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Thursday, July 25, 2013

Local Brokerages Stock Call 23 July 2013

From OCBC:
Raffles Medical Group: Solid double-digit growth
Summary: Raffles Medical Group’s (RMG) 2Q13 revenue of S$86.8m (+12.9% YoY; +7.1% QoQ) and PATMI of S$14.4m (+15.9% YoY; +6.8% QoQ) were within our expectations. Topline growth was driven by both its Hospital Services and Healthcare Services divisions, which increased 16.8% and 6.5% YoY, respectively. As expected, an interim dividend of 1 S cent/share was declared, similar to 1H12. Management is currently evaluating the bids for its commercial property and will make a decision on the sale in the coming weeks. Looking ahead, we expect further operating leverage improvement by RMG as management will continue to grow its revenue, underpinned by the expansion of its specialist services. We retain our projections, and reiterate our BUY rating and S$3.42 fair value estimate on RMG, pegged to 29x blended FY13/14F EPS.

Tiger Airways: Look beyond the bottom-line
Summary: Tigerair (TR) reported weaker-than-expected 1Q14 results following continued losses from its associate airlines, which masked overall improvements in performance from Tigerair SG (TRS) and Tigerair AU (TRA). The group’s operating loss had narrowed to S$6.2m from S$11.8m over the same period a year ago but 1Q14 net loss came in at S$32.8m (versus -S$13.7m in 1Q13). Nonetheless, we derive some positives from the figures as losses from its associates had actually narrowed during the quarter, and we believe the outlook for TR in FY14 remains encouraging. Adjusting our figures to account for TRA’s deconsolidation and aircraft deliveries for TRS, we maintain our BUY rating on TR with an unchanged fair value estimate of S$0.79.

SIA Engineering: Uninspiring 1Q14 but within expectations
Summary: SIA Engineering Company's (SIAEC) 1Q14 results were generally in line with ours and the street's expectations. Basic EPS of 6.22 S cents formed 25% of ours and 24% of the street's FY14 estimates. Revenue decreased 3.7% YoY to S$289.4m, chiefly due to lower material and fleet management revenue. Operating profit fell 19.5% YoY to S$27.7m. Share of profits from associated and JV companies increased 14.0% YoY to S$45.6m, representing a contribution of 58.0% of the group's pre-tax profits. PATMI was down 1.6% YoY to S$69.0m. We maintain our fair value of S$5.00 (EPS forecast of 25.0 S cents for FY14 and 20.0X peg) and HOLD rating on SIAEC.

Ascott Residence Trust: 2Q13 in line with street
Summary: Ascott Residence Trust (ART) reported 2Q13 results that were better than our expectations but in line with the street’s. Revenue fell 2% YoY to S$77.4m and gross profit dropped 4% YoY to S$41.0m. However, unitholders’ distribution grew 14% YoY to S$30.9m (including a reversal of over-provision of prior years’ tax expense of S$2.7m), which lead DPU rising 3% YoY to 2.45 S cents. Excluding the placement units issued in 1Q13, DPU for 2Q13 would be 2.70 cents. We place our FV of S$1.31 and Hold rating on ART UNDER REVIEW pending a briefing with management.  

OSIM International: Increases stake in TWG Tea by 10% to 45%
Summary: OSIM announced that it has increased its stake in associated company TWG Tea Company Pte Ltd (TWG Tea) from 35% to 45%. The astonishing element is that the 10% stake was acquired for a total purchase consideration of only S$2. This was because the founding members of TWG Tea had failed to meet the agreed performance target for the year ended 31 Mar 2013; although we believe that the TWG Tea business is doing well. As a recap, OSIM bought a 35% stake in TWG Tea for ~S$31.36m in Apr 2011. We estimate that this additional 10% stake will have an incremental 0.6% and 0.9% impact to our FY13 and FY14 PATMI forecasts for OSIM, respectively. We maintain our BUY rating and S$2.21 fair value estimate on OSIM for now as the group is scheduled to release its 2Q13 results next Tue, 30 Jul. 

