Market Pulse; Tat Hong, Petra Foods, STE, Nam Cheong (11 Jan 2013)

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: Petra
Company Name: PETRA FOODS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.57

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 3.90

Stock Name: Nam Cheong
Company Name: NAM CHEONG LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.30

MARKET PULSE: Tat Hong, Petra Foods, STE, Nam Cheong

11 Jan 2013

KEY IDEA Tat Hong Holdings: Stellar run to continue Tat Hong Holdings' share price soared by more than 67% since we last upgraded the counter about a year ago, outperforming STI's 19% return over the same period. Looking ahead, we believe the group will continue to grow on the back of higher rental rates and larger crane fleet size. The recent forest fires in Australia may bring a temporarily pause to its growth, but could also result in higher demand for general equipment to clear debris in its aftermath. Meanwhile, Tat Hong's China operations could surprise the market on the upside as it is now better positioned to ride the expected recovery in China's economy. Maintain BUY with an unchanged fair value estimate of S$1.70. (Chia Jiunyang) MORE REPORTS Petra Foods: Time to lock in some profits Carrying on from its very impressive rally in 2012 (+85.4%), Petra Foods has appreciated by more than 10% in just the first week of Jan alone. Although we continue to favour Petra for its EM Asia exposure - and have raised our projections and fair value accordingly following the sale of its Cocoa Ingredients division - the current pace of its appreciation in such a short span of time has compelled us to temper investor expectations for a sustained spike in its share price. The increase in its share price has far exceeded the gain per share to be realized from the sale, and is now trading at a PE multiple last seen was before the onset of the financial crisis. As a result, we downgrade Petra to HOLDon valuation grounds. Keeping our fair value of S$3.57 intact, we suggest that existing shareholders who entered at lower prices lock in some profits at current levels. (Lim Siyi) ST Engineering: ST Aerospace won S$450m of contracts ST Aerospace, an arm of ST Engineering (STE), announced that it has secured about S$450m worth of new contracts in 4Q12. This is in line with our expectations. The contracts, which are in airframe, component and engine maintenance, as well as engineering and development, will be carried out globally. In Singapore, ST Aerospace broke ground to add a narrow-body aircraft hangar at its Changi facility for its airframe maintenance, repair and overhaul (MRO) business. Expected to begin operations by end 3Q12, the new hangar will be able to accommodate two narrow-body aircraft (e.g., Boeing 737 and Airbus A320) and will increase the range of airframe MRO services provided. We maintain our fair value of S$3.90 and HOLD rating on STE. (Sarah Ong) Nam Cheong Ltd: Proposed placement for S$47m Nam Cheong Limited has proposed to place out 190m new ordinary shares at S$0.255 each (12% discount to yesterday's closing at S$0.285) to raise about S$47m in net proceeds. The proceeds will be used to mainly finance expenditure for its shipbuilding projects and vessel chartering business. The placement will be subject to SGX approval, and assuming successful, there will be a 10% dilution. We will speak to management for greater clarity. In the meantime, we'll put our Buy recommendation and S$0.30 fair value UNDER REVIEW. (Chia Jiunyang)

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NEWS HEADLINES - US stocks rose on Thu after China's Dec exports data beat expectations, boosting hopes that the world economy is improving. The Dow rose 0.6%, the S&P 500 index gained 0.8% to a five-year high, and the Nasdaq ended 0.5% up. - Singapore private home prices may keep rising this year after the cost of suburban land increased by an average of 22% last year, which could push up selling prices for future projects, according to property consultancy DTZ. - Ocean Sky International will sell a staff hostel in Kowloon, Hong Kong, for US$5.2m and expects a US$1.4m net gain from the sale. Proceeds will be used to reduce bank borrowings and for general working capital. - Singapore's labour market could tighten further in the next six months as more companies plan to hire even as tighter restrictions on hiring foreign workers are contributing to a manpower crunch, a recent poll of 500 companies showed. - DeClout Ltd has used S$2.1m or 36% of the net proceeds from its IPO in Oct, mainly for investment in its games cloud business.