SG: MARKET PULSE: Triyards, Vard, STE, Ezra, Dyna-Mac, Singapore Economy (12 Jul 2013)

Stock Name: Triyards
Company Name: TRIYARDS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.07

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 3.97

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

MARKET PULSE: Triyards, Vard, STE, Ezra, Dyna-Mac, Singapore Economy

12 Jul 2013

KEY IDEA Triyards Holdings: Awaiting new orders Summary: Triyards Holdings (Triyards) reported a 61% YoY drop in revenue to US$65.7m and a 55% decrease in net profit to US$7.5m in 3QFY13, bringing 9MFY13 net profit to 72% of our full year estimate, and in line with expectations. The fall in revenue was mainly due to lower revenue recognized for the Lewek Constellation - construction progress for this vessel had peaked in 2HFY12. Meanwhile, gross profit margin was higher at 19.2% in 3QFY13 vs 12.5% in 3QFY12. Management reiterated that it is receiving healthy enquiries for the construction of SEUs, and received favourable feedback during its roadshows of its 3rdgeneration SEU. We await new orders and news of a potential yard acquisition as the group pares down its debt. Maintain BUY with S$1.07 fair value estimate. (Low Pei Han) MORE REPORTS Vard Holdings: Continued difficulties in Brazil Summary: Vard Holdings Limited (VARD)'s 2Q13 results came in below ours and the street's expectations, despite issuing a profit warning earlier. The group reported a net loss of NOK20m for 2Q, bringing its 1H13 net profit to NOK168m - just 28% and 23% of ours and the consensus FY13F estimate. The poor performance was mainly due to operational challenges in its Niteroi and Promar yards in Brazil, which would likely need more time to stabilize. Its order-book also declined by about 11% to NOK14.0b. Downgrade from Hold to SELL with lower FV of S$0.80 (previously S$0.93). (Chia Jiunyang) ST Engineering: ST Aerospace won S$430m of contracts in 2Q13 Summary: ST Engineering (STE) announced that its aerospace arm, ST Aerospace, has secured new contracts worth about S$430m in 2Q13. This includes the exclusive component Maintenance-By-the-Hour contract worth S$32.25m awarded by Spring Airlines Japan, and the five-year Multi-crew Pilot Licence training contract from Qatar Airways announced in June 2013. In the VIP cabin reconfiguration business, ST Aerospace secured three deals involving Boeing Business Jets (BBJ): a cabin design contract in Eastern Europe, a 12-year maintenance check and interior refurbishment project on a Boeing 737 belonging to a returning Middle Eastern customer, and a maintenance and interior modification contract awarded by a US customer. The magnitude of the contract wins is in line with our expectations. We maintain our fair value estimate of S$3.97 and HOLD rating on STE. (Sarah Ong) Ezra Holdings: Profit bumped up by one-off items Summary: Ezra Holdings (Ezra) reported a 19% YoY rise in revenue to US$317.1m but saw a 68% drop in net profit to US$7.2m in 3QFY13, such that 9MFY13 revenue and net profit accounted for 75% and 72% of our full year estimates, respectively. However, if we were to strip out one-off items such as the disposal of Ezion shares which contributed to a US$67.4m gain, we estimate core net loss of US$54m for the quarter. Gross profit margin was only 1% vs 17% in 3QFY12. Meanwhile, the group announced it has won new contracts worth more than US$450m since its last quarterly results, bringing its order book to more than US$2b. Pending details from management, we put our Hold rating and fair value estimate of S$1.10 under review. (Low Pei Han) Dyna-Mac Holdings: Secures S$135m fabrication orders Summary: Dyna-Mac Holdings has secured a new order worth about S$135m from a regular client for the fabrication of topside modules, manifolds and flare towers for two FPSOs to be carried out in its Singapore and Guangzhou yards. Production will commence in late 3Q2013. As the group is expected to report its 2Q results in the coming weeks, we put off adjusting our FY13F estimates for now. Maintain HOLDrating with an unchanged fair value estimate of S$0.44. (Chia Jiunyang) Singapore Economy: 2Q13 GDP grows 15.2% QoQ, boosted by manufacturing Summary: Based on advance estimates from the MTI, the Singapore economy grew 3.7% YoY in 2Q13, compared to 0.2% in 1Q13. On a QoQ seasonally-adjusted annualized basis, the economy grew by 15.2%, faster than the 1.8% growth in the previous quarter. This also beat street's expectations for a 8.1% expansion, based on a Bloomberg survey. Manufacturing expanded by 37.6% QoQ, reversing the 12.7% contraction in 1Q13, mainly due to strong growth in the biomedical and electronics clusters. Construction grew by 9.0% QoQ, moderating from the 14.3% expansion in 1Q13. Meanwhile, services rose 9.0% vs 8.1% in the previous quarter, primarily supported by a robust recovery in the wholesale & retail trade sector and the transportation & storage sector. (Low Pei Han)

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NEWS HEADLINES - US stocks leapt on Thursday, with the S&P 500 up for a sixth day and setting a record finish, after Federal Reserve Chairman Ben Bernanke said the Fed would remain accommodative. - Companies continue to consider Iskandar Malaysia as an alternative even though a shortage of skilled labour may pose other challenges, including spiralling wages. - AusGroup has signed a sale-and-leaseback deal with Boustead Trustees Pte Ltd to sell the latter its Singapore fabrication facilities at 36 Tuas Road for S$39.4m. - Retailer Courts Asia's first "big-box" megastore in Malaysia, which is expected to contribute to earnings for the current financial year, has opened ahead of its Aug schedule. - Genting Singapore yesterday broke ground on what is slated to be the first hotel to open in the Jurong Lake District.