SG: MARKET PULSE: Venture Corp, STE, CSE, Dyna-Mac, ECS, SingTel, Swiber, Tat Hong (14 Aug 2013)

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 7.94

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.11

Stock Name: CSE Global
Company Name: CSE GLOBAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.96

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.57

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.86

MARKET PULSE: Venture Corp, STE, CSE, Dyna-Mac, ECS, SingTel, Swiber, Tat Hong

14 Aug 2013

KEY IDEA Venture Corp: Position for the recovery Venture Corp's (VMS) 2Q13 revenue fell 3.9% YoY to S$587.7m, while PATMI dipped 10.6% to S$30.1m and was within our expectations. We expect a stronger showing from VMS in 2H13, driven by more meaningful contribution from the mass production of programmes from customers acquired in 2012 as well as new product launches. Management also sounded more upbeat during the analyst briefing, highlighting better sentiment amongst most of its customers. We retain our projections and roll forward our valuations to 15x blended FY13/14F EPS, which correspondingly raises our fair value estimate from S$7.37 to S$7.94. Given VMS's attractive FY13F dividend yield of 7.0% and an improved outlook, we upgrade the stock from Hold to BUY. (Wong Teck Ching Andy) MORE REPORTS ST Engineering: 2Q13 in line; Maintain HOLD Singapore Technologies Engineering (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. 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. We tweak our assumptions and our FY13F EPS falls slightly to 19.6 S-cents 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%. (Sarah Ong) CSE Global: Spin-off of UK business CSE Global reported in-line results with revenue of S$116m (-20% YoY) and core net profit of S$12m (+12%). Gross margin improved to 34% from 25% in the year-ago period, mainly due to lower level of zero-margin work in Middle East and more profitable offshore work in the Americas. Separately, the CSE disclosed that its UK subsidiary, CSE (UK), is currently pursuing a separate listing on the London Stock Exchange. The listing will provide financial independence to both CSE and CSE (UK) to facilitate future access into capital markets to pursue growth opportunities. We will follow up with more updates after its briefing later. In the meantime, we keep our BUY rating but put our S$0.96 FV under review. (Chia Jiunyang) Dyna-Mac Holdings: Improving order visibility Dyna-Mac Holdings reported revenue of S$76.6m (+32.6% YoY) and net profit of S$7.5m (+23.2%) for 2Q13. The results were in-line with our expectations such that 1H13 net profit formed 50% of our FY13F estimates. The order-book improved to S$246m, up from S$113m just three months ago, providing visibility over the next one year. We currently have a HOLD rating with S$0.44 FV, and will provide updates after speaking to management later. (Chia Jiunyang) ECS Holdings: 2Q13 core PATMI below expectations ECS Holdings (ECS) reported a 11.0% YoY increase in its 2Q13 PATMI to S$9.0m on the back of a 23.5% hike in revenue to S$1,017.5m. However, if we exclude forex and other exceptional items, we estimate that core earnings would have decreased 7.3% to S$6.9m, which was below our expectations due largely to a lower-than-estimated gross margin. For 1H13, revenue increased 22.0% to S$2,107.8m, forming 50.1% of our FY13 forecast. Core PATMI rose 9.6% (reported PATMI jumped 21.0%) to S$15.4m, or 44.5% of our full-year estimate. On a positive note, ECS generated healthy net operating cashflows of S$50.6m in 2Q13, which helped to lower its net gearing ratio from 50.1% (as at end 1Q13) to 38.5% (as at end 2Q13). We will provide more details after meeting up with management. Meanwhile, we maintain our BUY rating but our S$0.57 fair value estimate is under review. (Wong Teck Ching Andy) SingTel: Decent FY14 start; but outlook muted SingTel posted 1QFY14 revenue of S$4293.3m, down 5.3% YoY and 4.2% QoQ, meeting about 24% of our full-year forecast; this largely weighed by lower revenue in Australia and the weaker AUD. Reported net profit though climbed 7.0% YoY and 16.4% QoQ to S$1011.0m, boosted by stronger EBITDA margins and higher associate contributions. Core net profit (excluding exceptional items) rose 5.5% YoY (but fell 10.4%) to S$897m, also meeting 24% of FY14 forecast. Meanwhile, free cashflow also climbed 23% YoY to S$893m, mainly due to timing and higher dividend receipts from associates. But going forward, the group's outlook remains somewhat muted, as SingTel expects lower overall revenue (mainly from Group Consumer), with likely EBITDA compression as well. We will have more after the analyst teleconference later. For now, we place our Hold rating and S$3.83 fair value under review. (Carey Wong) Swiber Holdings: Soft 2Q13 results after a strong 1Q13 Swiber Holdings (Swiber) reported a 5.4% YoY rise in revenue to US$242.1m and a 13.7% increase in gross profit to US$37.1m in 2Q13. However, higher administrative, finance and other operating expenses contributed to a 72.5% fall in net profit to US$4.2m in the quarter. Earnings are generally lumpy by quarter due to project executions. 1H13 net profit rose 2.0% and accounted for close to 40% of our full year estimate, slightly below our expectations. Still, execution remains steady and the group has a US$1.2b order book with more work expected to be carried out in 2H13. Pending an analysts' briefing later in the afternoon, we maintain our BUY rating but put our fair value estimate of S$0.86 under review. (Low Pei Han) Tat Hong Holdings: Has earnings peaked? Our recommendation to take profit on Tat Hong shares ("Time to take profit", 26/6/2013) more than a month ago turned out to be timely. After eight quarters of strong performance, the group's earnings appeared to have peaked. In 1QFY14, it posted sharp declines in revenue (S$175m,-18% YoY) and net profit (S$8.2m; -51%) with weakness seen across every business segment. As we have feared, uncertainties in the macro environment have led to slower infrastructure and construction activities in Australia, Indonesia and Singapore. We are currently re-assessing the counter; and in the meantime, put our hold rating and S$1.31 FV under review. (Chia Jiunyang)

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NEWS HEADLINES - US stock indexes rose on Tue, with technology pacing the gains, after investor Carl Icahn touted his large position in Apple Inc. - Banyan Tree Holdings' 2Q13 net profit rose to S$1.7m from S$644k a year ago as its revenue climbed 3% YoY to S$81.7m on the back of stronger contribution from its hotel investment segment. - Boustead Singapore saw its net profit for 1QFY14 rise 45% YoY to S$17.7m. - Asian Pay Television Trust declared a maiden distribution of 4.8 S-cents per unit for the period from 29 May 2013 (listing date) to 30 Jun 2013. - SBS Transit's ride continues to be bumpy, with its net profit dropping 30.6% YoY to S$3.2m for 2Q13.