SG: MARKET PULSE: NOL, OKP (27 Mar 2013)

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.38

Stock Name: OKP
Company Name: OKP HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.48

MARKET PULSE: NOL, OKP

27 Mar 2013

KEY IDEA Neptune Orient Lines: Turnaround still intact The Shanghai Containerised Freight Index has exhibited relative stability since the start of the year, and this should provide a good base for upcoming generate rate increases such as those enacted under the TSA for Apr. Although there is a possibility of a supply outpacing demand, several liners have expressed confidence in the resilience of rates this year and continue to push through GRIs beyond Apr. Nonetheless, the major liners acknowledge potential threats to profitability and have reiterated the need for the industry to strike a balance between competition and sustainability. Although some liners have taken heed - such as the G6 and CKYH alliances who have cancelled their planned Asia-Europe service launches this year - there remains some routes that are particularly susceptible to rate fluctuations, and we adjusted our estimates downwards for NOL accordingly. Regardless of this adjustment, our view on NOL's turnaround in FY13 remains intact and we maintain our BUY rating with a fair value of S$1.38. (Lim Siyi) MORE REPORTS OKP Holdings: Revenue visibility but margin compression To recap, 4Q12/FY12 results were generally in line with our expectations. While FY12 net income of S$104.5m (-5% YoY) was 5% lower than our estimate, PATMI of S$12.4m (-53% YoY) was 6% higher than what we expected. The lacklustre results were due to a weak economy, price competition and climbing labour costs. OKP declared a first and final dividend of 1.5 S cents/share, lower than the 2 S cents that we and the street had expected. FY12 dividend translates into a yield of 2.9%. We believe that management is conserving cash to increase its flexibility to tender for government projects. Following a change in analyst, we have adjusted our forecasts for OKP's FY13 and FY14 performance. Applying a P/E multiple of 11x to FY13F EPS, we derive a FV of S$0.48/share, slightly higher than our previous FV of S$0.46/share. We maintain our HOLDrating on OKP. (Sarah Ong)

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NEWS HEADLINES - US stocks surged on Tuesday, lifting the Dow Jones to a record and the S&P 500 Index near its all-time high, following data that showed improvement in home prices and manufacturing. - Singapore's industrial production plunged 16.6% YoY in Feb, a drop almost twice as large as the 8.6% drop forecasters were expecting. - Eastern Holdings said that it would pump S$9.99m into Hong Kong-based Schroder Asian Asset Income Fund. - Chip Eng Seng Corporation has agreed to buy San Centre, an office building along Chin Swee Road, for S$113m under a collective purchase. - Chuan Hup Holdings Limited said that its subsidiary, Provest Transworld Limited, has prematurely terminated its JTC leases at Jalan Samulun. - Olam International opened an almond shelling and processing plant in Victoria, Australia. The factory will have a total capacity of 40k tonnes of almond kernels a year.