16 May 2013~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.
- WILLIAM ARTHUR WARD
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Singapore: The Day AheadSINGAPORE DAYBOOK:SingTel's Q4 profit falls nearly one-third to $868m. Group will spend $2b on digital unit, boost dividend payout range [SINGAPORE] Even as SingTel's fourth-quarter bottom line fell by almost a third from exceptional losses, the telco has big outlays in the pipeline. It has set aside $2 billion for its loss-making digital unit and bumped up its dividend payout range and final dividend.
Net profit for the quarter ended March 31, 2013, fell from $1.29 billion to $868 million - a decline of 32.6 per cent - as the group absorbed a $225 million loss from the sale of its associate, Warid Pakistan. Excluding exceptional items, underlying net profit was 2.2 per cent lower at $1 billion.
Operating revenue was 6.3 per cent lower at $4.48 billion - something the group forecast last year. It is its first revenue decline in almost 12 years since it bought Optus in 2001. Incidentally, the quarter's profit was dragged down by the Australian unit, which saw an 8.8 per cent fall in its top line to $2.79 billion.
"The industry's been hit by a reduction in mobile termination rates which has been mandated by the regulator. For the half-year to December 2012, the service revenue for the total mobile industry in Australia declined by 4.5-4.6 per cent. We actually performed in line very much in line with that. We had a decline of 4.5 per cent," said Paul O'Sullivan, CEO of SingTel's group consumer division. (Source: The Business Times)
MARKET SCOOP
Hong Fok Q1 profit more than doubles to S$10.1m
Petra Foods in the red with cocoa ingredients unit
Hong Leong Asia Q1 profits up 3.6% to $14.4m
United Engineers Q1 profits down 24% to S$7.4 million
Hiap Hoe Q1 profit falls 28%
SwiberQ1 profit doubles to US$20.07m
STX Pan Ocean narrows Q1 loss, sees bottom of cycle
(Source: The Business Times)
NOMURA Securities says...
NEPTUNE ORIENT LINES | BUY | TP: S$1.38
NOL released its 1Q13 results with net profit of USD76mn but this distorted exceptional items (primarily one-off gain of USD200mn from the completed sale of the NOL headquarter building in Singapore)
Excluding all exceptional, pre-exceptional earnings would be a loss of USD107mn, which widened slightly from net loss of USD83mn in 4Q12 but significant improvement from net loss of USD246mn in 1Q12
Liner's EBIT loss of USD101mn was slightly larger than loss of USD95mn in 4Q12, but improved significantly from EBIT loss of USD246mn in 1Q12 due to stronger volume from transpacific routes which was up 4% y-y, this combined with lower unit costs (down by 6% y-y)
Logistics continues to be profitable with USD16mn EBIT
We expect 1H13 earnings to remain loss-making for NOL, with a return to profit in 2H13 driven by recovery in freight rates, especially reflecting the higher transpacific annual contracts
We estimate the transpacific annual contracts were concluded up to USD100 higher, and will be reflected from 3Q13 earnings onwards
To recap, NOL has the largest Asia-US exposure among pure container lines under our coverage
The container shipping sector is currently seeing slow demand growth and newbuilding deliveries pressures, which led to spot rates below breakeven
The current potential recovery depends on strategy market share vs. profitability
We believe the strategy depends on profits/loss, and return to losses is likely to drive capacity control again and drive rates higher
Our price target is based on sum-of-the-parts with mid-cycle P/B of 1.1x for the container business and industry average P/B of 3.0x for the logistics business
CREDIT SUISSE Securities says ...
VARD HOLDINGS LTD | NEUTRAL | TP:S$1.10
1Q13 EBITDA of NKr304 mn represents 21% of the consensus FY13 forecast, as margin declined to 11.1% in 1Q13, below the consensus estimate of 12.1% in FY13
Management attributed the decline in margin to delays in its yard in Niteroi, Brazil
Key challenges the company faced include high cost level and staff turnover, as well as bottlenecks in the subcontracting market
While operations are expected to stabilise by end-2013, margins are likely to be impacted through to 2014
We forecast EBITDA margin of 10.5% in 2013 and 10.0% in 2014
Management was positive on the outlook for subsea support and construction vessels, noting strong enquiries across vessels of different sizes, specifications and geographical markets
This is driven by increased use of subsea installation in oil and gas exploration, as well as demand for modern vessels for such installations
According to Upstream, Petrobras is in final talks to charter seven newbuild pipelaying vessels, of which two are expected to be constructed by VARD in Brazil
VARD has secured contracts for six vessels worth about NKr4.0 bn year-to-date, representing 33% of our 2013 forecast of NKr12 bn
The company had an order book of Nkr15,450 mn at the end of 1Q13
We maintain our NEUTRAL rating on VARD with a target price of S$1.10 (down from S$1.50), based on 2014E P/E of 8x, and lower our 2013-14E EPS by 19-20%, introducing 2015E estimates
In our view, margins are likely to remain under pressure in the near term, given ongoing execution difficulties in the Brazilian yard, and our 2013E and 2014E EPS are 6% and 24% below consensus, respectively
UOB KAY HIAN says...
SINGAPORE TELECOMMUNICATIONS | SELL | TP:S$3.41
SingTel reported net profit of S$868m (-32.6% yoy) for 4QFY13, below our expectation of S$913m
It completed the divestment of 30% stake in Warid Pakistan, resulting in exceptional loss of S$225m
Underlying net profit would have declined 2.2% yoy if we exclude all exceptional items
SingTel added a robust 29,000 new post-paid subscribers
ARPU maintained a declining trend contracting 4.9% yoy to S$78 due to lower roaming and SMS interconnect revenue
Depreciation was higher due to equipment investment for customer contracts at NCS
Overall earnings from Singapore declined by 7.4% yoy
Revenue from Optus declined by 5.4% yoy driven by a 7.3% yoy contraction for its mobile business
Blended ARPU declined 7% yoy to A$40 due to lower roaming revenue
Optus managed to improve EBITDA margin by 2.7ppt to 32.2% due to lower handset subsidies and selling & administrative expenses
Contributions from regional mobile associates was unchanged on a yoy basis
Telkomsel and AIS continue to register healthy growth of 4.9% and 7.5% yoy
Unfortunately, Bharti suffered earnings decline of 14.2% yoy for South Asia and 32.7% yoy for Africa
Bharti suffered a 5% decline in revenue per minute with intense competition and higher network related expenses due to expansion
SingTel provided financial performance based on its new organisational structure, which shows that Group Digital Life made losses of S$33m for 4Q13 and S$104m for FY13
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