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Monday, May 13, 2013

Local Brokerages Stock Call 13 May 2013

From OCBC:
ECS Holdings: Double-digit growth delivered
Summary: ECS Holdings (ECS) reported a positive set of 1Q13 results which exceeded our expectations. Estimated core PATMI jumped 28.6% YoY to S$8.5m on the back of a 20.9% YoY increase in revenue to S$1,090.3m. The group managed to record healthy YoY revenue and EBIT growth for all of its core segments. However, its gross margin slipped 0.4ppt to 3.7% in 1Q13 due largely to a change in product mix. We lift our FY13 and FY14 revenue projections by 8.9% and 10.6%, respectively. But as we also lower our margin assumptions slightly, our FY13 and FY14 core PATMI estimates are raised by a smaller magnitude of 4.2% each. Correspondingly, our fair value estimate increases from S$0.53 to S$0.57, now pegged to 6x FY13F EPS (previously 5.8x).  As ECS is trading at an attractive 5.0x and 0.52x FY13F PER and P/NTA, respectively, we upgrade the stock from Hold to BUY

UOL Group: Proposed delisting of Pan Pacific Hotels
Summary: UOL’s 1Q13 PATMI decreased 15% YoY to S$71.7m mostly due to a weak contribution from its hotel segment. 1Q earnings now make up 19% of our full-year forecast, which we judge to be generally within expectations and is tracking marginally below due to lumpy progress recognition at development projects. In addition, the group has made a cash offer of S$2.55 per share (9% premium over last transacted price) to delist PPHG (Pan Pacific Hotels Group), conditional on the shareholder approval. We see this as a sensible move which would consolidate the group’s hotel assets at a fairly reasonable price. That said, from our discussions with management, it appears unlikely that material operating changes, i.e., a major re-structuring or REIT listing, are in store for PPHG assets. Maintain HOLD with a higher fair value estimate of S$7.16 (20% RNAV disc.), versus S$6.01 previously, as we work into our valuation model higher prices of listed holdings and the Sengkang acquisition.

Midas Holdings: Expects net loss in 1Q13

Summary: Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 1Q13 results release, saying that it expects to report an unaudited net loss. This is mainly due to lower revenue and gross profit margin given the change in product mix and weaker utilisation rates, as well as higher operating expenses and finance costs and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). This profit guidance comes as no surprise to us as we had forecasted Midas to record a net loss of CNY3.2m in 1Q13. We still expect Midas to stage a recovery in 2H13, but the strength of this recovery will be dependent on the developments in China’s high-speed railway sector. Midas will report its 1Q13 results on 14 May after trading hours, while an analyst conference call has been scheduled the day after. We will provide more updates then. For now, we have a BUY rating and S$0.595 fair value estimate on the stock. 

Biosensors International Group: Proposed acquisition of assets from Spectrum Dynamics

Summary: Biosensors International Group (BIG) announced this morning that it has entered into an agreement to acquire substantially all the assets of Spectrum Dynamics (SD), which is a privately held company. SD is a medical imaging and clinical applications company involved in the designing, developing, manufacturing and distribution of medical imaging systems and technology in multiple fields. The initial deal consideration is US$51.1m (book value of SD’s assets valued at ~US$7.3m as at 31 Mar 2013), and will be funded by internal resources. Subsequent performance payments of US$4m and US$15m may be paid to SD if certain performance benchmarks are met in 2014 and 2016, respectively. We are positive on this move as it allows BIG to diversify its product offerings and revenue stream. But as the acquisition is not expected to have a material impact on the EPS and NTA of BIG in FY14, we leave our forecasts unchanged for now. Maintain BUY and S$1.60 fair value estimate on BIG.

From Lim & Tan:
We are downgrading Midas (50.5 cents, unchanged)
to Neutral
as we expect downward revisions in
consensus profit estimates by 20% to Rmb100mln
after the company warned that it expects to be loss
making in 1Q13, reversing last year and last quarter¡¦s
profit of Rmb16mln as a result of lower sales, lower
margins due to weaker product mix and increased
fixed costs, as well as larger losses from 32.5% owned
Nanjing Puzhen and higher operating costs.

We are upgrading our recommendation on China
Minzhong ($1.10, up 4 cents) to Neutral from Sell

as the stock has declined 11% since our last sell
recommendation in early March13 and while its 3Q
to Mar13 profit growth of 5.9% to Rmb255mln,
bringing 9 months to Mar13 profit up 17% to
Rmb593mln was about in line with expectations as
solid top-line growth of 28% yoy was eroded by cost
inflation in China. Expectations of a final dividend
payment for full year to June13, however small, could
provide some support.

 We are upgrading our recommendation on Yamada
(26 cents, up 1/2 cent) to Neutral from Sell
as the stock
has declined 15% since our last sell recommendation
in Mar13 and while 3Q to Mar13 profit has continued
to decline 37% to Rmb51mln, bringing 9 months to
Mar13 profit down 57% to Rmb69mln, prospects are
looking better with the company expecting their raw
material costs to moderate as they are able to source
their own raw materials rather than buy externally.
This should help improve margins going forward.

