Local Brokerages Stock Call 30 July 2013

From OCBC:
Telco Sector: Minimal impact on SingTel
SingTel will have to offer its BPL content to rival StarHub customers after the Ministry for Communications and Information (MCI) rejected its appeal for a stay of the Media Development Authority (MDA) ruling for the cross-carriage of the closely followed football content. However, the subscription comes with a price – new subscribers will have to fork out S$59.90 (before GST) for the stand-alone package, while existing mioTV subscribers can continue with the existing pricing of S$34.90 (before GST). While we may see some migration of subscribers from mioTV to StarHub’s cable TV platform, we do not expect a huge number. We maintain our NEUTRALrating on the sector. While we also maintain our HOLD rating on SingTel, we downgrade StarHub to SELL.

StarHub Ltd: Downgrade to SELL; BPL likely non-event
StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)), we suspect that any migration of subscribers from mioTV to StarHub’s cable TV platform would be quite muted. In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price (9.5% after our upgrade on 3 Jun), we feel that the stock may have run ahead of its fundamentals. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL. 
 
First REIT: Contribution from new assets
First REIT’s (FREIT) 2Q13 results were within our expectations. Revenue and DPU (after stripping out a special distribution in 2Q12) rose 43.4% and 16.4% YoY to S$20.1m and 1.85 S cents, respectively. Only 0.86 S cents will be paid to unitholders (on 29 Aug 2013) as FREIT had already made an advance distribution of 0.99 S cents on 26 Jun 2013 (prior to the issuance of new units for part payment of its acquisitions). FREIT is in the process of refinancing ~S$92m of its floating-rate debt to a 4-year fixed-rate unsecured bank loan. Upon completion, its floating rate exposure will be reduced from 72% to 46% of its total borrowings, which we view as a positive development. We retain our forecasts, HOLD rating and DDM-derived fair value estimate of S$1.20 on FREIT.
 
Yoma Strategic Holdings: First take on Yoma 1QFY14 results
Yoma Strategic Holdings (Yoma) reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – but expect the pace of recognition at development projects to be back-loaded in the year. 1QFY14 topline came in at S$15.2m, up 11.6% YoY due to higher contributions from recognition of residential sales. We highlight the slower pace of sales in Star City over 1QFY14, as the sales status for Buildings 3 and 4 only crept up by 22 units (from 491 units sold as at end Mar-13 to 513 units sold as at end Jun-13). However, we note the group also reported a potential conditional agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in zone B of Star City, which could be a significant catalyst for Star City sales ahead. We would speak with management about this set of results and the outlook ahead and, in the meantime, maintain HOLD with our fair value estimate of S$0.87 under review.  
 
M1: Joins Pay TV fray
M1 Ltd has announced its own Internet TV service – MiBox, which offers video-on-demand entertainment and educational titles, games, e-books and apps. Priced at just S$8/month with a 2-year contract for M1 fibre customers (S$12/month for non-M1 subscribers), customers will have access to MiBox’s library of 18k video-on-demand titles, 116 TV channels, 1.2k e-books and 370 apps. In addition, there is also an extensive selection of chargeable premium video-on-demand, e-learning titles and apps. According to M1, the service offers a new TV experience for everyone, from students to working adults to homemakers to retirees. However, given M1’s small fibre customer base and its relatively new presence in a pretty saturated Pay TV market, we do not expect to see any major impact on earnings. Maintain HOLD with an unchanged fair value of S$3.10. 

From Maybank KE:
Offshore & Marine: KL Marketing - Key Takeaways; Overweight
The  robust  oil  and  gas  activities in Malaysia, led by Petronas
spending,  piqued  interest  in  Singapore  offshore players during our
recent marketing trip to KL. We remain positive on the sector as we see
structural  fundamentals  sustaining  a high level of spending over the
next few years. Key Buys are Keppel, SMM and Ezion.
There  was  a  fair  amount of concern on the impact of Chinese and
Korean competition on Singapore rigbuilders’ margins. Execution risk in
Brazil  was  also  a  key  discussion point. While we acknowledge these
risks, we argue that these concerns may be overblown.
There was still strong interest in Ezion and the key question was if
there  is further upside given the strong run up in share price. In our
view,  forward  valuations  of  7.5x  FY14F  PER still look attractive,
backed  by  strong  earnings  visibility from its liftboat contracts to
support a 40% CAGR in EPS over FY13-15F. 

From UOB KH:
Singapore Airlines (SIA SP)

Analyst Briefing Takeaways

SIA guided that it carried a higher proportion of bellyhold cargo, which

would have lowered its breakeven load. In addition, further impairment

charges on the remaining nine freighters are unlikely. Maintain HOLD and

lower target price to S$10.80.

Suggested entry price is S$9.60.

From DBS:
United Envirotech has signed an agreement to fully acquire
Memstar’s membrane operation for S$293.4m or
S$0.11/share. Of this, S$73m will be settled in cash and the
remaining S$220m by the issue of 200m new shares priced at
S$1.10 a share (~19x FY14 PE). Apart from ensuring
membrane supply, this acquisition enables UENV to be
vertically integrated and to ride on growth potential of
Memstar’s membrane operations. Although this acquisition
could boost FY14/FY15F net profit by 1% and 6%
respectively, new share issues would dilute FY14/FY15 EPS by
18%/14% respectively. We are maintaining our earnings
forecast for UENV pending completion of this acquisition. No
change to HOLD call and TP for now.

2Q13 results for OKP Holdings below; gross margin collapsed
16ppts on higher subcontracting costs and low margin work.
We expect gross margins to remain depressed for at least
another quarter. Project rollout by the government has been
slow in 1H13. Visibility for project wins weak; going forward,
we expect project wins to come from the low value, low
margin maintenance segment. Maintain Fully Valued call.