KEY IDEA
Sheng Siong Group: Time to go defensive
Sheng Siong Group's (SSG) FY12 results met our expectations with revenue increasing 10.2% YoY To S$637.3m while prudent cost management ensured an improvement in core operating profit margin by 0.3 ppt to 6.2%. In addition, core PATMI rose 14.8% YoY to S$31.3m. Management also declared a final dividend of 1.75 S cents (versus 1.77 S cents in FY11), and committed to extend its 90% PAT payout policy for another two years. We are positive on the outlook for SSG in FY13 on the back of i) full-year contributions from the eight new stores, ii) margin stability, and iii) defensive consumer spending in the face of continued economic uncertainty. Therefore, we reverse our previously conservative assumptions and raise our fair value to S$0.69 from S$0.58 previously. Upgrade to BUY. (Lim Siyi)
MORE REPORTS
Genting Singapore: FY12 in line; HOLD with new S$1.52 FV
Genting Singapore (GS) reported FY12 revenue down 9% at S$2948.1m, or 4.6% shy of our forecast, mainly due to lower gaming business volume. Net profit came in around S$677.7m, down 34%, and was 4.4% shy of our estimate. GS declared a final dividend of S$0.01/share, unchanged from last year. Going forward, GS is also slightly more upbeat about RWS' performance this year, citing the more positive global economic outlook. Besides the VIP segment, GS intends to focus on the mass market by targeting visitors from Malaysia and Indonesia. It adds that it is well placed to capitalize on investment opportunities in related leisure/gaming business, after raising some S$3b from perpetual securities last year; but did not give specific targets. While our DCF-based fair value improves from S$1.33 to S$1.52, we maintain our HOLD rating on valuation grounds. But an accretive acquisition could provide the catalyst of a re-rating. (Carey Wong)
CapitaLand Limited: Focused on improving ROE
CapitaLand (CAPL) announced 4Q12 PATMI of S$262.7m, falling 45% YoY mostly due to the impact of lower fair value gains. FY12 PATMI now cumulates to S$930.3m (down 12% YoY), which forms 103% of our FY12 forecast and is judged to be mostly in line with our expectations. Over 3,000 units were sold in China over FY12 - a strong pickup from ~1,500 units in FY11. In Singapore, 681 residential units were sold in FY12, dipping 19% from 844 units the previous year. We believe the strategic realignment initiative is proceeding well, with management clearly articulating their focus on improving ROE for shareholders ahead. To that end, we observe that CAPL has, over FY12, increased its leverage ratio to 45% from 31% and committed S$4.1b of new investments, mainly in key markets Singapore and China. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee)
COSCO Corp (S'pore): Headwinds remain
COSCO Corp (S'pore) reported a decent set of results that were within ours and the street's expectations. FY12 revenue decreased 10% to S$3.7b, while PATMI fell 24% to S$106m. The declines largely reflected the general weakness in the shipbuilding environment and COSCO's initial expansion into the offshore segment. While the group's margins appear to have stabilized, its cash generation remains weak. Against the backdrop of an uncertain operating environment, the rising net gearing ratio is also another concern. Rolling forward to FY13F, we raise our fair value estimate to S$0.90 (on 1.5x P/B). Maintain HOLD. (Chia Jiunyang)
Hyflux: Order book hits S$2.9b
Hyflux Ltd posted FY12 revenue of S$682.4m, up 42%, and was also some 16% above our forecast, but reported net profit of S$61.0m (+15%) was around 5% below our estimate; this is likely due to higher-than-expected recognition from its TuaSpring Desalination Project (TDP), which is now substantially completed. Hyflux has declared a final dividend of S$0.025/share, versus S$0.021 last year; this brings the total dividend for the year to S$0.032, versus S$0.0277 in FY11. Going forward, Hyflux is slightly more upbeat about its prospects, citing the still-strong global demand for water infrastructure projects. Order book already stands at S$2.9b (as of end-2012); and management believes that growth in the O&M portion will provide a steady and recurring revenue stream; it further expects the O&M revenue to capture the full impact of its current portfolio by FY16. For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should it win another substantial contract. (Carey Wong)
Sembcorp Marine: Receiving enquiries for drillships
Sembcorp Marine (SMM) reported a 38.1% YoY rise in revenue to S$1.38b and a 27.0% fall in net profit to S$167.1m in 4Q12, bringing full year revenue and net profit to S$4.43b and S$538.5m, respectively. Excluding one-off items such as foreign exchange losses and disposal gains, core net profit of S$562m was in line with our expectations. Operating margin fell from 14.1% in 3Q12 to 10.8% in 4Q12, mainly due to lower margins from new design rigs, and a higher proportion of procurement in the business mix. The group is seeing healthy enquiries for semi-submersible rigs and even drillships. SMM has secured new orders worth S$900m YTD, accounting for 20.3% of our full year estimate. Net order book is also strong at S$13.6b with deliveries till 2019. Maintain BUY with S$5.84 fair value estimate, based on 16x blended FY13/14F earnings. (Low Pei Han)
KS Energy: FY12 sees net profit of S$1.3m
