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Thursday, August 29, 2013

Local Brokerages Stock Call 29 August 2013

From OCBC:
Oil and Gas: Looking beyond the volatility
YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. 

Local Retail REITs: Outlook remains sanguine
Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs’ existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs’ DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B).  

From UOB KH:
KSH Holdings (KSHH SP, ER0)
Technical BUY with +10.2% potential return

Last price: S$0.49
Resistance: S$0.54
Support: S$0.46
BUY with a target price of S$0.54 with tight stops placed
below S$0.465. The stock may have a short-term
rebound as a potential bullish hammer pattern has
formed near to its rising 200-day SMA. Its Stochastics
Indicator as formed a bullish crossover and could turn
up. Watch to see if the stock could break above its
middle Bollinger band. Our retail research has a
fundamental BUY with a target price of S$0.71.

Tiong Woon (TWC SP, T06) –
Technical SELL with +6.2% potential return

Last price: S$0.34
Resistance: S$0.375
Support: S$0.30
SELL with a target price of S$0.30 with tight stops
placed above S$0.360. The stock could continue to
trend down after being resisted near S$0.375 which was
a support now turned resistance level. A dead cross
could be formed on its 50- and 200-day SMAs. Its
Stochastics Indicator has formed a bearish crossover
and could continue to turn down. Watch to see if prices
could break below S$0.34.

Sinarmas Land (AFP SP, A26) –
Take profit from previous technical SELL

Last price: S$0.505
Resistance: S$0.60
Support: S$0.475
The stock was featured as a technical SELL when it
opened at S$0.60 on 20 Aug 13. The stock has since
returned 15.8% on closing prices, and its intraday low of
S$0.485 has exceeded our initial SELL target of
S$0.505. Some profits could be taken off the table as
the stock could be supported at around S$0.475 which
is also near to its rising 200-day SMA.

StarHub- Maintaining leadership in pay-TV.
(STH SP/BUY/S$4.12/Target: S$4.60)

FY13F PE (x): 20.4
FY14F PE (x): 18.6
Maintaining leadership in pay-TV. StarHub intends to differentiate and
maintain its lead in pay-TV through producing local content, such as
Academy Fantasia (a reality singing competition) and Lady First Singapore
(a variety show). Viewership for Lady First Singapore is said to be five
times higher than the original Taiwanese version. The programme is very
popular because fashion advice and beauty tips given are tailored for
Singapore’s women. StarHub is also looking into the production of
localised content for variety shows. It defrays costs of production through
advertising and sponsorship deals.
Maintain BUY. Our target price is S$4.60, based on DCF (required rate of
return: 6.7%, terminal growth: 1%).

From DBS:
United Envirotech announced a RMB90m (~S$19m) EPC
contract to upgrade a 100,000m3/day industrial
wastewater treatment plant in Nantong City, Jiangsu
Province, China. This wastewater treatment plant serves
industries located in the Nantong Economic Development
Zone and about 70% of the wastewater is from textile
industry. Upgrading of the plant is required to meet the
more stringent Grade 1A discharge standard imposed by
the local government. This project will commence
construction immediately and is expected to be completed
by the end of Dec 2013. Together with a RMB100m
contract announced last week, United Envirotech has met
~50% of our FY14 new win assumption of RMB400m. No
change to our forecast, S$0.90 TP and Hold call.

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