Friday, November 29, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: RH PetroGas
Company Name: RH PETROGAS LIMITED
Research House: OSKPrice Call: BUYTarget Price: 1.38

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD
Research House: OSKPrice Call: SELLTarget Price: 0.61

Stock Name: StarHub
Company Name: STARHUB LTD
Research House: NomuraPrice Call: HOLDTarget Price: 4.05




Market Compass


29 November 2013~ Good Morning Singapore!


Singapore Idea Snippets:
29 Nov 2013 ~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping

Source: Marketwatch



Quote for the day : We're running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere... can handle before there is an environmental catastrophe.
- ELON MUSK
Singapore: The Day Ahead

SINGAPORE DAYBOOK : Financing boost for exports to Asia emerging markets. IE S'pore to launch credit guarantee scheme with ADB and Swiss Re.

[SINGAPORE] Singapore's exports to Asia's emerging markets are about to get a $1 billion annual boost from a new government trade financing plan.
Some 250 local companies - a big chunk of them small and medium-sized enterprises (SMEs) - are tipped to gain yearly from a credit guarantee scheme that International Enterprise (IE) Singapore is launching with the Asian Development Bank (ADB) and Swiss Re Corporate Solutions, a Swiss insurance company.
With the new Trade Facilitation Scheme (TFS), which comes into effect on Dec 1, both IE Singapore and Swiss Re are topping up capital to expand the current limits of ADB's existing credit guarantee scheme, the Trade Finance Programme (ADB-TFP), to back more trade transactions by Singapore firms.
"The boost provided by the TFS will potentially support additional exports of $1 billion annually into emerging Asia - a potential 60 per cent increase in Singapore's exports supported under the ADB-TFP," IE Singapore said in a statement yesterday.
(Source: The Business Times)

MARKET SCOOP

Oxley's unit to develop 15.28-acre land in Selangor
OCBC divests from Vietnam's VPBank,sells all stake: statement
Kingsford Development puts in top bid for adjacent sites
Top metals trader resigns from Noble Singapore: sources
Pace of home price fall picks up in October
MOM bans 15 firms from hiring new foreign staff
(Source: The Business Times)

OSK DMG Securities says ...

RH PETROGAS | BUY | TP: S$1.38

We took RHP management on a non-deal roadshow on Tuesday
The company has published its 2014 drilling programme, planned reserve upgrades, and schedule of upcoming news flow
RHP's 2014 work programme, heavily focused on increasing production, includes nine
development wells and one appraisal well (contingent on Klagalo-1 being successful) in the Basin PSC
For Fuyu, 40 development wells are planned in 2Q-3Q14, with a deep exploration well to test the deep gas zone
Total net drilling capex is USD60m, and management expects >80% cash return in 2014
from cost recovery oil
RHP targets upgrading 19mmboe of 2C resources to 2P reserves in 2014
This will bring RHP's EV/2P ratio down from USD30.9/bbl to USD11.4/bbl by end-2014
KrisEnergy trades at an EV/2P of USD27.6/bbl, and the global average is USD18/bbl
We understand the Klagalo-1 well was completed ahead of schedule, with no hiccups to cementing and perforation
Wireline logs indicate potential hydrocarbons
Three zones will be tested, each for seven days
We expect the Klalin-15 and -17 wells to add to existing production, having successfully flowed
RHP is looking at acquiring a producing field in the Southeast Asian region
We do not expect this to be a large acquisition, and the agreement could be finalized within a few months
The stock trades at a 35% discount to production assets alone
Maintain BUY with SGD1.38 TP

OCBC Securities says ...

COSCO CORP | SELL | TP: S$0.61

2013 is looking to be the weakest year in terms of earnings for COSCO Corp (Singapore)
After recording net profit of S$139.7m and S$105.7m in FY11 and FY12, respectively, net profit for FY13 looks set to be below S$50m
Indeed, after five quarters of either little cost overruns or reversal of provisions made earlier, COSCO returned to making provisions on its construction contracts again, dousing hopes that it is gaining footing on the execution front
For 4Q13, the group may even have to reverse profits on its "substantially completed" drillship that is mired in arbitration proceedings with customer Dalian Deepwater Development, unless COSCO is able to quickly find another buyer for its drillship
Looking ahead, we expect the operating environment for the group to remain difficult
The oversupply of yard capacity in China continues to roil the shipbuilding industry
Outlook for the offshore industry is more positive, but COSCO - being a new entrant - may not be able to secure many good quality contracts, and the fact that it is executing a wide range of products that are new to the company means that margins remain vulnerable to execution risk
As of 30 Sep 2013, the group's order-book stood at US$7.2b with progressive deliveries up to 2015
However, many orders are likely to be executed at low margins
Though the group has a cash level of S$1.7b, it also has S$1.85b worth of debt maturing in a year (36% of which is secured and may be rolled over), not forgetting the substantial working capital that the group needs with its back-end loaded payments for its contracts
Moreover, any credit tightening in China may affect the ability of customers to meet their financial obligations
Maintain SELL with S$0.61 fair value estimate

NOMURA Securities says...

STARHUB LTD | NEUTRAL | TP: S$4.05

In our recent call with StarHub, management elaborated on various initiatives it is undertaking to improve its revenue run-rate beyond this year (flat service revenue guidance for this year and we currently forecast 3% revenue growth for 2014)
Most of these initiatives are targeted towards the wireless segment via data re-pricing, although pressures in the pay-TV and broadband segments continue
Wireless is 53% of revenues vs 16% for pay-TV and 11% for broadband
In wireless, StarHub is looking to increase price for excess data usage from SGD6 to SGD8 and has also discontinued its offer of free 1GB allowance on tiered plans
It is also looking to charge for WiFi too
In pay-TV, there is some cannibalisation towards internet-TV, we understand; but its own internet TV (TV Anywhere) together with VOD variant Anytime TV could help mitigate the impact of this, and it is also looking to create local content to improve stickiness
Maintain Neutral on its 5% yield, but otherwise, similar to various other integrated operators, driving revenue growth is becoming more of an uphill battle, in our view
StarHub could be looking to increase the tariff on excess data usage from the current promotional tariff of SGD6.42 per 1GB to SGD8.56 by early next year
SingTel has already increased this from SGD5.35 to SGD10.7
M1, which charges SGD5.35 currently, is also likely to review this, we think
Given that only ~13-16% of tiered subs exceed data bundles, telcos still have to
scale up the takeup of tiered plans to realise any meaningful pickup in ARPU
While StarHub and M1 had ARPU flat to down in the recent 3Q, SingTel had a sequential improvement
However, it is difficult to attribute SingTel's ARPU improvement fully to increase in excess data charges, given that there are other impacts from roaming, etc
But some benefits cannot be ruled out
StarHub also no longer offers 1GB additional allowance for free to its new tiered plan subscribers
This can help improve overall ARPU to some extent too
On Pay TV, StarHub notes that there is a tendency among subscribers to watch video content online, which could be a risk
However, StarHub has its own internet TV offering, TV Anywhere, which allows subscribers to access television content on-the-go in multiple screens including PCs and tablets
This should help retention/support ARPU on pay-TV side
With the rollout of LTE, this service should gain further traction over wireless too, we think
StarHub notes that there is competition from FTA (Free to Air) operator - currently there are 8 FTA channels of MediaCorp including Chinese/Malay/Indian content in entertainment and/or news - and we think StarHub is looking to address this by localization of content
Its Anytime TV, which is pay per use, should appeal to a price sensitive audience too
This service is for its home broadband customers who do not subscribe to its pay TV service, where it offers movies on demand and has more than 6.5k hours of video library available
StarHub is looking to introduce paid WiFi services
Most of tablet sales are outside contracts and most users offload the data into WiFi networks, so there is some revenue potential to tap there
NGN provisioning issues are still a concern especially in the enterprise segment while residential rollout seems to be tracking well (StarHub has around 20% share, we think)
IDA has also recently approved SingTel's sale of OpenNet which should simplify the whole structure, we think
StarHub's cable network lease agreement with SingTel will expire in 2017, post which it could either renew the lease on new terms or shift to NBN
StarHub thinks that given the current pay TV is over HFC (Hybrid Fiber Coaxial), transition to Fiber network, if required, would be seamless



