SG: MARKET PULSE: STE, Hyflux, Starhub, Yoma, Roxy-Pacific, Wilmar, SIAE, FEHT (8 Nov 2013)

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.32

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.23

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.65

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.33

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 5.00

MARKET PULSE: STE, Hyflux, Starhub, Yoma, Roxy-Pacific, Wilmar, SIAE, FEHT

8 Nov 2013

KEY IDEA ST Engineering: Earnings miss in 3Q13 Singapore Technologies Engineering (STE) reported 3Q13 results that missed ours and the street's expectations. While revenue grew 0.5% YoY to S$1.55b, PATMI fell 9.9% to S$131.4m. Highlights include: 1) lower gross profit from Aerospace and Land Systems; 2) an impairment of S$23.7m for ROPAX due to the prolonged softness in the shipping market in Europe, partially offset by a write-back of warranty provisions of S$14.4m that were no longer required; 3) an increase in net finance costs of S$5.1m (driven by a S$3m lower FX gain and a S$2.8m lower gain on disposal of investments). 9M13 EPS of 13.34 S cents formed only 66% and 68% of the street's and our prior FY13 forecast. We adjust our assumptions and cut our FY13F EPS to 18.0 S cents from 19.6 S cents. Using the same peg of 21x against FY14F EPS of 20.6 S cents (as opposed to FY13 EPS previously), our fair value rises to S$4.32 from S$4.11. Maintain HOLD on STE. FY14F dividend yield is 4.1%. (Sarah Ong) MORE REPORTS Hyflux: Slow 4Q after strong 3Q In 3Q13, Hyflux saw revenue jumped 26% YoY to S$187.7m and net profit rose 74% to S$25.3m, such that 9M13 revenue of S$450.7m met 68% and earnings of S$51.0m met 75% of our FY13 forecasts, respectively. But with the completion of Tuaspring in 3Q, Hyflux believes that 4Q is likely to be slow. Nevertheless, management remains largely upbeat about its prospects, as it is working on tenders for various projects in MENA potentially worth S$2b. As we roll forward our 20x multiple from blended FY13/FY14 to FY14F EPS, our fair value inches up from S$1.215 to S$1.23. But we opt to keep our HOLD rating on the stock until we see better clarity on its project wins. (Carey Wong) StarHub Ltd: 3Q13 slightly before forecast StarHub Ltd reported 3Q13 revenue easing 1.2% YoY (down 1.4% QoQ) to S$578.8m, versus our S$592m forecast; net profit slipped 0.9% YoY (down 5.2% QoQ) to S$95.3m, as compared to our S$100m estimate. Quarterly dividend of S$0.05/share was declared as expected. As 9M13 revenue of S$1745.7m (down 1.2%) met just 69% of our full-year forecast, we need to pare our FY13 estimate by 6% (FY14 by 5%). Note that StarHub now expects to see a lower operating revenue (but flat service revenue) in 2013, as opposed to an earlier guidance for low single-digit revenue growth. Our DCF-based fair value remains at S$3.82. Maintain SELL.(Carey Wong) 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 the gross margin has slipped 2.4 ppt YoY to 44.9% over the quarter due to a lower contribution from Pun Hliang Golf Estate (a higher margin project). In terms of the topline, 2QFY14 revenues increased 132.4% YoY to S$27.0m, again mostly due to recognition of residential sales and LDR sales at Star City. Maintain HOLD with an unchanged fair value estimate of S$0.84.(Eli Lee) Roxy-Pacific Holdings: Earnings momentum continues Roxy reported 3Q13 PATMI of S$16.1m, up 97% YoY due to stronger progress recognition at property projects. On a QoQ basis, however, 3Q13 PATMI was 18% lower mainly due to the absence of S$5.5m in fair value gains booked in 2Q13. After adjusting for fair value gains, we estimate 9M13 core PATMI to be S$42.9m, which forms 55% of our full year forecast. This is judged to be in line given that we foresee a back-loaded FY13 with Wis@Changi's contribution coming in wholly only upon obtaining TOP (anticipated to be 4Q13). 3Q13 topline increased 76% to S$76.7m again due to higher contributions from the property segment. We note that the hotel segment, which forms 16% of 3Q13 revenues, are putting in milder numbers with RevPar down 8% from S$189.2 (3Q12) to S$174.2 (3Q13), due to both lower occupancy and room rates. This is generally in line with OIR's outlook for the domestic hospitality sector. Maintain BUYwith an unchanged fair value estimate of S$0.65 (adjusted for 1-for-4 bonus issue in Sep-13). (Eli Lee) Wilmar: 9M13 earnings in line Wilmar International Limited's (WIL) reported its 3Q13 results last night, with revenue easing 4% to US$11,837m, mainly due to lower CPO prices. Nevertheless, reported net profit climbed 3% to US$416m, aided by better margins from its Palm & Laurics and also Oilseeds & Grains divisions. Core earnings was up 1% at US$391m. For 9M13, revenue slipped 4% to US$32,463m, meeting 66% of our FY13 forecast, while reported net profit climbed 22% to US$950m; core earnings rose 24% to US$950m, meeting 76% of our full-year forecast. We will be attending an analyst briefing at noon and will have more updates after that. In the meantime, we maintain our HOLD rating but place our S$3.33 fair value under review.(Carey Wong) SIA Engineering: 2Q14 results in-line SIA Engineering Company's (SIAEC) 2Q14 results were in-line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of consensus FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and maintenance overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract service costs. Share of profits from associated and JV companies expanded 25.0% YoY to S$48.5m, representing a contribution of 60.0% of the group's pre-tax profits. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% at S$140.0m and 12.60 S cents respectively. We maintain our HOLD rating on SIAEC but place our fair value of S$5.00 (EPS forecast of 25.0 S cents for FY14 and 20.0X peg) under review. We will be meeting management later today for more updates. (Sarah Ong) Far East Hospitality Trust: 3Q13 results in line Far East Hospitality Trust (FEHT) has announced 3Q13 results which are in line with ours and the street's expectations. 9M13 distribution per stapled security of 4.22 S cents forms 74% of ours and 73% of the street's FY13 forecasts. Gross revenue for was S$31.5m or 9.4% lower than the IPO prospectus forecast. RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug), was S$167.1, down 2.7% YoY mostly due to price competition in the sector. The serviced residences also performed poorer YoY, with RevPAU falling 0.6% to S$227.1. Net property income was 9.4% below forecast at S$28.5m. Income available for distribution was S$24.2m or 7.4% below forecast. 3Q13 distribution per stapled security was 1.43 S cents or 4.7% lower than forecast. However, we emphasize that the results were within expectations for the market. We maintain our HOLD rating on FEHT but place our FV of S$0.92 under review. We will be speaking with management later today. (Sarah Ong)

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NEWS HEADLINES - US stocks dropped on Thu, with strategists pinning the slide on investors taking profits after a strong run that has left key benchmarks just below record highs. - DBS Group Holdings is offering to buy back S$800m of an outstanding S$1.7b preference share issue, offering in exchange new notes with a higher payout and a shorter tenor. - Parkway Life REIT saw its 3Q13 DPU rise to 2.66 S cents from 2.58 S cents a year ago. - Nera Telecommunications' net profit for 3Q13 fell 42.1% YoY to S$3.3m, as operating expenses soared. - FJ Benjamin Holdings' 1QFY14 net profit tumbled 83%, hit by a fair value loss on investment securities and foreign exchange losses.