MARKET PULSE: Olam, Micro-Mechanics, Sembcorp Marine, Karin (29 Aug 2012)

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.80

Stock Name: Micro-Mech
Company Name: MICRO-MECHANICS (HOLDINGS) LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.325

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.09

Stock Name: Karin
Company Name: KARIN TECHNOLOGY HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.265

MARKET PULSE: Olam, Micro-Mechanics, Sembcorp Marine, Karin

29 Aug 2012

KEY IDEA Olam Int'l: Cautious FY13 outlook Olam International Limited (Olam) saw FY12 revenue rising 8.2% to S$17.1b, but reported net profit fell 13.7% to S$370.9m, which missed our forecast. It also declared a lower dividend of S$0.02 (versus S$0.03 in FY11). Going forward, Olam expects to see some uncertainty and volatility in the near term, but remains positive on the Agri-industry prospects. In light of the still muted outlook, we pare our estimates for FY13 revenue by 9.8% and core earnings by 6.2%. Hence even as we roll forward our unchanged 12.5x peg to FY13F EPS (from blended FY12/FY13 previously), our fair value drops to S$1.80. Maintain HOLD and would only consider accumulating around S$1.60 or better. (Carey Wong) MORE REPORTS Micro-Mechanics: Decent showing amid tough environment Micro-Mechanics Holdings (MMH) reported 4QFY12 results which beat our expectations. Revenue declined 6.8% YoY to S$10.3m, while net profit fell slightly by 0.4% YoY to S$1.4m, such that FY12 revenue and net profit of S$38.8m (-14.4%) and S$4.2m (-38.2%) exceeded our estimates by 2.8% and 7.3%, respectively. A final dividend of 2 S cents/share was declared, bringing total FY12 dividends to 3 S cents/share. This was similar to FY11 and our forecast, and translates into a yield of 7.7%. Looking ahead, sentiment within the semiconductor industry remains cautious, while cost pressures are also apparent. MMH is seeking to mitigate this via the implementation of more automated processes to improve its efficiency and lead time. We keep our FY13 projections and introduce our FY14 estimates. Maintain HOLD and S$0.325 fair value estimate, still based on 9x FY13F EPS. (Wong Teck Ching Andy) Sembcorp Marine: FPSO contract materialises, as expected Sembcorp Marine (SMM) announced that it has secured a contract worth US$674m for the construction of eight modules and module integration works for two FPSO vessels from Tupi B.V. (a consortium owned by Petrobras Netherlands, BG Overseas and Galp Energia E&P). Scheduled for completion in 60 months, the two FPSOs will be deployed in Brazil. Tupi also has a similar contract option to construct four modules and module integration work for an FPSO which can be exercised within 18 months. As mentioned in our earlier reports (8 Aug, 22 Aug 2012), SMM is expected to secure FPSO work from Petrobras and hence this latest announcement is within our expectations. With this contract win, SMM has secured contracts worth about S$9.1b YTD, accounting for 95.9% of our full year estimate. Maintain BUY with S$6.09 fair value estimate. (Low Pei Han) Karin Technology: 2HFY12 core earnings below expectations Karin Technology's (Karin) 2HFY12 revenue was within our expectations but core PATMI missed. Revenue jumped 35.3% YoY and 12.7% HoH to HK$1,712.9m, while reported PATMI surged 22.0% YoY and 61.3% HoH to HK$36.9m. But after adjusting for forex effects and other exceptional items, we estimate that core PATMI would instead have decreased 12.1% YoY and 16.2% HoH to HK$21.4m. For FY12, revenue accelerated by 49.1% to HK$3,232.3m, or 1.8% above our forecast. This growth was driven largely by its Consumer Electronics Products segment (now separated from the IT Infrastructure segment for reporting purposes), which entails the selling of a full range of Apple products through Karin's retail stores. Reported PATMI for FY12 grew 15.7% to HK$59.7m. We estimate that core PATMI fell 7.2% to HK$46.9m, which was 14.1% below our projections. On a positive note, a final dividend of 7.1 HK cents/share was declared, bringing total FY12 dividends to 14.1 HK cents/share, or a yield of ~8.8%. This is in line with our forecast and compares favourably to FY11's DPS of 12 HK cents. We will provide more details after the analyst briefing. For now, we place our Hold rating and S$0.265 fair value estimate under review. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks ended mostly lower on Tuesday as investors weighed mixed economic reports and were cautious ahead of possible central-bank moves. The Dow fell 0.17% to 13,102.99. The S&P 500 Index slipped 0.08% to 1,409.30. - Sim Lian Group's FY12 net profit was S$229.1m, up 14%. Revenue climbed 3% to S$764m. - Eu Yan Sang's FY12 net profit was down 35% to S$16.4m. Revenue had risen 9% to S$289.9m. - Loyz Energy has clinched its first major onshore exploration and production agreement in the US and says that the contract could potentially contribute quickly to earnings and cash flow. - Magnus Energy posted a FY12 net loss of S$684k, versus PATMI of S$1.51m for FY11. Revenue had fallen 12.7% to S$48.3m.