Singapore Telecom : BUY S$3.87;
Bloomberg: ST SP Associate setback but potential special dividends
Price Target : 12-month S$ 4.35 (Prev S$ 4.50)
By: Sachin Mittal +65 6398 7950
Story: SingTel’s upcoming 4QFY08 results will be clouded by a strong Singapore dollar and not-so strong performance of Indonesian associate Telkomsel. We expect SingTel to complement its regular dividend with a special dividend to be announced with 4QFY08 results.
Point: Three issues surrounding SingTel are (i) concerns of strong appreciation of SGD against the Indian rupee that could impact earnings and valuation contribution of its Indian associate - Bharti in terms of SGD; (ii) significant reduction in tariff of Indonesian associate Telkomsel that could lower its earnings contribution; and (iii) SingTel potentially paying 8-10 cents in special dividends on top of the 6.5 cents regular dividend with 4QFY08 results.
Relevance: We trimmed our pre-exceptional estimates for FY08F and FY09F by 1.4% and 3.7%, respectively. Overall, net profit for FY08F is unchanged due to S$155m exceptional income (evident in 9M08 results) compared to our assumption of S$100m. SingTel remains a BUY with a new sum-of-parts (SOP) based valuation of S$4.35 (prev. S$4.50) due to lower contribution from Telkomsel and Bharti.
SPH: BUY S$4.43;
Bloomberg: SPH SP Core business going strong;
Price Target : 12-month S$ 5.80
BY; Paul Yong +65 6398 7951
Story: SPH reported a good set of operating results as at 1H08, which helped to offset poorer investment income. 1H08 PBT for the core newsprint and magazine business rose by 16% yoy to S$191m, boosted by double-digit ad revenue growth whilst PBT for Treasury and Investment dropped by 76% yoy to S$14.5m, due to a lack of special dividends and a poor equities market. Stronger contribution from the property segment, boosted by contribution from Sky@Eleven also helped offset lower investment income. As at halftime, net earnings for the Group declined by 2% yoy to S$212m. An S 8cts dividend was declared, vs S 7 cts a year ago.
Point: SPH continues to benefit from strong consumer sentiment in Singapore, as evidenced by the double-digit growth in ad spend in 2Q08 and we believe the Group can post double digit earnings growth for the full year for this business even with a slower second half. Meanwhile, we have lowered our investment income projections for FY08 and FY09 and also factored in a delay in construction for Sky@Eleven, which has been affected somewhat by a shortage in manpower and bad weather. These changes have not impacted our sum-of-the-parts valuation for SPH.
Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of 7.2% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our 12-month target price is S$5.80, based on SOTP valuation.
Showing posts with label DBSVickers Report. Show all posts
Showing posts with label DBSVickers Report. Show all posts
Tuesday, April 15, 2008
Friday, April 4, 2008
DBSVickers Report - 04 April 2008
Hyflux Water Trust (Buy (Initiating Coverage); S$0.59; Bloomberg: HYFT SP)
Ready To Surf Up
Price Target : 12-Month S$ 0.78
BY: Singapore Research Team +65 6533 9688 and : Ai Teng Tan +65 6398 7967
Story: Hyflux Water Trust (“HWT”) is the first pure-play water trust to be listed in the region and should benefit from strong market fundamentals in the water infrastructure sector in China.
Point: The initial portfolio consists of water-related assets – water treatment plants, wastewater treatment plants and water recycling plants – capable of supplying a total capacity of 445,000 cu m / day in key industrial belts of high growth provinces in China. Growth potential in the initial years will stem from completing plants and escalating utilization rates of existing plants, which could lead to an 82% increase in annual tariff receipts over 2008-2010. Additionally, Hyflux has granted HWT the rights of first offer and refusal (“ROFOAR”) to a pipeline of assets with total design capacity of 760,000 cu m/ day, all ready to be injected into the trust in tranches every 12-18 months. HWT’s debt free position at IPO also leaves significant headroom for debt-sponsored acquisitions in the future.
Relevance: HWT is a defensive earnings play with predictable cash flows, promising a DPU yield of 7-9% for FY08 and FY09. At current valuation of 0.88x P/BV, HWT compares favourably with REITS and other infrastructure/ shipping trusts listed in Singapore, but with a much higher debt headroom to fund stronger growth potential. We believe the counter will outperform over time as HWT begins to deliver on it post-IPO acquisition schedule, just as market has favoured developer-backed REITs which have delivered on their acquisition promises. We initiate coverage on HWT with a BUY call at a DDM-backed Target Price of S$0.78 (WACC 10.0%).
Ready To Surf Up
Price Target : 12-Month S$ 0.78
BY: Singapore Research Team +65 6533 9688 and : Ai Teng Tan +65 6398 7967
Story: Hyflux Water Trust (“HWT”) is the first pure-play water trust to be listed in the region and should benefit from strong market fundamentals in the water infrastructure sector in China.
Point: The initial portfolio consists of water-related assets – water treatment plants, wastewater treatment plants and water recycling plants – capable of supplying a total capacity of 445,000 cu m / day in key industrial belts of high growth provinces in China. Growth potential in the initial years will stem from completing plants and escalating utilization rates of existing plants, which could lead to an 82% increase in annual tariff receipts over 2008-2010. Additionally, Hyflux has granted HWT the rights of first offer and refusal (“ROFOAR”) to a pipeline of assets with total design capacity of 760,000 cu m/ day, all ready to be injected into the trust in tranches every 12-18 months. HWT’s debt free position at IPO also leaves significant headroom for debt-sponsored acquisitions in the future.
Relevance: HWT is a defensive earnings play with predictable cash flows, promising a DPU yield of 7-9% for FY08 and FY09. At current valuation of 0.88x P/BV, HWT compares favourably with REITS and other infrastructure/ shipping trusts listed in Singapore, but with a much higher debt headroom to fund stronger growth potential. We believe the counter will outperform over time as HWT begins to deliver on it post-IPO acquisition schedule, just as market has favoured developer-backed REITs which have delivered on their acquisition promises. We initiate coverage on HWT with a BUY call at a DDM-backed Target Price of S$0.78 (WACC 10.0%).
Tuesday, March 25, 2008
DBSVickers Report - 25 March 2008
Allco Commercial REIT (BUY S$0.76 Bloomberg: ALLC SP)
Re-financing issues laid to rest
Price Target : 12-Month S$ 1.23 (Prev S$ 1.54)
By: Singapore Research Team +65 6533 9688
Story: Allco REIT (Allco) share price was hit recently by a spate of negative news ranging from a Moody’s ratings downgrade to ‘Ba2’ in view of its high debt expiry and strategic review to a potential fire sale situation given its inability to obtain re-financing. However, Allco has allayed such unfounded fears by securing an in-principal approval for the extension of its S$550m loan facility expiring in July’08 to end Dec’09. In addition, the proposed strategic review raised concerns of a possible dilutive impact on earnings in the near term.
Point: We have previously maintained that re-financing should not pose much of a problem for Allco given its strong asset base of S$2bn, (of which c. 50% is made up of its Singapore properties) but at a higher price of c. 200 bps above its current rates. The group is in the process of divesting its stake in AWPF and is looking to unlock gains from its Central Park in Perth. As such, we have further adjusted FY08 and FY09 DPU to 6.6cts and 6.8cts to reflect the absence of AWPF. A recent re-composition of its board to include a majority of independent directors is a positive signal to investors as a step in the right direction for good corporate governance and should be viewed positively on a operational, asset divestment and future reinvestment standpoint.
