14 Nov 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 : Food brings people together on many different levels. It's nourishment of the soul and body; it's truly love.
- GIADA DE LAURENTIIS
Singapore: The Day AheadSINGAPORE DAYBOOK :Prepare for US Fed stimulus taper: Tharman Countries should put in place domestic reforms, raise productivity [SINGAPORE] THE global economy has to accept the fact that the United States Federal Reserve will have to start paring its asset-buying stimulus at some point.
What countries should do ahead of the US central bank's expected tapering of the stimulus programme is to start preparing themselves early, said Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.
He made these points after a meeting with visiting US Treasury Secretary Jacob Lew yesterday.
The world's stock markets have taken a hit amid mounting speculation that Washington could begin cutting its US$85 billion a month economic stimulus programme from as early as next month.
Weighing in on the issue of market jitters and speculation about tapering, Mr Tharman said: "At some point, the Fed will have to start tapering. Whether it tapers in December or sometime next year will eventually be (only) a footnote in history.
"At some point, it's going to have to taper - and it's important for all of us to start preparing for this eventuality."
What this means is that all countries must, among other priorities, put in place domestic reforms, raise productivity, and liberalise and remove roadblocks to infrastructure investments.
"The eventual tapering on the Fed's part will, I think, (be) a net positive for emerging Asia - a net positive as long as we respond to this likely outcome, start preparing for it now, have a little more urgency in domestic reforms," said Mr Tharman.
He revealed that Mr Lew had assured that the US was serious about getting a clear resolution of its current budget and debt impasses.
"Resolving this problem is important not just to the United States, but for the global economy and sustaining the global recovery," said Mr Tharman.
The two leaders also discussed the latest state of the Trans-Pacific Partnership (TPP) negotiations, which are now in the final stages after three years of talks and are expected to be concluded soon.
The US-led TPP talks involve 12 Pacific Rim countries, including Singapore. The TPP is billed as the world's largest free-trade agreement and accounts for about a third of world trade and nearly 40 per cent of the global economy.
"We are both committed to achieving a high-standard TPP agreement that will ultimately boost trade, boost investment and boost job creation in all our countries. Our negotiators are working intensively to resolve the outstanding issues," said Mr Tharman.
The aim is still to strike a deal by year-end, and Mr Tharman said that every country involved "should try our best" to reach a consensus.
The negotiators from the 12 countries are set to meet in Salt Lake City in the US next week before Singapore hosts the next TPP Ministerial Meeting in December.
Separately, Mr Lew also met Prime Minister Lee Hsien Loong at the Istana, where they exchanged views on international and regional developments, including the global economic and financial outlook.
Mr Lew's two-day trip to Singapore, which ended yesterday, was the second leg of his five-nation swing through Asia that began earlier this week in Japan and will wrap up in China.
(Source: The Business Times)
MARKET SCOOP
WBL Q4 net profit halves on car cooling measures
CSE Global profit after tax up 5.8%
Tat Hong Q2 net down 53% at S$8.2m
Interra Resources's Q3 earnings soar to US$4.99m
Oxley Holdings Q1 net profit surges to S$250.8m
Olam sells Australian almond orchards for A$200m
ComfortDelGro's Q3 profit up 5.4% at S$76.7m
Banyan Tree narrows net loss in Q3 to S$1.42m
(Source: The Business Times)
DBS VICKERS Securities says ...
CENTURION CORPORATION | BUY | TP: 0.77
Centurion recorded 3Q13 revenues of S$16.8m (-5% y-o-y), gross profit of S$8.9m (+0%) and net profit of S$5.4m (+30%)
Gross margins improved 3ppts to 53% and net margin improved to 32%, on the back of higher contributions from the accommodation business
The group's 3Q13 accommodation revenue grew 12% y-o-y to c.S$12m, bringing 9M13 accommodation revenue to S$36m, which is 81% of our full year estimate
Revenue from optical disks declined much quicker than expected - 9M13 revenue fell 32% to S$14m, comprising c.68% of our full year estimate
Excluding the one-off impairment loss for the optical disk business, revaluation gains and the gain from sale of industrial land at Mandai, the group's core net profit was S$13.3m, slightly lagging our full-year estimate of S$19m
This was largely due to higher than expected cost of sales for the optical disk business
Phase 2 of the Mandai dormitory development, comprising an additional 1,540 beds, was completed in September 2013
As was with the Phase 1 development, we expect the dormitory to achieve full occupancy by end-2013
To date, the group has another 7,864 beds in its Singapore pipeline - 3,764 beds will be added upon completion of upgrading works at Toh Guan in 1Q14, with another 4,100 beds to be completed at the Woodlands site in 2015
We remain optimistic about Centurion's expansion in the Singapore dormitory space, as the market still remains vastly undersupplied (c.160k beds vs 740k foreign workers), and will continue to remain so, unless the BCA and JTC release more land for dormitory purposes
We should see sequential improvement in Centurion's dormitory business in 4Q13, given new contribution from Phase 2 of Mandai dormitory in Singapore, as well as improved occupancy rates in Malaysia
We should also see better performance from the optical disk business as production generally picks up during the holiday season
Maintain BUY, TP unchanged at S$0.77
UOB KAY HIAN says ...
