Local Brokerages Stock Call 5 April 2013

From CIMB:

Tiger Airways

Business first, airline second

UNDERPERFORM - Maintained | S$0.66 - Tgt. S$0.63

We made a house call on Tiger last week. We like Group CEO Koay Peng Yen’s focus on long-term shareholder value. Expect a gradual breakaway from a dogmatic low-cost approach to a more return-focussed model. We think that Tiger is in good hands. Having said that, we maintain our Underperform call in light of continued near-term cash burn from associate losses. Our SOP-based target price of S$0.63, pegged to 13.5x CY14 P/E or the LCC industry's 5-year historical forward average, also includes proceeds from its planned Tiger Australia stake sale.

From UOB KH:
Oil Service - Best performing sector in 1Q13. What’s next?
Ezion Holdings (EZI SP/BUY/S$2.15/Target: S$2.40)
Kreuz Holdings (KRZ SP/BUY/S$0.515/Target: S$0.68)
Nam Cheong (NCL SP/BUY/S$0.26/Target: S$0.34)
Triyards (ETL SP/BUY/S$0.78/Target: S$1.11)
 
Bottom-up strategy for outperformance. The oil-service sector was the best performing sector in 1Q13 with a market cap weighted return of 12.1%, outperforming the FSSTI (+4.5%) by 7.6%. Major outperformers were Ezion (+28.4%) and Kreuz
(+19.8%). Both were our top oil-service stock picks in our 2013 strategy report. We continue to advocate a bottom-up strategy that favours companies in an aggressive business expansion phase leading to EPS improvement. These companies focus on
regional/global expansion to capitalise on rising oil & gas spending or are expanding their footprints to increase market shares. They are actively pursuing business growth for greater earnings, instead of waiting for a global recovery in offshore support vessel
(OSV) charter rates. Corporate growth strategies in this cycle (2009 onwards) differ from those in the last cycle (2003-08), whichwas driven by OSV charter-rate increase. Our top stock picks are Ezion, Kreuz, Nam Cheong and Triyards.

Ezion Holdings (EZI SP/BUY/Target: S$2.40). Booming demand as liftboats and service rigs gain NOC acceptance. Ytd, Ezion has secured three new liftboat/service-rig charter contracts (2012: 22 new charters) and the green light for its new marine supply
base business in Australia. Potential demand is huge given the small liftboat and service rig fleets in Asia Pacific. In Southeast Asia, the Middle East and West Africa, there are only 54 liftboats vs a large fixed platform fleet of 3,266 units (or 14 platforms per
liftboat). In comparison, North America has a larger liftboat fleet of 240 units vs a fixed platform fleet of 3,257 (or 60 platforms per liftboat).

Kreuz Holdings (KRZ SP/BUY/Target: S$0.68). Kreuz recently inked a deal to build a game-changing deepwater subsea vessel, which will lift the group’s capability to match that of leading global subsea players. Ytd, Kreuz has clinched contracts worth
US$40.5m, on track to meet our full year forecast of US$200m. The group has also continued to grow third-party contributions, reducing its dependence on its parent Swiber. 86% of the contracts secured ytd are from third-party customers.

Nam Cheong (NCL SP/BUY/Target: S$0.34). A key beneficiary of a recent pick-up in Malaysian offshore activity, being the largest Malaysian OSV shipyard with a 50-75% domestic market share. OSV tendering activity is expected to pick up on the back
of Petronas’ requirement of 34 vessels in 2013, coupled with additional vessels required for the Pan Malaysian Hook-Up and  Commissioning project.

Triyards (ETL SP/BUY/Target: S$1.11). Triyards is a proxy to the growing global acceptance of liftboats, being one of the few yards outside of the US capable of building such vessels. Triyards will embark on further growth by: a) developing proprietary
third-generation liftboat designs, b) expanding ship-repair capacity, c) diversifying into new products such as high-speed aluminum commercial and patrol vessels, and d) growing its equipment business and branding. 

SGX (SGX SP, S68) –
Technical SELL with +5.0% potential return
Last price: S$7.58
Resistance: S$7.85
Support: S$7.20
SELL with a target price of S$7.20 with stops placed above
S$4.35. Potentially, prices may swing lower should it break
below its 50-day moving average. Currently prices have
fallen below its immediate rising trendline. Its Stochastics
indicator has formed a bearish crossover and has turned
down. Watch to see if its mid Bollinger band could now act as
a resistance rather than a support.
Our institutional research has a fundamental BUY with a
target price of S$7.70. 

Singapore Telecommunications Ltd (ST SP, Z74) –
Technical BUY with +7.7% potential return
Last price: S$3.62
Resistance: S$3.90
Support: S$3.40
BUY with a target price of S$3.90 with stops placed below
S$3.53. The stock has trended above its mid Bollinger band
as well as its 50-day moving average and rising trendline. Its
MACD and Stochastics indicators have each formed a bullish
crossover. Watch to see if the stock could close above S$3.64
for further upside.
Our institutional research has a fundamental SELL with a
target price of S$3.41. 

