SG: MARKET PULSE: SIA, KS Energy (17 May 2013)

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: SELL

Target Price: 10.00

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.50

MARKET PULSE: SIA, KS Energy

17 May 2013

KEY IDEA Singapore Airlines - Share gains premature Singapore Airlines (SIA) reported a weak set of 4Q13 results as passenger yields remained depressed following weak demand for its services. Revenue fell 1.0% YoY to S$3.7b and operating loss widened to S$44.2m. On a full-year basis, revenue inched 1.6% higher but operating profit declined 19.8% to S$229.2m. Only with the gains from disposal of aircraft and parts did it manage to post an increase in PATMI for both the quarter (S$68.3m vs. -S$38.2m) and FY13 (S$378.9m vs. S$335.9m). Management declared a final dividend of 17 S cents, which brought the total dividends declared for FY13 to 23 cents (FY12: 20 cents). With the lacklustre results, continuing challenges ahead, and possible disappointment over the lack of a special dividend that some on the street had anticipated, we expect selling pressure on the counter, especially after it gained ~8% since mid-Apr. Based on a peg of 0.8x P/Book, we downgrade SIA to SELLwith a fair value estimate of S$10.00 (S$10.85 previously). (Lim Siyi) MORE REPORTS KS Energy: Recovery will take time KS Energy (KSE) reported a 27.6% YoY rise in revenue to S$153.4m and a net profit of S$1.1m in 1Q13, vs a net loss of S$315k in 1Q12. Though the group's operating profit went into the red again after four previous quarters in the black, we understand that operating profit would have been about S$8.3m had it not been for a one-off foreign exchange loss from the Titan 2 disposal. We estimate core net profit of about S$0.4m in 1Q13. Overall, the group expects business and operating conditions this year to "remain similar" to 2012. We review the valuations of KSE's closest comparables on the SGX, and note that the average P/Book valuation is about 0.7x. We ascribe a ~20% premium to arrive at a 0.85x P/Book for KSE due to its integrated operations which are larger in scale in comparison to some of its peers. As such, our fair value estimate falls to S$0.50, based on 0.85x FY13/14F NTA. Maintain HOLD. (Low Pei Han)

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NEWS HEADLINES - US stocks declined Thursday, halting the S&P 500's four-session winning streak, after a Federal Reserve official said the central bank could begin tamping back on monetary easing as soon as this summer. - Japan's economy grew faster than expected in 1Q13, expanding at its quickest pace in a year on the back of solid private consumption and a rise in exports. - Singapore lost the pole position in Nasdaq-listed Morningstar Inc's Global Fund Investor Experience 2013 report, getting an overall grade of B this time. - Asian Pay Television Trust is set to raise around $1.39b through its IPO, making it Singapore's second largest listing this year. - Intraco has tied up with Tat Hong and a Myanmar businessman in a JV that will provide rental of cranes and the distribution of cranes and excavators in Myanmar. - Transcu Group has claimed a breakthrough in trials in Fukushima, Japan in which it used a process that cleans up nuclear contamination and converts nuclear waste to energy. - Eu Yan Sang will be forming a JV to set up a TCM decoction pieces (processed herbs) plant in China.