Going forward, Olam seems to be a tad more optimistic about its Food business; and more muted towards its Industrial Raw Materials segment. While we are keeping our FY12 and FY13 estimates intact, we note that the market is adopting a more "risk off" approach in light of the renewed global economic uncertainties. In response, we lower our fair value to S$2.24 from S$2.63, based on 15x blended FY12/FY13F EPS (vs. 18x FY12F previously). We maintain our HOLDrating in anticipation of more near-term weakness among commodity plays. (Carey Wong) KS Energy: Preparing funds for CB redemption? KS Energy (KSE) reported a 5.6% fall in revenue to S$120.2m and a net loss of S$193k in 1Q12 vs. a net loss of S$7.9m in 1Q11. Revenue was within our expectations, accounting for 22.3% of our full year estimates. We estimate core net loss of S$10.5m in the quarter, close to our full year net loss forecast of S$11.3m. The group's convertible bonds may be redeemed by bondholders in Mar 2013, but KSE has proven adept at raising funds from investors and partners. Hence we would not be surprised if there are news of further tie-ups in the near future. In line with recent weakness in market sentiment which has impacted valuations of the broader industry, we lower our peg from 1.5x to 1.4x FY12F NTA, such that our fair value estimate slips to S$0.85 (prev. S$0.91). Maintain HOLD. (Low Pei Han) Biosensors International Group: Announces large-scale clinical trial and study Biosensors International Group (BIG) made two announcements regarding its products. The first involves the selection of its flagship BioMatrix Flex™ drug-eluting stent (DES) and proprietary Biolimus A9™-drug technology platform for GLOBAL LEADERS, the largest ever randomised and independent clinical trial involving a DES. This is expected to enrol ~16,000 patients. The second includes a first large-scale study for its BioFreedom™ polymer-free drug-coated stent (DCS), which is BIG's next-generation stent. BioFreedom™ is currently awaiting CE Mark approval. We are positive on these two developments as clinical trial results is one of the most important factors impacting a physician's decision to adopt a DES for use. Hence any positive outcomes reported would enable BIG to further drive its penetration rates, in our view. In addition, we do not see much justification in BIG's recent share price slide. While there are concerns over stent price cuts in Japan and China as well as rising competitive pressures, we opine that these concerns are not new to the market and we had previously highlighted them in our report. BIG is slated to release its FY12 results on Tue 29 May 2012. We expect the group to meet our revenue and core PATMI estimates of US$291.4m (+86.1%) and US$102.4m (+94.6%), respectively. Maintain BUY and fair value estimate of S$1.92. (Wong Teck Ching Andy) Singapore Airlines: Passenger load factor up for 3rd month Singapore Airlines (SIA) released its Apr 2012 operating statistics and the parent airline's passenger load factor (PLF) gained YoY for the third month in a row. SIA's PLF rose significantly to 79.7%, from 74.6% in Apr 2011. SIA said flights to all regions recorded higher PLFs after promotional fares boosted passenger traffic. The move to increase promotional activities is in line with management's guidance post the announcement of FY12 earnings that passenger yields will likely come under further pressure. Elsewhere, SilkAir's PLF gained 2.5ppt higher to 77.2%. SIA Cargo cut its freight capacity by 4.6% YoY but its freight traffic contracted 8.8% YoY, resulting in its freight load factor falling to 62.6% from 65.5% a year ago. We maintain our fair value estimate of S$10.85/share and HOLD rating on SIA. (Eric Teo)

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NEWS HEADLINES - US stocks dipped lower with concern about Greece's failure to form a coalition government and reports of stress on the Greek banking system. The S&P 500 Index and the DJIA declined 0.4% and 0.3% respectively. - First Resource's 1Q12 net profit rose 60% YoY to US$49m. Revenue climbed 82% to US$165m. - Fragrance's 1Q12 net profit climbed 55% YoY to S$22m on the back of a revenue increase of 82% to S$94m. - Hong Leong Asia posted a 25% YoY drop in 1Q12 net profit to S$13.9m. Revenue declined 12% YoY to S$1.1b. - HG Metal reported a net loss of S$1.9m for 2Q12, versus a net profit of S$3.3m a year ago despite revenue rising 44% to S$86.5m. - Nam Lee Pressed Metal Industries registered a 31% YoY increase in net profit to S$7.3m. Revenue increased 16% to S$93.4m.