04 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 : Many of life's failures are people who did not realize how close they were to success when they gave up.
- THOMAS A. EDISON
Singapore: The Day AheadSINGAPORE DAYBOOK : M1 dealt record-breaking $1.5m fine for service disruption. M1 failed to ensure good electrical installation practices while upgrading: IDA [SINGAPORE] M1, Singapore's smallest telco, has been slapped with the industry's largest fine on record in the country's history - $1.5 million - for the disruption of its 2G and 3G mobile phone services in January.
These 2G and 3G mobile service disruptions lasted about 71 hours and 63 hours respectively in mid- January, affecting some 250,000 M1 customers.
When the Infocomm Development Authority of Singapore (IDA) announced its record-breaking decision yesterday, a spokesman said the regulator was "extremely concerned about the length and scope of M1's telecom service disruption, especially when it affected services heavily relied upon by both consumers and businesses".
According to IDA, the service disruption was caused by M1's "failure to ensure good electrical installation practices" during its upgrading works, which then set off a chain of events - sparks, smoke, the activation of a gas suppression system and, ultimately, the activation of a water sprinkler that caused one of M1's mobile network switches to fail.
IDA's mammoth fine is more than treble the previous record held by SingTel: a $400,000 fine for a 3G mobile service outage that lasted more than 20 hours in September 2011.
SingTel had in turn broken another record of M1's: a $300,000 fine that the orange-hued telco had to fork out for an outage in May 2011.
On a national level, M1's latest fine likely occupies a podium position regardless of industry. One of the largest fines in recent memory is the $2 million one dealt to train operator SMRT last July, but that figure was split evenly between breakdowns on the North-South Line on two separate dates in December 2011.
M1's financial penalty this time around was levied under the Service Resiliency Code, which carries a fine of up to $1 million or 10 per cent of a licensee's annual turnover, whichever is higher.
At $1.5 million, this fine represents 0.14 per cent of M1's last full year of operating revenue, which stands at $1.08 billion.
Responding to IDA's decision yesterday, an M1 spokesman said: "IDA did not agree with our reconsideration request to reduce the quantum of the fine in light of our strong mitigating factors including our view that the incident was unexpected and beyond our reasonable control."
"We are accordingly evaluating the decision," he added. At this stage, M1 has the option of appealing to Minister for Communications and Information Yaacob Ibrahim.
For the industry, more compliance hurdles might loom. Following a review of the network resiliency for all three operators - SingTel Mobile, M1 and StarHub Mobile - IDA noted yesterday that while they generally met international standards, there was "room for improvement". It will implement a new audit framework to review network resiliency regularly, IDA added.
(Source: The Business Times)
MARKET SCOOP
MAS obtains default judgement against Ong Beng Hock for false trading, market manipulation
China Gaoxian fined S$2.3m by Korean authority
Mixed-use and hotel deals drive surge in investment activity: DTZ
SMEs prefer to recruit locals, but face challenge in hiring
SGX says trading, clearing volumes up in Sept
(Source: The Business Times) OCBC Securities says... YANGZIJIANG SHIPBUILDING | HOLD | TP: S$1.04
Following the announcement of eight shipbuilding contracts in early Sep totaling US$214m, Yangzijiang Shipbuilding (YZJ) has secured 17 more contracts worth about US$871m, bringing total orders won YTD to US$2.096b
The 17 new contracts are scheduled for deliveries in 2015-2016, and provide much-anticipated replenishment of the order book for execution of orders further down the road - indeed the company may have to rely on a higher volume turnover as it starts executing more of its newer orders (also lower-margin) to maintain the yard's profit level
Meanwhile, the group still has a total of 28 options outstanding worth about US$1.36b
As Exhibits 2 and 3 illustrate, newbuild prices for bulk carriers in Chinese yards have been on a slow but steady uptrend since early this year
This has been more apparent in the larger ships, such as the Capesize carriers (e.g. US$50m in Sep 2013 vs US$45m in Dec 2012)
Indeed, according to RS Platou, spot earnings for Capesize tonnage rose substantially over the last month due to higher Chinese iron ore imports
The strength in Capesize has also influenced the Panamax sector positively as charterers started to take two Panamaxes instead of one Capesize when the spread in freight rates became greater than normal
In the longer term, a gradual recovery in the world economy should drive the demand for tonnage
With a gradually recovering newbuild market, we raise our peg from 8x to 9x P/E, while rolling forward our valuations from blended FY13/14F earnings to FY14F earnings, resulting in a slight rise in YZJ's fair value estimate to S$1.04 (prev. S$0.99)
While the newbuild price trend of ships by Chinese yards looks positive, additional monitoring is needed to determine its sustainability, which is dependent on the global
economic recovery, the rate of China's yard consolidation process as well as any further tightening in China's money supply that would affect financing terms offered by yards
Maintain HOLD
CIMB Securities says ...
