MARKET PULSE: Consumer Sector, Petra Foods, United Envirotech, ECS Holdings (10 Dec 2012)

Stock Name: Petra
Company Name: PETRA FOODS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.12

Stock Name: VizBranz
Company Name: VIZ BRANZ LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.74

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.55

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.67

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.56

Please use this version - includes Petra Foods

MARKET PULSE: Consumer Sector, United Envirotech, ECS Holdings

10 Dec 2012

KEY IDEA Consumer sector: Riding the EM wave Summary: Despite starting 2012 on a bright note, the FTSE ST Consumer Services Index (FSTCS Index) failed to recover from a mid-year slump and could potentially finish in negative territory for the second consecutive year. While the broad sector index produced sputtering results, an investment strategy focused on riding the wave of emerging Asia consumer demand fared extremely well in 2012. Entering 2013, we advocate a similar strategy and continue to favour the growing domestic consumption of our regional EM peers. As the FSTCS Index has mostly lagged the FTSE Straits Times Index on a historical basis, we deem that this trend will continue and as such maintain our NEUTRALoutlook. For EM Asia consumer exposure, our top picks are Petra Foods [BUY; FV: S$3.12] and Viz Branz [BUY; FV: S$0.74]. We also advocate a defensive allocation into Sheng Siong Group [BUY; FV: S$0.55] for its resilience against economic downturns and attractive dividend yield. (Lim Siyi) MORE REPORTS Petra Foods: Pickup in 2013 Summary: Since our initiation report on Petra Foods, the counter has appreciated by 7.5% to continue on its amazing ascension in 2012 (YTD: +55%). Our valuation of Petra - pegged at 24x 12-month forward PE - is at a premium to its global peers but the desire of investors to gain exposure to emerging Asia consumer demand clearly vindicates it. For 2013, we project a modest top-line growth of 3.8%, mainly on the back of the Branded Consumer division, while we also anticipate margin improvements from the 7.6% in FY11 to ~9% by FY13F. We remain sanguine over Petra's growth prospects in the coming year, and in light of Petra's recent appreciation, we raise our multiple to 25x 12-month forward PE (approaching one standard deviation above its six-year average forward PE. This increases our fair value to S$3.12 from S$2.98 previously. Maintain BUY. (Lim Siyi) United Envirotech: Focus on growing treatment income Summary: United Envirotech Limited (UEL) is likely to see its growth trend continuing in 2HFY13 after a strong showing in 1HFY13, buoyed by the still-growing demand for membrane-based water and waste-water treatment services in China. In particular, management intends to focus on looking for good existing TOT projects where it can inject its membrane technology and management know-how to increase existing cashflows. As before, management remains on the lookout for more such water projects, likely in Shandong, Jiangsu and Liaoning. As we have previously raised our FY13 estimates after a much better-than-expected 1HFY13 showing, we opt to leave it unchanged. Our fair value also remains at S$0.67 (based on 12.5x blended FY13/FY14F EPS). Maintain BUY. (Carey Wong)

ECS Holdings: Change in CEO and appointment of Executive Chairman Summary: ECS Holdings (ECS) announced a couple of key management changes over the weekend, with the most notable being the appointment of Mr. Ong Wei Hiam as new CEO from 1 Jan 2013. This comes after current CEO Mr. Narong Intanate announced his intention to retire and step down from the role on 31 Dec 2012 when his employment contract expires. We expect the leadership transition at ECS to be smooth with minimal disruption given the following reasons: 1) Mr. Ong is already an Executive Director at ECS, 2) currently holds the CFO role at VST Holdings (which he will retain) which is the HKSE-listed parent company of ECS (89.5% equity stake) and is also in the same distribution industry, 3) Mr. Intanate will continue to serve on the ECS board as Non-Executive Director and hence ECS will still be able to tap on his experience and expertise. Meanwhile, Mr. Tay Eng Hoe, a founding director, former CEO and current Non-Executive Chairman of ECS, will become Executive Chairman for a year (subject to renewal on a yearly basis), effective 1 Jan 2013. We maintain our BUY rating and S$0.56 fair value estimate on ECS. (Wong Teck Ching Andy) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks ended mostly higher on Fri, after a better-than-expected Nov jobs report offset a report showing a drop in consumer sentiment in Dec. The Dow gained 0.6%, the S&P 500 Index added 0.3% to 1,418.07; but Nasdaq fell 0.4%, weighed down by Apple Inc. - Wee Hur Holdings' construction arm has been awarded a S$150m construction contract for the Parc Centros condominium in Punggol, a joint venture under the group's property development arm. The contract raises the group's order book to S$540m. - Moya Asia plans to raise as much as S$10.5m through a rights issue of up to 262m shares at S$0.04 each, mostly as capex for current projects in Indonesia.