09 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 :The danger of the past was that men became slaves. The danger of the future is that man may become robots.
- ERICH FROMM
Singapore: The Day AheadSINGAPORE DAYBOOK :SGX drills deeper into the pool of MOG firms. New listing rules for mineral, oil and gas firms seen attracting more of them to S'pore. [SINGAPORE] New mainboard listing rules for mineral, oil and gas (MOG) companies are expected to add impetus to their already-growing cluster on the Singapore Exchange (SGX).
Since it first introduced the new Catalist MOG rules in January 2011 and advertised its intention to court listings in the sector, the exchange has seen seven additions - through both initial public offerings and reverse takeovers - to bring the number of MOG firms on the exchange to 17.
More could come if reverse takeover deals that have been announced to turn struggling listed firms into mining plays bear fruit.
Bereavement care service provider Asia-Pacific Strategic Investments became the seventh such firm this year to do so when it announced a reverse takeover deal on Thursday to buy a firm holding mining exploration rights in Armenia.
(Source: The Business Times)
MARKET SCOOP
Sunpower Group clinches 85.1m yuan deal in China
JTC awards Tuas South Ave 3 site toGrow-Tech at S$66.78m
GIC, Blackstone to buy stakes inRothesay: report
Singapore is 3rd largest forex centre in the world
Non-landed private home resale prices hit new high: SRX
S'pore top in Asia for IP protection, 2nd in world
(Source: The Business Times) DBS Securities says... OVERSEAS EDUCATION LIMITED | BUY | TP: S$1.03
Overseas Education Limited (OEL) presents a highly cash generative business with operating cashflow growing at 48% CAGR over 2010-2013
Regional education service providers trade at an average of 21x current PE and 6% FCF yield. In comparison, OEL looks compelling at only 15x PE and a substantially higher FCF yield of 13%
The company has a dividend payout policy of at least 50% of earnings
This translates to a decent yield of 4%
OEL is No.3 by turnover with a 10% market share
This private school offers both K-12 International Baccalaureate (IB) curriculum and the Cambridge-based secondary education (IGCSE) programmes to children aged between 3 and 18 years of expatriate parents in Singapore
More importantly, Singapore has the highest concentration of wealthy expats
Statistics show that 43% of expats here earned >US$250k (OEL's target market), compared to global average of 7%
Despite regulations on the influx of foreigners, it appears that Singapore will continue to attract high flying expats
With 3,680 students, OEL currently operates close to its capacity of 3,940 students
Hence, we only expect 6%/10% fee hike to lift near term earnings
We see growth accelerating when the new campus in Pasir Ris is completed in 2016
Then, OEL can add 900 more students and raise fees, given newer and better facilities
During the construction period, FCF will turn negative but our forecast showed that FCF would rebound to a level higher than before upon completion of the campus
OCBC Securities says ...
WILMAR INTERNATIONAL LIMITED | BUY | TP: S$3.33
Wilmar International Limited's (WIL) share price has taken a bit of a hit after it reported
slightly below par 1H13 results on 7 Aug (core earnings met about 40% of our
previous full-year forecast), falling 4.5% to a recent low of S$3.02
But as mentioned in our 12 Aug report, we would be buyers at S$3.10 or better, as we believe that most of the risks would have been captured in the price
Keeping our fair value at S$3.33 (still based on 12.5x blended FY13/FY14F EPS), we note that there is now a decent 10% upside from here
Hence we are upgrading our call from Hold to BUY
Note that an appreciating USD against SGD would also have a modest boost to our fair value
In addition, WIL tends to perform better in the second half
One reason is the seasonality of its sugar business in Australia
That outfit will typically reverse from a lossmaking position to a highly profitable one
And with the sugar prices (see Exhibit 2) already on the rebound, we believe that
2H13 would be no exception (although there may still be lingering concerns1 over a
mystery cane disease - Yellow Canopy Syndrome - that causes canes to turn
yellow)
Meanwhile, China - WIL's largest market - appears to be opting for slower growth this
year to allow the government to solve fundamental problems hindering long-run
development, according to President Xi Jinping
However, we note that market still expects China to expand by 7.5% this year,
which should not pose any issues for WIL's consumer pack business
Management had previously said that retail packs are fairly resilient and may even benefit from more people choosing to cook at home rather than dining out
UOB KAY HIAN says... PLANTATION CPO prices in the past month have been well supported by the easing of high inventory risk as plantation companies have lowered their FFB production guidance and exports are better than expected
Also, the wide gap between crude oil and CPO price has led to increased palm oil demand for energy use
Producing countries are taking steps to increase biodiesel consumption to reduce the high inventory level
Maintain OVERWEIGHT
More positive newsflow supported CPO prices in Aug 13, with CPO trading above RM2,400/tonne
Over the last one week, we saw less bearish market sentiment for palm oil, and the fear of rising production and inventory has been gradually subsiding
The key factors leading to the change in expectations are:
a) Lower FFB production growth guidance by Malaysia- and Indonesialisted companies
b) Palm biodiesel has been gaining market share as the feedstock for biodiesel. Oil World estimates market share for 2013 at 26%, up from 17% in 2008, thanks to cheaper pricing and rising domestic usage.
c) Slower increase in inventory levels in both producing and consuming countries, especially with China's palm oil inventory being 30% off from its peak in May 13.
Maintain OVERWEIGHT as CPO prices are expected to gain upside momentum on easing concerns over high inventories
For sector exposure, we prefer:
a) Young and efficient upstream players: First Resources (FR SP/BUY/Target: S$2.40) and Bumitama Agri (BAL SP/BUY/Target: S$1.23)
b) Integrated players with catalysts: Wilmar International (WIL SP/ BUY/Target: S$3.80) for its earnings recovery and IOI Corporation (IOI MK/BUY/Target: RM6.35) for the upside from the proposed demerger of its property unit
c) High beta to CPO prices: Golden Agri Resources (GGR SP/BUY/ Target: S$0.65) |
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