We suspect a replay of Guoco Group (HK$92.40,
up 10 cents) could be at work in Guoco Leisure (85
cents, up 1/2 cent)
where the former had reported a
huge US$330mln loss in 1H2012 only to see Tan Sri
QLC launch in privatization offer in Dec12 at HK$88
per share and recently revised it up to HK$100 per
share, significantly above the pre-privatization price
of HK$60. Guoco Leisure had just reported a loss
for 3Q to Mar13 of US$6.5mln due to the eurozone
crisis. Technically, a break of the 78-80 cents level
suggests lower levels. It is currently trading at 0.77x
its NAV of $1.10 a share. We do not yet have a rating
on the stock. 

From UOB KH:
Singapore Airlines (SIA SP, C6L) –
Recovery in 4QFY13; Benign fuel outlook
Last price: S$11.39
Target Price: S$13.50

The recent decline in crude oil has lowered jet fuel prices and
we expect the trend to continue into the coming quarters. SIA,
trading at the lowest P/B among Asian carriers under our
coverage, should be the first to be re-rated. We expect SIA to
report better quarterly results (4QFY13), primarily due to lower
unit costs. While the market has been hopeful of a potential
special dividend following the divestment of Virgin Atlantic,
recent investments made into Tiger Airways and Virgin Australia
have exceeded the proceeds. We now value SIA, excluding SIA
Engineering, at 0.9x FY14F book value, and consequently raised
our target price by 26% to S$13.50. We upgraded our call to
BUY on 3 May 13.
Technically, the stock could trend higher after being supported
near S$10.60/10.00. The stock could move towards S$13.20
after a potential breakout.

China Aviation Oil (CAO SP, G92) –
Optimisation bearing fruit
Last price: S$1.085
Target Price: S$1.30

We have upgraded CAO to BUY after it reported a better-than expected
set of results. We believe that the optimisation of the trading segment

and an increase in strategic acquisition is bearing fruit as shown by 
the 44% jump in gross profit. CAO’s business model gives it an advantage.
The company supplies jet fuel to China annually and makes a fixed spread
gross profit.
When trading opportunities arise, traders can also lock in
profits. This type of business model makes it unlikely to book an
operational loss. While we think contributions from its 30%-
owned subsidiary are likely to be lower in the near term, the
stock’s share price has also retraced 15% from the high. We
believe this is a good level for investors to accumulate and we
have raised our target price for the stock to S$1.30, based on a
blend of our dividend discount model and an 11x PE valuation.
We upgraded our recommendation to BUY on 3 May 13.
Technically, the stock appears to be supported near S$0.95 and
could increase its odds of a downtrend reversal as prices are
trading towards S$1.10/S$1.22.

Ezion Holdings (EZI SP, 5ME) –
1Q13 results ahead of expectations
Last price: S$2.29
Target Price: S$2.60

Ezion’s net profit more than doubled in 1Q13 due to a one-off
gain. Excluding this, results were still ahead of expectations and
we expect higher earnings in the remaining quarters of the year
as more liftboats and service rigs commence operation. Over
2013-15, we project operating profit to treble. Following its
recent breakthroughs in Indonesia, Malaysia and Vietnam, we
also expect Ezion to announce more new charter contracts this
year. Ytd, it has already won five. We have raised our earnings
forecasts and target price to S$2.60, which is pegged at 11x
2014F EPS. We maintain our BUY recommendation.
Technically, the stock appears to continue to trend up with price
well support near S$1.98/1.90. The technical price objective
could be at S$2.55.

Parkway Life REIT- Fundamentals intact although valuations starting to look rich.
Downgrade to HOLD.
(PREIT SP/HOLD/S$2.74/Target: S$2.70)

FY13F DPU Yld (%): 3.9
FY14F DPU Yld (%): 4.1
Results in line with expectations. Parkway Life REIT (PLife) reported 1Q13 distributable income of S$16.0m (+2.9% yoy, -1.8% qoq) or a DPU of 2.64 S cents (+2.9% yoy, -1.9% qoq). The DPU for 1Q13 is within expectations at 25.4% of our full-year
Acquisitions of nursing homes in Japan are likely to continue due to PLife’s strategic partnership with Japan nursing home operators, but remain opportunistic as competition intensifies due to rising liquidity spurred by monetary easing. For example
Shinsei Bank is establishing the first healthcare REIT in Japan, while Singapore’s Healthway Medical has established a ¥15b fund to invest in nursing homes in Japan.
We downgrade to HOLD with a higher target price of S$2.70 (from S$2.62). We use the dividend discount model (required rate of return: 5.9%, terminal growth: 2.0%) to value PLife. Entry price is at S$2.35.