Relevance: With re-financing issues put to rest, a re-rating of Allco would hinge on further newsflow with regards to i) the successful execution of its re-investment plans and organic growth strategies to drive DPU growth which will be partially driven by strong rental reversions from Keypoint offsetting the loss of the income from API and distribution income from AWPF, ii) clarity on the positioning of Allco REIT given API and AFG’s restructuring activities. We maintain BUY on Allco with revised TP of S$1.23 based on a 20% discount to its DCF backed price of S$1.54 on the premise of uncertainties arising from the ongoing restructuring activities at its parent level.
Re-financing issues laid to rest
Price Target : 12-Month S$ 1.23 (Prev S$ 1.54)
By: Singapore Research Team +65 6533 9688
Story: Allco REIT (Allco) share price was hit recently by a spate of negative news ranging from a Moody’s ratings downgrade to ‘Ba2’ in view of its high debt expiry and strategic review to a potential fire sale situation given its inability to obtain re-financing. However, Allco has allayed such unfounded fears by securing an in-principal approval for the extension of its S$550m loan facility expiring in July’08 to end Dec’09. In addition, the proposed strategic review raised concerns of a possible dilutive impact on earnings in the near term.
Point: We have previously maintained that re-financing should not pose much of a problem for Allco given its strong asset base of S$2bn, (of which c. 50% is made up of its Singapore properties) but at a higher price of c. 200 bps above its current rates. The group is in the process of divesting its stake in AWPF and is looking to unlock gains from its Central Park in Perth. As such, we have further adjusted FY08 and FY09 DPU to 6.6cts and 6.8cts to reflect the absence of AWPF. A recent re-composition of its board to include a majority of independent directors is a positive signal to investors as a step in the right direction for good corporate governance and should be viewed positively on a operational, asset divestment and future reinvestment standpoint.
Relevance: With re-financing issues put to rest, a re-rating of Allco would hinge on further newsflow with regards to i) the successful execution of its re-investment plans and organic growth strategies to drive DPU growth which will be partially driven by strong rental reversions from Keypoint offsetting the loss of the income from API and distribution income from AWPF, ii) clarity on the positioning of Allco REIT given API and AFG’s restructuring activities. We maintain BUY on Allco with revised TP of S$1.23 based on a 20% discount to its DCF backed price of S$1.54 on the premise of uncertainties arising from the ongoing restructuring activities at its parent level.
Wednesday, March 19, 2008
DBSVickers Report - 19 March 2008
Ferrochina; BUY S$1.16;
Bloomberg: FRC SP Plant Visit Reinforces
Our Confidence in the Group’s Outlook;
Price Target : 12-Month S$ 2.75 (Prev S$ 2.80)
By: Paul Yong +65 6398 7951
Story: We paid a visit to FerroChina’s production plant in Changshu, Jiangu last week and also had the opportunity to meet up with the Group’s management.
Point: FerroChina’s 3rd reverse cold rolling mill is on track for commercial production by 2Q08 whilst two more galvanizing lines are expected to be up by the second half of the year. After speaking to management, we believe FerroChina’s sales growth in 2008 is likely to be driven mostly by higher volume sales of cold rolled steel coils (CRC), which are currently in short supply and are commanding attractive margins. Demand for high quality galvanized steel also continues to be firm and we expect GP per MT for this product to hold steady, with the Group’s blended GP per MT improving as more higher margin products such as pre-painted galvanized steel coils are produced. At the same time, we have also tweaked our assumptions to match the Group’s current segmental reporting format, which breaks down their products into a) galvanized and pre-painted steel coils, b) cold rolled steel coils and c) others (antisepticised steel coils and cutting & slitting services). We have raised ASP assumptions to reflect current price trends but kept GP per MT largely intact. In summary, we have cut our FY08 earnings estimate by 2% and raised our FY09 earnings estimate by 3%.
Relevance: We maintain our BUY call, with a marginally adjusted target price of S$2.75, based on 10x FY08 earnings. At 4.1x FY08 PER and 3.2x FY09 PER, valuations are undemanding and the Group could be a take-out or investment target for upstream players looking to move into the downstream at this attractive price level.
Bloomberg: FRC SP Plant Visit Reinforces
Our Confidence in the Group’s Outlook;
Price Target : 12-Month S$ 2.75 (Prev S$ 2.80)
By: Paul Yong +65 6398 7951
Story: We paid a visit to FerroChina’s production plant in Changshu, Jiangu last week and also had the opportunity to meet up with the Group’s management.
Point: FerroChina’s 3rd reverse cold rolling mill is on track for commercial production by 2Q08 whilst two more galvanizing lines are expected to be up by the second half of the year. After speaking to management, we believe FerroChina’s sales growth in 2008 is likely to be driven mostly by higher volume sales of cold rolled steel coils (CRC), which are currently in short supply and are commanding attractive margins. Demand for high quality galvanized steel also continues to be firm and we expect GP per MT for this product to hold steady, with the Group’s blended GP per MT improving as more higher margin products such as pre-painted galvanized steel coils are produced. At the same time, we have also tweaked our assumptions to match the Group’s current segmental reporting format, which breaks down their products into a) galvanized and pre-painted steel coils, b) cold rolled steel coils and c) others (antisepticised steel coils and cutting & slitting services). We have raised ASP assumptions to reflect current price trends but kept GP per MT largely intact. In summary, we have cut our FY08 earnings estimate by 2% and raised our FY09 earnings estimate by 3%.
Relevance: We maintain our BUY call, with a marginally adjusted target price of S$2.75, based on 10x FY08 earnings. At 4.1x FY08 PER and 3.2x FY09 PER, valuations are undemanding and the Group could be a take-out or investment target for upstream players looking to move into the downstream at this attractive price level.
Tuesday, March 18, 2008
DBSVickers Report - 18 March 2008
Pacific Andes BUY S$0.485;
Bloomberg: PAH SP Worth more than it is
Price Target : 12-Month S$ 0.92
By: Andy Sim +65 6398 7969
Story: Despite the volatility and risk aversion seen recently in the equities market, we believe Pac Andes presents good value at the current price.
Point: Fundamentally, operations and growth for Pac Andes is intact. Growth should continue to be driven by its fishing division (through a 64. % stake in China Fishery Group) and supplemented by its Frozen Fish Distribution. Global annual demand for fish is expected to balloon by 50m tonnes to 183m by 2015, from c. 133m in 2001, according to FAO (Food and Agriculture Organisation). Based on historical data, global fish supply has been supported by growth in aquaculture (1990 – 2005 CAGR of 9.2% vs total global fish production CAGR of 2.9%). Growth of global wild caught fish was relatively flat due to “full or over-exploitation” of wild fishes (CAGR of 0.67%). CFG seems well poised to benefit from the above-mentioned trends due to their presence in trawling and fishmeal operations, in our opinion. The current price of S$0.485 is trading even below the market value of its effective stake in CFG. Market value of its 64% stake in CFG (at S$1.60 share) is worth about S$802m or S$0.60/share. Adding this to our estimate of its frozen fish business, valued at S$0.06/share, our estimate for sum-of-the-parts valuation shows a value of S$0.60/share (after assuming a 10% holding company discount).
Relevance: Valuations are undemanding at 6.4x FY08F and only 5.4x FY09F earnings. Reiterate Buy, with our target price maintained at S$0.92, pegged at 10x FY09F PER. At current levels, counter is trading at parity to FY08F book value. Downside price risk should be protected by a forecasted dividend yield of 4.5% for FYE Mar 08. We also introduced FY10F forecasts. Catalysts for this counter could come if and when CFG successfully re-negotiates its 4th VOA to terms on a pre-payment basis, which should be more cost efficient than the current fixed daily charter hire.