SG: MARKET PULSE: Strategy 2014, Dyna-Mac Holdings (29 Nov 2013)

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.
Research House: OCBCPrice Call: BUYTarget Price: 0.47




MARKET PULSE: Strategy 2014, Dyna-Mac Holdings
29 Nov 2013
KEY IDEA

Strategy 2014: Playing catch-up soon?
While the Singapore stock market is likely to end 2013 flat, the economic outlook for 2014 holds some potential for a re-look at Asian and Singapore equities. We expect developed markets issues which dominated global headlines in the last two years to remain, largely centering on slowing economic growth, debt and high unemployment. However, the recent 3Q corporate results in Singapore points to a cautiously optimistic guidance for 2014, and this could mean high single-digit earnings growth for the benchmark STI stocks. We continue to have an OVERWEIGHT for the Banking and Oil & Gas sectors, and are selectively positive on certain Property and REIT stocks. The Straits Times Index (STI) is currently trading at undemanding valuations of 13.7x FY14 earnings, 1.35x book and with decent dividend yield of 3.3%. Our stock picks for 2014 in the big cap space are CapitaLand, CapitaCommercial Trust, DBS, Ezion Holdings, Keppel Corporation, Keppel Land, Starhill Global, Suntec REIT and UOB. In the mid-cap space, our stock picks are KSH, Nam Cheong and Sheng Siong Group. (Carmen Lee)

MORE REPORTS

Dyna-Mac Holdings: Strong proxy to global FPSO growth prospects
Dyna-Mac Holdings looks set for a busy year ahead in 2014, buoyed by improving prospects in the FPSO market and a robust net order book of S$346m (as at 13 Nov 2013), thanks to YTD order wins of ~S$320m. There are positive developments happening for its major customers; while Dyna-Mac is also actively pursuing six to seven FPSO projects which it is confident of winning. If successful, this may culminate in healthy order wins amounting to ~S$280-350m for FY14, according to our estimates. We update our model and assumptions following a change in analyst coverage; and now forecast revenue and PATMI growth of 20%/-7% for FY13 and 4%/15% for FY14, respectively. Rolling forward our valuations to 16x FY14F EPS, we derive a higher fair value estimate of S$0.47 (previously S$0.44). Upgrade Dyna-Mac from Hold to BUY. (Wong Teck Ching Andy)


For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- Swissco has won S$27m of charter contracts.

- Etika has recorded FY13 PATMI of RM7.4m, down 66%.

- Starland reported FY13 net profit of CNY2.4m versus a loss of CNY6.3m a year ago.

- Casa has bought the remaining 50% stake in its Moroccan JV company.

- China Aviation Oil (Singapore) Corporation Ltd, has expanded its operations in Europe with the establishment of a wholly owned subsidiary in the UK.

- Singapore Airlines is adding a 5th daily Tokyo flight.

- China Jishan has signed an agreement to form a JV to provide financial services.


Thursday, November 28, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: IHH
Company Name: IHH HEALTHCARE BERHAD
Research House: UOB KayHianPrice Call: SELLTarget Price: 1.43

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD
Research House: UOB KayHianPrice Call: SELLTarget Price: 4.65




Market Compass


28 November 2013~ Good Morning Singapore!


Singapore Idea Snippets:
28 Nov 2013 ~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping

Source: Marketwatch



Quote for the day : My kids idea of a hard life is to live in a house with only one phone.
- GEORGE FOREMAN
Singapore: The Day Ahead

SINGAPORE DAYBOOK : Broker seeks to recover US$68m from 10 clients. Legal action taken in wake of October's penny stock collapse.

[SINGAPORE] Global broking giant Interactive Brokers has launched the largest legal action so far in the wake of October's penny stock collapse, taking aim at at least 10 clients as it seeks to recover about US$68 million of losses.
BT understands that Interactive Brokers launched arbitration proceedings earlier this month against 10 individuals and entities through the American Arbitration Association.
Pending the start of arbitration proceedings, the global broker has also obtained court orders in Singapore and Malaysia to freeze the assets of eight of those clients, including certain directors and shareholders of Asiasons Capital, Blumont Group, LionGold Corp and Innopac Holdings - four of the stocks at the centre of last month's selldowns.
According to court documents inspected by The Business Times and confirmed by sources, Interactive Brokers on Nov 8 sought court orders to freeze the assets of Malaysian nationals Neo Kim Hock, Peter Chen Hing Woon, Tan Boon Kiat, Quah Su-Ling, Lee Chai Huat and Kuan Ah Ming; and two British Virgin Islands-registered companies, Sun Spirit Group Ltd and Neptune Capital Group Ltd.
(Source: The Business Times)

MARKET SCOOP

China committed to reforms for sustained growth: PM Lee
Ooredoo (former Qtel) sells inaugural sukuk
PNE FY2013 profit falls to $3.76m
Oxley Holdings sells 3-year $100m bonds
Business receipts of services sector up 8% in Q3
Steering committee for UniSim law school unveiled
NTU, SBF to setup African studies centre
(Source: The Business Times)

UOB KAY HIAN says ...

