Market Pulse: SIAEC, Valuetronics, FEHT, Karin, Yangzijiang, DBS, CDL (6 Feb 2013)

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.38

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.19

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.02

Stock Name: Karin
Company Name: KARIN TECHNOLOGY HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.25

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 15.94

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 13.01

MARKET PULSE: SIAEC, Valuetronics, FEHT, Karin, Yangzijiang, DBS, CDL

6 Feb 2013

KEY IDEA SIA Engineering: 9MFY13 slightly below expectations SIA Engineering Company's (SIAEC) 9MFY13F results were slightly below our expectations. Revenue increased by 1.1% to S$863.2m, chiefly due to an increase in materials and line maintenance revenue. Operating profit thus stayed roughly flat (+0.1% YoY) at S$97.2m. Share of profits from associated and JV companies increased by 0.3% to S$118.8m, representing a contribution of 51.5% of the group's pre-tax profits. PATMI was up 0.7% YoY to S$204.2m. This formed 72.6% of our previous FY13F estimate of S$281.4m, which we now reduce to S$274.0m. Still using a P/E peg of 17.1x and our basic EPS forecast of 25.6 S cents for 4QFY13F-3QFY14F, we reduce our fair value estimate from S$4.48 to S$4.38 and maintain our HOLD rating on SIAEC. (Sarah Ong) MORE REPORTS Valuetronics Holdings: Another challenging quarter Valuetronics Holdings Limited's (VHL) 3QFY13 results were below our expectations. Revenue from continuing operations fell 16.3% YoY to HK$508.1m, or 10.5% below our forecast. Estimated core PATMI declined 17.9% to HK$23.9m and fell short of our projection by 16.2%. This was driven by a slowdown in demand from some of its customers, while ASP pressures also exacerbated the challenging operating conditions. On a positive note, VHL ended the Dec-quarter with a healthy net cash balance of HK$234.7m, which would act as a buffer in light of the still uncertain macroeconomic environment. We pare our FY13 and FY14 revenue forecasts by 5.0% and 4.3%, and our core PATMI projections by 9.3% and 7.4%, respectively. We also roll forward our valuations to 4x FY14F EPS, and our fair value estimate is lowered from S$0.20 to S$0.19. Maintain HOLD. (Wong Teck Ching Andy) Far East Hospitality Trust: Results in line for 1 Aug 2012-31 Dec 2012 Far East Hospitality Trust (FEHT) reported its first results since listing for the financial period 1 Aug 2012-31 Dec 2012 that were generally in line with our expectations (the actual results are from 27 Aug to 31 Dec 2012 since FEHT was listed on 27 Aug 2012). While gross revenue, at S$42.2m, was 0.7% lower than the pro-rated forecast in the prospectus, net property income of S$38.8m was 0.2% higher than the forecast as a result of lower operating expenses. Active management of finance costs and other trust expenses helped to lift its income available for distribution 4.5% above its forecast to S$33.6m. We maintain our HOLDrating on FEHT and put our fair value of S$1.02 under review. We will be meeting management shortly. (Sarah Ong) Karin Technology: 1HFY13 core PATMI within expectations Karin Technology's (Karin) 1HFY13 revenue exceeded our expectations but core PATMI was in line due to lower-than-expected gross margin. Revenue surged 39.7% YoY to HK$2,123.3m and formed 54.4% of our FY13 forecast. Reported PATMI jumped 47.5% YoY to HK$33.7m. However, after adjusting for exceptional items, we estimate that core PATMI came in at HK$26.8m (+5.1% YoY) and constituted 50.1% of our full-year projection. Karin's robust topline growth was driven largely by its Consumer Electronics Products segment, which reported a 56.7% increase in sales, although this also resulted in margin compression given the high volume, low margin nature of the business. Karin declared an interim dividend of 7.2 HK cents/share, higher than the 7 HK cents/share in 1HFY12 (3.5 HK cents of interim and special DPS each). Karin also returned to a net cash position of HK$69.4m in 1HFY13 (2HFY12: net debt of HK$31.7m), aided by strong free-cashflows generated of HK$99.7m. We