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Monday, May 13, 2013

Local Brokerages Stock Call 10 May 2013

From OCBC:
StarHub Ltd: Downgrade to SELL – pricey now
StarHub Ltd posted 1Q13 revenue of S$580.1m, down 2% YoY and 11% QoQ, but still met 23% of our full-year forecast. Net profit grew 3% YoY and 4% QoQ to S$91.2m, meeting 25% of our FY13 forecast. And as guided, StarHub declared a quarterly dividend of S$0.05/share, payable on 30 May 2013. For 2013, StarHub now expects to see low single-digit revenue growth, versus single-digit growth guidance previously. Management says it is being more cautious in view of the 2% drop in revenue in 1Q13. Otherwise, it has kept everything else unchanged. Stock price has outperformed not only its peers but also the STI. While part of the run-up could be driven by investors searching for yield, current valuation looks pricey; yield has also fallen to 4.2%. A more “risk on” approach could also see investors switching out of defensive stocks. As such, we downgrade our call from Hold to SELL, with an unchanged DCF-based fair value of S$4.00.

Fortune REIT: 1Q13 exceeds expectations

Fortune REIT reported excellent results for 1Q13. Revenue and net property income climbed 16.3% YoY and 17.6% YoY to HK$301.4m and HK$217.9M respectively. Occupancy rose to 98.6%, the highest level in over two years, with good portfolio-wide operational statistics and a fast recovery after AEI. Average passing rents grew by 10.0% YoY to a new high of HK$32.9 sq ft. Due to a strong leasing market, rental reversions were at 19.5%, higher than the mid-teen percentages that management had guided. While 2Q/3Q may see anchor tenants renewing leases with lower percentages, we think that revenue and net property income are likely to grow on a QoQ basis. DPU of 9.0 HK cents formed 27% of our initial FY13 estimate and 26% of the street’s FY13 consensus estimate. Raising revenue assumptions and lowering interest cost assumptions, we lift our fair value to HK$8.64 from HK$7.28 and we maintain a BUY rating on FRT. It is trading at a still-attractive P/B of 0.9x.

Hyflux: Slow start to 2013 as expected

Hyflux Ltd reported its 1Q13 results last night, with revenue slipping 8% YoY and 38% QoQ to S$124.5m, or around 17% of our full-year forecast; net profit rose 5% YoY (though down 62% QoQ) to S$8.0m, or 10.2% of our FY13 estimate. However, we are not perturbed by the seemingly slow start as 1Q is traditionally their weakest quarter. Going forward, Hyflux remains fairly optimistic about its prospects; and will actively pursue opportunities in Asia and MENA. As results are in line, we opt to keep our estimates unchanged. Maintain HOLD with an unchanged S$1.44 fair value. 

Marco Polo Marine: Drop in shipbuilding activity

Marco Polo Marine (MPM) reported a 31% YoY fall in revenue to S$21.3m but a 121% rise in net profit to S$9.3m in 2QFY13, such that 1HFY13 net profit accounted for 58% of our full year estimate. Excluding an exceptional gain of S$5.7m, core net profit was about S$3.7m, slightly below our expectations. The lower revenue was mainly due to lower contributions from the shipbuilding and repair segment with fewer third-part new-built contracts. Gross margin was 42% in 2QFY13, compared to 27% in 2QFY12 and 39% in 1QFY13. Pending an analysts’ briefing later, we put our Buy rating and fair value estimate of S$0.56 under review. 

From UOB KH: 
Overseas Education- 1Q13 Results: Within Expectations
(OEL SP/BUY/S$0.70/Target: S$0.88)

Maintain BUY and target price of S$0.88 based on a 3-
stage DCF model. The implied 2013F PE is 17.4x, which is
in line with peers’ average. We forecast dividend yields of
3.6-4.3% for 2013-15 based on a 50% payout ratio.