Bloomberg: PAH SP Worth more than it is
Price Target : 12-Month S$ 0.92
By: Andy Sim +65 6398 7969
Story: Despite the volatility and risk aversion seen recently in the equities market, we believe Pac Andes presents good value at the current price.
Point: Fundamentally, operations and growth for Pac Andes is intact. Growth should continue to be driven by its fishing division (through a 64. % stake in China Fishery Group) and supplemented by its Frozen Fish Distribution. Global annual demand for fish is expected to balloon by 50m tonnes to 183m by 2015, from c. 133m in 2001, according to FAO (Food and Agriculture Organisation). Based on historical data, global fish supply has been supported by growth in aquaculture (1990 – 2005 CAGR of 9.2% vs total global fish production CAGR of 2.9%). Growth of global wild caught fish was relatively flat due to “full or over-exploitation” of wild fishes (CAGR of 0.67%). CFG seems well poised to benefit from the above-mentioned trends due to their presence in trawling and fishmeal operations, in our opinion. The current price of S$0.485 is trading even below the market value of its effective stake in CFG. Market value of its 64% stake in CFG (at S$1.60 share) is worth about S$802m or S$0.60/share. Adding this to our estimate of its frozen fish business, valued at S$0.06/share, our estimate for sum-of-the-parts valuation shows a value of S$0.60/share (after assuming a 10% holding company discount).
Relevance: Valuations are undemanding at 6.4x FY08F and only 5.4x FY09F earnings. Reiterate Buy, with our target price maintained at S$0.92, pegged at 10x FY09F PER. At current levels, counter is trading at parity to FY08F book value. Downside price risk should be protected by a forecasted dividend yield of 4.5% for FYE Mar 08. We also introduced FY10F forecasts. Catalysts for this counter could come if and when CFG successfully re-negotiates its 4th VOA to terms on a pre-payment basis, which should be more cost efficient than the current fixed daily charter hire.
Monday, February 25, 2008
DBSVickers Report - 25 Feb 2008
Meiban Group (Buy S$0.39; MEI SP)
Maintaining its stride Price Target : 12-Month S$ 0.68 by Ai Teng Tan +65 6398 7967 and Sachin Mittal +65 6398 7950
Story: Meiban reported an impressive set of 4Q07 results. Net profit of S$7.5m (+133% y-o-y, -3% q-o-q) exceeded our S$6.1m forecast on further margin expansion and lower tax rate. Notwithstanding a lower than expected sales of S$146.2m (+12% y-o-y, -14% q-o-q) vs our forecast of S$150.3m, gross margin improved 30bp sequentially to 12.3%, thanks to better sales mix. For the full year, Plastic surged 35% on higher HP orders whilst organic growth and new model introductions by Dyson propelled Contract Manufacturing to expand 19%. Fundamentally, Meiban continued to generate positive free cashflows and ended the year with a strong balance sheet and net cash of S$5m.
Point: Although prevailing macroeconomic uncertainties have yet to improve, we remain positive that Meiban has a good chance of holding bottomline stable instead of negative growth because 1) it is still gaining market share for HP’s products from a weakening competitor; 2) HP (20% of sales) has guided positively for growth in FY08; 3) Aggressive new products in the pipeline from Dyson (50%) to capture new market segment; and 4) further margin expansion, courtesy of vertical integration as Meiban undertakes production of higher margin critical components ( cyclone) which were previously outsourced. As such, we are maintaining FY08 net profit of S$23m, indicating flat bottomline.
Relevance: In addition to compelling valuations of 5.7x PER and 1x P/BV, Meiban pays a handsome dividend of almost 11% dividend yield. We are maintaining our Buy rating and fair value of S$0.68, based on 10x FY08 earnings.
SembCorp Marine (Buy S$3.53; SMM SP) Confidence restored
Price Target : 12-month S$ 4.88 (Prev S$ 5.15) By: Jesvinder Sandhu +65 6398 7965
Story: FY07 net profit came in 9% ahead of our expectations; with 4Q reporting a net profit of S$0.8m rather than a loss of S$8.6m as previously expected. Key points to note: (a) The better performance was due to better higher operating margins which improved a significant 2.8ppt to 9.4% for 4Q07, thus reversing the decline that we had seen over 1Q to 3Q07. (b) This improvement was due to: (i) a strong baseload of rig building projects, especially the better priced contracts that have moved past the initial phase of completion as reflected in the 44% increase in rig building turnover to S$2.5bn; and (ii) better margins from shiprepair as SMM has been able to cherry pick jobs given the tight dock capacity. (c) SMM also maintained its dividend payout ratio at 75% - 2H DPS is 5.16Scts; bringing total DPS for the year to 8.73Scts. (d) A forex hit of S$308m has been taken through the 4Q numbers with US$50.7m reported as a contingent liability.
Point: Order book stands at an all-time high of S$7.4bn underpinned by S$5.4bn of order wins in 2007 and S$403m YTD. Enquiries are strong and we believe that order flows for this year is not a concern. We do not think that rising steel prices will have a significant impact on SMM’s margins. We confirmed with management that major cost components such drilling package, high tensile steel as well as other steel costs are locked in at the time that the contract is signed. Thus, SMM should only be exposed to labour costs and overheads, which account for around 20% of cost of sales for the rig building division.
Relevance: Maintain Buy. We have raised FY08-09 earnings by 6% and 9% respectively due to better margins of 8% (from 6.9%) and 8.2%(from 7%) respectively. TP reduced to S$4.88 (from S$5.15) to take into account our lower target price for Cosco (Buy, TP S$6.70) and the lower PE ratings ascribed to Cosco’s shipbuilding and shiprepair/conversion activities.
Maintaining its stride Price Target : 12-Month S$ 0.68 by Ai Teng Tan +65 6398 7967 and Sachin Mittal +65 6398 7950
Story: Meiban reported an impressive set of 4Q07 results. Net profit of S$7.5m (+133% y-o-y, -3% q-o-q) exceeded our S$6.1m forecast on further margin expansion and lower tax rate. Notwithstanding a lower than expected sales of S$146.2m (+12% y-o-y, -14% q-o-q) vs our forecast of S$150.3m, gross margin improved 30bp sequentially to 12.3%, thanks to better sales mix. For the full year, Plastic surged 35% on higher HP orders whilst organic growth and new model introductions by Dyson propelled Contract Manufacturing to expand 19%. Fundamentally, Meiban continued to generate positive free cashflows and ended the year with a strong balance sheet and net cash of S$5m.
Point: Although prevailing macroeconomic uncertainties have yet to improve, we remain positive that Meiban has a good chance of holding bottomline stable instead of negative growth because 1) it is still gaining market share for HP’s products from a weakening competitor; 2) HP (20% of sales) has guided positively for growth in FY08; 3) Aggressive new products in the pipeline from Dyson (50%) to capture new market segment; and 4) further margin expansion, courtesy of vertical integration as Meiban undertakes production of higher margin critical components ( cyclone) which were previously outsourced. As such, we are maintaining FY08 net profit of S$23m, indicating flat bottomline.
Relevance: In addition to compelling valuations of 5.7x PER and 1x P/BV, Meiban pays a handsome dividend of almost 11% dividend yield. We are maintaining our Buy rating and fair value of S$0.68, based on 10x FY08 earnings.