OFFSHORE AND MARINE | OVERWEIGHT |
Keppel (KEP) may have the upper hand as PEMEX and Transocean are existing customers
Sembmarine (SMM) will benefit from its experience with Mexican owners such as Oro Negro (likely to be chartered to PEMEX) and the jack-ups it built for Global SantaFe (before Transocean acquired it)
KEP is our top pick for its lower execution risks in Brazil
Maintain Overweight on the sector, with more orders as catalysts
PEMEX will start the tendering process for 10 jack-up rigs in Dec-13
Delivery for the first unit will be in 28 months, with each subsequent unit to be delivered at an interval of three months
The orders can go to two yards, with one building six and the other four (Source: ODS-Petrodata)
Transocean is also expected to receive bids for up to 10 high-specification jack-ups by end-Oct and has approached yards in Singapore, Korea and China, with speedy delivery (27 months) as a key criterion (Source: Upstream)
Global average jack-up day rates have risen 10% yoy to about US$123k/day and utilisation rate is above 80%
We believe this may encourage more jack-up orders from speculators and drillers
We think KEP can win US$2.2bn worth of jack-ups from the PEMEX/Transocean tenders, assuming it snatches six jack-ups from PEMEX and five from Transocean, given its long history with both the companies
Including the operators' units, KEP has built/is building five jack-ups for PEMEX and seven units for Transocean
SMM can win up to US$1.4bn (four from PEMEX and three from Transocean)
SMM delivered three jack-ups in 2006-09 that were chartered to PEMEX in addition to the six units it is building for Oro Negro, likely to be deployed by PEMEX in 2014-15
It also has a relationship with Transocean, via the two jack-ups it built for Global Santa Fe (acquired by Transocean in 2007)
We assume that Dalian shipyard in China can win two jack-ups from Transocean due to its track record with Seadrill
Stay invested, We see upside to order wins in 2014, boosted by jack-up rigs on top of the semi-subs, drillships and FPSOs NOMURA Securities says... WING TAI HOLDINGS | BUY | TP: S$2.54
We met with management recently for a company update and found that while the prime luxury market is still relatively quiet, WING sold another unit at ultra luxury Le Nouvel Ardmore to a foreign buyer in September and Belle Vue Residences is now fully sold
Following the recent success at The Tembusu, WINGT is looking to launch the Prince Charles Crescent project in 1Q14 at c.SGD2,000psf, which is similar to what nearby Mon Jervois is fetching
While the initial take-up at Mon Jervois has been relatively slow, we think the smaller unit size at WINGT's project is likely to be an advantage
Management believes there are already signs that developers are more cautious in bidding for land but going forward, the incremental capital could be deployed in Malaysia
With The Tembusu already launched (and well taken up) and the special dividend of SGD0.09/share already proposed, it appears there are few positive catalysts that investors can look forward to, at least in the near term, in our view
One such catalyst could be better-than-expected takeup at the Prince Charles Crescent project when it is launched
We raise our NAV to SGD3.35 (from SGD3.27) and TP to SGD2.54 (from
SGD2.49) to chiefly reflect the better-than-expected sales at The Tembusu and higher market value of WING
Stock remains fundamentally undervalued despite an apparent lack of near term catalysts |
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