03 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 :So many people try to grow up too fast, and it's not fun! You should stay a kid as long as possible!
- VANESSA HUDGENS
Singapore: The Day AheadSINGAPORE DAYBOOK:Singapore's Temasek faces key tests over China banks [SINGAPORE] Singapore's sovereign investor Temasek Holdings Pte Ltd is coming under pressure to review its large exposure to Chinese banks as the world's second biggest economy is on track for its slowest growth in more than 20 years.
The city-state's AAA-rated wealth fund has poured billions of dollars into the biggest Chinese banks over the past few years including about US$2.4 billion in the Industrial and Commercial Bank of China since 2012 alone.
But Chinese banks now face a difficult outlook due to credit tightening and bad loans. Banks suffered an unprecedented cash crunch last month after the Chinese central bank allowed rates to shoot to record highs to punish banks for making risky loans, and to force them to curtail dodgy lending.
The state investor will shed more light on its China strategy when it presents its annual report for the year ended March later this week. (Source: The Business Times)
MARKET SCOOP GLP leases 23,000 sqm to Lefeng ICPAS now known as ISCA
Property love affair drives up debt levels
Transcu, SingLand unit agree to delay judgment debt, explore options
FEOrchardplots move into Australia
UBSopens vault, joins gold rush in Singapore
Mixed showing for China's Asean infrastructure fund
(Source: The Business Times)
NOMURA Securities says...
OLAM INTERNATIONAL | BUY | TP: S$2.30
In order to enhance stakeholder communication, Olam kick-started its efforts with an Investor day in Singapore (27 June, 2013) focussing on its Edible nuts, spices & beans and Spices & Vegetable Ingredients (SVI) segments
Most of the global Agri players don't participate in niche segments such as edible nuts and spices, giving Olam an opportunity to take advantage of its global, value chain presence compared to its mostly local competition
Edible-nuts is a US$34bn market (Peanut: 24%, Almond: 18%, Walnut: 15% & Cashew: 14%) and Olam has a stronghold with its leadership in cashews, is the #1 peanut blancher, the #2 almond grower and a top-3 Hazelnut supplier
Olam is present in 80% of the producing countries and in all the major consumer markets
The company is the largest supplier of dehydrated onion, garlic, capsicum, black pepper and organic tomatoes
The global spices/tomatoes market is US$10bn/US$4bn, respectively, growing at a rate of 2-3% in developed markets (~5-7% in rest of the world)
Olam currently has 32%/14% and 12% share of global onion/garlic and pepper markets, respectively
The edible nuts, spices and beans segment has contributed ~25-30% of Olam's overall net contribution over the past five years (~15% of Olam's revenue and ~29% of Olam's net contribution in FY12) and thus is a key driver of its profitability
The segment has seen significant growth in the recent past (three-year revenue/net contribution CAGRs at 29%/36% respectively) driven by acquisitions in this space
Olam's key acquisitions in this segment include - Key Foods (2007), Universal Blanchers (2007), De Francesco & Sons (2008), IMC (2009), SK Foods (2009), Timbercorp (2009) and Gilroy (2010)
We expect three-year CAGRs of 7%/11% for revenues/net contribution for the segment going forward (without considering any further acquisitions)
A key profit driver would be maturing almond yields and new plantations and processing facility in California and Australia, respectively
DMG OSK Securities says ...
EZION HOLDINGS | BUY | TP: S$3.00
As Ezion's share price has fallen 14% since its recent peak, we see this as an opportunity to accumulate
We believe concerns over the impact of rising interest rates on the Group is overdone
Increasing awareness of its liftboat capabilities could herald in more contract awards, leading to more EPS upgrades for Ezion
We estimate that net gearing will rise to 1.14x by end-FY13
However, we are not concerned as the borrowings are backed by steady cash inflow of ~USD1.6bn from its liftboat and service rig chartering business
YTD 2013, Ezion has secured USD445m new charters vs USD1.12bn in 2012
Even in a scenario of zero new charters for the rest of 2013, we see little downside risk to our earnings projections as we have not factored in new charters apart from the contracts already announced
We are projecting FY13/14/15F net profit of USD117m/USD200m/USD243m, primarily driven by charter contracts secured in the past three years
Based on the current pipeline of contracts, Ezion's fleet is set to expand from 15 units in 1H13 to 26 units by 1H2015
Based on our analysis, Ezion can undertake capex of USD100m in FY14 and USD500m in FY15, assuming no fresh equity raising and renewal of the perpetual securities
We forecast that the new investments can deliver up to USD65m net profit, implying potential FY15F EPS revision of up to 28%
Maintain BUY with a TP of SGD3.00, based on 16x blended FY13/14F EPS
Key risks are charter renewals and lower level of LNG activities in Australia
OCBC Securities says...
MAPLETREE LOGISTICS TRUST | HOLD | TP: S$1.15
Mapletree Logistics Trust (MLT) announced that Menlo Worldwide Logistics, the subsidiary of NYSE-listed Con-way Inc, has signed a binding commitment to lease 48,700sqm at MLT's Mapletree Benoi Logistics Hub (MBLH) for a period of 10 years
This agreement marks the latest expansion by Menlo in Singapore and lifts Menlo as MLT's largest tenant (contributing 3.6% of MLT's enlarged monthly gross revenue)
Together with Menlo's commitment which accounts for 55% of MBLH's NLA, we understand the property is now 75% preleased, with the balance in the advanced stage of negotiation
MBLH is MLT's first redevelopment project in Singapore
Formerly known as 21/23 Benoi Sector, the property commenced the refurbishment in 2011 and is scheduled for completion in 4Q13
It is strategically located within the Jurong Industrial Estate and is in close proximity to Jurong Port and easily accessible via expressways
When completed, MBLH will be transformed into a modern five-storey ramp-up warehouse with significantly enhanced features such as floor loading capacity of up to 40kN/sqm and a clear height of up to 12m
Total GFA is expected to increase by four folds from 22,500sqm to 92,500sqm, based on an increased plot ratio from 1.4 to 2.5
We are positive on this development as it reflects continued healthy leasing demand and strong interest from major third-party logistics service providers
Judging from the strong pre-commitment levels, we believe that MLT will be able to meet its estimated yield-on-cost of 8-9% (development cost of ~S$128m)
In addition, we expect the long lease to further enhance MLT's already resilient lease structure
We make no change to our forecasts as we have previously factored in the redevelopment project
MLT is currently offering a 6.5% current yield, which is relatively attractive in our view
However, as the stock appears to be fairly priced when compared to our fair value of S$1.15, we maintain HOLD on MLT
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