05 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 :Never deprive someone of hope; it might be all they have.
- H. JACKSON BROWN, JR.
Singapore: The Day AheadSINGAPORE DAYBOOK:Temasek's portfolio climbs to record $215b. Recovery in global stocks helped weather rocky year, but risks still loom [SINGAPORE] Temasek Holdings saw the value of its portfolio grow to a record $215 billion at the close of its financial year ended March 31, 2013 - a performance it attributed to having "maintained a steady course . . . amidst an uncertain world".
The Singapore investment firm likely benefited from a late recovery in global stock markets, which helped to lift the value of its holdings (largely in listed equities) despite a tumultuous year for financial markets in general.
Still, the increase in its overall portfolio value to $215 billion marks the fourth consecutive year of growth since Temasek's investments were hit by the global financial crisis - up from $198 billion at the end of FY2012 and $193 billion at the end of FY2011.
Almost three-quarters of Temasek's portfolio is held in liquid and listed assets. "We are prepared to ride through the large mark-to-market volatility on our portfolio value, because a portfolio of mostly equities also means we expect higher returns over the long term from our portfolio," Temasek CEO Ho Ching said in a statement.
(Source: The Business Times)
MARKET SCOOP
Temasek says China liquidity crunch won't hit its bank holdings
FJ Benjamin inks Raoul franchise in Sri Lanka
Creditors want probe in Poh Lian to continue, liquidation to ensue
Possible interest in Old Chang Kee
MASfines Fuji Offset major shareholder for deceptive trading
SingTel may come full circle as F1 sponsor
Yangzijiang bags orders worth US$414m
United Engineers to sell UE BizHub East for $518m
(Source: The Business Times)
NOMURA Securities says...
KEPPEL CORPORATION | BUY | TP: S$13.20
Keppel FELS, a wholly owned subsidiary of Keppel Corp, has secured a USD 210mn contract from PV Drilling (subsidiary of PetroVietnam) for construction of a jack-up (JU) newbuild
This is Keppel's eighth JU order this year and along with Sembcorp Marine, Singapore-based offshore yards have secured a total of 15 JU new orders YTD
In addition, the rigs being based on proprietary designs implies stronger margins for the yards, in our view, given higher efficiencies and better understanding of rig design
Given that PetroVietnam is a national oil company, we believe the likelihood of order cancellations are low
Rig is scheduled for delivery in 1Q15
This will be Keppel's 19th KFELS B class rig on order while 45 rigs based on the same design have already been delivered since 2000
The rig will be capable of operating in water depths of 400 ft and drilling to depths of 30,000 ft. The rig will also have facilities to accommodate 150 men
PV Drilling's order for a JU newbuild opens a new market for offshore yards
Rising population and growing economic strength in South East Asia has led to a strong increase in oil and gas consumption and governments and national oil companies alike are making efforts to step up exploration and development of reserves
As per a press release on its PV Drilling website, the company has witnessed strong increases in day rates for its own and rented rigs and expects to invest in 1-2 new rigs in the medium term
Keppel has secured USD 2.7bn (~SGD 3.3bn) worth of new orders in 1H 2013 against our target of SGD 6.5bn for 2013
Keppel reported an orderbook of SGD 13.1bn at the time of 1Q13 results
We reiterate our BUY on Keppel
Its current FY13F and FY14F P/E of 13.2x and 12.5x (2013F/14F EPS of SGD0.79 and SGD0.83) respectively, are at the middle of its historical P/E band of 8-22x and its dividend yield at 4.4% appears attractive
CIMB Securities says ...
KEPPEL CORPORATION | OUTPERFORM | TP: S$11.90
Keppel secured a KFELS B class jack-up rig order from PV Drilling Overseas, priced at US$210m and due for delivery in1Q15
The rig is priced at a 2% premium (US$5m) to the B class rigs secured from Grupo R in Mar-2013, to factor in the tighter delivery schedule of 1Q15
We think that Keppel is selective in its contracts, reserving yard slots for higher margin/value jobs
We believe that the current rig will yield an EBIT margin of 15-18% for the repeated design as it is the 19thKFELS B Class rig on Keppel's order book
The current rig is slightly higher price than SMM's recent jack-up rigs from Oreo Negro Mexico at US$208.5m each, with a later delivery scheduled
The semi-sub contract that Keppel secured from SOCAR in June was also priced at a 6% premium over the semi-sub that Diamond Offshore awarded Hyundai Heavy Industries and at 25% above the two semi-subs that Naftogazz Ukraine awarded Keppel in Mar-2013
Keppel has not lost any customers despite the unbeatable financing offered by the Chinese yards
In fact, it continues to gather strong order momentum, especially in jack-up rigs, which dominated c.90% of its 2013 order wins
Investors should buy into Keppel on recent weakness
We expect strong margins from the peak delivery of rigs in 2013, to drive its share price
We maintain our Outperform rating and target price, still based on an RNAV valuation
Keppel has secured new orders of c.S$3.4bn YTD, bringing its order book to c.S$14.4bn
We maintain our order forecast of S$5.5bn and make no changes to our FY13-15EPS estimates
Keppel is our top pick in the big-cap O&M segment for its 1) quality 2) lower execution risk, and 3) better margins
DMG OSK Securities says...
ST ENGINEERING | BUY | TP: S$4.70
We initiate coverage on ST Engineering (STE) with a BUY rating
STE boasts of solid fundamentals, with a 31% ROE, 10-year EPS CAGR of 5% and is sitting on net cash
The stock offers a combination of sustainable yield and earnings resilience underpinned by its diversified business model
The group's largest segment, the aerospace division, accounted for 32% and 44% of 2012 group top line and PATMI respectively and has a robust outlook given the growth in global passenger and cargo traffic, while at the same time garnering a growing share of the MRO market
We see the company, with its historical 10-year earnings CAGR of 5%, chalking up 4.1% earnings CAGR over the next five years
STE offers an appealing 4.4% dividend yield on a 90% payout policy
Its share price, which has pulled back by about 10% from its recent peak in late April, is now trading at a 20.6x FY13 P/E, 16% below its historical 24.5x peak
Based on our DCF model and assuming a terminal growth rate (TGR) of 1.5% and WACC of 8.4%, we derive a SGD4.70 TP |
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