SEMBCORP INDUSTRIES | BUY | TP: S$6.00
Sembcorp Industries (SCI) reported a net profit of S$254.4m, up 40% yoy, for 3Q13
This was due to an exceptional gain of S$117.1m from the IPO of Sembcorp Salalah
Power & Water Company, but this gain was partially offset by an impairment charge of S$48.5m made for the Teeside operation in the UK
Excluding these exceptionals, 3Q13 group net profit would have posted an increase of 3% yoy (adjusted utilities net profit +4% yoy)
The utilities business accounted for S$172m (+73% yoy) or 68% of 3Q13 net profit
while the marine business contributed S$79m (+12% yoy) or 31%
Within the utilities business, Singapore registered a 24% decline in net profit because of a) plant maintenance in 1Q13, b) lower spark spreads, and c) lower gas sales
This was offset by higher contributions from China and the Middle East, while UK was affected by the impairment charge
Sembcorp Marine (SMM) had earlier reported net profit of S$129.7m (+23% yoy) for 3Q13 and S$373.3m (+0.5% yoy) for 9M13
Operating margin deteriorated to 10.1% in 3Q13 from 13.0% (11.8%, excluding disposal gain) in 2Q13 and 13.7% in 1Q13
This is due to conservative profit recognition in the early building stages of its maiden drillship projects
However, 3Q13 operating profit rose 32% yoy because of an 86% yoy increase in turnover
Earnings from associates and JVs fell 67% yoy to S$4.2m in 3Q13 from S$12.7m in
3Q12
This was largely due to COSCO Shipyard Group's poor earnings
At the turnover level, 3Q13's rig building revenue more than doubled
This offset lower revenue from offshore and conversion
Revenue from shiprepairs rose 33% yoy
Marine orderbook stands at S$13.5b with project deliveries stretching to 2019
The seven drillships for Sete Brasil make up 47% of the orderbook
SCI provides a better refuge than earnings-cyclical SMM as the latter's margin is uncertain
SCI's utilities earnings growth in 2013-15 will be driven by three additional power plant capacities, namely: a) the Salalah IWPP expansion in Oman (started in 2Q12), b) Sembcorp Cogen's new 400MW power plant (end-13/1Q14) in Singapore, and c) a 49% stake in Thermal Powertech Corp, which is building a 1,320MW power plant commencing in 1H14) in Andhra Pradesh, India
This should mitigate Singapore's weaker electricity spreads as a result of more competition from an expected planting up of >3,000MW of new power generation capacity (total of 10,800MW as at end-12) in Singapore in 2013-14
We raise our 2013 net profit forecast to factor in 3Q13's exceptionals while our 2014 and 2015 net profit forecasts are largely unchanged
Our target price is tweaked from S$5.80 to S$6.00, which is set at a 10% discount to our revised sum-of-the-parts (SOTP) valuation of S$6.67/share
Earnings from new utilities projects is a key share price catalyst
The major risks are Singapore's weak electricity spreads in 2013-14 and lower-than-expected earnings contributions from SMM
OSK DMG Securities says...
NAM CHEONG | BUY | TP: S$0.39
Nam Cheong released its 3Q13 results this morning, reporting a record quarterly profit that solidly beat our and street forecasts
Revenue was up 140% y-o-y to MYR341.2m on the back of strong shipbuilding
and higher contributions from vessel chartering
Gross margins were the big surprise - shipbuilding margins surged to 22.8% from 17.3% in 2Q13 and q-o-q vessel chartering margins jumped to 67.6% from 55.5%
These flowed down to the bottomline for a PATMI of MYR58.7m, up 86% q-o-q, comfortably surpassing our preview estimate of about MYR50m
The balance sheet position is even stronger today with net gearing falling to 12% from 39% at the start of the year
Cash flows were very strong in 3Q13, with net operating cash flow of MYR149.4m
What struck us was the build-up in inventory to MYR687m from MYR454m at end-FY12
This is a leading indicator for NCL's future performance as its shipbuilding sales are driven by vessels-in-stock, and the build-up hints at strong vessel sales and earnings growth to come
NCL is one of our Top Picks in the sector with strong earnings growth, healthy cash flows, high ROE, but trading at a low 7-8x P/E
We currently recommend BUY with a SGD0.39 TP |
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