MARKET PULSE: SembCorp Marine, Hyflux, DBS, LMIRT, Roxy-Pacific (3 Aug 2012)

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.69

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.35

MARKET PULSE: SembCorp Marine, Hyflux, DBS, LMIRT, Roxy-Pacific

03 Aug 2012

KEY IDEA Sembcorp Marine: Expecting more in 2H12 Sembcorp Marine (SMM) reported a 46.4% YoY rise in revenue but saw a 4.6% fall in net profit to S$142.8m in 2Q12, such that 1H12 net profit accounted for about 40% of both ours and the street's full year estimates. However we had noted in our earlier report "More going for SMM in 2H12" (27 Jun 2012) that we expect SMM's earnings to pick up in 2H12 as higher margin contracts contribute to the group's results. Operating margin was 13.1% in 2Q12 but the group is still striving to achieve 14-15% for the year. Enquiries remain healthy and we expect them to consequently add to the group's current order book of S$6.6b (vs S$5.1b as at end 2011). Meanwhile, construction at the Singapore and Brazil yards are progressing well. We tweak our estimates and update the market value of Cosco Corp in our SOTP valuation. As such, our fair value estimate slips slightly from S$5.71 to S$5.69. Maintain BUY. (Low Pei Han) MORE REPORTS Hyflux: 2Q12 results in-line Hyflux Ltd saw 1H12 revenue +66% to S$329.3m, meeting 56% of our FY12 forecast, while net profit rose 15% to S$25.2m, or 39% of our full-year forecast. We deem the results to be in-line as Hyflux typically achieves 40% of its earnings in the first half. It also declared an interim dividend of 0.7c/share, up from 0.6c last year. Current order book stands at S$1.6b, but the achievement of financial close of its Dahej desalination project in India could bump it up to S$2.2b (we expect it to be more of a FY13 story). As results were mostly in line with our expectations, we maintain our HOLD rating and S$1.35 fair value (18x FY12F EPS). (Carey Wong) DBS: 2Q earnings were in line with expectations DBS Group Holdings Ltd posted 2Q12 net earnings of S$810m, slightly above market expectations of S$807m from a Bloomberg poll. This is up 10% YoY, but down 13% QoQ. Overall, 1H12 earnings amounted to S$1743m, up 13%. Net Interest Income rose 10% YoY but was down 1% QoQ to S$1324m in 2Q12. Non-interest Income fell 3% YoY and 24% QoQ to S$621m. The QoQ decline was largely due to strong trading gains in 1Q12. Net Interest Margin (NIM) fell from 1.80% in 2Q11 and 1.77% in 1Q12 to 1.72% in 2Q12. It declared an unchanged interim dividend of 28 cents. The stock will be quoted ex-dividend on 15 Aug 2012. Pending the outcome of the analysts' briefing later on in the day, we may revise our earnings estimates. For now, we put our Buy rating and fair value estimate of S$15.40 UNDER REVIEW as the stock has appreciated in recent weeks and is now trading close to our fair value estimate. (Carmen Lee) Lippo Malls Indo Retail Trust: First take on 2QFY12 results Lippo Malls Indonesia Retail Trust's (LMIRT) reported its 2QFY12 results after the market close yesterday. NPI and distributable income grew significantly by 36.2% and 44.3% YoY to S$30.7m and S$17.1m respectively, due to full-quarter contribution from Pluit Village and Plaza Medan Fair that were acquired in Dec 2011. DPU for the quarter came in at 0.79 S cents, down from 1.09 S cents as a result of the 1-for-1 rights issue in 4Q11. However, this represents a 14.5% QoQ improvement from DPU of 0.69 S cents achieved in prior quarter. For 1HFY12, NPI was up 37.1% YoY to S$61.6m, meeting 51.1% of full-year estimate. 1HFY12 DPU, on the other hand, was down 34.5% to 1.48 S cents, equivalent to 42.9% of our DPU projection. This is slightly below our expectations, as the impact from unfavourable forex movement was larger than expected. We will be speaking to management later to get more insight on its financial performance and outlook. For now, we put our Buy rating and S$0.43 fair value estimate UNDER REVIEW. (Kevin Tan) Roxy-Pacific Holdings: 2Q12 results within expectations Roxy-Pacific announced 2Q12 PATMI of S$17.7m - up 8% YoY. This is in line with expectations and 1H12 PATMI (S$26.8m) now forms 49% of our FY12 forecast. 2Q12 top-line came in at S$52.7m, which increased 13% YoY mostly due to recognition from Spottiswoode 18 and Space@Kovan and a 3% YoY uptick in hotel revenue as RevPar climbed to S$181.2 in 2Q12 (2Q11: S$175.4). We note ROXY's gross margin improved 10 percentage points YoY to 29% as the group began revenue recognition at key development projects with higher margins. Management has also declared an interim dividend of 0.67 S-cents. We would speak with management later today regarding 2Q12 results, and in the meantime, put Buy rating at a fair value estimate of S$0.45 (25% RNAV discount) UNDER REVIEW. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - Disappointment with the European Central Bank's latest meeting led to a slide in stocks and commodities. The Dow and the S&P 500 Index both fell 0.7%. Crude-oil prices declined 2% to $87.13 a barrel. - Millennium & Copthorne Hotels' 2Q12 revenue grew 1.2% YoY to £198.4m. Net profit after tax climbed 55.2% to £43.0m. - United Overseas Insurance registered a 40.5% YoY increase in 2Q12 net profit to S$10.0m. - Global Premium Hotels' 2Q12 revenue grew 11.8% to S$15.2m. PATMI declined by 37.2% to S$4.4m. Administrative expenses had increased 86.8% YoY to S$6.8m, including one-off IPO expenses of ~S$1.4m. - BBR Holdings posted a 37.1% YoY decline in earnings to S$2.92m for 2Q12. Revenue decreased 53.4% YoY to S$59.11m, mainly due to decreased revenue recognized from general construction projects.