MARKET PULSE: SATS, Olam, Yoma (31 Jan 2013)

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 2.80

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.44

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.52

MARKET PULSE: SATS, Olam, Yoma

31 Jan 2013

KEY IDEA SATS Ltd: Results slightly disappoint SATS's 3Q13 results fell short of our expectations following weaker top and bottom-line growth. Higher operating expenses resulted in operating margin stagnating at 9.9%, and the seasonal peak in quarterly performance failed to materialise with PATMI coming in at 23.0% YoY higher (-6.6% QoQ) to S$47.0m. While SATS will likely see out FY13 on a positive note, operating margins could deteriorate further should staff costs rise further and airlines cut back on food solution budgets. In terms of valuations, SATS has had an amazing run and valuations appear stretched at the moment. Even after raising our peg to 16.5x 12-month forward PE (from 15.5x), to incorporate the possibility of a special dividend - our fair value moves to S$2.80 (from S$2.70 previously). As such, we maintain our HOLD rating in anticipation of some profit-taking. (Lim Siyi) MORE REPORTS Olam Int'l: Completes bond rights issue Summary: Olam International (Olam) has completed the bond rights issue which also came with free detachable warrants. While the full subscription by the major shareholders Kewalram (20.2% stake) and Temasek (20% stake) will provide near-term assurance, several medium- to long-term issues remain. Besides scrutinizing future acquisitions plans, we believe that investors will also be following the execution of past acquisitions closely. Lastly, our model assumes that Olam does not raise more money to repay the US$600m debt due this year. But even then, we are now projecting higher financing cost, which would result in a 13% fall in our FY13 earnings estimate. Given the still uncertain medium-term outlook, we keep our HOLD rating, but place our S$1.44 fair value under review pending its 2QFY13 results due shortly. (Carey Wong) Yoma Strategic Holdings: No surprises in 3QFY13 numbers Yoma Strategic Holdings (Yoma) reported 3QFY13 PATMI of S$3.7m, increasing by S$2.3m YoY mostly due to higher sales of residences and land development rights. This brings 9MFY13 PATMI to S$1.9m, which is mostly in line with our expectations but below consensus estimates. Topline for the quarter came in at S$13.0m, up 32.1% YoY, again driven by stronger property sales. Yoma reports that residential sales during the quarter increased by more than three times YoY, and is mainly attributable to multiple projects in Pun Hlaing Golf Estate (Ivory Court Residences II, Bamboo Grove Garden Villa, Lakeview Apartments) and also apartments in Star City. We expect key catalysts for the stock ahead to be the proposed approval and acquisition of the prime site in Yangon and a proposed 1-for-4 rights issue for S$0.38 per share ahead. We would speak further with management regarding the latest results and, in the meantime, put our Hold rating and fair value estimate of S$0.52 UNDER REVIEW. (Eli Lee)

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NEWS HEADLINES - US stocks declined on Wed after the Federal Reserve said that economic growth had paused in recent months and 4Q12 data showed a surprise contraction in GDP. The Dow slid 0.3% to 13,910.42, while the S&P 500 index and the Nasdaq each fell 0.4%, to end at 1,501.96 and 3,142.31, respectively. - The biggest risk to the population projections by the government from now to 2030 is that Singapore companies fail to raise productivity swiftly enough to make up for the projected slowdown in workforce growth, business associations said. - Thai billionaire Charoen Sirivadhanabhakdi offer for Fraser & Neave (F&N) has turned unconditional, after he successfully raised his stake in F&N to 50.92%. - Tuan Sing Holdings reported 4Q12 net profit of S$79m, more than triple the S$25m it earned a year earlier, due to a surge in fair-value gains from investment properties. Turnover rose 56% YoY to S$112m.