15 Aug 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 : I like gardening - it's a place where I find myself when I need to lose myself.
- ALICE SEBOLD
Singapore: The Day AheadSINGAPORE DAYBOOK :Battered AUD sits heavy on SingTel's plate. Telco's Q1 profit up 7% but falling Aussie dollar may hit its earnings and revenue in FY2014 [SINGAPORE] A strong showing from SingTel's associates boosted the telco's first-quarter profit, but the outlook for the rest of its financial year was brought Down Under by the emaciated Australian dollar.
Yesterday, SingTel was compelled to cut forecasts for revenue and earnings, with both metrics headed for a decline.
Group revenue is expected to shrink by the mid-single digits for the financial year of 2014 which ends on March 31, 2014. Meanwhile, Ebitda (earnings before interest, taxes, depreciation and amortization) could shrink by low single digits for the period.
Just a quarter ago, the group had expected revenue to be stable and for Ebitda to grow at a low single-digit level for the same period. Since then, the Australian dollar has tumbled 10 per cent relative to the Singapore dollar - a movement magnified by the fact that two-thirds of SingTel's revenue comes from Optus, its Australian subsidiary.
"We have merely updated the guidance for the exchange rate movements. The underlying fundamentals remain unchanged," said Jeann Low, SingTel's group CFO, yesterday.
For the first quarter ended June 30, 2013, net profit rose 7 per cent to $1.01 billion, buoyed by growth in its associates' contributions and cost-control measures.
These gains more than made up for the 5.3 per cent decline in operating revenue to $4.29 billion, weighed down by revenue shrinkage in Australia. Down Under, consumer operating revenue fell 5.7 per cent to A$1.74 billion (S$2 billion) on a decline in mobile termination rates which kicked in from Jan 1 and lower equipment sales.
"The Australian economy has been a two-tier one for quite a few years. Anything that was resource- based was booming . . . but . . . the manufacturing and services sectors - they've been starting to slow down over the last couple of years," SingTel's group CEO Chua Sock Koong told The Business Times yesterday.
In the meantime, an aggressive restructuring of the distribution chain and workforce has lifted Optus's Ebitda 4.9 per cent to A$572 million, even in the face of falling revenue.
While Optus had previously relied on franchise stores, it has discontinued the arrangement, moving towards branded stores instead, allowing it to control the customer experience and keep costs down. At the same time, headcount at Optus has been reduced by 10 per cent since last year.
"The benefits of these are coming through this financial year," Ms Chua said.
On the regional front, SingTel's share of associates' pre-tax profits grew 14.1 per cent to $578 million, on higher contributions from strong data growth at Telkomsel and AIS.
Closer to home, SingTel's mobile subscriber base grew 5.7 per cent to 3.85 million. Its 4G mobile subscribers here number 537,000, up from 378,000 in the previous quarter.
Its pay-TV division, mio TV, continued to see growth, with revenue gaining 53.4 per cent to $38 million and its residential subscriber base growing 6.8 per cent year-on-year to 406,000. Quarter-on-quarter, this represents a gain of 2,000 customers.
The new English Premier League (EPL) pricing - almost double that of the old one - will boost mio TV's average revenue per user (ARPU), according to SingTel's CEO Group Digital L!fe and country chief officer for SingTel, Allen Lew, yesterday. For the quarter, mio TV's ARPU was 26 per cent higher at $26.
Earnings per share for the quarter stood at 6.35 cents, up from 5.93 cents the year before. The group's counter closed one cent lower at $3.81 yesterday.
(Source: The Business Times)
MARKET SCOOP
STX Pan Ocean Q2 loss narrows to US$24.7m
Tat Hong shares plunge on Q1 results, downgrades
Swiber's Q2 net profit tumbles 72.5% on higher expenses
Sakae'sH1 net profit up 37.7% despite tough F&B conditions
Otto Marine returns to profit in Q2 on one-off gain after winding up unit
Sias Research sets off for new Voyage
(Source: The Business Times)
NOMURA Securities says...
