MARKET PULSE: Venture, GPH, Noble, UOL, City Dev, Wilmar, Valuetronics (9 Nov 2012)

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 9.22

Stock Name: GP Hotels
Company Name: GLOBAL PREMIUM HOTELS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.29

Stock Name: Noble Grp
Company Name: NOBLE GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.28

Stock Name: UOL
Company Name: UOL GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 5.48

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.10

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.06

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.21

MARKET PULSE: Venture, GPH, Noble, UOL, City Dev, Wilmar, Valuetronics

9 Nov 2012

KEY IDEA Venture Corp: Look beyond the short-term Venture Corp (VMS) reported a 8.1% YoY decline in its 3Q12 PATMI to S$32.6m despite revenue increasing 4.3% to S$608.9m. Topline was within our expectations, although bottomline missed due to weaker-than-expected margins. For 9M12, revenue of S$1,795.0m (-0.3%) and PATMI of S$101.7m (-14.2%) formed 72.7% and 67.7% of our FY12 estimates, respectively. The general sentiment among VMS's customers remains weak in the near-term, but we believe that its product pipeline from both new and existing customers would yield more meaningful contribution in FY13. While we pare our FY12 revenue and PATMI estimates by 1.6% and 9.1%, respectively, we leave our FY13 forecasts intact. We opine that investors should position themselves for the expected recovery in VMS's business in FY13, and hence roll forward our valuations to 15x FY13F EPS. This raises our fair value estimate from S$8.72 to S$9.22. Coupled with an attractive FY12F dividend yield of 7.1%, we maintain our BUY rating. (Wong Teck Ching Andy) MORE REPORTS Global Premium Hotels: Maintain FV of S$0.29 Global Premium Hotels (GPH) registered 3Q12 results that were below our expectations. 3Q12 revenue increased by 8.1% YoY to S$14.9m. EBITDA margin fell 6.6 ppt to 59.8% (excluding one-off expenses of S$0.5m for 3Q12). 9M12 EPS of 1.34 S cents equaled 72% of our prior FY12F estimate of 1.87 S cents, which we now lower to 1.75 S cents. GPH has begun construction of its new mid-tier Parc Sovereign Hotel located at Tyrwhitt Road in Aug 2012. An independent valuer has estimated a gross development value S$150m, implying a potential fair value gain of S$42m. We have incorporated the Tyrwhitt site development into our RNAV model. We maintain our fair value of S$0.29 (using a 10% discount to RNAV) and a BUY rating. GPH intends to distribute at least 80% of net profit after tax for FY12; we estimate an attractive FY12F dividend yield of 5.8%. (Sarah Ong) Noble Group Ltd: Downgrade to HOLD Noble Group (Noble) reported 3Q12 revenue of US$22.7b, though up 9% YoY, it was down 6% QoQ. Net profit came in at US$75.2m; while it had reversed a net loss of US$17.5m a year ago, it missed the street's US$155m forecast. For 9M12, revenue grew 15% to US$69.8b, meeting 75% of our FY12 forecast, while net profit climbed 17% to US$380.1m, or 68% of our full-year number. Estimated core earnings (without disposal gains) of US$282.9m formed just 50% of our forecast. We expect Noble to see a negative knee-jerk reaction to its lower-than-expected earnings (we have also cut our FY12 and FY13 forecasts to incorporate still-weak margins). We also downgrade our call to HOLD, given that the stock has risen some 21% since our upgrade on 14 Aug. But we believe Noble should start looking towards a reasonable recovery next year; and we have moved our valuation to FY13 with a higher 12x (versus 10.5x blended previously) peg, which keeps our fair value unchanged at S$1.28. (Carey Wong) UOL Group: 3Q12 earnings - no surprises UOL reported 3Q12 PATMI of S$87.8m, down 13% YoY mostly due to lower development profits and renovation works at Pan Pacific Singapore. We judge this set of results to be mostly within expectations and, excluding fair value and other gains, adjusted 9M12 PATMI cumulates to S$258.2m which makes up 74% of our annual FY12 forecast. This being so, we see the market likely taking a neutral view on 3Q numbers. We expect new residential launches at Bright Hill and St. Patrick Rd in 1H13, with Bright Hill likely to come first around Mar-Apr 