SembCorp Marine (Buy S$3.53; SMM SP) Confidence restored
Price Target : 12-month S$ 4.88 (Prev S$ 5.15) By: Jesvinder Sandhu +65 6398 7965
Story: FY07 net profit came in 9% ahead of our expectations; with 4Q reporting a net profit of S$0.8m rather than a loss of S$8.6m as previously expected. Key points to note: (a) The better performance was due to better higher operating margins which improved a significant 2.8ppt to 9.4% for 4Q07, thus reversing the decline that we had seen over 1Q to 3Q07. (b) This improvement was due to: (i) a strong baseload of rig building projects, especially the better priced contracts that have moved past the initial phase of completion as reflected in the 44% increase in rig building turnover to S$2.5bn; and (ii) better margins from shiprepair as SMM has been able to cherry pick jobs given the tight dock capacity. (c) SMM also maintained its dividend payout ratio at 75% - 2H DPS is 5.16Scts; bringing total DPS for the year to 8.73Scts. (d) A forex hit of S$308m has been taken through the 4Q numbers with US$50.7m reported as a contingent liability.
Point: Order book stands at an all-time high of S$7.4bn underpinned by S$5.4bn of order wins in 2007 and S$403m YTD. Enquiries are strong and we believe that order flows for this year is not a concern. We do not think that rising steel prices will have a significant impact on SMM’s margins. We confirmed with management that major cost components such drilling package, high tensile steel as well as other steel costs are locked in at the time that the contract is signed. Thus, SMM should only be exposed to labour costs and overheads, which account for around 20% of cost of sales for the rig building division.
Relevance: Maintain Buy. We have raised FY08-09 earnings by 6% and 9% respectively due to better margins of 8% (from 6.9%) and 8.2%(from 7%) respectively. TP reduced to S$4.88 (from S$5.15) to take into account our lower target price for Cosco (Buy, TP S$6.70) and the lower PE ratings ascribed to Cosco’s shipbuilding and shiprepair/conversion activities.
Friday, January 25, 2008
DBSVickers Report - 25 Jan 2008
Ascendas India Trust: Growing Strongly
Buy S$1.04
Price Target : S$ 1.84
A-iTrust reported a strong set of 3Q08 results. Gross revenue was up 60% yoy and 7% qoq to S$27.0m. The strong performance was attributable to strong rental renewals at 91% above preceding rates and completion of 2 buildings, Vega at V and Crest at ITPC which added 1.1m sf to portfolio. Net profit was up >100% to S$33.2m mainly due to revaluation gain of S$28.1m (net of deferred tax) on its Vega property.
Revaluation gain. More revaluation gains are expected in the pipeline in 4Q08 when the Crest obtains the necessary certification.
Gearing at a low 4%, giving the trust ample borrowing capacity of S$550m for acquisitions up to management’s imposed limit of 60% gearing.
CapitaCommercial Trust : Strong organic growth at a discount
Buy S$1.91 Price
Target : S$ 2.97
CCT reported FY07 results in line with estimates. Revenue and NPI grew by 54.2% and 51.7% y-o-y to S$240.1m and S$174.0m respectively.
DPU was 8.7 cents growing by 18.7% y-o-y, translating to 4.6% yield. 4Q07 DPU came in at 2.33 cents. Revaluation gains of a further S$575.6m in 4Q07 accumulating to S$1.3bn for FY07 (portfolio valued at 4-4.5% cap rate) lowers CCT’s gearing to 24%.
This could provide CCT with more headroom for debt funding compared to equity currently for AUM growth. Net interest cover remains reasonable at 3.3x, and average cost of debt at 3.9%.
Mapletree Logistics: Leading Pan Asian Logistics player
Buy S$0.90 Price
Target : S$ 1.42 (Prev S$ 1.6)
Mapletree Logistics Trust (MLT) reported FY07 results within expectations. Distributable income increased 76% yoy to S$141.7m and DPU posted a growth of 30% y-o-y to 6.57 cents. This is mainly attributable to contributions from its acquisitions that resulted from a larger property portfolio. (70 properties as at 31 Dec '07 vs 41 properties in 31st Dec'06).
Rights issue postponed. This may result in limited acquisition growth in the near term due to its current gearing level of 53.4%. Debt-funded acquisitions is limited to a further S$405m out of which S$241m has been committed.
However, management has indicated that their immediate term target for DPU growth is through yield optimization from AEIs and positive rental reversions.
MobileOne: Dividends cannot compensate for weak business model
Hold S$1.92
Price Target : S$ 2.20 (Previous S$2.30)
Net profit of S$37.9m was down 5% y-o-y and 6% below consensus and our expectations. The company announced final dividend of 8.3 cents per share, which is slightly below our expectations of 10 cents per share.
EBITDA margin down at 36.9% from 40.9% year earlier. Despite lower handset sales, margins were lower than our expectations due to
(1) higher traffic expenses from IDD promotions and
(2) higher leased circuit costs due to more data usage from 3.5G wireless broadband.
Market share loss. Quite noticeable was market share loss in prepaid mobile to 26.1% from 27.5% in 3Q07 and in post-paid mobile to 28.5% from 28.9% in 3Q07.
Buy S$1.04
Price Target : S$ 1.84
A-iTrust reported a strong set of 3Q08 results. Gross revenue was up 60% yoy and 7% qoq to S$27.0m. The strong performance was attributable to strong rental renewals at 91% above preceding rates and completion of 2 buildings, Vega at V and Crest at ITPC which added 1.1m sf to portfolio. Net profit was up >100% to S$33.2m mainly due to revaluation gain of S$28.1m (net of deferred tax) on its Vega property.
Revaluation gain. More revaluation gains are expected in the pipeline in 4Q08 when the Crest obtains the necessary certification.
Gearing at a low 4%, giving the trust ample borrowing capacity of S$550m for acquisitions up to management’s imposed limit of 60% gearing.
CapitaCommercial Trust : Strong organic growth at a discount
Buy S$1.91 Price
Target : S$ 2.97
CCT reported FY07 results in line with estimates. Revenue and NPI grew by 54.2% and 51.7% y-o-y to S$240.1m and S$174.0m respectively.
DPU was 8.7 cents growing by 18.7% y-o-y, translating to 4.6% yield. 4Q07 DPU came in at 2.33 cents. Revaluation gains of a further S$575.6m in 4Q07 accumulating to S$1.3bn for FY07 (portfolio valued at 4-4.5% cap rate) lowers CCT’s gearing to 24%.
This could provide CCT with more headroom for debt funding compared to equity currently for AUM growth. Net interest cover remains reasonable at 3.3x, and average cost of debt at 3.9%.
Mapletree Logistics: Leading Pan Asian Logistics player
Buy S$0.90 Price
Target : S$ 1.42 (Prev S$ 1.6)
Mapletree Logistics Trust (MLT) reported FY07 results within expectations. Distributable income increased 76% yoy to S$141.7m and DPU posted a growth of 30% y-o-y to 6.57 cents. This is mainly attributable to contributions from its acquisitions that resulted from a larger property portfolio. (70 properties as at 31 Dec '07 vs 41 properties in 31st Dec'06).
Rights issue postponed. This may result in limited acquisition growth in the near term due to its current gearing level of 53.4%. Debt-funded acquisitions is limited to a further S$405m out of which S$241m has been committed.
However, management has indicated that their immediate term target for DPU growth is through yield optimization from AEIs and positive rental reversions.
