Local Brokerages Stock Call 15 April 2013

From DBS:
Ezra - Recovery road still bumpy, maintain BUY, TP $1.56
2Q13 results for Ezra came in below expectations as utilisation
of assets remains sub-optimal in a seasonally weaker quarter.
Separately, Ezra announced a batch of contract wins worth
about US$120m from across its business divisions. This
includes subsea installation projects in West Africa and GoM as
well as OSV charter contracts. Subsea momentum continues to
build with FY13 YTD wins of US$760m. Our analyst has cut
FY13/14F earnings by 6%/20% to account for a more
stretched out revenue recognition schedule. Ezra’s recovery
story remains intact; maintain BUY, TP S$1.56 (Prev S$ 1.58).

SPH - REIT expectations provide support; maintain BUY,
TP S$4.75
2Q13 results for SPH were lower than expectations, dragged
by weak ad revenue. 7 Scts interim DPS was declared; we
maintain our DPS estimate of 24 Scts for the full year. The
evaluation of a property REIT is still in progress and is likely to
underpin share price but no mandate has been signed yet.
Maintain BUY, TP S$4.75 (Prev S$ 4.79).

From OCBC:
Singapore Press Holdings: Ad revenues impacted by cooling measures

Summary: SPH reported 2QFY13 PATMI of S$71.6m – down 14.7% YoY mostly due to a lower contribution from the Newspaper and Magazines segment. 1HFY13 PATMI now forms 45% of our FY13 forecast; despite 2Q being a weaker quarter cyclically, we now judge earnings to be tracking marginally below expectations as SPH’s ad revenues suffered the impact of recent cooling property and automobile measures. 1HFY13 rental income from Paragon increased by S$3.4m (up 4.5% YoY) from higher rental rates while occupancies at Paragon and Clementi Mall remained at 100%. The Seletar Mall remains on track to be completed by end of 2014. Management expressed that it is still in the midst of exploring a REIT listing, which continues to be a realistic event, in our view, given the size and quality of its retail malls and the potential for significant shareholder accretion. An interim dividend of 7 S-cents per share is announced. Maintain BUY with an unchanged fair value estimate of S$4.94.

Ezra Holdings: Delays in project execution and awards

Summary: Ezra Holdings (Ezra) reported a 17% YoY increase in revenue to US$247.1m and a 34% rise in net profit to US$29.7m in 2QFY13. However, we note that net profit in the quarter was bumped up by a US$30m disposal gain on fixed assets; excluding that, core net profit was minimal and below our expectations. The sub-par results were mainly due to lower vessel utilisation in the offshore support services segment and the subsea services segment. There is also a three-month delay for the Lewek Express, which will now start work in Jul/Aug 2013. According to management, uncertainty in the Eurozone has weighed on sentiment, and project execution and awards have been delayed. We have lowered our core earnings estimates due to the delays and possibly heightened project risks.  As such, our SOTP-based fair value estimate slips to S$1.10 (prev. S$1.30). Maintain HOLD.

From CIMB:

Ezra Holdings

Subsea substandard

UNDERPERFORM - Maintained | S$1.07 - Tgt. S$0.80

Ezra made a core net loss of US$0.3m in 2Q13, affected by low utilisation in both subsea and offshore segments. Stiff competition, slower pace of contract awards by customers, weak margins and higher tax rates all point to a grim outlook. Maintain Underperform. We had expected US$7m core profit for 2Q13. Ezra's 1H13 core profit of US$6.4m forms only 15% of our and consensus forecast. But its 2Q13 reported profit of US$29.7m was boosted by a US$30m gain on disposal of sale-and-leaseback assets. We cut FY13-15 core EPS by 11-18% on lower margins. Thus, our target price is reduced to S$0.80, still based on 10x CY14 P/E or 1 s.d. below its 5-year mean. 

