MARKET PULSE: Marco Polo Marine, Sheng Siong, Biosensors, Ascott Residence Trust (29 Jan 2013)

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

Research House: OCBC

Price Call: BUY

Target Price: 0.56

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.58

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

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.37

MARKET PULSE: Marco Polo Marine, Sheng Siong, Biosensors, ART

29 Jan 2013

KEY IDEA Marco Polo Marine: Banking on ship repair and OSV growth Marco Polo Marine (MPM) reported a 38% YoY drop in revenue to S$15.2m but saw a 3% rise in net profit to S$4.5m in 1QFY13, such that the latter formed about 20% of our full year net profit estimate, within our expectations. The fall in revenue was mainly due to slower progress in newbuild orders, resulting in lower shipbuilding revenue. This was offset by higher ship repair turnover. Overall gross profit margin also increased from 25% in 1QFY12 to 39% in 1QFY13 with a higher proportion of ship repair revenue. Demand for larger AHTS vessels in Indonesia is expected to grow, and MPM is set to capitalise on this market opportunity. The group is still upbeat on the outlook for the ship repair business for the next 12 months, and growth is also expected from the offshore support vessel segment. Maintain BUY with S$0.56 fair value estimate. (Low Pei Han) MORE REPORTS Sheng Siong Group: Caution ahead of FY12 earnings Despite having no significant developments since our last update report issued on 10 Dec 2012, Sheng Siong Group's (SSG) share price has soared by more than 25%. We view this amazing appreciation as a result of the street playing catch-up ahead of SSG's FY12 results release. While we expect a strong set of FY12 results - and have also adjusted our forward expectations accordingly to reflect our optimism, SSG's recent price action has been far too exuberant and unsustainable (TTM PE of 33x), in our view. Even after fine-tuning our DCF model, our fair value only increases slightly from S$0.55 to S$0.58. Therefore, we urge caution in trading SSG at this point and recommend investors take some profit around current levels. Downgrade to HOLD. (Lim Siyi) Biosensors International Group: Obtains CE Mark for BioFreedom™ drug-coated stent Biosensors International Group (BIG) announced that it has obtained the CE Mark approval for its next-generation polymer-free BioFreedom™ drug-coated stent (DCS). One of the key advantages of BioFreedom™ is that it would avoid the late adverse effects that might be attributable to the polymer on a stent. This approval was aided by positive clinical trial results which highlighted the safety and efficacy of the product. BIG expects to launch the BioFreedom™ DCS in selected markets during 2013, with a full commercial launch anticipated in 2014. The group also recently enrolled the first patient (a total of ~2,500 patients expected to be enrolled eventually) in the LEADERS FREE study involving BioFreedom™, as a means of further evaluating the use of BioFreedom™ in a larger patient population. We understand that the BioFreedom™ DCS would initially be targeted at a niche group of patients who are at high risk of bleeding and thus unsuitable for a prolonged course of dual anti-platelet therapy. There are also plans to submit BioFreedom™ for approval from China's State Food and Drug Administration. We view these developments as a platform for BIG to expand its leadership position and market share in the drug-eluting stent industry, although initial contribution from BioFreedom™ is likely to be small, in our opinion. We thus maintain our estimates, BUY rating and S$1.69 fair value estimate on BIG. (Wong Teck Ching Andy) Ascott Residence Trust: Raises S$150m through private placement Ascott Residence Trust (ART) has raised gross proceeds of S$150m through a placement of 114.9m new units at an issue price of S$1.305 per new unit, representing a discount of ~4.6% on the adjusted VWAP of S$1.3685 for trades done on the SGX-ST on 28 Jan. The proceeds will be used to fund potential future acquisitions, finance AEIs, repay existing debt and for general working capital. Assuming that the net proceeds of S$147.9m are used to repay existing debts, the private placement is expected to reduce ART's aggregate leverage from 40.1% to 34.9%. The placement will also increase ART's free float from 51% to 55%. We maintain our HOLD rating but place our S$1.37 fair value estimate on ART under review. (Sarah Ong)

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NEWS HEADLINES - US stocks ended mostly lower on Mon, snapping an eight-day winning streak for the S&P 500 index, after mixed reports on the US economy. The Dow slid 0.1%, the S&P 500 index fell 0.2% and the Nasdaq edged up 0.1%. - Singapore attracted S$16b in fixed asset investments in 2012, a record high, excluding spikes in 2007 and 2008 due to petrochemical cracker investments. But the government expects lower investment commitments of S$11b-S$13b this year, due to continued uncertainty over the global economy. - Prices of completed apartments and condos in the Central Region slipped 1.3% m-o-m in Dec, erasing the 2.2% m-o-m gain in Nov, according to the NUS Singapore Residential Price Index for Central Region (excluding small units).