Mapletree Commercial Trust (MCT SP, N2IU) -
Technical BUY with +8.1% potential return

Last price: S$1.48
Resistance: S$1.60
Support: S$1.42
BUY with a target price of S$1.60 with stops placed below
S$1.435. The stock appears to be trending up and above its
rising mid Bollinger band which could be acting as a support.
Prices have also have been trading above the gap near
S$0.425 which was created on 23 Apr 13. Its MACD indicator
appears to hook up instead of forming a bearish crossover
and its RSI has rebounded above a reading of 60. Watch to
see if the Stochastics indicator could form a bullish crossover.

KSH Holdings Ltd (KSHH SP, ER0) -
Technical BUY with +17.9% potential return

Last price: S$0.475
Resistance: S$0.56
Support: S$0.46
BUY with a target price of S$0.56 with tight stops placed
below S$0.46. The stock is likely to trend higher as it appears
to be supported by its rising 35-day moving average and has
closed above its mid Bollinger band while forming a higher
low. Its Stochastics indicator has formed a bullish crossover
and was accompanied with a RSI rebound above a reading of
40. Watch to see if the MACD indicator could form a bullish

Del Monte Pacific Ltd (DELM SP, D03) -
Take profit from previous technical BUY

Last price: S$0.935
Resistance: S$0.96
Support: S$0.71
The stock was featured as a technical BUY when it opened at
S$0.78 on 25 Apr 13. It has since returned 19.8% on closing
prices, with an intraday high of S$0.94 in the last trading
session which is near the initial technical buy target of
S$0.96. Some profits could be taken off the table should the
stock fail to exceed S$0.96. Its 21-day Stochastics is trending
in the overbought region.

Ezion Holdings- 1Q13: Net profit more than doubles.
(EZI SP/BUY/S$2.21/Target: S$2.60)

FY13F PE(x): 11.6
FY14F PE(x): 9.0
Boosted by gain from asset sale. Ezion reported 1Q13 net profit of US$46.2m (+227% yoy). Other income of US$21.5m included a gain of US$17.8m from the disposal of Ezion's stake in OMSA (the JV unit that is handling offshore marine logistics for the
Gorgon project in Australia) with the balance US$3.7m predominantly due to operation management fees.
Maintain BUY. Our target price has been raised from S$2.40 to S$2.60, which is pegged at 11x 2014F fully-diluted EPS (adjusted for dividends on perpetual securities). This is 15% above the long-term 1-year forward PE mean of 9.6x for the offshore support
vessel-owner segment of the offshore & marine sector.

Kreuz Holdings- 1Q13: In line; new capacity to bridge 2014 growth gap.
(KRZ SP/BUY/S$0.60/Target: S$0.68)

FY13F PE(x): 5.9
FY14F PE(x): 5.8
Results in line. Kreuz Holdings (Kreuz) reported a net profit of US$10.8m (+91% qoq +5.4% yoy) for 1Q13, which is in line with our forecast of US$10.4m and accounts for 23% of our full-year estimate.
Strong earnings visibility. Kreuz’s end-1Q13 orderbook stood at US$200m, which will be recognised over 12-18 months. Based on the current orderbook and without any new contract wins, we estimate that the group will be able to achieve 70-75% of our 2013
full-year revenue forecast.
Maintain BUY with an unchanged target price of S$0.68, pegged to an undemanding 2014F PE of 6.5x, which is at a 32% discount to the offshore support vessel owner segment’s long-term PE mean of 9.6x.

StarHub- 1Q13: Rate of growth slows down; valuation stretched.
(STH SP/SELL/S$4.72/Target: S$3.82)

FY13F PE(x): 23.2
FY14F PE(x): 21.3
StarHub reported a net profit of S$91.2m for 1Q13 (+3.2% yoy), in line with our expectations. The results included an adoption grant of S$15m that Nucleus Connect received as Operating Company for NGNBN.
Lower revenue guidance. Management guided low single-digit growth (previous: single-digit growth) in service revenue for 2013.
EBITDA margin is expected to be about 31%. Capex is expected to be higher at about 13% of service revenue (2012: 11.3%).
Our target price for StarHub is S$3.82 based on DCF (required rate of return: 7.2%, terminal growth: 0%).

