SG: MARKET PULSE: Land Transport, Swiber, SembMarine, Ezra and Ezion (31 May 2013)

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.95

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.86

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.10

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.62

MARKET PULSE: Land Transport, Swiber, SembMarine, Ezra and Ezion

31 May 2013

KEY IDEA Land Transportation sector: Possibility of new entrant? The LTA recently re-iterated the possibility of introducing competition in the bus services industry. However, as with before, we do not anticipate any changes to the operating landscape in the medium term unless the government decides how it wants to strike a balance between a free-market and government assisted model. For the near-term, the street is awaiting the recommendations from the fare review committee and has already factored in some level of increase. That said, any further delays from this committee could lead to continued losses for both PTOs and even asset impairments for SMRT. We downgrade the sector to NEUTRALin light of this possibility but do not anticipate further deterioration in the share prices for both ComfortDelgro and SMRT at this juncture. Maintain our HOLD ratings on both SMRT [HOLD; FV:S$1.45] and ComfortDelgro [HOLD; FV:S$1.95] although we favour the latter for its more attractive overseas ventures. (Lim Siyi) MORE REPORTS Swiber Holdings: Expanding into deepwater According to Upstream, Swiber Holdings is preparing to invest in its first large deep-water offshore construction vessel for its fleet. In particular, the company is understood to have expressed its intention to purchase a vessel similar to Ezra's Lewek Constellation. The capex of US$400-500m is huge, but considering that the unit is expected to take up to three years to build and the group has not announced any additional substantial capex plans, this may be a manageable purchase. Meanwhile, we would continue to monitor the group's cashflow from operations. Pending an official statement from the company, we do not see this as a surprise, as Swiber has expressed its intentions to expand its operations into deeper waters. Maintain BUY with S$0.86 fair value estimate. (Low Pei Han) Sembcorp Marine: Secures US$220.5m jack-up rig Sembcorp Marine (SMM) announced that subsidiary PPL Shipyard has secured a contract to build a jack-up drilling rig from BOT Lease Co., Ltd, a leasing company of The Bank of Tokyo-Mitsubishi UFJ which is under the umbrella of Mitsubishi UFJ Financial Group. The contract price is US$220.5m (excluding cost of BOTL's project management team and pre-operations cost), and is scheduled for delivery at end-Jan 2015. The unit is based on the proprietary Pacific Class 400 design; we note that Oro Negro had ordered a rig of similar design from SMM with a price tag of US$208.5m in Mar and Perisai Petroleum at US$208m in Feb this year. With this latest win, SMM has secured orders worth about S$2.7b YTD, accounting for 67% of our full year estimate. Maintain BUY on SMM with S$5.64 fair value estimate. (Low Pei Han) Ezra Holdings and Ezion Holdings: Ezra divests remaining shares in Ezion Ezra Holdings announced that it will divest its holding of 40m shares in Ezion Holdings via a placement that is fully underwritten by DBS Bank. This represents about 4.17% of Ezion's issued share capital, and was transacted at a price of S$2.25/share (4.9% discount to VWAP over 30 May 2013) for a total consideration of S$90m. Ezra will realize an estimated net gain of ~US$65.7m, and it intends to use the proceeds for working capital needs, lowering debt and fund growth of operations. We are not surprised by this move as Ezra had also previously sold off 60m shares in Ezion in Mar 2012. Maintain BUY on Ezion with S$2.62 fair value estimate and HOLD on Ezra with S$1.10 fair value estimate. (Low Pei Han)

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NEWS HEADLINES - US stocks rose on Thursday, rebounding from the previous session's losses, as tepid economic data eased concerns the US Federal Reserve would begin to gradually scale back its policy of stimulating growth. - WE Holdings Ltd will place 80m new shares at S$0.10224 each to raise S$7.5m in net proceeds to repay a bank loan and for general working capital purposes. - Ascendas Hospitality Trust has launched an equity-fund exercise to raise at least S$200m to partially fund the S$300m acquisition of Park Hotel Clarke Quay. - Del Monte Pacific Ltd announced that its application for listing by way of introduction of all the company's shares on the First Board of the Philippine Stock Exchange (PSE) was approved. - Yongnam Holdings has secured a 5-year S$130m syndicated loan from CIMB Bank, DBS Bank, OCBC and Chinatrust Commercial Bank. - The HDB on Thursday launched 8,000 flats for sale under the joint Build-to-Order (BTO) and Sale of Balance Flats (SBF) exercise.