IHH HEALTHCARE | SELL | TP: S$1.43

IHH Healthcare (IHH) reported 9M13 revenue and EBITDA increases of 18% and 24% yoy respectively
This was mainly attributed to organic growth of existing operations, ramping up of new hospitals and a full nine-month consolidation of Acibadem Holdings (Acibadem)
Net profit rose 38% yoy to RM438m, representing 66% and 67% of our and consensus full-year estimates respectively
Inpatient admissions ytd rose 7.5% and 5.6% yoy in Singapore and Malaysia respectively, supported by strong domestic demand
Business from medical travel rebounded in 3Q13 with a 9% qoq incease in Indonesian inpatient admissions in Singapore
Price adjustments and an increase in the number of specialists contributed to
higher average revenue per inpatient (ARPI). Ytd, Singapore's ARPI reached RM21,371
(+5% yoy) while Malaysia's hit RM4,499 (+7% yoy)
Assuming IHH had consolidated nine months of Acibadem's performance in 9M12, inpatient admissions in Turkey would have grown 6.7% yoy in 9M13 on higher patient volumes in existing hospitals as well as contributions from its two newly-opened hospitals
ARPI rose only 1.6% yoy
9M13 EBITDA margin improved to 24.3% from 23.1% in 9M12
MENH contributed a positive ytd EBITDA of RM10.9m, rebounding from a RM64m loss in 9M12
Acibadem's revenue growth was partly eroded by higher staff and rental costs as well as start-up and pre-operating expenses for its new hospitals
Foreign exchange loss of RM135.8m arising from the translation of US$-denominated
loans as the Turkish Lira depreciated by over 13% in the period
This is compared with an exchange gain of RM41m in 9M12 on the back of a 5% appreciation in the Turkish Lira vs the US$
Still cautious on execution risks as capex balloons to RM3.8b for the period 4Q13-2016
This is 39% more than the projected budget of RM2.7b as of end-Jun 13
We note the cost estimate for Gleneagles Hong Kong Hospital increased 21% to RM1.5b (previously RM1.2b)
Maintenance and expansion capex for Malaysia is now 26% higher at RM1b while Turkey's budget doubled to RM1.3b on the back of new hospital projects added to the pipeline
We continue to be wary of the key challenges facing IHH such as a shortage of qualified medical staff, slower ramp-up of operations due to a weaker economic environment and managing start-up and pre-operating expenses
Ytd, we have seen cost pressures impacting Acibadem's operating results as it confronts a 7-8% national inflation rate
There have been several signs of difficulties in ramping up MENH
The hospital currently has 120 beds operating at 75% utilisation, below the
intended 330 beds
ARPI is still below Mount Elizabeth Orchard's (MEO) and management is now looking to add new disciplines and specialties to MENH's offerings in order to boost revenue intensity
Our site visits also indicate that less than 50% of the 254 medical suites are in use
As a package promotion, the hospital has allocated one of its wards to provide
lower-cost beds at S$373 per day, a 40% discount to its standard single room
While management maintains it will not cut prices for its medical services, we think it will consider more package promotions if these will help pull up the hospital's business
MENH has already been placed under the same management as MEO to allow the group to rationalize its cost structure
We anticipate stiff competition for IHH from Connexion at Farrer Park, an integrated healthcare and hospitality complex by The Farrer Park Company
Comprising a 200-suite specialist medical centre (target opening: 1Q14), a 220-bed private tertiary hospital (mid-14) and a luxury hotel (mid-14), Connexion is helmed by Dr Luisa Lee whose 30 years in the public sector included stints as CEO of Woodbridge Hospital (now Institute of Mental Health) and Tan Tock Seng Hospital
Farrer Park Hospital (FPH) aims to promote fairness in its healthcare solutions, offering value for service to patients
We think it will attract the same patient profiles as IHH's hospitals, including a share of the medical travel market
We also note that a number of doctors who are involved in this project currently hold private practices in IHH's hospitals
Hence, the opening of FPH may pose more challenges for the group
Valuations rich; maintain SELL and target price of S$1.43, based on our SOTP model
No change to our earnings forecasts
Management says it will make an announcement on the dividend policy in 4Q13
IHH is currently trading at 45x 2014F PE, which we think is unjustified, given our cautious near-term outlook
Our target price implies 39x forward PE

UOB KAY HIAN says ...

SIA ENGINEERING | SELL | TP: S$4.65

We hosted a post-results luncheon with SIA Engineering (SIAEC). Group CFO, Anne Ang and Mr Chow Kok Wah, SVP Line maintenance, answered questions regarding line
maintenance, competition, operating costs as well as prospects for engine maintenance
Management explained that the difference between 1HFY14's 16.9% rise in flights handled at Changi and the 4.2% rise in line maintenance revenue was due to: a) a greater portion of LCC (low-cost carriers) work, and b) discontinuation of line maintenance work at Bahrain
LCC's line maintenance requirements are not as rigorous as that of full service airlines particularly relating to cabin works and in-flight entertainment (IFE)
LCCs also use narrow-bodied aircraft which requires less man hours
In 1HFY14, SIAEC signed nine new contracts, which should drive growth in 2HFY14, and the unit had a 79% market share of line checks as at 1HFY14
SIAEC also clarified that they only performed technical ramp handling for Jetstar Asia and not the higher value added certification work, which was performed by SHAECO
SIAEC explained that the discontinuation of a Gulf Air fleet maintenance contract was the primary reason behind a 15% decline in FMP revenue
2HFY14 should see this normalise
Except for parent SIA's maintenance work, maintenance, repair and overhaul (MRO) is priced in US dollars, while SIAEC's labour cost is primarily in SGD and is expected to grow 4-5% annually (+5.5% in 1HFY14)
A strong Singapore dollar has hurt SIAEC's revenue and margins
SIAEC also faces difficulty in passing cost increases as airlines have other choices in terms of MRO destinations
Recognising the labour challenges, SIAEC had expanded into the Philippines, where it has built two hangars at Clark Air Base
A third hangar will be completed in 2014, which will enable the unit to handle wide-bodied aircraft
MRO costs there are 20-30% lower and SIAEC plans to shift some of the narrow-bodied work
Even so, SIAEC faces competition in the Philippines from Lufthansa Technik which has a hangar at Manila with capabilities to provide MRO service for various wide-bodied aircraft including the Airbus A380. SIAEC also plans to invest in automation to reduce costs and improve productivity
SIAEC's Rolls Royce JV SAESL is expected to perform well, but the other engine maintenance associate, ESA is at the mature end of its product cycle and will
thus see less maintenance works
Overall, engine maintenance accounts for 90% of JV and associate income
Non- SIA work accounted for 69% of JV and associate revenue but SIA's related work grew 33% yoy vs 4.9% for non-SIA work
We queried management on the growing clout of Middle Eastern carriers and whether MRO OEMs will move some of their operations to the region
Management opined that access to qualified engineers could be a problem as
most of the skilled work force in the region is made up of foreigners who tend to command higher pay
While we managed to learn more about the company's operations, we still
feel that SIAEC faces substantial challenges
Operationally, the entrance of ST Aerospace at Changi is a risk that should not be downplayed
Management's guidance on the Pratt & Whitney associate ESA also implies that engine maintenance growth will be lower in coming quarters
Meanwhile, labour cost will be an ongoing challenge as will be the ability to pass
on these costs
In the longer term, we believe that the Middle Eastern carriers' huge base
load of orders could see engine OEMs set up shop in the region and potentially recruit from elsewhere
Maintain SELL and target price of S$4.65, based on DDM (COE: 6.9%, terminal growth
rate: 1%)
At our target price, the stock offers a dividend yield of 4.8%

OCBC Securities says ...

CONSUMER SECTOR: CHALLENGING 2014 AHEAD

Revenue growth hurt by weakness in EM data points
Margin pressures to stay
Prefer defensives/strong market positions

2013 recap: a see-sawing year
At the start of the year, we had called for allocation into counters with exposure to EM Asia consumer demand. While that call did fairly well for the first half of the year, it faced some challenges subsequently and YTD gains were eroded. At the company level, revenue growth for consumer-related firms was decent although margin pressures from rising costs had an effect on bottom-line figures.

Top-line growth to face headwinds
For 2014, we expect revenue growth to be a tad more challenging. Data points both domestically and aboard have indicated that consumer spending will not be as forthcoming as before. Concerns over the ongoing global recovery process will continue to dominate consumer focus, as will be the impact of rising inflation on purchasing ability. In fact, we could expect to see companies spend a higher amount in order to attract a single dollar of consumer expenditure vis-a-vis previous years.

Margin pressures to remain
On the cost front, we expect consumer-related companies to face the greatest pressures domestically. Regulatory changes have been rather punitive on companies with higher reliance on foreign labour, and have forced companies to look towards more expensive local help. With this issue extending to other countries in the region via an increase in the minimum wage requirements, we can expect to see an overall increase in wage costs for companies in 2014. This increase in operating expenses may potentially outpace top-line growth - due to greater competitive pressures - and lead to an eventual, further compression of margins.

Consumer sector to be less attractive in 2014
As the consumer sector is cyclical in nature, we expect the first half of 2014 to be an uneventful one for the sector. Investor attention is unlikely to be on consumer-related companies (particularly consumer discretionary counters) given the overall macro uncertainty and challenges ahead, and the sector could see itself trading sideways. That said, we maintain our UNDERWEIGHT rating on the sector. Our top picks are Sheng Siong Group [BUY; FV: S$0.78] as we like its defensive qualities in the face of weaker domestic sales, and Petra Foods [BUY; FYS$3.95] for its dominant leadership position in chocolate confectionary products.



