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Monday, May 6, 2013

Local Brokerages Stock Call 6 May 2013

From OCBC:
Sembcorp Marine: Pick up a quality stock on the cheap
Sembcorp Marine (SMM) reported a 11.4% YoY rise in revenue to S$1.05b and a 5% increase in net profit to S$118.7m in 1Q13, both accounting for about 20% of our full year estimates and in line with our expectations. Operating margin increased from 10.8% in 4Q12 to 13.7% in 1Q13, and the significant uptick could be partly because revenue recognition of the Sete Brasil drillship in the last quarter was not very significant. Management reiterated that enquiries remain healthy across the various business segments. SMM’s share price has underperformed the STI by about 15% YTD although there has been no change in the company’s fundamentals. In our view, investors seeking to hold a quality company for the longer term would find value in SMM. Maintain BUY with S$5.64 fair value estimate. 

Roxy-Pacific Holdings: Sales at new launches to be key

ROXY reported 1Q13 PATMI of S$11.7m – up 29% YoY mostly due to a stronger contribution from property development. This forms 15% of our FY13 forecast (S$78.0m) and is judged to be mostly within expectations, given that we expect a “lumpy” contribution later in FY13 from Wis@Changi (COC recognition). The 171-unit Jade Residences was launched in Apr and 44% of the units have been sold to date  at ~S1.6k psf. All considered, we believe this is a decent launch performance. We also expect WhiteHaven at Pasir Panjang to launch for sales soon, with Sophia Mansions to follow. At this juncture, maintain HOLD as we await more clarity on execution and sales performance at these first set of launches after latest Jan-13 cooling measures. Our fair value estimate is unchanged at S$0.61. (Eli Lee)

Cosco Corp (S’pore): Downgrade to SELL - missed expectations

Summary: COSCO Corp (S’pore)’s 1Q13 revenue and net profit attributable to shareholders came in at S$733m (-25% YoY) and S$9.7m (-65% YoY) respectively. Turnover from shipyard operations, consisting of ship repair and shipbuilding, decreased by 26% YoY to S$719m in 1Q13 (1Q12: S$966m), while turnover for dry bulk shipping and other businesses increased by 8% YoY to S$13.8m (1Q12: S$12.8m). All in all, 1Q13 performance was disappointing with PATMI forming only about 9-10% of ours and consensus’ FY13F estimates. We now cut our FY13F-14F PATMI estimates by 50-60% and pare our fair value estimates to S$0.76 (previously S$0.90) on 1.3x P/B. We expect the street to do the same. Downgrade from Hold to SELL

Singapore Post: Expenses continue to rise

Singapore Post (SingPost) reported a 25.0% YoY rise in revenue to S$182.5m but saw a 14.6% drop in net profit to S$26.1m in 4Q13, bringing full year net profit to S$136.5m, accounting for about 94% of our full year estimate. Excluding one-off items such as a S$5.7m write-off of intangible assets, underlying net profit was S$141.0m, which was 2.5% shy of our forecast. Volume-related and admin expenses continued to rise in the last quarter, such that total operating expenses rose 17.2% QoQ. EBITDA margin fell from 31.0% in 4QFY12 and 33.4% in 3QFY13 to 25.8% in 4QFY13 as a result. In line with its usual practice, the group has proposed a final dividend of 2.5 S cents/share, bringing the full year payout to 6.25 S cents. Pending an analyst briefing later, we maintain our HOLD rating but put our fair value estimate of S$1.23 under review.

Vard Holdings: Secures NOK400m contract

Vard Holdings, previously known as STX OSV, secured a contract with Island Offshore for the construction of one advanced offshore support vessel worth approximately NOK400m (US$70m). Delivery is scheduled from Vard Brevik in Norway in 3Q2014. Meanwhile, the group is also expected to report its 1Q results on 14 May 2013. We currently have a BUY rating with S$1.52 fair value estimate. 

From UOB KH:
CapitaCommercial Trust (CCT SP, C61U) –
Improving outlook on the office sector
Last price: S$1.70
Target Price: S$2.00

CCT’s 1Q13 results were in line on the back of strong leasing
momentum. 1Q13 leases already matched the total signed for
the full-year 2012. 63% of leases expiring in 2013 have also
been renewed. Average portfolio rent increased 2.5% qoq and
we expect positive reversions to continue over the rest of the
year. Near-term headwinds from the expiry of yield protection
at One George Street and lower occupancy at Capital Tower will
be mitigated by strong rental reversions and rising occupancy at
6 Battery Road. CCT has a substantial acquisition headroom of
S$1.1b with its conservative gearing of 30%. Asset
enhancement works remain on track and occupancies should
continue to improve. CCT is our top pick in the office segment,
where we anticipate higher growth dynamics going forward. We
have a BUY and target price of S$2.00.
Technically, the stock appears to be supported near S$1.53 and
may continue to rise gradually towards S$1.90.

