Local Brokerages Stock Call 5 June 2013

From OCBC:

Goodpack Limited: A buying opportunity
With the official opening of Lanxess’s synthetic rubber plant in Singapore, we expect production to commence in 1QFY14, and Goodpack will be able benefit corresponding given the additional IBCs that it had procured earlier. In addition, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production. With another deal in the pipeline (Asahi Kasei), its prospects look positive in the coming quarters. That said, as its share price fell by as much as 4.4% since our last update, we deem that a buying opportunity has emerged for the stock. Therefore, we are upgrading Goodpack to BUYwith an unchanged fair value estimate of S$1.80.

Petra Foods: Time to cool off for summer
A potential inflection point may be emerging for Petra Foods as a result of a possible slowdown in consumer demand growth in Indonesia and a larger-than-expected loss from its cocoa ingredients segment in 2Q13. For the former, the suggested removal of fuel subsidies could adversely affect consumer spending due to the higher level of dependency by the lower-income groups, which make a larger proportion of the population. In addition, Petra could experience greater cost pressures related to distribution, etc. For the latter, a larger-than-expected loss could materialize as other cocoa processors in the industry have issued profit warnings recently, and this could lead to a bigger drag for Petra in terms of its FY13 performance. Therefore, we downgrade Petra to SELL with an unchanged fair value estimate of S$3.88.
Keppel Corporation: Secures US$800m semi-sub rig for the Caspian Sea
Keppel Corporation (KEP), through its subsidiaries, has secured a US$800m contract from Caspian Drilling Company, a unit of the State Oil Company of Azerbaijan Republic (SOCAR), to build a semi-submersible drilling rig which includes owner furnished equipment. Scheduled for delivery in 4Q 2016, the rig will be built to Keppel FELS’ proprietary DSSTM 38M design, which has been customised for the harsh environment in the Caspian Sea. Having operated in Azerbaijan since 1997, KEP has built a strong relationship with SOCAR, and understand the requirements of rigs for the Caspian region. With this win, KEP has secured orders worth about S$3.1b YTD, accounting for 63% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. 

From UOB KH:
Singapore Shipyard- Keppel Corp lands US$800m SOCAR semi order; Samsung muscles into the harsh-environment jack-up space.
Keppel Corp (Keppel) has secured a US$800m (S$1b) semi-submersible rig (semi) order from Caspian Drilling Company Ltd, a subsidiary of State Oil Company of Azerbaijan Republic (SOCAR). The semi will be built using Keppel FELS’ DSSTM 38M design,and is scheduled for delivery in 4Q16. This is the first of two possible semi orders from SOCAR that was highlighted by Upstream and in our shipyard sector report dated 16 Apr 13.

Separately, South Korean yard Samsung Heavy Industries (Samsung) secured its maiden harsh-environment drilling jack-up rig contract. Statoil finally announced the winner of its Cat-J tender (originally due Jan 13). The contract – for two harsh-environment drilling jack-up rigs at an estimated US$600m each - was awarded to the operator-yard alliance KCA Deutag Drilling/Samsung, beating competing consortium Archer/North Sea Drilling Group (NSDG)/Jurong Shipyard. Samsung will be constructing the rigs.
Maintain BUY on Keppel and HOLD on SMM. We believe Keppel stands a good chance of registering higher O&M margins than SMM as the former is building semi-submersible rigs for Brazil. These are not new products to Keppel, while SMM is building drillships for the first time and for Brazil.

Venture Corporation- Value emerges after steep fall. Upgrade to BUY.
(VMS SP/BUY/S$7.38/Target: S$8.05)
FY13F PE(x): 14.7
FY14F PE(x): 12.4
Mild pick-up in 2Q13. Venture experienced a mild pick-up in 2Q13. Revenue mix was relatively unchanged, which led to stable margins. Customers’ forecast for 2H13 has improved slightly although management remains cautious as macro headwinds could
reappear.
Gradual increase in contribution from Oclaro. Run-rate for production of Oclaro’s fibre optics components has improved in 2Q13. The second phase of product transfer from Oclaro’s Shenzhen plant to Venture’s Penang plant started in May and will be completed in November. Full impact of the product transfer would be felt in 2014.
We have lowered our target price for Venture to S$8.05, based on 2013F PE of 16x (Benchmark Electronics: 17.8x, Plexus Corporation: 13.8x), justified by its average forward PE of 16.5x over the past 10 years.
Upgrade to BUY. Venture provides an attractive dividend yield of 6.8%. The stock corrected 14.9% after reporting 1Q13 results that were slightly below our expectations and valuation has become more attractive. 

From DBS:
DBSV Research issues an Equity Explorer report on Interra
Resources with fair value $0.57 and moderate risk return.
Interra is an oil & gas proxy in Myanmar and Indonesia,
with two producing fields in central Myanmar as well as
two producing fields and one exploration site in
Indonesia. Its wells produced close to 1m barrels of oil last
year, and it currently has about 24.6m of 2P (proven +
probable) reserves. Myanmar is the key earnings
contributor, accounting for 86% of FY12 EBITDA. ITRR
has been in Myanmar since 1996, and is currently the
largest onshore oil producer in Myanmar, commanding
c.40% market share. Growth is expected to come from
production ramp up, potential further upside from
exploration assets and bids for new licences.

Keppel Corp has secured a contract from Caspian Drilling,
a subsidiary of the State Oil Company of Azerbaijan
Republic (SOCAR), to build a semisubmersible drilling rig
worth about US$800m. The contract value is slightly
higher than expectations of US$700-750m. This contract
will lift Keppel’s YTD wins to S$2.47bn, forming 41% of
our full year assumption of S$6bn. Maintain BUY, TP:
S$13.00.

From Maybank KE:
Tat Hong Holdings: Two New Twists To An Old Favourite; Buy, TP $1.80
TAT SP | Mkt Cap USD727.6m | ADTV USD1.4m
Tat  Hong,  our  old  favourite  could  be gaining two new tricks. Its
impending  entry  into Myanmar and potential capital gains on sale of land
used  for  crane parking in Singapore are just what is needed to give it a
new investment angle.
 
At the same time, we continue to like Tat Hong for its exposure to the
infrastructure  sector  in  ASEAN  and  the oil & gas sector in Australia,
while  its  China  business  is turning around and is set to become a more
substantial contributor from FY14 onward.
 
We  expect  earnings growth will normalise to 13.4% CAGR over the next
three   years   but  earnings  volatility  to  gradually  fade  on  higher
contribution  from  Crane Rental; in short, enhanced earnings quality. The
stock  is still inexpensive at 10-12x forward earnings. Reiterate BUY with
new TP of SGD1.80, pegged at 14.5x FY3/14F PER.