Singapore Press Holdings

Tread carefully

UNDERPERFORM - Downgrade | S$4.60 - Tgt. S$4.32

We think it is still unclear if spinning off its prized property assets into a REIT creates shareholder value. This, coupled with the weak ad environment, suggests that the recent 10% run-up in the share price may be overly optimistic. 2QFY13’s earnings came in below expectations at 19% of our and consensus full-year estimates due to weaker-than-expected ad revenue. 1H13 formed 44%. We lower FY13-15 estimates by 5-9% but raise our SOP-based target price to reflect the appraised value of properties likely to be spun off into a REIT. Downgrade from Neutral to Underperform as we think the recent share price gains are unwarranted.

From UOB KH:
Ezra Holdings- 2QFY13: Large vessel disposal gain
offsets weak subsea margin. (EZRA
SP/BUY/S$1.08/Target: S$1.46)
Maintain BUY and target price of S$1.46. We value Ezra at 1.0x
FY14F P/B, -1SD below its long-term mean of 1.8x. 

Singapore Press Holdings- 2QFY13: Weaker advertising
revenue; mulling over retail REIT. (SPH
SP/HOLD/S$4.60/Target: S$4.50)
Maintain HOLD, pending decision on the retail REIT. Our target
price has been raised from S$4.30 to S$4.50. We have reduced
our discount to sum-of-the-parts valuation from 20% to 15%. 

DBS Group Holdings (DBS SP, D05) –
1Q13 results preview: Operationally a strong quarter
Last price: S$15.67
Target Price: S$19.90
DBS has benefitted from improved business sentiment with
robust loan growth seen to continue into 1Q13. Market-sensitive
sources of fee income have improved with more upbeat financial
markets. Net trading income, which is typically stronger in the
first quarter, is expected to improve in 1Q13 and NPL ratio and
credit costs are already fairly low compared to historical trend.
Maintain BUY and target price of S$19.90, based on 1.55x P/B.
Growth drivers include regional businesses and greater
contribution from high-growth emerging markets if DBS
successfully acquires Bank Danamon.
Technically, the stock could trend higher for a break above
S$16.00 to test S$16.80 should it be well supported at above
S$15.30.

SIA Engineering (SIE SP, S59) –
Attractive 4.5% yield with potential for a special dividend
Last price: S$4.87
Target Price: S$5.20
We estimate SIAEC will declare a 15 S cents final dividend when
it announces full-year results on 14 May, taking total payout to
22 S cents for FY13. At the current level, this translates to a
yield of 4.5%. There is also a possibility that the final dividend
could be higher than our initial estimate. Historically, the
company paid in excess of 100% of recurring free cash flow and
such a possibility cannot be ruled out, especially with SIA
needing funds. If half of the cash balance is paid out, SIAEC
could declare a 9 S cents special dividend, which would raise
the yield to 6.7%. We have a fair value of $5.20 on the stock
based on a dividend discount model. Maintain BUY.
From a technical view, the stock looks poised to trend higher
towards S$5.25 should it be well supported at above S$4.67.

Overseas Education (OEL SP, RQ1) –
Steady growth and decent yields
Last price: S$0.73
Target Price: S$0.88
This week, we initiated coverage on OEL with a BUY and a
target price of S$0.88. OEL is the holding company of Overseas
Family School (OFS), which is the third-largest foreign system
school in the country. We expect OFS to continue to benefit
from resilient demand for quality education as Singapore’s
foreign population continues to grow. The potential opening of a
new campus in 2015 will increase its student capacity by 22%.
We see room for them to increase tuition fees as they are still
15-25% below competitors’. With strong cash flow and balance
sheet, we expect the company to be able to retain its net cash
position throughout the construction of its new campus. OEL
has a dividend policy to distribute 50% of net profit for each
financial year. This translates to yields of 3-4%. Our fair value is
based on a discounted cash flow model.
Technically, the stock could trend higher towards S$0.88 should
it be well supported at above S$0.67.