Memstar Technology (MSL SP, 5MS) –
Technical BUY with +27.5% potential return
Last price: S$0.098
Resistance: S$0.105/0.125
Support: S$0.085
BUY with a target price of S$0.125 with stops placed below
S$0.092. Prices appear to be supported by its mid Bollinger
band and the stock is also trending above its 50-day moving
average. Its MACD and Stochastics indicators have each
formed a bullish crossover. Watch to see if the stock could
close above S$0.105 for further upside. 

From Maybank KE:
SMRT Corp: Ending the Year with a Whimper; Maintain Sell TP SGD1.19
MRT SP | Mkt Cap USD1.9b | ADTV USD2.1m

The  previously  unimaginable  has  happened. SMRT is expecting its
first  ever  quarterly  loss  in  its  history  for 4QFY3/13. This loss
guidance  validates  our sustained SELL call, and we are reiterating it
with a reduced, street-low target price of SGD1.19.
SMRT  has  been  a  dividend  darling  in the past, with stable and
growing  earnings  providing  shareholders  with  a  steady  stream  of
dividends  to  look  forward  to.  However  those days of stability and
certainty  look  to be coming to an end, as our final dividend forecast
for FY3/13 is correspondingly cut by 30% to SG 3.5 cts /share.
In  light  of  such  firm guidance on the challenges ahead for land
transport  operators  like SMRT, we are slashing our earnings forecasts
by  25%  for FY3/13 and ~10% for FY3/14-15. Our target price is reduced
to  SGD1.19, as we maintain our valuation peg to 15x FY3/14 PER, a full
standard deviation below mean. SELL SMRT. 

From OCBC:
Conviction Idea: Pair trade - Long SPH / Short STH
We recommend a long SPH/short STH pair trade. Investors would pick up a 63 bps dividend yield spread (to offset transactions costs) and gain significant upside exposure to the scenario that SPH lists its REIT. Two bases for our trade: first, we believe SPH’s 63 bps spread over STH is attractive. Newspapers are generally perceived to have weaker prospects than telcos but SPH has a virtual monopoly in its market while STH perennially competes against the much larger SingTel and has been losing market share in both its mobile and Pay TV segments. Second, from our calculations, we believe a SPH REIT listing scenario is realistic given the current yield/valuation dynamics of its assets and the size of its portfolio. Assuming SPH retains a 51% stake in the REIT, we see potential divestment gains of S$625m to S$744m or 39 to 46 S-cents per share. This could consequently lead to a special dividend and/or distribution in specie of REIT units for SPH shareholders.

CapitaMall Trust: Deep value at current price
CapitaMall Trust (CMT) has been a clear laggard within the S-REITs space, staying flat YTD versus an average of 11.0% increase in unit prices for its local retail peers. We believe this is unjustified given its portfolio of 15 quality retail malls and its relentless efforts in optimizing its yield via asset enhancement initiatives. The operating landscape in the retail space also appears sanguine thus far. According to CBRE, the average rents in prime Orchard Road rose for the first time in 1Q13 after staying flat since 3Q11. While the suburban retail will see a substantial amount of space coming online in 2013, CBRE notes that retailers are still upbeat about the suburban market. This is consistent with our view that both the Orchard Road and suburban rents may possibly remain firm in 2013. We are keeping our S$2.32 fair value unchanged and maintaining BUY on CMT as we expect the valuation gap to narrow between CMT and its peers.

Yoma Strategic Holdings: Forming consortium to bid for mobile license
Yoma announced that it has formed a consortium with FMI, its affiliate in Myanmar, and Digicel Group and Quantum Strategic Partners to bid for one of the two mobile licenses expected to be awarded by the Myanmar Government later this year. The consortium has submitted its pre-qualification bid in Nay Pyi Taw yesterday as the first part of the mobile license process. We understand that Yoma and FMI has joined the consortium through a newly created 80:20 joint venture YSH Finance Ltd, but Yoma’s eventual effective stake in the consortium is yet unclear. Also, we expect fierce competition for the mobile licenses from a host of contenders, including a Vodafone-China Mobile tie-up and other major telco players such as SingTel, Telekomunikasi Indonesia, Malaysia's Axiata Group Bhd, Norway's Telenor ASA and India's Bharti Airtel Ltd. Since we have downgraded Yoma to a SELL on 1 Feb 2013 with a fair value estimate of S$0.71, the share price has corrected 17.2% from S$0.90 to S$0.745. We now put our rating and fair value estimate UNDER REVIEW.

ST Engineering: ST Electronics won S$151m of contracts in 1Q13
ST Engineering (STE) announced that its electronics arm, ST Electronics, has secured about S$151m of contracts. This is in line with our expectations. The contracts include S$65m in the rail electronics market with projects for mass rapid transit (MRT) projects in Malaysia, Taiwan and North America. S$78m in contracts was secured under the satcom and sensor business segment and S$8m was under smart utilities solutions. We maintain our fair value estimate of S$4.12 and HOLDrating on STE.