MARKET PULSE: CityDev, KSH, Olam, Swiber, STX OSV, Valuetronics, Viz Branz, Midas, KSE (15 Nov 2012)

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.10

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.50

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.80

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.65

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.20

Stock Name: VizBranz
Company Name: VIZ BRANZ LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.735

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.505

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.83

MARKET PULSE: CityDev, KSH, Olam, Swiber, STX OSV, Valuetronics, Viz Branz, Midas, KSE

15 Nov 2012

KEY IDEA City Developments Limited: Looking ahead to Redhill launch in 4Q12 CDL reported 3Q12 PATMI of $134.5 which showed a marginal YoY increase (1.8%) over 3Q11. Recognition at development projects kept mostly in pace with the previous quarter and we judge this set of results to be generally in line with expectations. HAUS@SERANGOON GARDEN and Up@Robertson Quay have 86 and 48 units sold to date, respectively. In addition, The Palette and Bartley Residences are over 94% and 92% sold, respectively. Looking ahead to 4Q12, we expect CDL to launch the 508-unit condominium development (the Echelon) near Redhill MRT station and, in 1H13, another 912-unit project in Pasir Ris Grove. Hotel subsidiary M&C reported 3Q12 PATMI of GBP30.7, down 47.5% YoY due to the absence of disposal profit in 3Q11. YTD overall REVPAR was up 4.9%, with a particularly strong showing from London (up 10.2% YoY) from the Olympic games. Maintain BUYwith an unchanged fair value estimate of S$13.10 (15% RNAV disc.). (Eli Lee) MORE REPORTS KSH Holdings: Healthy earnings and dividends growth KSH reported 2QFY13 PATMI of S$9.8m, up a whooping 90% YoY mainly due to increased contributions from the construction business and project recognition from Cityscape@Farrer Park. We judge this set of results to be mostly in line with expectations as 1HFY13 PATMI now made up 46% of our FY13 forecast. We note the pace of profit recognition at Cityscape@Farrer in 2QFY13 (through share of results of associates) was somewhat below expectations - S$2.1m versus an expected S$3.5m-S$4.5m - but this was offset by higher profits from the construction segment. Management also announced an interim dividend of 1.35 S-cents, up 35% from a 1.0 S-cent interim dividend last year. KSH's order book continues to be healthy at S$375m as of end Sep 12, down 10% QoQ versus S$416m as of end Jun 12. Maintain BUY with an unchanged S$0.50 fair value estimate (50% discount to RNAV). (Eli Lee) Olam Int'l: 1QFY13 results mostly in line Olam International Limited (Olam) reported 1QFY13 revenue of S$4689.1m, though up 45% YoY, it was down 9% QoQ; but still met 24% of our full-year forecast. Reported net profit came in at S$43.2m, up 26% YoY but down 61% QoQ. We estimate that core earnings (excluding financial and biological revaluation gains) fell 16% YoY and 18% QoQ to S$28.4m, meeting around 8% of our FY13 estimate; but we still deem its results to be in line as 1Q typically contributes just 5-10% of its full-year earnings due to the unique seasonal pattern of its portfolio. As its results were mostly in line with our forecast, we are keeping our estimates unchanged. As such, our fair value also remains at S$1.80, or 12.5x FY13F EPS. Given the limited upside, we maintain our HOLD rating. (Carey Wong) Swiber Holdings: First dividend since FY05 Summary: Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net profit accounted for about 80% of our full year estimates, within expectations. Gross margin declined from 16.6% in 3Q11 to 14.1% in 3Q12, but was similar to 2Q12's 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012. As of Nov 2012, Swiber's order book stood around US$1.4b vs. US$1.6b as at Aug. The group has also proposed an interim dividend of S$0.01/share. Meanwhile, we would be monitoring the group's operating cashflows. Maintain HOLDwith slightly lower fair value estimate of S$0.65 (prev. S$0.66). (Low Pei Han) STX OSV: Subdued 3Q STX OSV reported a fairly muted set of 3Q12 results that were below ours and the street's expectations. 3Q revenue and net profit to shareholders declined by 27% and 39% YoY to NOK 2.5b and NOK 228m respectively. On a sequential basis, revenue and net profit fell by 26% and 18% respectively. The weaker performance in 3Q12 was mainly due to slower pace of revenue recognition during the tail end of shipbuilding. Its yards reported generally stable operations, but the slow order intake (only NOK 900m in 3Q) may lead to under-utilization in its Norwegian yards in 2013. In view of this and the weaker-than-expected 3Q results, we reduce our fair value estimate to S$1.69 (previously S$2.00), Maintain BUY.