MARKET PULSE: KepCorp, Mapletree Log, Pacific Andes, Marco Polo Marine (27 Nov 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.49

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.25

Stock Name: Pac Andes
Company Name: PACIFIC ANDES RESOURCES DEVLTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.143

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.53

MARKET PULSE: KepCorp, Mapletree Log, Pacific Andes, Marco Polo Marine

27 Nov 2012

KEY IDEA Keppel Corporation: Order flows to continue in 2013 In our year-end report on Keppel Corporation (KEP) last year, we highlighted that order flows for jack-up rigs would slow while prospects for semi-submersible rigs look increasingly brighter. The year played out as expected, with the group securing three jack-up rigs and seven semi-sub orders so far this year. This has been a front-end loaded year due to property, while O&M margins continued to normalize. Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements. The group's net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. We roll forward our valuations to FY13 earnings in which we are expecting lower operating margins mainly due to the O&M segment and comparatively lower property earnings contribution; as such, our fair value estimate slips from S$13.34 to S$12.49. Maintain BUY. (Low Pei Han) MORE REPORTS Mapletree Logistics Trust: Increasing presence in China Mapletree Logistics Trust (MLT) recently announced its intention to acquire Mapletree Wuxi Logistics Park in China from its Sponsor. The purchase consideration of RMB116m was at a 2.5% discount to the average valuation of RMB119m by two independent valuers. Management guided that the acquisition is expected to be accretive at the DPU level, with an initial NPI yield of 8.0%. This is higher than the implied yield of 6.0% for MLT's existing China portfolio. Separately, MLT also updated that the divestment of 30 Woodlands Loop in Singapore to Accenovate Engineering Pte Ltd will not proceed. This was because the buyer's application to purchase the property was not approved by JTC Corporation as it did not meet its evaluation criteria. We have earlier assumed the divestment to be completed by Feb 2013, as previously guided by MLT. We now factor the China warehouse acquisition into our forecasts and reverse the divestment of 30 Woodlands Loop as the sale will not be completed. Accordingly, our fair value inches up slightly from S$1.24 to S$1.25. We maintain BUYon MLT. (Kevin Tan) Pacific Andes: Below expectations 4Q Pacific Andes Resources Development (PARD) delivered a disappointing set of 4Q results, dragged down by lower earnings from China Fishery Group (CFG). Net earnings plunged to HK$8.9m, down from HK$146.1m in 3Q12. As a result of this, dividend per share was slashed from 1.08 S cents (which traditionally accounted for about one-third of its earnings) to 0.3 S cent (14.5% of earnings). Outlook is muted, and management is exploring new growth areas. While the Supply Chain Management (SCM) operation is still relative stable, the fishing operation appears to be under pressure. Overall, in view of the weaker outlook, we have cut our estimates for FY13 from HK$839m to HK$638m. In addition, we have also dropped our DPS projection to be the same as this year's payout at 0.3 S cent. Using the same valuation peg, but moving to blended FY13/14 earnings, we dropped our fair value estimate from 17.8 cents to 14.3 cents. Downgrade to HOLD. (Carmen Lee)

Marco Polo Marine: 4QFY12 results in line with expectations Marco Polo Marine (MPM) reported a 3% YoY fall in revenue to S$19.8m and a 10% increase in net profit to S$3.9m in 4Q12, bringing full year revenue and net profit to S$89.8m and S$21.3m, respectively. Results were in line with our expectations; full year net profit was exactly what we had forecasted earlier. Gross profit margin was 32.5% in FY12 vs 28.1% in FY11, mainly due to ship repair which performed well in the year. The group continues to receive enquiries for its ship building, repair and conversion services. Pending a briefing later in the afternoon, we maintain our BUY rating but put our fair value estimate of S$0.53 under review. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks finished mostly lower on Monday, with the S&P 500 Index snapping its winning streak, as lawmakers prepared to debate the fiscal cliff. The Dow fell 0.3% to 12,967.37, while the S&P 500 Index slid 0.2% to 1,406.29. Only the Nasdaq ended higher, rising 0.3% to 2,976.78. - Straits Trading Co has offered to buy 23.6% of WBL Corp for S$218m, raising its stake in the firm to 40.6%. If successful, the deal would trigger a mandatory offer to buy the remaining WBL shares for S$3.41 in cash or 1.07 new Straits Trading shares each. - BRC Asia's FY12 PATMI rose 9% to S$16.5m, on the back of a 37% increase in revenue to S$388m. Sales volume was higher due to buoyant construction activities in Singapore. - Rising manpower costs have hit businesses hard, with construction firms suffering the most, a survey of over 10,000 SMEs in Singapore showed. Overall, 72% of the SMEs polled cited high labour costs as the main reason for their eroding profits. High material costs and rising rental costs were also blamed.