SG: MARKET PULSE: KSH, Rotary, ST Engineering (11 Apr 2013)

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.73

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

Research House: OCBC

Price Call: HOLD

Target Price: 4.12

MARKET PULSE: KSH, Rotary, ST Engineering

11 Apr 2013

KEY IDEA KSH Holdings: More earnings growth momentum likely We recently met with KSH management and keep intact our FY13E and FY14E forecasts at S$30.7m (up 68% YoY) and S$53.0m (up 72% YoY), respectively, which are underpinned by progress billings for already-sold projects in Singapore. Beyond FY14, we see earnings growth momentum likely continuing due to the upcoming launch of its Beijing condo project this year (Liang Jing Ming Ju Phase 4) which would contribute an estimated S$23m net earnings upon TOP. We also understand management is also focused on launching Phase 1 of its 533-hectare Gaobeidian township project (GBD), located 30 mins away from Beijing city via high-speed rail. For upcoming FY13E results, we expect final dividends in the range of 0.5 - 1.5 S-cents and possibly a bonus share issue as well. Maintain BUYwith an increased fair value estimate of S$0.73, versus S$0.62 previously, as we now incorporate accretion from Liang Jing Ming Ju into our SOTP valuation model and raise our PE multiple for the construction segment from 4x to 5x, in line with peers trading at 5-7 times. (Eli Lee) MORE REPORTS Rotary Engineering Ltd: Ceasing coverage Rotary Engineering Ltd (Rotary) had a difficult year in 2012, as it battled escalating cost over-runs on its US$745m SATORP mega-project and repeated delays on its S$260m Fujairah Oil Terminal project. In 4Q12, the group appeared to be making progress on its SATORP project, although the non-controlling deficit is still a thorny issue. The group recently secured S$42m of project work in Singapore's Jurong Island, and S$300m of EPC work in Pulau Busing. However, the tighter foreign labour market in Singapore could mean lower project margins over the medium term horizon. Coupled with the uncertainty at its SATORP JV, it may still be too early for investors to buy its shares, which are currently trading at 1.4x PBR. Meanwhile due to a reallocation of resources, we have decided to CEASE COVERAGE. (Chia Jiunyang) ST Engineering: ST Aerospace won S$480m of contracts in 1Q13 ST Engineering (STE) announced that its aerospace arm, Singapore Technologies Aerospace Ltd (ST Aerospace) has secured new contracts worth about $480m in 1Q13. The contracts are for airframe, component and engine maintenance, as well as engineering and development, which will be carried out through its global maintenance, repair and overhaul (MRO) network. As this is in line with our expectations, we maintain our fair value estimate of S$4.12 and HOLD rating on STE. (Sarah Ong)

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