27 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 :Technology is just a tool. In terms of getting the kids working together and motivating them, the teacher is the most important.
- BILL GATES
Singapore: The Day AheadSINGAPORE DAYBOOK:Output up 2.1% in May as pharma jumps. Transport, precision engineering sectors contract; Q2 GDP growth put at 2% [SINGAPORE] Yet another jump in pharmaceutical output drove manufacturing output higher than expected in May, setting the stage for a sequential rebound in second quarter GDP.
Industrial production grew 2.1 per cent year- on-year in May, trouncing the market's expectations for just 0.1 per cent growth but slowing from April's revised growth of 5 per cent.
But if the biomedical sector's 22.8 per cent growth is excluded, industrial output would have shrunk 2.4 per cent instead.
After seasonal adjustments, manufacturing output grew 1.2 per cent month-on-month. Excluding biomedical production, output would have risen 1 per cent from April.
(Source: The Business Times)
MARKET SCOOP
CFOs upbeat about growth prospects
Sin Heng Heavy Machinery plans 1-for-4 rights issue
OCBC starts Sembcorp Industries with 'buy'
JTC tenders to sell 4 Tuas South sites
WEin jv to explore oil and gas in Myanmar
Banks slow to revive Singapore trading desks after rate-fixing cull
Mugabe heads to Singapore for health check before vote
(Source: The Business Times)
CREDIT SUISSE Securities says...
NOBLE GROUP LTD | UNDERPERFORM | TP: S$0.90
We assume coverage on Noble Group with an UNDERPERFORM rating and a TP of S$0.90, as we expect the company's ROE to be below its COE in FY13, driven by weakness in Agriculture
Noble made its first loss in the Agriculture segment in 1Q13, and we expect challenges faced to persist into 2Q13
Lower raw sugar prices are likely to offset higher utilisation of its Brazilian sugar mills
Logistics bottlenecks in Brazil will only ease in July at the earliest
Oilseed processing in China could see weakness caused by structural overcapacity
Despite initiatives taken to reduce its Selling, Administrative and Operating expenses by US$100 mn, we estimate Noble needs to earn an Energy GP/ton of US$9.50 and Agriculture GP/ton of US$4.50 to generate an ROE of above 10.5%, which we believe is unlikely given macro headwinds
Our FY13 EPS forecasts are 10% below consensus
We base our target price of S$0.90 on 0.9x P/B, in line with global peers
DBS VICKERS Securities says ...
YONGNAM HOLDINGS LIMITED | BUY | TP: S$0.41
Yongnam has won two new civil engineering subcontracts worth HK$166m (S$27m) in Hong Kong
The two projects are namely the Hong Kong Express Link Central-Wan Chai Bypass Tunnel to be completed by April 2014 and the Shatin to Central Link MTR project due for completion by December 2013
The project value is small in our view and within our project win expectations for the year
No change to our earnings forecast on this event for now
With regards to Yongnam's exposure to insolvent Downtown Line 2 (DTL2) contractor Alpine Bau GmbH, we estimate this could lower our current TP of S$0.41 by 5% if Yongnam provides for losses
Yongnam has reported that its exposure will be about S$5m (10% of FY13 earnings)
Main contractor Alpine Bau GmbH has filed for insolvency and Yongnam is exposed to package C918 of DTL2
The project value is S$25m, started in March 2011 and due to end in 2Q13 to 3Q13
As this project is very near completion, we estimate that write offs could amount to about c.S$5m if management chooses to do so
Otherwise, we remain positive as Yongnam is a strong contender for Yangon Airport Project
Results of Yangon Airport's expansion project bid are expected to be announced around July
We believe Yongnam's consortium is a strong contender and is one of the front runners
If it wins the contract, the Yangon Airport project could add another S$0.12 to the stock price based on our assessment
Maintain BUY
OCBC Securities says...
SEMBCORP INDUSTRIES | BUY | TP: S$6.48
Sembcorp Industries (SCI) is a major industrial group primarily involved in the businesses of 1) utilities, 2) marine and 3) urban development
SCI is now a more focused group today after a streamlining of its businesses
The nature of SCI's utilities business is relatively stable, as the demand for utilities generally does not vary significantly over a short period of time
At the same time, growth is driven by asset acquisition and construction, so there is growth potential, provided that good investment decisions are made
SCI's marine arm is also well positioned to capitalise on demand from the offshore oil and gas industry, given its market -leading position
Finally, SCI's urban development segment, though small in comparison to the utilities and marine arms, possesses growth potential with its focus on emerging markets
SCI has had a good track record in its three main business segments, inspiring confidence in the business and investment community
The long-term outlook for its businesses also looks bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition
The group has been consistent in paying out dividends of at least S$0.15/share each year since 2009, implying a minimum dividend yield of 3.1% at current prices
Initiate with BUY and S$6.48 (based on sum-of-parts method) fair value estimate
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