SG: MARKET PULSE: Cosco Singapore (28 Nov 2013)

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD
Research House: OCBCPrice Call: SELLTarget Price: 0.61




MARKET PULSE: Cosco Singapore
28 Nov 2013
KEY IDEA

COSCO Corp: Time needed to scale offshore value chain

2013 is looking to be the weakest year in terms of earnings for COSCO Corp (Singapore). After recording net profit of S$139.7m and S$105.7m in FY11 and FY12, respectively, net profit for FY13 looks set to be below S$50m. Indeed, after five quarters of either little cost overruns or reversal of provisions made earlier, COSCO returned to making provisions on its construction contracts again, dousing hopes that it is gaining footing on the execution front. Looking ahead, we expect the operating environment for the group to remain difficult. Any credit tightening in China may also affect the ability of customers to meet their financial obligations. Maintain SELL with S$0.61 fair value estimate. (Low Pei Han)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- Taxi operators Comfort, CityCab and SMRT will be allowed to expand their fleet in the first half of next year, after meeting the LTA's taxi availability standards.


- SembCorp Industries has announced that its wholly-owned subsidiary has issued S$200m 3.64% fixed rate notes due 2024.


- Interra Resources has started drilling development well TMT-58. TMT-57 is producing 650 barrels of oil/day.


- Global Invacom Group has acquired Raven Manufacturing Limited for a cash consideration of £1.98m (approximately US$3.18m).


- Datapulse reported 1Q14 net profit of S$985k versus S$4.05m a year ago.


- PNE Industries announced FY13 profit of S$3.76m versus S$5.6m a year ago.


- Elektromotive has issued S$200k of convertible notes due in 2018.





Wednesday, November 27, 2013

SG: MARKET PULSE: Consumer Sector (27 Nov 2013)

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD
Research House: OCBCPrice Call: BUYTarget Price: 0.78

Stock Name: Petra
Company Name: PETRA FOODS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 3.95




MARKET PULSE: Consumer Sector
27 Nov 2013
KEY IDEA

Consumer sector: Challenging 2014 ahead

Summary: We expect the first half of 2014 to be an uneventful one for the consumer sector, and we maintain our UNDERWEIGHT rating. We feel that revenue growth is likely to be challenging given the recent spate of bearish data points both domestically and abroad, which indicate that consumer spending is likely to be subdued in 2014, and that companies will also continue to face margin pressures from rising operating expenses (i.e. higher staff and rental expenses). In addition, ongoing concerns over the overall macro environment and the focus on rising inflation will also keep a lid on consumer spending. Within our sector coverage our top picks are Sheng Siong Group [BUY; FV: S$0.78] as we like its defensive qualities in the face of weaker domestic sales, and Petra Foods [BUY; FYS$3.95] for its dominant leadership position in chocolate confectionary products. (Lim Siyi)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- For 3Q13, IHH Healthcare's revenue grew by 13% YoY to RM1.7b while PATMI, excluding exceptional items, increased 63% to RM138.3m.

- Vallianz has received US$150m chartering contracts in the Middle East.

- Willas-Array Electronics expects its shares to start trading on the Main Board of the SEHK on 6 Dec, having received approval-in-principle for the dual primary listing.

- United Envirotech has announced the termination of the Transfer-Operate-Transfer project in Shangzhi, Harbin City, Heilongjiang Province, China.

- Novo Group reports that it expects to see a higher loss for its half year ended 31 Oct.

- Food Empire has established a S$200m multicurrency medium term note program.

Tuesday, November 26, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.
Research House: Credit SuissePrice Call: HOLDTarget Price: 1.00




Market Compass


26 November 2013~ Good Morning Singapore!


Singapore Idea Snippets:
26 Nov 2013 ~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping

Source: Marketwatch



Quote for the day : Success is a lousy teacher. It seduces smart people into thinking they can't lose.
- BILL GATES
Singapore: The Day Ahead

SINGAPORE DAYBOOK : New, direct route for China firms seeking S'pore listing. They will need approval of both SGX and CSRC; won't have to set up holding company in a tax haven.

AMID an initial public offering (IPO) freeze in China, the stock-market regulators of China and Singapore have set up a framework for Chinese companies to list here, a move that might see more such companies seeking capital from investors here.
Under the framework announced yesterday, Chinese-owned, China-incorporated companies will be able to list on Singapore Exchange (SGX) after getting approval from the China Securities Regulatory Commission (CSRC) as well as SGX by fulfilling the requirements of relevant laws and regulations of both sides.
SGX CEO Magnus Bocker said investors here would have more choices and access to the growing Chinese economy.
The new development effectively gives China companies another pathway to get listed here. The traditional route was setting up a holding company in tax havens such as Bermuda and the British Virgin Islands, and listing that holding vehicle here.
(Source: The Business Times)

MARKET SCOOP

Yongnam Holdings clinches record $168m contract
CPFIS funds gained in Q3; equity funds performed better
AIMS AMP to buy stake in Optus Centre for A$184m
Cosco wins two contracts worth more than US$400m
Sunrise Brokers joins SGX as derivatives trading member
Profits up for Pacific Andes and China Fishery for FY2013
Singapore's inflation rises to 2% in Oct
(Source: The Business Times)

CREDIT SUISSE Securities says ...

BIOSENSORS INTERNATIONAL GROUP | NEUTRAL | TP: S$1.00

Shandong Weigao announced on Friday it intends to sell its entire 370 mn shares in Biosensors, or about 21.7% of Biosensors' total issued share capital, to CB Medical Holdings, a subsidiary of Citic PE, at 7.1% premium to Friday's closing price of S$0.98
We view this transaction as positive for Biosensors
As one of the most renowned PE fund manager in China, Citic PE will likely strongly support Biosensors in deal sourcing and product line diversification
Recall that Biosensors issued S$300 mn in debt early this year and acquisition will be its focus in the near term
In the near term, earnings in FY14 will likely remain distressed due to the headwinds in Japan and China
However, as ~37% of Biosensors' stake is held by two PE firms (Hony Capital holds around 15.8%), we believe the fundamentals of Biosensors will improve in the long term
We maintain our NEUTRAL rating
Our TP of S$1.00 is based on 18x FY15E normalised EPS, plus S$0.26 net cash and foreseeable licensing revenue per share

OCBC Securities says ...

SPH REIT | HOLD | TP: S$0.99

SPH REIT is a Singapore-based REIT established principally to invest in a portfolio of income-producing real estate used primarily for retail purposes in Asia-Pacific
The initial portfolio comprises two commercial properties in Singapore, namely Paragon and The Clementi Mall, with a total NLA of 898,779 sqft and appraised value of S$3.1b as at 28 Feb 2013
The Sponsor is Singapore Press Holdings, the leading media organization in Southeast Asia with a market cap of S$6.8b
Through the Paragon Mall, SPH REIT has the purest exposure to the upscale retail market in Orchard Road precinct than any Singapore-listed retail REIT
In addition to Paragon Mall, Paragon also houses Paragon Medical that hosts over 60 medical and dental specialist clinics and offices
Clementi Mall, on the other hand, is a mid-market suburban retail mall that is located in the heart of Clementi town with direct access to the bus interchange and MRT station
We like SPH REIT's unique exposure to the upscale retail market, suburban retail space and burgeoning healthcare services sector
In our opinion, the local retail landscape is expected to remain robust, bolstered by growing retail sales, rising visitor arrivals, an expanding population and comfortable supply of retail space
We also believe Clementi Mall's strategic location and retail offerings will make it very resilient in nature
Furthermore, the underlying growth drivers for the regional healthcare scene are expected to remain strong
Since its listing, we note that SPH REIT has enjoyed a strong run-up in unit price of 8.9%, significantly outperforming the FTSE ST REIT Index by 14.3ppt over the same period
At current price, SPH REIT is trading at 1.10x P/B, slightly higher than the local retail subsector P/B of 1.05x
Our DDM-based fair value of S$0.99 implies a total expected return of 6.4%, including a FY14F DPU yield of 5.4%
As the counter appears to be fairly priced with no visible strong near-term price catalyst, we initiate coverage on SPH REIT with a HOLD rating

OCBC Securities says...

