SG: MARKET PULSE: BreadTalk, Vard, LMIRT, Yoma, KepCorp (7 Nov 2013)

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.77

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.87

MARKET PULSE: BreadTalk, Vard, LMIRT, Yoma, KepCorp

7 Nov 2013

KEY IDEA BreadTalk Group: Same ol' same ol' BreadTalk's 3Q13 results exhibited the same traits as before. Revenue and operating profit increased following top-line growth across all three operating segments but operating margins remained depressed. In the coming quarters, we expect this trend to persist, especially with its new stated goal of having S$1b in revenue by 2016 and 2,000 stores by 2018. In our view, achieving these goals will be challenging in such a short-time as even our moderately optimistic medium-term projections has them missing the mark. More importantly, we feel that group has to address margin declines sooner rather than later as revenue growth without corresponding bottom-line increases via margin improvements will be hollow. Until then, we maintain SELL on BreadTalk with an unchanged fair value estimate of S$0.77. (Lim Siyi) MORE REPORTS Vard Holdings: Strong margins pressure Vard Holdings Limited's (VARD) 3Q13 results fell short of ours and the street's expectations, with revenue and PATMI dipping by 3.5% and 66.7% YoY to NOK2,370m and NOK76m, respectively. There was also strong margins pressure as its Niteroi yard in Brazil continued to experience cost overruns and delays. Nevertheless, the situation appears to be stabilising and we are also positive on its healthy orders intake worth NOK7.95b in 3Q13. This has boosted its orderbook to NOK19.5b as at 30 Sep 2013, versus NOK16.4b as at 30 Sep 2012. We rework our assumptions following a change in analyst coverage, lowering our FY13 and FY14 PATMI projections by 23.1% and 2.7%, respectively. Applying a PER valuation peg of 8x (approximately in-line with its average forward PER since listing) to our FY14F EPS forecast, we derive a new fair value estimate of S$0.84 (previously S$0.80). Upgrade VARD from Sell to HOLD. (Wong Teck Ching Andy) Lippo Malls Indonesia Retail Trust: 3Q13 results in-line LMIRT reported 3Q13 gross rental income of S$38.9m, up 13.6% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions for the existing malls. Distributable income increased by 20.7% YoY to S$19.1m and DPU climbed 19.2% YoY to 0.87 S cents. Results for the quarter were in-line with ours and consensus expectations. 9M13 DPU of 2.69 S cents forms 75% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.44 under review. We will be speaking with management shortly. (Sarah Ong) Yoma Strategic Holdings: No surprises from 2QFY14 earnings Yoma reported 2QFY14 PATMI of S$3.3m, versus a loss of S$4.2m in 2QFY13. The return to profitability was mainly due to the sale of two buildings in Zone B of Star City, for which Yoma recognized S$15.1m of revenue and an incentive fee of S$2.3m, and lower staff costs. YTD PATMI now cumulates to S$3.76m and is judged to be mostly within expectations, making up 48.0% of our full year forecast for FY14. We note, however, that 2QFY14 gross margin has slipped 2.4 ppt YoY to 44.9% due to a lower contribution from Pun Hliang Golf Estate which is a higher margin project. In terms of the 2QFY14 topline, it increased 132.4% YoY to S$27.0m, again mostly due to recognition of residential sales and LDR sales at Star City. As at end Sep-13, 523 (out of 528 total units) at Star City's Building A3 and A4 were sold, up marginally from 513 units sold as at end Jun-13. Maintain HOLD with an unchanged fair value estimate of S$0.84. (Eli Lee) Keppel Corporation: Secures order for five jack-ups from Transocean Keppel Corporation's (KEP) offshore and marine arm has secured an order from returning customer Transocean to build five KFELS Super B Class jack-up rigs for US$1.1b. In addition, Transocean has options to build up to another five similar jack-up rigs with KFELS. With a price tag of about US$220m for each rig, this is more or less in line with Falcon Energy's order from KEP in Apr this year for a similar rig. We view this contract as an affirmation of KEP's leading position as a rigbuilder in the eyes of established industry players, and think that the contract likely landed in KEP's hands due to 1) the proven track record the KFELS Super B Class design has with Transocean (recent units enjoyed high revenue efficiency), and 2) the tight delivery schedule (progressive from 1Q16 to 3Q17) is safer in a pair of trusted hands. KEP has secured orders worth about S$6.4b YTD, exceeding our full year estimate of S$6b. Maintain BUY with S$12.87 fair value estimate. (Low Pei Han)

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NEWS HEADLINES - Wages are expected to increase by 4.5% in Singapore next year, according to a survey by Towers Watson. - STATS ChipPAC reported 3Q13 net profit of US$13.3m, versus US$3.2m last year. 3Q13 net profit includes an exceptional gain of US$19.6m insurance settlement on account of business disruption due to the floods in Thailand. - Baker Technology reported 3Q13 net profit of S$3.6m versus S$5.7m a year ago. - Aussino Group, which has been on the SGX watch-list since Sep 2011, has announced that it plans to issue up to US$30m in convertible senior notes to a US investment firm. - Hengyang Petrochemical has issued a profit warning for 3Q13. - Action Asia expects to report a loss for 3Q13 due to lower revenue.