MARKET PULSE: Sheng Siong, Golden Agri (14 Jun 2012)

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.49

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.74

MARKET PULSE: Sheng Siong, Golden Agri

14 Jun 2012

KEY IDEA Sheng Siong Group: Time to revisit SSG Summary: With the rest of the broad market performing poorly in the face of global uncertainty, we deem the proportionally greater sell-off of SSG (-17.3%) to be related to loss-covering as investors use gains from SSG since its IPO to cover other unprofitable ventures. Nonetheless, the sell-offs have resulted in an attractive entry point for SSG, and we base our argument on three main factors: 1) shifting consumer spending patterns towards supermarkets, 2) improving and promising operations supporting our FY12 outlook, and 3) likelihood of an interim dividend. We upgrade our rating on SSG to BUY on valuations grounds with an unchanged fair value estimate of S$0.49. (Lim Siyi) MORE REPORTS Golden Agri-Resources Ltd: Easing CPO assumptions Summary: Given the continued uncertainties in Europe, US and even China, we believe that the commodities sector could face increased headwinds; which could also affect CPO (crude palm oil) prices. In view of the increasingly less optimistic outlook, we are also paring our CPO assumptions for this year to US$925/ton from US$1000 previously. Golden Agri-Resources (GAR), being one of the largest CPO plantation owners in the world, is likely to be affected. Based on our new CPO assumption, we will be paring our FY12 forecasts by 3% (we estimate that every US$10-drop in CPO prices will trim 0.4% off our FY12 forecasts). Keeping our valuation peg at 12.5x FY12F EPS, our fair value eases slightly from S$0.77 to S$0.74. But we think that most of the negatives have been into account, hence we maintain our BUY rating on the stock. (Carey Wong)

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NEWS HEADLINES - US stocks dropped on Wednesday as worries about Europe and disappointing US data outweighed earlier optimism about the outlook for financial stocks. The Dow and the S&P 500 Index closed down 0.6% and 0.7% respectively. - Low Keng Huat registered a 39% YoY decline in 1QFY13 net profit to S$13.15m. Lower construction profit was offset by higher profits from development, hotel and investment segments. Revenue declined 17% to S$33.2m. - Boustead Singapore has won a S$14m contract to design and build an integrated food processing and office facility for RE&S Enterprises Pte Ltd. - Courage Marine Group is disposing a vessel, MV Courage, for a total cash consideration of US$4.3m. It is estimated that the group will record a US$1.8m loss on the disposal. - Medi-Flex, a cleanroom glove manufacturer, has posted a 61% YoY increase in 3Q12 to MYR1.53m (~S$615k). This was due to marginally higher revenue, better gross margins and higher foreign exchange gain. - Asia Water's 70%-owned subsidiary has entered into a build-operate-transfer agreement with the Dalian City municipal government to construct three wastewater treatment plants in Liaoning province, China. The term will be for 30 years and the investment value is ~S$31.2m.