BIOSENSORS INTERNATIONAL GROUP | SELL | TP: S$0.80

Shandong Weigao to sell its entire 21.7% stake in BIG Shandong Weigao (SW), which is Biosensors International Group's (BIG) single largest shareholder, announced that it has entered into a Sale and Purchase Agreement to dispose its entire 21.7% stake in BIG
to CB Medical Holdings Limited (CBMH)
The total aggregate consideration of US$312.3m translates into a purchase price of
S$1.05 per share by CBMH
This represents a 11.2% premium to BIG's closing price prior to this announcement
CBMH is an investment holding company incorporated in Bermuda. According to a SGX-net filing, it is part of CITIC Private Equity Funds Management, a large private equity fund in China
SW cited the increasingly competitive business environment in China and its decision to focus on its three core business units in which it has controlling equity interests as its
reasons for disposing its stake in BIG
As SW will incur a loss of ~CNY449.0m from this transaction, we believe it also partly reflects the lack of confidence in BIG's prospects going forward
We do not foresee any impact from SW's sale on the operations of BIG
While both companies have healthcare operations in China, BIG has operated independently from SW even when SW became a shareholder of BIG
This is because BIG has its own established manufacturing facilities, distribution channels and networks in China
SW also does not compete with BIG, nor is it a supplier or customer of BIG
While we do not rule out the possibility of a privatisation exercise on BIG by CBMH in the future, we continue to value the stock based on our expectations of its operational performance
Hence, with our estimates kept intact, we maintain our SELL rating and S$0.80 fair
value estimate on BIG
Given the recent hike in BIG's share price and with BIG now trading at a rich valuation of 20.7x blended FY14/15F PER, we believe it is an opportune time for investors to lock in some profits



SG: MARKET PULSE: Wilmar, ST Engineering (26 Nov 2013)

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 3.70

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD
Research House: OCBCPrice Call: HOLDTarget Price: 4.32




MARKET PULSE: Wilmar, ST Engineering
26 Nov 2013
KEY IDEA

Wilmar: Forms China corn starch JV

Summary: Wilmar International Limited (WIL) recently announced that it has formed a JV with Tereos Internacional to manufacture corn starch in China - this is its second commercial collaboration with Tereos. However, we do not see any immediate boost to earnings. Meanwhile, we note that WIL's share price has done very well (+17%) since our upgrade to Buy on 6 Sep; but as WIL looks fairly priced around current levels versus unchanged S$3.55 fair value (based on 12.5x FY14F EPS), we opt to maintain our HOLD rating. We also advocate taking profit closer to S$3.70. (Carey Wong)

MORE REPORTS

ST Engineering: US Shipyard wins US$350m contract from Crowley

Summary: Singapore Technologies Engineering Ltd (STE) has announced that its US Shipyard, VT Halter Marine, Inc has won a shipbuilding contract from Crowley Maritime Corporation (Crowley) to build two Container Roll-on/Roll-off (ConRo) vessels. The value of this contract is in the region of US$350m (~S$420m). The vessels will be built at the Pascagoula facility in the US, with construction taking place in the first half of 2014 with deliveries in mid and late 2017. While there is no material impact to near-term earnings, we still see the contract as a testament to STE's shipbuilding capabilities. We maintain our FV of S$4.32 and HOLD rating on STE. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- Yongnam Holdings has secured a structural steel subcontract worth S$168m for works at Marina One, a mixed-use development located at Marina South.

- City Developments has been approached by independent third parties regarding the possibility of the sale of its 52.52% interest in its Hong Kong unit, City e-Solutions Limited.

- CapitaLand's wholly-owned serviced residence business unit, The Ascott Limited, has crossed a milestone of having 10,000 apartment units in its key market of China.

- Singapore Exchange has formed a direct-listing framework with the China Securities Regulatory Commission where Chinese companies planning to list in Singapore will file applications to the SGX and the Chinese regulator.

- Rex International's jointly-controlled entity, Lime Petroleum Plc, through its subsidiary Masirah Oil Ltd, has begun drilling an exploration well in Oman.

- Freight Links Express Holdings Ltd has changed its name to Vibrant Group Ltd.


Monday, November 25, 2013

SG: MARKET PULSE: Biosensors (25 Nov 2013)

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.
Research House: OCBCPrice Call: SELLTarget Price: 0.80




MARKET PULSE: Biosensors
25 Nov 2013
KEY IDEA

Biosensors International Group: Sale by largest shareholder

Summary: Shandong Weigao (SW), which is Biosensors International Group's (BIG) largest shareholder, announced that it has agreed to dispose its entire 21.7% stake in BIG to CB Medical Holdings Limited (CBMH) at a sale price of S$1.05 per share. According to a SGX-net filing, CBMH is part of CITIC Private Equity Funds Management, a large private equity fund in China. As SW will incur a loss of ~CNY449.0m from this transaction, we believe it also partly reflects the lack of confidence in BIG's prospects going forward. We do not foresee any impact from SW's sale on the operations of BIG. While we do not rule out the possibility of a privatisation exercise on BIG by CBMH in the future, we continue to value the stock based on our expectations of its operational performance. Hence, maintain SELL and S$0.80 fair value estimate on BIG. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks rose on Fri, with the S&P 500 index closing above 1,800 for the first time and extending gains into a seventh consecutive week.

- Pacific Andes Resources reported FY13 net profit attributable to shareholders of HK$775.2m, up 23.5%.

- China Fishery Group announced FY13 net profit attributable to shareholders of US$83.8m, representing a 7.3% growth.

- Keppel Land has completed the divestment of its 51% shareholding in Jakarta Garden City.

- Straits Trading Co is planning "Blackstone-like" funds as Asia's appetite for real estate investments increases.

- Shares in Aussino Group plunged 50% to a low of 3.6 S cents, after SGX issued a delisting notification to the company and rejected its application for a time extension to meet certain listing requirements.

- Guthrie GTS will be delisted from SGX at 9am today.