(Chia Jiunyang) Valuetronics Holdings: Dearth of near-term catalysts Valuetronics Holdings Limited's (VHL) 2QFY13 PATMI plunged 88.5% YoY to HK$3.3m as it incurred hefty one-off termination expenses and provisions due to the cessation of its Licensing business. Revenue from continued operations was flat at HK$595.5m, or 11.6% below our forecast. However, we estimate that core PATMI came in at HK$31.5m, a 34.1% YoY increase, which exceeded our HK$26.2m projection. Looking ahead, we believe that sales from its largest customer would likely moderate, while there is also a strong sense of caution amongst its major customers. We trim our FY13 and FY14 revenue estimates by 9.7% and 10.6%, but raise our core PATMI forecasts by 8.0% and 6.5%, respectively, on higher margin assumptions. Applying a lower 4x (previously 4.5x) peg and rolling forward our valuations to blended FY13/14F core EPS, our fair value estimate falls from S$0.21 to S$0.20. While estimated 8.9% yield is attractive, we maintain HOLD given the lack of near-term catalysts. (Wong Teck Ching Andy) Viz Branz Limited: Faith will be rewarded Viz Branz (VB) reported a decent 1Q13 performance with continued margin improvements. Although revenue declined slightly, PATMI grew 17.4% YoY to S$4.5m following favourable raw material costs and effective cost control measures. With the performance coming in within our expectations, our FY13 outlook for VB remains unchanged, and we retain our fair value estimate of S$0.74. While there is no update on further share purchases by Lam Soon, we reiterate our optimism that an eventual general offer will materialize in the near-term. Given the recent price correction of the counter - and a supportive price base of S$0.735 from Lam Soon's partial stake purchase - we feel that an investment opportunity has presented itself. With a potential upside of nearly 10%, we upgrade VB to BUY. (Lim Siyi) Midas Holdings: 3Q12 net loss wider than expected Midas Holdings (Midas) reported a 21.8% YoY dip in its 3Q12 revenue to CNY202.7m, which was 6.0% below our projection. As a result of higher operating expenses, finance costs and a share of loss of CNY7.0m from its associated company, Nanjing SR Puzhen Rail Transport, Midas registered a loss before tax of CNY1.6m, which matched our estimate. However, net loss of CNY6.1m (3Q11: CNY27.4m PATMI) came in worse than our CNY1.3m forecast due to higher-than-expected income tax expenses. Midas' net gearing ratio also increased from 2.2% in 3Q11 and 22.5% in 2Q12 to 23.7% in 3Q12 as it increased its borrowings to finance its working capital requirements and capacity expansion plans. We expect this to translate into higher finance costs for the group in 4Q12 and FY13 and will thus adjust our estimates accordingly. More details will be provided after the analyst conference call. We still opine that FY12 would be a non-event for Midas and investors should instead focus on the likelihood of a recovery in its business operations in FY13, in line with the Chinese government's commitment to expand its rail transport system. We maintain our BUYrating but our S$0.505 fair value estimate is under review. (Wong Teck Ching Andy) KS Energy: Another profitable quarter KS Energy (KSE) reported a 21.9% YoY rise in revenue to S$161.3m and a net profit of S$14k in 3Q12 vs net loss of S$11.5m in 3Q11. 9M12 revenue and operating profit accounted for 80% and 73% of our full year estimates. 9M12 net profit was also within expectations, amounting to S$391k vs our full year estimate of a net loss of S$3.5m. Revenue growth was driven by the distribution business in 3Q12, while the drilling segment had a relatively stable quarter. More assets are expected to be deployed over the next 12 months, and we expect the earliest signs of a more significant recovery only in 2Q13. Pending a call with management, we maintain our HOLD rating but put our fair value estimate of S$0.83 under review. (Low Pei Han)

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NEWS HEADLINES - US stocks slid further on Wednesday as worries about the fiscal cliff continued to weigh heavily on sentiment. The Dow slumped 1.5% to 12,570.95, despite surprisingly good results from Cisco Systems, while the S&P 500 Index fell 1.4% to 1,355.49 and the Nasdaq ended 1.3% lower at 2,846.81. - Otto Marine reported 3Q12 PATMI of US$4.7m, reversing a US$16.2m loss a year earlier. The improvement was supported by an 84% YoY jump in revenue to US$78.4m, with the increase coming mainly from its chartering and subsea services segments.