22 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 : It is not how much we have, but how much we enjoy, that makes happiness.
- CHARLES SPURGEON
Singapore: The Day Ahead
SINGAPORE DAYBOOK : China banks latest to join commodity party. And they're a force to be reckoned with, even overshadowing the local banks [SINGAPORE] The commodity trade financing business is getting crowded.
Since the sector first came into the spotlight in late 2011 when the European sovereign debt crisis caused French banks - the traditional commodity financiers - to rein in their lending, new actors such as DBS have come onto the stage.
And now, Chinese banks are muscling in.
While typically more supportive of Chinese state-owned enterprises in the past, banks such as ICBC, Bank of China and China Construction Bank are also starting to enter the international space, said commodity trading houses. (Source: The Business Times)
MARKET SCOOP
Keppel property investment unit raises US$1.65b
Long-term factors making asset managers vulnerable: McKinsey
Temasek, Exxon, Shell vying for top LNG project
Short-selling injects market stability
July buybacks beat 2008-12 averages
China's rate reform points to eventual banking shake-up
(Source: The Business Times)
UOB KAY HIAN says...
KEPPEL CORPORATION | BUY | TP: S$13.50
(Keppel) has declared an interim DPS 20.8 S cents, comprising a) cash DPS of 10.0 S cents and b) a dividend in-specie of Keppel's remaining KREIT units (on the ratio of 8 K-REIT shares for every 100 Keppel shares held) equivalent to 10.8 S cents/share
Keppel has also announced a top management rejuvenation
CFO Loh Chin Hua is to replace CEO Choo Chiau Beng from 1 Jan 14
Keppel has reported a net profit of S$703.8m (-45% yoy) for 1H13
Excluding exceptionals and fair value items, net profit for 1H13 was S$677m
Against our earlier net profit forecast of S$1.410b for 2013, results appear to be in line with our projection, but may be marginally below consensus net profit of S$1.563b for 2013
Net profit for 2Q13 came in at S$346.8m (-33%)
The dip in 1H13 O&M net profit (-8% yoy in 1H13) was due to a lower O&M turnover (-13% yoy)
2Q13 O&M operating margin of 14.2% (1Q13: 14.0%; 4Q12's 12.8%) was firm. O&M margins appear to be bottoming
Lower property net profit (-62% yoy) for 2Q13 was because 2012 earnings were skewed by large exceptional earnings from deferred payment sales at Reflections at Keppel Bay project
Better infrastructure net profit (+20% yoy) was due Keppel Merlimau Cogen's expansion and a reversal of earlier cost provision, but partially offset by losses from the EPC contracts
Investment net profit was lower (-89% yoy) as 1H12 was boosted by large gains from disposal of investments
Firm O&M margins for 2Q13 and an unexpected interim dividend windfall of dividend in-specie of K-REIT share should boost investor sentiments
We raise our blended O&M operating margin assumption by 0.5ppt from 13.0% to 13.5%
As a result, we raise our 2013-15F net profit forecasts by about 3%
Our earnings forecasts have factored in contract wins of S$6b p.a.. Ytd, Keppel has won contract wins worth S$3.7b
Maintain BUY and raise our target price from S$13.10 to S$13.50, on a higher sum-of-the-parts (SOTP) valuation, which still values Keppel's O&M business at 18x 2014F PE
Besides a higher valuation for Keppel's O&M business following our O&M earnings upgrade, we have also imputed Keppel's investment (before additional shares from options conversion and additional cornerstone investor shares) in Kris Energy - as of end-1H13 - at the latter's IPO price of S$1.10/share
DBS VICKERS Securities says ...
EZION HOLDINGS | BUY | TP: S$2.96
Ezion has signed a LOI to provide bareboat charter for a liftboat worth US$82.1m over five years
It may be converted to time charter at potentially higher contract value of c.US$90m
The rig is expected to be delivered to a national oil company in SEA by late 1Q 2015
The cost of the newbuild - US$60m - will be funded by the issuance of preference shares (27%) and bank borrowings (73%)
Ezion is issuing 300 redeemable exchangeable preference shares to five Global Investor Programme Funds at an issue price of S$100k each to raise S$29.5m net proceeds
Dilution is minimal at 1.4% and would be more than offset by 1.6% earnings accretion from the new liftboat
Refurbishment of service rig #5 had been completed in May as guided, but deployment to Myanmar is impossible until the monsoon season ends in September
Ezion is expected to absorb the bulk of lost income, which is US$2.5m per quarter
Separately, the delivery of liftboat #11 under construction at a Vietnamese yard may be delayed by three months to April 2015
On a positive note, service rig #14 to Pemex is commencing operation two months ahead of schedule in July and will contribute additional US$0.8m net profit in FY13
Maintain BUY; TP adjusted to S$2.96
We trimmed FY13-15F net profit 0.4-2.2% and assumed full conversion of the preference shares by FY15
This led us to adjust our TP to S$2.96, still pegged to 14x FY13/14 PE
We continue to like Ezion's strong growth profile and earnings visibility
DMG OSK Securities says...
KEPPEL CORPORATION | NEUTRAL | TP: S$11.44
Keppel's 2Q13 net profit of SGD347m (-3% QoQ, -33% YoY) lifted 1H13 net profit to SGD704m (-45% YoY), making up 52% of our estimate and 45% of consensus
We don't expect significant reaction to the results
O&M margins held up well and we raise FY13F/14F EPS by 5%/4%
The key focus will be on the leadership change, with CFO Mr Loh Chin Hua taking over as CEO from Mr Choo Chiau Beng on 1 Jan 2014
Maintain Neutral with a revised TP of SGD11.44 (from SGD11.21)
We see this set of results as slightly above as Offshore & Marine (O&M)'s operating margins held up well at 14.2% (1H13: 14.1%) and infrastructure earnings are likely to improve in 2H13 thanks to Merlimau plant start-up
Group's outlook is mixed as solid O&M market is offset by property policy headwinds
Two key management changes
The key focus in the next six months will be the leadership change with CFO Mr Loh Chin Hua taking over as CEO from Mr Choo Chiau Beng (1 Jan 2014) and Keppel O&M COO Mr Chow Yew Yuen replacing Mr Tong Chong Heong as CEO of Keppel O&M (1 Feb 2014)
While we don't expect a sharp strategy change, we note Mr Loh has a strong background in property fund and may lead to potential shift in asset allocation to property related business
Interim cash and special dividend in-specie of KREIT units
KEP will distribute interim dividend of SGD0.208 (1H12: SGD0.18) consisting of SGD0.10 cash and eight KREIT units for every 100 KEP shares (8-for-100) valued at SGD0.108
The distribution of up to 146.6m units in KREIT will lead to de-consolidation of KREIT in KEP's balance sheet as its effective stake will fall to ~46%
Upgrade FY13/14F EPS by 5%/4% on higher margin
Our revision came from higher O&M margins and stronger infrastructure earnings
Raise TP from SGD11.21 to SGD11.44. We update our valuation model to reflect the earnings adjustments, latest market prices and KPLD at TP of SGD4.36/share (consensus)
O&M is valued at 16x FY14F P/E |
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