27 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 :Wisdom is the reward you get for a lifetime of listening when you'd have preferred to talk.
- DOUG LARSON
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Singapore: The Day AheadSINGAPORE DAYBOOK:S'pore yuan clearing to set cat among pigeons. It will raise yuan deposit rate rivalry involving HK, Taiwan [HONG KONG] The launch of yuan clearing services in Singapore today by Industrial and Commercial Bank of China (ICBC) is likely to intensify the yuan deposit rate competition among lenders in the Lion City, Hong Kong and Taiwan, an analyst said.
As Singapore is very proactive in developing its bond market, it has strong potential to become a key yuan-denominated offshore bond centre in the region and lure some yuan deposits that are currently parked in Hong Kong and Taiwan, said Frances Cheung, senior fixed-income strategist at Credit Agricole CIB.
If that happens, it will put more pressure on banks based in Hong Kong and Taiwan to raise their deposit rates for yuan savers, Ms Cheung said. Although it is hard to predict at the moment just how much Singapore can build for its yuan savings pool, it is almost certain that the growth will be robust, she said.
ICBC's Singapore branch will launch clearing bank services for participating lenders from today. The move comes after authorities in early February picked the lender to be the city-state's yuan clearing bank. (Source: The Business Times)
MARKET SCOOP
Yoma's Q4, full-year earnings jump on higher real estate sales
(Source: The Business Times)
DBS Securities says...
COMFORTDELGRO | BUY | TP: S$2.19
According to media reports, Singapore Labour Foundation (SLF) has sold a stake in ComfortDelGro to raise S$329.8m at S$1.94/share
The total number of shares sold of about 170m, equates to 8% of CD shares
SLF held an 11.93% stake in CD prior to the sale, and we estimate its residual stake will decline to c.3.93%
Established in 1977, SLF is a statutory board of the Ministry of Manpower and it aims to improve the welfare of union members and further the trade development of trade union movement in Singapore
We understand that the marketed price range was S$1.94 to S$2.03
The reason for selling such a huge stake, at the lower end of range and at an c.11% discount from last traded price is not known
Over the years, CD evolved and expanded outside of Singapore with overseas revenues accounting for almost 50% of the Group's revenue
This may be seen as less of a strategic fit to the overall labour union movement
We thought another possible reason is that SLF could be relooking at its portfolio to release funds
We see two possible reasons: Firstly, a total of 170m shares (8%) is not small and SLF may adopt the view to dispose of it in a block rather than in tranches
Secondly, CD has appreciated by 22% YTD and 14% in the past 1 month, outpacing STI's 8.6% and 3.9% gain, respectively
Fundamentally, we do not see any changes in the operations with the change in ownership
In fact, CD just reported a reasonable set of 1Q results with net profit up by 8% y-o-y, despite cost challenges
In addition, it is also pursuing inorganic growth via bite-sized acquisitions leveraging on its strong balance sheet
Our TP of S$2.19 and BUY recommendation is retained
UOB KAY HIAN says ...
COMFORTDELGRO | BUY | TP:S$2.32
Singapore Labour Foundation (SLF) yesterday sold S$332m of ComfortDelGro (CD) shares at about S$1.94-2.02, a 7-11% discount to the last traded price of S$2.18
SLF sold 170m shares, which accounted for about 2/3 of its total holdings and about 8.1% of CD's total shares
We believe that the sell-down is unwarranted and this represents a good opportunity to buy CD at attractive levels
Maintain BUY and DCF-derived target price of S$2.32 (cost of equity 6.5% terminal growth 2%)
We like CD for its consistent ability to balance the challenging domestic public transport segment with contributions from overseas operations
Upcoming catalysts could come from value accretive acquisitions and divestments, and the roll-out of the DTL in 4Q13
MAYBANK KIM ENG Securities says...
SATS | BUY | TP:S$3.90
We see a multi-year re-rating of SATS as we believe that the company is likely to structurally increase their dividend distribution to shareholders
SATS announced special dividends in the last 3 years and we expect this to be the new normal
Even after factoring in progressive increments in dividends over the next 3 years, we forecast a net cash position of more than SGD400mn by the end of FY16E
This implies that SATS would have a sizeable war chest of c.SGD900mn, should they achieve a capital structure with net debt to equity of 0.3X by the end of FY16E
The latest results from SATS suggest that TFK had turned a corner with FY13 EBIT contribution of SGD12.1mn (FY12: SGD0.3mn)
While the weaker JPY would lead to lower contributions upon translation to SGD, we believe that the positive economic impact of a weaker JPY (eg. tourism, business travel) should result in a net positive effect on air travel demand and TFK
Either way, we expect TFK to continue leveraging on SATS's existing business relationships with various airlines to clinch more contracts
We are 8% above street view for our FY14-16E estimates, as we believe that consensus numbers may not have factored in incremental contributions from new contracts and our expectations of margin expansion as they scale up their operations
We believe that a DCF (WACC: 8.0%, terminal g: 1.0%) based valuation would best reflect the strong cash-generative nature of the company
Upgrade to BUY with TP of SGD3.90/shr
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