26 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 :Women are made to be loved, not understood.
- OSCAR WILDE
Singapore: The Day AheadSINGAPORE DAYBOOK:China's credit-guzzling banks face lean diet. Rise in interbank lending rate spooks market and may hurt small companies STOCK markets in China yesterday finished at a four-year low amid fears that China could face a severe liquidity crunch. Though lending among banks has resumed after a temporary freeze last week, interbank lending rates remain high, limiting access to fresh capital and raising doubts over the solidity of the banking system.
On Tuesday evening, SHIBOR (Shanghai interbank offered rate) overnight rates stood at 5.7 per cent while one-week rates were 7.64 per cent. Though significantly lower than when they spiked last week, they are still above their usual average.
Analysts warn there could well be more bad days ahead for Chinese banks, which are overly dependent on interbank lending to balance their books after years of careless spending. The credit tightness comes as China's GDP is settling well under 8 per cent. But the central bank looks determined to impose discipline and some wonder whether China will miss even its 7.5 per cent GDP target for 2013.
On Monday, after four days of silence, the People's Bank of China issued a statement, suggesting there will be no loosening ahead, despite a string of poor economic data.
(Source: The Business Times)
MARKET SCOOP
AusGroup sues Karara for A$54.7m
OCBC offers access to blue chips for as low as S$100/mth
AusGroup halts share trading on law suit against customer
Courage seeks approval to diversify into property investment
H2 GLS sites announced
TEE in MOU to buy water treatment plant in Huzhou, China
Logistics to buy Minton Court for $13.4m
(Source: The Business Times)
DBS VICKERS Securities says...
COURTS ASIA | BUY | TP: S$1.13
Courts offers investors a unique exposure to Asean's retail markets, growing middle class, rising disposable income, and increasing consumer appetite for credit on the back of rising incomes
Courts is a beneficiary of Singapore's rising population and housing demand
With presence in Malaysia, and Indonesia from 2014, Courts will also benefit from the growing middle class and rising income of Asean consumer markets
Courts' unique business model of offering in-house credit to customers helps it to expand its customer base and have an active balance sheet that yields c.25% on its credit sales vs cost of funding of 8%-9%
Entry into Indonesia presents a longer term catalyst for the stock
We forecast earnings growth of 15% CAGR between FY13 to FY15F, largely driven by store growth in Singapore and Malaysia
Management has planned for 1 new big box and 6 new stores in Malaysia this year
We factor in modest contribution from the Indonesia store which is expected to open in 2014
We view an upward earnings revision is possible in the event that the Indonesian operation exceeds expectations
Courts currently trades at 10.7x FY14F PE, compared to peers' 12-15x
We expect Courts to post healthy earnings CAGR of 15% from FY13 to FY15F, which implies a PEG of 0.7x
We initiate Courts with a BUY on account of its healthy growth prospects and undemanding valuation
Our TP of S$1.13 is based on 13x PE valuation, comparable to its peers
OCBC Securities says ...
NEPTUNE ORIENT LINES | HOLD | TP: S$1.17
According to the Shanghai Containerised Freight Index (SCFI), average freight rates~for 2Q13 have fallen by more than 13% QoQ with the decline more pronounced in certain sectors (mainly Europe and South America: - 35.4% QoQ % -34.5% QoQ each)
The sole sector that registered marginal improvements was Intra-Asia (+4.1% QoQ)
This was in stark contrast to the figures over the same period last year where overall average freight rates improved by 31.2% QoQ as carriers collectively enforced capacity cuts and rate hikes
Members of the Transpacific Stabilisation Agreement (TSA) - of which Neptune Orient Lines (NOL) belongs to - have agreed to hike rates by US$400/FEU for the transpacific route and by US$600/FEU for all other destinations, effective 1 July
However, carriers continue to be plagued by over-capacity issues and the impact from this increase could only be temporary in nature
Aside from the substantial capacity adjustments back in late 2011, efforts to control capacity since then have waned despite initiatives by alliances to reduce routes, and this has led to a negation of general rate hikes implemented in Jan and Apr this year
Although there has been the recent formulation of a P3 alliance between the world's three largest container liners (Maersk, CMA CGM and Mediterranean Shipping Company), it will only commence from 2Q14 and impact mainly the Asia- Europe trade route (of which NOL has ~15% top-line exposure)
While the low-fuel cost environment and ongoing cost-saving initiatives will benefit NOL, we opt to lower our forecasts in light of weaker freight rates and anticipation of a slightly disappointing peak season
Lowering our P/B peg to 1.1x (1.3x previously), our fair value estimate falls to S$1.17 (S$1.38 previously)
Downgrade to HOLD
CIMB Securities says...
RELIGARE HEALTH TRUST | OUTPERFORM | TP: S$1.07
CEO, Mr Gurpreet Dhillon, and CFO, Mr Pawanpreet, participated in our recent annual Asia-Pacific Conference
Discussions centred on: 1) forex fluctuations / hedges; 2) acquisitions; and 3) growth of its underlying assets
Management says the trust's forex exposure has been fully hedged till Mar 14 with a policy of hedging distributions for the next 12 months on a rolling basis
Management is evaluating three potential assets (estimated value of S$100m) for acquisition
Assets under consideration are those which are operated by Fortis but owned by third parties
As for underlying assets, revenue growth for its seven largest assets was 7-55% yoy in FY3/13
RHT offers a combination of stability through its fixed base fees (that are growing 3% p.a.) and growth through variable fees tied to the revenue growth of its underlying assets
The latter should come from capacity expansion and ARPOB increases for underlying assets
Meanwhile, RHT's low asset leverage should provide debt headroom for acquisition growth; while parent/sponsor's deleveraging efforts should instil some confidence
Share price has corrected alongside a weakening Indian rupee and the broad-based selldown of SREITs and other yield instruments in the wake bond yield spikes
Maintain Outperform, nonetheless, as we believe attractive headline yields of 9-10% have priced in some risks
We see re-rating catalysts from earnings deliveries and acquisitions |
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