MobileOne: Dividends cannot compensate for weak business model
Hold S$1.92
Price Target : S$ 2.20 (Previous S$2.30)
Net profit of S$37.9m was down 5% y-o-y and 6% below consensus and our expectations. The company announced final dividend of 8.3 cents per share, which is slightly below our expectations of 10 cents per share.
EBITDA margin down at 36.9% from 40.9% year earlier. Despite lower handset sales, margins were lower than our expectations due to
(1) higher traffic expenses from IDD promotions and
(2) higher leased circuit costs due to more data usage from 3.5G wireless broadband.
Market share loss. Quite noticeable was market share loss in prepaid mobile to 26.1% from 27.5% in 3Q07 and in post-paid mobile to 28.5% from 28.9% in 3Q07.
Monday, January 21, 2008
DBSVickers Report - 21 Jan 2008
Yanlord Land Group Demand for high-end residences remains strong
Story: We hosted Yanlord at our recent Pulse of Asia Conference. The management remains confident of the outlook for high-end residences in China, with their most recent launch of another batch of apartments in Yanlord Riverside City (Phase 2) over the first two weekends of January experiencing high take-up rates and healthy ASP growth.
Point: This came on the back of some concern about a perceived softening of the PRC real estate market. The media had reported lower property transaction volumes and declining prices for developments towards the end of 2007, as the mortgage policy on second homes tightens.
Relevance: While we have incorporated the development surplus on their most recent site acquisitions, our target price has been revised downwards slightly to S$4.21 (at par to RNAV) as we factor in higher Land Appreciate Tax (LAT) charges. With an upside of 52% on this stock at current price levels, we see value emerging. This also translates into PE of around 14x and 11x on FY08F and FY09F EPS respectively. Maintain BUY.
Ascendas REIT (AREIT SP)
Slowly and steadily
A-REIT reported 15% higher net income available for distribution yoy at S$47.2, on the back of 13% increase in gross revenues to S$80.2m. This was mainly due to additional rental income from completed acquisitions and positive rental reversions from its high-tech industrials and business as well as science parks. Average occupancy levels rose to 98.7% as at 31 Dec 07 compared to 96.1% a year ago. Leverage at 38.6%. As at end Dec 07, AREIT had an aggregate gearing of 38.6%, which was 88% fixed at 3.39% and an average weighted term of 3.92 years. Interest cover ratio was 5.32x.
Story: We hosted Yanlord at our recent Pulse of Asia Conference. The management remains confident of the outlook for high-end residences in China, with their most recent launch of another batch of apartments in Yanlord Riverside City (Phase 2) over the first two weekends of January experiencing high take-up rates and healthy ASP growth.
Point: This came on the back of some concern about a perceived softening of the PRC real estate market. The media had reported lower property transaction volumes and declining prices for developments towards the end of 2007, as the mortgage policy on second homes tightens.
Relevance: While we have incorporated the development surplus on their most recent site acquisitions, our target price has been revised downwards slightly to S$4.21 (at par to RNAV) as we factor in higher Land Appreciate Tax (LAT) charges. With an upside of 52% on this stock at current price levels, we see value emerging. This also translates into PE of around 14x and 11x on FY08F and FY09F EPS respectively. Maintain BUY.
Ascendas REIT (AREIT SP)
Slowly and steadily
A-REIT reported 15% higher net income available for distribution yoy at S$47.2, on the back of 13% increase in gross revenues to S$80.2m. This was mainly due to additional rental income from completed acquisitions and positive rental reversions from its high-tech industrials and business as well as science parks. Average occupancy levels rose to 98.7% as at 31 Dec 07 compared to 96.1% a year ago. Leverage at 38.6%. As at end Dec 07, AREIT had an aggregate gearing of 38.6%, which was 88% fixed at 3.39% and an average weighted term of 3.92 years. Interest cover ratio was 5.32x.
Friday, January 18, 2008
DBSVickers Report - 18 Jan 2008
CDL Hospitality Trusts Largest Singapore hotel owner, direct RevPAR play
Story: We hosted CDL Hospitality Trusts (CDL HT) at The Pulse of Asia Conference. Management reiterated their positive views on the hotel sector in Singapore.
Point: Key takeaways are:
(i) CDL HT is now the largest hotel owner in Singapore, and likely to remain Singapore-centric over the next 2-3 years;
(ii) asset enhancement was explored, but thwarted by rising construction costs; and
(iii) smaller hotels with better control on room rates and smaller F&B component with lower margins offer better yield-enhancing opportunities, as illustrated by the strong performance of Copthorne King’s Hotel.
Relevance: We reiterate CDL HT, as our top pick for the hotel sector. The counter is well positioned to leverage on the rising RevPAR in Singapore. We have a BUY call on CDL HT with target price of S$2.90 per unit. The stock is trading at an attractive FY08 yield of 4.9% and 5.9% yield for FY09, underpinned by growth of 26% and 21%, respectively.
Story: We hosted CDL Hospitality Trusts (CDL HT) at The Pulse of Asia Conference. Management reiterated their positive views on the hotel sector in Singapore.
Point: Key takeaways are:
(i) CDL HT is now the largest hotel owner in Singapore, and likely to remain Singapore-centric over the next 2-3 years;
(ii) asset enhancement was explored, but thwarted by rising construction costs; and
(iii) smaller hotels with better control on room rates and smaller F&B component with lower margins offer better yield-enhancing opportunities, as illustrated by the strong performance of Copthorne King’s Hotel.
Relevance: We reiterate CDL HT, as our top pick for the hotel sector. The counter is well positioned to leverage on the rising RevPAR in Singapore. We have a BUY call on CDL HT with target price of S$2.90 per unit. The stock is trading at an attractive FY08 yield of 4.9% and 5.9% yield for FY09, underpinned by growth of 26% and 21%, respectively.
Tuesday, January 15, 2008
DBSVickers Report - 15 Jan 2008
Jiutian Earnings visibility has reduced
Story: Together with the announcement of a further 24.5% stake acquisition in a new methanol plant to enhance integration, Jiutian also provides an operation update, indicating a weak 4Q07 owing to high methanol cost and slower ramp-up of its new DMF plant. Besides, our industry observation also suggests weak DMF prices since late 2007, which rings warning bells on our DMF price assumption.
Point: We have adjusted our earnings estimates down by 40%, 48%, and 23% for 2007, 2008 and 2009, respectively. This is to account for potential DMF price weakness, and slower than expected capacity ramp up at its new plant in 4Q 2007. Our 52% EPS CAGR estimate in FY07-09 is now based on more conservative DMF-methanol price spread assumption of RMB2800 per tonne, which is at the lower end in the past two years.
Relevance: Our TP is down to S$0.42, with reduced earnings estimates, and using a lower valuation metric of 12x FY08/09 earnings (vs. 15x previously) to reflect a more challenging operating outlook. Still, we believe that the potential earnings risk over volatile DMF prices have already been factored into our new earnings estimates, and we are maintaining BUY call on the counter. Future earnings catalyst could come from positive updates on its M&A activities.
Story: Together with the announcement of a further 24.5% stake acquisition in a new methanol plant to enhance integration, Jiutian also provides an operation update, indicating a weak 4Q07 owing to high methanol cost and slower ramp-up of its new DMF plant. Besides, our industry observation also suggests weak DMF prices since late 2007, which rings warning bells on our DMF price assumption.
