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Friday, August 2, 2013

Local Brokerages Stock Call 2 August 2013

From OCBC:
Sembcorp Marine: New yard opens at a time of record order book
Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group’s net order book stands at S$14.4b, a record high in SMM’s history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate.

UOB: Stronger 2Q and modest rise in NIM
Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower.

Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth
Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units – this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi’s TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter’s uneven trading liquidity.

COSCO Corp (Singapore): Another weak quarter
Summary: COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.

Lippo Malls Indonesia Retail Trust: 2Q13 results as expected
Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review.

Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore
Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI’s largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. 

From DBS:
UOB’s 2Q13 earnings were slightly above expectations
from lower provisions; pre-provision profits were in line.
UOB is focusing on total customer returns and regional
growth. We raised loan growth to 13%, in line with
guidance of low-to-mid teens. A 20 Scts DPS was declared
but no scrip dividend applied. Our FY13-15F earnings
forecasts are raised by 1-3% after adjusting for higher
loan growth. TP is lifted to S$21.90 (Prev S$ 20.10) as we
roll over our valuation base to FY14. Upgrade to HOLD.

OCBC’s 2Q13 results were inline with ours but below
consensus. Ex- Great Eastern Holdings, non-interest
income was strong. 2Q13 net profit came in at S$597m (-
14%q-o-q; -8% y-o-y) mainly dragged down by GEH nonpar
fund losses (as a result of bond yield volatility in June).
NIM was stable at 1.64%. Provisions were higher mainly
from general provisions which increased with strong loan
growth. An interim dividend of 17 S cts was declared;
scrip dividends are not applicable. More updates after
briefing this morning.

2Q net earnings for SembCorp Marine down 12.5% y-oy,
marginally below. Operating margins declined to
11.8% from 13.7% (1Q13). New orders are on track,
strengthening order book to S$14.4b. We expect stronger
2H from higher order book drawdown and repair
revenue. Upside to earnings could come from the sale of
ARV3, which is now operating on a 5 year charter in
Brazil. We have trimmed FY13F net earnings by 3% as we
have assumed lower EBIT margin of 12% vs 12.4%
previously. Stock is fairly valued at PE of 17.5x (FY13),
maintain HOLD.

2Q13 results for Cosco Corp below due to forex loss. The
group is under pressure to fill yard capacity. We lowered
our below consensus FY13 forecast by a further 12% to
account for the forex loss. Maintain FULLY VALUED; TP

On contract wins, Cosco has secured a contract worth
over RMB590m from a Chinese company to build two
deep water platform supply vessels. Both of them are
scheduled for delivery in the second quarter of 2015. It
also announced contract valued over US$170m from a
European company to build one Jackupdrilling rig. The rig
is scheduled for delivery in the 3rd quarter of 2015. YTD,
contract wins form 60% of our order win assumption of

Hi-P reported 2Q13 net profit of S$10.9m, in line; formed
39% of FY13F. Outlook is positive, driven by multiple new
product launches in 2H13. Maintain BUY, TP raised to
S$0.97 (Prev S$ 0.88) as valuation is rolled over to
blended FY13/14 EPS.

2Q DPU of 2.63 Scts for Parkway Life REIT was within
expectations. Hedges were in place to counter impact of
weaker JPY. The REIT is on track to meet FY13F earnings.
Maintain HOLD, TP adjusted to S$2.49 (Prev S$ 2.57) on
higher risk-free rate assumption.

Underlying earnings for HongKong Land were 17%
ahead of our estimate due to higher development
earnings and rental income. We expect encouraging
residential sales to add to growth momentum.
Maintain BUY with US$7.94 TP.

From Maybank KE:
DBS Group: 2Q13 In Line, Danamon Off; Maintain Buy TP $20.00
DBS SP | Mkt Cap USD33.1b | ADTV USD64.5m

Maintain  BUY  on  DBS  with  an unchanged Street-high TP of SGD20,
pegged  to  a  rolled  forward  2014  P/BV  1.3x  (1.4x  previously) on
factoring in higher market volatility risk.
DBS’  2Q13  results  were within our expectation and consensus. Our
forecasts are maintained. That the Danamon deal is off is a setback for
the group but it does clear a large overhang issue on the stock.
Near-term  prospects remain robust and the group is well-positioned
to ride steepening yields/rising interest rate trends.

Sembcorp Marine: Efficiency Is The Focus; Maintain Buy, TP $5.20
SMM SP | Mkt Cap USD7.5b | ADTV USD14.6m

2Q13 PATMI of SGD125m (-13% YoY, +5% QoQ) was lower than our preview
figure of SGD162m, but can be explained by the lower revenue recognised
which  is  entirely  a timing issue (we forecasted SGD1.4b in revenue).
More  importantly, op. margin of 13.0% was within our expected range of
The  key  focus  of  the  analyst  brief  was  on  SMM’s efficiency
enhancement  plans.  We came away more positive of its well thought-out
plans and believe that these could alleviate the risks in Brazil and be
an added support to sustain overall margins.
Orderbook  momentum remains on track to meet our full-year forecast
of  SGD5.2b  with  YTD  order  win  of  SGD3.5b. Net orderbook breached
another  record high at SGD14.4b. Maintain Buy, SOTP-based TP unchanged
at SGD5.20.

UOB: 2Q13 Results Within Expectations; Maintain Sell TP $20.50
UOB SP | Mkt Cap USD27.0b | ADTV USD40.5m

Maintain  contrarian  SELL with an unchanged TP of SGD20.50, rolled
forward  to FY14 on a lower P/BV of 1.2x (1.3x previously) to factor in
higher market volatility risk.
UOB’s 1H13 net profit of SGD1.5b was within our expectations (53% of
full-year) but above consensus (56%).
Results  were  fairly  lackluster  as  bottomline growth was driven
primarily by lower provisions and a one-off associate gain.
UOB’s  higher  exposure to the domestic property sector remains our
primary  concern,  and  for  which  we  believe  a discount to peers is
warranted at this stage.

Cosco: The Going Gets Tougher; Maintain Sell, TP $0.65
COS SP | Mkt Cap USD1.3b | ADTV USD1.3m

Cosco  reported 2Q13 PATMI of SGD12.0m (-56% YoY, +24% QoQ), weaker
than  our  below-consensus forecasts. 1H13 net profit makes up only 35%
of  our  previous  FY13F  forecast.  We cut FY13F-15F net profits by by
27-36%. Maintain Sell, with TP of SGD0.65, pegged to 1.1x P/B.
Operating  margins  continue  to  be under pressure, trending lower
sequentially to 4.1% (1Q13:5.7%). We believe that yard underutilisation
in the next few quarters would cap any meaningful margin upside.
We flag the rising debt level which has pushed net gearing higher to
0.86x  (1Q13:0.82x)  as  Cosco  took  on  more  borrowings  to fund its
shipyard operations.

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