will provide more updates after speaking with management. We maintain our HOLD rating on Karin but our S$0.25 fair value estimate is under review. (Wong Teck Ching Andy) Yangzijiang Shipbuilding: Ups stake in Xinfu yard Yangzijiang Shipbuilding (YZJ) announced last evening that it has acquired an additional 20% interest in Jiangsu Yangzi Xinfu Shipbuilding for US$18m (~RMB 112.1m). Following this, YZJ will hold an 80% interest in the Xinfu yard, which has a huge production area of about 166ha (YZJ's old yard: 20ha, new yard: 201ha, Changbo yard: 29ha) and is therefore ideal for building large vessels. As mentioned by management previously, the group has plans to build VLCCs, large containerships (e.g. 10,000 TEU) and other vessels in this yard. Meanwhile, YZJ has also acquired the remaining balance of 40% interest in Shanghai Henggao Ships Design Co for RMB6m. The latter is engaged in the detail and production design for merchant ships. These acquisitions are still relatively small in comparison to the group's cash position - YZJ had net cash and held-to-maturity assets of RMB2.6b as at Sep 2012. Maintain HOLD with S$0.95 fair value estimate on YZJ. (Low Pei Han) DBS: Slightly below expectations 4Q DBS posted 4Q12 net earnings of S$760m this morning (excluding divestment gains of S$450m), and this is slightly below market expectations of S$788m (based on Bloomberg poll). For the full year, net earnings came in at S$3,360m (+17.4% excluding divestments or S$3,809m including divestment gains). The board has declared a final dividend of 28 cents, bringing full year payout to 56 cents per share (same as 2011), and the shares will be quoted ex-dividend on 13 May 2013. Loans grew 8% from end 2011 or 4% from 3Q12 to S$210.5b. Net Interest Margin continued to ease off, down from 1.73% in 4Q11 and 1.67% in 3Q12 to 1.62% in 4Q12. For the year, double-digit declines in Stockbroking and Investment Banking due to weak equity markets were compensated for by double-digit gains for Wealth Management and Cards. We will provide more updates after the results briefing. Do note that our previous call on the stock was a BUY with a fair value estimate of S$15.94. We will review our estimates after the briefing. (Carmen Lee) City Developments Limited: Top bid at GLS tender for Commonwealth Ave site Yesterday evening, City Developments (CDL) was part of a consortium that put in the top bid of S$562.8m at a GLS tender for a residential site at Commonwealth Ave. We understand that CDL would have a 30% stake in this project. The tender attracted three bidders in total, and CDL's bid was 2.4% above that of the second highest bidder. The site has a land area of 12.1k sqm and a maximum GFA of 59.2k sqm, and is across the street from the Queenstown MRT station - an attractive location. We estimate breakeven and selling ASPs of S$1.35k psf and S$1.6k psf, respectively, for the 99-year condominium project with ~700 units and expect this transaction to accrete 4 S-cents to CDL's RNAV. Recent transactions over the last twelve months at Alexis, the last private condominium (freehold) launched in that area, were at ASPs of S$1.65k psf. Maintain HOLD on CDL with our fair value estimate of S$13.01 (15% discount to RNAV) under review. (Eli Lee)

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NEWS HEADLINES - US stocks rebounded on Tue to recoup much of Mon's losses, boosted by news of a leveraged buyout of computer maker Dell. The Dow rose 0.7% to 13,979.30, the S&P 500 index gained 1% to 1,511.29 and the Nasdaq ended 1.3% higher at 3,171.58. - FJ Benjamin Holdings' 2Q13 net profit fell 73% YoY to S$1.3m as turnover slid 12% to S$97m, due to lower revenue from its operations in North Asia and weaker spending in Singapore and Malaysia during the festive season. - Stamford Land Corp's 9M13 net profit fell 47% YoY to S$18.6m, as turnover slid 53% to S$196m, due to a plunge in revenue from its property development segment. - Lorenzo International, Ziwo Holdings and Sinotel Technologies each separately warned of full-year losses for 2012 while United Food Holdings said it will report a loss for 4Q12.