2013. Management continues to execute well, and upcoming launches would be key catalysts for the share price over the mid-term. Maintain HOLD with a higher fair value estimate of S$5.48 (30% RNAV disc.), from S$5.26 previously mostly due to updated valuations of listed holdings. (Eli Lee) City Developments Limited: Top bid for Sengkang EC site City Developments Limited (CDL) put in the top bid of S$135m (S$296 psf) for an EC site at Sengkang West Way/Fernvale Link. The tender attracted a total of six bidders and CDL's bid was only 0.1% above the second highest bid. This site, with a total GFA of 455k sf, is located near Layar LRT station, Fernvale Point and the upcoming Seletar Mall, and the development is expected to consist ~380 units. We estimate breakeven and selling ASPs at S$S$600 psf and S$720 psf, respectively; the latter generally in line with price levels at comparable projects, such as Twin Waterfalls and Riverparc Residence, over the first three quarters of FY13. We expect this acquisition to accrete 1.5 S-cents to RNAV but leave our fair value estimate unchanged at S$13.10 (15% RNAV disc.) pending approval of this acquisition. Maintain BUY. (Eli Lee) Wilmar: Stronger 3Q12 showing Wilmar International Limited (WIL) reported a stronger set of 3Q12 results, with reported net profit jumping 26% YoY to US$405.8m, even though revenue slipped 6% to US$12.3b, aided by better performance at most key segments (except for Oilseeds & Grains and Plantations & Palm Oil Mills). Excluding non-operating items, net profit came in around US$388.0m, from US$451.4m a year ago. 9M12 revenue inched up 2% to US$33.8b, meeting 73% of our full-year estimate, while reported net profit fell 29% to US$778.7m; core net profit fell 41% to US$766.0m, but still met 80% of our FY12 estimate. While management maintains its positive long-term outlook, we note that near-term challenges remain. We will be speaking with management later to get further updates. Until then, we place our Hold rating and S$3.06 fair value under review.(Carey Wong) Valuetronics Holdings: 2QFY13 core earnings above expectations Valuetronics Holdings Limited (VHL) reported its 2QFY13 results this morning. Revenue from continued operations was flat YoY at HK$595.5m (+0.2%), or 11.6% below our forecast. Reported PATMI plunged -88.5% YoY to HK$3.3m as VHL incurred hefty termination expenditure and provision for impairment on property, plant and equipment (PPE) from its Licensing division (announced its decision to cease operations during its 1QFY13 announcement). Adjusting for this and other exceptional items, we estimate core PATMI of HK$31.5m, a 34.1% YoY increase, and this exceeded our HK$26.2m projection. With regards to its Licensing division, VHL said that it does not expect to incur further provision for termination expenditure and impairment losses for PPE. Looking ahead, challenging conditions in the manufacturing industry such as rising labour costs are expeced to continue and we expect this to place some pressure on VHL's margins. We will provide more details after the analyst briefing next week. We maintain our HOLD rating but place our S$0.21 fair value estimate under review.(Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks extended losses for a second day despite upbeat data showing that jobless claims fell last week, as investors fretted about the looming fiscal cliff and Europe's troubles. The Dow fell 0.9% to 12,811.32, while the S&P 500 Index slid 1.2% to 1,377.51 and the Nasdaq 1.4% lower at 2,895.58. - The ECB held its main interest rate at 0.75%. The euro zone's economy is weak and not improving, ECB president Mario Draghi warned. - Sim Lian Group's 1Q13 PATMI slumped 64% YoY to S$37.4m as revenue fell 28% to S$190m, mainly due to lower revenue contribution from two projects that obtained their TOP a year earlier. - GP Batteries' 2Q13 PATMI fell 88% YoY to S$0.3m as revenue slid 1% to S$200m, mainly due to lower sales in Europe. Its bottom line was also hurt by losses at associates and foreign exchange losses due to a weaker US$. - Food Junction Holdings' 3Q12 net loss attributable to shareholders widened to S$5.4m, from S$0.8m a year ago, as revenue declined 0.6% to S$13.9m, mainly due to permanent and temporary closures of some food courts.