18 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 : Find joy in everything you choose to do. Every job, relationship, home... it's your responsibility to love it, or change it. - CHUCK PALAHNIUK
Singapore: The Day Ahead
SINGAPORE DAYBOOK : August non-oil domestic exports disappoint
[SINGAPORE] Two months into the second half of 2013 and still no whiff of the anticipated export recovery. Instead, latest trade data for August points to a higher risk that the Singapore economy will slip in the current quarter - with exports falling short of the official projection.
Not only did non-oil domestic exports (NODX) stay in negative territory last month - private-sector economists were expecting 2.4 per cent year-on-year growth - the 6.2 per cent decline was steeper than July's NODX which fell a revised 1.9 per cent (it was first estimated to be a 0.7 per cent dip).
August NODX's dismal showing, announced yesterday by the government's trade promotion agency, International Enterprise Singapore, marked the seventh straight monthly decline.
Compared with July, NODX fell a seasonally adjusted 6 per cent in August, after a revised 1.8 per cent drop (originally -1.1 per cent) in the previous month.
Except for China and Hong Kong, NODX shipments to all of Singapore's 10 biggest markets fell last month, with the European Union, South Korea and Taiwan being the top three contributors to the fall.
The only bright spot was non-oil re-exports (NORX), which jumped 14.4 per cent from a year ago, extending the 8.1 per cent rise in July.
(Source: The Business Times)
CIMB Securities says... SINGAPORE AIRLINES | NEUTRAL | TP: S$10.50
WE leave our target price and estimates unchanged and maintain our Neutral rating
We base our CY14 target price of S$10.50 on a trough multiple of 4.2x CY14 EV/EBITDAR to reflect the long-term de-rating that we believe SIA is undergoing due to competition from Middle East airlines and LCCs (low-cost carriers)
Mainline passenger loads improved 4% pts in Aug as travel was boosted by strong leisure travel over the summer as well as the shift in the Hari Raya period from late Aug to early Aug
Traffic rose 9% even though capacity increased just 3% yoy
Encouragingly, improvement in load factors was evident across all route regions last month
In contrast, SilkAir's loads declined 2% pts as capacity growth of 13% outpaced traffic growth of 11% last month
Cargo growth fell 6% yoy even though capacity declined just 5% last month
Excluding Chinese New Year distortions, air freight traffic has waned for 20 consecutive months
SIA notes that passenger yields are likely to remain under pressure due to promotional efforts to boost loads
Apart from discounting, we believe that the persistent strength of the S$ against other operating currencies is also contributing to weak pricing
We believe cargo weakness will continue to be a drag on SIA
Despite the divestment of SIA's Virgin Atlantic stake, we believe that its net cash balance of S$4.6bn as at Jun 2013 is insufficient to warrant a large special dividend, as we expect it to be just enough to cover estimated capitalised operating lease costs
We believe that SIA tends to distribute a significantly larger part of its earnings to investors when these costs are covered by more than S$1bn
We prefer Cathay Pacific (Outperform, target price HK$16) to SIA due to the former's greater reliance on traffic and revenues from North America, where we see less intense competition
OCBC Securities says ...
GOLDEN AGRI-RESOURCES | SELL | TP: S$0.465
The outlook for CPO (crude palm oil) prices is likely to remain weak as market watchers continue to expect further weakness in 2H13, weighed by expectations of higher CPO production and also increased supply from vegetable substitutes like soy and corn oils
According to Dorab Mistry, director at Godrej International Ltd, "the rally in CPO prices has just about run its course and will face downward pressure from here"
Mistry now expects to see new lows in vegetable oil and particularly in palm and lauric oil in early Jan1
Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, is likely to feel the negative impact the most
Over the past three years, GAR share price has shown a strong 0.8 correlation to CPO prices
And in wake of the recent rebound in CPO prices and the corresponding rebound in GAR share price, we suspect that any pullback could come quite swiftly
Nevertheless, management continues to remain upbeat about the long-term prospects of the palm oil industry, and will continue to increase its production of sustainable palm oil, improve operating efficiency and also optimise its downstream value chain opportunities
But in the short term, the prospects for GAR remain more negative
We also note that import of vegetable oils into India has fallen by nearly 17% MoM in Aug, led by crude soy oil (down 46%) and RBD palm olein (down 33%)
We note that Fitch has recently warned that CPO plantation companies in Asia could face slower demand from both China and India - two of its largest import markets
As such, we do not believe that the worst is over yet and hence we maintain our SELL rating and S$0.465 fair value (still based on 11x blended FY13/FY14F EPS)
DMG OSK Securities says... NAM CHEONG | BUY | TP: S$0.37 We showcased NCL at our Hong Kong Asean Corporate Day last Thursday
Investors warmed up to the company's business model, growth prospects and low valuations, which struck a chord with the value- and growth-oriented funds
Meanwhile, the recovery of commercial shipbuilding in China is a strong support to vessel prices
Investors especially liked Nam Cheong's strong customer base in Malaysia, which effectively mitigates the build-to stock model risk
The company's MYR1.4bn-strong orderbook, consistent profitability during the financial crisis and solid prospects of securing more orders found fans among a diverse group of investors
"Why can't customers bypass NCL and order directly from Chinese
yards?"
The answers to these are: i) as Chinese state-owned yards are
not allowed to build-to-stock, any vessel ordered will need an 18-24 month
lead time; ii) financing is an issue for smaller private yards; iii) operators do
not have the required shipbuilding expertise to supervise the construction
process, and iv) NCL's large orders allow yards to achieve economies of
scale, thus making NCL a preferred customer
Management said the only time when vessels were cancelled was during 2009 when bank financing dried up
The vessels were resold at even higher prices due to the shorter time to delivery
As a gesture of goodwill, NCL returned the deposits to the customers, who have since reciprocated with more orders
Management said NCL is looking at creating a different product range that can "dominate the market in the next few years", while remaining understandably coy about the details
We expect more information in mid-FY14 on this
Maintain BUY, TP SGD0.37 TP
As the recovery in commercial shipbuilding may reduce pressure on offshore asset prices, we upgraded the O & G sector to OVERWEIGHT
As a global industry leader at low valuations, NCL is one of our top picks |
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