Wednesday, November 20, 2013

SG: MARKET PULSE: Golden Agri, ST Engineering (20 Nov 2013)

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD
Research House: OCBCPrice Call: SELLTarget Price: 0.50

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD
Research House: OCBCPrice Call: HOLDTarget Price: 4.32




MARKET PULSE: Golden Agri, ST Engineering
20 Nov 2013
KEY IDEA

Golden Agri-Resources: Recent run-ahead likely overdone

Summary: Despite a disappointing set of 3Q13 results, Golden Agri-Resources' (GAR) share price has continued to do well, likely buoyed by more signs that CPO (crude palm oil) prices are stabilizing around current levels (MYR2500/ton), aided by slightly better demand and supply factors. Note that our US$830/ton (MYR2650/ton) forecast has already taken these factors into consideration. But further CPO price upside may still be capped by the expected jump in global oilseed production. And as the market appears to be taking on a more "risk on" approach, we apply a higher 13.5x peg (versus 12.5x previously) to our FY14F EPS, thus raising our fair value from S$0.465 to S$0.50. But given the potential downside risk, we maintain our SELL rating. (Carey Wong)

MORE REPORTS

ST Engineering: ST Kinetics in Myanmar

Summary: The land systems arm of Singapore Technologies Engineering (STE), ST Kinetics, has set up a wholly-owned subsidiary, Kinetics Automotive & Specialty Equipment Co., Ltd (KASE), in Yangon, Myanmar, with a paid up capital of US$423,000 (S$524,000). KASE will serve as a platform to introduce and support ST Kinetics' automotive and specialty vehicles products and services in Myanmar. The setting up of KASE is not expected to have any material impact on EPS of STE for the current financial year. We maintain our HOLD rating and S$4.32 FV on STE. (Sarah Ong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks pulled back on Tue, as investors showed caution after the Dow and S&P 500 failed to hold above milestone levels in the prior session.

- Singapore's growing status as a commodities trading hub has drawn global heavyweight IntercontinentalExchange Group Inc, which will fork out US$150m to acquire commodities market operator Singapore Mercantile Exchange.

- Organisation for Economic Co-operation and Development (OECD) announced yesterday a "significant" downward revision of its earlier growth forecasts for 2013 and 2014.

- The blueprint for Singapore's development over the medium term identifies new districts that will provide 14,500 homes and 100,000 jobs in Woodlands Regional Centre.

- CapitaMalls Asia Limited announced that it is acquiring a new shopping mall in Guangzhou, China - its first in the city.

- Standard & Poor's Ratings Services yesterday lowered the long-term corporate credit rating of First Ship Lease Trust to "B-" from "B".

Tuesday, November 19, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: DBS VickersPrice Call: BUYTarget Price: 2.65

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 0.67




Market Compass


19 November 2013~ Good Morning Singapore!


Singapore Idea Snippets:
19 Nov 2013 ~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping

Source: Marketwatch



Quote for the day :The most important part of teaching is to teach what it is to know.
- SIMONE WEIL
Singapore: The Day Ahead

SINGAPORE DAYBOOK : Vector putting $50m into Seletar facility. Scheduled to be in service by next Oct, the plant will focus on PW150Aengines

[SINGAPORE] Vector Aerospace Corporation is investing more than $50 million to set up a new engine facility in Seletar Aerospace Park, one that is slated to commence operations by October next year.
The Canada-based company, which provides maintenance, repair and overhaul (MRO) services to the aviation industry, will focus on carrying out works for Pratt and Whitney's PW150A turboprop engine, used in jet manufacturer Bombardier's Q400 aircraft.
The firm secured the licence to be a designated overhaul facility from Pratt and Whitney about a year ago.
Dubbed Vector Aerospace Asia, the 8,000-square metre (sq m) engine centre, which incorporates a 5,200 sq m facility, will be equipped with full engine overhaul and test capabilities.
(Source: The Business Times)

MARKET SCOOP

Hong Leong Finance relaunches cash for shares deal
Ascendas unveils industrial township in India
SingHaiyi buys Vietnam Town project in San Jose for US$33.05m
Fugro Australis counters OEL'swrongful termination claims
Pacific Radiance's Q3 net profit falls 45%
Fund managers in favour of new investment framework: PwC
Singapore to sell 4 residential sites in Nov
UOB's medium-term notes drawdown rated 'AA-'
(Source: The Business Times)

DBS VICKERS Securities says ...

EZION HOLDING | BUY | TP: 2.65

Ezion's 3Q13 net profit surged 137% y-o-y and 5% q-o-q to US$38.2m, bringing 9M13 net profit to US$102.9m, or 73% and 77% of our and consensus' FY13 estimates
Growth was driven by fleet expansion, commencement of three LNG projects at Curtis Island and margin improvement
We are impressed with the 1.9ppt q-o-q gross margin expansion to 48.2%, though impact on the bottomline was partially offset by lower JV and other income
Net gearing is manageable at 1.05x as of end Sept
Ezion took delivery of two service rigs - for deployment in Myanmar and Mexico in 3Q - and three more units are expected to come onstream by end Dec (for Caspian Sea, India and Middle East), bringing its total fleet to 18 vessels (double that of 9 in early 2013)
Management indicated during the briefing that 3 liftboats and 1 refurbished jackup rig are experiencing delays of 3-6 months due to external factors
In addition, service rig #11 will be off hire for about 5 months for an upgrade requested by customer
We have adjusted our revenue recognition accordingly
Nonetheless, after factoring positive impact from higher margins, lower tax and interest expense, our FY14/15F EPS are lifted marginally by 3.0%/1.6%
BUY, TP adjusted to S$2.65, based on 14x revised FY13/14F EPS
Current valuation is undemanding and we believe Ezion's strong earnings growth (2-year CAGR of 42% in FY13-15) and contract wins will drive the stock price further
Maintain BUY

UOB KAY HIAN says ...

GENTING HONG KONG | BUY | TP: US$0.49

Alliance Global's (AGI) 3Q13 teleconference call confirmed that Resorts World Manila's (RWM) lower-than-expected results stemmed from a poor run of luck
Blended hold in 3Q13 fell to a record low against its historical range of around 3.8-5.9% , masking very healthy VIP volumes, consistent with the 82% yoy surge in promotional allowances (which includes rolling chip volume commissions)
Mass market drop momentum held steady
RWM, a 45% associate of GENHK, had posted a 3Q13 EBITDA and net profit of US$45m and US$29m respectively (9M13 EBITDA and net profit stood at US$155m and US$85m respectively
We trim our 2013 EBITDA forecasts for RWM by about 5.6% to US$240m, after accounting for the poor run in 3Q13, and assuming recovery in blended hold and sustained volume growth going into the seasonally strong 4Q13
RWM is now expected to account for 35% of GENHK's adjusted net profit
GENHK's valuations are undemanding at current levels, having retreated 12% from the recent peak
A key catalyst would be a likely sharp earnings recovery in the seasonally strong 4Q13
Our target price of US$0.49, which is based on a 10% discount to our assessed SOTP, implies a target 2014F adjusted EV/EBITDA of 10.2x (the discount to SOTP widens to 30% if the SOTP incorporates its listed associates' market prices)
We trim our 2013 EBITDA forecasts for RWM by 5.6%, after accounting for the poor run in 3Q13, but assuming blended hold will recover in 4Q13 and that VIP volumes will sustain
Nothwithstanding the strong VIP volume growth and sustained mass market growth, we are still mindful over its growth outlook going into 2014 as RWM will contend with the opening of Melco Crown Philippines' casino, and noting Bloomberry's impressive mass market player sign-ups in 3Q13
The downward revision at RWM lowers our GENHK net profit forecasts by 3.7% in 2013, and we also lower our 2014-15 forecasts by 2.8% and 2.4% respectively, adjusting for the dilution of GENHK's stake in RWM post-IPO
While RMW was not directly impacted by the recent Typhoon Haiyan, we note that adverse weather (ie flooding) had previously resulted in several days of dampened visitation
That said, from GENHK's perspective, the adverse weather has directly impacted Star Cruises, prompting the cancellation of some five sailings and adjustments to itineraries to 16 others since the start of 2H13
Notwithstanding our downward earnings revision, we reckon GENHK's valuations are undemanding at current levels
Share price has retreated by 12% from its recent peak to US$0.415 following the disappointing reception to RWM's IPO and as investors have generally turned cautious on the Philippines
We reckon this presents a trading opportunity ahead of the seasonally strong December earnings
However, in the longer term, we remain cautious of rising competition
However, upside to GENHK's shares is capped due to long-term concerns - mushrooming competition in Manila's integrated casino space, and a potentially long payback period for its recently-commissioned new vessel for Asia, which will also be its largest (a 150,000 tonne, 1,682-berth vessel costing €707m), slated for delivery late-2016

OCBC Securities says...

