07 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 : Your success and happiness lies in you. Resolve to keep happy, and your joy and you shall form an invincible host against difficulties.
- HELEN KELLER
Singapore: The Day AheadSINGAPORE DAYBOOK :F&N spat with Myanmar partner turning ugly. MEHL starts arbitration process, saying it has clear right to buy over F&N's 55% stake. [SINGAPORE] An ugly spat is unfolding between Fraser and Neave (F&N) and a Myanmar state-owned enterprise - at a time when Singapore companies are flocking to the emerging market that is just about to leave its pariah status behind for good.
Myanma Economic Holdings Limited (MEHL), the joint venture partner of F&N in Myanmar Brewery, yesterday said that it had a "clear right" to buy out the Singapore conglomerate's stake in the beer-making business - which it values at US$246 million - adding that the deal is not political in nature.
The Myanmar military-linked investment firm, which holds 45 per cent of Myanmar Brewery, has commenced arbitration proceedings to claim F&N's 55 per cent stake in the brewery, the company said in a statement yesterday.
F&N has described MEHL's arbitration claims as having no basis, and added that MEHL was also significantly undervaluing the asset. F&N said that it has engaged lawyers and "intends to vigorously resist the claim".
(Source: The Business Times)
MARKET SCOOP
Singapore fund to sell US$350m of Glencore convertible bonds
STATS ChipPac's 3Q revenue down 1.8%
BreadTalk's Q3 profit flat; revenue up 22%
CWT's net profit drops 53 per cent in Q3 to $19.2m
SingTel to launch new mobile game portal, WePlay
S'pore to become global insurance hub by 2020: MAS
Aussino to raise US$30m in convertible notes
(Source: The Business Times)
DBS VICKERS Securities says ...
SEMBCORP MARINE | HOLD | TP: S$4.80
Excluding S$1m disposal gain, recurring net earnings grew 11% y-o-y and 19% q-o-q to S$128.6m in 3Q13
Sales jumped 86% y-o-y and 48% q-o-q to S$1.66bn, with initial contributions from 5 new rigs
Operating margins fell further to 10.0% from 11.8% in 2Q13 and 13.7% in 1Q13, the lowest since 2Q09
Associates income dived 67% to only S$4.2m due to weaker contributions from Cosco Shipyard Group. 9M13 earnings account for just 66% and 63% of our previous forecast and consensus' FY13 estimates, respectively
Order book declined by 6%(S$0.9bn) to S$13.5bn during the quarter
YTD, SMM has secured new projects worth S$3.9bn, or 79% of our new order wins assumption of S$5bn, and is on track to meet our expectations
Construction of the first drillship for Petrobras is ahead of schedule with 48% completed, and is planned to be towed to Brazil in Mar 2014
The second drillship is expected to commence initial recognition of revenue in 1Q14
The construction of SMM's yard in Brazil is also on schedule
YTD, global jack up orders amounted to 51 units, higher than the 19 units ordered in 2012 and 43 units in 2011
Jack up enquiries from the Gulf of Mexico remain buoyant, and FPSO demand should recover in the near future
The robust sector fundamentals are underpinned by upbeat E&P capex and replacement demand for the aged fleet (c.60% of jack up and semi-submersible fleet > 25 years old) as oil prices stay above US$90/bbl
We have trimmed FY13E/14F net earnings by 7% as we have assumed lower EBIT margins of 11.8%/12.1% vs 12.0%/12.4% previously and lower assoc income from Cosco
As we roll over our SOTP valuation to FY14F earnings, TP increases marginally from S$4.70 to S$4.80
Maintain HOLD
We believe margin recovery and strong order wins are required for the stock to re-rate
GOLDMAN SACHS says ...
GENTING SINGAPORE | SELL | TP: S$0.67
3Q13 headline net profit came in at S$4mn (-84% yoy; -65% qoq). 9M13 net
profit of S$26mn (-68% yoy) was only 47%/42% of FY13E GSe/Bloomberg
consensus
The miss was due to lower-than-expected 3Q13 GM of 7.4% (1H13:
10.7%; GSe: 11.0%) because of a sizeable S$52mn write off, which we suspect
was largely driven by project cost overruns
COS did not provide any details on provisions
We believe they likely came primarily from COS's offshore order book, which we think may contain too many non-repeat and first time (i.e. low margin and risky) orders
COS said it does not rule out the possibility that it could take more provisions
We note that on its recently cancelled drillship order from Dalian Deepwater (due to severe delivery delays), it has thus far received only 22% of the total payment
That said, according to COS, there are some interested parties enquiring about the drillship with whom COS hopes to close a deal and consequently recoup the remaining
outstanding payments
The weak 3Q13 net profit was compounded by continued increase in leverage (net D/E rose further to 103% vs. 1H13 of 87%) and negative operating cash flow due to rising working capital needs (as a result of current orders having unfavorable payment terms)
COS expects to secure more jackup orders, but is cautious on the commercial shipbuilding market despite the recent Baltic Dry Index rebound, as it is unconvinced of a sustainable recovery given still significant vessel oversupply in the market
Maintain Sell
We cut 2013/14/15E EPS 20%/4%/3%% mainly to factor in higher provisions
Reflecting this, we lower our 12-m FY14E EV/GCI-CROCI/WACCbased TP to S$0.67 (S$0.70 prior)
Risks: Stronger-than-expected recovery in macro conditions; stronger-than-expected execution in new products
OSK DMG Securities says...
KREUZ HOLDINGS LTD | BUY | TP: S$1.16
Kreuz is the subject of a takeover offer by private equity fund SEA9 Pte Ltd at a price of SGD0.80 per share
Unusually, the method of acquisition is by scheme of arrangement, which aims to bypass a general offer
We believe that the offer price undervalues Kreuz, given its long-term growth potential
Our recommendation to shareholders is DO NOT ACCEPT, reiterating our SGD1.16 TP and DCF-value of SGD2.25 per share 31% discount to TP, 64% discount to DCF-value
The offer price values Kreuz at a mere 7.4x FY13F P/E, resulting from the interplay between a weak seller and a strong buyer
The offer price implies a 31% discount from our 12-month TP, and a 64% discount from our DCF-value of the company at SGD2.25 per share, based on a 10.6% WACC
Factoring in the growth from the diving support vessels (DSVs) sector, we believe that Kreuz' earnings can grow to USD69.4m in FY15F and USD92.2m in FY16F from
USD39.7m in FY12
At those earnings, its shares will be worth SGD2.07-2.61 at the same 10x P/E. SEA9 stands to achieve a 226% return in three years by taking Kreuz private now and potentially re-listing it later at an even higher multiple than at takeover
Swiber (SWIB SP, NR) will recognise a USD90.6m gain upon deal completion
However, we note that Kreuz accounted for 22-202% of the former's earnings in the last six quarters, and 50% overall for FY12
Swiber is selling its crown jewel for a one-time gain at the expense of future growth and profitability
In this case, the combined stakes of Swiber's and Kreuz' directors already stands at 73.69%, almost at the requisite 75% to achieve "shareholder approval"
The scheme of arrangement will then be brought to court, which can then sanction a
compulsory acquisition of minority shareholders' stakes
In this case, the minorities have little chance against the Goliath of the majority, and we
expect the deal to go through
We do, however, stand by our valuations and recommend that investors DO NOT ACCEPT |
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