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Wednesday, April 17, 2013

Local Brokerages Stock Call 17 April 2013

From CIMB:

Wilmar International
Snaps up Moroccan sugar firm
OUTPERFORM - Maintained | S$3.31 - Tgt. S$3.74
Wilmar's acquisition of a strategic 27.5% stake in Cosumar gives the group exposure to the regulated Moroccan sugar industry and access to Africa's structurally sugar-deficient market. It can add value by introducing better techniques for farming and procuring raw sugar. We are positive on the acquisition as we feel that valuations for the assets are fair. We also expect this acquisition to enhance the group's future earnings base, with the potential earnings enhancement estimated to be around 1%. We maintain Outperform with an unchanged SOP-based target price of S$3.74.

M1 Limited
Tiered data plans kick in
OUTPERFORM - Maintained | S$2.95 - Tgt. S$3.60
 M1’s 1Q13 annualised results are in line at 98% of our estimate and 99% of consensus. The adoption of tiered data plans is robust with 20% of postpaid users switching over, up from 14% in 4Q12. Management maintains its 2013 outlook for moderate yoy growth in net profits. The group’s EBITDA margin should be lifted by lower subsidies as Android devices increase in popularity. M1 remains an Outperform and our top Singapore telco pick as it will benefit the most from the take-up of tiered data plans. We retain our forecast and DCF-based target price (WACC 8.0%). A faster-than-expected adoption of tiered plans would catalyse the stock.

Singapore Exchange
Buoyed by strong trading activity
UNDERPERFORM - Maintained | S$7.70 - Tgt. S$7.29
Strong securities/derivatives trading, an increase in demand for depository services and effective cost control helped widen 3QFY13 operating jaws. Management appears upbeat on SGX’s ability to ride Singapore’s new offshore Rmb-clearing status. 3QFY13 (S$97.7m) slightly exceeded estimates (ours: S$96.2m, consensus: S$94m). 9M13 formed 79% of our FY13 estimate. We raise FY13 by 4.2% as our volume assumption is too low compared to current activity, but maintain FY14-15. Our DDM-based target price inches up to S$7.29 accordingly (r: 9.5%, g: 4.5%). Strong trading activity is unlikely to recur. We maintain Underperform as we see risks from weaker trading activities.

From OCBC:
CWT: Growth from warehouse assets and Commodity SCM
CWT is a leading provider of logistics solutions for worldwide customers in the commodities, chemical, petrochemical, marine, oil & gas, defense and industrial sectors. A competitive edge is its global logistics network which connects customers to around 200 direct ports and 1,500 inland destinations. The group is currently developing two large warehouses, estimated to add another 50% to its owned warehouse space in Singapore. In total, we estimate its entire warehouse portfolio to be worth about S$800m. Meanwhile, the recently acquired Commodity SCM business is also expected to scale up quickly, taking advantage of the group’s strong global logistics network and reputation as an established commodity collateral manager. Our SOTP fair value estimate for CWT is S$2.08 per share. Given the ample upside, we initiate coverage with BUY.

Singapore Exchange: Strong 3Q, but likely QoQ slowdown in 4Q
Singapore Exchange (SGX) generated above market expectation 3QFY13 net earnings of S$97.7m, up 25.6% YoY. The strong performance came from several units, especially its core Securities and Derivatives businesses. A 3Q dividend of 4 cents has been declared and is payable on 2 May 2013. The final quarter is likely to see some slowdown, largely due to prevailing macro economic uncertainties, and we expect volatility to come back again as sentiment is likely to turn more cautious especially after the good gains for the key equity indices since the start of the year. We have raised our fair value estimate slightly from S$6.80 to S$7.16 based on the same 23x blended earnings. With an estimated dividend yield of 3.5%, total return is -3.5% and we are buyers only at S$6.80 or lower. Maintain HOLD.  

M1: 1Q13 results in line; downgrade to HOLD
M1 Ltd reported its 1Q13 revenue of S$243.0m (-7.4% YoY, -25.8% QoQ) which met just 21.3% of our full-year forecast, mainly due to lower handset sales and also the mix of handsets (Android now makes up >50% of its postpaid subscriber base). Nevertheless, net profit grew 1.7% YoY and 8.2% QoQ to S$41.0m, meeting 26.5% of our FY13 forecast. It may have also gotten a one-off boost from recognizing the unused credit in expired pre-paid cards that were periodically terminated. While we are not making any chances to our FY13 estimates as 1Q13 results were largely in line, our DCF-based fair value improves to S$3.10 (from S$2.89) as we tweak our interest rate expectations slightly lower in view of the still sluggish global economic performance. But as there is now
< 10% total return from here, we downgrade the stock to HOLD.

