SG: MARKET PULSE: ECS, UOL, Midas, Biosensors (13 May 2013)

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.57

Stock Name: UOL
Company Name: UOL GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 7.16

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.595

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.60

MARKET PULSE: ECS, UOL, Midas, Biosensors

13 May 2013

KEY IDEA ECS Holdings: Double-digit growth delivered Summary: ECS Holdings (ECS) reported a positive set of 1Q13 results which exceeded our expectations. Estimated core PATMI jumped 28.6% YoY to S$8.5m on the back of a 20.9% YoY increase in revenue to S$1,090.3m. The group managed to record healthy YoY revenue and EBIT growth for all of its core segments. However, its gross margin slipped 0.4ppt to 3.7% in 1Q13 due largely to a change in product mix. We lift our FY13 and FY14 revenue projections by 8.9% and 10.6%, respectively. But as we also lower our margin assumptions slightly, our FY13 and FY14 core PATMI estimates are raised by a smaller magnitude of 4.2% each. Correspondingly, our fair value estimate increases from S$0.53 to S$0.57, now pegged to 6x FY13F EPS (previously 5.8x). As ECS is trading at an attractive 5.0x and 0.52x FY13F PER and P/NTA, respectively, we upgrade the stock from Hold to BUY. (Wong Teck Ching Andy) MORE REPORTS UOL Group: Proposed delisting of Pan Pacific Hotels Summary: UOL's 1Q13 PATMI decreased 15% YoY to S$71.7m mostly due to a weak contribution from its hotel segment. 1Q earnings now make up 19% of our full-year forecast, which we judge to be generally within expectations and is tracking marginally below due to lumpy progress recognition at development projects. In addition, the group has made a cash offer of S$2.55 per share (9% premium over last transacted price) to delist PPHG (Pan Pacific Hotels Group), conditional on the shareholder approval. We see this as a sensible move which would consolidate the group's hotel assets at a fairly reasonable price. That said, from our discussions with management, it appears unlikely that material operating changes, i.e., a major re-structuring or REIT listing, are in store for PPHG assets. Maintain HOLD with a higher fair value estimate of S$7.16 (20% RNAV disc.), versus S$6.01 previously, as we work into our valuation model higher prices of listed holdings and the Sengkang acquisition. (Eli Lee) Midas Holdings: Expects net loss in 1Q13 Summary: Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 1Q13 results release, saying that it expects to report an unaudited net loss. This is mainly due to lower revenue and gross profit margin given the change in product mix and weaker utilisation rates, as well as higher operating expenses and finance costs and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). This profit guidance comes as no surprise to us as we had forecasted Midas to record a net loss of CNY3.2m in 1Q13. We still expect Midas to stage a recovery in 2H13, but the strength of this recovery will be dependent on the developments in China's high-speed railway sector. Midas will report its 1Q13 results on 14 May after trading hours, while an analyst conference call has been scheduled the day after. We will provide more updates then. For now, we have a BUY rating and S$0.595 fair value estimate on the stock. (Wong Teck Ching Andy) Biosensors International Group: Proposed acquisition of assets from Spectrum Dynamics Summary: Biosensors International Group (BIG) announced this morning that it has entered into an agreement to acquire substantially all the assets of Spectrum Dynamics (SD), which is a privately held company. SD is a medical imaging and clinical applications company involved in the designing, developing, manufacturing and distribution of medical imaging systems and technology in multiple fields. The initial deal consideration is US$51.1m (book value of SD's assets valued at ~US$7.3m as at 31 Mar 2013), and will be funded by internal resources. Subsequent performance payments of US$4m and US$15m may be paid to SD if certain performance benchmarks are met in 2014 and 2016, respectively. We are positive on this move as it allows BIG to diversify its product offerings and revenue stream. But as the acquisition is not expected to have a material impact on the EPS and NTA of BIG in FY14, we leave our forecasts unchanged for now. Maintain BUY and S$1.60 fair value estimate on BIG. (Wong Teck Ching Andy)

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NEWS HEADLINES - Two shareholders in See Hup Seng have called for an EGM to remove the managing director from the board and return the founder and ex-chairman of the company to the boardroom. - The combined profits of companies listed on the SGX trended lower in 1Q13. As of Friday, the 206 companies with 1Q earnings reported a combined profit of about S$6.48b, down 8.4% YoY. - China's new local-currency loans exceeded estimates last month while money supply expanded at a faster pace, a sign policy makers are maintaining credit support for the economy after 1Q growth unexpectedly slowed. - Italian Prime Minister Enrico Letta warned that the future of the government was at risk following a furious row over Silvio Berlusconi's attacks on magistrates in a rally at the weekend. - A dual-track system, including survey-based lending rates along with transaction-linked indices, is likely to replace scandal-hit LIBOR as soon as next year, the Financial Times reported.