From DBS:
DBSV Research is initiating coverage on Thai Beverage
with a BUY recommendation and target price of S$0.80,

offering 30% total return upside on regional F&B player in
the making. Thai Bev is a market leader in spirits, green
tea and established distribution network in Thailand. We
expect continued re-rating to global/regional peers
average. The potential inclusion in MSCI could be a

The F&N Board has proposed a cash distribution of
S$3.28/share (total of S$4.73bn) via a proposed capital
reduction exercise. This accounts for c.85% of APB sales
proceeds of S$5.59bn. The timing of this capital reduction
is not surprising given expectations that its controlling
shareholders would be looking at extracting cash to pare
down debt that was undertaken for the takeover. F&N’s
2Q13 results were flat but within expectations. We expect
a stronger 2H on overseas property recognition. We
expect limited downside on the share price backed by its
proposed S$3.28/share cash distribution, and stable
earnings with its S$3.3bn in unrecognized revenue from
presold development properties. Maintain HOLD, TP
revised to S$9.52 (Prev S$ 8.99).

Mapletree Greater China Commercial Trust’s Festival Walk
continues to show resilience in tenant trades. Our latest
checks with management showed that the property
continued to enjoy a 9% y-o-y growth in tenant sales
from Jan-Mar 13 (up from 6% y-o-y expansion in the
previous quarter). Over the next few quarters, we believe
organic growth would remain the strongest drivers. With
80% of FY14 lease expiries at Festival Walk already locked
in and one thirds of renewals at Gateway Plaza

already re-contracted, earnings visibility and sustainability
is strong. Maintain Buy, TP S$1.22 (Prev S$ 1.18). The
trust is offering yields of 4.7% in FY14 and 5.3% in FY15.

9M12 earnings of RM 136m (+17%) for Silverlake Axis
were in line. FY13F/14F/15F earnings raised
6%/14%/19% on the back of recent acquisition and new
project pipeline. Maintain BUY, TP raised to S$0.80 (Prev
S$ 0.58) offering 14% potential returns over the next one

1Q13 results for Pan-United Corporation in line, driven by
volume increases in Building Materials segment and
higher utilisation at CXP port. We expect construction
activities to rise and earnings growth is set to accelerate in
FY14F. We are neutral to PAN whether it increases,
maintains or decreases its CXP stake. Maintain BUY with
S$1.16 TP.

Earnings for UOL declined y-o-y on lower residential
recognition, and accounted for 16% of our full year
forecast. We expect earnings to be back end loaded this
year, with 2 residential projects to receive TOP this year
(1in Q2, 1 in Q4) and the launch of the Bright Hill Dr and
St Patrick’s Garden sites in 3Q13. The group has launched
a delisting and exit offer for the remaining stake in Pan
Pacific Hotels Group (PPHG) at SS$2.55/share. The offer
price is 3% lower than the Dec 12 RNAV of S$2.64 and at
a 65.5% premium to its book NTA of S$1.54. The
privatisation of PPHG gives more operational flex and
potential for RNAV expansion. Maintain BUY, TP raised to
S$8.21 (Prev S$ 7.77).

3Q13 net profit of US$4.1m (-25% y-o-y, -14% q-o-q) for
Amtek came in 50% below our forecasts. Tooling sales
were robust but outlook is dragged by the uncertain end
demand. FY13/14F earnings cut by 19%/16% to reflect
lower margin and higher tax rate. Maintain Fully Valued,
TP lowered to S$0.45 (Prev S$ 0.46) following earnings
cut and a rollover to blended FY13/14F from FY13

Nam Cheong’s 1Q13 earnings were largely in line at
RM35.8m, up 8% y-o-y. Revenue was up 14% to
RM235m on the back of delivery of 5 vessels during the
quarter. Shipbuilding gross margin was slightly below
expectations at 17% in 1Q13, but within guided range.
The Group also announced significant contract wins
worth a total of US$110m – for 1 AHTS vessel sold to a
new Indonesian customer + 4 PSVs sold to an existing
customer. The Group remains well on track to sell and
deliver on its newbuild programme of 19 vessels in FY13
and 25 vessels in FY14, underpinning earnings growth
trajectory of >20% CAGR over FY12-14. Including buildto-
order vessels, orderbook is now at record levels of
RM1.7bn. Maintain BUY, estimates and TP under review

 with likely upward bias), pending discussions with
management and analyst briefing today. 

Cosco Corp has signed a contract with a Malaysian
shipowner to build a floatover launch barge worth over
US$23m. Delivery is slated for 4Q13 from its Zhoushan
yard. With this contract, Cosco's YTD win is lifted to
US$277m. Management guided US$2bn order win this
year with 90% coming from offshore projects. YTD wins
seem lagging, forming only 14% of company's target
new order (as well as our assumption). Maintain FULLY
VALUED, TP: S$0.75. 

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