03 Oct 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 : Change your opinions, keep to your principles; change your leaves, keep intact your roots.
- VICTOR HUGO
Singapore: The Day AheadSINGAPORE DAYBOOK : Obama warns Wall Street over fiscal crisis [WASHINGTON] President Barack Obama sent Wall Street a blunt warning Wednesday that it should be very worried about a political crisis that has shut down the government and could trigger a US debt default.
Mr Obama said he was "exasperated" by the budget impasse in Congress, in an interview with CNBC apparently designed to pressure Republicans by targeting the financial community moments after markets closed.
The president then met Republican and Democratic leaders for their first talks since the US government money's ran out and it slumped into a shutdown now well into its second day.
But few informed observers held out much hope for a sudden breakthrough.
(Source: The Business Times)
MARKET SCOOP
S'pore PMI holds steady in Sept, but falls short of market expectations
Southeast Asia's net oil imports to more than double by 2035: IEA
Australia's Linc Energy to seek Singapore listing
Singapore's GIC invests US$135 million in Brazilian water treatment company
CRA's CEO is first Asian to lead body of regulators
(Source: The Business Times) OCBC Securities says... YOMA STRATEGIC HOLDINGS | HOLD | TP: S$0.87
Yoma reported that it has entered into a strategic alliance with Mitsubishi Corporation
to jointly explore business opportunities in Myanmar
In addition, Mitsubishi Corp and Mitsubishi Estate have signed an MOU to invest in Yoma's Landmark project (excluding the Peninsula Yangon)
We see these developments as positives which points to management's continued deal-making ability and ambitions to grow as a major conglomerate
There are two sets of implications here, in our view
First, that Mitsubishi opted to invest in the Landmark project before construction is slated to begin in Nov-13 leads us to establish a base case that the lease completion and subsequent 1-for-4 rights issue at S$0.38 would occur this quarter
Second, we see this alliance with the blue-chip Mitsubishi cementing Yoma's
reputation (note that Mitsubishi Estate and CapitaLand are partners in Singapore) and
further widening its access to capital and business opportunities in Myanmar
We would speak with management later today and, in the meantime, put our Hold rating
with a fair value estimate of S$0.87 under review
DBS Securities says ...
HI-P INTERNATIONAL | HOLD | TP: S$0.65
Our recent channel checks suggest that Hi-P's recovery may have hit a speed bump as less than spectacular reception to Apple's 5C iPhones has clipped off potential upside for Hi-P
While the company has the capability to support 5S models, we believe production volume may not be that high as Hi-P is relatively new in metal processes
At the same time, Blackberry is deteriorating at a much faster pace than expected, having reported dismal revenues, c.US$1bn inventory write-off and is looking to lay off 4500 workers
We believe 3Q earnings are on track to meet our estimates of 5% growth q-o-q, lifted by ramp up of new products
However, the staggering stockpiles at Blackberry and possibly Apple could drag down 4Q's production volume
Moreover, Blackberry's ongoing restructuring is bound to create uncertainty, leading to lower volumes in the near term
Hence, we now expect 4Q earnings to be 20% lower q-o-q
We are cutting FY13/14F earnings by 17%/27% to account for the expected slowdown in volumes
We believe the prospects of a weaker outlook could lead to cuts in consensus earnings, which are higher than ours
Taking into account our earnings downgrade and the weaker outlook, our TP is cut to S$0.65, based on 13.5x FY14 PE
Downgrade to Hold. UOB KAY HIAN says... KEPPEL CORPORATION | BUY | TP: S$13.50
Keppel Corp (Keppel) has secured two rig orders from an affiliate of Clearwater Capital Partners to build a pair of premium KFELS B Class jack-up rigs
The total cost of the rigs is about US$440m (S$550m), which also includes owner-furnished equipment and project management fees
These rigs are scheduled to be completed in 4Q15 and 1Q16 respectively
Ytd, Keppel has won S$4.7b worth of new contracts, We maintain our new contract win projection of S$6b for 2013 (also S$6b each for 2014 and 2015)
More yards are diversifying to offshore heavy engineering because of dwindling shipbuilding orderbooks of conventional ships (ie dry bulk carriers, containerships and tankers), as a result of the current still weak global shipping market
Singapore rig builders are facing competition from Chinese shipyards in the standard jack-up rig segment (US$200m apiece), but it remains to be seen whether the first-time rig-building Chinese yards can deliver on time
A tighter credit environment in China will curb the competitiveness of Chinese yards
Separately, South Korean yards have muscled into the harsh-environment jack-up rig space because of its sizeable contracts
In the past, South Korean yards had stayed away from building standard jack-up rigs, preferring to focus on higher-value semi-submersible rigs and drillships (US$600m apiece). Japanese yards had - at the beginning of this year - also expressed their intention to diversify to offshore heavy engineering, but they are very late-comers in the rig-building game
With an extensive global network of more than 20 shipyards, Keppel believes its near-market, near-customer strategy is the way to beat competition
Maintain BUY on Keppel with our target price unchanged at S$13.50
No change in our earnings forecasts
Keppel remains our preferred large-cap O&M stock pick
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