Local Brokerages Stock Call 23 May 2013

From OCBC:
OKP Holdings: Ceasing coverage
For the first quarter of the year, PATMI came down 22.2% YoY to S$2.4m – below our expectations and consensus estimates – mostly due to margin pressures from increased subcontracting and labour costs. Looking ahead, we see softer gross margins in the vicinity of 15%-20% for OKP as it continues to face significant cost-side pressures from more restrictive labour regulations from authorities and increased competition to hire and retain engineers. That said, OKP continues to have a fairly healthy order book at S$393.5m as at 30 Apr 2013, as the group benefits from significant experience in public-sector construction and maintenance projects with a good reputation for on-time delivery. We last rated OKP a HOLD with a fair value estimate of S$0.46, based on a P/E multiple of 11x applied to FY13F EPS. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.
Singapore Economy: 2013 GDP growth forecast remains at 1-3%
According to the MTI, the Singapore economy grew by 0.2% YoY in 1Q13, better than the street’s expectations of -0.6% growth, but worse than the 1.5% growth seen in 4Q12. On a seasonally adjusted, annualised basis, the economy expanded by 1.8% QoQ, compared to the 3.3% growth in 4Q12. Manufacturing contracted by 12.3% QoQ, reversing the 3.1% growth in 4Q12, largely due to lower output in the biomedical manufacturing and transport engineering clusters. Construction grew by 16.5%, compared to 4Q12’s 3.9% negative growth, due to a strong rebound in private sector building activities. Finally, services expanded by 7.9% after 4Q12’s 2.5% rise, driven mainly by the finance and insurance sector. Despite the stabilisation of external macroeconomic conditions since late last year, risks to global growth outlook remain. Hence barring downside risks, the MTI maintains its 2013 GDP growth forecast at 1.0-3.0%.

TEE International: TEE Land lodges preliminary IPO prospectus
TEE International’s real estate unit TEE Land lodged its preliminary IPO prospectus with the Monetary Authority of Singapore yesterday. The property portfolio injected into TEE Land by its parent comprises 24 projects, worth $394.6m as at 30 Nov 2012. Four pre-IPO investors have collectively subscribed for 4m shares in TEE Land for $4m. TEE’s managing director of real estate will lead TEE Land as CEO. TEE Land must still meet several conditions to complete its listing: It needs to raise at least $20m from its IPO at an issue price of $0.50 or more per share, and it must have a market cap of $150m or more at the time of the IPO. Our rating on TEE is currently UNDER REVIEW, pending a change in analyst.

From UOB KH:
1Q13 Results Wrap-Up: A Slow Start To The Year
We remain constructive on the market with a year-end target
of 3,600 for the FSSTI. Our top picks in Singapore are DBS,
Keppel Corp, Suntec REIT, K-REIT, Ezion, First
Resources, Courts, Triyards, Nam Cheong, Silverlake and
Ying Li. We see deeper value in the midcap space, particularly
for stocks with strong operating cashflow and company specific
catalysts. 

Global Premium Hotel (GPHL SP, P9J)-
Technical BUY with +27.2% potential return
Last price: S$0.275
Resistance: S$0.35
Support: S$0.23
BUY with a target price of S$0.35 with tight stops placed
below S$0.255. The stock has made a higher low and its 10-
day moving average has crossed above its 35 day moving
average, suggesting its recent retracement towards S$0.25
could be reversed. Its MACD indicator has formed a bullish
crossover and has crossed above its centerline, while its
positive directional indicator appears to be positively placed.
Watch to see if the stock could break above its all-time high
of S$0.305.
Our retail research has a fundamental BUY with a target price
of S$0.34. 

KSH Holdings (KSHH SP, ER0) -
Take profit from previous technical BUY
Last price: S$0.605
Resistance: S$0.65
Support: S$0.495
The stock was featured as a technical BUY when it opened at
S$0.475 on 10 May 13. It has since returned 27.4% on
closing prices, with an intraday high of S$0.61 in the last
trading session, which has exceeded the initial target of
S$0.56. Some profits could be taken off the table should the
stock fail to close above S$0.65. Watch to see if its MACD
indicator could form a bearish crossover. 

Strategy – Singapore: 1Q13 Results Wrap-Up: A Slow Start To The Year
1Q13 report card. The 1Q13 reporting season ended on a mixed note. 52% of the results were in line with expectations
(57% in 4Q12) but the number of misses rose to 31% in 1Q13 from 23% in 4Q12. A turnaround in trend but largely sector specific. The higher number of earnings misses were a slight disappointment and reversed a trend of earnings improvements since
2Q12, which saw earnings disappointments fell to a low of 23% in 4Q12 before spiking up to 31% in 1Q13.
Disappointments from property and plantations. The major disappointments were relatively sector specific, including property and plantations. The latter’s earnings were dragged by lower CPO prices, rising cost of production and weak CPO production for selective companies. Planters that reported below-expectation earnings include Indofood Agri and Kencana Agri. On the other hand, our key BUY in the plantation sector First Resources exceeded our expectations due to forward selling of CPO in early-12 as well as inventory drawdown. In the property sector, all the large-cap developers including City Developments,
CapitaLand and OUE missed our estimates due to a combination of lower recognition of properties sold and weaker contributions from investment properties/hospitality segment. We have BUY ratings on CapitaLand and OUE whereas City Developments
is a HOLD.

