MARKET PULSE: KSH Holdings, ASL Marine (21 Sep 2012)

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.50

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

Research House: OCBC

Price Call: BUY

Target Price: 0.82

MARKET PULSE: KSH Holdings, ASL Marine

21 Sep 2011

KEY IDEA KSH Holdings: Earnings growth at deep value - upgrade to BUY Summary: Due to a rapid sales pickup at a key project, Cityscape@Farrer Park, we now forecast for FY13 (ending Mar 13) earnings to surge 68%. Similarly, we expect FY14 earnings to increase 73%. We see sustained earnings growth as a key price catalyst ahead, particularly as continued market liquidity seeks out deep value laggards like KSH (0.6x trailing PB, 3x FY13E PE). We also note KSH has been actively buying back shares near current levels - which management views as severely undervalued - and has a mandate to purchase up to a quarter of its free float, with ample cash (S$53m) to do so. Finally, we see a major re-rating as likely imminent given KSH's transition, over the last two years, from a cash-hoarding contractor to an property player actively managing shareholders' capital - deploying capital into accretive site acquisitions and returning excess cash via dividends and share buy-backs. Upgrade KSH to BUY as our key small-cap conviction idea. Our FV increases to S$0.50, from S$0.26 previously, as we lower the RNAV discount to 50% to reflect active capital management, better-than-expected real estate execution, and a still resilient construction order book. (Eli Lee) MORE REPORTS ASL Marine: A worthy stock amidst the rising tide Summary: Announcement of QE3, while long-expected, has helped buoy sentiment across the board. However, amidst the rising tide, investors are well-advised to pick stocks that can stand the test of time. In the small-mid cap space, ASL Marine's (ASL) diversified business model means it is positioned to capitalise on the recovering newbuild market (driven by offshore support vessels), while still being supported by its healthy shiprepair and chartering operations. Management has turned more positive but more importantly, we also expect the group to double its capex to about S$115m (mainly to expand shipcharter fleet and deepen waterfront) in FY13 compared to just S$67m in FY12. With an upside potential of about 27%, we maintain our BUY rating on the stock with S$0.82 fair value estimate. (Low Pei Han)

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

NEWS HEADLINES - The Dow rose 0.14% to 13,596.93, posting its third consecutive gain. The S&P 500 Index fell 0.05% to 1,460.26. Stocks dropped in early Thursday trading, with weak China economic data and higher-than-expected US jobless claims. Indexes reclaimed most of the lost ground. - United Envirotech's 70%-owned subsidiary has signed a deal to acquire an industrial wastewater treatment plant in Shandong, China. The first phase of the project will cost RMB120m (S$23.2m). - Sarin Technologies has launched a new version of its best-selling rough-diamond planning software - the AdvisorTM 5.0, which can further improve the value of the polished diamonds derivable from the rough raw material. - TA Corporation will preview the group's latest residential development, Gambir Ridge, which is located close to the Bartley and Woodleigh MRT stations. - Advanced Systems Automation has agreed to acquire 45% of the issued shares of Auramas Teknologi Sdn Bhd for a consideration of MYR7.7m, to be satisfied by a MYR100k cash payment and an allotment and issue of shares for the remaining MYR7.6m. - Texchem-Pack Holdings has subscribed for an additional six million shares in Texchem Polymers Sdn Bhd for MYR6m (S$2.4m).