MIDAS HOLDINGS | BUY | TP: S$0.67

Midas Holdings' 3Q13 results exceeded our expectations, with revenue jumping 48.5% YoY to CNY301.0m, or 15.8% above our forecast
Gross margin of 20.8% (-10.7 ppt YoY) disappointed due to a change in product mix as more aluminium extrusion profile deliveries were made to the lower margin freight wagons, while there was also an increase in per unit production cost
Nevertheless, bottomline reversed from a CNY6.1m net loss in 3Q12 to a PATMI of CNY16.4m and beat our projection of CNY13.3m
This was attributed largely to a share of profit of CNY10.9m from its 32.5%-owned associated company Nanjing SR Puzhen Rail Transport (NPRT) as more train cars were delivered, versus a share of loss of CNY7.0m in 3Q12. For 9M13, revenue and PATMI increased by 20.6% and 145.6% to CNY787.5m and CNY26.4m, respectively
Current order book stands at CNY900m for Midas and CNY8.5b for NPR
Midas recently clinched CNY167.5m of contracts to supply aluminium alloy extrusion profiles for the manufacture of high-speed railway (HSR) train cars on 21 Oct this year
We expect the bulk of this contribution to be booked in 4Q13, with the remainder in 1Q14 due to tight delivery schedules from its customers
Meanwhile, the China Railway Corporation (CRC) recently opened the second round of HSR train car tenders on 7 Nov
This involves a total of 258 train car sets, of which 78 are of 250km/h speed and 180 are of 350km/h speed (higher value)
We believe the potential market size for aluminium alloy extrusion profile suppliers may amount to ~CNY715.5m
Midas could possibly secure ~CNY325-380m of contracts from its customers from this procurement exercise in late Dec or early Jan next year, based on our estimates
We raise our FY13 revenue and PATMI forecast by 11.0% and 27.0%, respectively
While our projection for Midas' FY14 revenue is bumped up by 9.7%, we keep our earnings estimate intact due to a lower gross margin assumption
Rolling forward our valuations to 1.3x FY14F P/B, we increase our fair value estimate marginally from S$0.65 to S$0.67



SG: MARKET PULSE: ECS (19 Nov 2013)

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 0.585




MARKET PULSE: ECS
19 Nov 2013
KEY IDEA

ECS Holdings: Challenging environment, but growth achieved
ECS Holdings (ECS) reported a 4.5% YoY increase in its 3Q13 PATMI to S$8.7m on the back of a 11.4% jump in revenue to S$999.3m. After adjusting for forex and other exceptional items, we estimate that core earnings would have increased 4.7% YoY from S$8.7m to S$9.1m. This was in-line with our expectations. Looking ahead, we expect ECS to benefit from new product launches by major IT vendors in which it has established a strong working relationship with, such as Apple and Lenovo. We finetune our assumptions and raise our fair value estimate from S$0.56 to S$0.585 as we roll forward our valuations to 6x FY14F EPS. Maintain BUY, as valuations remain undemanding, with the stock trading at FY14F P/NTA of 0.55x and PER of 5.6x. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks closed mostly lower on Mon after activist investor Carl Icahn said he's "very cautious" on equities and they could experience a "big drop."

- Singapore's non-oil re-exports (NORX) surged to a record high of S$22.3b in Oct, rising 26.7% YoY.

- SingHaiyi Group has acquired the full equity stake of Vietnam Town, a partially completed commercial condominium development project in San Jose, California, for US$33.05m.

- Falcon Energy Group proposed a 1-for-10 bonus warrant issue of up to 82,453,751 free warrants for shareholders.

- Soilbuild Construction has won a contract to build a S$13m facility at the new Seletar Aerospace Park.

- NSL Chemicals, a wholly owned subsidiary of NSL Ltd, has agreed to sell its entire 100% stake in NSL Chemicals (Thailand) Ltd (NSCT) to SCG Chemicals Ltd for S$328.3m.

- Civmec Construction & Engineering, a subsidiary of Civmec Limited, has bagged new contracts worth a combined S$65m.





Monday, November 18, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: THBEV
Company Name: THAI BEVERAGE PUBLIC CO LTD
Research House: DBS VickersPrice Call: HOLDTarget Price: 0.57

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED
Research House: UOB KayHianPrice Call: HOLDTarget Price: 1.60

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED
Research House: Credit SuissePrice Call: HOLDTarget Price: 1.50




Market Compass


18 November 2013~ Good Morning Singapore!


Singapore Idea Snippets:
18 Nov 2013 ~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping

Source: Marketwatch



Quote for the day : All successful people men and women are big dreamers. They imagine what their future could be, ideal in every respect, and then they work every day toward their distant vision, that goal or purpose.
- BRIAN TRACY
Singapore: The Day Ahead

SINGAPORE DAYBOOK : London stakes claim to be the global capital of Islamic finance. The UK capital is already the biggest such centre outside the Islamic world.

