02 July 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 :Being deeply loved by someone gives you strength, while loving someone deeply gives you courage.
- LAO TZU
Singapore: The Day AheadSINGAPORE DAYBOOK:Property stocks dip, but reaction measured. Falls following latest govt measures milder compared with previous curbs EVEN as property stocks fell across the board yesterday, following Friday night's announcement of a new Total Debt Servicing Ratio (TDSR), the dips were measured compared to market reaction following previous cooling measures.
The FTSE ST Real Estate Index dipped 5.67 points to close at 734.24 yesterday, led by counters such as UOL Group which lost 18 cents (2.68 per cent) to end trading at $6.54 and CapitaLand which dipped 7 cents (2.27 per cent) to close at $3.01. City Developments Limited (CDL) - a proxy for Singapore's property market - lost 17 cents (1.59 per cent) to end trading at $10.53.
On the other hand, Wing Tai bucked the trend, gaining one cent (0.49 per cent) to end trading at $2.06.
"The negative tone of the market today was dominated by the latest property measures and also weak Chinese manufacturing data," said OCBC research analyst Eli Lee.
(Source: The Business Times)
MARKET SCOOP
OKP gets S$6.7m Stamford Canal contract
Keppel to boost KrisEnergy stake to 36% for up to US$123m
Update: S'pore home prices up again, suburbs seen most vulnerable to correction
Sino Grandness to spin off beverage segment in IPO
KrisEnergy plans to list by Aug 15
SembMarine wins two rig orders worth US$417m
HDB resale price index up 0.5% q/q in Q2
Sembcorp invests S$6.4m in water treatment tech firm
(Source: The Business Times)
DBS VICKERS Securities says...
FRASER & NEAVE LIMITED | HOLD | TP: S$9.52
F&N's Board announced that it will appoint advisors to study and review alternative strategic options available to the group to unlock shareholder value
The announcement went on to say that this may involve a segregation of the group's property-related business from its non-property related businesses
No decision has yet been made on any strategic option or proposal and any option selected will proceed only upon receipt of all relevant approvals
Separately, the S$4.7bn cash distribution was approved by shareholders and resolution was passed in its EGM held on 28 June 2013
Shareholders will receive S$3.28/share in cash, and based on the preliminary timeline indicated in its shareholders' circular dated 6 June 2013, F&N shares will trade ex-cash distribution on or about 19 July 2013 at 9am, and payment expected on or about 31 July 2013
The controlling shareholders, TCC Assets and ThaiBev, collectively hold about 90.32% post the General Offer which was completed in Feb 2013
The SGX-ST has granted F&N three months till 19 July to restore the public float to above 10%, or about 0.32% from the current level (9.7%)
Assuming outstanding shares stay constant, this implies about 4.7m shares
We are not surprised by the message, though timing of this announcement seems faster than expected
In our view, the announcement is providing some insights to the plans by the new controlling shareholders, and hopefully this could garner more interest in F&N in view of the impending 19 July date to restore the free float
So far, TCC and ThaiBev have remained silent on plans for F&N (save for indications for F&N to remain listed)
According to the announcement, it seems that the advisors have yet to be appointed
There was no indication of the timeline, but we believe the review may take some time
Further to that, there could be regulatory approvals and market conditions could also be a deciding factor, for instance if a listing of its property-related business is proposed and chosen
Our Hold recommendation and TP at S$9.52 are maintained
Our TP is based on 15% discount to our sum-of-parts based RNAV of S$11.20
CIMB Securities says ...
VARD HOLDINGS LIMITED | TRADING SELL | TP: S$0.94
Due to higher-than-expected cost overruns at its Niteroi yard as well as higher-than-expected start-up costs at its new yard, Promar, Vardhas guided that its 2Q13 earnings will be lower than consensus
What is also new to us is that work for the hulls of the first two LPG carriers, which has been subcontracted to a third-party Brazilian yard (Rio Nave), is slow
This has led Vard to inflate its cost estimates for that project
Elsewhere, operations remain stable and Vard is expected to remain profitable
Management will now focus on stabilising the Niteroi operations and ramping up the new yard
While Vard had previously flagged its troubles in Brazil and we had estimated that the group's EBITDA margins for 2013 could retreat 2.2% pts yoy to 11%, we are negatively surprised by the scale of underperformance from Vard's Brazil yards
Factoring in lower margins, we cut our FY13-15 EPS by 19-36%
We downgrade Vard to Trading Sell from Outperform as we expect the market to focus on Brazilian issues and the stock to come under heavy near-term selling pressure
Hence, we lower our target price, now based on 9x CY13P/E(previously 9x CY14 P/E), 1s.d.above its trading mean since listing)
Our target implies 1.9x CY13 P/BV, 1s.d. below its trading mean since listing, which could form a floor for the stock, in our view
However,a swift rebound could follow a couple of weeks later on positive news of sizeable pipe-laying support vessel (PLSV) orders
As expected, Seadrill/SapuraKencana announced on Friday that it has been awarded a US$2.7bn contract from Petrobras to charter and operate three PLSVs
OCBC Securities says...
SATS LTD | HOLD | TP: S$3.15
SATS announced that it will sell its 40% equity interest in its Adel Abuljadayel Flight Catering Company joint venture for a cash consideration of US$18.4m (~S$23.4m), which is slightly below the book value of the asset as of 31 Mar (S$24.1m)
The stake will be purchased by the JV's existing shareholder, Adel Abdulmajed S Abuljadayel, and the proposed sale will be subject to the fulfilment of certain conditions and the procurement of necessary regulatory approvals by the Saudi Arabian General Investment Authority
Despite the short tenure of the JV - the 40% equity interest was only purchased back in Apr 2011 - the exit does not signal a change in management intent regarding the region
Management still intends to establish a foothold in the Middle East, and will continue to pursue other attractive investment opportunities
That said, the inherent difficulties in penetrating the region and sourcing for a suitable partner will mean that future opportunities will likely take the form of JVs
The JV does not contribute significantly to SATS's west Asia operations as the segment is largely dominated by its Indian subcontinent JVs so the impact to its financials will be minimal
With its earnings stability, positive prospects (Changi Airport passenger traffic grew 4.7% YoY for May) and healthy dividends, it is no surprise to see SATS's share price remain fairly resilient even in the face of recent market volatility
Although valuations are still expensive in our view as many of the positives have already been priced in, we believe the counter will continue to hold up in the coming weeks ahead of its 1Q14 results
Maintain HOLD with an unchanged fair value of S$3.15
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