17 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 : When you are a mother, you are never really alone in your thoughts. A mother always has to think twice, once for herself and once for her child.
- SOPHIA LOREN
Singapore: The Day AheadSINGAPORE DAYBOOK :Govt hopes to roll out MediShield Life in 2015. Public consultation exercise in Q4 this year: Health Minister THE government hopes to roll out the new MediShield Life insurance plan, which will cover all Singaporeans and for life, in 2015.
Health Minister Gan Kim Yong said in Parliament yesterday that the planned public consultation exercise will be done in the fourth quarter of this year; during the consultation, more details on the revamped scheme will be announced, such as the likely impact on payouts if all pre-existing conditions and all citizens are covered for life.
Mr Gan gave the House this update in response to queries from Non-Constituency MP Gerald Giam, who asked for more information on the projected annual increase in MediShield payouts.
MediShield Life was first announced by Prime Minister Lee Hsien Loong at his National Day Rally speech last month. It is part of the government's review of healthcare financing, aimed at ensuring that healthcare remains affordable for Singaporeans.
(Source: The Business Times)
MARKET SCOOP
UE to buy HP Building for over S$400m
Nam See makes partial offer for HMI
Logistics plans precast plant inIskandar
A-Sonic inks deal to lease more aircraft
Aug home sales up from July, down from year ago
(Source: The Business Times) MAYBANK KIM ENG Securities says... HANKORE ENVIROMENT | NOT RATED |
Hankore is mainly involved in municipal wastewater treatments in China with 11 water plants and total contracted capacity of 1.57tons/day when fully completed
We recently met with Hankore's management and visited one of its water plants in Suzhou
We are impressed by the restructuring and progress that occurred in the past few years and think there are some improvements in company's fundamental
The stock seems gain more interest after introducing a strategic investor in July 2013
We highlight this stock to investors as we think it might be a good turnaround story
After a series of developments including debt restructuring (2008), appointment of new management (2011) and liquidation of some non-performing assets (2011), Hankore successfully recovered from a net loss of RMB407m in FY11 to a profit of RMB103m in FY12
Hankore is upgrading or expanding 5 out of its total 11 water projects in China, which gives growth potential to the company
The turnaround might be sustainable given the better earnings visibility and cleaner balance sheet
We identified three main growth drivers for the company
(1) in FY6/14, there could be a big increase in the construction revenue as the existing 5 upgrading and expansion contracts delivered to the government; (2) FY6/15 onwards, the ongoing expansion works will increase the water processing capacity by around 33% from current level; and (3) water tariff hike due to the improved water quality after the upgrades are completed
In our view, there are three main risks to almost any water treatment companies including Hankore: (1) interest rate risk, (2) liquidity risk and (3) credit risk
Lack of a strong parent company could also be one of the disadvantages for Hankore compared with other SOE backed water companies such as Beijing Enterprises Water Group (371: HK) and SIIC Environment (SIIC: SP)
Hankore provides a very attractive exposure to China water industry
It is currently trading at 8.2x 12m trailing PER compared with 22.6x average for SGX-listed peers
UOB KAY HIAN says ...
TIGERAIR | SELL | TP: S$0.55
Tigerair rose 5% post release of August operating statistics
We believe that the market viewed the absence of Tigerair Australia's operating stats as a sign that the former wholly-owned subsidiary will no longer be a drag on earnings
60% of the unit was divested to Virgin Australia on 8 July, which will lead to partial losses
Still, a weak Australian dollar and higher fuel prices during the period will lead to associate losses
Tigerair for the first time provided monthly load factors for Tigerair Mandala (74%) and Tigerair Philippines (70%), which were well below Singapore's (78.5%)
The relatively weak loads suggest that both associates will continue to be in the red
Pax traffic rose 23% while capacity grew by a higher 30% in August
This resulted in a 4.7ppt decline in loads, the lowest load factor since Jan 12
The number of pax carried grew 19%, which shows that Tigerair was carrying passengers on longer distances
Ideally, ticket prices should rise to compensate for the higher sector lengths
However, we remain doubtful about Tigerair's ability to raise fares as the previous quarter showed a lack of pricing power
In 1Q13, fares stayed constant and yields fell 5% in the wake of a S$6 increase in
passenger service charge (PSC) by Changi Airport
The lack of pricing power coupled with higher fuel costs in July and August (2.6% higher than in 1QFY14) would also impact margins
Fuel accounted for 40% of total operating costs in 1QFY14
In 1QFY14, yields fell 5% and Tigerair Singapore reported an operating profit of S$5.9m
During the period, Tigerair Singapore achieved a passenger load factor (PLF) of 83.9%
Loads for 2M were a whopping 4.7ppt lower
Thus, unless fares rise substantially, 2QFY14 earnings will likely disappoint
At current price levels, Tigerair is trading at 1.5x 2013F P/B compared with AirAsia's 1.3x P/B and the industry average of 1x P/B
As AirAsia has better pricing power, it successfully implemented fuel surcharges to defray fuel costs
Thus it would be our preferred pick in the LCC space, especially if it has increased its hedging on its US dollar-denominated debt
Tigerair has rebranded itself as a more customer friendly airline and has aligned itself with National Trades Union Congress (NTUC)
While this will increase brand awareness with the potential for higher market share, we would like to see that supplemented by fuel surcharges
Several other LCCs have successfully adopted such a strategy and raised revenue
Until, we see that, we believe that there is limited scope for Tigerair to achieve operating efficiency from volume alone
Maintain SELL with unchanged target price of S$0.55, valuing the stock at 1.4x FY14F book value, excluding perpetual securities NOMURA Securities says... CAPITALAND | BUY | TP: S$3.94 We visited the township development La Botanica in Xi'an on 6 September
CAPL has an effective stake of 15.2% in the project via CapitaLand Township (the previous Surbana)
Of the 7,300 units launched to date, 88% have already been sold and 1,100 units of which were sold this year (and this is on top of the 1,691 homes sold in China that CAPL
reported in 1H13)
The average price has also appreciated from CNY4,600psm for Phase 1 launched in 2008 to CNY6,900psm for the latest Phase 5 launched in May this year
While CAPL's stake in the project is minor, the relatively healthy pace of take-up at La Botanica suggests the owner-occupied demand for mass market housing in China remains robust and this bodes well for the value home projects that CAPL plans to launch in FY14F (one in Guangzhou and two in Shanghai), in our view
Besides home sales in China, we believe a near-term catalyst could be the launch and sales achieved at CAPL's second project in Bishan (694 units)
Our estimates suggest the average unit size to be relatively small at just over 800 sq ft, which implies an average purchase price of just over SGD1mn/unit
Therefore we expect sales to move faster than next-door Sky Habitat, which has larger units
We maintain our Buy rating and TP of SGD3.94 (NAV SGD4.66/share) though our top pick in the sector remains CMA (CMA SP, Buy) |
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