MARKET PULSE: Raffles Medical, YZJ, Midas (17 Jan 2013)

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.60

MARKET PULSE: Raffles Medical, YZJ, Midas

17 Jan 2013

KEY IDEA Raffles Medical Group: Downgrade to HOLD; toning down assumptions We believe that there are still ongoing uncertainties over the possible commencement date of Raffles Medical Group's (RMG) proposed new Specialist Centre in the Orchard area. We thus adopt a more conservative approach, and assume that the delay in operations would stretch until late 2013 or early 2014 (previously 1H13). This could have a negative flow-through effect to its Raffles Hospital as this new Specialist Centre was intended to act as an additional platform for referrals. Hence, we trim our FY13F revenue and EPS estimates by 2.7% and 5.0%, respectively. This lowers our fair value estimate from S$2.82 to S$2.68, still pegged to 24x FY13F EPS. Coupled with RMG's recent strong share price performance, we downgrade the stock from Buy to HOLD. (Wong Teck Ching Andy) MORE REPORTS Yangzijiang Shipbuilding: Preparing future funds Yangzijiang Shipbuilding (YZJ) has proposed an issue of 330m warrants at a price of RMB0.3072 (S$0.0605) for each warrant. Each warrant carries the right to subscribe for one new ordinary share in YZJ at the price of RMB7.617/share (S$1.50). Though this is a fund raising exercise, the amount that YZJ will receive for now (~$18.15m) is actually relatively insignificant to the amount that may potentially come in later when the warrants are exercised (~$495m). Hence management contends that this move is for YZJ to prepare funds for the future when the shipbuilding industry recovers, which we do not see happening this year or even 1H14. There is no impact on the group's EPS for now, though there is a potential 8.6% dilutive effect if all warrants are exercised. Maintain HOLD with fair value estimate of S$0.95. (Low Pei Han) Midas Holdings: JV seals CNY338m tram contract Midas Holdings (Midas) announced last evening that its 32.5%-owned JV company Nanjing SR Puzhen Rail Transport (NPRT) has clinched its first 100% low-floor tram contract valued at ~CNY338m. This entails the supply of 18 100% low-floor trams for the Suzhou National New & Hi-tech Industrial Development Zone Tramline 1 project. We see potential in the development of the low-floor tram business, as more than ten cities in China are currently working on modern 100% low-floor tram projects. Delivery and hence contribution would only take place in 2014 for NPRT. However, we believe that NPRT's first tram contract win highlights the possibility of a new revenue stream, besides its core metro business. In addition, we understand that these trains are made of aluminium and thus provide potential orders from NPRT to Midas for its Aluminium Alloy Extruded Products Division. We expect a positive reaction to Midas' share price and reiterate our BUY rating and S$0.60 fair value estimate, pegged to 1.2x FY13F P/B. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks ended mixed on Wed, as investors digested earnings reports from JP Morgan and Goldman Sachs, while tech stocks were buoyed by a rebound in Apple after its drop earlier this week. The Dow fell 0.2% to 13,511.23, the S&P 500 index ended flat at 1,472.63 and the Nasdaq rose 0.2% to 3,117.54. - The Straits Trading Co's shareholders have approved the firm's plan to purchase a further 23.6% stake in WBL Corp by issuing new shares, paving the way for it to make a formal offer for the other WBL shares it does not already own. - Mobile phone distributor mDr Ltd has incorporated a subsidiary in Myanmar that will spearhead its push into the market. mDr owns 51% of MDR Myanmar Co, while its local partners, Be-Well (Myanmar), Be-Well Corp and Avitar Enterprises, hold stakes of 20%, 20% and 9%, respectively. - Ntegrator International has secured S$11.7m worth of new contracts from Myanmar Radio and Television and the Viettel Group.