Local Brokerages Stock Call 28 May 2013

From OCBC:
KSH Holdings: A strong year of performance
Summary: KSH reported 4QFY13 PATMI of S$14.0m, up 85% YoY mostly due to an increase in profit contributions from development projects held by its associates and JVs. On a full year basis, FY13 PATMI is S$36.3m which increased a strong 98%. We judge this to be somewhat above our expectations (our FY13 PATMI forecast is S$30.7m) as the pace of revenue recognition at JV development projects came in faster than anticipated. Management proposed a final dividend of 1.15 S-cents per share. Likely catalysts ahead includes major pipeline launches at Hong Leong Garden (NeWest), King Albert Park and Seletar Garden which would all likely take place this year. In China, KSH’s 45% Beijing condo project could also begin sales this year. We view a potential firm performance at this project to be significant for KSH’s earnings profile which could sustain earnings growth into FY15 by contributing an estimated S$23m net earnings upon TOP. Maintain BUY with an unchanged fair value estimate of S$0.73. 
 
Yoma Strategic Holdings: Catalysts ahead – upgrade to HOLD Summary: Yoma reported 4QFY13 PATMI of S$11.5m, up 452% YoY mostly due to a S$9.1m one-time gain. FY13 PATMI cumulates to S$14.4m and, excluding one-time gains, is judged to be generally in line with our forecast. We see the completion of the Landmark Project acquisition as a key catalyst for the share price ahead but note that management has raised the possibility of another deadline extension. That said, the signing of a Heads of Agreement with the Hong Kong and Shanghai Hotels Group and other preparations by Yoma for site development points to a good level of confidence that they would acquire the site eventually, in our view. Sales at launched projects remain firm, with 491 out of total 528 units sold in buildings 3 and 4 at Star City. In addition, management showed a strong deal-making record in FY13 and is in the midst of acquiring more land sites and establishing businesses in tourism, retail, agriculture and automobiles. Upgrade to HOLD with an increased fair value estimate of S$0.87 (20% premium to RNAV), versus S$0.71 previously, as we incorporate firmer valuations for the Landmark Project and Yoma’s existing land bank into our model.
 
Valuetronics Holdings: Starting on a fresh page
Summary: Valuetronics Holdings Limited’s (VHL) FY13 results were within our expectations. Revenue from continuing operations fell 3.4% to HK$2,210.2m, or just 0.6% shy of our forecast. Net profit from continuing operations fell 26.1% to HK$118.4m, while net losses from its now discontinued Licensing division widened by 32.7% to HK$39.8m, resulting in overall PATMI decline of 39.6% to HK$78.7m. Excluding exceptional items, we estimate that core PATMI for FY13 fell 14.7% to HK$103.7m (1.1% above our estimate). VHL also slashed its FY13 DPS from HK$0.17 to HK$0.08. This was below our HK$0.11/share forecast but still translates into a decent yield of ~6.0%. We foresee an improvement in VHL’s bottomline and DPS in FY14 as it does not expect to incur any further expenses for its Licensing business. We maintain our HOLD rating but raise our fair value estimate slightly from S$0.19 to S$0.195 due to a marginal 2.7% increase in our FY14 core PATMI forecast.

Sembcorp Marine: Secures US$596m jack-up rig order from Noble
Summary: Sembcorp Marine (SMM) announced that subsidiary Jurong Shipyard has secured a US$596m contract for a newbuild ultra-high spec jack-up rig for use in the United Kingdom sector in the North Sea from Noble Corporation. There is also an option for an additional unit. Calling it the “most advanced and versatile of its kind in the industry”, this rig will be constructed based on the Gusto MSC CJ70 design, and is in line with an enhanced version of Statoil’s “Cat J” specifications. Indeed, we note that the last Gusto MSC CJ70 order secured by SMM had a price tag of US$450m in Mar 2011. With this latest win (scheduled for delivery in 1Q16), SMM has secured orders about US$2.4b YTD, accounting for around 60% of our full-year estimate. Maintain BUY with S$5.64 fair value estimate.
 
Singapore Airlines – Grounds another cargo plane Summary: Singapore Airlines (SIA) announced that it will park another cargo freight plane until May 2014 in an effort to cut its cargo capacity further. This will be the second freighter taken out of service with the first pulled out in Dec 2012. As a recap, in its recent FY13 results, SIA Cargo experienced an operating loss for its second straight year. While the move is a welcomed one in light of the weak air cargo market, particularly in Asia-Pacific, we still expect operating losses for the division in FY14 and assert that a turnaround is unlikely even with capacity cuts as cargo yields remain depressed. Overall, SIA as a group continues to face competitive pressures from other premium carriers, and management has yet to take any concrete steps to invigorate its business prospects. Therefore, we maintain our SELL rating on SIA with an unchanged fair value estimate of S$10.00. 

