MARKET PULSE: Tiger Airways, OKP Holdings, Sembcorp Marine (11 Dec 2012)

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.81

Stock Name: OKP
Company Name: OKP HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.53

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.84

MARKET PULSE: Tiger Airways, OKP Holdings, Sembcorp Marine

11 Dec 2012

KEY IDEA Tiger Airways: Time for an upgrade Tiger Airways (TGR) saw increased passenger traffic for the second consecutive month, mainly on the back of TGR SG. Passengers carried grew 30.1% YoY (+6.0% MoM) and passenger load factor (PLF) rose by 10 ppt correspondingly from a year ago to 85% (+2ppt from Oct), which was aided by a slower pace of capacity expansion. With this development, the group's performance has been encouraging thus far. The tepid economic situation, which has resulted in a slowdown in premium travel demand growth and softened jet fuel prices, will continue to benefit low-cost carriers like TGR especially in the ongoing peak season travel months. TGR's share price has now consolidated close to one standard deviation below its average P/B multiple, and we believe that an inflection point has emerged. With our FY13 estimates pointing to a modest return we to profitability, we upgrade TGR to BUY with an unchanged fair value estimate of S$0.81. (Lim Siyi) MORE REPORTS OKP Holdings: Steady Revenue Stream Ahead, But Margins Likely To Shrink OKP's order book of S$385.9m (as at 1 Nov) gives it excellent revenue visibility over the next two years. But the group has found it difficult to compete for work on the new MRT lines and is now exploring possible tie-ups with other firms to improve its chances of winning such projects. Though OKP's revenues will likely be sustained by strong demand for public construction work in Singapore, we expect its gross margins to shrink from 20-25% now to <20% in future, due to increased competition and rising manpower costs. We have lowered our fair value estimate for OKP from S$0.53/share to S$0.46/share, or 11x its projected FY13 earnings. Though its 9M12 results suggest that its FY12 financial performance is likely to be lacklustre, we expect to see more support for OKP's share price in the coming months as it recognises more revenue from its current project pipeline. We maintain our HOLD rating on OKP. (Conrad Tan) Sembcorp Marine: Leader in the niche market of cruise ship repair Sembcorp Marine (SMM) announced that its subsidiary, Sembawang Shipyard, has won a "favoured customer contract" from Royal Caribbean Cruises Ltd to provide ship repair, revitalization, upgrading and related marine services for its fleet of 41 cruise ships. Royal Caribbean is the world's second largest cruise ship company by number of ships, behind Carnival Cruise Lines (81 cruise liners). This reinforces Sembawang's reputation as one of the world's leading yards in the specialized segment of cruise ships repair, refurbishment and conversion. The contract will include two cruise ships that will undergo major revitalization and a third for drydocking and repairs from Jan 2013 till 2014 with total revenue ranging from S$50m-70m, depending on the scope of repairs and upgrade. SMM has turned in an average of S$704m/year in terms of ship repair revenue in the past five years. Maintain BUY with S$5.84 fair value estimate on SMM. (Low Pei Han)

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NEWS HEADLINES - US stocks rose slightly on Mon, though investors remained cautious amid the ongoing political debate over the fiscal cliff. The Dow rose 0.1% to 13,169.88 while the S&P 500 Index was barely changed at 1,418.55 and the Nasdaq added 0.3% to finish at 2,986.96. - Gaylin Holdings' 2QFY13 PATMI rose 80% YoY to S$3.2m, supported by an 8.4% rise in revenue to S$20.9m. The increase in revenue was mainly due to a project for a customer in Europe. - Popular Holdings' 2QFY13 PATMI fell 57% YoY to S$1.7m despite a 2% rise in turnover to S$121m. Its profit was dragged down by higher cost of sales, as well as increased distribution and administrative expenses. Unlike last year, the group did not declare an interim dividend. - Swee Hong Ltd has won a S$4.9m contract from the Gardens by the Bay related to a proposed tadpole play garden and other works. The contract, which starts tomorrow, is to be completed by May 2013.