Point: We have adjusted our earnings estimates down by 40%, 48%, and 23% for 2007, 2008 and 2009, respectively. This is to account for potential DMF price weakness, and slower than expected capacity ramp up at its new plant in 4Q 2007. Our 52% EPS CAGR estimate in FY07-09 is now based on more conservative DMF-methanol price spread assumption of RMB2800 per tonne, which is at the lower end in the past two years.
Relevance: Our TP is down to S$0.42, with reduced earnings estimates, and using a lower valuation metric of 12x FY08/09 earnings (vs. 15x previously) to reflect a more challenging operating outlook. Still, we believe that the potential earnings risk over volatile DMF prices have already been factored into our new earnings estimates, and we are maintaining BUY call on the counter. Future earnings catalyst could come from positive updates on its M&A activities.
Monday, January 14, 2008
DBSVickers Report - 14 Jan 2008
Ezra Holding (EZRA SP) In line with expectations
Buy S$3.12;
Price Target : S$ 4.00
1Q08 net profit, ex EI, rose 270% yoy to S$16.1m, making up 27% of FY08F.
Revenue benefited from
(1) the full 3-mth contributions of eight vessels that were delivered in 4Q07 – seven AHTS vessels and a crewboat;
(2) 1 launch barge that was delivered after Nov 2006; and
(3) one month operations from one accommodation barge Lewek Chancellor and one pipelaying barge – Lewek Champion.
Gross Margin improvement reflected the rising charter rates. Net EI gain of S$172.3m includes S$197.9m from partial divestment of 39.1% stake in Oslo Bors-listed EOC. This was mainly offset by S$12.4m forex loss arising from translation of cash items denominated in US$ and NOK.
China Auto Electronics Share price has overshoot on the downside
Story: Our check with management over the weekend shows that China Auto’s sales in 4Q 2007 may be weaker than expected, due to slower sales growth from its customers.
Point: We have cut our recurring earnings estimates by 22.7% to RMB90.6m in FY07 and 24.7% to RMB195.6m in FY08, so as to account for the lower than expected utilization rates at China Auto’s factories. While our previous forecasts now appear to be too bullish, on hindsight, the reduced numbers still reflect a strong 196% y-o-y recurring net profit growth in FY07 and 116% growth in FY08. This is underpinned by the bullish outlook for the Chinese automobile component market, and our expectation that China Auto is able to leverage on its status as the largest Chinese company providing wire harness in the PRC.
Relevance: Our fair value has also been adjusted to S$0.875; using a similar 15x PE and the downward revised FY08 EPS. Still, the recent share price weakness does not reflect China Auto’s longer term potential, and we maintain our BUY rating on the counter.
Buy S$3.12;
Price Target : S$ 4.00
1Q08 net profit, ex EI, rose 270% yoy to S$16.1m, making up 27% of FY08F.
Revenue benefited from
(1) the full 3-mth contributions of eight vessels that were delivered in 4Q07 – seven AHTS vessels and a crewboat;
(2) 1 launch barge that was delivered after Nov 2006; and
(3) one month operations from one accommodation barge Lewek Chancellor and one pipelaying barge – Lewek Champion.
Gross Margin improvement reflected the rising charter rates. Net EI gain of S$172.3m includes S$197.9m from partial divestment of 39.1% stake in Oslo Bors-listed EOC. This was mainly offset by S$12.4m forex loss arising from translation of cash items denominated in US$ and NOK.
China Auto Electronics Share price has overshoot on the downside
Story: Our check with management over the weekend shows that China Auto’s sales in 4Q 2007 may be weaker than expected, due to slower sales growth from its customers.
Point: We have cut our recurring earnings estimates by 22.7% to RMB90.6m in FY07 and 24.7% to RMB195.6m in FY08, so as to account for the lower than expected utilization rates at China Auto’s factories. While our previous forecasts now appear to be too bullish, on hindsight, the reduced numbers still reflect a strong 196% y-o-y recurring net profit growth in FY07 and 116% growth in FY08. This is underpinned by the bullish outlook for the Chinese automobile component market, and our expectation that China Auto is able to leverage on its status as the largest Chinese company providing wire harness in the PRC.
Relevance: Our fair value has also been adjusted to S$0.875; using a similar 15x PE and the downward revised FY08 EPS. Still, the recent share price weakness does not reflect China Auto’s longer term potential, and we maintain our BUY rating on the counter.
Friday, January 11, 2008
DBSVickers Report - 11 Jan 2008
Silverlake Axis Expanding into new sectors and markets
Story: We hosted Silverlake Axis at our “Pulse of Asia” conference where management sounded upbeat about the company’s prospects.
Point: There were three key takeaways from the conference.
(1) Management clarified that it has not witnessed any slowdown in Asian banks’ IT spending due to the credit crunch in the US and expects to deliver healthy earnings growth in the current year.
(2) Management highlighted the diversification of its business into non-banking financial sectors in the last six months, which should further fuel its growth.
(3) On the geographical front, management expects to secure more business from outside its traditional markets of South East Asia, particularly from China.
Relevance: We maintain BUY at our DCF-based (WACC 9.3%, terminal growth 1%) target price of S$0.95, which implies 19x FY08 earnings. Silverlake currently trades at 12x FY08 earnings, which is more than 40% discount to peers in the banking sector.
Story: We hosted Silverlake Axis at our “Pulse of Asia” conference where management sounded upbeat about the company’s prospects.
Point: There were three key takeaways from the conference.
(1) Management clarified that it has not witnessed any slowdown in Asian banks’ IT spending due to the credit crunch in the US and expects to deliver healthy earnings growth in the current year.
(2) Management highlighted the diversification of its business into non-banking financial sectors in the last six months, which should further fuel its growth.
(3) On the geographical front, management expects to secure more business from outside its traditional markets of South East Asia, particularly from China.
Relevance: We maintain BUY at our DCF-based (WACC 9.3%, terminal growth 1%) target price of S$0.95, which implies 19x FY08 earnings. Silverlake currently trades at 12x FY08 earnings, which is more than 40% discount to peers in the banking sector.
Wednesday, January 2, 2008
DBSVickers Report - 02 Jan 2008
Oil and gas sector More lubricants for growth
Story: The outlook for oil and gas sector remains positive, underpinned by high earnings visibility and strong contract flows. The sector’s earnings visibility is supported by the high order books for SGX-listed equipment/vessel builders and charterers. The strong contracts flow is underpinned by the global need to replace older/obsolete equipment/vessels, and to develop new oil fields.
Point: We have identified four investment themes for the oil and gas sector in 2008:
1) emergence of pair trading opportunities among blue chip oil and gas plays;
2) better Growth-At-Reasonable-Price (GARP) investment opportunities in mid-tier oil and gas plays;
3) higher activities related to offshore oil field development; and
4) mergers and acquisitions.
Relevance: We are overweight on the oil and gas sector, which presents good investment opportunities at current price levels. We believe that the mid-tier oil and gas stocks will outperform its peers in 2008, and feature strongly amongst our top picks. We like Cosco, Keppel Corp, Ezra Holdings, KS Energy, Jaya Holdings, and Swiber Holdings.
Story: The outlook for oil and gas sector remains positive, underpinned by high earnings visibility and strong contract flows. The sector’s earnings visibility is supported by the high order books for SGX-listed equipment/vessel builders and charterers. The strong contracts flow is underpinned by the global need to replace older/obsolete equipment/vessels, and to develop new oil fields.
