MARKET PULSE: Biosensors, Hyflux, Rotary (02 Nov 2012)

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.44

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.43

MARKET PULSE: Biosensors, Hyflux, Rotary

2 Nov 2012

KEY IDEA Biosensors International Group: Opportune time to accumulate We lower our FY13/14F revenue forecasts on Biosensors International Group (BIG) by 2.7/4.0%, and our core PATMI projections by 3.7/4.3% as we expect weaker licensing revenues and softer sales growth from Europe. Nevertheless, we believe that BIG remains well-positioned to capture market share from its competitors given continued positive clinical trial data for its flagship BioMatrix™ family of drug-eluting stents. BIG's recent share price pullback appears to be overdone, in our view. Despite our earnings cut and a lower adopted USD-SGD assumption, we opine that valuations for BIG are still compelling. The stock trades at 11.3x blended FY13/14F core EPS, which is approximately 1.5 SD below its 3-year average forward core PER. Maintain BUY, with a revised fair value estimate of S$1.70, from S$1.81 previously. (Wong Teck Ching Andy) MORE REPORTS Hyflux: 3Q12 margins improve Hyflux Ltd saw 3Q12 revenue rising 77% YoY to S$155.0m, while net profit also increased 15.1% YoY to S$14.5m. Gross margin also recovered to 41.2% in 3Q12 from 34.5% in 2Q12 and also close to the 43.4% seen in 3Q11. For 9M12, revenue jumped 70% to S$484.4m, meeting 82% of our full-year forecast, while net profit rose 17% to S$39.7m, or 62% of FY12 forecast. Hyflux notes that the current environment remains challenging, but management believes that the fundamental demand for water remains strong, especially in countries like China, India and MENA. We are also keeping our FY12 and FY13 estimates unchanged and are raising our fair value from S$1.35 to S$1.44 as we roll forward our 18x peg to blended FY12/Fy13F EPS. Maintain HOLD; but fresh catalyst could come in the form of a substantial contract win. (Carey Wong) Rotary Engineering: Sharp losses in 3Q Rotary Engineering (Rotary) reported a 3Q12 net loss of S$66m, mainly due to the cost over-run situation for its SATORP project. Recall that the group recorded S$22m of provisions for the SATORP cost over-run in 2Q12 and warned of net losses for 3Q12 and FY12. During the last quarter, the group said it booked in "further additional costs, including S$40m of provisions for foreseeable losses" on the project. We will be speaking with management later to understand the situation better. In the meantime, we keep our SELL rating but put our S$0.43 fair value estimate under review. (Chia Jiunyang)

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NEWS HEADLINES - US stocks rose on positive data showing stronger-than-expected consumer confidence and manufacturing activity in Oct. The Dow +1.0% to 13,232.62, while the S&P 500 +1.1% to finish at 1,427.59 and the Nasdaq ended 1.4% higher at 3,020.06. - Cambridge Industrial Trust's 3Q12 net income available for distribution rose 6.6% YoY to S$13.7m, supported by an 8.5% rise in revenue to S$22.5m. DPU rose 11% to 1.204 S cents. - CitySpring Infrastructure Trust's 2Q13 cash earnings more than doubled to S$34.5m, from S$14.5m a year ago. It kept its DPU unchanged at 0.82 S cents. - SC Global Development's 3Q12 PATMI rose 9% YoY to S$34.6m, supported by a 20% increase in revenue to S$238m, due to new sales of completed properties and higher revenue recognition for projects as construction progressed. - Magnus Energy Group expects to report a higher profit for 3Q12 compared to a year ago, mainly due to gains on the sale of financial assets.