SG: MARKET PULSE: GAR, GPH, SingPost, StarHub, UEL (5 Aug 2013)

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: SELL

Target Price: 0.465

Stock Name: GP Hotels
Company Name: GLOBAL PREMIUM HOTELS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.33

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.32

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

MARKET PULSE: GAR, GPH, SingPost, StarHub, UEL

5 Aug 2013

KEY IDEA Golden Agri-Resources: Downgrade to SELL; poor 2Q13 showing Summary: Golden Agri-Resources (GAR) saw 2Q13 revenue jumped 25.4% YoY and 17.6% QoQ to US$1682.3m, but weaker margins on the back of softer CPO prices led to core earnings tumbling 52.3% YoY and 50.0% QoQ to an estimated US$55.1m. 1H13 revenue grew 8.8% to US$3112.4m, meeting 49.7% of our FY13 forecast, while net profit tumbled 41.5% to US$158.1m; core earnings slipped 40.9% to US$165.2m, or just 33.7% of our full-year forecast. In view of the worse-than-expected showing and likely more margin compression ahead, we opt to slash our FY13 core earnings forecast by 19%; this in turn drops our fair value from S$0.57 to S$0.465, now based on 11x blended FY13/FY14F EPS. We also downgrade our call from Hold to SELL. (Carey Wong) MORE REPORTS Global Premium Hotels: 2Q13 in line Summary: The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.m and gross profit rose 1.1% to S$13.m. Administrative expense fell 19.4% to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in Jul and Aug. Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH. (Sarah Ong) Singapore Post: In Post we still trust Summary: Singapore Post (SingPost) reported a 32.8% YoY rise in revenue to S$201.3m but saw a 2.0% decrease in net profit to S$37.3m in 1QFY14, such that the latter accounted for 25.3% of our full year estimates. Underlying net profit fell slightly by 0.9% to S$36.2m in the quarter, in line with our expectations. Margins continued to normalise as expected, while the group's cashflow generation remained strong. In line with its usual practice, SingPost has proposed an interim quarterly dividend of 1.25 S cents/share. We look forward to the group's transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves better than expected. Still, we expect the share price to be supported by investors seeking yield (~4.8% FY14F). Maintain HOLD with S$1.32 fair value estimate. (Low Pei Han) StarHub - Offers S$300 rebate for new BPL customers Summary: StarHub Ltd has announced its "Surf & Watch" bundles specifically aimed at welcoming BPL fans home. Priced from S$47.37/month with a 24-month contract, subscribers (new and those without a contract) will get 25Mbps cable home broadband, its Deluxe HD Pack (82 channels) and a S$300 rebate; note that subscribers will have to pay SingTel S$59.90/month directly for the BPL content. According to StarHub, the rebate will be part of its Marketing & Promotions expense, and will not affect the Pay TV cost. However, as the bundle involves its older cable broadband, there could be limited appeal versus the newer NBN fibre network. We also see limited traction for existing SingTel subscribers who can continue to pay S$34.90/month for BPL. For now, we maintain SELLon StarHub with an unchanged S$3.82 fair value. (Carey Wong) United Envirotech: Decent 1QFY14 start Summary: United Envirotech Ltd (UEL) this morning reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit climbed 3.5% YoY (down 13.8% QoQ) to S$6.1m, or 12.5% of our full-year forecast. According to management, the higher revenue came from a 23.3% YoY jump in Engineering revenue to S$31.2m, while recurring Water Treatment revenue surged 89.7% to S$12.9m. Note that its fiscal first quarter tends to be seasonally softer. Going forward, management intends to grow its recurring treatment income further and focus on securing more industrial wastewater treatment projects in China. We will speak more with management for further updates. For now, we place our Buy rating and S$1.03 fair value under review. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - Oil and base metal prices gained last week as positive US and Chinese economic data fuelled higher demand expectations, according to analysts. - The US dollar rallied last week as a weaker-than-forecast unemployment report and the Fed's pledge to keep buying bonds fails to erase speculation that the programme will be wound down this year. - Directors' buying was low for the second straight week while the selling was low for the ninth straight week. A total of eight companies recorded 14 purchases worth S$1.36m versus two firms with two disposals worth S$1.59m. - Pacific Healthcare Holdings Ltd has obtained approval in-principle for proposed renounceable non-underwritten rights issue of 114,748,586 new ordinary shares at an issue price of S$0.048 for each rights share, on 1-for-4 basis.