Local Brokerages Stock Call 27 March 2013

From OCBC:

Neptune Orient Lines: Turnaround still intact
The Shanghai Containerised Freight Index has exhibited relative stability since the start of the year, and this should provide a good base for upcoming generate rate increases such as those enacted under the TSA for Apr. Although there is a possibility of a supply outpacing demand, several liners have expressed confidence in the resilience of rates this year and continue to push through GRIs beyond Apr. Nonetheless, the major liners acknowledge potential threats to profitability and have reiterated the need for the industry to strike a balance between competition and sustainability. Although some liners have taken heed – such as the G6 and CKYH alliances who have cancelled their planned Asia-Europe service launches this year – there remains some routes that are particularly susceptible to rate fluctuations, and we adjusted our estimates downwards for NOL accordingly. Regardless of this adjustment, our view on NOL’s turnaround in FY13 remains intact and we maintain our BUY rating with a fair value of S$1.38. (Lim Siyi)

OKP Holdings: Revenue visibility but margin compression
To recap, 4Q12/FY12 results were generally in line with our expectations. While FY12 net income of S$104.5m (-5% YoY) was 5% lower than our estimate, PATMI of S$12.4m (-53% YoY) was 6% higher than what we expected. The lacklustre results were due to a weak economy, price competition and climbing labour costs. OKP declared a first and final dividend of 1.5 S cents/share, lower than the 2 S cents that we and the street had expected. FY12 dividend translates into a yield of 2.9%. We believe that management is conserving cash to increase its flexibility to tender for government projects. Following a change in analyst, we have adjusted our forecasts for OKP’s FY13 and FY14 performance. Applying a P/E multiple of 11x to FY13F EPS, we derive a FV of S$0.48/share, slightly higher than our previous FV of S$0.46/share. We maintain our HOLDrating on OKP. (Sarah Ong)

From UOB

Halcyon Agri Corp - Solid Midstream Rubber Player With
Potential For Upstream Expansion
(HACL SP/NOT RATED/S$0.475)
We see the potential for M&As in the upstream segment, which
would enhance Halcyon’s position in natural rubber

From Maybank KE

ST Engineering: Defence’s Turn In The Limelight; Buy, TP $4.4
STE SP | Mkt Cap USD10.5b | ADTV USD5.8m
Ø We reiterate our BUY call on ST Engineering (STE), as a positive defence business outlook lends support to the thesis that it should trade at a premium to its historical average.
Ø Two of STE’s largest contracts announced to-date have been derived from its defence business, and both from its Marine arm. We continue to see healthy defence expenditure trends both in terms of Singapore (CAGR 4%) as well as from STE’s overseas customers (CAGR 4-5%).
Ø We believe STE’s 1Q13 orderbook will set yet another record (~SGD13b), providing the earnings visibility that would catalyse its share price appreciation. Our target price of SGD4.40 is pegged at 21.6x FY2013 PER, 1 SD above its historical average. Investors who own the stock before Ex-Div on 26 Apr will stand to enjoy SG 13.8 cts / share of dividends (translating to ~3.3% yield).

BreadTalk Group: Have a MINT, Have a BreadTalk; Not Rated
BREAD SP | Mkt Cap USD194.5m | ADTV USD0.44m

Ø Primacy Investment, a wholly-owned subsidiary of Minor International (MINT) in Thailand, surfaced as a shareholder in January and purchased an additional 2.58% last week at an average of SGD0.83 a share, reaffirming our suspicions that Minor may just be getting started. With BreadTalk’s premium reputation as a bread operator, and entrenched position in Asia, this could be the prized jewel which Minor has been waiting for.
Ø BreadTalk offers MINT an excellent portal to extend its cross-selling channels, as well as an opportunity to strengthen and add prominent brands to its growing overseas portfolio. It is a leading bakery chain, which has restaurants and cafes also figuring in its portfolio.
Ø Current valuations of BreadTalk are below peers with a forward consensus P/E of 15.6x against 16.5x. We believe BreadTalk deserves a premium valuation for its multi-country success in growing its bakery chain.