30 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 : Those who dare to fail miserably can achieve greatly.
- JOHN F. KENNEDY
Singapore: The Day AheadSINGAPORE DAYBOOK :Brokers raise shields with Sky One falling. [SINGAPORE] Sky One Holdings' collapse on Monday prompted a number of brokers to update their lists of restricted stocks this week, raising questions about why the Singapore Exchange (SGX) did not impose trading curbs as it had done with three other stocks a few weeks earlier.
Trading in shares of Sky One, a logistics provider being targeted in a reverse takeover (RTO) by a coal- mining business, whose stock fell as much as 91 per cent early Monday before being halted, is currently restricted at several brokers, including AmFraser, CIMB, DMG, OCBC Securities and UOB Kay Hian, according to market sources and some of the brokers' own websites.
Sky One shares continued to retreat yesterday, shedding 7.6 per cent, or 0.7 cent, to close at 8.5 cents. The stock had entered the weekend at 47 cents.
"It took two years to climb all the way up to whatever price it was, and all it took was one morning for it to collapse all the way down," one trader said.
(Source: The Business Times)
MARKET SCOOP
Absence of one-time gain weighs on GEH'sQ3 earnings
Norwegian Cruise Line's Q3 earnings up 33%
Forterra Trust sinks to the red with net loss of S$2.34m in Q3
MAS expects wage growth to be strong
Singapore's economy more tied to advanced economies: MAS
Faster job creation in H1 2013, says MAS
(Source: The Business Times)
DBS VICKERS Securities says ...
OVERSEA-CHINESE BANKING CORP | BUY | TP: S$12.40
Great Eastern Holdings' (GEH) 3Q13 net profit came in at S$283m, a significant rebound from the previous quarter
This was contributed by unrealised mark-to-market gains brought about by the partial recovery in financial markets which normalised interest rates and narrowed credit and swap spreads
Gross premiums grew 11% q-o-q and 32% y-o-y on the back of strong underwriting for life assurance funds
Total weighted new sales improved 6% q-o-q and 38% y-o-y
Better performance from the bancassurance tie-up with OCBC NISP in Indonesia also contributed towards the rise in GEH's total weighted new sales
Elsewhere, new business embedded value was flattish q-o-q but 18% higher y-o-y
The strong recovery of GEH's contribution should reignite positive sentiment on OCBC
Wealth management fees are likely to be softer q-o-q on lower activities but as trade finance loans remain active, this will support fee income
We expect NIM to remain stable, but potentially with very slight pressure from mortgage re-pricing
Recall that OCBC kept its loan growth guidance conservative at a high single digit despite already recording 10% loan growth in 1H13
We have assumed a conservative run rate of 1% loan growth per quarter, with FY13F loan growth at 12%. Loan-to-deposit ratio should stay around 90%
Provisions and expenses should remain stable
No asset quality surprises
Capital is likely to improve with AFS gains recouped over the quarter
We believe OCBC's strong banking operations coupled with the rebound in GEH's performance in addition to its better-than-average asset quality indicators underlines our preference for OCBC
OCBC's Islamic banking business in Malaysia offers an added advantage over UOB in terms of product offerings
OCBC is a BUY with S$12.40 TP (1.6x FY14 BV) based on the Gordon Growth Model with 12% ROE, 5% growth and 9.3% cost of equity
UOB KAY HIAN says ...
