MARKET PULSE: Dyna-mac, Olam, ST Eng (6 Jul 2012)

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.45

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.86

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.50

MARKET PULSE: Dyna-mac, Olam, ST Eng

6 Jul 2012

KEY IDEA Dyna-mac Holdings: Upgrade to BUY We met up with the management of Dyna-Mac Holdings Ltd (DMH) yesterday for an update on its proposed acquisition of Paliy Marine Fabricator (Guangzhou) Ltd (PMF). On 29 Jun 2012, the group announced that it intends to purchase a 70% stake in PMF, from its controlling shareholder - Paliy Marine Engineering Pte Ltd - for S$3.8m. PMF operates a 100,000sqm fabrication yard in Guangzhou and has been engaged in the fabrication of structural blocks for semi-submersibles for the past three years. Assuming full utilization and productivity level similar to its yards in Singapore, we believe this acquisition could potentially increase DMH's maximum output by 70%. We updated our model and now project a 20-40% increase in FY12-13F EPS. This, in turn, raises our fair value estimate to S$0.45. Upgrade to BUY. (Chia Jiunyang) MORE REPORTS Olam Int'l: Business as usual with new CFO Olam International Limited (Olam) recently held a luncheon for analysts to meet Shekhar Anantharaman who has just moved into a new and enhanced role as Executive Director - Finance and Business. And we believe that it should be "business as usual" for the company, given that Shekhar and his team have been with Olam for many years. Thus, management remains confident of achieving its target of recording US$1b net profit by FY16. Olam also shared more insights on its share buyback scheme, with management saying that it will continue to buy back shares as long as the implied return to existing shareholders is higher than the expected IRR of any new projects. Since Olam will be releasing its 4Q12 results soon, we are opting to leave our estimates unchanged until then. Meanwhile, we also maintain our HOLD rating and S$1.86 fair value. (Carey Wong) ST Engineering: S$210m of new contracts ST Engineering (STE) yesterday announced that its electronics segment won new contracts worth ~S$210m in 2Q12. Among the new contracts were, 1) S$98m from Singapore's Land Transport Authority (LTA) to enhance the Expressway Monitoring & Advisory System (EMAS) equipment along eight expressways in Singapore, 2) S$31.6m was also from LTA for the Tuas West Extension of Singapore's rail system, and 3) ~ S$80m to provide satellite communications systems to local and international customers. STE added that these contracts are not expected to have any material impact on the consolidated financials of the group for the current financial year. We maintain our fair value estimate of S$3.50/share andBUY rating on STE. (Eric Teo)

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NEWS HEADLINES - Despite actions by three central banks (ECB, BOE, PBOC) to lower borrowing costs, US stocks dipped as investors assessed a poor report on the services sector. The S&P 500 Index and the Dow closed down 0.5% and 0.4% respectively. - Singapore Exchange (SGX) announced today it is ready to list, quote, trade, clear and settle securities denominated in Chinese Renminbi (RMB). - Catalist-listed Chasen Holdings' 51% owned subsidiary, Hup Lian Engineering Pte Ltd, has clinched two local engineering projects worth about S$4.05m. - UPP Holdings' subsidiary, UPP Greentech Pte Ltd has entered into a 67%-33% JV with Myan Shwe Pyi Ltd. The JV company is intended to be involved with drilling, blasting and crushing rock in support of major infrastructure projects in Myanmar. - Radiance Group announced that it has completed its reverse takeover of UK satellite communications equipment specialist, Global Invacom Holdings Ltd. It also announced its name change from Radiance to Global Invacom Group Ltd. - Teledata (Singapore) Ltd has reached an amicable settlement with Christopher Michael Pan, its former chief executive who lost his job in 2010 and subsequently sued the company for alleged wrongful termination of employment.