Rigbuilders: Who has been ordering from the Chinese yards?
There have been recent reports on Chinese yards surpassing Singapore yards in terms of jack-up rig orders YTD. Indeed, we find that jack-up orders for the former have totaled ~US$2.3b so far, compared to ~US$2.1b for the latter. However, we note that many of the contracts that Chinese yards have won so far are mostly from newcomers in the offshore industry, including speculators who sell the rigs later for a profit. Meanwhile, Keppel Corp (KEP) and Sembcorp Marine (SMM) have been diversifying their product range and innovating to stay ahead in certain niche areas. Maintain BUY on both KEP [FV: S$12.68] and SMM [FV: S$5.64]; we note that markets may be increasingly volatile ahead, providing an opportune time to enter such quality stocks.

Frasers Centrepoint Trust: 2QFY13 results broadly in line
Frasers Centrepoint Trust (FCT) announced its 2QFY13 results this morning. NPI and distributable income grew by 9.7% YoY and 10.4% YoY to S$28.7m and S$23.5m respectively. DPU for the quarter came in at 2.7 S cents, up by a slightly slower 8.0% YoY due to retention of S$1.2m in distributable income. For 1HFY13, DPU rose by 8.5% YoY to 5.1 S cents. This is broadly in line with both ours and consensus expectation, with 1HFY13 DPU forming ~47% of our full-year DPU forecasts. FCT’s portfolio assets continued to exhibit resilience. Average occupancy improved to 98.2% as at 31 Mar from 97.2% in the prior quarter, and positive rental reversion of 6.6% was achieved for 1HFY13. We will be speaking to management during the analyst briefing scheduled later in the morning. For now, we keep our S$2.13 fair value and HOLD rating on FCT unchanged.

Keppel Land: Diversifying stake in Tanah Merah site
Keppel Land (KPLD) announced yesterday that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. In addition, Vanke would take a 30% interest in a KPLD’s Tanah Merah GLS site for S$135.5m. Recall that KPLD had won this site with a S$434.6m bid last Oct and Vanke’s entry price is only marginally above that of KPLD’s cost. We believe this price is reasonable and, all considered, expect a neutral market reaction to this transaction. In our view, the potential loss of accretion to KPLD’s RNAV from this divestment is limited and mostly offset by the benefits of diversification in an increasingly uncertain domestic residential space. Maintain BUYwith an unchanged fair value estimate of S$4.53. 
From UOB KH:
M1- 1Q13: Unfavourable mix of handsets. (M1
SP/HOLD/S$3.00/Target: S$3.04)

M1 reported a net profit of S$41m for 1Q13 (+8.2% qoq,
+4.2% yoy), marginally below our expectations. Our target
price is S$3.04, based on DCF (required rate of return: 7.2%,
terminal growth: 0%).

Hafary Holdings- Positive Earnings Outlook With A
Portfolio Of Industrial Gems; BUY Initiation
(HAFA SP/BUY/S$0.485/Target: S$0.66)

We initiate coverage on Hafary Holdings (Hafary) with a
BUY recommendation and a SOTP-based target price of
S$0.66, implying a 36.1% upside from the current price.
Strong construction demand is likely to boost future earnings.
Valuation is backed by a portfolio of industrial buildings held
at low cost on balance sheet. Any plans to unlock hidden
value of the property portfolio may be an upside catalyst for
the stock, in our view.

From Maybank KE:
M1: Maximum Warp, Mr Data. Up to BUY; TP $3.55
M1 SP | Mkt Cap USD2.23b | ADTV USD2.4m
We upgrade M1 to BUY with a DCF-derived target price of SGD3.55, at
 the  top  end  of consensus. Including forecast dividends of 14.8 cents
for  FY13,  the  upside potential is 23%. Switch to M1 from StarHub and
The  relative  underperformance  of the stock this year against its
 peers  provides  a  chance to get in early on potential earnings upside
 from the adoption of 4G, which we believe will happen faster and sooner
 than expected in 2013. Yield of 5% is also very decent.
 Already,  the  numbers  unearthed from the in-line 1Q13 results are
 encouraging.  Service  revenue  rose 4% YoY, the fastest since 2010, on
 the  back  of  tiered  price  hikes  and  ARPU  uplift from excess data

