14 June 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 : Education is an admirable thing, but it is well to remember from time to time that nothing that is worth knowing can be taught.
- OSCAR WILDE
Singapore: The Day AheadSINGAPORE DAYBOOK:Markets finally coming to grips with reality STOCK markets around the world have been savaged over the past three weeks, triggered by US Federal Reserve chairman Ben Bernanke's recent hints at a tapering off of the Fed's "quantitative easing" (QE) programme.
Yet, traders, brokers and analysts say they are not surprised by the bloodbath. There is no sense of bewilderment, no grasping for answers as to why this is occurring.
There may be worry and dismay that things are unwinding so rapidly and there may be the odd report circulated about the selling being overdone, but there is also a tacit acknowledgement that markets had been riding on their luck for too long, that this correction was only to be expected and the only real surprise is that it took this long coming. At the risk of sounding cliched - at the end of the day - money pump-priming can do only so much because fundamentals matter.
Consider the absurd and somewhat perverse state of affairs that has prevailed for the past few years where the worse the economic data, the better the performance of equities because it means QE should continue. (Source: The Business Times)
MARKET SCOOP
Transviewsinks into the red
9 bids for Fernvale site; top bid at S$533 psf ppr
UOBAM, Sumitomo Mitsui Asset Mgt offer Asia Pacific real estate unit trust
United Envirotech sets up US$300m MTN programme
See Hup Seng to convene EGM to consider boardroom shake-up
Tiong Seng gets nod to build S$15.6m precast plant in Iskandar
ST Index component stocks unchanged after review
(Source: The Business Times)
OCBC Securities says...
MIDAS HOLDINGS | BUY | TP: S$0.54
Midas Holdings' (Midas) 32.5%-owned JV company Nanjing SR Puzhen Rail Transport (NPRT), which manufactures metro trains in China, recently secured three contracts amounting to ~CNY2.45b (assuming a 70% stake for one of the contracts won together with its consortium partners) within a span of two weeks (29 May to 11 Jun)
This entails the supply of a total of 428 train cars, with delivery spread over 2013 to 2016 (Exhibit 2)
We believe this highlights the fast growing momentum of China's metro industry, which is targeted at easing China's traffic congestion and environmental pollution issues
As Midas is also a key supplier of aluminium alloy extrusion profiles to NPRT, we expect it to strive to win new orders from NPRT
YTD, Midas has already clinched CNY99m worth of contracts from NPRT (for projects which NPRT won last Jul-Sep)
Hence, although NPRT has been a drag on Midas' financials, with a reported share of loss of associates of CNY5.7m and CNY4.0m for FY12 and 1Q13, respectively, we believe that the situation would improve from 2H13, based on NPRT's delivery schedule
We forecast Midas to record a share of profits of associates of CNY11.9m for FY13 and CNY24.8m for FY14
Midas' management has also set its sights on growing its exports business
For example, Russia is seeking to develop its high-speed rail network, with global train manufacturers Siemens AG and Alstom reportedly keen on expanding their presence there
Midas would be a key beneficiary of this, given that it is a supplier of both companies. It recently won a EUR22.7m Russian electric train contract in Mar this year
In light of the aforementioned factors, we remain positive on Midas' long-term outlook,
but believe that the major re-rating catalyst would have to come from the resumption of new high-speed train car tenders from China
Maintain BUY and S$0.54 fair value estimate on Midas
CIMB Securities says ...
JAYA HOLDINGS | OUTPERFORM | TP: S$0.88
Jaya has sold its second16,000 bhp AHTS, Jaya Sovereign, to a Canadian buyer, Atlantic Towing, with delivery expected atend-2013
The DP2, ice-class anchor handler is being built to Wartsila's VS4622 design, with Clean Design notation from DNV and will have a continuous bollard pull of 200mt
Jaya Sovereign is a sister vessel of Jaya Supreme, which was sold to the same customer for an estimatedUS$72min Nov 2012
We understand that Sovereign's sale price is likely to be higher and Jaya could book shipbuilding profits of US$1m-2m
This somewhat low profit is due to the high costs of the vessel
Equipment was ordered at the peak of a suppliers' market while the vessel had also accumulated over five years of overhead costs due to legacy issues
We are not surprised by the sale as its high specs render it economically unviable for deployment in regional waters
Jaya's focus on ship chartering is in tact and the sale should not be read as a reversion to its speculative sales
Lastly, the sale should give it additional firepower to kick start a new build programme for its charter fleet, finance possible build-t0-order vessels with backend payment terms or right-size its capital structure (higher dividends?)
Trading at 0.7x CY13 P/BV (against raising ROEs and net cash), we see value in Jaya
By 2014, it should trade at 4x EV/EBITDA with contributions from on coming vessels
We also expect higher dividends to accompany its rising chartering EBITDA
DMG OSK Securities says...
JAYA HOLDINGS | SELL | TP: S$0.53
Jaya announced that it had sold its second 16,000bhp Anchor Handling Tug Supply (AHTS) vessel, the Jaya Sovereign, to Atlantic Towing
The Jaya Sovereign is a sister vessel to the Jaya Supreme which was delivered to Atlantic Towing in Nov 2012
This sale is already part of our forecast as we believe that Jaya will use the sales proceeds to bridge the gap between its cash on hand and the cash required to complete its shipbuilding programme
Operationally, selling the vessel also makes more sense because a 16,000bhp Ice-class AHTS would not readily find work in the regions in which Jaya has operations
In particular, a piece of key information was missing from the announcement - the sale price
Our channel checks indicate that the sale of this vessel occurred through the exercise of an option following the sale of the sister vessel Jaya Supreme, which pegs the sale price at around USD73m
The sale of the Jaya Supreme caused Jaya to record a USD1.3m loss, which we fear may happen again in this case
We currently have a SELL recommendation on Jaya with a TP of SGD0.53
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