[SINGAPORE] Which city, or nation, will be the global leader in Islamic finance over the next decade?
The favourites at the moment are Kuala Lumpur and Dubai. But a lot of people are now beginning to bet on London.
On Oct 29, the British government created a stir that reverberated across the financial capitals of the Islamic world. On that day, Prime Minister David Cameron announced that the UK Treasury would soon issue a £200 million (S$401 million) "sukuk" or Islamic bond. This will be the first sovereign sukuk issued by a Western country (a sukuk differs from a traditional bond in that it pays no interest; investors get a share of profits from an underlying syariah-compliant asset).
Moreover, the UK sovereign sukuk could serve as a global benchmark for Islamic bonds, which at the moment have none.
Mr Cameron was speaking at the 9th World Islamic Economic Forum (WIEF) in London at the end of October - the first time this annual convention - known as "the Davos of the Islamic world" - has ever been held in a non-Islamic nation. He was expansive about his country's ambitions in the realm of syariah-compliant finance.
"London is already the biggest centre for Islamic finance outside the Islamic world," he said. "I want London to stand alongside Dubai and Kuala Lumpur as one of the greatest capitals of Islamic finance anywhere in the world."
There's a lot to play for. According to a report by PwC, Islamic finance assets (including banking assets) total US$1.6 trillion globally. Between 2008 and 2012, they grew at close to 20 per cent per year and, by 2020, the market is expected to cross US$6 trillion. While Islamic finance assets are barely one per cent of all global financial assets, the number of players is also small.
Nearly all of the Western world does not participate in this market - London being the significant exception. Nine countries hold about 90 per cent of Islamic finance assets and just three (Iran, Malaysia and Saudi Arabia) account for more than 50 per cent.
Moreover, in certain areas of Islamic finance, demand exceeds supply - and this is particularly true of bonds. Sukuks outstanding at the end of 2012 totalled US$240 billion, with Malaysia being the biggest issuer, followed by Saudi Arabia.
Last year, Ernst & Young forecast that sukuk demand is likely to jump to US$900 billion by 2017, partly driven by rising risk aversion following the global financial crisis. Sukuks are popular because they are backed by real assets or real projects. Significantly, they are also favoured by investors from the non-Islamic world.
At the WIEF, Musaffar Hisham, CEO of Maybank Group Islamic Banking, pointed out that about half of the group's customers for Islamic products in Malaysia are non-Muslim. In Singapore, the figure is around 70 per cent.
The wider world's interest in Islamic finance products also derives from the growing interest in "ethical finance". During a session on Internationalising Islamic Finance at the WIEF, Hasan Al Jabri, CEO of Sedco Capital, an asset manager in Saudi Arabia, said: "Syariah-compliant finance intersects 90 per cent with ethical finance, which is a US$6 trillion market."
He added that common features include investments in sustainable development and avoiding investments in companies associated with gambling, alcohol, tobacco and weapons. A growing number of pension funds - such as Calpers, the California public employees retirement system, the biggest in the United States - and several foundations have strict guidelines mandating that they invest ethically. Many have Islamic finance products in their portfolio.
However, even its promoters and practitioners acknowledge that Islamic Finance has some way to go before it becomes truly mainstream. Sajid Javid, a British MP and Financial Secretary to the UK Treasury, who is one of the key personalities driving the development of Islamic finance in Britain pointed out: "Islamic scholars don't always agree on what constitutes Islamic finance; they come from different schools of thought."
Amr Al Menhali, head of Islamic Banking at the Abu Dhabi Commercial Bank in the UAE called for more simplicity in Islamic finance, including in the use of terminology.
Maybank's Mr Hisham called for clearer global regulation to ensure more uniformity of syariah-compliant products.
But the UK is undeterred by these obstacles. It is pulling out all the stops to promote itself as the centre for Islamic finance. It has set up an Islamic Finance Task Force. Its infrastructure is already relatively advanced: more Islamic products are listed on London exchanges than anywhere else. London has 25 law firms that provide services in Islamic finance and more syariah-compliant banks than anywhere in the Western world. And 16 British universities offer courses in Islamic finance.
Even London's mayor Boris Johnson (who spoke at the WIEF) is on board.
The mayor's office co-finances a corporation called London & Partners, which is the official promotional organisation for London, including for business, tourism, education, and conventions. Its director for International Business, David Slater told BT that London has seen what Islamic finance can do and likes what it sees.
On the proposed British sovereign sukuk, he said: "Investors are demanding more Islamic finance products, so it's about following the market, responding to what the market wants."
(Source: The Business Times)

MARKET SCOOP

Singapore Airlines says CFO to leave in Feb
468 units at Duo Residence sold as at 3pm Friday
LionGold to issue 98.2m new shares at 18.3 cts/shr to raise S$17m
Singapore retail sales slip 5.9% in Sept
SIA, Tourism New Zealand renew partnership
Ho Bee's Q3 net profit slips to S$7.3m
Thai Beverage Co Q3 profit tumbles
Kingsmen Q3 net profit down 8.2% to S$3.2m
(Source: The Business Times)

DBS VICKERS Securities says ...

THAI BEVERAGE PUBLIC CO | HOLD | TP: 0.57

3Q13 core net profit grew by 36% y-o-y to THB4.1bn, from THB3bn in 3Q12, despite revenue falling by 7% to THB35bn
The growth came largely from contribution of its associate stake in FNN
Stripping out FNN's profit contribution, ThaiBev's net profit fell by 23% to THB3.7bn
Beer and Non-Alcoholic Beverage (NAB) sales volume disappointed in 3Q13, while Spirits' volumes managed to show sequential volume growth of 7% from 2Q13
Beer revenue slipped by 9% as volumes dipped 14% arising from a hefty 15-20% ASP increase (due to a new excise tax passed on 4 Sep'13)
NAB segment faces keen competition, and with lower sales (-52% y-o-y) and higher expenses, the segment registered a loss of THB419m in 3Q13
We revised our forecasts down by 17%/ 20%/15% for FY13F/14F/15F
We expect competition to remain keen for its NAB segment while the Beer segment is likely to continue to see declining volumes on the back of the recent hefty price increase
We have also lowered Spirits' gross margin assumption to c.32%, from 34-34.5% previously
While we like the strong cash generation of its stable Spirits business, the projected slow ramp up and uncertainty in its other segments would be a drag on overall growth
We expect growth momentum to pick up meaningfully only in FY15F, which is still some time away
With the downward revision in earnings, our SOP-based TP is cut to S$0.57
In view of the limited upside, we downgrade ThaiBev to HOLD

UOB KAY HIAN says ...

OLAM INTERNATIONAL | HOLD | TP: S$1.60

Olam reported net profit of S$45.6m, up 5.7% yoy
1QFY14 results is about 10% of our full-year earnings and this a norm for Olam due to the seasonality of the production cycle
The growth was driven by margin expansion in upstream and midstream activities
Meanwhile, revenue dropped 7.9% yoy on lower commodity prices as sales volume was unchanged at 3.67m mt yoy
Olam announced sale-and-leaseback of our Australian Almond assets (A$200m) and sale of Dirranbandi Cotton gin (A$20m) for A$220.0m
We expect a one-time net profit of A$45m from the sale-and-leaseback of almond orchards
Across all divisions, EBITDA margin showed good improvement (refer to following table) due mainly to a) better cost management, b) some upstream investments starts contributing better margin as they move into a more mature stage
At group level, EBITDA margin for 1QFY14 was 5.7% vs 4.7% and 3.8% for 1QFY13 and 4QFY13 respectively
Although management stressed in the past that Olam's operations are less dependent on prices as most trades are on cost plus formula, in this quarter, management did highlight that the lower coffee and rice prices could have an impact on their margin
Both commodities prices corrected due to oversupply from Vietnam and Thailand respectively
Food Staples & Packaged Foods division deliver best results, ie the only division that delivered yoy and qoq growth in EBITDA
The good performance was mainly supported by the growth from African wheat milling, Packaged Foods and Indonesian Sugar refining segments
Losses mainly attributed to the Market-making & Volatility Trading Division
Both the Fund Management as well as the Market-making & Volatility Trading parts of the business have been restructured after the strategy review
Gearing maintained at 1.9x for 1QFY14, still below the 2x limit
The proceeds from the sale-and-leaseback of its plantations will be used to pair down the debts and working capital
This should further improve its gearing and cashflow
Capex for FY14 will be scaled back
For 1QFY14 the capex was down by 24.5% yoy to S$159.5m
No change to earnings estimates
We are expecting core net profits of S$447m, S$532 and S$604m for FY14, FY15 and FY16 respectively
Maintain HOLD with target price of S$1.60 based on FY15F PE and a 30% discount to Olam's long-term forward PE of 16.1x (or equivalent to 1SD below long-term mean PE)

CREDIT SUISSE Securities says...

OLAM INTERNATIONAL |HOLD | TP: S$1.50


Olam reported FY1Q14 PATMI of S$46 mn, inline with expectations and representing 12% of consensus FY14 PATMI
While FY1Q14 volumes were flat YoY, an improvement in group margin particularly in the Edible nuts, spices and beans segment led to a 12% YoY increase in EBITDA
Olam generated positive FCF of S$46 mn in FY1Q14, driven by both a reduction in working capital outflow and capex
With a further A$220 mn (S$255 mn) expected to be released with the completion of the sale of its Dirranbandi cotton gin and sale-and-leaseback of its almond plantation assets in Australia, we believe Olam is on track to turning FCF positive in FY14
There were no further updates on Olam's Gabon fertiliser project, even though negotiations with EPC negotiations with contractors were supposed to be completed in CY 3Q13 based on previous guidance
We maintain our NEUTRAL rating and DCF-based target price of S$1.50