Sino Grandness: A Big Step Towards Profit Target; BUY TP $1.60
SFGI SP | Mkt Cap USD296.9m | ADTV USD2.3m
Sino  Grandness’  beverage  subsidiary,  Garden Fresh, has received
indicative  orders  worth  more  than CNY290m at last month’s F&B trade
fair  in  Chengdu,  China. The order win from this year’s event trumped
last year’s CNY200m by 45%.
In  our  view,  this development augurs well for Garden Fresh as it

represents  a  big  step towards helping it meet its profit target this
We continue to like Sino Grandness’s growth prospects and the
potential spinoff of Garden Fresh to unlock value. The stock has surged

28% in the last week but we still see plenty of upside from here.
Reiterate BUY and target price of SGD1.60. 

SGX: Strong Securities And Derivatives Revenues Help Lift 3QFY13 Results
(SELL, S$7.66, TP: S$6.80)

SGX’s 3QFY13 net profit rose 26% y-o-y (+28% q-o-q) to SGD98m, on the back
of a pickup in securities market average daily turnover (ADT) to SGD1.7bn (17%
y-o-y; +41% q-o-q) and a record quarter for derivatives. We raised our FY13-14
net profit projections by 4% p.a. and our fair value to SGD6.80 (21x FY14 EPS)
from SGD6.50. However, our Sell call is unchanged. Apr’s ADT has softened,
suggesting a weaker 4QFY13.
Valuation and recommendation. Fair value raised to SGD6.80 from SGD6.50,
based on unchanged target FY14 PER of 21x. SGX is currently trading at CY13 PER
of 24.5x. While not particularly excessive, we prefer Bursa Malaysia (Buy, MYR7.16,
TP: MYR7.50) given cheaper valuations (CY13 PER: 22x) and stronger earnings
growth (2013F: 14%). Furthermore, we note that Apr’s ADT has softened to around
SGD1.26bn, potentially suggesting a weaker 4QFY13 is in store. Thus, despite the
commendable results, we have maintained our Sell call on the stock.

M1: A Seasonally Weaker Quarter, Roaming Revenues Stay Under Pressure
(NEUTRAL, S$3.00, TP: S$2.70)

There were no surprises in M1’s 1QFY13 results, which reflected typical
seasonality and the extended weakness in roaming revenue. Management
expects margin upside to be capped as subscriber acquisition cost (SAC) will
likely remain high. We maintain our core earnings forecasts, which assume a
two-year CAGR of 14.5%. Our FV remains at SGD2.70, based on DCF (10%
WACC). Maintain NEUTRAL.
Share price playing catch-up. M1’s share price has risen 11.3% YTD, which could
indicate a laggard play following its relative underperformance vis-à-vis its peers in
2012. Management has reaffirmed its previous net profit guidance of ‘moderate
growth’ and capex guidance of SGD130m-SGD150m for FY13 (excluding 4G
spectrum cost). We make no changes to our core earnings forecasts of SGD161m
and SGD192m for FY13 and FY14 respectively. NEUTRAL.

From Phillip:
M1 – Results
Recommendation: Neutral
Previous close: S$3.00
Fair value: S$2.58
  • 1.7% y-y increase in Net Income, Service revenue healthy with 4.1% y-y growth
  • Positive on 11% of re-contracting customers upgrading to higher tiered postpaid plans
  • Maintain Neutral, with new TP of S$2.58.
Wilmar International Ltd - Acquires 27.5% stake in Cosumar
Recommendation: Neutral
Previous close: S$3.27
Fair value: S$3.79
  • Acquisition of 27.5% stake in Cosumar for MA$2.3bn
  • Impact should remain insignificant in the near term
  • Maintain Neutral rating
SGX – Results
Recommendation: Accumulate
Previous close: S$7.70
Fair value: S$8.00
  • SGX reported 5-year record high 3Q13 net profit of S$97.7 million and Total revenue of S$190.6 million.
  • Securities and Derivatives  revenue positive on improved market sentiments, wide variety of attractive offerings, and solid infrastructure
  • Maintain “Accumulate” with TP of S$8.00, based on unchanged PE multiple of 26X FY13 earnings.  

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