Point: We have identified four investment themes for the oil and gas sector in 2008:
1) emergence of pair trading opportunities among blue chip oil and gas plays;
2) better Growth-At-Reasonable-Price (GARP) investment opportunities in mid-tier oil and gas plays;
3) higher activities related to offshore oil field development; and
4) mergers and acquisitions.
Relevance: We are overweight on the oil and gas sector, which presents good investment opportunities at current price levels. We believe that the mid-tier oil and gas stocks will outperform its peers in 2008, and feature strongly amongst our top picks. We like Cosco, Keppel Corp, Ezra Holdings, KS Energy, Jaya Holdings, and Swiber Holdings.
Friday, December 21, 2007
DBSVickers Report - 21 Dec 2007
Swiber Holdings Order book to continue swelling
Story: Swiber announced that it has won a contract extension from Brunei Shell Petroleum (Brunei Shell) for transportation and installation of offshore facilities off the coast of Brunei. The extension work is scheduled for 2009, and we estimate the contract value to be about US$53.4m.
Point: This latest contract win is significant, as it is an extension of Swiber’s earlier US$146.6m contract win from Brunei Shell, and brings the total contract value from this oil major to about US$200m. We believe this implies that that Swiber has fulfilled the stringent requirements of Brunei Shell’s original contract well, and should provide reassurance to other oil majors and national oil companies on Swiber’s ability to deliver on big contracts leveraging on its enlarged offshore EPCIC capabilities.
Relevance: We are maintaining our recurring earnings estimates in the FY07-09 forecast periods. Our fair value for Swiber is S$4.18, using 18x diluted recurring FY08 PER. Maintain BUY.
Story: Swiber announced that it has won a contract extension from Brunei Shell Petroleum (Brunei Shell) for transportation and installation of offshore facilities off the coast of Brunei. The extension work is scheduled for 2009, and we estimate the contract value to be about US$53.4m.
Point: This latest contract win is significant, as it is an extension of Swiber’s earlier US$146.6m contract win from Brunei Shell, and brings the total contract value from this oil major to about US$200m. We believe this implies that that Swiber has fulfilled the stringent requirements of Brunei Shell’s original contract well, and should provide reassurance to other oil majors and national oil companies on Swiber’s ability to deliver on big contracts leveraging on its enlarged offshore EPCIC capabilities.
Relevance: We are maintaining our recurring earnings estimates in the FY07-09 forecast periods. Our fair value for Swiber is S$4.18, using 18x diluted recurring FY08 PER. Maintain BUY.
Wednesday, December 19, 2007
DBSVickers Report - 19 Dec 2007
Silverlake Axis Enormous potential to grow in Asia
Story: Silverlake Axis has announced a licensing contract worth RM 25m for a Malaysian outsourcing deal.
Point: The significant size of the contract win assures us that Silverlake will achieve our 2Q08 earnings estimates. There is an upside potential to our FY08 earnings estimates, if Silverlake can secure few contracts in the Chinese market through its JV with local partner Unifisoft Holdings.
Relevance: We maintain BUY and our DCF-based (WACC 9.3%, terminal growth 1%) target price of S$0.95, which implies 19x FY08 earnings. Despite a healthy deal pipeline, due to broader concerns over the banking sector, the stock has shed about 15% in the last one month. Silverlake currently trades at 11x FY08 earnings, which is at 50% discount to IT peers in the banking sector.
Tuesday, December 11, 2007
DBSVickers Report - 11 Dec 2007
The Hour Glass Hidden Treasures of Time
Story: Hour Glass distributes and retails watches, clocks and luxury timepieces. In over 28 years, it has grown from one store in Singapore to a retail and distribution network of over 21 stores in 6 cities. It retails over 60 international brands including Rolex, Patek Philip and Breguet.
Point: With a healthy set of 1H08 results and its seasonally strong Christmas season coming up, we expect strong earnings to continue. We forecast FY08 net profit to experience a 40% y-o-y growth to S$26m. Going forward, buoyant economies in Singapore, HK and China will fuel demand for luxury watches. In Singapore, government initiatives like the IRs and F1 race will increase tourist arrivals and should boost sales. Hour Glass Watch is expected to register steady y-o-y net profit growth of 9% into FY 09.
Relevance: Initiate coverage with a BUY recommendation and target price of S$2.32, based on 10x FY08 earnings. Our valuation is at a discount to its closest competitor, Sincere Watch, that trades at consensus 19x FY08 PER, given its smaller market capitalization and low share liquidity. Market interests in HG should increase following the announcement of a 1-for-1 stock split on 10 Dec 2007 following a report that Peace Mark, a HK listed fashion and luxury watch retailer is making a voluntary general offer for Sincere Watch at an attractive PE of 19x on FY08 earnings on 7 Dec.
Thursday, December 6, 2007
DBCVickers Report - 06 Dec 2007
Frontline Offer price is attractive and above industry average
Story: British Telecom Global Services (BT) has proposed to acquire Frontline at a cash consideration of 24.5 cents per share. With this acquisition, BT would get (a) A footprint in nine key Asian countries with reputed customer base (2) Access to over 5,000 employees in Asia, with low wage advantage.
Point: The offer price is attractive at 6.5% premium to our previous target price of 23 cents, based on 12x FY09 earnings. We like to highlight two key points: (1) The offer price translates into FY08 PE of 16.3x, which is above the average PE of 14.5x for the Singapore IT sector; (2) It offers 29% premium to the average closing price of S$0.19 in the last week, which is higher than the 10% premium offered by VST Holdings to ECS Holdings recently.
Relevance: We recommend investors to accept the offer. We want to highlight that Silverlake Axis could be an attractive acquisition target due to its strong regional footprint across Asia & Middle East and a high margin product business of core banking solutions.
Story: British Telecom Global Services (BT) has proposed to acquire Frontline at a cash consideration of 24.5 cents per share. With this acquisition, BT would get (a) A footprint in nine key Asian countries with reputed customer base (2) Access to over 5,000 employees in Asia, with low wage advantage.
Point: The offer price is attractive at 6.5% premium to our previous target price of 23 cents, based on 12x FY09 earnings. We like to highlight two key points: (1) The offer price translates into FY08 PE of 16.3x, which is above the average PE of 14.5x for the Singapore IT sector; (2) It offers 29% premium to the average closing price of S$0.19 in the last week, which is higher than the 10% premium offered by VST Holdings to ECS Holdings recently.
Relevance: We recommend investors to accept the offer. We want to highlight that Silverlake Axis could be an attractive acquisition target due to its strong regional footprint across Asia & Middle East and a high margin product business of core banking solutions.
Wednesday, December 5, 2007
DBSVickers Report - 05 Dec 2007
Ezra Holding Going deeper
Story: We visited Ezra last week. With its well diversified fleet, Ezra is a beneficiary across various segments of the oil and gas chain. More importantly, it is well positioned to support the expected higher level of E&P activities in deeper waters.
Point: Ezra has a strong growth profile going forward, underpinned by eight vessel deliveries in FY08, three in FY09 and a further four in FY10 and rising rates especially for vessels with deepwater capabilities.
Relevance: Ezra’s growth is well mapped out till 2010. We expect net earnings to rise 70% in FY08 and 76% in FY09. Ezra will also recognize an exceptional gain of around S$200m arising from the disposal of 39% in EOC (to 48.9%) following its listing on the Oslo Bors. Saigon Shipyard is expected to be fully operational by 2009, which should pave the way for more fabrication, installation and commissioning projects. Maintain Buy with a target price of S$4.00 based on 15x chartering and 20x for EOC on FY09 earnings.
