MARKET PULSE: Olam, Biosensor, Viz Branz, KepCorp, Sembcorp Marine, Yangzijiang (4 Dec 2012)

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.44

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: VizBranz
Company Name: VIZ BRANZ LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.74

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.49

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.84

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

MARKET PULSE: Olam, Biosensor, Viz Branz, KepCorp, Sembcorp Marine, Yangzijiang

4 Dec 2012

KEY IDEA Olam Int'l: Issues bonds with stapled warrants Olam International Limited (Olam) is planning a rights issue consisting of US$750m worth of 5-year bonds with a 6.75% coupon (but effective yield closer to 8% due to 95% issue price) with stapled warrants (up to US$500m if fully converted at US$1.291 each after three years). Besides being fully underwritten (by Credit Suisse, DBS, HSBC and JP Morgan), Temasek Holdings will not only undertake to subscribe to its pro-rata entitlement of the rights, but the sovereign fund is also committed to take 100% of the rights not subscribed by existing shareholders. While we think that there could be some near-term boost to its share price, we note that the outlook for the next six months remains quite muted. As such, we are maintaining our HOLD rating and S$1.44 fair value for now. (Carey Wong) MORE REPORTS Biosensors International Group: Top healthcare pick for 2013 We project Biosensors International Group (BIG) to report revenue and core EPS CAGR of 17.6% and 10.9% from FY12-14F, respectively. In our opinion, growth would be underpinned by its superior drug-eluting stent (DES) technology, which would enable BIG to continue its market share gains from competitors to mitigate the challenges in the industry. BIG's healthy financial position would also enhance its ability to weather the vagaries of the global economy, finance its R&D and clinical trials, and provide it with ample ammunition for share buybacks and M&A activities. BIG currently trades at 12.1x blended FY13/14F core EPS, which is approximately one standard deviation below its 3-year average forward core PER. Maintain BUY with an unchanged DCF-derived fair value estimate of S$1.69, which implies a potential upside return of 48.2%. We are recommending BIG as our top healthcare pick for 2013. (Wong Teck Ching Andy) Viz Branz Limited: Another step forward Viz Branz's (VB) former CEO has unreservedly withdrawn all his previous allegations of impropriety about a series of payments involving the company. We view this development as a positive event that coincides with the possibility of a general offer (GO) by Lam Soon Cannery. Taken together, the resolution of an outstanding family dispute and the absence of a dividend declaration for FY12 suggest that preparations are being made for an impending offer. While the counter has fluctuated in recent trading, we urge investors to keep the faith and reiterate our stance that a GO will materialise. In addition, the investment case for VB remains sound with its strong fundamentals and FY13 growth projections. We maintain BUY with an unchanged fair value estimate of S$0.74. (Lim Siyi) Keppel Corporation: Confirms US$1.2b worth of semi-sub orders Keppel Corporation (KEP) announced this morning that its O&M arm has signed contract with Naftogaz of Ukraine to construct two semi-submersible drilling rigs. We had earlier mentioned that the price tag for these two rigs would be about US$1.2b, and KEP has confirmed the price as such. Like the earlier two jack-ups delivered by KEP for the same customer, these rigs are meant for the Black Sea as well. This contract brings KEP's order wins to S$10b YTD, forming 98% of our full year estimate. Maintain BUY with S$12.49 fair value estimate. (Low Pei Han) Sembcorp Marine: Updates on Jurong Shipyard accident Following the failure of the jack-up mechanism of a jack-up rig at Jurong Shipyard which caused the injuries of workers, Sembcorp Marine (SMM) updated that out of a total of 89 workers who were admitted to hospital for observation or treatment, 77 have been discharged as at 7.30pm yesterday. According to newswires, the rig involved is a Friede and Goldman JU3000N for an American customer, which we think is likely to be Noble Corp. We believe that the scheduled delivery date is around the end of next year, and chances of a delay in delivery are unlikely to be high. Still, we await more information as investigations are ongoing. Meanwhile, we have a BUY rating with S$5.84 fair value estimate on SMM. (Low Pei Han) Yangzijiang Shipbuilding: Secures maiden offshore order Yangzijiang Shipbuilding (YZJ) announced that it has clinched its first offshore order worth US$170m for a jack-up drilling rig. Its 78%-owned Jiangsu Yangzijiang Offshore Engineering Co had entered into a contract with a subsidiary of Mena Offshore Investments, a Malaysian-domiciled fund managed by Offshore Logistics Asia Pacific (OLAP). OLAP is a leading oil and gas equipment supplier to the Asian market. The unit will be of Letourneau Super 116E design (delivery 2Q15), and the contract includes an option for one more identical unit. For the sake of comparison, Keppel Corporation had secured an order to build a unit of the same design in Apr this year for delivery in 1Q14 with a price tag of US$205m. Maintain HOLD on YZJ with a fair value estimate of S$0.95. (Low Pei Han)

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NEWS HEADLINES - US stocks ended lower on Monday as new data showed that manufacturing activity unexpectedly shrank in Nov, amid little progress in talks to avoid the looming fiscal cliff. The Dow and S&P 500 Index each slid 0.5%, to 12,965.60 and 1,409.46, respectively, while the Nasdaq ended 0.3% lower at 3,002.20. - Geo Energy Resources has appointed commodities investor Jim Rogers as a non-executive director. Trading in its shares is expected to resume this morning. - China Farm Equipment's chairman, CEO and controlling shareholder has offered to buy the remaining 12.29% of the firm that he does not already own, for S$0.28 per share or S$8.3m in total. If successful, he intends to delist the company from SGX.