From UOB KH:
First Resources (FR SP, EB5) -
Technical BUY with +11.4% potential return
Last price: S$1.885
Resistance: S$2.10
Support: S$1.77
BUY with a target price of S$2.10 with tight stops placed
below S$1.80. The stock has broken above its downward
sloping trendline and is currently trading above its 20- and
50-day moving averages. Potentially, these moving averages
looks poised to form a golden cross. Its MACD indicator has
crossed above its centerline.
Our institutional research has a fundamental BUY with a
target price of S$2.34.

Overseas Education (OEL SP, RQ1) -
Technical BUY with +22.6% potential return
Last price: S$0.685
Resistance: S$0.84
Support: S$0.665
BUY with a target price of S$0.84 with tight stops placed
below S$0.660. The stock appears to have rebounded from
its trendline extension and from its lower Bollinger band.
Stochastics indicator has formed a bullish crossover in the
oversold region and MACD indicator looks poised to form one
as well. Watch to see if prices could break above its all-time
high of S$0.755 to test S$0.84.
Our retail research has a fundamental BUY with a target price
of S$0.88.

Dukang Distillers Holdings (DKNG SP, GJ8) -
Technical SELL with +14% potential return
Last price: S$0.515
Resistance: S$0.55
Support: S$0.42
SELL with a target price of S$0.42 with tight stops placed
above S$0.55. The stock has formed a shooting star pattern,
which could suggest an interim top has formed. Prices could
move lower from its upper Bollinger band. Stochastics
indicator has formed a bearish crossover in the overbought
region and RSI indicator has turned down after being resisted
near a reading of 80. Watch to see if the stock could be
supported by its rising 50-day moving average.

CDL Hospitality Trusts- Orchard Hotel Shopping Arcade makeover.
(CDREIT SP/BUY/S$1.93/Target: S$2.36)
FY13F DPU Yld (%): 6.0
FY14F DPU Yld (%): 5.9
CDL Hospitality Trusts (CDREIT) has announced an asset enhancement (AEI) at Orchard Hotel Shopping Arcade (OHSA),
repositioning the mall with a more family-centric theme with enhanced retail offerings.
AEI will increase NLA by 16% and rentals by 37%. The proposed AEI will add an additional 10,000sf, or a 16% increase to existing NLA. In 2012, OHSA accounted for about 3.6% and 3% of total revenue and net property income respectively. Post-AEI,
management expects an incremental income of S$2m (+37% increase), translating into a ROI of 8%. Our calculation suggests that this is easily achievable considering the fact that current average rentals are about S$7psf pm, a 30-50% discount to the
prevailing rents in the area.
Maintain BUY and target price of S$2.36 as the loss of income in 2014 will be offset by a pick-up in long-term yields. Our target price is based on our two-stage dividend discount model (required rate of return: 6.9% and terminal growth rate: 2%).

From DBS:
The slow construction pace dragged Yoma Strategic’s
FY13 results but take-up rate and average selling price
(ASP) trumped expectations. ASPs grew 20-30% y-o-y and
5-10% q-o-q. The booming property sector, accelerated
construction and Landmark’s progress lead us to raise
FY14/15F earnings by 60%/40%. Target price raised to
S$0.92 (Prev S$ 0.80) to reflect higher sales, ASP and nonproperty
values. Upgrade to BUY. Telco win or agriculture
developments are potential catalysts.

Sembcorp Marine has secured a rig-building contract
worth US$596m from Noble Corp. It comes with an
option for an additional unit. The rig is due for delivery in
the first quarter of 2016. We believe the jack up order is
backed by the firm charter contract secured by Noble
from Norwegian operator Statoil, which was announced
last week. More significantly, SMM won this contract
from the other finalist - South Korean Daewoo
Shipbuilding & Marine Engineering. This is again a
demonstration of Singapore rigbuilders' competitive
strength in the jack up segment. This latest order brings
SMM's YTD wins to S$2.43bn, forming 49% of our full
year expectation of S$5bn. Maintain Hold, TP: $4.70.

From Maybank KE:
Sarin Technologies: Crisis or Opportunity? Maintain Buy, TP $1.66
SARIN SP | Mkt Cap USD405m | ADTV USD0.2m
DeBeers increased rough diamond prices by about 4% in its May sight.
Rough  diamond  prices  have  increased  by  about 10% this year, while
polished  prices  for  1-carat  diamonds  rose  by a mere 0.3%. Without
further  rise  in  polished  prices,  manufacturers  face  a squeeze on
margins.
Indian manufacturers are expected to maintain cautious manufacturing
levels  in  2Q13,  and  this is also quiet period due to the May summer
holidays.  We  expect  a more subdued demand for traditional equipment,
but we think that this could be compensated by higher GalaxyTM sales.
We  believe  that  the  repeated  margin  pressures  faced  by  the
manufacturers  would  stimulate  motivation to seek higher efficiencies
through  long-term  investments  in technologies. We highlight that the
investment  case  for  Sarin  is  the structural changes it would bring
forth with its game-changing technologies. Maintain Buy, TP SGD1.66.