12 Sept 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 : It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate.
- DONALD TRUMP
Singapore: The Day AheadSINGAPORE DAYBOOK :Softer blow to local telcos with waning Apple mania. SingTel, StarHub, M1 start taking registrations of interest for upcoming iPhone 5c and iPhone 5s [SINGAPORE] It's margin pressure season for the telcos again with a new iPhone release, but the collective yawn that consumers are stifling could mean a softer blow to the telcos' bottom line for the coming quarter.
Yesterday, SingTel, StarHub and M1 began taking registrations of interest for the new iPhone 5c and iPhone 5s. While the three telcos will sell both models from Sept 20, StarHub will take pre-orders for the iPhone 5c from tomorrow at 11.59pm as well.
The telcos' subscriber acquisition costs have traditionally spiked in the last quarter of the year, following Apple's product launches in late September. iPhones hold the dubious distinction of costing telcos the most in handset subsidies compared to other handsets, both in nominal and percentage terms.
Last year, after the iPhone 5 was released, SingTel's acquisition cost per postpaid customer stood at $322 for the last quarter of the year, up from $291, $301 and $289 in the three previous quarters. Post-iPhone 5 launch, M1's acquisition cost per postpaid customer, too, jumped from $370 in Q3 to $418 in Q4.
Even so, industry watchers believe that the looming margin crunch will be milder with the new iPhone 5c and iPhone 5s.
"I don't think the iPhone 5s is going to have very much impact. . . You normally see that the demand tends to be higher for the models that really make a difference to the user experience," said James Ong, senior manager of telecommunications consultancy Delta Partners. "The sentiment this time around is that Apple seems to have underperformed in terms of innovation and creativity."
Waning Apple-mania had begun to set in as far back as a year ago. Between the last quarter of 2011 and the fourth quarter of 2012, SingTel's acquisition cost per postpaid customer fell 12 per cent year on year as a result of what it called "changes in smartphone mix" - a sign that Android handsets which carry lower subsidies were muscling into iPhone territory. This has been borne out over at M1, where Android devices made up 70 per cent of handset sales in Q2 this year.
That said, the impact on margins - while muted - will be inevitable. "There will still be significant demand, given that Singapore is a market where people are held to two-year contracts. People who bought the iPhone 4S two years ago will be up for renewal now," Delta Partners's Mr Ong said.
No price plan details have been released, but the cheaper iPhone 5c can be pre-ordered through the Apple Singapore store from tomorrow, while the iPhone 5s will be available a week later. The iPhone 5s is priced at $988, $1,148 and $1,288 for the 16 gigabyte (GB), 32GB and 64GB models, respectively, while the iPhone 5c costs $848 and $988 for the 16GB and 32GB models.
The upside of this margin pressure is that the new iPhone 5s and iPhone 5c will do their bit to convert 3G mobile subscribers to more profitable Long Term Evolution (LTE) or 4G ones.
"This will help drive LTE connections uptake in the market as users of iPhone4S will look for a replacement," said Shalini Verma, a principal analyst at Gartner. The older iPhone 4S is not LTE-enabled.
"There will be some increase in data usage if users are using LTE service because a better performing phone does encourage users to use it more for data. . . The high-speed network will also contribute to it."
While the margin pain might be felt over the short term, the telcos should eventually wring more data dollars from consumers in the long term.
(Source: The Business Times)
MARKET SCOOP
Popular Holdings Q1 profit down 18.8%
S'pore, Vietnam ink strategic partnership
Singapore tightens rules on unsecured loans to rein in debt
Japan's Xyec prices S$6.5m IPO at 26 S'pore cents
SingTel to offer iPhone 5s, 5con Friday, Sept 20
(Source: The Business Times) DBS Securities says... UNITED ENVIROTECH | BUY | TP: S$0.98
United Envirotech has secured a Rmb286m (S$59m) contract with the municipal government of Hong Wei District, Liaoyang. For the TOT, UENV will acquire an existing 15,000 m³/day treatment plant for Rmb25m and upgrade it with a membrane bioreactor (MBR) system
For the BOT portion, UENV will expand its treatment capacity by an additional 45,000 m³/day to a total capacity of 60,000 m³/day
Upon completion, the plant will treat 30,000 m³/day of municipal wastewater and 30,000 m³/day of industrial wastewater
The upgrading work will commence immediately and is expected to be completed by September 2014
The expansion work is expected to start in early 2014 and will take 12 months to complete
The construction of the BOT will add Rmb261m to EPC's orderbook, lifting YTD new contract win to Rmb451m, above our Rmb400m assumption
More importantly, the new capacity will add 6% to existing Phase 1 capacity, lifting UENV's total treatment capacity to 1.1m m³/day
Based on minimum offtake for TOT and staggered guaranteed offtake from 70% of the design capacity for Year 1, this contract will boost SOTP of UENV to S$0.98 from S$0.90 previously
In view of the improved upside, we therefore upgrade UENV to Buy from Hold
We see more contract wins as catalysts for more upside on the stock
CIMB Securities says ...
