21 June 2013~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : One loyal friend is worth ten thousand relatives
- EURIPIDES
Singapore: The Day AheadSINGAPORE DAYBOOK:Mr Market's taper tantrum. Addiction to cheap money has to end some day, but markets are too spoilt to listen FOR several days leading up to the meeting of the US Federal Reserve's key policymaking body, the Federal Open Market Committee (FOMC), which ended on Wednesday, Mr Market was on tenterhooks.
He was hoping against hope that the zero-interest rate, high-liquidity party hosted by the Fed for the last five years would rage on, but fearing in his heart that it might just be winding down.
When, after two days of deliberations, the Fed released its statement on Wednesday and chairman Ben Bernanke wrapped up his news conference, Mr Market did not like what he read and heard. So he threw a tantrum.
A bout of turmoil followed. US Treasuries were dumped, with 10-year yields hitting their highest level since March 2012. Even shorter-dated notes were sold off, as if short-term rates were on the verge of rising. Emerging-market stocks and bonds, which have been under pressure since early May, were further hammered - including all from Asean. Currencies also took a tumble against the dollar; all Southeast Asian currencies fell, and so did the Indian rupee, the South African rand and the Australian dollar. (Source: The Business Times)
MARKET SCOOP
99-year residential site in Coronation Road gets top bid of $908.17 psf ppr
SGXto review special audit report on China Sky for breaches
Wilmar senior executive emerges as significant shareholder in Whitehaven
S.Korea's Lotte Shopping to raise up to US$1b via Singapore Reit: IFR
Armstrong'smajor shareholder in talks that may lead to delisting
Jubilee to place 97.5m new shares at 15.4 cts/shr
ISDNto issue up to 179.97m warrants to fund energy-related projects
S'pore firms' payment record improves
"Hazardous" air, murky skies in Singapore from Indonesian fires
(Source: The Business Times)
DBS VICKERS says...
MIDAS HOLDINGS | BUY | TP: S$0.60
We hosted Midas' CEO and CFO for a two-day NDR in Hong Kong, and key concerns revolved around when the new high-speed train orders would be coming through
With China planning to double its HSR network to 18,000km by end-2015 and lack of orders for rolling stock in the last two years, there is firm optimism that the newly-formed China Railway Corporation could be placing orders for new HSR rolling stock in the second half of 2013, which should lead to substantial contract wins for Midas
Meanwhile, the group has won a number of metro and overseas train contracts to boost its order book to Rmb650m, up from Rmb400m at the end of 2012
32.5%-owned associate Nanjing Puzhen has won five metro contracts worth nearly Rmb4bn in the last six months to bring their order book to over Rmb10bn, which should underpin its earnings over the next two to three years
In turn, NPRT should start to contribute positively to Midas' bottom line from 2H13 onwards
Midas is currently trading below 1x P/B, which we see as attractive for a stock that is due for an earnings recovery from 2H13 onwards
Our TP is based on 1.2x P/B
UOB KAY HIAN says ...
SINGAPORE AIRLINES | HOLD | TP: S$11.50
Weaker-than-expected 2MFY14 traffic numbers, warning on yields and concern over SIA's aircraft orders lead us to downgrade SIA to HOLD
Yields are under pressure and if loads don't improve in June, losses are likely
Along with the May operating stats, SIA mentioned that yields are expected to remain under pressure as efforts are made to boost loads in the current operating environment
June is a peak period in 1QFY and if loads are below 80.5%, the odds of the parent airline business swinging into a loss are heightened
Silk Air fares no better with a ytd 7.4% decline in load factor
In 1QFY13, Silk Air contributed 25% of group operating profit
Given, the steep decline in loads, no doubt due to competition from low-cost carriers (LCC), Silk Air's yields and profits are also likely to remain weak in 1QFY14
As at end-FY12, SIA had capital commitments of S$7.5b
Recent orders along with associated engine orders could place this commitment at an estimated S$55b over the next 10-12 years
Total commitment now stands at 5x book value 4.6x market cap
While SIA has several options such as sale and leaseback of existing aircraft, we reckon it will fund about 20-25% of its capex requirements
SIA has generated an average of S$2.2b in operating cash flow over the past years and thus internal cash flow could fund about 50% of capex requirements on a straight line basis
We estimate that SIA would thus require external funding in the range of S$5b-8b to fulfill its capex commitments
According to Amadeus, Air Traffic Trend Intelligence Solution, 15% of all pax traffic between Asia Pacific and Europe transit at Dubai, Doha and Abu Dhabi
Traffic on the transit routes are growing at a faster pace than the main route, which highlights the significant competition that SIA faces
We had long argued that despite a cash hoard of S$5b, SIA should not be viewed as a dividend play given its substantial capital commitments
We cut our FY14 earnings estimates by 34% factoring in lower pax yields and adjusting our passenger and cargo traffic assumptions
Downgrade from BUY to HOLD, with a lower target price of S$11.50 (S$13.30 prev).
CIMB Securities says...
JAYA HOLDINGS | OUTPERFORM | TP: S$0.88
We came away positive from Jaya's meetings with investors a tour Annual Asia Pacific Conference
After a two-year transition, we see that Jaya has successfully morphed into a quality charterer
CEO Venkatraman Sheshashayee (Shesh) and CFO Chong Chow Pin participated in our Annual Asia Pacific Conference in Kuala Lumpur, where they met 10institutional funds
Investors found this old name familiar but lost track of the company when it underwent debt restructuring in FY09 -the result of its massive speculative new build programme, which was largely funded by short-term debt
Management articulated its strategy of transforming Jaya into a quality ship charterer with a shipyard focused on build-to-order and ship repairs
Additionally, CEO Shesh provided his views on the health of the OSV sector (steady strides and continued revival expected) and how Jaya has indirectly benefited from Malaysia's heightened E&P activities(see overleaf for details)
Chartering EBITDA had grown 43% yoy in FY12, and is set to grow by another 41% in FY13 to US$57.8m
Also, charter rates have increased due to higher-value incoming vessels and a focus on more complex time charters rather than simple bareboat charters
We see value emerging as the stock is trading at 0.65x CY3 P/BV,1 s.d.below its four-year mean
We maintain Outperform with catalysts to come from stronger chartering operations and shipbuilding and charter contracts
Also, we expect higher dividends(FY13: 1Scts; FY14: 3Scts)to accompany its rising chartering EBITDA
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