SG: MARKET PULSE: ECS, Lippo MIRT, Vard (22 Aug 2013)

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.56

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

MARKET PULSE: ECS, Lippo MIRT, Vard

22 Aug 2013

KEY IDEA ECS Holdings: Beneficiary of product refresh cycle We met up with the management of ECS Holdings following its recent 2Q13 results. Revenue and PATMI rose 23.5% and 11.0% YoY to S$1,017.5m and S$9.0m, respectively. However, after adjusting for forex and other exceptional items, we estimate that core earnings declined 7.3% YoY from S$7.4m to S$6.9m, which was below our expectations. On a positive note, ECS managed to lower its net gearing ratio from 59.4% (as at end 2Q12) to 38.5% (as at end 2Q13) due to good working capital management. Looking ahead, we expect ECS to be a beneficiary of new product launches by major IT vendors such as Apple. We trim our FY13 and FY14 core PATMI forecasts by 6.2% and 3.9%, respectively. But as we also roll forward our valuations to 6x blended FY13/14F core EPS, our fair value estimate only declines marginally from S$0.57 to S$0.56. Maintain BUY. (Wong Teck Ching Andy) MORE REPORTS Lippo Malls Indonesia Retail Trust: Weakening IDR likely to affect NAV The IDR has weakened some 7.4% against the SGD since 28 Jun, with SGD1 buying IDR8558.25 as at 21 Aug, compared to IDR7922.96 on 28 Jun (Bloomberg). We understand that only ~65% of the cash flow from the properties for 2H13 are likely hedged for depreciation of IDR against SGD. In addition, the weakening of the IDR against the SGD does not bode well for the valuation of LMIRT's properties in SGD terms, which means that NAV would likely be affected negatively. To reflect a higher risk profile for LMRT, especially given the outflow of funds from emerging markets, we incorporate a higher cost of equity of 10.8%, versus 9.7% previously, and trim our DDM-based FV to S$0.44 from S$0.49. Maintain HOLD. (Sarah Ong) Vard Holdings: Secures NOK800m contract Vard Holdings Limited (VARD) announced that it has secured a new contract for the design and construction of one Offshore Subsea Construction Vessel (OSCV) worth ~NOK800m. This contract is awarded by Farstad Shipping, which is an existing customer of VARD. Delivery for this OSCV is scheduled for 3Q15, and will be used for subsea and Inspection, Maintenance and Repair (IMR) operations. Recall that VARD also recently announced on 12 Aug 2013 that it had won four Pipe Lay Support Vessels (PLSVs) contracts with an aggregate order value of ~NOK6.5b. But due to a change in analyst coverage, we are placing our Sell rating and S$0.80 fair value estimate under review. (Research Team)

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NEWS HEADLINES - US stocks ended sharply lower as investors weighed the Feds signalling that it remained on course to curb its monthly bond purchases by the end of the year. - Parkson Retail Asia's net profit for 4QFY13 fell 62.1% YoY to S$3.4m, even as its revenue inched up 0.6% YoY to S$102.9m. - PEC Ltd posted an 11% YoY increase in net profit attributable to equity-holders to S$5.06m for 4QFY13 (versus S$4.55m in 4QFY12). - Neo Group Ltd has made its maiden overseas expansion, inking a five-year licence agreement with PT Umi Sushi Indonesia to launch three sushi retail outlets in Jakarta. - TSH Australia Holdings, a wholly owned subsidiary of Tuan Sing Holdings, has received a writ of summons by Kara Investments, a unit of Morgan Stanley, and GSS III Rutgers BV. - Airlines, aviation-related operators and construction firms, and REITs with assets in Paya Lebar, stand to benefit the most from plans to expand and upgrade Changi Airport, according to brokerage houses.