YANGZIJIANG SHIPBUILDING | OUTPERFORM | TP: S$1.25
The heightened order momentum and FY15 delivery slots being quickly snapped up suggest that YZJ's order drought has bottomed out
We like YZJ as it is one of the last privately-owned Chinese shipyards with decent profitability
We keep our Outperform rating and target price (based on 1.4x FY13 P/BV; 1 s.d. below its 5-year mean)
The stock has the highest dividend yield of 4.8% among the ship/rig builders
With about half of its order book (US$3.24bn as at end-Jun) dominated by bulk carriers, we believe YJZ can benefit from more shipbuilding orders if the BDI's climb is sustained
A high BDI also lowers the risk of order cancellations
The BDI spiked recently to its 52-week high of 1,478, driven primarily by the increase in Chinese steel production that spurred demand for shipping vessels mainly in the Capesize sector
China's macro fundamentals have stabilised with the recent data showing that the real economic activity is starting to improve
Iron ore inventories are also relatively low and we expect the import demand to remain relatively strong in 4Q13, which can lead to further upsides in the BDI
New orders have rebounded sharply from US$300m in FY12 to US$1.22bn YTD
YZJ has been consistently getting new orders, with another US$241m (eight shipbuilding contracts) in the bag during the first two months of 2H13
The YTD order win is about 50% of our FY13 order target of US$2.5bn
We look forward to more orders in 2H13 as YZJ has 51 options worth US$2.87bn, of which 22 are for containerships (US$1.79bn) and 29 for bulk carriers (US$1.08bn)
The stock is trading at its trough of 0.98x FY13 P/BV, an unwarranted 20% discount to its peers despite a stronger ROE of 20%
In comparison, Cosco is trading at 1.23 P/BV with an ROE of 3.7% OCBC Securities says... MIDAS HOLDINGS | BUY | TP: S$0.65 According to the China Railway Corporation (CRC) website, the results of its public tender for 91 high-speed train sets (speeds of 250 km/h) were released on 6 Sep 2013 CSR Qingdao Sifang, a subsidiary of Hong Kong listed CSR Corp, clinched all the orders
This is a welcome relief to the railway industry as it is the first high-speed train car tender by CRC (formerly Ministry of Railways) after a hiatus of more than two years
However, we believe this news is disappointing for Midas Holdings, as it has only managed to supply small quantities of aluminium alloy extrusion profiles to CSR Qingdao Sifang in the past
Hence we expect Midas to miss out on this tender
Nevertheless, Midas is actively engaging them and we believe Midas may be able to penetrate into their supply chain in the future
Besides this open tender, we understand that CRC also carries out competitive negotiations with train manufacturers directly, and results of these negotiations may not be published on CRC's website
According to our channel checks, there are 68 other train sets (speeds of 350 km/h)
which will be procured by CRC under this format. In total, 108 out of the 159 train set orders will be awarded to CSR Corp, with the remainder going to China CNR
As Midas is a key supplier to CNR Tangshan and CNR Changchun (both subsidiaries of China CNR), we expect Midas to still secure high-speed contracts in 4Q13
Assuming each 350 km/h train set costs CNY200m and the value of the train car body forms 1.5% of total train set value, we estimate potential addressable market size of
CNY153m for Midas for this round of procurement (based on 51 train sets)
We understand that there may also be another round of procurement by CRC by year end, while 2014 will likely see the bulk of purchases by CRC under China's 12th Five-Year Plan from 2011 to 2015
In light of the aforementioned factors, we expect order wins to be a rerating catalyst for Midas' share price
Hence we maintain our BUY rating and fair estimate of S$0.65 on Midas, which is pegged to 1.3x blended FY13/14F P/B
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