From UOB KH:
Civmec (CVL SP, P9D) –
Technical SELL with +15.1% potential return

Last price: S$0.825
Resistance: S$0.87
Support: S$0.70
Maintain SELL with the same target price of S$0.70 and
tight stops placed above S$0.87. The stock is likely to
be resisted by its declining 50-day moving average,
which acted as resistance previously. Its RSI indicator
has turned down and its MACD indicator is currently
below its centreline. Watch to see if prices could break
below S$0.80 for further downside.

Genting Singapore (GENS SP, G13) –
Technical BUY with +12.4% potential return

Last price: S$1.37
Resistance: S$1.54
Support: S$1.31
BUY with a target price of S$1.54 with tight stops placed
below S$1.33. The stock looks poised to break out
above its upper Bollinger band and its 35-day moving
average, with prices closing above its mid Bollinger
band. Its Stochastics indicator has formed a bullish
crossover with its RSI indicator looking poised to move
above 50. Watch to see if prices could break above
S$1.385 for further upside. Our institutional research
has a fundamental SELL with a target price of S$1.17.

KS Energy (KST SP, 578) –
Technical BUY with +18.7% potential return

Last price: S$0.48
Resistance: S$0.57
Support: S$0.345
BUY with a target price of S$0.57 with tight stops placed
below S$0.45. The stock is trading near a potential
resistance-turned-support level, which is also near its
35-day moving average. Its Stochastics indicator
appears to hook up, with its MACD indicator well above
its centreline. Watch to see if the stock could be resisted
near its 200-day moving average.

Raffles Medical Group- 1H13: Solid performance; upgrade to BUY
after share price correction.
(RFMD SP/BUY/S$3.12/Target: S$3.78)

FY13F PE (x): 22.7
FY14F PE (x): 19.5
Solid 1H13 results in line with estimates. Raffles Medical Group’s (RMG)
1H13 net profit of S$27.9m (+16% yoy) is in line with our estimates,
accounting for 43% of our full-year estimates. We expect a seasonally
stronger 2H (particularly during holiday periods for noncritical treatment
such as aesthetics, medical screenings, etc) to lift earnings closer to our
full-year forecast. Revenue grew 12.1% yoy in 1H13 (S$167.9m), driven by
solid growth in the hospital services segment (2Q13 up 16.8% yoy) due to
higher volume and patient acuity.

Upgrading to BUY (from HOLD) with a higher target price of S$3.78/share.
We maintain our 2013-15 earnings forecast and have a DCF-based target
price of S$3.78/share (+6% from S$3.57/share previously). The change is
to reflect changes in assumption of risk-free rate (3.0% vs 2.2% previously)
and terminal growth (3.0% vs 2.0% previously). At our DCF-based target
price of S$3.78/share, the implied 2014F PER is 27.3x. This is close to its
+1 SD to mean PER of 28.6x but we think this is deserved, given its strong
cashflow generation and healthy financial position which could fund
potential M&As or other investments. 2013-15F ROE of 15.8-16.9% is also
higher than its long term average ROE of 11.0% (1997-2012).

SIA Engineering- 1QFY14: Revenue and operating margins decline;
downgrade to SELL.
(SIE SP/SELL/S$5.16/Target: S$4.65)

FY14F PE (x): 20.4
FY15F PE (x): 19.3
Disappointing 1QFY14 performance as top-line and operating profit
declined. Top-line declined for the third consecutive quarter and the 3.7%
yoy decline was said to be due to lower material and fleet management
revenue. Nothing was mentioned about line maintenance which typically
accounts for 35% of revenue but we assume revenue would have been at
least flat given Changi’s pax traffic growing only 3.9% yoy.

Downgrade to SELL with target price unchanged at S$4.65. The stock has
risen 19% ytd vs a 2% rise in the FSSTI due to the market’s appetite for
cash-rich yield stocks. We believe the outperformance will not continue
given the weak revenue and declining operating margins. Thus, we
downgrade SIAEC from HOLD to SELL with target price unchanged at
S$4.65. Our valuation is on a DDM basis (COE - 6.9%, terminal growth:
1%). At our target price, the stock offers a dividend yield of 4.8%.

