MARKET PULSE: Nam Cheong, Breadtalk, STX OSV, CSE Global, Dyna-Mac, ECS, Petra Foods (27 Feb 2013)

Stock Name: Nam Cheong
Company Name: NAM CHEONG LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.30

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.77

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.52

Stock Name: CSE Global
Company Name: CSE GLOBAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.99

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.57

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.56

Stock Name: Petra
Company Name: PETRA FOODS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.57

MARKET PULSE: Nam Cheong, Breadtalk, STX OSV, CSE Global, Dyna-Mac, ECS, Petra Foods

27 Feb 2013

KEY IDEA Nam Cheong Limited: A strong quarter to finish FY12 Nam Cheong Limited reported a strong set of 4Q12 results with revenue and net profit increasing by 172% and 87% to MYR 379m and MYR 49m respectively. On a full-year basis, revenue climbed 45% to MYR 877m, while net profit increased 47% to MYR 137m. Operating margin declined slightly to 16.4% compared to 17.3% a year ago, partly due to lower margins from its vessel chartering division. Several vessels were demobilized upon the charter fulfillment and later re-deployed for ensuing contracts. The shipbuilding business achieved significant growth with revenue improving to MYR 839m (+49%) and gross profit increasing to MYR 164m (+56%). The group recommended a final dividend of 0.5 S cts for FY12 (FY11: 0.2 S cts), representing a payout of 19.2%. Maintain BUYwith unchanged fair value estimate of S$0.30. (Chia Jiunyang) MORE REPORTS BreadTalk Group: Margin pressures as expected BreadTalk Group registered a 19.1% YoY and 5.7% increase in 4Q12 revenue and operating profit to S$119.7m and S$6.5m respectively on the back of higher same-store sales across all business segments. Although these results exceeded our forecast, the group's operating and net profit margins declined as expected following greater cost pressures. In line with its expansion phase, BreadTalk declared a lower final dividend to bring the total dividends declared in FY12 to 1.3 S cents (FY11: 1.5 S cents). Going forward, we adjusted our FY13/14 forecasts upwards to account for full year contributions from new stores but remained lukewarm on possible margin improvements as the group's continued expansion push makes the scenario unlikely. Therefore, we lower our rolling 12-month EPS peg to 15.5x (from 19x) but keep our fair value estimate at S$0.77. Maintain HOLD. (Lim Siyi) STX OSV: FY12 net profit down 45% STX OSV reported a weak set of results with FY12 net profit coming in at NOK902m, 13% below our expectations and 15% below consensus. 4Q revenue and net profit were NOK2.5b (-18.8%) and NOK124m (-80.6%), respectively. Lower-than-expected order intake resulted in temporarily lower utilizations in some yards in Norway. Its Niteroi shipyard in Brazil also impacted the group's performance negatively. Meanwhile, the vessel market appears to be improving with STX OSV clinching three OSCV contracts worth NOK2-2.8b since the beginning of 2013. Assuming a stronger order intake in 2013 (compared to 2012's NOK9.5b) and barring a serious deterioration in its Brazil operations, the group should see improved utilization and sustained level of performance across 2013-14. Maintain BUY with unchanged fair value estimate of S$1.52. (Chia Jiunyang) CSE Global: Net profit doubled to S$56m CSE Global reported results which were in line with expectations as FY12 net profit doubled to S$56m versus our estimate of S$57m. The improvement was partly due disposal gains from its investment in eBworx Berhad. The group has recommended a final dividend of 2.75 Scts for FY12 (FY11: 2.0 Scts). We currently have a BUY rating with a fair value estimate of S$0.99, and will provide further updates after its briefing later. (Chia Jiunyang) Dyna-Mac Holdings: FY12 net profit up 56.5% Dyna-Mac Holdings' FY12 net profit came in at S$28.4m (+56.5%) and was in line with our estimate of S$28.0m. In separate SGX announcements, the group disclosed that its COO John Varghese will be re-designated as Chief Corporate and Technical Officer "in line with his intention to take on a less demanding role due to his age and health". John will be succeeded by Mr. Lim Tjew Yok, the Chief Technical Officer and an Executive Director of the company. We will be attending its briefing later and will provide further updates accordingly. In the meantime, do note that we have a BUY rating with S$0.57 fair value estimate. (Chia Jiunyang) ECS Holdings: 4Q12 core PATMI misses expectations ECS Holdings (ECS) reported a 21.4% YoY dip in its 4Q12 PATMI to S$7.1m despite a 10.5% increase in revenue to S$1,021.1m. Excluding forex and other exceptional items, we estimate that core earnings would have decreased 16.4% YoY to S$6.6m. This is below our expectations due largely to a 1.1ppt slide in gross margin to 3.4%. For FY12, revenue inched 1.0% higher to S$3,643.7m, forming 102.0% of our FY12 forecast. Estimated core PATMI declined 18.4% (reported PATMI fell 24.4%) to S$29.4m, which missed our estimate by 5.8%. On a positive note, a first and final dividend of S$0.022 per share was declared, similar to FY11, but above our S$0.017 per share forecast. This translates into a yield of 4.2%. Looking ahead, ECS aims to broaden its range of distribution products and services to accommodate the shift in consumer preference from PCs to mobile devices, while it is also looking to develop its own cloud-based solutions. We will provide more details after the analyst briefing. We place our Buy rating and S$0.56 fair value estimate under reviewgiven this set of weaker-than-expected results and ECS's 14.1% YTD share price appreciation. (Wong Teck Ching Andy) Petra Foods: Branded Division continues strong growth Petra Foods' 4Q12 results registered a net loss of US$16.7m that came in below our expectations following continued weaknesses in its Cocoa Ingredients business. Double-digit net profit growth (+10.4% YoY to US$14.7m) in the Branded Consumer division was offset by a sizeable loss of US$31.4m from the Cocoa Ingredients division during the same period. This brought FY12 net profit to US$25.8m - a decline of 57.3% YoY from US$60.5m. However, excluding the soon-to-be-sold Cocoa Ingredients division, Petra would have registered a 38.8% increase in its FY12 bottom-line to US$54.5m on a 13.8% YoY improvement in revenue to US$477.7m. Pending a briefing with management later in the morning, we place our fair value estimate of S$3.57 under review but maintain our HOLD rating on the counter. (Lim Siyi)

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NEWS HEADLINES - US stocks climbed Tuesday with positive housing data and comments by Fed Chairman Bernanke that the benefits of quantitative easing are clear. The Dow rose 0.8% to 13,900.13. - Keppel Corporation's O&M arm has won two contracts worth S$200m from SBM Offshore and MODEC and Toyo Offshore Production Systems (MTOPS). - Far East Orchard, formerly known as Orchard Parade Holdings, posted a 53% increase in FY12 net profit to S$190.8m, chiefly due to other gains (net) of S$121.5m. - Hotel Properties' FY12 PATMI jumped 84% to S$129.7m. Revenue rose 10% to S$542.8m. - JB Foods' 4Q12 PATMI fell 55% YoY to RM7.2m despite revenue climbing 13% to RM194.8m.