From Maybank KE:

StarHub: Stars Moving Out Of Alignment; Downgrade to Sell TP $4.20
STH SP | Mkt Cap USD6.6b | ADTV USD6.1m

Downgrade  to  SELL.  Admittedly,  this  is a risky call amidst the
current  liquidity and yield compression conditions, but we had held on
to  our  BUY call with the highest TP on the Street even when the stock
exceeded all expectations. Switch to M1.
Now  the  dividend  spread  is getting ever thinner, competition is
heating  up,  revenue guidance cut and demands on cash are growing more
onerous.  While  gearing  is  ultra-low,  the  nearest  window for more
dividends  has  now  been  pushed  back with a delay in the 4G spectrum
auction toward 2H12.
The  fixed  dividend and yield of 4% may still provide some comfort
and  prevent  an  immediate rush to the exit, but we would still advise
clients  to  sell  into  strength.  Our DCF-derived TP is SGD4.20 (prev SGD4.31).
Ezion Holdings: Entering the High Growth Years; Buy TP $2.56
EZI SP | Mkt Cap USD1.7b | ADTV USD12m

Maintain  BUY  on  Ezion  as we raise our valuation multiple to 15x
FY13F  PER (from 13x), TP SGD2.56. We believe that previous concerns on
high gearing have mostly dissipated as Ezion demonstrates astute use of
its capital.
1Q13 results were within expectations. Our forecast of 51% growth in
FY13F  EPS  and  a CAGR of 40% over FY13-15F remain well on track to be
met.  These  high  growth  expectations are primarily backed by secured
charter contracts limiting the risk of major misses.
We see sequential quarterly growth as more liftboat units are
deployed. Net gearing has risen to 0.83x in 1Q13 and is expected to
rise further in subsequent quarters.

From DBS:
1Q13 earnings for Kreuz Holdings in line; the group is on
track for another growth year. Prudent balance between
chasing growth and pace of adding assets should reap
benefits over the cycle. Kreuz is still cheap at just 6x FY13F PE
despite strong run. Maintain BUY with a higher TP of S$0.78
(Prev S$ 0.58).

Ezion’s 1Q13 results slightly ahead, recurring net profit
doubled y-o-y on 79% topline growth and firm margins.
Addition of 3 service rigs and maiden contribution from
GLNG will drive growth in 2Q. Our analyst expects further
fleet expansion, supported by sound financials and
strengthening cash flow. Maintain BUY; TP S$2.47.

Hyflux’s 1Q13 slightly under, formed 12% of FY13F. Revenue
fell short but margins held firm. Project execution is on track,
pipeline awaiting conclusion. Positive industry trend bodes
well for Hyflux but near term performance may be slow as
orderbook is depleting. Maintain forecast; HOLD and TP
unchanged at S$1.43.

StarHub’s 1Q13 earnings of S$91.2m (+3% y-o-y, +4% q-oq)
were in line; comprised 24% of our FY13F earnings.
Mobile revenue was weak but impact was offset by lower
handset subsidies and higher grants. Dividend yield of 4.2%
and mid-single digit growth prospects are priced in; maintain
HOLD and S$4.30 TP.

Sin Heng registered revenue of $40.3m (+51.2% y-o-y) for
3Q FY13 and $124.6m (+37.8% y-o-y) for 9M FY13. The
increase in total revenue was due to increase in both rental
and trading revenues. Gross profit of $7.2m for 3Q FY13 was
67.0% higher y-o-y while total gross profit of $21.6m for 9M
FY13 which was 61.7% higher than the prior 9M FY12. Gross
margin improved to 17.3% for 9M FY13 from 15.8% in
FY12. 3Q13 net profit doubled to S$3.1m while 9MFY13 was
up 67% to S$9.4m. Chartwise, it’s been based out at 0.245.
Looking ahead, the company is cautiously optimistic that the
key markets it operates remain encouraging. Technically, the
stock has been trading in a narrow band from 0.23-0.26
since early March. It looks to have based out at $0.24-0.245.
Scope for an initial move to $0.265, a rise above this is
needed to lift the stock to $0.285.

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