MARKET PULSE: Ezion, SATS, United Envirotech, YZJ (7 Nov 2012)

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 2.65

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.67

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.03

MARKET PULSE: Ezion, SATS, United Envirotech, YZJ

7 Nov 2012

KEY IDEA Ezion Holdings: Results in line; contracts continue to flow in Ezion Holdings (Ezion) reported a 21.1% YoY rise in revenue to S$38.6m and a 24.4% increase in net profit to S$16.1m in 3Q12, such that 9M12 net profit accounted for 78% of our full year estimates, in line with our expectations. Operating margin in 3Q12 was slightly higher at 38.3% vs 37.0% in 3Q11. Meanwhile the group has entered into a JV which has secured contracts worth US$298m to provide two service rigs over a seven-year period (ROE ~42.7%). The constant flow of contracts illustrates the demand for Ezion's expertise and assets, which we find very encouraging. We increase our FY13F and FY14F earnings estimates by 13.4% and 9.8%, respectively. This raises our fair value estimate from S$1.53 to S$1.70, still based on 9x FY13F earnings. Maintain BUY. (Low Pei Han) MORE REPORTS SATS Ltd: Stock ascent justified SATS Ltd's (SATS) reported a strong set of 2QFY13 financial results that beat our and market expectations. SATS's aviation-related segments led revenue growth while effective cost management initiatives helped to improve margins. Similar to last year, SATS also declared an interim dividend of 5 S cents. While the macro-environment remains uncertain, we are positive about SATS's performance in 2H13. Competition amongst airlines to stimulate passenger demand could prove supportive for the group going forward. In addition, cost pressures arising from higher staff costs could face some relief from easing food inflation. After tweaking our estimates slightly, our fair value estimate increases from S$2.55 to S$2.65. However, we maintain our HOLD rating on account of its recent 7.4% share appreciation since going ex-dividend on 31 Jul. Even if we include our FY13 dividend forecast, our valuation on a total return basis provides an upside of 3.2% only. (Lim Siyi) United Envirotech: Strong run continues in 2QFY13 United Envirotech Limited (UEL) reported 2QFY13 revenue +114% YoY to S$53.9m, while net profit doubled to S$8.1m, as it undertook more projects over the quarter. For 1HFY13, revenue grew 87% to S$86.0m, meeting 72% of our full-year forecast, while net profit jumped 93% to S$14.0m, or 78% of our FY13 estimate. In light of the much better-than-expected performance, we are raising our FY13 forecasts by 20-30%. Going forward, UEL continues to remain bullish on the water and waste-water treatment market in China; and will continue to be on the lookout for more viable water projects. We believe that UEL remains in a relatively strong financial position to do so. Maintain BUY with an improved fair value of S$0.67, based on 12.5x blended FY13/FY14 EPS, versus S$0.50 previously. (Carey Wong) Yangzijiang Shipbuilding: No vessel cessation or effective orders secured in 3Q12 Yangzijiang Shipbuilding (YZJ) reported a 1% YoY drop in revenue to RMB3.6b and a 14% fall in net profit to RMB877m in 3Q12, such that 9M12 revenue and net profit accounted for 72.5% and 73.3% of our full year estimates. Results were in line with expectations, with gross profit margin in the shipbuilding segment lower at 22.9% in 3Q12 vs 24.2% in 2Q12 and 27.7% in 3Q11. Commercial shipbuilding remains challenging and according to the group, consolidation in the industry is now affecting mid-sized and large-sized yards. There was no vessel cessation and no effective orders secured in 3Q12. As such, YZJ's order book stood at 75 vessels with a total value of US$3.6b as at 30 Sep 2012. Pending an analyst briefing later, we maintain our HOLD rating but put our fair value estimate of S$1.03 under review. (Low Pei Han)

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NEWS HEADLINES - US stocks extended gains for a second day but on low volume as investors awaited the results of the presidential election. The Dow rose 1% to end at 13,245.68, led by Hewlett-Packard, while the S&P 500 Index climbed 0.8% to 1,428.39 and the Nasdaq +0.4% at 3,011.93. - Pan-United Corp's 3Q12 PATMI rose 33% YoY to S$11.6m, supported by a 35% increase in revenue to S$184.9m on higher contributions from all its major business segments. - Koh Brothers Group's 3Q12 PATMI fell 44% YoY to S$7.4m as sales slid 37% to S$73.9m, mainly due to lower revenue recognition from its construction and real estate divisions. - Mermaid Maritime has been awarded a subsea services contract worth a total of US$25m over five years in Qatar by an existing client, an international upstream oil and gas operator.