MARKET PULSE: Midas, ASL Marine, ECS, KS Energy, Swiber, Wilmar (16 Aug 2012)

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.41

Stock Name: ASL Marine
Company Name: ASL MARINE HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.82

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.52

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.83

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.66

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.90

MARKET PULSE: Midas, ASL Marine, ECS, KS Energy, Swiber, Wilmar

16 Aug 2012

KEY IDEA Midas Holdings: Time to board the train Midas Holdings (Midas) reported a dismal set of 2Q12 results, with PATMI plunging 97.5% YoY to RMB1.6m on the back of a 30.0% dip in revenue to RMB219.8m. Results were significantly below ours and the street's expectations. Interim DPS was also lowered from 0.5 S cents in 1H11 to 0.25 S cents in 1H12. Nevertheless, there is growing optimism of a recovery in China's high-speed railway (HSR) sector. We believe that FY12 would be a non-event for Midas as it is transitioning into a recovery in FY13. We upgrade Midas from Hold to BUY as we switch our valuation matrix to 0.8x FY13F P/B. This is premised on an anticipated pick up in Midas' orders win momentum and likelihood of a resumption of HSR passenger train car contracts by China's Ministry of Railways in the near future, which would provide a catalyst for Midas' share price. Our new fair value is S$0.41 (previously S$0.30). (Wong Teck Ching Andy) MORE REPORTS ASL Marine: Progressing on all fronts ASL Marine (ASL) reported a 26.3% increase in revenue to S$117.0m and a 42.3% rise in net profit to S$8.3m in 3QFY12 such that FY12 net profit (S$32.3m) accounted for 99% and 97% of ours and the street's full year estimates, respectively. Excluding a provision made due to a customer's financial difficulties, PATMI would have been S$37m. Management shared that it will focus on securing more repair and conversion jobs for FSOs, FPSOs and oil rigs. The group has also seen increased activity in the OSV market. ASL's shipbuilding order book stood at about S$586m as at 30 Jun, and 53% of this is should be recognized in FY13, providing good earnings visibility. We adjust our estimates with the improved outlook, and our fair value estimate rises from S$0.75 to S$0.82. Maintain BUY. Meanwhile, ASL has also declared a final cash dividend of 1.75 S cents per share, up from 1.5 S cents last year. (Low Pei Han) ECS Holdings: Focusing on key initiatives ECS Holdings' (ECS) 2Q12 PATMI declined 24.2% YoY to S$8.1m on the back of a 3.0% fall in revenue to S$823.6m. We estimate that its core earnings fell 23.1% YoY to S$7.4m. Results were below our expectations. Going forward, we continue to expect a sequential improvement in its 2H12 results, given new product launches by major IT vendors and management's focus to drive its higher-margin Enterprise Systems business. Nevertheless, as the global economic backdrop remains uncertain, we pare our FY12/13F revenue and core PATMI forecasts by 7.1/8.9% and 13.8/14.9%, respectively. This is partially mitigated as we also roll forward our valuations to 5.8x blended FY12/13F core EPS, deriving a new fair value estimate of S$0.52 (previously S$0.555). Maintain BUY on cheap valuations, with the stock trading at FY13F PER of 5.0x and P/NTA of 0.51x. (Wong Teck Ching Andy) KS Energy: Slowly turning around KS Energy (KSE) reported a 23.4% fall in revenue to S$151.6m and a net profit of S$692k in 2Q12 vs. a net loss of S$5.5m in 2Q11, such that results were within our expectations. 2Q12 marks the group's first quarterly net profit after nine consecutive quarters of net losses, and results were also not boosted by any significant one-off gains, unlike 1Q12. Management is still "working on various options" to meet a possible funding requirement for its convertible bonds. Though businesses in both distribution and drilling are improving, we are conservatively forecasting a net loss of S$3.5m for now, which is a significant improvement from FY11's S$78.8m net loss. Rolling over our valuation to 1.1x blended FY12/13F NTA, our fair value estimate slips slightly from S$0.85 to S$0.83. Maintain HOLD. (Low Pei Han) Swiber Holdings: Continues to execute in 2Q12 Swiber Holdings (Swiber) reported a 27.1% YoY rise in revenue to US$229.6m and a 103.9% YoY increase in net profit to US$15.1m in 2Q12, boosted by one-off gains of about US$10m. 1H12 revenue and core net profit accounted for about 55% and 57% of our full year estimate, largely within our expectations. The group has been active in the bond market in the past few months, which is not surprising given the amount of debt obligations that are coming up. As of Aug 2012, the group's order book stood at about US$1.6b and is expected to contribute to its performance over the next two years. Looking ahead, Swiber is still bidding for more projects in the pipeline given the positive industry outlook. However, given limited upside potential, we maintain our HOLD rating on the stock with a fair value estimate of S$0.66 (prev. S$0.63). (Low Pei Han) Wilmar: HOLD with new S$2.90 fair value Wilmar International Limited (WIL) reported a very disappointing set of 2Q12 results. Although revenue grew by 4.3% YoY to US$11,019.7m, core net profit declined 55% YoY to US$172.3m. WIL has declared an interim dividend of S$0.02/share, versus S$0.03 in 1H11. Management expects near-term operating environment to remain "challenging" in China, due to excess capacity in oilseeds crushing. Its Consumer Products business could also see margin squeeze due to rising input prices (especially from soy beans), while ability to raise selling prices may need approval from the Chinese government. To reflect the dismal 1H12 performance and still-tough operating environment, we pare our FY12 earnings forecast by 30% (FY13 by 23%). Based on a more conservative 12.5x blended FY12/FY13F EPS, versus 13.5x FY12F EPS previously, our fair value drops to S$2.90 (from S$3.87 previously). Maintain HOLD as stock is already more than two standard deviations below its 3-year average P/B. (Carey Wong)

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