KS Energy (KSE) reported a 41.7% increase in revenue to S$698.1m and a net profit of S$1.3m in FY12, vs. our forecast of a full year net loss of S$1.0m. This compares to a net loss of S$78.8m in FY11. Revenue from the distribution business grew 32% to S$460.4m, accounting for 66% of total revenue. Turnover from the drilling segment rose 76%, mainly due to the sale of the KS Java Star rig to a subsidiary of KSE's jointly controlled subsidiary, PT KS Drilling Indonesia. Overall gross profit margin fell from 22.2% to 18.6%. KSE expects more assets to be deployed over the next twelve months for its drilling business, particularly in Indonesia. Pending more details from management, we maintain our HOLDrating but place our fair value estimate of S$0.83 under review. (Low Pei Han)
Midas Holdings: Expects significant fall in FY12 revenue and PATMI
Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 4Q12 results release, saying that it expects to record a significant drop in its revenue and PATMI for FY12. This is unsurprising as its 9M12 results had already seen a 24.9% and 92.9% plunge in revenue and PATMI, respectively. We are forecasting FY12 revenue of CNY845.6m and PATMI of CNY6.8m, which translates into a decline of 21.8% and 96.4%, respectively. We had also constantly highlighted that Midas' near term financial performance would remain lacklustre in the near term. Reasons cited for the guidance are higher operating and financial expenses and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). Midas will report its 4Q12 results on 27 Feb after trading hours, while an analyst conference call has been scheduled the day after. We will provide more updates then. For now, we have a BUY rating and S$0.60 fair value estimate on the stock. (Wong Teck Ching Andy)
Raffles Medical Group: Letter of Intent for proposed hospital development in China
Raffles Medical Group (RMG) announced this morning that it had entered into a non-binding Letter of Intent (LOI) dated 31 Jan 2013 with China Merchants Shekou Industrial Zone, to collaborate on the proposed development of an integrated international hospital in Shenzhen, China. The hospital would have more than 200 beds and is targeted to provide high-end medical services to foreigners and locals in the Pearl River Delta region. Although this LOI is subject to terms being finalised and relevant regulatory approvals, we believe that it highlights the intention of management to expand its hospital operations beyond Singapore. Recall that RMG had also submitted a hospital development tender in Hong Kong last Jul (tender results expected to be out in early 2013). Should these projects materialise, we opine that it would raise RMG's brand profile in the region and diversify its income streams. As RMG is slated to release its 4Q12 results next Monday, 25 Feb before market open, coupled with its recent share price appreciation, we place our Hold rating and S$2.68 fair value estimate under review. (Wong Teck Ching Andy)
Wilmar: Much stronger-than-expected FY12 earnings
Wilmar International Limited (WIL) has posted a much stronger-than-expected set of FY12 results. Although reported net profit was down 21.6% at US$1255.5m, core earnings at US$1167.0m (down 23.1%) were still 14% ahead of our forecast. We note that the outperformance came mainly from a 32% jump in PBT from its Palm & Laurics division; this driven by the revised Indonesian export tax structure. WIL has declared a final dividend of S$0.03/share (versus S$0.031 last year), bringing its total dividend to S$0.05 for FY12, or 18% lower than last year. Going forward, management remains "cautiously optimistic" about its long-term prospects. We will have more after the mid-day analyst briefing. For now, we place our Buy rating and S$3.52 fair value under review. Note that the stock has jumped 18% since we upgraded it on 9 Nov 2011. (Carey Wong)
Yangzijiang Shipbuilding: Results largely in line; four more contracts ceased
Yangzijiang Shipbuilding (YZJ) reported a 32% YoY fall in revenue to RMB3.6b and a 22% drop in net profit to RMB807.7m in 4Q12, bringing full year revenue and net profit to RMB14.8b and RMB3.6b, respectively. Results were largely in line with our expectations, with both revenue and net profit 4% shy of our full year estimates. Four shipbuilding contracts were ceased in 4Q12, affecting the original delivery schedule. Hence the group only delivered 12 vessels in the quarter. The commercial shipbuilding industry is still in its down cycle and the operating environment continues to be difficult and challenging. Pending an analysts' briefing later this morning, we maintain our HOLD rating but our fair value estimate of S$0.95 is under review. (Low Pei Han)
Singapore Economy: 2013 growth forecast remains at 1.0-3.0%
According to the Ministry of Trade and Industry (MTI), Singapore's economy grew by 1.5% in 4Q12, better than the street's expectations of a 1.2% growth, as well as the zero growth seen in 3Q12. On a seasonally-adjusted annualized basis, the economy expanded by 3.3% QoQ, compared to the 4.6% contraction in 3Q12. Manufacturing grew by 3.1% QoQ vs 3Q12's 16.6% decline, largely due to a rebound in biomedical output and transport engineering. Construction contracted by 3.9% while services grew by 2.5% QoQ. All these factors brought 2012 growth to 1.3%. For 2013, the official growth forecast is maintained at 1.0-3.0%, but key risks include the fiscal cutback in the US and the Eurozone debt crisis. (Low Pei Han)
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