Tiger Airways- 1QFY14: Singapore operations disappoint as yields
(TGR SP/SELL/S$0.62/Target: S$0.55)

FY15F PE (x): 7.6
FY16F PE (x): 6.8
Operating profit trend reversed as Singapore yields declined. The S$6.2m
operating loss vs our expectation of an S$13.2m operating profit was due
primarily to a 5.0% decline in yields for the Singapore operations. This
stood in contrast to our assumption of a 3.5% rise in yields for the group
(4QFY13: +7.0%) The decline in yields was attributed to a lack of pricing
power following a S$6.00 increase in passenger service charge (PSC) by
Changi Airport. The average fare of Tigerair Singapore was flat at
S$132.80 despite a near 5.0% higher stage length.
Maintain SELL with a lower target price of S$0.55 (from S$0.61), or 1.4x
FY14F book value, excluding perpetual securities.

SATS- 1QFY14 results preview: Expecting a 3% yoy decline in net
(SATS SP/HOLD/S$3.29/Target: S$3.13)

FY14F PE (x): 17.8
FY15F PE (x): 18.7
SATS will be reporting 1QFY14 results on 25 July after market close. We
estimate a 2.9% yoy decline in net profit to S$40m, mainly due to a 6.6%
yoy decline in unit meals produced and higher staff costs.
Unit meals per pax handled was the lowest in five years. Unit meals, which
are weighted meals served by SATS out of Changi, declined 6.6% yoy in
spite of a 6% rise in pax handled. SATS attributed the decline to Qantas
Airways’ move of its Kangaroo route transit hub from Singapore to Dubai,
which would have led to a decline in premium meals served. In addition,
SATS also lost Qatar Airways as an in-flight catering customer in 4QFY13
and the full impact of this will be reflected in the current quarter.
Maintain HOLD and target price of S$3.13, based on a dividend discount
model (required return: 7.0%, terminal growth 1.2%). At our fair value, the
stock will offer a dividend yield of 5.1%. Entry price is S$2.90.

From DBS:
Tiger Airways reported 1QFYMar14 operating loss of S$6.2m,
lower than our expectations of a small profit. Yield erosion in
Singapore led to disappointing operating results. FY14/15F
earnings cut by 32%/22% to reflect higher losses from
associates. The group should report stronger operating profits
hereon, with Tigerair Australia moving to the associate line
from 2Q14, and Tigerair Singapore expanding its fleet by
almost 25% in FY14. We still remain positive on Tigerair’s
ongoing transformation, and its niche focus on the booming
Singapore-Indonesia routes should bear fruit. Maintain BUY
with lower TP of S$0.74 (Prev S$ 0.79).

SIA Engineering reported 1QFYMar14 net profit of S$69m,
largely in line. Weaker core operating margins were offset by
stronger contributions from JV/ associates. Near term outlook
is steady but unexciting. Maintain HOLD while revising our TP
higher to S$5.10 (Prev S$ 4.80), as we benchmark valuations
to listed peers.

Ascendas India Trust’s 1Q14 performance was stable, with
revenue coming in flat at INR1,392m. Available distribution
per unit (DPU) of 1.27 cents for 1Q14 was down 5%
compared to the 1.33 cents posted a year ago. A-iTrust
remains operationally robust as India continues to be an
important hub for IT services. But the weakening INR means
that the strong growth in income has not been translated
into a stronger DPU growth in SGD. Given that acquisitions in
its current pipeline are more a medium term event, we
maintain HOLD, with TP unchanged at S$0.82.

2Q13 result for Raffles Medical in line, net profit up 16% y-oy.
A 1 Sct interim DPS was declared; group remains in healthy
net cash position. Its plan to divest Thong Sia Building is
underway. Maintain HOLD, TP is intact at S$3.15.

Courts Asia has entered into a Memorandum of
Understanding (MOU) with Sinar Mas Land, the property
development part of the Indonesian Conglomerate, Sinar Mas
Group, to build two “Big-Box” outlets in Indonesia. One
includes the previously announced 140,000 sq ft Bekasi store
located in eastern Jakarta. The second development will be

located at BSD City, Serpong, Tangerang, 25km S-W of
Jakarta. The BSD City site will have 130,000 sq ft of retail
space, a regional distribution centre and a support office.
This is expected to open six months after the Bekasi store
opens. The first development in Bekasi Indonesia is
expected to start contributing to earnings in 2014. We
have factored in modest contribution in FY15F. We expect
minimal contribution the BSD City store in FY15F since it
will open later than the Bekasi store. Maintain BUY, TP


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