CDL Hospitality Trust (CDREIT SP, J85) –
Pick-up in 2H13 on more events, new attractions
Last price: S$1.985
Target Price: S$2.36

CDREIT reported a slightly weaker performance in 1Q13, in line
with its earlier guidance. We see these results as one-off and
expect a pick-up in room rates and occupancies in 2H13 on the
back of more major events and new attractions. The recent
yield-accretive acquisition of a resort in the Maldives should also
help boost yields. Post this acquisition, CDREIT’s gearing
remains low at 28%, among the lowest in S-REITs. This
presents a debt headroom of more than S$400m. Management
noted that Singapore will remain its focus market for
acquisitions. Maintain BUY and target price of S$2.36. CDREIT is
currently trading at dividend yields of more than 5.5%.
Technically, the stock appears to be trading sideways between
S$1.90 and S$2.13.

Starhill Global REIT (SGREIT SP, P40U) –
Retail to remain stable, rentals resilient
Last price: S$0.955
Target Price: S$1.06

Starhill’s 1Q13 results were within expectations, boosted by
accumulated rental arrears from Toshin. From our management
luncheon, the team highlighted its competitive advantage in
bringing in newer brands, high-end tenants, and directly
engaging with the brand principals. The acquisition pipeline
includes underperforming malls in Singapore, properties in
Kuala Lumpur, and assets in key cities in Australia. Starhill has
a debt headroom of S$450m from its current gearing of 30.5%.
Although management was cautious about further potential
upside following the Toshin review, we believe a modest
increase is still achievable as underlying rentals are close to half
that of neighbouring Wisma. We expect positive reversions as
well as over 50% of office leases expiring in 2013 have been
renewed or pre-committed. Our BUY recommendation comes
with a target price of S$1.06.
Technically, the stock appears to be well supported near S$0.85
and prices could be trending towards S$1.05. 

COSCO Corp (S)- 1Q13: From bad to worse.
(COS SP/SELL/S$0.87/Target: S$0.88)
FY13F PE(x): 39.0
FY14F PE(x): 30.0

From bad to worse. COSCO Corp’s (COSCO) 1Q13 net profit of S$9.7m was well below expectations. Net profit declined by 65% yoy because of: a) a 25% fall on lower turnover. Although this lower shipbuilding turnover (-74% yoy) in 1Q13 had been expected
as COSCO has been seeing a decrease in shipbuilding order wins for some time, the 26% fall in shiprepair turnover came as a surprise. The shiprepair business suffered further because of a continued poor shipping market and intense competition because
Chinese yards’ orderbooks are generally low, b) lower sale of scrap materials of S$7.5m in 1Q13 vs S$16.3m in 1Q12, c) a forex loss of S$4.3m in 1Q13 vs a loss of S$9.7m in 1Q12, and d) higher interest expense of S$27.3m vs S$21.8m previously. Shipping
turnover (+8% yoy) appears to have bottomed.
No light at end of the tunnel. Shipbuilding margins are expected to come under pressure as the group is executing low-margin shipbuilding contracts secured in the last three years during the shipping slump. For new offshore product types, as a relatively
new entrant, COSCO expects to incur higher costs during the execution of these new product types.
Maintain SELL. We tweak our target price marginally from S$0.86 to S$0.88, based on 1.5x P/B. Current NAV is 58.62 Scents/share.

Sembcorp Marine- 1Q13: Mixed signals.
(SMM SP/HOLD/S$4.26/Target: S$4.60)
FY13F PE(x): 17.1
FY14F PE(x): 14.5

Below consensus expectation. Sembcorp Marine (SMM) reported a net profit of S$119m (+5% yoy) on the back of a turnover of
S$1,050m (+11% yoy). 1Q13 net profit appears to be below consensus expectation, but within our expectation. 1Q13 net profit
accounts for 20% of consensus’ 2013 forecast of S$604m, but 23% of our 2013 forecast of S$516m.
Our 2013-15 earnings forecasts are largely unchanged. We maintain our contract win assumptions of S$5b p.a. for 2013-15 (2012: S$11b). Ytd, SMM has won S$1.7b worth of new contracts. Orderbook stands at S$13.6b with project deliveries stretching
to 2019. The seven drillships for Sete Brasil make up 49% of SMM’s orderbook.
Maintain HOLD. We lower our target price marginally from S$4.85 to S$4.60 due to valuations for SMM’s own shipyard business
(15x 2014F earnings vs 16x previously) and CSG following a cut in the latter’s earnings. We have widened SMM’s shipyard valuation vs Keppel’s (we have ascribed an 18x 2014F PE valuation to Keppel). Keppel’s O&M margins appear to be more resilient.
We suggest entry at S$4.10. 

From DBS:
SembCorp Marine’s 1Q13 results below expectations, net
profit up only 5% on slower than expected revenue
recognition. Our analyst has cut FY13/14 net earnings by
8%/4%, factoring in slower revenue recognition. Healthy rig
demand but keen competition could cap margins recovery.
Maintain HOLD with a lower TP of S$4.70 (Prev S$ 5.00).

Cosco Corporation’s 1Q13 results were way below
consensus. The excess shipbuilding capacity, weak shipping
market and the recent yen depreciation which has wiped out
cost advantages of the Chinese yards and may lead to more
bulk carrier orders being channeled to Japan, have prompted
us to cut FY13/14F earnings by 43/44%. Maintain FULLY
VALUED; TP reduced to S$0.75 (Prev S$ 0.80). Weak industry
prospects will continue to drag on earnings over the next 2

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