Story: We visited Ezra last week. With its well diversified fleet, Ezra is a beneficiary across various segments of the oil and gas chain. More importantly, it is well positioned to support the expected higher level of E&P activities in deeper waters.
Point: Ezra has a strong growth profile going forward, underpinned by eight vessel deliveries in FY08, three in FY09 and a further four in FY10 and rising rates especially for vessels with deepwater capabilities.
Relevance: Ezra’s growth is well mapped out till 2010. We expect net earnings to rise 70% in FY08 and 76% in FY09. Ezra will also recognize an exceptional gain of around S$200m arising from the disposal of 39% in EOC (to 48.9%) following its listing on the Oslo Bors. Saigon Shipyard is expected to be fully operational by 2009, which should pave the way for more fabrication, installation and commissioning projects. Maintain Buy with a target price of S$4.00 based on 15x chartering and 20x for EOC on FY09 earnings.
Tuesday, December 4, 2007
DBSVickers Report - 04 Dec 2007
See Hup Seng Limited Post conference takeaways
Story: See Hup Seng’s earnings are set to grow strongly in 4Q07. The outlook for 2008 remains strong, underpinned by Keppel Corp’s strong order book of S$13-14bn, capacity expansion that will come onstream by 1Q08, and the continuing strong outlook for the offshore, marine and construction sectors.
Point: The market was largely disappointed with the weak showing in 3Q that was caused by delays on tank coating jobs. We expect a strong showing for the tank coating segment in 4Q, underpinned by one project that has since been completed and WIP on a further three projects.
Relevance: The share price has shed 30% since SHS released results on 6 November. We believe that the current weakness is a buying opportunity as SHS is a beneficiary of the strong demand for FPSOs and offshore equipment as well as construction steel. We are rolling over our valuation using FY09 earnings, but using a lower 16x multiple. Maintain Buy with an unchanged TP of S$1.18.
Story: See Hup Seng’s earnings are set to grow strongly in 4Q07. The outlook for 2008 remains strong, underpinned by Keppel Corp’s strong order book of S$13-14bn, capacity expansion that will come onstream by 1Q08, and the continuing strong outlook for the offshore, marine and construction sectors.
Point: The market was largely disappointed with the weak showing in 3Q that was caused by delays on tank coating jobs. We expect a strong showing for the tank coating segment in 4Q, underpinned by one project that has since been completed and WIP on a further three projects.
Relevance: The share price has shed 30% since SHS released results on 6 November. We believe that the current weakness is a buying opportunity as SHS is a beneficiary of the strong demand for FPSOs and offshore equipment as well as construction steel. We are rolling over our valuation using FY09 earnings, but using a lower 16x multiple. Maintain Buy with an unchanged TP of S$1.18.
Friday, November 30, 2007
DBSVickers Report - 30 Nov 2007
Cerebos A good year and another bumper payout in Feb’08
Story: Cerebos Pacific reported a good set of FY07 results, which were slightly above our expectations.
Point: Topline grew 13%, while net profit ended at S$84.4m, up 21% from a year ago. The better-than-expected growth was largely from (i) slower operating expenses growth vis-à-vis topline; and, (ii) a lower effective tax rate against our forecasts. We adjusted our FY08F forecasts up slightly by 4% to account for higher sales growth from its businesses.
Relevance: We like this defensive counter for its steady business, geographical and business diversification spanning numerous countries across the Asia Pacific region and businesses, namely Health Supplements, Coffee and Sauces. More importantly, it pays out good dividends and, in our opinion, is likely to continue to do so. The proposed dividend of 25 Scts works out to rather attractive yields of around c. 6%. It also has a strong operating cashflow and is in a net cash position (about S$107m or S$0.34/share), which would come in handy should it decide to pursue more aggressive expansion plans. We maintain our BUY recommendation, TP raised marginally to S$4.65 as we roll our valuations to blended FY08/09 earnings, based on 16x PER.
MAP Technology HDD best buy: Growth, value & dividend
Story: MAP Tech is a dominant voice coil motor (VCM) plates and external hard disk drives (EHDD) supplier to Western Digital (WD), the faster growing of the two hard drive titans dominating the market currently. MAP Tech’s core competencies are metal stamping and PCB assembly with full box-build.
Point: Through WD, MAP Tech is a major beneficiary of the Seagate/Maxtor consolidation. Not only can MAP Tech participate in the growth of WD, it is also winning market share from competitors whose performance has deteriorated post buyouts. We believe MAP Tech has the potential to grow faster than the broader HDD industry (c.12-15% pa), as the company is also capturing more products (eg top cover) with WD. Additionally, the company has diversified into new businesses like auto and renewable-energy related products for its next phase of growth. All things considered, we expect net profit to grow 53% and 46% in FY07 and FY08 respectively.
Relevance: Apart from being the cheapest HDD proxy in Singapore at 5x FY08 PER and 1.5x P/B, compared to sector average of 8-9x FY08 PER and 2x P/B, MAP Tech has 7.5cts cash per share, generates strong free cashflow and maintains 25-30% ROE. As such, the stock offers attractive dividend yield of 5-7% based on conservative payout of 35%. Recommend Buy with target price of S$0.50 based on 8x FY08 earnings
Story: Cerebos Pacific reported a good set of FY07 results, which were slightly above our expectations.
Point: Topline grew 13%, while net profit ended at S$84.4m, up 21% from a year ago. The better-than-expected growth was largely from (i) slower operating expenses growth vis-à-vis topline; and, (ii) a lower effective tax rate against our forecasts. We adjusted our FY08F forecasts up slightly by 4% to account for higher sales growth from its businesses.
Relevance: We like this defensive counter for its steady business, geographical and business diversification spanning numerous countries across the Asia Pacific region and businesses, namely Health Supplements, Coffee and Sauces. More importantly, it pays out good dividends and, in our opinion, is likely to continue to do so. The proposed dividend of 25 Scts works out to rather attractive yields of around c. 6%. It also has a strong operating cashflow and is in a net cash position (about S$107m or S$0.34/share), which would come in handy should it decide to pursue more aggressive expansion plans. We maintain our BUY recommendation, TP raised marginally to S$4.65 as we roll our valuations to blended FY08/09 earnings, based on 16x PER.
MAP Technology HDD best buy: Growth, value & dividend
Story: MAP Tech is a dominant voice coil motor (VCM) plates and external hard disk drives (EHDD) supplier to Western Digital (WD), the faster growing of the two hard drive titans dominating the market currently. MAP Tech’s core competencies are metal stamping and PCB assembly with full box-build.
Point: Through WD, MAP Tech is a major beneficiary of the Seagate/Maxtor consolidation. Not only can MAP Tech participate in the growth of WD, it is also winning market share from competitors whose performance has deteriorated post buyouts. We believe MAP Tech has the potential to grow faster than the broader HDD industry (c.12-15% pa), as the company is also capturing more products (eg top cover) with WD. Additionally, the company has diversified into new businesses like auto and renewable-energy related products for its next phase of growth. All things considered, we expect net profit to grow 53% and 46% in FY07 and FY08 respectively.
Relevance: Apart from being the cheapest HDD proxy in Singapore at 5x FY08 PER and 1.5x P/B, compared to sector average of 8-9x FY08 PER and 2x P/B, MAP Tech has 7.5cts cash per share, generates strong free cashflow and maintains 25-30% ROE. As such, the stock offers attractive dividend yield of 5-7% based on conservative payout of 35%. Recommend Buy with target price of S$0.50 based on 8x FY08 earnings
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