21 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 : A wise man is superior to any insults which can be put upon him, and the best reply to unseemly behavior is patience and moderation.
- MOLIERE
Singapore: The Day Ahead
SINGAPORE DAYBOOK :Keppel FELS bags US$280m deal with Floatel. Fellow rig-builder Sembmarine signs MOU with Saudi Aramco for study
KEPPEL FELS, a wholly-owned unit of the world's largest oil-rig builder Keppel Corp, has won a US$280 million contract with Floatel International to build a fifth accommodation semi-submersible.
This will be for delivery in the fourth quarter of 2015.
The new contract comes on top of two vessels - Floatel Victory and Floatel Endurance - that the firm is already building.
It had previously delivered two accommodation semi-subs to Floatel in 2010.
(Source: The Business Times)
MARKET SCOOP
Albedo enters Iskandar deal, potential RTO
S'pore wholesale trade down 1.1% in Q2
China to create agency to align financial supervision
Malaysia Q2 GDP seen growing but current account in focus
India says sense of panic in market "completely unfounded"
(Source: The Business Times) DBS Securities says... SINGAPORE BANKS: BETTER VISIBILITY Improved prospects; raise to Overweight
We are raising Singapore banks to overweight, both within the Singapore context and among our ASEAN banks coverage
Besides improved prospects in 2014 coupled with possible interest rate hikes, we believe Singapore banks provide a flight-to-safety theme in the near term, especially when compared with its ASEAN counterparts
We have imputed NIM recovery and stronger earnings growth for 2014. 2013 earnings will be subdued on flat NIM and normalised provisions
NIM has reached an inflection point; potential recovery in 2014
NIM has finally started to stabilise, as evidenced in the recent set of 2Q13 results
NIM pressure appears to be well combated
Banks have started to price up loans
As such, banks with higher CASA composition as well as better S$ liquidity should be well positioned
We believe OCBC is in a better position (vs UOB) given that its S$ loan-to-deposit ratio is 84% (UOB: 95%) while its CASA to total deposits stands at 50% (UOB: 42%)
Asset quality intact; watch unemployment and job creation rate
We believe days of extra-low provision cycle are over; current levels of 30bps will be the new normal
That said, Singapore banks' asset quality is the best among ASEAN peers
While unemployment rates should be watched closely to detect asset quality issues, it is equally crucial to monitor job creation
While unemployment rate has inched up to 2.1% from 1.9% in 1Q13, job creation has increased significantly
Hence, risk to a NPL spike should be limited at this juncture
Preference for OCBC is a contrarian view
Despite weak contribution from insurance in 2Q13, its banking operations were strong and solid; testimony of the strength of its banking operations
OCBC's exposure to China is small vs UOB, while it has no operations in Thailand
OCBC and UOB have relatively small exposure in Indonesia at 6% and 4% respectively
OCBC's Islamic banking business offers an added advantage over UOB in terms of product offerings
CIMB Securities says ...
EZRA HOLDINGS | UNDERPERFORM | TP: S$0.70
SHI started to look at M&As in the subsea business from 2011, to diversify away from the crowded commercial shipbuilding and offshore business
Ezra was one of its targets
We are doubtful of Ezra's traction in subsea, both in winning sizeable orders and profitability, which may be de-rating catalysts for our intact Underperform rating
Our target price stays at 10.5x CY14 P/E, -1SD from its 5-year mean
Industry sources have reported that SHI's Future Strategy Team has rejected plans for the group to acquire Ezra Holdings, as part of the group's venture into the subsea segment
SHI has been planning for a sizeable M&A in the subsea business for two years, to diversify from the crowded commercial shipbuilding and its constrained capacity
However, there are not that many M&A targets in this space
Apart from Ezra, SHI had looked at other subsea companies based in the Netherlands and Switzerland
In contrast, HHI is venturing into the subsea business with its in-house subsea R&D resources, targeting commercial shipments by 2H14
Ezra's subsea division had lost money in 3QFY13 with Ezra having to write off costs from project delays due to client rescheduling and cost overruns for some
A lack of project baseload meant the group could not afford any major timeline shifts in project execution due to its high overheads and subcontractor costs
4Q13 should be profitable following the completion of some projects but we are worried about low vessel utilisation during winter (Nov-Jan), which could eat into subsea's profitability in 1Q14
We would revisit the stock after 1Q14 if it can survive the winter lull with positive earnings contributions from subsea to show
OCBC Securities says...
EZION HOLDINGS | BUY | TP: S$2.90
Further to an earlier announcement that a subsidiary of Ezion had entered into a letter
agreement for a proposed issue of redeemable exchangeable preference shares,
the subsidiary has now entered into a subscription agreement for the issue, raising
net proceeds of about S$29.5m
The investors are five funds managed by Evia Capital Partners Pte Ltd and Venstar Capital Management Pte Ltd who are existing investors in Ezion
The holders of the preference shares can only exchange 50% of their holdings into ordinary shares of Ezion at a price of S$2.1857 a year from the issue of the pref shares
The remaining 50% can be exchanged after two years
Hence we expect any dilutive impact only from Jul/Aug 2014 onwards
Even then, assuming all the preference shares are converted, the dilutive impact is still small at 1.43% of the existing share capital
On the cashflow side, Ezion will see an inflow of S$29.5m this year from the net proceeds, and we expect about S$1.5m outflow in FY14, and S$0.9m each in FY15 and FY16 due to the preferred dividends
Since the beginning of the year, the group has raised S$93.5m from a share issue (28
Feb announcement), S$110m from a 4.7% note issue (22 May announcement), S$30m
from the above-mentioned preference shares, and was recently marketing a S$60m
4.6% note issue
Most of the proceeds so far have been earmarked for acquisition of offshore and
marine assets, due to the promising pipeline of opportunities that the group sees ahead
YTD, Ezion and its related entities have secured letters of intent or contracts for
seven units of liftboats and service rigs, and we expect more to come, given the good
demand for such assets
Maintain BUY with S$2.90 fair value estimate, which would drop to S$2.42 after adjusting for a proposed bonus share issue (details in 7 Aug 2013 report) |
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