SG: MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO (6 Nov 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.68

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.35

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO

6 Nov 2013

KEY IDEA UOB: Exceeded expectations UOB's 3Q13 net earnings of S$730m were above market expectations, and this was led by both YoY and QoQ improvements in Net Interest Income despite lower Non-interest Income. In addition, its Net Interest Margin (NIM) also stabilized at 1.71%, bucking the downtrend seen at the other two banks. Management is cautiously optimistic about its prospects, although it expects loans growth to be slower in 2014 versus 2013. While Indonesia and Thailand faced recent economic and political uncertainties, we do not expect this to have a lasting impact on UOB's long-term regional franchise and business. Overall, our earnings projections are still largely intact for both FY13 and FY14, and we are retaining our fair value estimates of S$22.97. Maintain BUY. (Carmen Lee) MORE REPORTS Sembcorp Marine: Business as usual; waiting for new yard ramp-up Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, within our expectations. Operating margin in 3Q13 was 10.1%; though on the lower side, this is still within management's guidance of 10-13% for this year. With the commencement of operations in the new Tuas yard, ship repair revenue rose 34% YoY. After securing new orders worth about S$3.9b YTD (vs our full year estimate of S$4b), the group's net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY. (Low Pei Han) SATS Ltd: Same story as 1QFY14 SATS's 2QFY14 results came in below expectations. Revenue fell for the second straight quarter (-2.0% YoY to S$452.1m) following declines in the food solutions segment, and EBITDA and PATMI fell 11.6% YoY to S$65.7m and 3.2% YoY to S$48.7m, respectively, as a result of higher staff costs. Management declared an interim dividend of 5 S cents, similar to last year's amount. For 2HFY14, we expect revenue to decline further due to the full-year impact of Qantas' relocation to Dubai, and margins should stay compressed as well. With the weakened 2HFY14 outlook, we leave our fair value estimate unchanged at S$3.35 and maintain our HOLD rating. We foresee limited upside at this juncture and on-going tapering expectations may have a negative impact on dividend-yielding counters like SATS. (Lim Siyi) Vard Holdings: 3Q13 results below our expectations Vard Holdings Limited (VARD) reported its 3Q13 results this morning which fell short of our expectations. Revenue decreased by 3.5% YoY to NOK2,370m, while PATMI plunged 66.7% to NOK76m. However, this was a reversal from the net loss of NOK20m suffered in 2Q13 as VARD had taken an impairment of goodwill on its Niteroi yard in Brazil then. For 9M13, revenue and PATMI dipped 6.3% and 68.6% to NOK8,062m and NOK244m, forming 68.0% and 52.0% of our previous FY13 forecasts, respectively. Meanwhile, VARD also announced last evening that it has secured a new contract worth NOK55m for the construction of a survey vessel for Circle Maritime Invest JSC, with delivery scheduled in 3Q14. We place our Sell rating and S$0.80 fair value estimate under review, pending an analyst conference call with VARD's management and also due to a change in analyst coverage. (Wong Teck Ching Andy) Swiber Holdings: Disposes Kreuz for S$256.2m Summary: Swiber Holdings announced last evening that SEA9 Pte Ltd, an investment-holding company wholly-owned by The Headland Private Equity Fund 6 L.P, has proposed to acquire Swiber's entire 57.5% stake in Kreuz Holdings for S$0.80/share, translating to a consideration of S$256.2m for Swiber. Due to a netting agreement in which all trade and other receivables as well as payables between Kreuz and Swiber are set-off and settled, Swiber will receive S$129.2m in cash out of its S$256.2m consideration. The offer of S$0.80/share represents a premium of about 78.4% over Kreuz's NAV/share as at 30 Sep, and Swiber is expected to record a net gain of about US$90.6m from this proposed disposal. Pending further details from management, we put our Buy rating and fair value estimate of S$0.86 on Swiber under review. (Low Pei Han) CapitaMalls Asia: Divests Grand Canyon Mall in Beijing to CRCT CMA announced that CRCT has exercised its call option to acquire Grand Canyon Mall in Beijing. To recap, this divestment was set in motion in Jul 13 when a conditional call option was agreed upon between both parties as CMA successfully tendered for the asset. The mall is expected to be divested at cost price at ~RMB1.82b (S$367.5m), or ~RMB26k (S$5,249) psm based on GFA (excluding the car park). The mall has been valued at RMB1.83b as at 15 Apr 2013 by CBRE. The current occupancy (as of Apr 2013) is 92.7% with an annualized net property income (NPI) yield of about 3.5%, based on the divestment price. Maintain BUY on CMAwith an unchanged fair value estimate of S$2.55. We also have a BUYrating on CRCT with a fair value estimate of S$1.64. (Eli Lee) COSCO Corporation: Provisions hit bottom-line COSCO Corporation reported a 6% YoY rise in revenue to S$989.4m but saw an 84% drop in net profit to S$4.2m in 3Q13, such that 9MFY13 net profit accounted for 53% of our full year estimate. The results also disappointed the street, as 9MFY13 net profit only made up 42% of the full year consensus figure of S$62.6m. Gross profit margin was only 7.4% in 3Q13 vs. 12.3% in 3Q12, mainly because of a S$33.9m provision for expected losses on construction contracts. A S$15.8m provision was also taken for inventory write-down. This resulted in a net profit margin of 0.4% in the quarter vs. 2.8% in 3Q12. With a change in analyst coverage and pending details from a call with management later, we maintain our SELL rating but put our fair value estimate of S$0.60 under review. (Low Pei Han)

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NEWS HEADLINES - Singapore's latest PMI exceeded forecasts, showing a stronger pick-up in manufacturing activity in Oct, less than two weeks after an unexpected jump in Sep's factory output. - The Fare Review Mechanism Committee has recommended more public transport fare concessions, with new schemes proposed for low-income workers and people with disabilities. - BBR Holdings said 3Q13 net profit more than tripled to S$8.35m on a busy construction schedule, but warned that there is a challenging year ahead. - Perennial China Retail Trust posted a DPU of 0.95 S cents for 3Q13, down slightly from 0.97 S cents last year. - Chip Eng Seng reported a net profit of S$27.2m for 3Q13, down 10% YoY.