MARKET PULSE: CSE Global, Wilmar, Ezra (01 Oct 2012)

Stock Name: CSE Global
Company Name: CSE GLOBAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.09

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.06

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.48

MARKET PULSE: CSE Global, Wilmar, Ezra

01 Oct 2012

KEY IDEA CSE Global: Turnaround story Summary: We continue to like CSE Global (CSE) and believe that it is still in the early stages of its turnaround story. As a brief recap, CSE was previously hit by a confluence of negative events, such as cost over-runs and unexpected customer delays. Since then, we noted that the telecom division, which had encountered the cost overrun issues, appeared to be turning around. Operations have been stable so far and the financial performance is also improving. At the group level, CSE has strengthened its balance sheet by (i) selling off its non-core assets to pare down loans, and (ii) refinancing its short-term borrowing with long-term debt. The group now has more flexibility in financing larger projects or pursuing M&A deals. Its experienced former Group MD has also returned to the group as a Non-Executive Deputy Chairman to look into investment opportunities. Maintain BUY with an unchanged S$1.09 fair value estimate. (Chia Jiunyang) MORE REPORTS Wilmar: Kellogg JV - more long term boost Summary: Wilmar International Limited (WIL) recently announced a 50-50 JV with US-based Kellogg Company to make, sell and distribute cereal, snacks and savory snacks in China. Overall, we do see potential in the JV. For one, it would allow WIL to monetize its extensive distribution channels in China. However, initial contribution will likely be small and become more meaningful in 2014. Secondly, the JV could allow WIL to diversify into the manufacturing of snacks and other food items, which could in turn act as ready customers for its upstream products. But given the lack of more immediate benefits, we maintain our HOLD rating and S$3.06 fair value. (Carey Wong)

Ezra Holdings: Secures US$47m subsea contract Summary: Ezra Holdings (Ezra) announced this morning that its subsea construction division, EMAS AMC, has won a US$47m contract from Petroleum Technical Services Corporation Mechanical and Construction (PTSC M&C) for the transportation and installation of facilities for the Dua subsea field in offshore Vietnam. More specifically, this includes the transportation and installation-engineering, testing, inspection, offshore-installation and commissioning of subsea flowlines, structures, risers and umbilicals. Work will commence in 3Q12, while subsea installation will start in 1Q13. We estimate Ezra's subsea net order book currently stands at about US$1.05b, and tendering activity remains buoyant. As offshore production in Asia gradually moves into deeper waters, Ezra is well-positioned to tap the expected increase in demand for subsea services. Maintain BUY with S$1.48 fair value estimate. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - With concerns about a review of Spain's credit rating and poor data on US wage gains and manufacturing, the Dow lost 0.4% to 13,437.13 and the S&P 500 Index fell 0.5% to 1,440.67 on Friday. The blue-chip Dow gained 2.6% in September. - Khong Guan posted a FY12 PATMI (15-months) of S$2.4m, a 48% decline from FY11 (12-months). Revenue had increased 37% to S$78.4m. - Cougar Logistics Corporation has entered an agreement to acquire 20% of the issued share capital of Grace Shine, a property investment company, for a consideration of S$24.0m. - Total Access Communication Public Company has filed an application for spectrum licensing for international mobile telecommunications in the frequency band of 2.1 GHz. - Catalist-listed ES Group has successfully launched its second bunker vessel, the 3,400 dead-weight-tonne Sea Tanker II, which was constructed at its subsidiary's shipyard in Thailand.