SG: MARKET PULSE: SMRT, United Environtech, SPH (2 Apr 2013)

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.51

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.90

MARKET PULSE: SMRT, United Environtech, SPH

2 Apr 2013

KEY IDEA SMRT Corporation: More impairments? We view the recent goodwill impairment announcement as a way for SMRT's new management to turn the page on its past overseas ventures although the timing did take us by surprise. While the Shenzhen ZONA venture failed to yield the desired results, its performance only turned negative over the past two quarters. Nonetheless, we feel that management review of existing operations is still ongoing, and we could see further impairments - particularly on the SG bus business - down the line. In the interim, we expect to see a net loss in excess of S$4.3m for 4QCY13, and a possible halving of FY12's final dividend. As we roll our valuations forward to include FY15, our fair value declines to S$1.51 from S$1.62 previously with higher operating expenses and a lack of growth opportunities to blame. We maintain HOLD on SMRT and reiterate our view that an inflection point is unlikely anytime soon. (Lim Siyi) MORE REPORTS United Envirotech: Inks another project in Jiangsu United Envirotech Ltd (UEL) has recently inked an agreement worth RMB200m (S$40m) with the local government of Siyang County, Jiangsu Province, China for TOT (Transfer-Operate-Transfer) and BOT (Built-Operate-Transfer) projects in an industrial park for the textile industry. Management intends to finance its latest investment using proceeds from the previous convertible bond issue to KRR and bank financing. Based on its usual 40% equity/60% debt financing model, UEL would need around S$5.6m for Phase 1 of the TOT project, which should not be an issue as it is currently sitting on ~S$63.2m of cash (as at 31 Dec 2012). In light of the latest investment, we bump up our FY14 estimates for revenue by 1.5% and earnings by 4.9%; this in turn raises our fair value from S$0.88 to S$0.90, still based on 13x FY14F EPS. Maintain BUY. (Carey Wong) Singapore Press Holdings: Acquires vehicle online classifieds site SPH announced that it has entered into a sale and purchase agreement to purchase SGCM Pte. Ltd. which owns and operates vehicle online classified sites (including the popular sgcarmart.com), a car auction platform, and performs online marketing. In addition, it is also a service provider for car loans, insurance and settlement services. The maximum aggregate consideration payable is S$60m and would be made in cash. We see this acqusition to be a logical one and part of SPH's continued expansion into online media advertising. We would speak further with management regarding this acquisition and, in the meantime, maintain BUY with an unchanged fair value estimate of S$4.94. (Eli Lee)

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NEWS HEADLINES - Latest official flash estimates show a slower QoQ increase in private home prices in 1Q13 than in 4Q12. Meanwhile, HDB resale flat prices grew at the slowest pace (1.2% QoQ) in a year in 1Q13. - Beijing, Shanghai and another major city in China's south-west will implement strict property cooling measures, such as the prohibition of single Beijing residents from buying second homes. - China's official PMI came in at 50.9 last month, an 11-month high, compared to 50.1 in Feb. However, it still missed analysts' estimates. - SPH will pay up to S$60m in cash for popular online car portal, sgCarMart. - HPH Trust's shares slipped yesterday as its Hong Kong unit saw a fifth day of demonstrations by port workers demanding a pay rise from stevedoring contractors. - Chip Eng Seng has bought a 2,927 sq m site at the fringe of the CBD of Melbourne, Australia, for A$32m.