RAFFLES MEDICAL GROUP | BUY | TP: S$3.78
Raffles Medical Group's (RMG) 9M13 net profit of S$41.7m (+14% yoy) is broadly in line with our estimate, accounting for 64% of our full-year estimate
4Q tends to be seasonally stronger (particularly during the holiday periods for non-critical treatment, such as aesthetics and medical screening)
3Q13 top-line grew 8.0% yoy, backed a 9.4% yoy rise in hospital revenue whereas the healthcare services gained only 5.7% yoy due to the loss of contract from Singapore Prison
On a like-for-like comparison, turnover from healthcare services would have risen by more than 10% yoy if the Singapore Prison contract were excluded
RMG has 73 clinics and expects to open another two before this year-end
Despite the upward pressure on costs, RMG continued to contain costs well, with staff costs (49.3% of revenue and within historical average) growing 10.8% yoy, in line with 9M13 top-line growth of 10.7% yoy
During the analyst briefing, management reiterated it is committed to its proposed joint ventures in China
These include a JV with China Merchants to develop an integrated international hospital with 250 beds in Shenzhen and another JV with Shanghai Lujiazui Co to develop an integrated international hospital with 400 beds in Shanghai
We understand RMG will have a 70% stake in these JVs but will have full control over the operations
The group hopes to finalise the terms of these JVs in the next three months
Funding will not be an issue given RMG's strong net cash of S$261.7m after the sale of Thong Sia Building
The group's cash balance continued to rise
As at Sep 13, its net cash balance was S$141.7m (S$0.26/share) compared with S$122.4m (S$0.22/share) as at Jun 13
Its cash could rise further in 4Q13 on the completion of the disposal of Thong Sia
Building for S$120m
Given the capital expenditure of S$80m-100m for expansion works for its flagship hospitals and potential JVs in China, management is unlikely to pay a special dividend
Instead, the group plans to maintain its dividend of at least S$0.045/share
Management highlighted that expansion work on its flagship hospital should commence by 4Q13 or 1Q14 at the latest
Management is undertaking technical studies to ensure disruptions to its existing operations are kept to a minimal during the construction period
Management expects to complete the sale of Thong Sia Building in 4Q13
We understand the estimated non-recurrent gain is S$18m after deducting professional fees, such as independent valuation and brokers' commission
The group remains keen on having a medical centre at Orchard Road and is still on the lookout for potential sites
We maintain our 2013-15 recurrent earnings forecasts and DCF-based target price of S$3.78
We have not included the expected gain of S$18m from the sale of Thong Sia Building as this is a non-recurrent item
Our target price of S$3.78 implies 27.5x 2014F PE, close to its +1SD to mean PE of 28.8x
We think this is deserved, given its strong cash flow generation and healthy financial position which could fund potential M&As or other investments
Meanwhile, 2013-15F ROE of 15.8-16.9% are also higher than its long term
average ROE of 11.0% (1997-2012)
Share price catalysts include: a) better-than-expected 2014-15 earnings, and b) accretive investments and more news flow on its China JVs
OSK DMG Securities says...
EZION HOLDINGS | BUY | TP: S$3.18
EZI has secured a new Letter of Intent (LOI) from an oil major to provide a service rig for three years in South-East Asia
The contract is expected to start in 3QCY15 and EZI will form a joint-venture (JV) company to order and own the rig
We understand that the 50:50 JV will own the rig with an estimated project cost of USD60m
We estimate the latest LOI raised its YTD new charter wins to USD584m (attributable to EZI)
Ever since the company started the liftboat and service rig business, it has won USD2.2bn worth of charters, with an average contract tenure of 4.3 years
We estimate a current backlog of USD1.9bn (including optional extension), which will run up to 2020
EZI will enjoy two source of income from this contract - income from operating the service rig and income from ownership of the asset under the JV
We estimate the LOI could add USD3.4m net profit on a full-year charter
We are maintaining our EPS estimates given insignificant impact (<1%) in our forecast period
Demand for liftboats and service rigs remains strong and we believe the rising acceptance by oil majors in the region could lead to more deployment opportunities
We estimate EZI has room for USD200m/USD500m new project capex in FY14/15 respectively, while keeping its net gearing at around 1.1x
This excludes any issuance of equity or perpetual securities
Our TP is based on 16x blended FY13F/14F P/Es. Key re-rating catalysts are the company's: i) EPS upgrades from new contracts, and ii) positive earnings momentum |
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