SG: MARKET PULSE: SCI, CityDev, Genting, Hyflux, StarHub, Wilmar, Ezion, YZJ, FEHT (7 Aug 2013)

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.48

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 11.38

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: HOLD

Target Price: 1.41

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.215

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.25

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.62

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.01

MARKET PULSE: SCI, CityDev, Genting, Hyflux, StarHub, Wilmar, Ezion, YZJ, FEHT

7 Aug 2013

KEY IDEA Sembcorp Industries: Steady performance in utilities Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was slower order book drawdown in the marine division in the quarter as fewer projects achieved the initial recognition milestone, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. As expected, Singapore power spreads were weaker in 1H13 compared to 1H12, but overseas utilities helped to bump up net profit in the quarter. Going forward, management expects the utilities business to deliver a "steady performance" in 2013 despite intensified competition in the Singapore market. Maintain BUY with S$6.48 fair value estimate. (Low Pei Han) MORE REPORTS City Developments Limited: A dimmer residential sales outlook CDL's 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from an industrial site at 100G Pasir Panjang. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. In 2H13, CDL is expected to launch the 380-unit Lush Acres EC project and a mixed development at MacPherson/Upper Serangoon Rd (266 residential and 28 retail units). Due to recent property curbs, the group expects stronger headwinds and moderating transaction volumes and prices in 2H13. In addition, management indicates that a situation of residential oversupply could ensue in 2014. While navigating a more onerous risk-reward landscape ahead, we believe that CDL could take a more measured approach to land-banking over FY13-14. Maintain HOLD with a lower fair value estimate of S$11.38 (20% RNAV disc.), versus S$12.04 previously, mainly due to a higher discount to RNAV reflecting a dimmer residential sales outlook. (Eli Lee) Genting Singapore: Decent 2Q13 showing; but upside limited Genting Singapore (GS) reported a better-than-expected set of 2Q13 results, with adjusted EBITDA margin recovering back to 44% from 37.3% in 1Q13. 1H13 revenue met around 50% of our full-year forecast, while net profit was nearly 64% of our FY13 figure. Going forward, management still remains slightly cautious about the slower growth outlook for China; but notes that it has yet to see much impact on its Chinese customers. Given the slightly better-than-expected showing, we opt to raise our net profit forecasts for FY13 and FY14 by around 3.5% each; but this has little impact on our DCF-based fair value, which remains at S$1.41. Given the limited upside from here, we maintain HOLD. Longer-term catalyst could come from a potential IR license overseas in markets like Japan, which is still a 2015 or 2016 story. (Carey Wong) Hyflux: 1H13 tracking below forecast Hyflux Ltd reported that its 2Q13 revenue fell 24.6% YoY (but rebounded 11.1% QoQ) to S$138.4m, while net profit came in around S$17.7m, +3.0% YoY and 119.9% QoQ. 1H13 revenue of S$262.9m fell 17.6% and met about 36.0% of our full-year forecast. While net profit climbed 2.1% to S$25.2m, it only met 32.8% of FY13 estimate, and we were expecting it to cover about 40%. Hyflux declared an interim dividend of S$0.007/share, same as 1H12. While the company continues to show a relatively healthy order book of S$2731m, we believe that the outlook may still be muted, given the credit crunch situation in China. As such, we are lowering our FY13 estimates for revenue by 9.6% (FY14 by 11.1%) and earnings by 12.8% and 14.0% respectively. Our fair value correspondingly falls to S$1.215 (based on 20x blended FY13/FY14F EPS). We maintain our HOLD rating; but we do not rule out any near-term knee-jerk reaction. (Carey Wong) StarHub Ltd: Decent 2Q13 showing; but risks remain StarHub Ltd reported a decent set of 2Q13 results, with revenue down 0.7% YoY (+1.2% QoQ); net profit improved 15.9% YoY and 10.3% to S$100.6m. StarHub declared a quarterly S$0.05/share dividend as guided. For 1H13, revenue slipped 1.2% to S$1166.9m, or about 46.4% of our full-year forecast, while net profit climbed 9.5% to S$191.8m, meeting 53.2% of