More bank for your buck. The banks delivered a solid set of results. Most notable was DBS which was firing on all cylinders with growth in interest and non-interest income. Management gave a convincing performance, demonstrating its ability to execute
and a sound strategy. In addition, DBS’s NIM edged up slightly by 2bp but NIM for both OCBC and UOB contracted by 6bp. DBS pioneered the floating rate housing loan and probably experienced the pressure from refinancing much earlier, thus explaining the
divergent trend in NIM.

A tale of two land transporters. There was significant contrast in the performance of the two land transport companies. Whilst SMRT continues to be weighed down (primarily on a sharp 67% fall in full-year DPS) by cost pressures and high capex,
ComfortDelGro surprised us with an 8 % yoy rise in 1Q13 net profit. Despite pre-operational start-up costs for the Downtown Line, earnings growth was driven by higher ridership and an improvement in EBITDA margins (+0.5ppt to 20.6%) on lower fuel costs.
Consequently, we upgrade the stock to BUY from HOLD with a DCF-based target price of S$2.32/share.

Steady performance from shipyards. The two shipyards delivered results in line with our expectations but below consensus. A positive takeaway was SMM’s operating margin which recovered to 13.7% (12.9% excluding a large forex claim) in 1Q13 from a
low level of 10.8% in 4Q12. Management still maintains its operating margin guidance of 10-13% for the longer term. Keppel Corp registered a strong O&M operating margin of 14.0% for 1Q13, up from 4Q12’s 12.8% but lower than 1Q12’s 15.1%.
Furthermore, Keppel had started progressive recognition of the first of six semi-submersible rigs for Brazil. Our top pick in the sector continues to be Keppel Corp given better earnings visibility.

Hang up on telcos. SingTel’s 4Q13 disappointed, with core net profit falling 2% yoy. Factors which dragged earnings were falling ARPUs in Singapore and weaker contributions from Bharti. The bright spark was a slight increase in its dividend payout ratio, from
55-70% to 60-75%. We re-iterate SELL with a SOTP-based target price of S$3.54/share. M1 and StarHub’s earnings were broadly within our expectations but we downgraded M1 to HOLD after the strong run-up in share prices. We maintain SELL on StarHub with a DCF-based target price of S$3.82/share.

REIT on; low financing costs to spur accretive acquisitions. The REIT sector performed in line with expectations. The REITs continued to enjoy low refinancing costs, with the likes of Suntec issuing convertible bonds with 1.4% coupon. In light of this, we
see further accretive acquisitions ahead. Our key picks include Suntec REIT, Keppel REIT and CDLH-T.

Commodity disparity. Noble disappointed the market again with losses from its agricultural division due to a delay in harvest in Brazil (owing to rainfall) and the lack of bean inventory in Argentine for its crushing plant due to weak harvest in the last season.
Otherwise, we think the group executed well on its plans to manage finance and sales, administration and operating expenses (SAO) by cutting these two costs by 13% yoy and 19% yoy respectively. Maintain SELL but cut our target price to S$0.92
(from S$1.17 previously). Olam’s 3QFY13 results were in line with our expectations. 3QFY13 EBITDA was relatively flat as lower qoq sales volume was compensated by better net contribution/mt.

Genting Singapore misses expectations. Annualised, GENS’ 1Q13 adjusted EBITDA of S$249.7m (-33.7% yoy) was well below our 2013 forecast of S$1,384m on the back of a below-theoretical win rate of 2.12% (4Q12: 3.0%, 1Q12: 3.4%) despite a 38%
yoy increase in rolling chip volume (RCV) to an estimated S$20.8b. We maintain SELL with a target price of S$1.17 (based on 10x FY13F EV/EBITDA).
Market earnings for 2013F cut after 1Q13 results. We adjusted our market EPS estimates after the reporting season. Post our changes, we forecast market EPS to decline 1.0% yoy in 2013 followed by a recovery of 13.0% yoy in 2014 (previously
+0.1% in 2013F and 12.6% in 2014F). We remain constructive on the market with a year-end target of 3,600 for the FSSTI. We see deeper value in the midcap space, particularly for stocks with strong operating cashflow and company specific catalysts. Our top picks in Singapore are DBS, Keppel Corp, Suntec REIT, K-REIT, Ezion, First Resources, Courts, Triyards, Nam Cheong, Silverlake and Ying Li.