RELIGARE HEALTHCARE TRUST | BUY | TP: S$1.05
1QFY14 results in line with expectations
Distributable income for grew 5.6% y-y, on the back of a 1% y-y increase in revenue
1QFY14 DPU stands at 2.0S$cent, which is in line with expectations
This makes up 24.5% of our FY14F full year DPU estimate
The group remains positive on achieving its projected DPU of 8.17S$cent for FY14F, or a projected yield of 9.5%, based on the last closing price
The results show that the group is on track to meet their guidance
We expect the stock reaction to be neutral to slightly positive
The stock trades at FY14F DPU yield of 9.5% and FY14F P/B of 1.0x
Revenue came in slightly higher than expected due to SGD/INR being weaker than what was assumed (i.e. the INR appreciated against SGD vis-à-vis our and management's assumption)
However, the weaker SGD/INR was a double-edged sword as it led to a fx loss on its forward currency contract
Barring the higher-than-expected depreciation, which is non-cash and does not affect distributable income, other cost items appear to be under control despite the weaker-than expected SGD/INR
Higher-than-expected net interest income also had a helping hand in bringing distributable income in line with expectations
Base fee ahead; variable fee behind expectations
Service fees (base+variable), as a net figure of S$25.7mn, saw no material variance from the company's initial projections
The base fee at S$20.1mn was S$0.6mn higher than the initial projection due to a weaker SGD/INR visà-vis the assumed rate in the prospectus
However, variable fees at S$5.6mn saw a negative variance of S$0.4mn as hospital revenues recorded were lower than expected
The direction and magnitude of the variance was similar for our own forecasts
Total service fees (excluding hospital expenses) were higher 3% higher than the projected amounted in INR term due to higher depreciation charges, offset by decreases in other cost such as medical consumables
In addition, a weaker SGD/INR (vis-à-vis what was assumed in the prospectus) expanded the variance such that the cost was 6% higher than projected
The net effect of the above was for NOI to be 1.7% below management guidance
This variance expanded further at the PBT level (before FV chg) due to 1.1mn of fx losses, offset by higher than-projected net finance income and lower-than-projected trust expenses
PBT before depreciation and FV changes stand at S$17.0mn, in line with management guidance of S$17.2mn and in line with our forecasts
Adjust for non-cash item; distributable income in line
Even though the changes in FV of financial derivatives has a significant impact on the PAT, we note that the impact on the distributable income is nil because it is non-cash and is adjusted back to arrive at the distributable income
The same can be said for the higher than expected depreciation which is a non-cash item
Excluding those two items, the net variance in the distribution adjustments was minimal and as such brought distributable income in line with our and management expectations
UOB KAY HIAN says ...
RAFFLES MEDICAL GROUP | BUY | TP: S$3.78
Raffles Medical Group (RMG) has entered into an agreement with Mr Kishore Kumar to dispose to him the group's units at 30 Bideford Road (Thong Sia) for a consideration of S$120m
Based on an independent valuation by Jones Lang LaSalle (as at December 2012), the fair value of the property is S$98m
This development is NOT a surprise as the group indicated that it had appointed JLL to advise and manage the sale of Thong Sia
This comes after the group's unsuccessful attempts to secure the approval to set up a medical centre at Bideford Road and the asset is now non-core
In terms of financial impact, RMG stands to make a disposal gain for Thong Sia as its cost for the building was S$98m, which was acquired in 2011
The estimated non-recurrent gains are up to S$21m
As for the impact on NTA, there is an enhancement of up to 5.5% to 75.19cents following the disposal
We understand that management continue to be on the lookout for a suitable site in the vicinity of the Orchard/Novena/Newton area to set up a specialist medical centre
Despite the strategic setback for Thong Sia, the group still stands to make a reasonable financial gain
However, RMG has not indicated that it is considering a special dividend
Nevertheless, we remain upbeat on RMG as prospects remain promising and we think RMG is well poised for new investments and M&As to drive growth due to its strong financials
We maintain our 2013-15 earnings forecast (notwithstanding an exceptional gain from the disposal of Thong Sia) and have a DCF-based target price of S$3.78/share
At our DCF-based target price of S$3.78/share, the implied 2014F PER is 27.3x
This is close to its +1 SD to mean PER of 28.6x but we think this is deserved, given its strong cashflow generation and healthy financial position which could fund potential M&As or other investments
OCBC Securities says...
ST ENGINEERING | HOLD | TP: S$4.11
STE reported 2Q13 results that were generally in line with our expectations and the street's
Revenue grew 1.7% YoY to S$1.60b, and PATMI climbed 3.3% to S$147.9m
PBT margin for the group stayed flat YoY at 12%. Highlights include: 1) absence of gain on disposal of properties in Aerospace and Land Systems, which totalled S$12.8m in 2Q12; 2) write-back of allowance for doubtful debts (S$2.7m) in 2Q13 versus allowance for doubtful debts (S$10.6m) in 2Q12; 3) unfavourable fair value change of S$3.9m in 2Q13 versus a favourable fair value change of S$6.7m in 2Q12 with regard to cross currency interest rate swaps (CCIRS) from USD to SGD
STE's order book fell slightly from its high of S$13.0b as of end-Mar 2013 to S$12.7b, of which S$2.8b is expected to be delivered in 2H13
Growth from core sectors All four sectors registered higher revenue YoY in 2Q13; Aerospace (+3%),Electronics (+2%), Land Systems (+1%) and Marine (+12%)
However, it should be noted that there was lower revenue in 2Q13 than what management had anticipated due to the rescheduling of Electronics project milestone completions to later periods
PBT for all four sectors rose YoY; Aerospace (+1%), Electronics (+13%; there was a gain on disposal of a 4.9% holding in HK-listed company), Land Systems (+7%) and Marine (+13%)
The "Others" component clocked a loss before tax of S$10.1m versus a 2Q12 PBT of S$0.8m chiefly due to the CCIRS
Better outlook for 2H13 STE continues to anticipate achieving higher revenue and PBT in FY13 versus FY12
The company also expects to achieve higher revenue and PBT in 2H13 versus 1H13. In particular, all sectors' 2H13 revenue and PBT are expected to be higher HoH
We tweak our assumptions and our FY13F EPS falls slightly to 19.6 Scents from 19.8 S-cents
Using a higher 21x peg (versus 20x previously) against our FY13F EPS, our fair value climbs to S$4.11 from S$3.97
We maintain a HOLD rating on STE
FY13F dividend yield is 4.1% |
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