FY13 estimate. For 2013, StarHub has kept its previous guidance; it also does not expect the BPL cross-carriage to have a material financial impact. Despite the decent 2Q13 showing, we opt to keep our FY13 estimates, as potential margin pressures are likely to emerge in 2H. Maintain SELLon the stock with an unchanged DCF-based fair value of S$3.82. (Carey Wong) Wilmar: 1H13 results slightly below expectations Wilmar International Limited (WIL) posted its 2Q13 results last evening, with revenue easing 5.4% YoY (+2.2% QoQ) to US$10426.3m, on lower CPO prices (but was alleviated by volume growth in other segments). While net profit jumped 86.5% YoY to US$218.5m (mainly due to the loss in its Oilseeds & Grains segment in 2Q12), it was still down 30.7% QoQ, likely hit by lower crushing margins in the quarter. For 1H13, revenue slipped 4.0% to US$20626.8m, meeting 41.5% of our full-year forecast, while net profit climbed 43.1% to US$533.9m, or about 40.1% of our FY13 forecast. WIL declared an interim dividend of S$0.025/share, versus S$0.02 in 1H12. We will have more after the analyst briefing at noon. We maintain HOLD on the stock but place our S$3.25 fair value (based on 12.5x FY13F EPS) under review. (Carey Wong) Ezion Holdings: Operations remain strong Ezion Holdings (Ezion) reported a 80.9% YoY rise in revenue to S$67.2m and a 28.8% increase in net profit to S$36.2m in 2Q13, such that 1H13 net profit accounted for 55% of our full year estimates. Excluding a one-off disposal gain in 1Q13, core 1H13 net profit represented 49% of our full year estimates, in line with expectations. Gross profit margin remained strong at 46.3% in 2Q13 vs 45.9% in 2Q12 and 44.9% in 1Q13. Looking ahead, more assets are expected to be deployed, and there should be more contributions from the commencement of the APLNG and GLNG projects this year. Meanwhile, Ezion is proposing a bonus share issue of one bonus share for every five existing ordinary shares. Pending an analysts' briefing later in the morning, we maintain our BUY rating but put our fair value estimate of S$2.62 under review. (Low Pei Han) Yangzijiang Shipbuilding: Still a steady ship Yangzijiang Shipbuilding (YZJ) reported a 12% YoY rise in revenue to RMB4.4b and a 8% decrease in net profit to RMB811.7m in 2Q13, such that 1H13 net profit accounted for 54% of our full year estimates, within expectations. Gross margin in the shipbuilding related segment dropped from 24.2% in 2Q12 and 25.9% in 1Q13 to 20.6% in 2Q13, while gross margin in the group's investment division remained high. YZJ has secured 27 effective shipbuilding contracts worth US$1.01b in 1H13 with four other options converted into effective orders in Jul 2013. As growth in the shipbuilding industry remains slow, management is looking at its investments business to weather through challenging times. Pending an analysts' briefing later, we maintain our HOLD rating but put our fair value estimate of S$0.95 under review. (Low Pei Han) Far East Hospitality Trust: 2Q13 below expectations Far East Hospitality Trust (FEHT) has announced 2Q13 results which we judge to be below our expectations and the street's. Gross revenue for was S$29.3m or 7.9% lower than the IPO prospectus forecast. In addition, RevPAR for the hotels was S$168, 11% lower than the forecast of S$189. The serviced residences, however, generally performed in line with expectations, with RevPAU of S$230, versus S$228 in the forecast.As a result, we see net property income and income available for distribution coming at S$26.9m and S$23.2m, which are 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 distribution per stapled security was 1.43 S cents which we view to be below expectations. We place our FV of S$1.01 and Hold rating on FEHT UNDER REVIEW. We will be speaking with management later today. (Sarah Ong)

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NEWS HEADLINES - US stocks extended losses into a second day Tue as Fed official Charles Evans said the economy should be able to shoulder reduced Fed asset purchases later this year. - Rotary Engineering posted a net profit increase to S$5.1m in 2Q13 from S$1.03m in 2Q12, with a 13% YoY increase in revenue to S$126.2 million. - The Hour Glass Ltd posted a net profit attributable to shareholders of S$8.8m for 1QFY13, down 6% YoY, on the back of higher operating expenses amid a more competitive marketplace. - Vallianz Holdings reported a 29% fall to US$1.89m in 2Q13 net profit attributable to shareholders.